N. DAMODAR REDDY


                                 April 25, 1997

Mr. Robert H. C. Tsao
Chairman, United Microelectronics Corporation
No. 13, Innovation Rd. 1
Science-Based Industrial Park
Hsin-Chu City, Taiwan, R.O.C.

Mr. Gary Johnson
President, S3 Incorporated
2770 San Thomas Expressway
Santa Clara, California 95051
U.S.A.

Mr. Peter Chang
President, United Semiconductor Corporation
No. 3, Li-Hsin Rd.
Science-Based Industrial Park
Hsin-Chu City, Taiwan, R.O.C.

Dear Bob, Gary and Peter:

                  Alliance   Semiconductor    Corporation   ("Alliance")   again
appreciates your agreement to extend the time by which Alliance may exercise the
option to purchase  from United  Microelectronics  Corporation  ("UMC") up to 45
million shares of United Semiconductor Corporation ("USC"), as set forth below.

                  UMC, S3  Incorporated  ("S3") and USC agree to extend Alliance
an option to purchase from UMC up to 45 million shares of USC as follows:

                  (i) The  purchase  price under these  options will be at a per
         share  price,  with the  price  per  share  being  equal to NTD 10 plus
         interest  calculated  at a  cumulative  rate of 8.5%  per  annum  (with
         interest accruing from July 4, 1996 to the closing date of the purchase
         of the shares subject to the options).  Alliance shall pay the purchase
         price in U.S. dollars,  with the exchange rate calculated as of the day
         of payment.

                  (ii) Alliance may exercise these options with at least fifteen
         days advance  written  notice to UMC and S3 given on or before July 15,
         1997, but all  unexercised  options will expire if not fully  exercised
         (including  full  payment to UMC for the shares  involved) on or before
         midnight July 31, 1997 (Taiwan, R.O.C. time).

                  (iii)  Subject  to the  terms of this  letter  agreement  (the
         "Agreement"),  Alliance  can  exercise  its option  all at once,  or in
         installments,  and thus,  with at least 


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         fifteen  days'  advance  written  notice to UMC and S3,  can select its
         closing date(s) at times it finds convenient,  so long as the last such
         date occurs on or before July 31, 1997.

                  UMC,  S3 and USC also  agree  that  through  at least July 31,
1997, Alliance may retain its production capacity percentage of 25%.

                  UMC, S3 and USC further  agree that (a) this  Agreement may be
executed in counterparts,  each of which shall be deemed an original, but all of
which together shall constitute one and the same  instrument;  and (b) the terms
of Article 9 of the Foundry  Venture  Agreement  dated as of July 8, 1995 by and
among Alliance,  UMC and S3 are  incorporated by reference as if set forth fully
herein,  in each  case  with  this  Agreement  deemed  to be one of the  Venture
Agreements.

                  We remain  pleased  with the history of  cooperation  in these
matters  shown by the  parties,  and request  that each of you confirm the above
agreement in the space provided below.

                                                    Very truly yours,


                                                    /s/ N. D. Reddy
                                                    N. Damodar Reddy
                                                    President


Agreed on behalf of United Microelectronics         Agreed on behalf of S3 
Corporation                                         Incorporated

/s/ R. Tsao                                         
__________________________________                  ____________________________
Robert H. C. Tsao, Chairman                         Gary Johnson, President

Agreed on behalf of United Semiconductor 
Corporation



/s/ Peter Chang
__________________________________
Peter Chang, President