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

Randy Abrams – Credit Suisse Dan Heyler – Bank of America/Merrill Lynch Steven Pelayo – HSBC Pranab Sarmah – Daiwa Capital Markets Zhou Ying – BNP Satya Kumar – Credit Suisse C.J. Muse – Barclays Capital

Welcome to the TSMC’s First Quarter 2011 Results Webcast Conference Call. This conference call is being webcast live via the TSMC website at www.tsmc.com, and only in audio mode. Your dial-in lines are also in listen-only mode. I would now like to turn the conference over to Dr. Elizabeth Sun, TSMC’s Head of Investor Relations. Please proceed.

All right. Good morning, and good evening, everyone. Welcome to TSMC’s first quarter 2011 conference call. Joining us on the call are Dr. Morris Chang, our Chairman and Chief Executive Officer; and 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 third quarter. Afterwards, TSMC’s Chairman, Dr. Chang, will provide his general remark on the business outlook and a couple of key messages. Then and 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 now 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 uncertainty, 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, 2011 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 will like to turn the call over to Lora.

Thank you, Elizabeth. Good morning, and good evening to everyone. Welcome to our 2011 first quarter earnings conference call. During today’s call I will start with financial highlights in the first quarter, then we will move to the outlook for the second quarter. You may also refer to the quarterly financial summary slides on our website or dollar figures in NT dollars unless otherwise stated. In the first quarter wafer demand was strong, stronger than seasonal, our revenue was only slightly down 0.7% in US dollar turn. However, an unfavorable impact from a 3.6% change in foreign exchange rate lead to a decline in NT dollar denoted sales, which was at the lower end of our guidance. However, we managed to achieve albeit our guidance in margin. First quarter wafer shipments was 3.2 million inch equivalent wafer, down 1% from the prior quarter. Revenue was $105 billion, down 4.3% sequentially. Our growth margin was 49%, and operating margin was 37.2%. Earnings per share in the first quarter was $1.40, ROE was 24.6%. Let me move into the income statement. Our gross margin was 49%, down 0.8 percentage points sequentially, mainly reflecting lower capacity utilizations and unfavorable foreign exchange rate partially offset by a more favorable product mix revenue and cost improvements. Operating expense decreased $800 million from the fourth quarter primarily due to lower operating expense for Fab 14 and Fab 12. Non-operating income decreased by $50 million from the last quarter. Net investment gain declined by $170 million sequentially reflecting lower profit from certain invested companies. Net margin was 34.4%, down 2.6 percentage points sequentially and declined 2 .1 percentage points year-over-year, mainly reflecting a higher tax rate and lower tax credit for investment compared with the last year. Now let’s examine our revenue by applications. The first quarter wafer sales decreased sequentially in all major segments. Communication, computer and consumer related applications declined 3%, 9% and 6% respectively. Meanwhile, industrial and others declined 8% from the last quarter. Revenue from communications related applications represented 48% of our total wafer revenue in the first quarter. Computer, consumer and industrial applications accounted for 23%, 11% and 18% of our wafer sales respectively. Now revenue by technology. Demand for advanced technologies continued to grow in first quarter combining contribution from 40 nanometer and 65 nanometer represented 64% of total wafer sales, up from 52% in the last quarter. Now let’s move on to the balance sheet. We conclude the first quarter with 163 million – $163 billion in cash and short-term investments, representing a decrease of $18 million from the prior quarter. And due to a decrease in free cash flow resulting from higher capital expenditures. Total current liabilities increased by $4 billion, primarily due to a reclassification of corporate bonds from long-term liabilities and an increase in short-term loans to hedge our increased portion of U.S. dollar position. In sum, current ratio in the first quarter was two times. Accounts receivable days increased one-day to 39 days. Inventory turnover days were 56 days, up six days sequentially mainly due to some customers, changing in delivery schedule. Daily orders from certain customers, and the increased safety stock in materials in response to the Japan earthquake. Net fixed asset turnover for the first quarter was 1 ton. Now let’s take a look of cash flow. Cash flow generated from operating activities totaled $56 billion, representing a decrease of $14 billion for the fourth quarter last year, mainly due to the change in accounts payable, accounts receivable, payment of 2010 annual bonus and changing inventory level. Cap expenditure was $81 billion in the first quarter. We also increased short term loan paged the company’s increased U.S. dollar position, resulting in a $3 billion increase in cash. In some, the ending cash balance was $129 billion, down $18 billion sequentially. Free cash flow was a net outflow of $25 billion during the first quarter. Primarily due to an increase in capital expenditure. Nevertheless, we still anticipate a positive free cash flow for the whole year of 2011. In terms of our installed capacity, in the first quarter, total installed capacity was sequentially flat from the prior quarter with approximately 3.1 million equivalent wafer. An increase in total wafer capacity was offset by a decrease in six and eight inch capacity due to annual maintenance and fewer working days. For the second quarter 2011, we expect our overall capacity to increase by 8% sequentially. 12-inch wafer capacity will increase 10%, while six and eight inch capacity will increase 6%. As we are expending capacity at TSMC Shanghai, China. 2011 managed capacity is expected to increase 19% year-over-year, with 12-inch capacity up 33% from 2010. Regarding capital expenditure, in order to support the customer demand for advanced technologies, we spend $2.77 billion U.S. dollar in the first quarter representing a 36% of our total 2010 budget. We expect 70% of the budget to be spent in the first half of 2011. Now let’s turn to the outlook for the second quarter. Based on the current business expectations and the forecast extension rate of 29.03, we expect our consolidated revenue in the second quarter to come in between NT$109 and NT$111 billion. In terms of margin, we expect our second quarter gross margin to between 45.5% and 47.5%. Lastly, operating margin to be between 33.5% and 35.5%. This concludes my remarks today. Now I would like to turn the call to Dr. Morris Chang for his remarks.

Good morning, and good evening. I would like to make some comments on various topics of interest, Japan earthquake, world economy as they reflect our market, exchange rate and also our advanced technology development. And then I will also talk about the new Killer App, we have a smart phones and tablets. Then I will also cover more and more technologies that which have really transformed our mainstream technology business. Then I will talk about capital expenditures in capacity and then a few words about our new businesses namely solar and LED, and then lastly our strategic financial plan. On Japan earthquake, we have had no interruption in supply stores. We have had no interruption in production line because of any shortage of supply to us, and we don’t expect any in the future. Now I think the Japan earthquake probably had some effect on our second quarter demand, because some of our customers and some of their customers perhaps have suffered some delay in their production. But that effect is probably rather modest and it’s only in the second quarter. I don’t – we expect any significant impact on the second half demand. In Japan earthquake thus impact Japanese and world economies. Now, a few words about world economy as the fact of our market. The outlook for world economy is a bit softer now than the outlook three or four months ago. The outlook in Japan in southern Europe and in UK is a bit softer. There is also inflation fighting in China, India and other emerging countries, which has made the estimate of growth a bit less than a few months ago. Now, how does that affect our market? Well, our market forecast model starts with world GDP. And as the world GDP got a little softer, this year, our forecasting model use a less, a smaller semiconductor market number. And that is indeed why a few weeks ago, I adjusted up the semiconductor EX memory market growth down to 4% from 7%. Now on the effect of the exchange rate on our business. As you know, all our revenues in U.S. dollars and 80% of our cost are $80. Therefore, the U.S. dollar depreciation hits us two ways. First, it makes our revenue less, makes our NT revenue less. Back in the day, it hurts our profitability, our profit percent. Basically I have said before, and I say it again, we lose 40 basis points of profitability for every 100 basis points of U.S. dollar depreciation. 40 basis points loss of profitability for every 100 basis points of U.S. dollar depreciation. Now, at the current exchange rate of NT on a 28.9 to $1, U.S. depreciation – U.S. dollar depreciation is 8% from the 2010 average. And the exchange rate has stayed the same as the last year, we would make $26 billion NT more profit this year, which is equivalent to $1 a share, $1NT a share. And that’s a pretty big number, that is, if the exchange rate has stayed the same as last year. Now I, let me talk about our advanced technologies. First, on 28 nanometers, we completed a very important milestone. We completed full technology qualifications for both oxynitrite, which is our 28 LP and high-k metal gate, which is our 28 HP. Now the significance of this milestone is that the way is now clear to volume production on the 28 LP and 28 HP, both the oxynitrite and the high-k metal gate versions. And furthermore, we have 89 customer product tables. We have one – everyone that we compete at the pool, that’s the 28 nanometers. On 20 nanometers development is on track for risk production in second half of next year. So that’s little more than a year away yet, but development is on track. And we already have many early customer engagement on the 20 nanometers. Now on the more advanced technologies, 14, 10 and beyond, we have a significant efforts in (inaudible) and non-silicon channel structure. We will have been today pushed more slow to the further most. Now I would like to say a few words about smart phones and tablets. They are the new killer app for us. This like PCs in the 80s and 90s and cell phones in the 2000s. Smart phones and tablets will be (inaudible) was in the forthcoming decade. Smart phones and tablets are the fastest growth segments in communication and computer products. They need more, they need most advanced technology for application processes because everybody wants a smart phone that’s fast and the low-power. And the fact that they need the most advanced technology is a definite advantage for TSMC, because we do lead in technology. Almost all the smart phones and tablet application processors utilize ARM architecture. As you know, tablets companies are all use ARM or mostly use ARM architecture. And that is again TSMC sets the advantage because we have products with practically all the tablets companies in the world. And then tablets companies will gain semiconductor market share in these smart phone and tablet segments. That again turns out to be a TSMC advantage, because as I said, tablets companies are our customers, our partners. And as they gain market share, we gain market share. Now, TSMC value-added is three or four times in smart phones and tablets as it is on feature phones. Now, we gain greater value added as the smart phones and tablets markets expand very rapidly. Now, I’d like to say a few words about more and more. More and more are specialty technologies, which we have developed and applying in mainly the older technologies, technologies that are greater than 90 pr 130 nanometers And indeed we have been doing it for several – four years now, for of five years. And the increment of result has really transformed business in the older technologies. The combined specialty technologies revenue, we have been clouding the specialty technologies, Mr. ABCD and MRABCB, M stands for Men’s, R for RFIC, A stands for automotive and analog, B stands for BCB, C stands for C-loss imager, D stands for display driver, all MRABCB, those six kinds of specialty technologies combined yield a revenue of $3.1 billion US in 2011. And that’s a pretty significant percentage of our total revenue and in fact this is weightier than half of our revenue in the older technologies. So that’s why I said that the practice of more than more or specialty technologies has already transformed our older technologies business. And as I said, the combined MIABCDs specialty technologies (inaudible) $3.1 billion of revenue this year, just the C-max imager alone is using $600 million to $700 million of revenue US in 2011. In addition, we are leaders in embedded flash, DSI sensor and also high voltage IC. Now a few words about capital expenditure and capacity. We, in the last few months we have looked at this year capital expenditures pretty carefully. Now we in fact have had to operate adjustments higher capital expenditure, because of US dollar depreciation against the euro and the yen. Part of our capital expenditures is in euros and yens and as the US dollar have depreciated against those currencies, we have to adjust our capital expenditure upwards. Now we have also adjusted them downwards because of some conversions that they were able to make. We have converted some 65-nanometer capacity to 40 nanometer, because it appears to be greater demand for 40, greater demand than we anticipated. And there appears to be less demand than we anticipated for the 65. So we have converted some 65-nanometer capacity to 40 . And we have also converted some 90 nanometer and 130-nanometer capacity to CMOS images. As a result of both the upward adjustments due to currency exchange and the downward adjustments, because of capacity conversions actually we netted about zero. So capital expenditure guidance remains unchanged at $7.8 billion U.S. And few words on the solar and LED businesses. We took a very important step, the Board took a very important step just yesterday in passing, approving the formation of two companies. One is TSMC Solar Ltd., and the second is SMC Solid State Lighting Ltd. We did those to encourage entrepreneurism and the independence of those companies. We believe it’s important. We believe that it is almost essential for a successful company like us to form new companies. So that a successful company can spawn new businesses, because the new business is indeed must stand on their own and must be an entrepreneurial and you cannot now keep them confined in the thinking, in the kind of thinking that has made the parent very successful. And so we formed these two companies and Rick Tsai is the Chairman and CEO for both of those companies. And both those companies will plan to have IPO in a few years. Now just a few words on our strategic financial plan. I announced some time ago that we have a five-year financial goal of 10% profit before tax, compounded annual growth rate and later RE go to 20% ROE or the five years between this year and 2015, and that goal is unchanged. In fact, I see now even more bullish about achieving that goal in the next five years than I did a year ago, when the formulated a goal. We will have good years and bad years. But I’m talking about now a five-year compounded annual growth average – growth rate of 10% of PBT. So in some of those years, we’ll probably grow less, but in some of those years we will grow more than 10% but overall, I plan to achieve it. And in looking at 2011, actually it’s a good year except for exchange rate. The exchange rate has kind of only a one – in the works here and if you look at the original intent assumption, I would say that 2011 is a good year. Those are the comments, I have at this moment.

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

At this time we will open the flow for questions.(Operator Instructions) And our first question to comes from the line of Randy Abrams with Credit Suisse. Please proceed. Randy Abrams – Credit Suisse: Hi, good evening. I wanted to ask about the subsidiary creation for the solar and LED business. Now that you may not move, what would the next step or what can the divisions do if they cannot do as a division within TSMC. And would you now fund those groups still out of the parent or would they need funding from external investors. And if you could give an update on milestones for solar and LED or upcoming milestones for the division?

There is no external investor. We are still – TSMC is still the 100% owner of those two companies. Now, you ask what can they do in the future that they cannot do as internal divisions. Well, first of all, the employees of those two companies will be, will subscribe to the shares – will subscribe to shares and of course the expectation is that the shares will be very valuable after the companies have gone public. So that’s one big difference that we have created a powerful incentive for the employees in the solar and LED businesses. And also another difference is that, as I said, this is on the entrepreneurism side, and I think that the incentive needs to be there and the incentive is now the spark of those affiliate companies. Now, independents, I said I wanted to encourage more independents. Well, up to now, the new businesses do report to the board on a separate meeting, every board meeting and actually a pretty large percentage of the board meeting is taken up by the new companies report. And that’s going to be very much reduced from now on to encourage independence. And as I said, Rick Tsai will be the Chairman and CEO of both those companies. And TSMC as the so owner so far of course as the employees start to subscribe shares, a part of the shares would be owned by the employees. Now TSMC is the larger owner, still of course will maintain a very firm connection with the companies. And that connection will primarily be maintained through the Board members that TSMC will appoint to the two companies. But there will actually be only two Board members aside from Rick Tsai himself. Rick is the Chairman and there will be only two Board members. In fact, one of them is F.C. Tseng, who is also the Vice Chairman of TSMC, and the other one is Dick Thurston, General Counsel of TSMC. And Lora, who is our CFO, Lora Ho, who is TSMC’s Chief Financial Officer will serve as the Supervisor in both companies. This is Supervisor in that Taiwan definition, financial as well. So I can see that the connection will be there and the synergy will be there. And – but there will be more independent, and there will be more entrepreneurial. Randy Abrams – Credit Suisse: Okay. Thank you, and I appreciate the color. And just the one follow-up on solar and LED is the next milestone for both groups. And the second question was a quick one just on the CapEx. If the amount of the puts and takes like in terms of the currency impact versus the 65 nanometer to 40 conversion and the CMOS conversion?

Puts and takes. Well, I will just give you the operating adjustment the upward adjustment was going to be little over $250 million.

$200 million.

$200 million, that was due to the exchange rate change, so we had enough to make it to neutralize it. Was that your question, Randy? Randy Abrams – Credit Suisse: Yes.

And our next question comes from Dan Heyler with Bank of America/Merrill Lynch. Please proceed. Dan Heyler – Bank of America/Merrill Lynch: Great. Thanks for taking my question. Dr. Chang, I had a question on the forecast revision, which you talked about I think a couple of weeks ago going from the 7% growth to the non-memory semiconductor industry globally to 4%, now for 2011. As you look at that number, your target for TSMC is still shooting for about 20%. That’s a pretty wide disparity between your customer growth in TSM, I wonder if you could help me reconcile that, given the fabless portion of that non memory sector is by far the largest and that would be an unprecedented variance between your growth and the underlying growth of non-memory.

Between what – Yeah, I know that, but he said it was a bit between –

Customer growth.

Well, look, I think that the fabric company’s growth will be greater than – in fact much greater than 4%. And I think that foundry’s growth will perhaps be even a little greater than the fabrics growth. And then I think TSMC’s growth will even be greater than the foundry’s growth. That explains the difference between the 4% and the 20% goal that I’ve set. Now, all right, maybe it doesn’t explain it to you, yet. But certainly I have looked over the numbers and I – that’s the explanation in my mind. As I said– Dan Heyler – Bank of America/Merrill Lynch: Okay.

4% is for the digital logic IC industry, but the tablets companies will have a silver higher growth than 4%. And then foundries were even a bit higher than the tablets companies and because foundries still get IBM outsourcing. And then TSMC, because of our leadership position will have even greater growth than the foundries, then the total foundries own. Dan Heyler – Bank of America/Merrill Lynch: Okay. Just the guess that presumes an outsourcing as well as some share gains, because some tablets is well over 60% of the digit logic market.

Yeah, I think perhaps the part of the key is what I already mentioned when I talked about the mobile products, the smart phones and tablets. I said that the tablets companies would have advantage in gaining more market share. So – Dan Heyler – Bank of America/Merrill Lynch: Understood, understood, thank you. And then my second question was relatively smaller one, but it looks at the strength that Lora talked about today in the computer sector being the strength in second quarter. I wonder if Lora you provide more color on the trends and technology notes. How this softer 2Q will play out. While we continue to see strength and 40 and 55, did those actually still grow in the second quarter or do we see some softness more in the leading edge due to some of the short-term wireless supply chain related issues?

Dan, this is Elizabeth. Dan Heyler – Bank of America/Merrill Lynch: Hi, Elizabeth.

Yeah, hi. We do expect that our advanced technologies such as 14 nanometer will continue to account for an increasing percent of our total weaker revenue. Dan Heyler – Bank of America/Merrill Lynch: And what about 65? Because you did allude to 65 capacity being pulled forward to 40, so with 65 still being able to grow?

I think solar among 65 is definitely is continuing to grow. As a percentage, I think we’re anticipating second quarter probably what we left in last quarter. Dan Heyler – Bank of America/Merrill Lynch: Great. Thank you.

And our next question comes from Steven Pelayo with HSBC. Please proceed. Steven Pelayo – HSBC: Yeah, one bigger picture question and one kind of housekeeping question. On the bigger picture. You talked about these killer applications of PCs in 80s, 90s in the mobile phones. Yeah, I’m curious if today’s industry environment is in fact, I don’t know, even more killer if you will. Can you help me think about this – have we ever had such a big market, billions of units, if you will, moving from feature phones to smart phone, where you’re seeing three times plus the dollar increase in silicon. I just can’t think of a time where we’ve ever had such a big increase in any other types of devices for this large market. Am my right or is this kind of a similar playbook and the same kind of killer?

Three times value, three times our value – our value from three to four times, Steven. I wasn’t talking about general silicon increase. Our strong – our, the value that we capture, TSMC captures is three or four times more in a smart phone than in a feature phone. Steven Pelayo – HSBC: So have you ever seen anything like that in the past, we had that significant, an increase in your value capture as it goes through –

Well, yeah. I think so. When the cellphone groups came about, we had I guess, almost an infinite increase because before the cellphone... Steven Pelayo – HSBC: Okay.

Yes, so... Steven Pelayo – HSBC: Okay, fair enough. And then just...

Yeah, tablets of course is a – is almost a new market. It doesn’t really cannibalize, it may cannibalize a bit of the notebook, netbook, but I really don’t think even that will happen. I think it will just be a new market, it’s a new product, and a lot of people will keep their netphones and, I’m sorry, that...

Netbooks.

Netbooks and notebooks, and we’ll buy tablets, and I have. Steven Pelayo – HSBC: And I too understand. The new products are definitely ramping up. It’s just a surprise to me that such a big market, billions of units are supposed to kind of 300 million to 400 million PCs, billions of mobile phones. The question that I – the other housekeeping question that I have was really, your capital spending plan, you talked about, what about three quarters of it in the first half of the year. So could you remind us what that does to your depreciation for the full year as well as how it will then into your cost of goods sold on a quarterly basis?

Stephen, with the $7.8 billion capital expenditure, we expect the depreciation for 2011 will be 30% higher than 2010. The total dollar amount depreciation, we estimate is going to be about $114 billion. This compared to our $88 billion last year, the 30% increase. In terms of the profile on quarterly basis, I think more than half will be on the second half. About 53% of depreciation will be in second half and 47% will be first half. Steven Pelayo – HSBC: Okay. Excellent. Thanks.

Our next question comes from Pranab Sarmah with Daiwa Capital Markets. Please proceed. Pranab Sarmah – Daiwa Capital Markets: Hi. Thank you for taking my question. My first one is on your customers’ inventory side, could you make some comments like how you are looking at your customer inventory at the end of second – first quarter?

Pranab, the present inventory were largely (inaudible) in 2010 from an overly depleted level in late 2009. So we estimate, aggregated OI was higher than the seasonal in first quarter 2011. And we extract IT companies will manage the inventories down to close to a seasonal in second quarter this year. Pranab Sarmah – Daiwa Capital Markets: So there will be some inventory adjustments in second quarter.

Some adjustment in the second quarter. I think that’s what Laura is saying.

Yes. Pranab Sarmah – Daiwa Capital Markets: Okay. Got it. And second one is on solar and LED business. What will be the milestone so that your companies can go to public, it has to be at least one years of profitability or you will like to some amount of market capitalization of those company, so that you want to make it public?

Pranab, the criteria for a company, this in Taiwan, you have to achieve a certain percentage of our OI for constructive two years and then you can –

That way, we really haven’t decided that way we will go public here.

Yeah.

It could be in NASDAQ for instance when I understand there’s really no profit –

Yeah. No criteria.

Criteria at all and now, but whatever – whether there is criteria or no criteria, obviously, we need to think about the value addition that we will achieve, so we go public. So I think that, basically I think that the companies will go public either when they have already achieved some profitability or when profit is certainly is where they’ll reach. Pranab Sarmah – Daiwa Capital Markets: Okay. Got it. Can you remind us your revenue targets from these two divisions by 2012? Did you indicate some number earlier, any sense to that number?

No, I don’t think, it’s still pretty early in the game. Of course, we have had the new businesses for about two years now. It was less than two years. And in the last two years, rather the last two years was spending formulating strategies. And this strategy was formulated all about a year to 1.5 years ago. And basically, it’s a strategy that will differentiate us by technology. I mean, we are going to be – those two companies are going to be technology companies. And then of course, we signed up with (inaudible) and I think that there has been a pretty good experience for us. And things are still very much evolving. And I think it’s pre mature to predict revenue level or anything like that, particularly in the near future. Obviously, in the more distant future like 10 years, we expect them to be billion-dollar size – each of them, billions of dollars.

Our next question comes from (inaudible) with TSMC. Please proceed.

Thank you. I’m actually with (inaudible) not TSMC. Thanks for taking my question. I want to go back to the Q2 guidance. And please help us understand with the sequential revenue growth, is that primarily the utilization rate that is causing a decline in margin profile, or is that a mix of utilization at higher cost of material? And how will the utilization rate would trend into the second half? And I have a follow-up question.

Okay. The second quarter guidance should – midpoint of profit margin above 46.5%, which is a level lower than 3%, lower than first quarter. The main reason is we’re – we have added capacity in the second quarter. The total quantity is about 8%, second quarter. With the short term with some correction on inventory and also the some destruction because of Japanese earthquake, so our second quarter will not grow as much as that we would like to see. So many (inaudible) some decrease in the profit margin.

Should it rebound in the second half with second-half, assuming seasonality would be helping with shipment growth?

Yeah. We believe the second-half utilization will be higher than the second quarter.

Okay. Thank you. And Dr. Chang, I want to ask you about the overall industry trend. Given the recent quarterly earnings year-end conference call from the big microprocessor company here in California, it seems to me that may be they could also be considered as an often coming foundry competitor, especially their commentary for sub 20 nanometer, which is – which also bode well with your commentary that the smart phone and tablets are going to be the growth driver. So I want to hear your views without mentioning any specific company. Is this a right way of thinking how the competitive nature of the industry is changing? And if so what are you doing there that would keep advantage of that TSCM offers to fabless companies?

We often I believe we are buying things. We offer technology leadership, and I don’t mean technology in technology leadership in every kind of technology. But we offer a technology leadership in the kind of technologies that the fabless companies need. We have a manufacturing leadership, which means much as lower cost to our sales, but that means extra cycle time, meaning shorter time to market for our customers. Also it means more reliable commitments, let’s say. And also it means, I was thinking about, yeah, capacity. We have I believe much more capacity available to our customers. And then of course largely, but certainly, importantly, we have always worked with customers as partners. And I think that this partnership spirit and business model, in fact I may even call, I would even call it a part of our business model. Partnership is a part of business model I think is very important. So we offer those three things. We are aware of some of the things that you have at least in five that look we think that we are watching our radar screen and we are not overly concerned.

Our next question comes from Zhou Ying with BNP. Please proceed. Zhou Ying – BNP: Hi, good evening. Just want to talk about the 28 nano. Could you get us some idea about what percentage of 28 nano right now is decide on high-k metal gate and what percentage on polygate?

I don’t know whether we have that number, do we?

At this point we have already shipped 28 nanometers to our customers and our customers have already started shipping in both high-k metal gate. So we also have other – in polygate.

We have that number, it is two. But we don’t have that number here tonight. Zhou Ying – BNP: Okay. Actually not exact the number, but maybe some idea, is it polygate over 50% of the total sell off?

I would say, just taking a guess, I would say the rate of majority is being in high-k low gates. Zhou Ying – BNP: Oh okay. And is it possible to talk about production yield differential between the two profits?

Production yield.

Production yield of our company 28 nanometer LP. No, I don’t think I can comment on that. I think it’s in pre-measured to talk about those now. We’re just ramping up, we are just working out the tape outs, we are just getting the tape outs and the exercise every one of them and I think it is premature to talk about that now. Certainly we would not be taking the tape out, if the zero protection was not good. And I’m seeing that the zero projections at this point looks pretty good rather than to what we experience in the past with 40 nanometer and 65 nanometer.

Well operator, in the interest of time, I think we’ll just accommodate two more callers’ questions. Thank you.

Our next question comes from Satya Kumar with Credit Suisse. Please proceed. Satya Kumar – Credit Suisse: Yeah. Hi, thanks for taking my question. Just was curious if you able to disclose the equipment supplier cable balance at the end of Q1?

Equipment supplier?

Can you repeat, what at the end of Q1? Satya Kumar – Credit Suisse: On your 20-F you disclose the payable balance of equipment suppliers. Do you have the balance information at the end of Q1?

Yeah, because, as we said last time, CapEx will be very much front-end loaded this year. So last year and we were – have order, which for the equipments will be delivered in the first half of this year. So that explain why the accounts payable to equipment vendor was high in the first quarter last year. A lot of that has been paid out, last year. Just looking at the 20-F. Satya Kumar – Credit Suisse: Okay, okay. And you mentioned that there was the lot of conversions from 65 nanometer to 40 nanometer that have affected your – lower your CapEx because of that?

Not a lot, I said a convergence. I would say it wasn’t a lot, it was not a big percentage of the total 65 nanometer capacity. Satya Kumar – Credit Suisse: Okay. Do you see more convergence happening in the second half of the year or further reducing the CapEx?

No, I’m not anticipating any. Satya Kumar – Credit Suisse: All right. Thank you.

Because I’m not anticipating anymore, because I think that the 65-nanometre capacity will be quite fully utilized in the second half.

And our last question comes from C.J. Muse with Barclays Capital. Please proceed. C.J. Muse – Barclays Capital: Yeah, good evening. Thank you for taking my question. I guess first question – expected demand for leading-edge capacity. I’m curious where you see that trending in to 2012, 54% of your business were 65-nanometer and below, and I think as you add on last 28, and migration to 40 from 65, what do you think that percentage could be looking into 2012?

It’s probably too early to give you a number about this leading edge technologies contribution to revenue. But just look at our 40-nanometer will continue to grow from the current level. We are also – of 28 nanometer and we will 1% in third quarter, 2% to 3% in the fourth quarter. And that number will continue to go up for the whole year 2012 since that’s a very (inaudible). C.J. Muse – Barclays Capital: That’s helpful. And then –

We are still talking about 65, 45, 40 and 28. If you can talk about those three notes then will be combined note I think it will probably increase the percentage of those three combined notes that will be almost same definitely. C.J. Muse – Barclays Capital: And as you think about 28-nanometer and your leadership there on the gate last side, what are the implications in terms of the mix growing there and CapEx requirements beyond your budget here in 2011?

Well, future budgets that is measured in the financial strategic plan, which I alluded to earlier. We have taken a greater capital intensity into consideration. And I think that means the whole issue is resolved in a greater capital intensity for us, but then of course we need to try to still maintain the returns for about 20% ROE. And so all these coordinated in the plan. And we are now executing the plan. We have been executing the plant and we think that it’s coming along. C.J. Muse – Barclays Capital: It’s very helpful. And one last question from me. You commented that 70% of your budget will be spend in the first half of ‘11. And I’m just curious if you talk to some of your equipment suppliers, they’ve referenced push out by foundries at the 65 nanometer node. So I guess if that’s true in the case, will you spend the 70% in the first half or might some of that lead into the second half?

Well, it’s just talking about 65 nanometer, then that may well be true. But I think we said earlier that most impact – almost all this is capital expenditures are not in 40 and in 28. In fact, there’s something in 20, I think.

Yes.

Did I explain it? C.J. Muse – Barclays Capital: Thank you.

All right. So that’s good. This concludes our Q&A session. Thank you for your participation. We look forward to talk to you in the next quarter. Bye bye.

Before we conclude TSMC’s first quarter 2011 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.