Good afternoon. My name is Marcello and I will be your conference operator today. At this time, I would like to welcome everyone to the Ultra Clean Technology third quarter financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. (Operator instructions) Joining us today is Mr. Jack Sexton, Chief Financial Officer, and Mr. Clarence Granger, Chairman and Chief Executive Officer. I will now turn the call over to Mr. Sexton. Sir, you may begin your conference.

Thank you, Marcello. Good afternoon and Welcome to our third quarter financial results conference call. My name is Jack Sexton, Chief Financial Officer of Ultra Clean Holdings, and with me today is our Chairman and Chief Executive Officer, Clarence Granger. A few moments ago we issued a press release reporting financial results for the third quarter of 2008. The press release can be accessed from the Investor Relations section of Ultra Clean’s website at uct.com. In addition, we have arranged for a taped replay of this call, which may be accessed by phone. This replay will be available approximately one hour after the call’s conclusion and will be accessible for two weeks. The dial-in access number for this replay is 888-642-1687 for domestic callers and 706-645-9291 for international dialers. The pass code is 68499647 for both domestic and international callers. This call is also being webcast live with a web replay also available for 14 days from the Investor Relations section of our website at uct.com. Together with our recently issued press release, this conference call enables the company to comply with the SEC regulations for fair disclosure. Therefore, investors should accept the contents of this call as the company’s official guidance for the fourth quarter of fiscal 2008. Investors should note that only the CEO and CFO are authorized to provide company guidance. If at any time after this call we communicate any material changes in guidance, it is our intent that such updates will be done officially via public forum such as a press release or publicly announced conference call. Matters that we discuss today include forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995 related to matters including our future financial performance, new product orders and shipments, consolidation of activities in the…

Thanks, Jack. Despite an increasingly difficult environment, we achieved third quarter results within our guidance range. We continued to increase our revenues in the solar, flat panel and medical device markets, partially offsetting lower revenues in semiconductor capital equipment. Total non-semi revenues increased by 21% or $3.2 million to $18.2 million, or 30% of total revenue in the quarter. We successfully initiated production and sales of two new customer mandates, which were previously announced. We increased revenue from our two China facilities by 14% sequentially to 24% of our total sales. As previously projected, our second China facility reached profitability in the third quarter, less than one year after its opening. We secured a partnership agreement with Cascade Microtech to manufacture its 200 millimeter probe stations. We completed consolidation of our facilities in the Silicon Valley on schedule and on budget. And finally, we continued all forms of cost cutting in the U. S., including reductions in force, factory and office shutdown days and continued reduction of discretionary spending. I will now provide further details on these accomplishments. As I just mentioned, total non-semi revenues increased by 21% or $3.2 million to $18.2 million in the quarter. Breaking this down by industry, Medical Device revenue increased by $500,000 to $7.6 million, equating to 13% of total sales, on the strength of our expanding partnership with Intuitive Surgical. We also began prototype production of the recently-announced Flusher Cart assemblies, which increases our market opportunity with Intuitive Surgical by approximately 20%. Additionally, we successfully transferred production of the ISI patient side robots to our new Hayward facility, and we plan to transfer manufacturing of the Flusher Cart assemblies to Hayward in October. During the quarter, our Flat Panel Display business increased $1.8 million to $9.3 million or 15% of total revenue, due…

(Operator instructions) Our first question is from the line of Edwin Mok with Needham & Company. Please go ahead with your question. Edwin Mok – Needham & Company: Hi, guys, thanks for taking my question. First, a teething question, do you have any 10% customer, and how much revenue was recognized from these customers?

We maintain three 10% customers, I am not going to look through on the call here, Edwin, but historically, the two big semiconductor customers that we work with, and then of course our large medical device customer has recently become a 10% customer. In total, they range in the high seventies or low eighties in total, between the three. Edwin Mok – Needham & Company: That’s great. I have a question regarding that recent announcement regarding the patent infringement. (inaudible) from reading the press release that it is a judgment against Ultra, I mean, I was just wondering what impact would that have on Ultra Clean, and you mentioned a Predator line on the press release, I was wondering how much revenue have you guys recognized from that line before?

Edwin, this is Clarence. This is kind of an old issue. We had wrapped this up at the end of 2007, but we had continued with an appeal. The Predator a substrate design that UCT developed for its gas panel subsystems; it is actually a lower cost to manufacture substrate than what is currently widely used in the marketplace. Our competitor sued us claiming that that design infringed on one of their patents as a consequence, and they were successful in that claim. As a consequence, we were not able to bring this new lower cost design to market. So, we had a nominal judgment against us, I believe it was around $20,000, do you remember, Jack? But that has long since been resolved. This was just an appeal, we thought again that we might win this appeal and be able to bring this lower cost concept to market. We did not win that appeal and as a consequence, we won’t be bringing this to market. It doesn’t affect any of our current or future business opportunities; it just would have meant a cost savings for UCT and our customers that we can’t implement now. Edwin Mok – Needham & Company: You said compares the (inaudible) or you see any impact on your business as a result of not able to provide product (inaudible)?

It doesn’t preclude us from using what is the industry standard and what everybody else uses today. So it would have been a competitive advantage if we could have brought it to the marketplace. Unfortunately, we can’t, instead, we remain at competitive neutral position. Edwin Mok – Needham & Company: I see. That is fair. Talking a little bit about proton dynamics, you mentioned that your China revenue has increased and you are making progress in transitioning to China for manufacturing. I’m just curious, have you guys started recognizing revenue from shipments on that platform, and given your strong guidance for the fourth quarter for non-semi, is there more growth there or high (inaudible)?

Sure. So most of our growth associated with the flat panel business in Q3 was related to the growth in proton dynamics. So we are now shipping in volume production Gen-5 testers from our China facility. We have not shipped any Gen-8 tools. Those are expected to go into production in late Q1 or Q2 of 2009.

But, Edwin, to your question about revenue recognition, we have recognized revenue on those turnkey system shipments, and yes, we are enjoying growth in that aspect of our flat panel, but also our core customer flat panel business is doing well as well.

Yes, that has been very successful for us. Edwin Mok – Needham & Company: Great. One last question. Yes, I understand your visibility tends to be a little more limited given your supply to the semi-cap guys, but given that from (inaudible) you had quite a big drop, based on your guidance, maybe around 70% or so, how do you kind of look at the semi-cap end market right now, do you see a bonding process or do you see more headwind in the first half of 2009, how do you visualize that?

Well, my customers seem to be indicating that we are not likely to see any further reductions, but I don’t think anybody really knows right now, Edwin, I certainly don’t know. We don’t really have access to end user information. All we have is access to what my customers were telling me. Everybody believed that we are approaching a bottom. I don’t know how much lower semi-cap could go, but yes, the general thesis is that most of our customers think we are approaching the bottom. We might stay here for quite a while and we are operating on that assumption, and so, we are restructuring our businesses. As we talked about, we are consolidating into Hayward, and we have talked about future consolidations that we are already starting to implement, but I am not prepared to talk about right now, but we expect to bring down our cost considerably, we expect to see significant continued growth in the non-semiconductor portion of our revenue, and we will deal with whatever happens in semiconductor.

And Edwin, just to calibrate that, you know, from our peak, the midpoint of our Q4 guidance is 45% of our peak in Q1 of 2007, so we are at about 55% drop taking that data point. Edwin Mok – Needham & Company: Okay, thanks.

You are welcome.

(Operator instructions) Our next question is from the line of Jay Deahna with JP Morgan. Please go ahead with your question. Jay Deahna – JP Morgan: Thanks a lot, guys. The first question, following up on Edwin’s last question, do you think that your guidance for the fourth quarter incorporates some level of inventory depletion of your products at your semiconductor customers?

Yes, Jay, this is Clarence. The comment was does it include some inventory depletion? First of all, we pretty much build the order, so our customers don’t have significant amounts of inventory of our products, because they are all highly customized. Given that, our customers do take order of products within a couple of weeks of their scheduled shipment and they have obligations. And in some cases, they take our products and end up having their orders cancelled while they still have some of our products on hand, and so as a result of that, they do end up with some inventory of our products and the short answer to your question is yes, we are seeing – what happens is, our customers then want us to reconfigure these subsystems for different customers or different applications, and so, yes, we do see, as we get to a depressed situation like this, we do see a higher emphasis from our customers on reconfiguring their inventory. Jay Deahna – JP Morgan: Based on your experience on previous downturns, has that proven to be some sort of an indication of finding a bottom?

I think we are finally getting to the point where everybody is kind of (inaudible) and that tends to indicate we are probably getting close to a bottom. Certainly, some of our major customers in some of their recent earnings calls have certainly seemed like they were being very cautious and conservative and so again, I have been wrong several times already in projecting a bottom, but it does feel like that the numbers are pretty low and our customers are doing the kinds of things that they do as they approach a bottom. Jay Deahna – JP Morgan: Okay, and then, if you look at what you guys have done in terms of building out and ramping up your China facility over the last few years, and at the same time going from a gas delivery subsystems supplier to being a broad line supplier of subsystems for semiconductors and the other three industries you indicated, have you actually failed to (inaudible) in the strategic roadmap despite the fact that just general semiconductor-related demand is weak?

I think last time we said out of the 8 new product opportunities that we had targeted in 2007, we achieved 7 of them, so I would say we had one that didn’t work out, but that is it. Of the 5 that we have talked about this year, we have achieved them all. We are pretty proud of what we have done, I mean, a few years ago, we were strictly a gas panel manufacturer, we have since expanded into where the majority of our revenue is coming from non-GAAP delivery subsystems and when we started recognizing this slowdown in semiconductor capital equipment in late 2007, we set ourselves a goal of expanding beyond the traditional semiconductor capital equipment industry, and we think we have been pretty successful at that. So I guess, by and large, we feel pretty comfortable about having executed on the things that we have targeted and about being fleeter foot and moving into new areas to increase our addressable market. And so, we are pretty excited about our opportunities going forward. We are disappointed with the situation in the semiconductor capital equipment industry, but we are very proud of what we have been able to do and how quickly we have been able to transform ourselves as a company. Jay Deahna – JP Morgan: Okay, then two other quick ones. Number one, how much the longer does flat panel hang in there before that drops off, because obviously you are shipping into a backlog situation where the other side of it, the orders are weak, and does that stabilize the sequential growth potential of your non-semi business going into the first half of next year?

Sure. So we are aware that the flat panel business is going to slow down. We have seen and we have got some of that in our data. But we also absolutely believe that – we know our customers have given us indications that the solar opportunities are projected to more than dwarf the decline in flat panel. So, our projection, as I said, we did $18.2 million from these three adjacent markets in Q3. We are projecting $22 million in Q4. So if you average that, that is about $20 million in revenue right now. We are projecting by Q4 of 2009 to grow that by an additional 60%, so we would expect that revenue from non-semiconductor sources to be at least $32 million per quarter by this time next year, and we are pretty confident of that. We have got feedback from our existing customers and then on top of that, we think we have got some pretty good additional opportunities in the pipeline with potential new customers. Jay Deahna – JP Morgan: So we should be modeling on semi to just kind of grow sequentially even in 1Q if flat panel comes on.

Yes, in the past, we have tried to indicate as a percentage of our total activity, but that infers a rate of growth for semiconductor, which tends to makes a lot of sense. So we have just gone to predicting it in the absolute sense. Jay Deahna – JP Morgan: Okay, and then lastly, your new mandate this quarter from Cascade. It is a pretty small company, so it is pretty small mandate. Usually, you have several mandates that total a kind of a big chunk and I think this is the first time in a while that you haven’t had something that was sort of plasma-centric or a little bit more forward looking, so to speak.

Yes. Jay Deahna – JP Morgan: So, is there a buildup of compelling mandates in the sales pipeline that might come loose over the next 90 days or so?

Yes, all I can say is that there are more opportunities there than we might have recognized this quarter. We do have quite a few in the pipeline. Some of them are related to solar, some of them are related to our traditional semiconductor capital business. There will be more opportunities, one of our major customers is making a significant move to Asia and we have been led to believe that there will be some specific opportunities associated with that. So yes, we absolutely believe that there are going to be some bigger opportunities near term. Jay Deahna – JP Morgan: Okay, thank you very much.

You are welcome.

Our next question is from the line of Jesse Pichel with Piper Jaffray. Please go ahead with your question. Elaine Clay – Piper Jaffray: This is Elaine Clay [ph] for Jesse Pichel. I just wanted to dig into the solar revenue a little bit more. Was all of the solar revenue from the 14 gas abatement systems or was there any revenue from the gas delivery.

Most of it was gas abatement systems, and there was a little bit of gas delivery as well. We are expecting, as Clarence indicated about the growth going forward, we are indicating that both are going to be a big part of the growth driver, but in this most recent quarter, it was mostly gas abatement. Elaine Clay – Piper Jaffray: And then in terms of the non-semi mix going forward, I was wondering if you could talk a little bit more about that right now, solar is about 2% of that, I was just wondering how you would expect that mix to shift.

So without specific quantification, we would expect our medical device revenue and percentage to increase gradually. Our primary customer, Intuitive Surgical has some very strong projected growth rates. We would expect our flat panel opportunity to decline and then stabilize again probably at slightly lower percentages than we are currently at, and we would expect a very strong increase in our solar opportunities, both with our existing customers and new customers. It is very difficult for me to quantify, but I would expect it to be well over 10% by this time next year. Elaine Clay – Piper Jaffray: Well over 10% increase?

Well over 10% of our total revenue by this time next year. Elaine Clay – Piper Jaffray: Okay, so that 60% growth, a good portion of that, would it be fair to say it would be coming from solar, depending on the strength in non-semi?

That is correct. Now of course that is based on our customer’s projections but, they seem to be progressing well. Elaine Clay – Piper Jaffray: Do you have a backlog number for the solar portion of the business?

We don’t work with backlog. We turn the business within the quarter, so we don’t call it backlog, but we do have, of course, existing products that sell into solar, and as we indicated, we are discussing with additional new solar customers on a regular basis. Elaine Clay – Piper Jaffray: All right. And just one question on gross margins in the next quarter. Is that something that you expect it to sort of come back up to earlier levels or is it sort of (inaudible) going forward?

That is a good question, Elaine. One of the things that I would like to indicate is that our gross margin changes have been strictly volume related. We basically manage through the decline in the industry and declines in our volumes. And the decline that you see in our gross margin percentage is strictly related to that volume. In fact, we have performed a little bit better than that volume model would indicate, if you look at it from the second quarter of 2008. So, in this coming quarter, we are of course indicating flattish, basically flat margins, because the volumes are continuing down, so our efficiencies are continuing, but we are battling further declines in volume. Elaine Clay – Piper Jaffray: Okay, great. Thank you so much.

(Operator instructions) Our next question is from the line of Jenny Noone [ph] with JP Morgan. Please go ahead with your question. Jenny Noone – JP Morgan: Hi guys. Did you give your non gas panel revenues for the quarter?

We didn’t indicate that, Jenny, but it is pretty flattish. The profit margin of the non gas is remaining at just above 50% with gas just below 50% for that piece of our business. Jenny Noone – JP Morgan: Okay, so your gas delivery is just below 50%?

Correct. Jenny Noone – JP Morgan: Okay.

In line with what we indicated last quarter. Jenny Noone – JP Morgan: Okay. And Clarence, do you have a sense of how big that Cascade mandate is going to be next year?

Sure, let me give you an idea. First of all, we are clearly starting out with 200 millimeter, but we have been led to believe that if we do a good job on 200 millimeter, that could expand. Their quarterly cost of goods sold is about $10 million, so we are targeting somewhere between 25% and 35% of their cost of goods sold, probably in the next two to three quarters. So we would expect it to be around $10 million to $15 million a year run rate at about this time of next year. Jenny Noone – JP Morgan: Okay, thank you.

Thanks, Jenny.

Our next question is from the line of Adam Meisel with Aquifer Capital. Please go ahead with your question sir. Adam Meisel – Aquifer Capital: Hey, Clarence; hey, Jack. A couple of quick questions. Can you give us a sense of why are the recent additional headcount cuts and the movements in your business, about what level of revenue leads you to be cash earnings breakeven on a quarterly basis?

It would be a further drop from where we were in this quarter. So in the mid-$50 million range for the quarter. $50 million quarter, we generated $0.5 million in vested cash net income. So you can take $3 million to $5 million of additional reduction in our revenue and we will still be positive from a cash generating standpoint.

And what we haven’t defined, Adam, is we are taking some additional actions, which will further reduce our breakeven. We are assuming that we are going to be in this for a long haul. So our expectation, as we said, $47 million to $53 million this quarter, our objective is going to be to make sure we drop our cash flow breakeven to around a $50 million run rate. Adam Meisel – Aquifer Capital: Got it. Now you have got sort of (inaudible) question, which is, in this environment, when you talk to your customers, what do they describe as the generators of demand, currently just for systems, what was making people order and then what going forward are the things they are watching or you are watching that could actually start to see this move back up again a demand for new tools and new capacity, or technologically new capacity?

Well, some of this ends up getting driven by the macro environment, where we are talking about just end user demand and so everybody is concerned about a recession, worldwide recession and I think that is just making everything worse and so, I think what it is going to take is some level of confidence that the macro environment is stabilizing or improving and then we will start seeing capacity buys. What we are seeing now, primarily are new technology buys, and buys that customers have to make. That is in the semiconductor capital equipment. In the other areas in the solar and the medical device side and the flat panel side, particularly in the medical device side and the solar side, we see a very strong demand and user pull-through. Those applications seem to have growth opportunities beyond the current economic environment. Adam Meisel – Aquifer Capital: Last question would be, in this environment, do you see or have a perspective on a number of – whether smaller or similar sized manufacturers of components who are struggling and as a result that may be (inaudible) consolidation opportunities that allow you to sort of take advantage of your relatively-stronger position?

Something like that is something that we would always be exploring, should a reasonable opportunity arise. We think we are in a strong, stable position, we think there are going to be consolidation opportunities and we would be prepared to take advantage of that if the opportunity came along. That is certainly what happened with the Sieger opportunity. Adam Meisel – Aquifer Capital: Yes, I used to think there has got to be some smaller businesses that just can’t afford to stay, are not enough scale that they would be able to afford to survive this kind of a downturn, either with customers or technology, so it makes sense that they be out there for you.

We wouldn’t be afraid of doing something in this environment.

The only thing that is given in a similar way, Adam, is you know, OEMs and then equipment makers are realizing more and more that they can benefit tremendously in this fiscal decline by using outsourcing. So, what we do see is the spend towards outsourcing continuing in a really strong way despite the tough economic conditions.

What Jack is alluding to is Cascade Microtech. We are seeing other smaller manufacturers reassessing whether it makes sense for them to be manufacturing in volume or whether it makes sense for them to look an outsource solutions provider like UCT. Adam Meisel – Aquifer Capital: Do you think those kinds of Cascade-like opportunities, there are enough of them out there that can start to see your semi business growing even in the event of an overall growth in the industry, can that happen or is the traditional module you manufactured just too big a piece of the denominator I guess (inaudible) to drive growth?

Sure, Adam, this is Clarence again. So, I see small incremental opportunities with companies like Cascade, where we are talking maybe $10 million or $15 million a year incremental opportunity. I think by far the biggest growth opportunity is when semiconductor starts to grow again. Again, we are kind of on the tail end of the food chain there. So, when things are slow, we tend to get hit pretty hard; when things take off, we tend to take off very dramatically. So, what we are attempting to is augment in the semiconductor capital equipment area with some of the smaller players, and then expand beyond the semiconductor capital equipment and other growth areas and ultimately, we expect to see a dramatic growth when semiconductor capital equipment starts back on the upside. Adam Meisel – Aquifer Capital: Okay, thanks guys, I appreciate it.

You are welcome.

(Operator instructions) And it appears that we have no questions at this time. Gentlemen, do you have any final comments you would like to add?

Yes, Marcello. Just to thank everyone for joining the call and we look forward to seeing our investors on the road. We will be in the Northeast in the first couple of weeks of November and then of course doing conferences including the Needham conference in January. So, I look forward to seeing everybody on the road, and thanks for joining the call.

This does conclude today’s conference call and you may now disconnect.