Hello, my name is Dan and I will be facilitating the conference call today. I would like to welcome everyone to UMC’s second quarter 2007 earnings conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question-and-answer period. Please follow the instructions given at that time if you would like to ask a question. For your information, this conference is now being broadcast live over the Internet. A replay of the call will be available at www.umc.com under the investor relations investor events section through Tuesday, October 2, 2007. Also, a telephone replay of the call will be available from 10:00 a.m. New York time and will run until midnight on August 2, 2007. To access the replay, please call 888-286-8010, or 617-801-6888 if you are calling from outside the U.S. The access code will be 28979718 throughout this period. I would now like to turn the conference over to Mr. Qidong Liu, CFO of UMC. Please proceed.

Thank you, Operator. Hello, everyone. This is Qidong and thank you for joining our second quarter conference call today. Here we also have Dr. Jackson Hu, Chairman and CEO of UMC; and Mr. Bowen Huang, Senior IR Manager. Before we start our second quarter 2007 earnings conference call, I need to take a few seconds to go over our Safe Harbor policy. Certain statements made during the course of our discussion today may constitute forward-looking statements that are based on management’s current expectations and beliefs, and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including risks that may be beyond the company’s control. For this reason, please refer to UMC’s filings with the securities authorities in the U.S. and also in the ROC. Now, for the second quarter results, for the first part of the call, I would like to give you a short summary of our second quarter results. Our revenue was NTD 25.1 billion, which increased by 9% quarter over quarter compared to NTD 23.3 billion in the first quarter of 2007. On a year-over-year revenue comparison, revenue decreased by 2.5% from NTD 25.75 billion in the second quarter ’06. Gross profit for the quarter was NTD 4.96 billion, or 19.8% of revenue, compared to NTD 3.68, or 16% of Q1 2007 revenue. Operating profit was NTD 1.23 billion, or 4.9% of revenue, compared to NTD 18 million, or 0.1% of first quarter 2007 revenue. Net income was NTD 4.91 billion in second quarter 2007, compared to a net income of NTD 1.46 billion in the first quarter of 2007. EPS for the quarter was NTD 0.28 and earnings per ADS were $0.043. This is a short summary of our first quarter results and more details are available in the quarterly report, which has been posted on our IR website. Next, Dr. Jackson Hu will provide you with the business update and our guidance for the third quarter of 2007. Now I would like to turn the call over to Jackson.

Thank you, Qidong. Welcome, everyone to our second quarter conference call. We appreciate your participation on this call and your interest in UMC. Before we move into the Q&A session, which we always like to devote the most amount of time to, I will give you some insight on where we think we are heading in the third quarter. Starting from June, we have seen a continuous reduction of our customers’ inventory levels. In fact, quite a few of them are currently experiencing inventory levels that are lower than normal. This situation leads us to foresee very strong demand across the board for all applications in Q3. Due to much improved product and the customer mixes, we are taking full advantage of this seasonally strong demand. On the advanced technology front, we continue to work with several customers on multiple products. The production yields for 65-nanometer products have been very satisfactory. However, we have also noticed that customer demand for 65-nanometer product is still in the early stage of development and a meaningful percentage of revenue from 65-nanometer may not be seen until early 2008. For 45-nanometer, we will have product tape-out in Q3. We believe that applications will make good use of the increasing chip density offered by Moore's Law, which will enable the integration of more and more features on a single chip. The future of the semiconductor industry will be defined by the proliferation of these SoCs. Electronic product companies will utilize these chips to roll out a continuous stream of innovative products that feature increased functionality, lower power consumption and higher performance, and current innovative products such as the game console Wii and the iPhone can be manufactured more cost effectively. Now, let me provide you with the guidance for third quarter 2007. Shipments are expected to increase by approximately 20%; wafer ASP in US dollars is expected to be from the previous quarter; capacity utilization rate will be approximately 90%; as for profitability, gross profit margin will improve by approximately 5 percentage points; the percentage of revenues from 90-nanometer and below will increase to 25%; the communication segment is expected to be the strongest, followed by computer segment and consumer segment; finally, our 2007 CapEx budget will be within the range of $1.0 billion to $1.2 billion. This concludes my comments. Thank you again for attending today’s conference. We certainly appreciate your continued interested in and support of UMC and we will now take your questions.

(Operator Instructions) Your first question comes from the line of Pranab Sarmah from Daiwa Securities. Please proceed.

Thank you for my call. Congratulations on a good set of results. I have a couple of housekeeping questions and one strategic question. The housekeeping is could you give us what would be the non-operating level on third quarter? Any guidance on that line?

The non-operating profit should be equal or similar to that of second quarter, or slightly better. As you may be aware, we have announced we are selling two of our invested companies, namely OTEC and ITE. In the meantime, third quarter is the peak season in terms of cash dividend collection. We have collected cash dividends from our holdings in Mediatech and [Promos] already, so altogether we expect to see equal or higher non-operating income in the third quarter.

All the other foundries are talking about basically tight capacity on the [inaudible] fab, but your guidance, you have a tight -- I mean, your capacity relations are stronger on 12-inch fab. Any particular reason behind that? Any of your mature technology customers is migrating to the advanced technology -- something, some color in that area?

The mature technology also has a very strong demand. What we are saying is that the 12-inch fabs have higher loading than the 8-inch fabs, but both are well-loaded.

And your 45-nanometer [inaudible] is coming out in the third quarter. Could you give us some idea, like this customer is from, what segment is it from, the handset side, or --

Communications.

Communications. Okay, and last question is on your China investment side. I think your board has already approved that China investment part. What is the timeframe you are looking at to apply for Taiwan Government and potentially get some approval?

The foreign approval is nothing related to a semiconductor. It is actually a joint investment with one of our invested companies, Unimicron in the PCB space. They are somewhat constrained by the limits on the usable fund ratio to their paid in capital, so they invited UMC to do a joint investment. It is a small amount from UMC's perspective but it is purely on this PCB operation. Up to now, we have not had any approval from the board yet regarding the semiconductor side of the investment.

Thank you.

Your next question comes from the line of [Shales Geli] from Nomura Singapore. Please proceed.

Thanks for taking my question. Firstly, if you could help explain as to what proportion of your business currently is coming from wireless and when you talk about the strength in the next quarter, is it primarily driven by single-chip solutions, or is it more broad-based?

In Q2, 55% of our revenue was contributed by communication products, which consists of both wireless and wireline.

Can you provide the split there?

The split? It is about four to one, so 80% are wireless and 20% for wireline.

And going forward, when you talk about the strength, my question is was it primarily driven by single chip solutions, or is it across the board among all your wireless customers?

Pretty much across the board for all the wireless customers. And SoC right now is still in my opinion in the early stage in the industry and it will proliferate over time.

Could you provide some sense as to what proportion of your business was 65-nano and where do you expect it by the end of the year?

I think for Q2 it is around 2% from 65.

As we highlighted, we don’t expect to see meaningful volume until early next year, so it may not be very much different throughout the rest of the year in terms of 65 revenue. Of course, it should increase but not in a very meaningful magnitude.

Thanks a lot.

Your next question comes from the line of Steven Pelayo from HSBC. Please proceed.

I am curious if your guidance for depreciation this year on a total basis is still down 10%, and then what is your guidance for depreciation that actually just occurs within the COGS line?

The guidance is pretty much the same but just for your precise calculation sake, we provide a more precise guidance, which is the depreciation should be down 12% year over year, compared to last year. And the quarterly increase in the third quarter should be 3% to 4%. There will be a higher increase in Q4.

And when I look year over year here, your revenues are roughly the same in the second quarter. However, the depreciation was up around 39% of revenues. And now on this most recent quarter, about 31.5%, so about 7.5% of gross margin right there alone on the much lower depreciation. I believe depreciation in COGS is down about 20% year over year. Since your total gross margin reported is about the same year over year, it really means that the variable or cash COGS component has gone up quite significantly. I am wondering if that is an opportunity for gross margin upside going forward, if we are going to be able to see that cash COGS component come down.

It is not that kind of straightforward calculation. Depreciation also is allocated to R&D and other operations as well, not only to the cost of goods sold. So the way you calculate may not be 100% correct but again, just to pinpoint the depreciation guidance, this year we expect to see somewhere between 13% decrease in depreciation year over year, and the third quarter we expect to see 3% to 4% increase quarter over quarter.

Okay. I think the difficulty is really just trying to figure out the portion that is allocated to the cost of goods line versus other lines and overall, so we can talk more about that offline. Thank you.

Your next question comes from the line of Dan Heyler from Merrill Lynch. Please proceed.

Good evening. I wanted to ask you a question on the pricing environment, if you could update us on how things have evolved relative to previous cycles. Is it worse, better, or in line with your experience in the industry?

On the pricing, there is pricing pressure on the leading edge and but the blended ASP is still sustainable, due to better product mixes, and of course the better utilization helped relieve some pricing pressure.

Okay. As you enter an upturn, customers come back and place orders and I imagine they negotiate pricing with you a little more intensively as they have units. Have you seen more intense pricing pressure than in the past?

When the loading, when the demand is strong, then you see less of -- [Multiple Speakers]

So now you are moving into -- are you saying that pricing now is moving more into a stable environment, relative to two quarters ago?

In the foreseeable future, for the foreseeable quarter, that is the case.

Okay, and then on -- if you could talk a little bit about the overall engagement activity on 65. The issue there on the pick up, is it related to the end market readiness for next generation 65, entering parts such as 3G phones and other phones that you are waiting for market acceptance that are being tested or is it a function of you getting qualified into those customers, you are still working on getting designed in? Or is it just a question of demand?

All of the above, and I can elaborate more. Yes, as a matter of fact, we have engaged with 11 customers and we have more than 20 products at various stages. Five of them are in production. However, we did notice that the end market demand is not as strong as we originally expected. We also noticed that due to the complexity, increasing complexity of the products, customers are taking longer to tape out and to qualify the products. So as a combined result, that is why the 65-nanometer revenue contribution we believe will be delayed through early next year.

Okay, and then on the end demand side of that equation, what are customers telling you? Is it more related to product launches? Because this is, I imagine, next generation products, right? So are they waiting for signs of demand pick-up before launching or can they give you a better sense of when these products will be launched?

They did not give a very clear picture.

Okay. All right, because there is quite a bit of 65 into feature phones and next generation phones, and those are starting to get launched, so I am wondering why, when you expect to see that benefit.

It depends on customers.

Right. Okay, thank you.

Your next question comes from the line of Mark FitzGerald from Banc of America Securities. Please proceed.

Thank you. With the tight capacity, are you going to move ahead on new 12-inch factory at this point?

Well, our CapEx plan for this year is unchanged.

But looking out into 2008?

2008, we will make that decision by the end of the year.

Okay, and the second issue is on the 65-nanometer slowing, is there any issue here with the costs associated with your customers, with the design costs going up so significantly that that is slowing customers down or preventing some customers from making the transition?

No, I don’t think that is the reason. Also, I explained this afternoon in Taipei that we are seeing some of the customers are skipping nodes. In other words, they do not follow the Moore’s Law as closely as they used to. I will give you an example. One customer may skip, may consider 0.13 micron as a major node and the 90-nanometer as a minor node, and then they skip to 65-nanometer as a major node again. And whereas another customer may treat 90-nanometer as a major node and 65-nanometer as a minor node. So due to a couple of reasons, in my opinion, number one, the complexity of the design is taking customers longer time, especially the preparation of IP is taking time. Secondly, customers, end customers, whether they need more time to qualify the products. So those two reasons contribute to the skipping nodes situation.

Thank you.

Your next question comes from the line of Michael McConnell from Pacific Crest Securities. Please proceed.

Yes, I wanted to touch on something you alluded to earlier about the cadence to which some of your customers are ramping the most current or leading edge process node. So you are basically saying that with 65-nanometer, because the complexity of some of these devices is increasing, the ramp you have seen at some of the customers has been slower than maybe what you saw at 90-nanometer. Is that correct?

I also said some other customers consider 65-nanometer as a major node.

Okay, but if we look at just 65-nanometer across the board, do you view the cadence to which you will be ramping that node relative to 90-nanometer to be at the same pace or faster or slower?

I think from a manufacturing ability point of view, 65-nanometer is a smaller node actually from 90-nanometer, so from a technology readiness or manufacturing ability readiness point of view, 65-nanometer is ready.

Okay, but that’s the process. But you have to also think about the design on that process, so with the design complexity increasing, do you expect overall the cadence to which you are ramping 65-nanometer or the pace to be as moving up at the same rate as 90-nanometer?

Yes, I think just initially it will take a little bit longer. Once customers are ready, then it will start to ramp.

Okay, and then what about with 45-nanometer? What do you expect with that?

For 45-nanometer, 45-nanometer is relatively speaking still a little bit early. But I think for applications that can benefit from 45-nanometer, they are moving forward fast.

Okay. Thank you very much.

Your next question comes from the line of Sunil Gupta from Morgan Stanley. Please proceed.

Good evening. Could I just go back to your earlier comments about wafer pricing environment? You mentioned that the pricing erosion is quite steep for the leading edge. Is it only at 90-nanometer, or are you also seeing it at 0.13 micron? Would it be fair to say that you are seeing more than 5% decline in pricing on a same-node basis every quarter?

I wouldn’t give an exact percentage number because it is a very complex situation. Certain customers’ products may have a different number of layers, but yes, for both 0.13 micron and the 90-nanometer, we see price pressure.

Okay, and could you also provide an update on your capital [inaudible] timetable, if there’s any changes to that?

We have, pending the application to the local authority, the FSC, and they are in the process of reviewing. If we follow benchmark, other companies’ similar case, we should receive the approval by the middle of August. After we receive the approval, we will provide a very detailed schedule to investors and the expected cash return should happen in late September, early October. It takes about one-and-a-half months after we receive the approval.

Thank you.

Your next question comes from the line of Bhavin Shah from JP Morgan. Please proceed.

Good evening. Can you clarify the depreciation comment again? Specifically, if you can provide guidance on the depreciation and cost of goods sold. Is that also down 12% year on year or is there a different number?

Overall depreciation of the company is down 12% year over year. For the third quarter, we will be up by 3% to 4% quarter over quarter. We don’t have guidance in terms of a breakdown.

Right, because generally the cost of goods sold depreciation, drags a little, the depreciation. In order to get a 12% decline year on year, your Q4 depreciation has to go up more than 20%, so that’s why I --

No, our current calculation is to go up about 7% in Q4.

Seven percent, great. And any thoughts on where it might be next year on a year-on-year basis, assuming that the CapEx remains roughly let’s say at the same level?

If we keep our current run-rate, 2008 we are talking about 5% to 6% of increase.

Okay. And the capital spending in the second-half of the year, is that going to be for equipment or for building up the facility for the next phase of 12?

The next phase of 12-inch?

I guess [12D].

Well, it is mainly for expanding the existing 12-inch facility capacity.

Okay, so it is for equipment?

Yes.

Okay. Thank you.

Your next question comes from the line of Pranab Sarmah from Daiwa Securities. Please proceed.

I have a follow-up question. Jackson, about three months back you had a very strong visibility for the third quarter number. What type of visibility do you have for the fourth quarter?

Considering the visibility that we have, the fourth quarter looks good.

Fourth quarter looks good. And --

That’s as much as I can put.

Okay, that’s fine. Last time you had given very strong guidance for third quarter, three months back, so now -- on the mature technology node, would you consider some time maybe next year converting any of the DRAM fabs to logic fab if your demand increases significantly?

It depends how significant is significant, but in the meantime we also noticed that there is plenty of 8-inch capacity in the industry and many of them try to enter by offering very low, low price. So we have to watch the situation.

Okay, and the last one is you have given a very strong guidance of 90-nanometer sequential increase for the third quarter. Could you give us which product category by application you are seeing those growth?

Across the board -- communications, computer and also even consumer products.

At 90-nanometer, consumer products?

That is correct.

Okay. Thank you.

Your next question comes from the line of Sunil Gupta from Morgan Stanley. Please proceed.

Jackson, I wanted to get your view on the inventory situation, particularly in the wireless communications segment. I think earlier in the day you mentioned that inventory at some of the customers is low. Is that specifically in wireless? Is it across the board? And what are these customers telling you? Are they looking to replenish and restock this inventory or do they just want to run with the lean inventory numbers that they have?

Of course, we cannot get disclose the customers’ names but for the wireless category, I think their inventory level is normal.

Okay, so which area are you seeing low inventory, in that case?

I cannot talk about this specifically. It is scattered around the application areas and it is customer dependent.

Okay. And are these customers telling you that they are looking to rebuild the inventory or, given the demand outlook, are they happy to run with these lean inventories that they have?

I think we see strong orders from them. That’s an indication.

Okay. Great. Thank you.

Your next question comes from the line of Bhavin Shah from JP Morgan. Please proceed.

Just a follow-up; what is the market value of the investments at the end of --

Based upon the quarterly financial report, it is at least about NTD 30 billion plus.

And do you expect this to be -- I mean, there’s obviously been still meaningful gains from disposal. Do you think that will happen in ’08 as well?

I cannot predict share price but our policy has been continuously bring down our holdings in the mature, non-core assets, being a [temporary measure] which will not affect those share price.

Okay. Thank you.

Your next question comes from the line of Dan Heyler from Merrill Lynch. Please proceed.

Thanks. I had a question on your SOI developments. You made that announcement a little while ago. Are you seeing much traction there in that business? When would we see that contribute more meaningfully to revenue?

Would you please repeat again, sorry?

On SOI.

On SOI, sure. Yes, we are continuously developing our SOI technology and you may have noticed that that arm, that I talked about that in the June [DECK] conference. So we expect to have our IP ready in Q3, near the end of Q3 and then we can start to offer to customers. The first offering will be based on 65-nanometer.

Right, okay, and so when would you start normally, I guess, the design and development stage and qualification? Would that contribute into revenue then more in the second-half of ’08 then, or would it be the first-half of ’08?

It is still a little too early to predict that but we are talking to multiple customers. I’ll put it this way -- multiple customers showed interest

Okay. As a result of you joining the SOI camp, I guess the complaints or the issues have been that there hasn’t been a huge amount of IP. Obviously ARM is supporting it. With UMC joining it, has that made an impact in terms of the interest in the level of IP development in SOI?

Definitely that helps, yes. It enables customers who are interested in it.

Okay, great, thanks. And then a follow-up on your investment. Could you remind me how much you currently own in Mediatech and Novatech, in terms of market --

Mediatech I recall is about 1.5%, and Novatech is about 12%.

Great. Thank you.

(Operator Instructions) At this time, there are no further questions in the queue. I would now like to turn the call back over to Mr. Liu for closing remarks.

Thank you, everyone. With no more questions, we will conclude the call today. Thank you for joining us. If you have any additional questions, please do not hesitate to contact us directly. Now, Operator, back to you.

Thank you. A link to the replay of this call will be available until the end of Tuesday, October 7, 2007 in the investor relations section of the UMC website. A dial-in version of the replay can be accessed by calling 888-286-8010 if you are in the U.S., or at 617-801-6888 for international calls. The dial-in replay will be available until midnight on August 2, 2007 New York time. The access code will be 28979718. If you have any additional questions, please feel free to contact us directly. Thank you all again and have a good day.