UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
 (Mark One)
 o
    
    Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2010
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 or
 o
    
    Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Date of event requiring this shell company report
 Commission file number 001-15128
 
 United Microelectronics Corporation
 (Exact Name of Registrant as Specified in its Charter)
 Taiwan, Republic of China
(Jurisdiction of Incorporation or Organization)
 No. 3 Li-Hsin Road II, Hsinchu Science Park,
Hsinchu City, Taiwan, Republic of China
(Address of Principal Executive Offices)
 Peter Courture, +1 (650) 968-8855, peter@courture.com ,
978 Highlands Circle, Los Altos, CA 94024, USA
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on which RegisteredAmerican Depositary Shares, as evidenced by American
    
    New York Stock ExchangeDepositary Receipts, each representing 5 Common Shares
 
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
  12,987,912,315 Common Shares of Registrant issued as of December 31, 2010 (including 457,934,400
treasury shares)
 Yes þ No o
 Yes o No þ
 þ o
 Yes o
No o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
 o
 o þ
 o þ
 o þ




---



##### 



UNITED MICROELECTRONICS CORPORATION
FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2010
 Table of Contents
 PageSUPPLEMENTAL INFORMATION
    
    
    1PART I
    
    
    3ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    3ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    3ITEM 3. KEY INFORMATION
    
    
    3ITEM 4. INFORMATION ON THE COMPANY
    
    
    24ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    44ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    60ITEM 7. MAJOR STOCKHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    63ITEM 8. FINANCIAL INFORMATION
    
    
    64ITEM 9. THE OFFER AND LISTING
    
    
    65ITEM 10. ADDITIONAL INFORMATION
    
    
    67ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    85ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    88PART II
    
    
    89ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    89ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    89ITEM 15. CONTROLS AND PROCEDURES
    
    
    89ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    92ITEM 16B. CODE OF ETHICS
    
    
    92ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    92ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    92ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    93ITEM
16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    93ITEM 16G. CORPORATE GOVERNANCE
    
    
    93PART III
    
    
    94ITEM 17. FINANCIAL STATEMENTS
    
    
    94ITEM 18. FINANCIAL STATEMENTS
    
    
    94ITEM 19. EXHIBITS
    
    
    95




---



##### 



SUPPLEMENTAL INFORMATION
   FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT MAY NOT BE REALIZED
  
    
    our dependence on frequent introduction of new product services and technologies
based on the latest developments;
 
    
    the intensely competitive semiconductor, communications, consumer electronics and PC
industries and markets;
 
    
    risks associated with our international business activities;
 
    
    our dependence on key personnel;
 
    
    general economic and political conditions, including those related to the
semiconductor, communications, consumer electronics and PC industries;
 
    
    natural disasters, such as earthquakes and droughts, which are beyond our control;
 
    
    possible disruptions in commercial activities caused by natural and human-induced
disasters and outbreaks of contagious diseases;
 
    
    fluctuations in foreign currency exchange rates;
 
    
    additional disclosures we make in our previous and future Form 20-F annual reports
and Form 6-K periodic reports to the U.S. Securities and Exchange Commission; and
 
    
    those other risks identified in the Item 3. Key InformationD. Risk Factors
section of this annual report.
  1




---



##### 



GLOSSARY
 ASIC
    
    Application Specific Integrated Circuit. A custom-designed integrated circuit that
performs specific functions which would otherwise require a number of off-the-shelf
integrated circuits to perform.Cell
    
    Semiconductor structure in an electrical state which can store a bit of information,
mainly used as the building block of memory array.Die
    
    A piece of a semiconductor wafer containing the circuitry of an unpackaged single chip.DRAM
    
    Dynamic Random Access Memory. A type of volatile memory product that is used in
electronic systems to store data and program instructions. It is the most common type
of RAM and must be refreshed with electricity hundreds of times per second or else it
will fade away.FPGA
    
    Field Programmable Gate Array. A programmable integrated circuit.Integrated circuit
    
    Entire electronic circuit built on a single piece of solid substrate and enclosed in a
small package. The package is equipped with leads needed to electrically integrate the
integrated circuit with a larger electronic system. Monolithic and hybrid integrated
circuits are distinguished by the type of substrate used.Interconnect
    
    The conductive path made from copper or aluminum that is required to achieve connection
from one circuit element to the other circuit elements within a circuit.Mask
    
    Photomask. A piece of glass on which an integrated circuit circuitry design is laid out.Memory
    
    A group of integrated circuits that a computer uses to store data and programs, such as
ROM, RAM, DRAM and SRAM.Micron
    
    A unit of spatial measurement that is one-millionth of a meter.Nanometer
    
    A unit of spatial measurement that is one-billionth of a meter.PC
    
    Personal computer.RAM
    
    Random Access Memory. A type of volatile memory forming the main memory of a computer
where applications and files are run.ROM
    
    Read-Only Memory. Memory that is programmed by the manufacturer and cannot be changed.
Typically, ROM is used to provide start-up data when a computer is first turned on.Scanner
    
    A photolithography tool used in the production of semiconductor devices. This
camera-like step-and-scan tool projects the image of a circuit from a master image onto
a photosensitized silicon wafer.
  2




---



##### 



Semiconductor
    
    A material with electrical conducting properties in between those of metals and
insulators. Essentially, semiconductors transmit electricity only under certain
circumstances, such as when given a positive or negative electric charge. Therefore, a
semiconductors ability to conduct can be turned on or off by manipulating those
charges and this allows the semiconductor to act as an electric switch. The most common
semiconductor material is silicon, used as the base of most semiconductor chips today
because it is relatively inexpensive and easy to create.SoC
    
    System-on-Chip. A chip that incorporates functions currently performed by several chips
on a cost-effective basis.SOI
    
    Silicon-On-Insulator. Silicon wafer consisting of a thin layer of oxide, on top of
which semiconductor devices are built.SRAM
    
    Static Random Access Memory. A type of volatile memory product that is used in
electronic systems to store data and program instructions. Unlike the more common DRAM,
it does not need to be refreshed.Transistor
    
    Tri-terminal semiconductor device in which input signal (voltage or current depending
on the type of transistor) controls output current. An individual circuit that can
amplify or switch electric current. This is the building block of all integrated
circuits.Volatile memory
    
    Memory products which lose their data content when the power supply is switched off.Wafer
    
    Thin, round, flat piece of silicon that is the base of most integrated circuits.8-inch wafer 
equivalents
    
    Standard unit describing the equivalent amount of 8-inch wafers produced after
conversion, used to quantify levels of wafer production for purposes of comparison.
Figures of 8-inch wafer equivalents are derived by converting the number of wafers of
all dimensions (e.g., 6-inch, 8-inch and 12-inch) into their equivalent figures for
8-inch wafers. 100 6-inch wafers are equivalent to 56.25 8-inch wafers. 100 12-inch
wafers are equivalent to 225 8-inch wafers.
 
 PART I
 
 ITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3.
    
    KEY INFORMATION
 A. Selected Financial Data
   3




---



##### 



Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions, except per share and per ADS data)Consolidated Statement of Income Data:R.O.C. GAAPNet operating revenues
    
    
    112,004
    
    
    
    113,311
    
    
    
    96,814
    
    
    
    91,390
    
    
    
    126,442
    
    
    
    4,339Cost of goods sold
    
    
    (91,690
    )
    
    
    (90,072
    )
    
    
    (84,102
    )
    
    
    (75,975
    )
    
    
    (89,518
    )
    
    
    (3,072
    )Gross profit
    
    
    20,314
    
    
    
    23,239
    
    
    
    12,712
    
    
    
    15,415
    
    
    
    36,924
    
    
    
    1,267Operating expenses:Sales and marketing
    
    
    (3,366
    )
    
    
    (4,069
    )
    
    
    (3,483
    )
    
    
    (2,800
    )
    
    
    (2,566
    )
    
    
    (88
    )General and administrative
    
    
    (3,422
    )
    
    
    (3,724
    )
    
    
    (3,055
    )
    
    
    (2,724
    )
    
    
    (3,598
    )
    
    
    (123
    )Research and development
    
    
    (9,419
    )
    
    
    (9,631
    )
    
    
    (8,274
    )
    
    
    (8,044
    )
    
    
    (8,740
    )
    
    
    (300
    )Total operating expenses
    
    
    (16,207
    )
    
    
    (17,424
    )
    
    
    (14,812
    )
    
    
    (13,568
    )
    
    
    (14,904
    )
    
    
    (511
    )Operating income (loss)
    
    
    4,107
    
    
    
    5,815
    
    
    
    (2,100
    )
    
    
    1,847
    
    
    
    22,020
    
    
    
    756Net non-operating income (loss)
    
    
    32,480
    
    
    
    13,855
    
    
    
    (19,886
    )
    
    
    (174
    )
    
    
    3,364
    
    
    
    115Income (Loss) before income tax and minority
interests
    
    
    36,587
    
    
    
    19,670
    
    
    
    (21,986
    )
    
    
    1,673
    
    
    
    25,384
    
    
    
    871Income tax expense
    
    
    (3,261
    )
    
    
    (2,809
    )
    
    
    (997
    )
    
    
    (651
    )
    
    
    (1,606
    )
    
    
    (55
    )Cumulative effect of changes in accounting
principles (the net amount after deducted tax
expense $0) (1)
    
    
    (1,189
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    649
    
    
    
    68
    
    
    
    2Net income (loss)
    
    
    32,137
    
    
    
    16,861
    
    
    
    (22,983
    )
    
    
    1,671
    
    
    
    23,846
    
    
    
    818Attributable to:the Company
    
    
    32,619
    
    
    
    16,962
    
    
    
    (22,320
    )
    
    
    3,874
    
    
    
    23,899
    
    
    
    820minority interests
    
    
    (482
    )
    
    
    (101
    )
    
    
    (663
    )
    
    
    (2,203
    )
    
    
    (53
    )
    
    
    (2
    )Earnings (Losses) per share: (2)(3)Basic
    
    
    1.71
    
    
    
    1.03
    
    
    
    (1.70
    )
    
    
    0.31
    
    
    
    1.91
    
    
    
    0.07Diluted (5)
    
    
    1.66
    
    
    
    1.00
    
    
    
    (1.70
    )
    
    
    0.30
    
    
    
    1.87
    
    
    
    0.06Shares used in earnings (losses) per share
calculation: (3)Basic
    
    
    19,029
    
    
    
    16,464
    
    
    
    13,111
    
    
    
    12,699
    
    
    
    12,496
    
    
    
    12,496Diluted (5)
    
    
    19,687
    
    
    
    16,943
    
    
    
    13,170
    
    
    
    12,786
    
    
    
    12,768
    
    
    
    12,768Earnings (Losses) per ADS: (3)Basic
    
    
    8.55
    
    
    
    5.15
    
    
    
    (8.50
    )
    
    
    1.55
    
    
    
    9.55
    
    
    
    0.35Diluted (5)
    
    
    8.30
    
    
    
    5.00
    
    
    
    (8.50
    )
    
    
    1.50
    
    
    
    9.35
    
    
    
    0.30U.S. GAAPNet operating revenues
    
    
    112,004
    
    
    
    113,311
    
    
    
    96,814
    
    
    
    91,390
    
    
    
    126,442
    
    
    
    4,339Cost of goods sold
    
    
    (93,288
    )
    
    
    (92,012
    )
    
    
    (85,923
    )
    
    
    (76,209
    )
    
    
    (89,929
    )
    
    
    (3,086
    )Operating income (loss)
    
    
    2,200
    
    
    
    (19,992
    )
    
    
    (22,431
    )
    
    
    (2,323
    )
    
    
    21,394
    
    
    
    734Net income (loss)
    
    
    21,271
    
    
    
    (9,398
    )
    
    
    (29,632
    )
    
    
    364
    
    
    
    23,544
    
    
    
    808Attributable to:the Company
    
    
    21,797
    
    
    
    (9,264
    )
    
    
    (28,955
    )
    
    
    2,572
    
    
    
    23,616
    
    
    
    810noncontrolling interests
    
    
    (526
    )
    
    
    (134
    )
    
    
    (677
    )
    
    
    (2,208
    )
    
    
    (72
    )
    
    
    (2
    )Other comprehensive income (loss)
attributable to the Company
    
    
    (8,194
    )
    
    
    (4,863
    )
    
    
    (25,239
    )
    
    
    24,540
    
    
    
    (8,629
    )
    
    
    (296
    )Comprehensive income (loss) attributable to
the Company
    
    
    13,602
    
    
    
    (14,127
    )
    
    
    (54,194
    )
    
    
    27,112
    
    
    
    14,987
    
    
    
    514Earnings (Losses) per share: (2)(4)Basic
    
    
    1.42
    
    
    
    (0.63
    )
    
    
    (2.25
    )
    
    
    0.21
    
    
    
    1.91
    
    
    
    0.07Diluted (5)
    
    
    1.37
    
    
    
    (0.63
    )
    
    
    (2.25
    )
    
    
    0.20
    
    
    
    1.90
    
    
    
    0.07Shares used in earnings (losses) per share
calculation: (4)Basic
    
    
    15,350
    
    
    
    14,599
    
    
    
    12,870
    
    
    
    12,538
    
    
    
    12,335
    
    
    
    12,335Diluted (5)
    
    
    15,891
    
    
    
    14,599
    
    
    
    12,870
    
    
    
    12,560
    
    
    
    12,399
    
    
    
    12,399Earnings (Losses) per ADS: (4)Basic
    
    
    7.10
    
    
    
    (3.17
    )
    
    
    (11.25
    )
    
    
    1.03
    
    
    
    9.57
    
    
    
    0.33Diluted (5)
    
    
    6.87
    
    
    
    (3.17
    )
    
    
    (11.25
    )
    
    
    1.02
    
    
    
    9.52
    
    
    
    0.33
  4




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##### 



Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions, except per share and per ADS data)Consolidated Balance Sheet Data:R.O.C. GAAPCurrent assets
    
    
    132,344
    
    
    
    81,111
    
    
    
    68,888
    
    
    
    102,363
    
    
    
    93,769
    
    
    
    3,218Long-term investment
    
    
    71,964
    
    
    
    69,813
    
    
    
    32,441
    
    
    
    55,227
    
    
    
    47,179
    
    
    
    1,619Property, plant and equipment
    
    
    151,828
    
    
    
    137,219
    
    
    
    108,410
    
    
    
    89,596
    
    
    
    132,762
    
    
    
    4,556Total assets
    
    
    367,653
    
    
    
    299,558
    
    
    
    216,399
    
    
    
    253,638
    
    
    
    280,887
    
    
    
    9,639Current liabilities
    
    
    35,851
    
    
    
    45,357
    
    
    
    13,033
    
    
    
    35,246
    
    
    
    45,445
    
    
    
    1,560Long-term debt (excluding
current portion)
    
    
    30,383
    
    
    
    7,495
    
    
    
    8,130
    
    
    
    767
    
    
    
    6,799
    
    
    
    233Total liabilities
    
    
    70,251
    
    
    
    56,561
    
    
    
    24,740
    
    
    
    39,542
    
    
    
    55,751
    
    
    
    1,913Stockholders equity
    
    
    297,402
    
    
    
    242,997
    
    
    
    191,659
    
    
    
    214,096
    
    
    
    225,136
    
    
    
    7,726U.S. GAAPCash and cash equivalents
    
    
    61,649
    
    
    
    47,678
    
    
    
    40,017
    
    
    
    54,413
    
    
    
    51,034
    
    
    
    1,751Working capital (6)
    
    
    95,779
    
    
    
    35,111
    
    
    
    55,525
    
    
    
    67,162
    
    
    
    48,322
    
    
    
    1,658Total assets
    
    
    401,628
    
    
    
    310,614
    
    
    
    214,990
    
    
    
    252,705
    
    
    
    281,387
    
    
    
    9,657Total liabilities
    
    
    71,226
    
    
    
    56,795
    
    
    
    24,099
    
    
    
    39,465
    
    
    
    56,264
    
    
    
    1,931Stockholders equity
    
    
    330,402
    
    
    
    253,819
    
    
    
    190,891
    
    
    
    213,240
    
    
    
    225,123
    
    
    
    7,726
 Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions, except per share and per ADS data)Other Consolidated Data:R.O.C. GAAPCash flow:Capital expenditure
    
    
    33,240
    
    
    
    28,299
    
    
    
    11,515
    
    
    
    17,618
    
    
    
    61,290
    
    
    
    2,103Cash provided by operating activities
    
    
    47,124
    
    
    
    48,124
    
    
    
    45,251
    
    
    
    32,427
    
    
    
    53,560
    
    
    
    1,838Cash used in investing activities
    
    
    (16,595
    )
    
    
    (21,844
    )
    
    
    (11,423
    )
    
    
    (19,234
    )
    
    
    (57,843
    )
    
    
    (1,985
    )Cash provided by (used in) financing
activities
    
    
    (45,056
    )
    
    
    (72,694
    )
    
    
    (34,380
    )
    
    
    4,944
    
    
    
    (10,174
    )
    
    
    (349
    )Net increase (decrease) in cash and cash
equivalents
    
    
    (14,774
    )
    
    
    (46,175
    )
    
    
    889
    
    
    
    17,586
    
    
    
    (14,882
    )
    
    
    (511
    )Gross profit margin
    
    
    18.1
    %
    
    
    20.5
    %
    
    
    13.1
    %
    
    
    16.9
    %
    
    
    29.2
    %
    
    
    29.2
    %Operating profit (loss) margin
    
    
    3.7
    %
    
    
    5.1
    %
    
    
    (2.2
    )%
    
    
    2.0
    %
    
    
    17.4
    %
    
    
    17.4
    %Net profit (loss) margin
    
    
    29.1
    %
    
    
    15.0
    %
    
    
    (23.0
    )%
    
    
    4.2
    %
    
    
    18.9
    %
    
    
    18.9
    %Capacity utilization rate (on an actual
basis)
    
    
    79.5
    %
    
    
    81.9
    %
    
    
    70.7
    %
    
    
    69.4
    %
    
    
    93.7
    %
    
    
    93.7
    %Dividends declared per share (7)
    
    
    0.5
    
    
    
    0.7
    
    
    
    1.2
    
    
    
    
    
    
    
    0.5
    
    
    
    0.02U.S. GAAPCash flow:Capital expenditure
    
    
    33,240
    
    
    
    28,299
    
    
    
    11,515
    
    
    
    17,618
    
    
    
    61,290
    
    
    
    2,103Cash provided by operating activities
    
    
    46,385
    
    
    
    45,785
    
    
    
    44,953
    
    
    
    32,427
    
    
    
    53,560
    
    
    
    1,838Cash provided by (used in) investing
activities
    
    
    (9,775
    )
    
    
    10,360
    
    
    
    (19,973
    )
    
    
    (22,424
    )
    
    
    (46,341
    )
    
    
    (1,590
    )Cash provided by (used in) financing
activities
    
    
    (38,222
    )
    
    
    (70,354
    )
    
    
    (34,081
    )
    
    
    4,944
    
    
    
    (10,174
    )
    
    
    (349
    )Net increase (decrease) in cash and cash
equivalents
    
    
    (1,859
    )
    
    
    (13,971
    )
    
    
    (7,661
    )
    
    
    14,396
    
    
    
    (3,379
    )
    
    
    (116
    )Gross profit margin
    
    
    16.7
    %
    
    
    18.8
    %
    
    
    11.3
    %
    
    
    16.6
    %
    
    
    28.9
    %
    
    
    28.9
    %Operating profit (loss) margin
    
    
    2.0
    %
    
    
    (17.6
    )%
    
    
    (23.2
    )%
    
    
    (2.5
    )%
    
    
    16.9
    %
    
    
    16.9
    %Net profit (loss) margin
    
    
    19.5
    %
    
    
    (8.2
    )%
    
    
    (29.9
    )%
    
    
    2.8
    %
    
    
    18.7
    %
    
    
    18.7
    %
 
 (1)
    
    We adopted R.O.C. SFAS No. 34, Financial Instruments: Recognition and Measurement and
SFAS No. 36, Financial Instruments: Disclosure and Presentation to account for the
financial instruments effective January 1, 2006. The changes in accounting principles resulted
in an unfavorable cumulative effect of changes in accounting principles of NT$1,189 million to
be deducted from consolidated net income for the year ended December 31, 2006.(2)
    
    Earnings (Losses) per share is calculated by dividing net income (loss) by the weighted
average number of shares outstanding during the year.(3)
    
    Retroactively adjusted for all subsequent stock dividends; retroactively adjusted for
employee stock bonus before 2008.(4)
    
    Retroactively adjusted for the capital reduction completed in 2007 and all subsequent stock
dividends.(5)
    
    Diluted securities include convertible bonds and employee stock options, if any.(6)
    
    Working capital equals current assets minus current liabilities.(7)
    
    Dividends declared per share are in connection with earnings and accumulated additional
paid-in capital.(8)
    
    Refer to Note 34 to the audited consolidated financial statements included elsewhere in this
annual report.  5




---



##### 



Currency Translations and Exchange Rates
  AtAverage(1)
    
    
    High
    
    
    Low
    
    
    Period-End2006
    
    
    32.51
    
    
    
    33.31
    
    
    
    31.28
    
    
    
    32.592007
    
    
    32.85
    
    
    
    33.41
    
    
    
    32.26
    
    
    
    32.432008
    
    
    31.52
    
    
    
    33.58
    
    
    
    29.99
    
    
    
    32.762009
    
    
    33.02
    
    
    
    35.21
    
    
    
    31.95
    
    
    
    31.952010
    
    
    31.50
    
    
    
    32.43
    
    
    
    29.14
    
    
    
    29.14October
    
    
    30.81
    
    
    
    31.30
    
    
    
    30.42
    
    
    
    30.60November
    
    
    30.32
    
    
    
    30.52
    
    
    
    30.12
    
    
    
    30.47December
    
    
    29.90
    
    
    
    30.37
    
    
    
    29.14
    
    
    
    29.142011 (through April 22)
    
    
    29.25
    
    
    
    29.76
    
    
    
    28.78
    
    
    
    28.88January
    
    
    29.11
    
    
    
    29.36
    
    
    
    28.98
    
    
    
    29.03February
    
    
    29.28
    
    
    
    29.76
    
    
    
    28.78
    
    
    
    29.74March
    
    
    29.49
    
    
    
    29.63
    
    
    
    29.35
    
    
    
    29.40April (through April 22)
    
    
    29.04
    
    
    
    29.31
    
    
    
    28.85
    
    
    
    28.88
 
 Source: Federal Reserve Statistical Release, Board of Governors of the Federal Reserve
System.(1)
    
    Determined by averaging the rates on the last business day of each month during the
relevant period for annual periods and the rates on each business day for monthly periods. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Our business and operations are subject to various risks, many of which are beyond our
control. If any of the risks described below actually occurs, our business, financial condition or
results of operations could be seriously harmed.
 Risks Related to Our Business and Financial Condition
 A global recession and credit crisis may cause significant disruptions to our major customers
businesses as well as to their ability to access sources of liquidity. Demand for our products has
been, and will continue to be, adversely affected by overall macroeconomic conditions.
   6




---



##### 



The seasonality and cyclical nature of the semiconductor industry and periodic overcapacity make us
particularly vulnerable to significant and sometimes prolonged economic downturns.
   Our operating results fluctuate from quarter to quarter, which makes it difficult to predict our
future performance.
  
    
    the seasonality and cyclical nature of both the semiconductor industry and the
markets served by our customers;
 
    
    our customers adjustments in their inventory;
 
    
    the loss of a key customer or the postponement of orders from a key customer;
 
    
    the rescheduling and cancellation of large orders;
 
    
    our ability to obtain equipment, raw materials, electricity, water and other
required utilities on a timely and economic basis;
  7




---



##### 




    
    outbreaks of contagious diseases, including severe acute respiratory syndrome, avian
flu and swine flu;
 
    
    environmental events, such as fires and earthquakes, or industrial accidents; and
 
    
    technological changes.
  A decrease in demand for or selling prices of communication devices, consumer electronics and
computer goods may decrease the demand for our services and reduce our margins.
  Overcapacity in the semiconductor industry may reduce our revenues, earnings and margins.
  Any problem in the semiconductor outsourcing infrastructure can adversely affect our net operating
revenues and profitability.
   8




---



##### 



We may be unable to implement new technology as it becomes available, which may result in our loss
of customers and market share.
  We may be unable to provide leading technology to our customers if we lose the support of our
technology partners.
   Our business may suffer if we cannot compete successfully in our industry.
   9




---



##### 




    
    technical competence;
 
    
    time-to-volume production and cycle time;
 
    
    time-to-market;
 
    
    research and development quality;
 
    
    available capacity;
 
    
    manufacturing yields;
 
    
    customer service;
 
    
    price;
 
    
    management expertise; and
 
    
    strategic alliances.
  We may not succeed in our efforts to acquire operations in China and Japan.
    10




---



##### 



We may not be able to successfully integrate the operations to be acquired in Japan with our global
activities.
  
    
    technical competence of UMCJ;
 
    
    management and engineering abilities of UMCJ;
 
    
    our ability to adapt UMCJ to our processes, practices and management approaches;
 
    
    our ability to optimize the process, equipment, capacity, customer and technology
mix in our global operations;
  11




---



##### 




    
    communication and coordination between different locations; and
 
    
    cultural compatibility.
  Our profit margin may substantially decline if we are unable to continuously improve our
manufacturing yields, maintain high capacity utilization and optimize the technology mix of our
silicon wafer production.
  
    
    maintain our capacity utilization, that is, the wafer-out quantity of 8-inch wafer
equivalents divided by estimated total 8- inch equivalent capacity in a specified
period. The estimated capacity numbers may differ depending upon equipment delivery
schedules, pace of migration to more advanced process technologies and other factors
affecting production ramp-ups;
 
    
    maintain or improve our manufacturing yield, that is, the percentage of usable
manufactured devices on a wafer; and
 
    
    optimize the technology mix of our production, that is, the relative number of
wafers manufactured utilizing different process technologies.
  We may not be able to implement our planned growth if we are unable to obtain the financing
necessary to fund the substantial capital expenditures we expect to incur.
  
    
    our growth plan;
 
    
    our process technology;
 
    
    market conditions;
 
    
    interest rates;
 
    
    exchange rate fluctuations; and
 
    
    prices of equipment.
  12




---



##### 



We depend on a small number of customers for a significant portion of our net operating revenues
and a loss of some of these customers would result in the loss of a significant portion of our net
operating revenues.
  Our customers generally do not place purchase orders far in advance, which makes it difficult for
us to predict our future revenues, adjust production costs and allocate capacity efficiently on a
timely basis.
  Our inability to obtain, preserve and defend intellectual property rights could harm our
competitive position.
   
    
    seek to acquire licenses to the infringed technology which may not be available on
commercially reasonable terms, if at all;
 
    
    discontinue using certain process technologies, which could cause us to stop
manufacturing certain semiconductors;
 
    
    pay substantial monetary damages; and/or
 
    
    seek to develop non-infringing technologies, which may not be feasible.
  13




---



##### 



Two of our former executives were charged with criminal offenses and our company was fined for
violations of the Act Governing Relations Between Peoples of the Taiwan Area and the Mainland Area
in connection with our alleged involvement in the operation of Hejian.
      14




---



##### 



Our operations and business will suffer if we lose one or more of our key personnel without
adequate replacements.
  We may have difficulty attracting and retaining skilled employees, who are critical to our future
success.
  Our transactions with affiliates and stockholders may hurt our profitability and competitive
position.
  The differences between R.O.C. and U.S. accounting standards affect the amount of our net income.
  The trend of adopting protectionist measures in certain countries, including the United States,
could have a material adverse impact on our results of operations and financial condition.
   15




---



##### 



Any future outbreak of contagious diseases may materially and adversely affect our business and
operations, as well as our financial condition and results of operations.
  Risks Relating to Manufacturing
 Our manufacturing processes are highly complex, costly and potentially vulnerable to impurities and
other disruptions that can significantly increase our costs and delay product shipments to our
customers.
  
    
    capacity constraints due to changes in product mix or the delayed delivery of
equipment critical to our production, including scanners, steppers and chemical
stations;
 
    
    construction delays during expansions of our clean rooms and other facilities;
 
    
    difficulties in upgrading or expanding existing facilities;
 
    
    manufacturing execution system or automatic transportation system failure;
 
    
    unexpected breakdowns in our manufacturing equipment and/or related facilities;
 
    
    changing or upgrading our process technologies;
 
    
    raw materials shortages and impurities; and
 
    
    delays in delivery and shortages of spare parts and in maintenance for our equipment
and tools
   16




---



##### 



We may have difficulty in ramping up production in accordance with our schedule, which could cause
delays in product deliveries and decreases in manufacturing yields.
  
    
    the migration to more advanced process technologies, such as 45/40- and 28 nanometer
process technology;
 
    
    the joint development with vendors for more powerful tools (both in production and
inspection) needed in the future to meet advanced process technology requirements; and
 
    
    the adoption of new materials in our manufacturing processes.
  Our production schedules could be delayed and we may lose customers if we are unable to obtain raw
materials and equipment in a timely manner.
    We may be subject to the risk of loss due to fire because the materials we use in our manufacturing
processes are highly flammable.
   17




---



##### 



We and many of our customers and suppliers are vulnerable to natural disasters and other events
outside of our control, which may seriously disrupt our operations.
  Our operations may be delayed or interrupted and our business could suffer if we violate
environmental, safety and health, or ESH, regulations.
  Climate change may negatively affect our business.
     18




---



##### 



Disruptions in the international trading environment may seriously decrease our international
sales.
   Political, Economic and Regulatory Risks
 We face substantial political risks associated with doing business in Taiwan, particularly due to
the tense relationship between the R.O.C. and the Peoples Republic of China, or the PRC, that
could negatively affect the value of your investment.
  Our business depends on the support of the R.O.C. government, and a decrease in this support may
increase our labor costs and decrease our net income after tax.
    19




---



##### 



Our future tax obligations may adversely affect our profitability.
  The trading price of the shares and ADSs may be adversely affected by the general activities of the
Taiwan Stock Exchange and U.S. stock exchanges, the trading price of our shares, increases in
interest rates and the economic performance of Taiwan.
   Currency fluctuations could increase our costs relative to our revenues, which could adversely
affect our profitability.
   20




---



##### 



Compliance with the US Conflict Minerals Law may affect our ability or the ability of our suppliers
to purchase raw materials at an effective cost.
  Risks Related to the Shares and ADSs and Our Trading Markets
 Restrictions on the ability to deposit shares into our ADS program may adversely affect the
liquidity and price of the ADSs.
  (1)
    
    distribution of share dividends or free distribution of our shares;
 (2)
    
    exercise of the preemptive rights of ADS holders applicable to the shares
evidenced by ADSs in the event of capital increases for cash; or
 (3)
    
    delivery of our shares which are purchased in the domestic market in Taiwan
directly by the investor or through the depositary or are already in the possession of
the investor to the custodian for deposit into our ADS program, subject to the
following conditions: (a) the re-issuance is permitted under the deposit agreement and
custody agreement, (b) the depositary may accept deposit of those shares and issue the
corresponding number of ADSs with regard to such deposit only if the total number of
ADSs outstanding after the issuance does not exceed the number of ADSs previously
approved by the R.O.C. FSC, plus any ADSs issued pursuant to the events described in
(1) and (2) above and (c) this deposit may only be made to the extent previously issued
ADSs have been withdrawn.
   21




---



##### 



Holders of our ADSs will not have the same proposal or voting rights as the holders of our shares,
which may affect the value of your investment.
    The rights of holders of our ADSs to participate in our rights offerings may be limited, which
may cause dilution to their holdings.
  Changes in exchange controls that restrict your ability to convert proceeds received from your
ownership of ADSs may have an adverse effect on the value of your investment.
  
    
    the proceeds of the sale of shares represented by ADSs or received as share
dividends with respect to the shares and deposited into the depositary receipt
facility; and
 
    
    any cash dividends or distributions received from the shares represented by ADSs.
  22




---



##### 



Our public stockholders may have more difficulty protecting their interests than they would as
stockholders of a U.S. corporation.
  Holders of our ADSs will be required to appoint several local agents in Taiwan if they withdraw
shares from our ADS program and become our stockholders, which may make ownership burdensome.
   23




---



##### 



You may not be able to enforce a judgment of a foreign court in the R.O.C..
  
    
    the court rendering the judgment does not have jurisdiction over the subject matter
according to R.O.C. law;
 
    
    the judgment or the court procedure resulting in the judgment is contrary to the
public order or good morals of the R.O.C.;
 
    
    the judgment was rendered by default, except where the summons or order necessary
for the commencement of the action was legally served on us within the jurisdiction of
the court rendering the judgment within a reasonable period of time or with judicial
assistance of the R.O.C.; or
 
    
    judgments of R.O.C. courts are not recognized in the jurisdiction of the court
rendering the judgment on a reciprocal basis.
 We may be considered a passive foreign investment company, which could result in adverse U.S. tax
consequences for U.S. investors.
   
 ITEM 4.
    
    INFORMATION ON THE COMPANY
 A. History and Development of the Company
    24




---



##### 



25




---



##### 



26




---



##### 



Our Strategy
  Operate as a Customer-Driven Foundry.
 Build up Customer-focused Partnership Business Model.
 Continue to Focus on High Growth Applications and Customers.
 Maintain Our Leading Position in Mass-Producible Semiconductor Technology and Selectively
Pursue Strategic Investments in New Technologies.
  27




---



##### 



Maintain Scale and Capacity Capabilities to Meet Customer Requirements, with a Focus on
12-inch Wafer Facilities for Future Expansion.
 B. Business Overview
 Manufacturing Facilities
    Fab 6A
    
    Fab 8A
    
    Fab 8C
    
    Fab 8D
    
    Fab 8E
    
    Fab 8F
    
    Fab 8S
    
    Fab 12A
    
    Fab 12i
    
    UMCJCommencement of
volume production
    
    
    1989
    
    
    
    1995
    
    
    
    1998
    
    
    
    2000
    
    
    
    1998
    
    
    
    2000
    
    
    
    2000
    
    
    
    2002
    
    
    
    2004
    
    
    
    1996Estimated full 
capacity(1)(2)
    
    49,300
wafers
per
months
    
    68,000
wafers
per
months
    
    30,000
wafers
per
months
    
    28,000
wafers
per
months
    
    35,100
wafers
per
months
    
    32,500
wafers
per
months
    
    25,500
wafers
per
months
    
    32,170
wafers
per
months
    
    43,807
wafers
per
months
    
    20,000
wafers
per
MonthsWafer size
    
    6-inch
(150mm)
    
    8-inch
(200mm)
    
    8-inch
(200mm)
    
    8-inch
(200mm)
    
    8-inch
(200mm)
    
    8-inch
(200mm)
    
    8-inch
(200mm)
    
    12-inch
(300mm)
    
    12-inch
(300mm)
    
    8-inch
(200mm)
 
 (1)
    
    Measured in stated wafer size.(2)
    
    The capacity of a fab is determined based on the capacity ratings given by
manufacturers of the equipment used in the fab, adjusted for, among other factors, actual
output during uninterrupted trial runs, expected down time due to set up for production runs
and maintenance and expected product mix.  28




---



##### 



BuildingSize
    
    
    
    Land
    
    (Owned orLocation
    
    (Land/Building)
    
    Primary Use
    
    (Owned or Leased)
    
    Leased)(in square meters)Fab
6A, 10 Innovation 1st Rd.,
Hsinchu Science Park,
Hsinchu, Taiwan 30076, R.O.C.
    
    27,898/34,609
6-inch wafer
production
    
    6-inch wafer production
    
    Leased
(expires in December 2026)
    
    OwnedFab 8A, 3 Li-Hsin 2nd Rd.,
Hsinchu Science Park,
Hsinchu, Taiwan 30078, R.O.C.
    
    43,468/83,699
8-inch wafer
production
    
    8-inch wafer production
    
    Leased
(expires in March 2014)
    
    OwnedFab 8C, 6 Li-Hsin 3rd Rd.,
Hsinchu Science Park, Hsinchu,
Taiwan 30078, R.O.C.
    
    24,678/71,427
8-inch wafer
production
    
    8-inch wafer production
    
    Leased
(expires in March 2016)
    
    OwnedFab 8D, 8 Li-Hsin 3rd Rd.,
Hsinchu Science Park,
Hsinchu, Taiwan 30078, R.O.C.
    
    8,036/29,181
8-inch wafer production
    
    8-inch wafer production
    
    Leased
(expires in March 2016)
    
    OwnedFab 8E, 17 Li-Hsin Rd., 
Hsinchu Science Park, 
Hsinchu, Taiwan 30078, R.O.C.
    
    35,000/76,315
8-inch wafer
production
    
    8-inch wafer production
    
    Leased
(expires in February 2016)
    
    OwnedFab 8F, 3 Li-Hsin 6th Rd.,
Hsinchu Science Park, 
Hsinchu, Taiwan 30078, R.O.C.
    
    24,180/65,736
8-inch wafer
production
    
    8-inch wafer production
    
    Leased
(expires in February 2018)
    
    OwnedFab 8S, 16 Creation 1st Rd., 
Hsinchu Science Park, 
Hsinchu, Taiwan 30077, R.O.C.
    
    20,404/65,614
8-inch wafer
production
    
    8-inch wafer production
    
    Leased
(expires in December 2023)
    
    OwnedFab 12A, 18, 20 Nan-Ke 2nd Rd., 
Tainan Science Park, Sinshih, 
Tainan, Taiwan 74147, R.O.C.
    
    113,661/316,456
12-inch wafer
production
    
    12-inch wafer production
    
    Leased
(expires in November 2030)
    
    OwnedFab 12i, 3 Pasir Ris Drive 12
Singapore 519528
    
    85,737/142,169
12-inch wafer
production
    
    12-inch wafer production
    
    Leased
(expires in March 2031)
    
    OwnedUMCJ, 1580, Yamamoto, 
Tateyama-City, Chiba, Japan
    
    387,551/61,111
8-inch wafer
production
    
    8-inch wafer production
    
    83% owned, 17% leased
(expires in June 2049)
    
    96% Owned,
4% LeasedUnited Tower, 3 Li-Hsin 2nd Rd., 
Hsinchu Science Park, 
Hsinchu, Taiwan 30078, R.O.C.
    
    8,818/85,224
Administration
office
    
    Administration office
    
    Leased
(expires in March 2014)
    
    OwnedNeihu Rd. office, 8F,68.Sec. 
1,Neihu Rd., Taipei Taiwan 11493,
R.O.C.
    
    626/4,817
Administration
office
    
    Administration office
    
    Owned
    
    OwnedTesting Building, 1, Chin-Shan, St. 
7, Hsinchu, Taiwan 30080, R.O.C.
    
    10,762/41,318
Leased to several
companies
    
    Leased to several companies
    
    Owned
    
    OwnedR&D Building, 18 Nan-Ke 2nd Rd., 
Tainan Science Park, Sinshih, 
Tainan, Taiwan 74147, R.O.C.
    
    42,000/47,501
Research and
development
    
    Research and development
    
    Leased
(expires in December 2023)
    
    Owned
  29




---



##### 



BuildingSize
    
    
    
    Land
    
    (Owned orLocation
    
    (Land/Building)
    
    Primary Use
    
    (Owned or Leased)
    
    Leased)(in square meters)Nexpower, No.2, Houke S.Rd., Houli
Township, Taichung, Taiwan 42152,
R.O.C.
    
    90,634/78,212
Sun power production
    
    Sun power production
    
    Leased
(expires in December 2026)
    
    OwnedTopcell, No. 1560, Sec. 1,
Zhongshan Rd., Guanyin Township,
Taoyuan, Taiwan 32852, R.O.C.
    
    16,873/29,124
6-inch cell
production
    
    6-inch cell production
    
    Leased
(expires in March 2018)
    
    Leased (expires in March 2018)
 Process Technology
     30




---



##### 



Year endedDecember 31,2010Range of
    
    Year Ended December 31,Year of
    
    Process)
    
    2008
    
    2009
    
    2010Commencement
    
    Technologies
    
    (in thousands of 8-inch waferof Operation
    
    (in microns)
    
    equivalents, except percentages)FabFab 6A
    
    
    1989
    
    
    
    0.5
    
    
    
    328
    
    
    
    328
    
    
    
    332Fab 8A
    
    
    1995
    
    
    
    0.5 to 0.25
    
    
    
    816
    
    
    
    816
    
    
    
    816Fab 8C
    
    
    1998
    
    
    
    0.35 to 0.13
    
    
    
    400
    
    
    
    402
    
    
    
    366Fab 8D
    
    
    2000
    
    
    
    0.18 to 0.09
    
    
    
    260
    
    
    
    270
    
    
    
    314Fab 8E
    
    
    1998
    
    
    
    0.5 to 0.15
    
    
    
    408
    
    
    
    408
    
    
    
    410Fab 8F
    
    
    2000
    
    
    
    0.25 to 0.13
    
    
    
    374
    
    
    
    381
    
    
    
    387Fab 8S
    
    
    2000
    
    
    
    0.25 to 0.13
    
    
    
    294
    
    
    
    300
    
    
    
    303Fab 12A
    
    
    2002
    
    
    
    0.18 to 0.028
    
    
    
    884
    
    
    
    888
    
    
    
    842Fab 12i
    
    
    2004
    
    
    
    0.13 to 0.065
    
    
    
    743
    
    
    
    815
    
    
    
    1,022UMCJ
    
    
    1996
    
    
    
    0.35 to 0.15
    
    
    
    240
    
    
    
    240
    
    
    
    240Total estimated capacity
    
    
    
    
    
    
    
    
    
    
    4,747
    
    
    
    4,848
    
    
    
    5,031Total output (actual)
    
    
    
    
    
    
    
    
    
    
    3,355
    
    
    
    3,362
    
    
    
    4,713Average capacity utilization
    
    
    
    
    
    
    
    
    
    
    70.7
    %
    
    
    69.4
    %
    
    
    93.7
    %
  Year Ended December 31,2008
    
    
    2009
    
    
    2010(in thousands of 8-inch wafer equivalents, except percentages)Technology65 nanometers and under
    
    
    147
    
    
    
    4.3
    %
    
    
    270
    
    
    
    8.0
    %
    
    
    761
    
    
    
    16.1
    %90 nanometers
    
    
    701
    
    
    
    21.0
    
    
    
    605
    
    
    
    18.0
    
    
    
    584
    
    
    
    12.40.13 micron
    
    
    555
    
    
    
    16.5
    
    
    
    602
    
    
    
    17.9
    
    
    
    997
    
    
    
    21.20.15 micron
    
    
    258
    
    
    
    7.7
    
    
    
    269
    
    
    
    8.0
    
    
    
    367
    
    
    
    7.80.18 micron
    
    
    587
    
    
    
    17.5
    
    
    
    587
    
    
    
    17.4
    
    
    
    611
    
    
    
    13.00.25 micron
    
    
    110
    
    
    
    3.3
    
    
    
    76
    
    
    
    2.3
    
    
    
    144
    
    
    
    3.00.35 micron
    
    
    728
    
    
    
    21.7
    
    
    
    655
    
    
    
    19.5
    
    
    
    766
    
    
    
    16.30.50 micron or higher
    
    
    269
    
    
    
    8.0
    
    
    
    298
    
    
    
    8.9
    
    
    
    483
    
    
    
    10.2Total
    
    
    3,355
    
    
    
    100.0
    %
    
    
    3,362
    
    
    
    100.0
    %
    
    
    4,713
    
    
    
    100.0
    %
 Capacity and Utilization
   Equipment
      31




---



##### 



Raw Materials
     Quality Management
      32




---



##### 



Services and Products
   Circuit Design.
 Mask Tooling.
 Wafer Fabrication.
  33




---



##### 



Assembly and Testing.
 Customers and Markets
  Year Ended December 31,Region
    
    2008
    
    2009
    
    2010Taiwan
    
    
    29.8
    %
    
    
    38.2
    %
    
    
    37.5
    %Asia (excluding Taiwan)
    
    
    5.1
    
    
    
    10.6
    
    
    
    15.2North America
    
    
    55.4
    
    
    
    50.2
    
    
    
    47.3Europe
    
    
    9.7
    
    
    
    1.0
    
    
    
    0.0Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Year Ended December 31,Customer Type
    
    2008
    
    2009
    
    2010Fabless design companies
    
    
    73.2
    %
    
    
    79.2
    %
    
    
    78.1
    %Integrated device manufacturers
    
    
    26.8
    
    
    
    20.8
    
    
    
    21.9Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
     34




---



##### 



Competition
    35




---



##### 



Intellectual Property
     Research and Development
   Our Investments
   36




---



##### 



Environmental, Safety and Health Matters
   37




---



##### 




    
    To be an environmentally friendly enterprise characterized by continual
improvement with a goal of pollution-free production;
 
    
    To incorporate our environmental management system into the general
organizational management system;
 
    
    To take initiatives to reduce waste production and prevent pollution by
introducing and developing environmentally friendly technology for design,
production and operation;
 
    
    To conserve energy and recycle resources in order to be a model of
environmental protection for the international community;
 
    
    To fulfill corporate social responsibilities by playing an active role in
public and community affairs to improve and protect the environment;
 
    
    To educate employees about environmentally sound ethics and practices.
  
    
    To achieve a goal of zero accidents and comply with all applicable safety and
regulatory requirements to ensure safety is the top priority for UMCs
sustainable development.
 
    
    To reinforce best safety and health management practice to reach
international ESH and risk management standards.
 
    
    To adopt risk control advanced ESH management and rescue technologies to
enhance companys standards.
 
    
    To provide safe work environment and operation through preventive management
and audit.
 
    
    To eliminate hazard factors and prevent incidents through each and every
ownership of responsibilities in safety and health.
 
    
    To encourage all employees to actively participate in safety and health
training and promotional activities.
      38




---



##### 




    
    Selected as a member of Dow Jones Sustainability Indexes for 3 years since
2008.
 
    
    Awarded the Taiwan Environmental Heroes award, by Global Views Magazine in
2010.
 
    
    Awarded Taiwan Corporate Sustainability Report Award by Taiwan Institute
for Sustainable Energy. (2008-2010)
 
    
    Awarded Enterprises Environmental Award of the Republic of China by the
Environmental Protection Administration of Executive Yuan, R.O.C.. (totally 11
times since 2001)
 
    
    Awarded Excellent Performance in Waste Management and Resource
Reduction, Recycle and Reuse by EPA. (2010)
 Climate Change
  2 2
 2 6 3 8 2 4 8 2 2
   Litigation
   39




---



##### 



40




---



##### 



Dispute with LSI
   
    
    In April 2008, LSI filed a petition with the U.S. International Trade
Commission naming us and eighteen other companies as proposed respondents (including
AMIC Technology, one of our customers). LSIs petition was based on alleged
infringement of U.S. Patent Number 5,227,335, claiming certain methods for forming
nitrided glue layers for tungsten processing in semiconductor fabrication. LSIs
petition sought an order prohibiting import and/or sale of the accused devices in the
U.S.. Under established ITC practice, the ITC initiated an investigation on the
petition.
 
    
    On April 18 2008, LSI also filed a complaint in Federal District Court in the
Eastern District of Texas, alleging an infringement of the same patent by the same
parties. This complaint sought an injunction or order prohibiting the alleged
infringement along with a reasonable royalty, and other damages in a trebled amount on
the basis of alleged willfulness. Based on our motion, this court case was stayed
pending the outcome of the ITC matter.
 
    
    On October 31, 2008, we filed a counter-suit against LSI in the Federal District
Court in the Northern District of California alleging infringement of two our patents,
U.S. Patent Numbers 5,459,354 and 5,652,689. Our complaint sought an injunction or
order prohibiting the alleged infringement along with a reasonable royalty, and other
damages, trebled on the basis of alleged willfulness.
 
    
    On December 24, 2008, LSI filed its response to our complaint, denying infringement
and alleging invalidity and unenforceability. In addition, LSI included counterclaims
against us, alleging invalidity and unenforceability of our patents and further
alleging infringement of four LSI U.S. Patents, U.S. Patent Numbers 5,149,672;
6,153,543; 5,599,739; and 5,693,561. LSIs counterclaim sought an order invalidating
and/or rendering the our patents unenforceable, together with an injunction or order
prohibiting the alleged infringement along with a reasonable royalty, and other
damages, trebled on the
basis of alleged willfulness. On January 15, 2009, LSI dismissed that counterclaim
without prejudice, and reasserted the same claims in the same court against us and our
U.S. subsidiary.
  41




---



##### 




    
    On January 9, 2009, we filed a second complaint in the Federal District Court in the
Northern District of California, alleging infringement by LSI and Agere of our U.S.
Patent Number 5,393,701. Our complaint sought an injunction or order prohibiting the
alleged infringement along with a reasonable royalty, and other damages, trebled on the
basis of alleged willfulness.
  Risk Management
   
    
    Uniqueness in risk management
 
    
    Maturity in property loss control
 
    
    Continuous improvement in BCP
    Insurance
   42




---



##### 



C. Organizational Structure
  Percentage ofJurisdiction of
    
    Ownership as ofCompany
    
    Incorporation
    
    December 31, 2010UMC Group (USA)
    
    California, U.S.A.
    
    
    100.00
    %United Microelectronics (Europe) B.V.
    
    The Netherlands
    
    
    100.00
    %UMC Capital Corp.
    
    Cayman Islands
    
    
    100.00
    %TLC Capital Co., Ltd.
    
    Taiwan, R.O.C.
    
    
    100.00
    %UMC New Business Investment Corp.
    
    Taiwan, R.O.C.
    
    
    100.00
    %Alpha Wisdom Limited
    
    Cayman Islands
    
    
    100.00
    %Green Earth Limited
    
    Samoa
    
    
    100.00
    %Fortune Venture Capital Corp.
    
    Taiwan, R.O.C.
    
    
    100.00
    %UMC Japan
    
    Japan
    
    
    100.00
    %Unitruth Investment Corp.
    
    Taiwan, R.O.C.
    
    
    100.00
    %UMC Capital (U.S.A)
    
    California, U.S.A.
    
    
    100.00
    %ECP VITA Ltd.
    
    British Virgin Islands
    
    
    100.00
    %Soaring Capital Corp.
    
    Samoa
    
    
    100.00
    %Unitruth Advisor (Shanghai) Co., Ltd.
    
    China
    
    
    100.00
    %Mos Art Pack Corp.
    
    Taiwan, R.O.C.
    
    
    73.34
    %Nexpower Technology Corp.
    
    Taiwan, R.O.C.
    
    
    57.67
    %Wavetek Microelectronics Corporation
    
    Taiwan, R.O.C.
    
    
    99.79
    %United Lighting Opto-Electronic Inc.
    
    Taiwan, R.O.C.
    
    
    94.65
    %United Lighting Opto-Electronic
Investment (HK) Limited
    
    China
    
    
    94.65
    %Everrich Energy Corp.
    
    Taiwan, R.O.C.
    
    
    91.12
    %Everrich Energy Investment (HK) Limited
    
    China
    
    
    91.12
    %Everrich (Shandong) Energy Co.
(formerly Yongsheng (Shandong) Energy Co.)
    
    China
    
    
    91.12
    %Unistars Corp.
    
    Taiwan, R.O.C.
    
    
    65.63
    %Topcell Solar International Co. Ltd.
    
    Taiwan, R.O.C.
    
    
    51.49
    %Jenenergy System Corporation
    
    Taiwan, R.O.C.
    
    
    38.45
    %Smart Energy Enterprises Limited
    
    China
    
    
    38.45
    %Smart Energy ShanDong Corporation
    
    China
    
    
    38.45
    %
 Note 1:
    
    On November 4, 2010, United Microelectronics Corp. (Samoa) filed for liquidation as a
result of a decision of its stockholders meeting. We ceased accounting for our ownership of United
Microelectronics Corp. (Samoa) under the equity method from November 4, 2010, and United
Microelectronics Corp. (Samoa) was not our consolidated subsidiary as of December 31, 2010.Note 2:
    
    On July 30, 2010, UMCi Ltd. filed for liquidation as a result of a decision of its
stockholders meeting. We ceased accounting for our ownership of UMCi Ltd. under the equity method
from July 30, 2010, and UMCi Ltd. was not our consolidated subsidiary as of December 31, 2010. D. Property, Plants and Equipment
  ITEM 4A.
    
    UNRESOLVED STAFF COMMENTS
   43




---



##### 



ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 Unless stated otherwise, the discussion and analysis of our financial condition and
results of operations in this section apply to our financial information as prepared in accordance
with R.O.C. GAAP. You should read the following discussion of our financial condition and results
of operations together with the consolidated financial statements and the
notes to such statements included in this annual report. R.O.C. GAAP varies in certain
significant respects from U.S. GAAP. These differences and their effects on our financial
statements are described in Note 34 to our audited consolidated financial statements included in
this annual report.
 For the convenience of readers, NT dollar amounts used in this section for, and as of, the
year ended December 31, 2010 have been translated into U.S. dollar amounts using US$1.00 = NT$29.14,
the noon buying rate as certified for customs purposes by the Federal Reserve Bank of New York on
December 30, 2010. The U.S. dollar translation appears in parentheses next to the relevant NT
dollar amount.
 Overview
  Cyclicality of the Semiconductor Industry
  Pricing
   Capacity Utilization Rates
    44




---



##### 



Change in Product Mix and Technology Migration
   Manufacturing Yields
   Investments
   Treasury Share Programs
   45




---



##### 



Critical Accounting Policies
 General
   Revenue Recognition
   Accounts Receivable and Allowance for Doubtful Accounts
   Inventory
   46




---



##### 



Income Taxes
  Income Tax Income Tax
 Long-lived Assets Impairment
   47




---



##### 



Pension
   Investments in Debt and Equity Securities
 Investments-Debt and
Equity Securities
 Derivative Instruments
   Employee Stock Options
   48




---



##### 



A. Operating Results
 Net Operating Revenues
  Cost of Goods Sold
  
    
    overhead, including depreciation and maintenance of production equipment,
indirect labor costs, indirect material costs, supplies, utilities and royalties;
 
    
    wafer costs;
 
    
    direct labor costs; and
 
    
    service charges paid to subcontractors for mask tooling, assembly and test services.
  Operating Expenses
  
    
    Sales and marketing expenses. Sales and marketing expenses consist primarily of
intellectual property development expenses, salaries and related personnel expenses,
wafer sample expenses and related marketing expenses. Wafer samples are actual silicon
samples of our customers early design ideas made with our most advanced processes and
provided to those customers.
  49




---



##### 




    
    General and administrative expenses. General and administrative expenses consist
primarily of salaries for our administrative, finance and human resource personnel,
fees for professional services, and cost of computer and communication systems to
support our operations.
 
    
    Research and development expenses. Research and development expenses consist
primarily of research testing related expenses, salaries and related personnel expenses
and depreciation on the equipment used for our research and development.
 Non-operating Income and Expenses
  
    
    interest income, which has been primarily derived from time deposits;
 
    
    investment income accounted for under the equity method, which has been primarily
derived from the recognition of investee companies net income based on the percentage
of their ownership we hold;
 
    
    gain on disposal of investments, which has been primarily derived from our disposal
of long-term investments accounted for under the equity method, available-for-sale
financial assets and financial assets measured at cost;
 
    
    dividend income, which has been primarily derived from the financial instruments of
financial assets at fair value through profit or loss, available-for-sale financial
assets and financial assets measured at cost;
 
    
    gain on valuation of financial assets and liabilities, which have been primarily
derived from disposal of and changes in the values of financial assets and liabilities
classified as FVTPL according to R.O.C. SFAS No. 34 Financial Instruments: Recognition
and Measurement, or R.O.C. SFAS 34; and
 
    
    other income, which has been primarily derived from our branchs grant income
received from the government in Singapore.
  
    
    loss on valuation of financial assets and liabilities, which have been primarily
derived from disposal of and changes in the values of financial assets and liabilities
classified as FVTPL according to R.O.C. SFAS 34;
 
    
    investment loss accounted for under the equity method, which has been primarily
derived from the recognition of investee companies net loss based on the percentage of
their ownership we hold; and
 
    
    impairment loss, which have been primarily derived from the loss recognized in
long-term investments and long-live assets.
 Taxation
   50




---



##### 



Comparisons of Results of Operations
  Year Ended December 31,2008
    
    
    2009
    
    
    2010Net operating revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    (86.9
    )
    
    
    (83.1
    )
    
    
    (70.8
    )Gross profit
    
    
    13.1
    
    
    
    16.9
    
    
    
    29.2Operating expenses:Sales and marketing
    
    
    (3.6
    )
    
    
    (3.1
    )
    
    
    (2.0
    )General and administrative
    
    
    (3.1
    )
    
    
    (3.0
    )
    
    
    (2.9
    )Research and development
    
    
    (8.6
    )
    
    
    (8.8
    )
    
    
    (6.9
    )Operating income (loss)
    
    
    (2.2
    )
    
    
    2.0
    
    
    
    17.4Net non-operating income (loss)
    
    
    (20.5
    )
    
    
    (0.2
    )
    
    
    2.7Income (Loss) before income tax and minority interests
    
    
    (22.7
    )
    
    
    1.8
    
    
    
    20.1Income tax expense
    
    
    (1.0
    )
    
    
    (0.7
    )
    
    
    (1.3
    )Extraordinary gain
    
    
    
    
    
    
    0.7
    
    
    
    0.1Net income (loss)
    
    
    (23.7
    )
    
    
    1.8
    
    
    
    18.9Attributable to:the Company
    
    
    (23.0
    )
    
    
    4.2
    
    
    
    18.9minority interests
    
    
    (0.7
    )
    
    
    (2.4
    )
    
    
    (0.0
    )
 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Net operating revenues
 Cost of goods sold.
  51




---



##### 



Gross profit and gross margin.
 Operating income (loss) and operating margin.
 Sales and marketing expenses.
 General and administrative expenses.
 Research and development expenses.
 Net non-operating income (loss).
 Net income attributable to the Company.
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Net operating revenues.
 Cost of goods sold.
 Gross profit and gross margin.
 Operating income (loss) and operating margin.
 Sales and marketing expenses .
  52




---



##### 



General and administrative expenses.
 Research and development expenses.
 Net non-operating loss.
 Net income (loss) attributable to the Company.
 B. Liquidity and Capital Resources
      53




---



##### 



Operating Activities
  Investment Activities
  Financing Activities
         54




---



##### 



Transactions with Related Parties
  Inflation/Deflation
  U.S. GAAP Reconciliation
   Year Ended December 31,2008
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions)Net income (loss) attributable to the CompanyNet income (loss) attributable to the Company, R.O.C. GAAP
    
    
    (22,320
    )
    
    
    3,874
    
    
    
    23,899
    
    
    
    820U.S. GAAP adjustmentsCompensation
    
    
    (1,925
    )
    
    
    (802
    )
    
    
    (397
    )
    
    
    (14
    )Equity investees
    
    
    (80
    )
    
    
    (32
    )
    
    
    (41
    )
    
    
    (1
    )Investments in debt and equity securities
    
    
    1,486
    
    
    
    (830
    )
    
    
    (234
    )
    
    
    (8
    )Goodwill and Business Combinations
    
    
    (14,571
    )
    
    
    
    
    
    
    470
    
    
    
    16Treasury stock and related disposal
    
    
    8,817
    
    
    
    
    
    
    
    (81
    )
    
    
    (3
    )Inventory
    
    
    (362
    )
    
    
    362
    
    
    
    
    
    
    
    Net income (loss) attributable to the Company, U.S. GAAP
    
    
    (28,955
    )
    
    
    2,572
    
    
    
    23,616
    
    
    
    810Stockholders equityStockholders equity, R.O.C. GAAP
    
    
    191,659
    
    
    
    214,096
    
    
    
    225,136
    
    
    
    7,726Compensation
    
    
    63
    
    
    
    65
    
    
    
    32
    
    
    
    1Equity investees
    
    
    (199
    )
    
    
    (150
    )
    
    
    (142
    )
    
    
    (5
    )Investments in debt and equity securities
    
    
    
    
    
    
    1,717
    
    
    
    1,765
    
    
    
    61Goodwill and Business Combinations
    
    
    (8
    )
    
    
    (8
    )
    
    
    1,301
    
    
    
    45Treasury stock and related disposal
    
    
    (1,196
    )
    
    
    (2,769
    )
    
    
    (2,624
    )
    
    
    (90
    )Pension
    
    
    934
    
    
    
    289
    
    
    
    (345
    )
    
    
    (12
    )Inventory
    
    
    (362
    )
    
    
    
    
    
    
    
    
    
    
    Stockholders equity, U.S. GAAP
    
    
    190,891
    
    
    
    213,240
    
    
    
    225,123
    
    
    
    7,726
 
 Note. Refer to Note 34 to our audited financial statements included elsewhere in this annual
report.  55




---



##### 



Compensation Expenses
   Investments in Debt and Equity Securities
  Noncontrolling Interests in a
Subsidiary
  Goodwill and Business Combinations
   56




---



##### 



Goodwill or Gain
from Bargain Purchase, Including Considerations Transferred IntangiblesGoodwill and Other
   Treasury stock and related disposal
  Pension
 Defined Benefit Plans-Pension,
 Inventory
 Inventory
   57




---



##### 



Recent Accounting Pronouncements
  Revenue recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements
 Derivatives and Hedging
 Compensation-Stock Compensation (Topic 718) Effect of
Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in
Which the Underlying Equity Security Trades
 Revenue Recognition (Topic 605) Milestone Method of
Revenue Recognition
 IntangiblesGoodwill and Other (Topic 350) When
to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative
Carrying Amounts
  58




---



##### 



C. Research, Development, Patents and Licenses, Etc.
   D. Trend Information
  E. Off-balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  Payments Due by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5-Years(consolidated) (in NT$ millions)Long-term debt (1)Unsecured bonds
    
    
    5,887
    
    
    
    
    
    
    
    
    
    
    
    5,887
    
    
    
    Long-term loans
    
    
    7,522
    
    
    
    711
    
    
    
    3,808
    
    
    
    3,003
    
    
    
    Operating lease obligations (2)
    
    
    3,010
    
    
    
    406
    
    
    
    659
    
    
    
    483
    
    
    
    1,462Purchase obligations (3)
    
    
    2,311
    
    
    
    2,311
    
    
    
    
    
    
    
    
    
    
    
    Other long-term obligations (4)
    
    
    1,616
    
    
    
    1,536
    
    
    
    15
    
    
    
    
    
    
    
    65Total contractual cash obligations
    
    
    20,346
    
    
    
    4,964
    
    
    
    4,482
    
    
    
    9,373
    
    
    
    1,527
 
 (1)
    
    Assuming the exchangeable bonds are paid off upon maturity.(2)
    
    Represents our obligations to make lease payments to use machineries, equipments and land on
which our fabs are located, primarily in the Hsinchu Science Park and the Tainan Science Park
in Taiwan, Pasir Ris Wafer Fab Park in Singapore and UMCJ.  59




---



##### 



(3)
    
    Represents commitments for construction and purchase of raw materials. These commitments are
not recorded on our balance sheet as of December 31, 2010.(4)
    
    Represents intellectual properties and royalties payable under our technology license
agreements. The amounts of payments due under these agreements are determined based on fixed
contract amounts. 
 ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
   Name
    
    Age
    
    Position
    
    Years with UsStan Hung
    
    50
    
    Chairman and Director
    
    19Shih-Wei Sun
    
    53
    
    Director (Representative of Silicon Integrated Systems Corp.) and Chief
    
    16Executive OfficerWen-Yang Chen
    
    58
    
    Director (Representative of Hsun Chieh Investment Co.) and Chief Operating
    
    31OfficerPo-Wen Yen
    
    54
    
    Director (Representative of Hsun Chieh Investment Co.) and Senior Vice President
    
    24Ting-Yu Lin
    
    50
    
    Director
    
    5Paul S.C. Hsu (1)
    
    75
    
    Independent Director
    
    7Chung-Laung Liu (1)
    
    77
    
    Independent Director
    
    5Chun-Yen Chang (1)
    
    74
    
    Independent Director
    
    5Cheng-Li Huang (1)
    
    62
    
    Independent Director
    
    2Chitung Liu
    
    45
    
    Chief Financial Officer
    
    10
 
 (1)
    
    Member of the Audit Committee. Stan Hung
 Shih-Wei Sun
 Wen-Yang Chen
  60




---



##### 



Po-Wen Yen
 Ting-Yu Lin
 Paul S.C. Hsu
 Chung-Laung Liu
 Chun-Yen Chang
 Cheng-Li Huang
 Chitung Liu
 B. Compensation
  C. Board Practices
    61




---



##### 



http://www.umc.com/english/investors/Corp_gov_difference.asp.
 D. Employees
  As of December 31,Employees
    
    2008
    
    
    2009
    
    
    2010Engineers
    
    
    6,461
    
    
    
    6,579
    
    
    
    7,365Technicians
    
    
    4,734
    
    
    
    5,290
    
    
    
    5,835Administrative Staff
    
    
    509
    
    
    
    465
    
    
    
    471Total
    
    
    11,704
    
    
    
    12,334
    
    
    
    13,671
     E. Share Ownership
   62




---



##### 



ITEM 7.
    
    MAJOR STOCKHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Stockholders
  As of
    
    
    As of
    
    
    As of
    
    
    As ofAs of April 17
    
    
    April 17,
    
    
    April 12,
    
    
    April 15,
    
    
    April 13,2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007Number
    
    
    Percentage
    
    
    Percentage
    
    
    Percentage
    
    
    Percentage
    
    
    Percentageof shares
    
    
    of shares
    
    
    of shares
    
    
    of shares
    
    
    of shares
    
    
    of sharesbeneficially
    
    
    beneficially
    
    
    beneficially
    
    
    beneficially
    
    
    beneficially
    
    
    beneficiallyName of Beneficial Owner
    
    owned
    
    
    owned
    
    
    owned
    
    
    owned
    
    
    owned
    
    
    ownedHsun Chieh Investment Co., Ltd. (1)
    
    
    441
    
    
    
    3.4
    %
    
    
    3.4
    %
    
    
    3.3
    %
    
    
    3.2
    %
    
    
    3.2
    %Xilinx, Inc.
    
    
    0
    
    
    
    0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.6
    %Silicon Integrated Systems Corp.
    
    
    315
    
    
    
    2.4
    %
    
    
    2.4
    %
    
    
    2.4
    %
    
    
    2.3
    %
    
    
    2.3
    %Directors,
supervisors and
executive officers
as a group
    
    
    808
    
    
    
    6.22
    %
    
    
    6.2
    %
    
    
    5.7
    %
    
    
    5.6
    %
    
    
    6.2
    %
 
 (1)
    
    36.5% owned by United Microelectronics as of March 31, 2011.    63




---



##### 



B. Related Party Transactions
   Name
    
    Ownership%AMIC Technology (Taiwan), Inc.
    
    
    18.77Silicon Integrated Systems Corp.
    
    
    16.94
  C. Interests of Experts and Counsel
  
 ITEM 8.
    
    FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
     Total Number of
    
    
    Number ofCash Dividend per
    
    
    Stock Dividend per
    
    
    Shares Issued as
    
    
    Outstanding SharesShare
    
    
    Share
    
    
    Stock Dividend
    
    
    at Year EndNT$
    
    
    NT$1997
    
    
    
    
    
    
    3.0
    
    
    
    868,629,276
    
    
    
    4,117,758,2651998
    
    
    
    
    
    
    2.9
    
    
    
    1,199,052,940
    
    
    
    5,480,221,7251999
    
    
    
    
    
    
    1.5
    
    
    
    834,140,790
    
    
    
    6,638,054,4622000
    
    
    
    
    
    
    2.0
    
    
    
    1,809,853,716
    
    
    
    11,439,016,9002001
    
    
    
    
    
    
    1.5
    
    
    
    1,715,104,035
    
    
    
    13,169,235,4162002
    
    
    
    
    
    
    1.5
    
    
    
    1,968,018,212
    
    
    
    15,238,578,6462003
    
    
    
    
    
    
    0.4
    
    
    
    607,925,145
    
    
    
    15,941,901,4632004
    
    
    
    
    
    
    0.8
    
    
    
    1,288,558,185
    
    
    
    17,550,800,8592005
    
    
    0.1029
    
    
    
    1.029
    
    
    
    1,758,736,435
    
    
    
    18,856,632,3242006
    
    
    0.409141420
    
    
    
    0.10228530
    
    
    
    179,031,672
    
    
    
    19,131,192,6902007
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    13,214,494,8832008
    
    
    0.75
    
    
    
    0.45
    
    
    
    562,958,816
    
    
    
    12,987,771,3152009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,987,771,3152010
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    12,987,912,315
 
 (1)
    
    We declare stock dividends in a NT dollar amount per share, but we pay the stock
dividends to our stockholders in the form of shares. The amount of shares distributed to each
stockholder is calculated by multiplying the dividend declared by the number of shares held by
the given stockholder, divided by the par value of NT$10 per share. Fractional shares are not
issued but are paid in cash.  64




---



##### 



B. Significant Changes
   
 ITEM 9.
    
    THE OFFER AND LISTING
 A. Offer and Listing Details
 Market Price Information for Our Shares
  Closing Price Per Share(1)
    
    
    Average DailyHigh
    
    
    Low
    
    
    Trading VolumeNT$
    
    
    NT$
    
    
    (in thousands of shares)2005
    
    
    25.20
    
    
    
    16.75
    
    
    
    84,868.002006
    
    
    22.60
    
    
    
    17.60
    
    
    
    67,133.002007
    
    
    23.45
    
    
    
    17.15
    
    
    
    53,166.862008
    
    
    20.30
    
    
    
    6.80
    
    
    
    37,521.002009
    
    
    17.20
    
    
    
    7.10
    
    
    
    85,869.55First Quarter
    
    
    12.00
    
    
    
    7.10
    
    
    
    65,283.37Second Quarter
    
    
    14.95
    
    
    
    10.30
    
    
    
    135,721.42Third Quarter
    
    
    16.15
    
    
    
    10.95
    
    
    
    83,937.95Fourth Quarter
    
    
    17.20
    
    
    
    15.40
    
    
    
    57,964.972010
    
    
    18.6
    
    
    
    12.95
    
    
    
    53,660.37First Quarter
    
    
    18.6
    
    
    
    15.45
    
    
    
    61,199.41Second Quarter
    
    
    17.2
    
    
    
    13.8
    
    
    
    44,109.17Third Quarter
    
    
    14.85
    
    
    
    12.95
    
    
    
    41,111.93Fourth Quarter
    
    
    16.7
    
    
    
    13.3
    
    
    
    68,624.75October
    
    
    14.55
    
    
    
    13.3
    
    
    
    64,308.25November
    
    
    15.4
    
    
    
    14.4
    
    
    
    72,114.45December
    
    
    16.7
    
    
    
    15.35
    
    
    
    69,227.942011
(through April 27)
    
    
    18.10
    
    
    
    14.10
    
    
    
    63,196.90First Quarter
    
    
    18.1
    
    
    
    14.1
    
    
    
    70,662.07January
    
    
    18.1
    
    
    
    15.55
    
    
    
    90,482.50February
    
    
    17.6
    
    
    
    15.4
    
    
    
    64,251.73March
    
    
    15.9
    
    
    
    14.1
    
    
    
    57,328.86Second Quarter (through April 27)
    
    
    15.60
    
    
    
    14.75
    
    
    
    38,166.63April (through April 27)
    
    
    15.60
    
    
    
    14.75
    
    
    
    38,166.63
 
 Source: Taiwan Stock Exchange.(1)
    
    Information has been adjusted to give effect to 758,736,435 Shares and 197,285,530 Shares
issued as stock dividend and employee bonus, respectively, in August 2005; 179,031,672 Shares,
NT$7,161,266,830, 45,845,444 Shares and NT$305,636,291 issued as stock dividend, cash
dividend, stock employee bonus and cash employee bonus, respectively, in August 2006;
NT$12,461,529,283 and NT$2,324,119,405 issued as cash dividend and cash employee bonus,
respectively, in August 2007; and 562,958,816 Shares and 114,616,567 Shares issued as stock
dividend and employee bonus, respectively, in August 2008.  65




---



##### 



Market Price Information for Our American Depositary Shares
  Closing Price Per ADS(1)
    
    
    Average ADS DailyHigh
    
    
    Low
    
    
    Trading VolumeUS$
    
    
    US$2005
    
    
    4.43
    
    
    
    2.80
    
    
    
    4,279,9292006
    
    
    3.90
    
    
    
    2.82
    
    
    
    5,804,7662007
    
    
    4.48
    
    
    
    2.93
    
    
    
    6,536,8882008
    
    
    3.71
    
    
    
    1.51
    
    
    
    5,784,0552009
    
    
    3.53
    
    
    
    1.65
    
    
    
    4,784,033First Quarter
    
    
    2.82
    
    
    
    1.65
    
    
    
    4,100,685Second Quarter
    
    
    3.53
    
    
    
    2.36
    
    
    
    6,364,041Third Quarter
    
    
    3.82
    
    
    
    2.54
    
    
    
    4,099,427Fourth Quarter
    
    
    3.88
    
    
    
    3.25
    
    
    
    5,828,8532010
    
    
    4.22
    
    
    
    2.55
    
    
    
    3,929,367First Quarter
    
    
    4.22
    
    
    
    3.34
    
    
    
    5,840,361Second Quarter
    
    
    3.89
    
    
    
    2.87
    
    
    
    4,404,338Third Quarter
    
    
    3.21
    
    
    
    2.55
    
    
    
    2,943,675Fourth Quarter
    
    
    3.28
    
    
    
    2.6
    
    
    
    2,626,094November
    
    
    3.23
    
    
    
    2.85
    
    
    
    2,376,990December
    
    
    3.28
    
    
    
    2.96
    
    
    
    3,110,8362011 (through April 27)
    
    
    3.46
    
    
    
    2.50
    
    
    
    4,000,139First Quarter
    
    
    3.46
    
    
    
    2.50
    
    
    
    4,125,455January
    
    
    3.46
    
    
    
    3.09
    
    
    
    5,257,485February
    
    
    3.43
    
    
    
    2.80
    
    
    
    4,650,800March
    
    
    2.94
    
    
    
    2.50
    
    
    
    2,707,100Second Quarter (through April 27)
    
    
    2.84
    
    
    
    2.65
    
    
    
    3,568,493April (through April 27)
    
    
    2.84
    
    
    
    2.65
    
    
    
    3,568,493
 
 Sources: Bloomberg(1)
    
    Information has been adjusted to give effect to 1,758,736,435 Shares and 197,285,530 Shares
issued as stock dividend and employee bonus, respectively, in August 2005; 179,031,672 Shares,
NT$7,161,266,830, 45,845,444 Shares and NT$305,636,291 issued as stock dividend, cash
dividend, stock employee bonus and cash employee bonus, respectively, in August 2006;
NT$12,461,529,283 and NT$2,324,119,405 issued as cash dividend and cash employee bonus,
respectively, in August 2007; and 562,958,816 Shares and 114,616,567 Shares issued as stock
dividend and employee bonus, respectively, in August 2008.   66




---



##### 



B. Plan of Distribution
  C. Markets
  D. Selling Stockholders
  E. Dilution
  F. Expenses of the Issue
  
 ITEM 10.
    
    ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
 The following statements summarize the material elements of our capital structure and
the more important rights and privileges of stockholders conferred by R.O.C. law and our articles
of incorporation.
 Objects and Purpose
  Directors
   67




---



##### 



Compensation Committee
   68




---



##### 



Shares
  Employee Stock Option
   April
    
    
    August
    
    
    September
    
    
    January2005
    
    
    2005
    
    
    2005
    
    
    2006(in millions)Number of Options Granted
    
    
    23
    
    
    
    54
    
    
    
    52
    
    
    
    39Number of Options Outstanding as of March 31, 2011
    
    
    5
    
    
    
    17
    
    
    
    23
    
    
    
    9Shares available to option holders as of March 31, 2011
    
    
    5
    
    
    
    17
    
    
    
    23
    
    
    
    9
 May
    
    
    August
    
    
    December
    
    
    June2006
    
    
    2006
    
    
    2007
    
    
    2009(in millions)Number of Options Granted
    
    
    42
    
    
    
    28
    
    
    
    500
    
    
    
    300Number of Options Outstanding as of March 31, 2011
    
    
    14
    
    
    
    8
    
    
    
    367
    
    
    
    264Shares available to option holders as of March 31, 2011
    
    
    14
    
    
    
    8
    
    
    
    367
    
    
    
    264
 Note:
    
    The employee stock options granted prior to August 7, 2007, the effective date of
capital reduction, were adjusted in accordance with capital reduction rate. Each option unit
entitles an optionee to subscribe for about 0.7 share of the Companys common stock. The exercise
price of the options was also adjusted according to the capital reduction rate. Each stock option
unit granted after August 7, 2007 remains to be subscribed for one share of the Companys common
stock. New Shares and Preemptive Rights
   69




---



##### 



Stockholders
  Transfer of Shares
  Stockholders Meetings
  Voting Rights
    70




---



##### 



Dividends and Distributions
    
    
    payment of all taxes and dues;
 
    
    deduction of any past losses; and
 
    
    allocation of 10% of our net income as a legal reserve.
      71




---



##### 



Acquisition of Our Shares by Us
   
    
    to transfer shares to our employees;
 
    
    to transfer upon conversion of bonds with warrants, preferred shares with warrants,
convertible bonds, convertible preferred shares or certificates of warrants issued by
us; and
 
    
    if necessary, to maintain our credit and our stockholders equity; provided that the
shares so purchased shall be canceled thereafter.
     Liquidation Rights
  Rights to Bring Stockholders Suits
  
    
    within 30 days from the date on which a stockholders resolution is adopted, a
stockholder may file a lawsuit to annul a stockholders resolution if the procedure for
convening a stockholders meeting or the method of resolution violates any law or
regulation or our articles of incorporation. However, if the court is of the opinion
that such violation is not material and does not affect the result of the resolution,
the court may reject the stockholders claim.
  72




---



##### 




    
    if the substance of a resolution adopted at a stockholders meeting contradicts any
applicable law or regulation or our articles of incorporation, a stockholder may bring
a suit to determine the validity of such resolution.
  
    
    Stockholders who have continuously held 3% or more of our issued shares for a period
of one year or longer may request in writing that the audit committee institute an
action against a director on our behalf. In case the audit committee fails to institute
an action within 30 days after receiving such request, the stockholders may institute
an action on our behalf. In the event stockholders institute an action, a court may,
upon the defendants motion, order such stockholders to furnish appropriate security.
 
    
    Stockholders who hold more than 3% or more of our total issued shares may institute
an action with a court to remove a director of ours who has materially violated the
applicable laws or our articles of incorporation or has materially damaged the
interests of our company if a resolution for removal on such grounds has first been
voted on and rejected by our stockholders and such suit is filed within 30 days of such
stockholders vote.
 
    
    In the event that any director, manager or stockholder holding more than 10% of our
shares or any respective spouses or minor children and/or nominees of any of them sells
shares within six months after acquisition of such shares, or repurchases the shares
within six months after the sale, we may claim for recovery of any profits realized
from the sale and purchase. If our board of directors fail to claim for recovery, any
stockholder may set forth a 30-day period for our board of directors to exercise the
right. In the event our directors fail to exercise the right during such 30-day period,
such requesting stockholder shall have the right to claim such recovery on our behalf.
Our directors shall be jointly and severally liable for damages suffered by us as a
result of their failure to exercise the right of claim.
 Other Rights of Stockholders
    Financial Statements
  Transfer Restrictions
   73




---



##### 



C. Material Contracts
 Cross License Agreement, dated as of December 7, 2005, between United Microelectronics Corporation
and Freescale Semiconductor, Inc.
  Cross License Agreement, dated as of January 1, 2006, between United Microelectronics
Corporation and International Business Machine Corporation.
  Cross License Agreement, dated as of January 1, 2006, between United Microelectronics
Corporation and Renesas Technology Corp.
   74




---



##### 



Settlement and Cross License Agreement, dated as of April 1, 2009, between United
Microelectronics Corporation and LSI Corporation (and its subsidiary Agere)
  Major Long-term Supply and Marketing Agreements
  Major Construction Agreements
  Major Long-term Loan Agreements
  D. Exchange Controls
 Foreign Investment and Exchange Controls in Taiwan
 We have extracted from publicly available documents the information presented in this
section. Please note that citizens of the Peoples Republic of China and entities organized in the
Peoples Republic of China are subject to special R.O.C. laws, rules and regulations, which are not
discussed in this section.
 General
   75




---



##### 



Foreign Ownership Limitations
   Foreign Investors
   Foreign Investment Approval
     76




---



##### 



Exchange Controls
     Depositary Receipts
     77




---



##### 



(1)
    
    stock dividends;
 (2)
    
    free distributions of common shares;
 (3)
    
    due to the exercise by a holder of his or her preemptive rights in the event of
capital increases for cash; or
 (4)
    
    permitted under the deposit agreement and the custody agreement, due to the
direct purchase of shares or purchase through the depositary in the domestic market or
the surrender of shares under
the possession of investors and then delivery of such shares to the custodian for
deposit in the depositary receipt facility, provided that the total number of
depositary receipts outstanding after an issuance cannot exceed the number of issued
depositary shares previously approved by the R.O.C. FSC in connection with the
offering plus any depositary shares issued pursuant to the events described in (1),
(2) and (3) above. These issuances may only be made to the extent previously issued
depositary shares have been withdrawn.
   E. Taxation
 R.O.C. Tax Considerations
  Dividends
   78




---



##### 



Capital Gains
  Securities Transaction Tax
  Preemptive Rights
  Estate Taxation and Gift Tax
  Tax Treaties
  Tax Reform
    79




---



##### 



U.S. Federal Income Tax Considerations For U.S. Persons
  
    
    an individual citizen or resident of the United States;
 
    
    a corporation (or other entity treated as a corporation for U.S. federal income tax
purposes) created or organized in or under the laws of the United States, any state
thereof or the District of Columbia;
 
    
    an estate the income of which is subject to U.S. federal income taxation regardless
of its source;
 
    
    a trust that is subject to the primary supervision of a court within the United
States and that has one or more U.S. persons with the authority to control all
substantial decisions of the trust; or
 
    
    a trust that has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a U.S. person.
  
    
    a dealer in securities or currencies;
 
    
    a trader in securities if you elect to use a mark-to-market method of accounting for
your securities holdings;
 
    
    a financial institution or an insurance company;
 
    
    a tax-exempt organization;
 
    
    a regulated investment company;
 
    
    a real estate investment trust;
 
    
    a person liable for alternative minimum tax;
 
    
    a person holding shares or ADSs as part of a hedging, integrated or conversion
transaction, constructive sale or straddle;
 
    
    a partnership or other pass-through entity for U.S. federal income tax purposes;
 
    
    a person owning, actually or constructively, 10% or more of our voting stock; or
 
    
    a U.S. holder whose functional currency is not the U.S. dollar.
  80




---



##### 



You should consult your own tax advisor concerning the particular U.S. federal income tax
consequences to you of the ownership and disposition of the shares or ADSs, as well as the
consequences to you arising under the laws of any other taxing jurisdiction.
  Taxation of Dividends
     81




---



##### 



Taxation of Capital Gains
   Passive Foreign Investment Company
   
    
    at least 75% of its gross income is passive income, which generally includes
income derived from certain dividends, interest, royalties and rents (other than
royalties and rents derived in the active conduct of a trade or business and not
derived from a related person), annuities or property transactions; or
 
    
    at least 50% of the value of its assets is attributable to assets that produce or
are held for the production of passive income.
  82




---



##### 




    
    the excess distribution or gain will be allocated ratably over your holding
period for shares or ADSs;
 
    
    the amount allocated to the current taxable year, and any taxable year prior to the
first taxable year in which we were a PFIC, will be treated as ordinary income; and
 
    
    the amount allocated to each other year will be subject to tax at the highest tax
rate in effect for that year and the interest charge generally applicable to
underpayments of tax will be imposed on the resulting tax attributable to each such
year.
     83




---



##### 



Information Reporting and Backup Withholding
   Inheritance and Gift Tax
   F. Dividends and Paying Agents
  G. Statement by Experts
   84




---



##### 



H. Documents on Display
   www.sec.gov
 I. Subsidiary Information
  
 ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      85




---



##### 



As of December 31, 2010Book Value
    
    
    Fair Value(in NT$ millions)Foreign exchange rate contracts: Non-Trading Purpose
    
    $
    3
    
    
    $
    3Time Deposits: Non-Trading Purpose
    
    $
    34,360
    
    
    $
    34,360Short-term Loans: Non-Trading Purpose
    
    $
    4,124
    
    
    $
    4,124Bonds: Non-Trading Purpose
    
    $
    4,996
    
    
    $
    5,158Long-term loans: Non-Trading Purpose
    
    $
    7,522
    
    
    $
    7,522
 Interest Rate Risk
  Notional Amount
    
    Contract Period
    
    Interest Rate Received
    
    Interest Rate PaidAs of December 31, 2010NT$0 million
    
    
    
    
    
    
    As of December 31, 2009NT$7,500 million
    
    May 21, 2003 to
June 24, 2010
    
    4.3% minus US$12-month
LIBOR
    
    
    1.48
    %
  Expected Maturity DatesAs of December 31, 2010
    
    
    2015 and2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    thereunder
    
    
    Total
    
    
    Fair Value(in millions, except percentages)Time Deposits:Fixed Rate (US$)
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144
    
    
    
    144Average Interest Rate
    
    
    0.3
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    %
    
    
    0.3
    %Fixed Rate (¥)
    
    
    4,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,400
    
    
    
    4,400Average Interest Rate
    
    
    0.1136
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1136
    %
    
    
    0.1136
    %Fixed Rate (NT$)
    
    
    18,710
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,710
    
    
    
    18,710Average Interest Rate
    
    
    0.3
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    %
    
    
    0.3
    %Unsecured Long-term Loans:Variable Rate (NT$)
    
    
    132
    
    
    
    187
    
    
    
    124
    
    
    
    61
    
    
    
    61
    
    
    
    566
    
    
    
    566Average Interest Rate
    
    
    1.503
    %
    
    
    1.503
    %
    
    
    1.503
    %
    
    
    1.503
    %
    
    
    1.503
    %
    
    
    1.503
    %
    
    
    1.503
    %Secured Long-term Loans:Variable Rate (NT$)
    
    
    233
    
    
    
    233
    
    
    
    233
    
    
    
    
    
    
    
    
    
    
    
    700
    
    
    
    700Average Interest Rate
    
    
    1.375
    %
    
    
    1.375
    %
    
    
    1.375
    %
    
    
    
    
    
    
    
    
    
    
    1.375
    %
    
    
    1.375
    %Bonds:Unsecured (NT$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable Rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unsecured (US$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    127
    
    
    
    109Fixed Rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %
    
    
    0
    %Unsecured (US$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    80
    
    
    
    68Fixed Rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %
    
    
    0
    %Interest Rate DerivativesAverage pay rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest Rate Swaps:Variable to Fixed (denomination)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average receive rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  86




---



##### 



Expected Maturity DatesAs
of December 31, 2009
    
    
    2014 and2010
    
    

2011
    
    

2012
    
    

2013
    
    
    thereunder
    
    
    Total
    
    
    Fair Value(in millions, except percentages)Time Deposits:Fixed Rate (US$)
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177
    
    
    
    177Average Interest Rate
    
    
    0.1228
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1228
    %
    
    
    0.1228
    %Fixed Rate (¥)
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000Average Interest Rate
    
    
    0.1
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    %
    
    
    0.1
    %Fixed Rate (NT$)
    
    
    33,940
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,940
    
    
    
    33,940Average Interest Rate
    
    
    0.1659
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1659
    %
    
    
    0.1659
    %Unsecured Long-term Loans:Variable Rate (NT$)
    
    
    33
    
    
    
    45
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    100Average Interest Rate
    
    
    1.63
    %
    
    
    1.63
    %
    
    
    1.63
    %
    
    
    
    
    
    
    
    
    
    
    1.63
    %
    
    
    1.63
    %Secured Long-term Loans:Variable Rate (NT$)
    
    
    
    
    
    
    233
    
    
    
    233
    
    
    
    233
    
    
    
    
    
    
    
    700
    
    
    
    700Average Interest Rate
    
    
    
    
    
    
    1.275
    %
    
    
    1.275
    %
    
    
    1.275
    %
    
    
    
    
    
    
    1.275
    %
    
    
    1.275
    %Bonds:Unsecured (NT$)
    
    
    7,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    7,187Variable Rate
    
    
    0%-4.3
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0%-4.3
    %
    
    
    0%-4.3
    %Unsecured (US$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    127
    
    
    
    99Fixed Rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Unsecured (US$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    80
    
    
    
    62Fixed Rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Interest Rate DerivativesInterest Rate Swaps:Variable to Fixed (denomination)
    
    NT$7,500
million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NT$7,500
million
    
    
    NT$88
millionAverage pay rate
    
    
    1.48
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.48
    %
    
    
    1.48
    %Average receive rate
    
    4.3% minus
US$12-
month
LIBOR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    4.3% minus

US$12-
month
LIBOR
    
    
    4.3
minus
US$12-
month
LIBOR
    %
 Foreign Currency Risk
   Expected Maturity DatesAs
of December 31, 2010
    
    
    2015 and2011
    
    

2012
    
    

2013
    
    

2014
    
    
    thereunder
    
    
    Total
    
    
    Fair Value(in millions, except percentages)Foreign Currency Forward
Contracts:Sell US$ against NT$Contract Amount
    
    US$
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$
    26
    
    
    NT$3Average Contractual Exchange Rate
    
    US$
    1=NT$29.8950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$
    1=NT$29.8950
    
    
    
    
  87




---



##### 



Expected Maturity DatesAs
of December 31, 2009
    
    
    2014 and2010
    
    

2011
    
    

2012
    
    

2013
    
    
    thereunder
    
    
    Total
    
    
    Fair Value(in millions, except percentages)Foreign Currency
Forward Contracts:Sell US$ against NT$Contract Amount
    
    US$
    267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$
    267
    
    
    NT $75Average Contractual
Exchange Rate
    
    US$
    1=NT$32.2910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$
    1=NT$32.2910
    
    
    
    
 
 ITEM 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 A. Debt Securities
  B. Warrants and Rights
  C. Other Securities
  D. American Depositary Shares
 Depositary Fees and Charges
  Service
    
    FeesIssuance of ADSs
    
    Up to US$0.05 per ADS issuedCancellation of ADSs
    
    Up to US$0.05 per ADS canceledDistribution of cash dividends or other cash distributions
    
    Up to US$0.02 per ADS heldDistribution of ADSs pursuant to stock dividends, free stock distributions or exercises of rights
    
    Up to US$0.05 per ADS heldDistribution of securities other than ADSs or rights to purchase additional ADSs.
    
    Up to US$0.05 per ADS held
  
    
    taxes (including applicable interest and penalties) and other governmental
charges;
 
    
    such registration fees as may from time to time be in effect for the registration of
common shares or other deposited securities on the share register and applicable to
transfers of common shares or other deposited securities to or from the name of the
custodian, the depositary or any nominees upon the making of deposits and withdrawals,
respectively;
 
    
    such cable, telex and facsimile transmission and delivery expenses as are expressly
provided in the deposit agreement to be at the expense of ADS holders and beneficial
owners of ADSs;
 
    
    the expenses and charges incurred by the depositary in the conversion of foreign
currency;
  88




---



##### 




    
    such fees and expenses as are incurred by the depositary in connection with
compliance with exchange control regulations and other regulatory requirements
applicable to common shares, deposited securities, ADSs and ADRs; and
 
    
    the fees and expenses incurred by the depositary, the custodian or any nominee in
connection with the servicing or delivery of deposited securities.
     Depositary Payments
  Service
    
    FeesReimbursement of listing fees
    
    US$
    213,499.00Reimbursement of SEC filing fees
    
    US$
    7,775.00Reimbursement of accounting supporting fees for FASB and Public Company Accounting Oversight Board
    
    US$
    10,700.00Reimbursement of annual ordinary stockholders meeting expenses
    
    US$
    31,106.14Reimbursement of fees in connection with annual financial and Sarbanes-Oxley Act of 2002 audit
    
    US$
    824,120.00Contribution to our companys investor relations efforts
    
    US$
    7,537.75Others
    
    US$
    29,059.99Total
    
    US$
    1,123,797.88
 
 PART II
 
 ITEM 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15.
    
    CONTROLS AND PROCEDURES
  89




---



##### 



Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting
      90




---



##### 



Attestation Report of the Independent Registered Public Accounting Firm
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      .
    
   91




---



##### 



Changes in Internal Control over Financial Reporting
  
 ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B.
    
    CODE OF ETHICS
 http://www.umc.com/english/pdf/Code_of_Ethics.pdf http://www.umc.com/english/pdf/Code_of_Conduct.pdf, ir@umc.com
 
 ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the year ended December 31,2009
    
    
    2010NT$
    
    
    NT$
    
    
    US$(in thousands)Audit Fees(1)
    
    
    66,712
    
    
    
    65,568
    
    
    
    2,250Audit-related Fees(2)
    
    
    1,520
    
    
    
    1,513
    
    
    
    52Tax Fees(3)
    
    
    2,460
    
    
    
    2,966
    
    
    
    102All Other Fees(4)
    
    
    
    
    
    
    14,570
    
    
    
    500Total
    
    
    70,692
    
    
    
    84,617
    
    
    
    2,904
 
 (1)
    
    Audit fees consist of fees associated with the annual audit, review of our quarterly
financial statements, statutory audits and internal control review. They also include fees
billed for those services that are normally provided by the independent accountants in
connection with statutory and regulatory filings.(2)
    
    Audit-related fees consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of our financial statements but
not described in footnote (1) above. These services include review of regulatory checklist for
the adoption of our employee stock option plan, certification of our Singapore Branch to
Singapore authorities and application for corporation registration.(3)
    
    Tax fees include fees billed for professional services rendered by Ernst & Young, primarily
in connection with our tax compliance activities.(4)
    
    All Other Fees consists of professional services rendered by the Ernst&Young for IFRS
adoption.  
 ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
   92




---



##### 



ITEM 16E.
    
    PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  MaximumNumberTotal Number of
    
    
    of Shares thatCommon Shares
    
    
    MayAverage Price
    
    
    Purchased as Part
    
    
    Yet bePaid
    
    
    of
    
    
    PurchasedTotal Number of
    
    
    per Common
    
    
    Publicly
    
    
    Under the PlansCommon Shares
    
    
    Share
    
    
    Announced
    
    
    orPeriod
    
    Purchased
    
    
    (NT$)
    
    
    Plans or Program
    
    
    Program2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1)August (from August 28, 2008)
    
    
    15,913,000
    
    
    
    13.21
    
    
    
    15,913,000
    
    
    
    184,087,000September
    
    
    171,205,000
    
    
    
    11.32
    
    
    
    187,118,000
    
    
    
    12,882,000October (to October 2, 2008)
    
    
    12,882,000
    
    
    
    10.17
    
    
    
    200,000,000
    
    
    
    (2)December (from December 17, 2008)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000,000January
    
    
    110,412,000
    
    
    
    7.81
    
    
    
    110,412,000
    
    
    
    189,588,000February (to February 16, 2009)
    
    
    189,588,000
    
    
    
    8.08
    
    
    
    300,000,000
    
    
    
    (3)February (from February 3, 2010)
    
    
    147,845,000
    
    
    
    15.98
    
    
    
    147,845,000
    
    
    
    152,155,000March (to March 22)
    
    
    152,155,000
    
    
    
    16.31
    
    
    
    300,000,000
    
    
    
    
 
 (1)
    
    The 12th share buy-back plan was announced on August 27, 2008 to repurchase 200 million
shares during the period from August 28, 2008 to October 27, 2008.(2)
    
    The 13th share buy-back plan was announced on December 16, 2008 to repurchase 300 million
shares during the period from December 17, 2008 to February 16, 2009.(3)
    
    The 14th share buy-back plan was announced on February 2, 2010 to repurchase 300 million shares
during the period from February 3, 2010 to April 2, 2010. 
 ITEM 16F.
    
    CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
  
 ITEM 16G.
    
    CORPORATE GOVERNANCE
  The Legal Framework.
 Independent Board Members.
  93




---



##### 



Board Committees.
  Equity Compensation Plans.
 
 PART III
 
 ITEM 17.
    
    FINANCIAL STATEMENTS
  
 ITEM 18.
    
    FINANCIAL STATEMENTS
 The following is a list of the audited consolidated financial statements and report of
independent registered public accounting firm included in this annual report beginning on page F-1.
 PageConsolidated Financial Statements of United Microelectronics Corporation and SubsidiariesReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets at December 31, 2009 and 2010
    
    
    F-3Consolidated
Statements of Income for each of the three years ended
December 31, 2008, 2009 and 2010
    
    
    F-4Consolidated Statements of Changes in Stockholders Equity for each of the three years ended
December 31, 2008, 2009 and 2010
    
    
    F-5Consolidated
Statements of Cash Flows for each of the three years ended
December 31, 2008, 2009 and 2010
    
    
    F-8Notes to the Consolidated Financial Statements
    
    
    F-10
  94




---



##### 



ITEM 19.
    
    EXHIBITS
 ExhibitNumber
    
    
    Description of Exhibits*1.1
    
    
    Articles of Incorporation of the Company as last amended on June 13, 20082.1
    
    
    Form of Amendment No. 1 to Deposit Agreement among the Company, and Holders and Beneficial Owners of
American Depositary Shares issued thereunder, including the form of American Depositary Shares (1)2.2
    
    
    Form of Amendment No. 2 to Deposit Agreement among the Company, and Holders and Beneficial Owners of
American Depositary Shares issued thereunder, including the form of American Depositary Shares (2)4.1
    
    
    Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located
at Hsinchu Science Park, Ko-Kuan Section, No. 20-22, Hsinchu, Taiwan, R.O.C., the site of Fab 6A (in
Chinese with English summary translation) (3)4.2
    
    
    Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located
at Hsinchu Science Park, third section of first phase, Hsinchu, Taiwan, R.O.C., the site of Fab 8A
and United Tower (in Chinese with English summary translation) (4)4.3
    
    
    Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located
at Hsinchu Science Park, third section of first phase, Hsinchu, Taiwan, R.O.C., the site of Fab 8C
(in Chinese with English summary translation) (5)4.4
    
    
    Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located
at Hsinchu Science Park, third section of first phase, Hsinchu, Taiwan, R.O.C., the site of Fab 8D
(in Chinese with English summary translation) (6)4.5
    
    
    Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located
at Hsinchu Science Park, third section of second phase, Hsinchu, Taiwan, R.O.C., the site of Fab 8E
(in Chinese with English summary translation) (7)4.6
    
    
    Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located
at Hsinchu Science Park, Gin-Shan section, Hsinchu, Taiwan, R.O.C., the site of Fab 8F (in Chinese
with English summary translation) (8)4.7
    
    
    Lease Agreement with Southern Taiwan Science Park Administration in relation to government-owned land
located at Tainan Science Park, Tainan, Taiwan, R.O.C., the site of Fab 12A (in Chinese with English
summary translation) (9)4.8
    
    
    Merger Agreement, entered into as of February 26, 2004, between United Microelectronics Corporation
and SiS Microelectronics Corporation (English Translation) (10)4.9
    
    
    Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located
at Hsinchu Science Park, Ko-Kuan section, Hsinchu, Taiwan, R.O.C., the site of Fab 8S (in Chinese
with English summary translation) (11)4.10
    
    
    Lease Agreement with JTC Corporation in relation to land located at Pasir Ris Wafer Fab Park,
Singapore, the site of Fab12i (summary) (12)4.11
    
    
    Merger Agreement, entered into as of April 29, 2009, among United Microelectronics Corporation,
Infoshine Technology Limited and Best Elite International Limited (13)*8.1
    
    
    List of Significant Subsidiaries of United Microelectronics Corporation11.1
    
    
    Code of Ethics for Directors, Supervisors and Officers (14)11.2
    
    
    Employee Code of Conduct (15)*12.1
    
    
    Certification of our Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*12.2
    
    
    Certification of our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*13.1
    
    
    Certification of our Chief Executive Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*13.2
    
    
    Certification of our Chief Financial Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*15.1
    
    
    Consent of Independent Registered Public Accounting Firm99.1
    
    
    Form 6-K furnished to the Commission on April 29, 2009 (File No. 001-15128) (16)99.2
    
    
    Form 6-K furnished to the Commission on October 28, 2009 (File No. 001-15128) (17)99.3
    
    
    Form 6-K furnished to the Commission on December 21, 2009 (File No. 001-15128) (18)
 
 *
    
    Filed herewith.(1)
    
    Incorporated by reference to Exhibit (a) to the Registrants Registration Statement on Form
F-6 (File No. 333-13796) filed with the Commission on March 2, 2006.(2)
    
    Incorporated by reference to Exhibit (a)(iii) to the Registrants Registration Statement on
Form F-6 (File No. 333-98591) filed with the Commission on March 19, 2007.(3)
    
    Incorporated by reference to Exhibit 4.1 to Registrants Annual Report on Form 20-F for the
fiscal year ended December 31, 2006 (File No. 001-15128) filed with the Commission on May 9,
2007.(4)
    
    Incorporated by reference to Exhibit 10.7 to the Registrants Registration Statement on Form
F-1 (File No. 333-12444) filed with the Commission on August 28, 2000, as amended.  95




---



##### 



(5)
    
    Incorporated by reference to Exhibit 10.8 to the Registrants Registration Statement on Form
F-1 (File No. 333-12444) filed with the Commission on August 28, 2000, as amended.(6)
    
    Incorporated by reference to Exhibit 10.9 to the Registrants Registration Statement on Form
F-1 (File No. 333-12444) filed with the Commission on August 28, 2000, as amended.(7)
    
    Incorporated by reference to Exhibit 10.10 to the Registrants Registration Statement on Form
F-1 (File No. 333-12444) filed with the Commission on August 28, 2000, as amended.(8)
    
    Incorporated by reference to Exhibit 10.11 to the Registrants Registration Statement on F-1
(File No. 333-12444) filed with the Commission on August 28, 2000, as amended.(9)
    
    Incorporated by reference to Exhibit 10.12 to the Registrants Registration Statement on F-1
(File No. 333-12444) filed with the Commission on August 28, 2000, as amended.(10)
    
    Incorporated by reference to Exhibit 4.8 to the Registrants Annual Report on Form 20-F for
the fiscal year ended December 31, 2003 (File No. 1-15128) filed with the Commission on June
17, 2004.(11)
    
    Incorporated by reference to Exhibit 4.9 to Registrants Annual Report on Form 20-F for the
fiscal year ended December 31, 2006 (File No. 001-15128) filed with the Commission on May 9,
2007.(12)
    
    Incorporated by reference to Exhibit 4.10 to Registrants Annual Report on Form 20-F for the
fiscal year ended December 31, 2006 (File No. 001-15128) filed with the Commission on May 9,
2007.(13)
    
    Incorporated by reference to Exhibit 99.1 to the Form 6-K furnished to the Commission on May
8, 2009.(14)
    
    Incorporated by reference to Exhibit 99.1 to the Form 6-K furnished to the Commission on May
25, 2005.(15)
    
    Incorporated by reference to Exhibit 99.2 to the Form 6-K furnished to the Commission on
March 26, 2006.(16)
    
    Incorporated by reference to Exhibit 99 to the Form 6-K furnished to the Commission on April
29, 2009.(17)
    
    Incorporated by reference to Exhibit 99 to the Form 6-K furnished to the Commission on
October 28, 2009.(18)
    
    Incorporated by reference to Exhibit 99 to the Form 6-K furnished to the Commission on
December 21, 2009.  96




---



##### 



SIGNATURES
   By:
    
    /S/ CHITUNG LIU

Name:Chitung LiuTitle:Chief Financial Officer
   97




---



##### 



United Microelectronics Corporation and Subsidiaries
 Consolidated Financial Statements for years ended December 31, 2008, 2009 and 2010
 Together with Report of Independent Registered Public Accounting Firm
  F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the Board of Directors and Stockholders of United Microelectronics Corporation
 We have audited the accompanying consolidated balance sheets of United Microelectronics Corporation
and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated
statements of income, changes in stockholders equity and cash flows for each of the three years in
the period ended December 31, 2010. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements
based on our audits.
 We conducted our audits in accordance with auditing standards generally accepted in the Republic of
China (R.O.C.) and the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of United Microelectronics Corporation and
subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31, 2010, in conformity
with the requirements of the Guidelines Governing the Preparation of Financial Reports by
Securities Issuers and accounting principles generally accepted in the Republic of China, which
differ in certain respects from U.S. generally accepted accounting principles (see Note 34 to the
consolidated financial statements).
 As described in Note 3 to the consolidated financial statements, effective January 1, 2009, the
Company has adopted the amendment of R.O.C. Statement of Financial Accounting Standards No. 10,
Accounting for Inventories.
 We also have audited, in accordance with the standards of Public Company Accounting Oversight
Board (United States), United Microelectronics Corporation and subsidiaries internal control over
financial reporting as of December 31, 2010, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated April 29, 2011 expressed an unqualified opinion thereon.
 ERNST & YOUNG
CERTIFIED PUBLIC ACCOUNTANTS
 Taipei, Taiwan
Republic of China
 April 29, 2011
  F-2




---



##### 



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Expressed in Thousands)
 As of December 31,Notes
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    US$AssetsCurrent assetsCash and cash equivalents
    
    
    2, 4
    
    
    
    66,152,960
    
    
    
    51,271,105
    
    
    
    1,759,475Financial assets at fair value through profit or loss, current
    
    
    2, 5
    
    
    
    2,096,091
    
    
    
    1,139,943
    
    
    
    39,119Available-for-sale financial assets, current
    
    
    2, 8
    
    
    
    6,250,694
    
    
    
    7,044,673
    
    
    
    241,753Notes receivable
    
    
    
    
    
    
    429,762
    
    
    
    115,833
    
    
    
    3,975Accounts receivable, net
    
    
    2, 6
    
    
    
    16,417,801
    
    
    
    18,110,521
    
    
    
    621,500Accounts receivable-related parties, net
    
    
    2, 26
    
    
    
    240,708
    
    
    
    759,644
    
    
    
    26,069Other receivables
    
    
    2
    
    
    
    401,783
    
    
    
    569,559
    
    
    
    19,545Inventories, net
    
    
    2, 3, 7
    
    
    
    9,141,385
    
    
    
    13,032,623
    
    
    
    447,242Prepaid expenses
    
    
    
    
    
    
    692,509
    
    
    
    848,349
    
    
    
    29,113Non-current assets held for sale
    
    
    2
    
    
    
    
    
    
    
    16,233
    
    
    
    557Deferred income tax assets, current
    
    
    2, 24
    
    
    
    538,923
    
    
    
    834,737
    
    
    
    28,646Restricted assets
    
    
    
    
    
    
    
    
    
    
    26,077
    
    
    
    895Total current assets
    
    
    
    
    
    
    102,362,616
    
    
    
    93,769,297
    
    
    
    3,217,889Funds and investmentsFinancial assets at fair value through profit or loss,
noncurrent
    
    
    2, 5
    
    
    
    
    
    
    
    79,920
    
    
    
    2,743Available-for-sale financial assets, noncurrent
    
    
    2, 8
    
    
    
    35,106,942
    
    
    
    30,254,065
    
    
    
    1,038,231Financial assets measured at cost, noncurrent
    
    
    2, 9, 13
    
    
    
    7,628,523
    
    
    
    7,651,864
    
    
    
    262,590Long-term investments accounted for under the equity method
    
    
    2, 10, 13, 26, 32
    
    
    
    12,168,942
    
    
    
    9,193,239
    
    
    
    315,485Prepayment for long-term investments
    
    
    
    
    
    
    322,290
    
    
    
    
    
    
    
    Total funds and investments
    
    
    
    
    
    
    55,226,697
    
    
    
    47,179,088
    
    
    
    1,619,049Property, plant and equipment
    
    
    2, 11, 13, 27, 28Land
    
    
    
    
    
    
    1,056,823
    
    
    
    1,555,904
    
    
    
    53,394Buildings
    
    
    
    
    
    
    21,097,255
    
    
    
    26,156,284
    
    
    
    897,608Machinery and equipment
    
    
    
    
    
    
    453,597,613
    
    
    
    498,122,888
    
    
    
    17,094,128Transportation equipment
    
    
    
    
    
    
    68,580
    
    
    
    72,938
    
    
    
    2,503Furniture and fixtures
    
    
    
    
    
    
    3,324,352
    
    
    
    3,594,261
    
    
    
    123,345Leasehold improvements
    
    
    
    
    
    
    53,411
    
    
    
    728,030
    
    
    
    24,984Total cost
    
    
    
    
    
    
    479,198,034
    
    
    
    530,230,305
    
    
    
    18,195,962Less: Accumulated depreciation
    
    
    
    
    
    
    (405,899,110
    )
    
    
    (428,492,265
    )
    
    
    (14,704,608
    )Less: Accumulated impariment
    
    
    
    
    
    
    (1,868,968
    )
    
    
    (1,725,272
    )
    
    
    (59,206
    )Add: Construction in progress and prepayments
    
    
    
    
    
    
    18,166,404
    
    
    
    32,749,232
    
    
    
    1,123,858Property, plant and equipment, net
    
    
    
    
    
    
    89,596,360
    
    
    
    132,762,000
    
    
    
    4,556,006Goodwill
    
    
    2
    
    
    
    7,615
    
    
    
    304,728
    
    
    
    10,457Deferred charges
    
    
    2
    
    
    
    1,368,418
    
    
    
    1,287,212
    
    
    
    44,173Deferred income tax assets, noncurrent
    
    
    2, 24
    
    
    
    3,152,277
    
    
    
    2,889,902
    
    
    
    99,173Other assets-others
    
    
    2, 12, 13, 27
    
    
    
    1,924,468
    
    
    
    2,694,769
    
    
    
    92,477Total assets
    
    
    
    
    
    
    253,638,451
    
    
    
    280,886,996
    
    
    
    9,639,224Liabilities and Stockholders EquityCurrent liabilitiesShort-term loans
    
    
    14
    
    
    
    128,682
    
    
    
    4,124,115
    
    
    
    141,528Financial liabilities at fair value through profit or loss,
current
    
    
    2, 15
    
    
    
    1,914,879
    
    
    
    2,254,937
    
    
    
    77,383Notes and accounts payable
    
    
    
    
    
    
    5,505,895
    
    
    
    7,024,359
    
    
    
    241,055Income tax payable
    
    
    2
    
    
    
    181,173
    
    
    
    1,563,391
    
    
    
    53,651Accrued expenses
    
    
    2, 22
    
    
    
    8,611,231
    
    
    
    11,263,161
    
    
    
    386,519Payable on equipment
    
    
    
    
    
    
    5,487,908
    
    
    
    12,619,400
    
    
    
    433,061Current portion of long-term liabilities
    
    
    2, 16, 17, 27
    
    
    
    12,800,587
    
    
    
    5,706,189
    
    
    
    195,820Deferred income tax liabilities, current
    
    
    2, 24
    
    
    
    5,700
    
    
    
    11,586
    
    
    
    398Other current liabilities
    
    
    
    
    
    
    609,821
    
    
    
    877,487
    
    
    
    30,113Total current liabilities
    
    
    
    
    
    
    35,245,876
    
    
    
    45,444,625
    
    
    
    1,559,528Long-term liabilitiesLong-term loans
    
    
    17, 27
    
    
    
    766,550
    
    
    
    6,799,390
    
    
    
    233,335Accrued pension liabilities
    
    
    2, 18
    
    
    
    3,261,457
    
    
    
    3,299,416
    
    
    
    113,226Deposits-in
    
    
    
    
    
    
    15,217
    
    
    
    24,205
    
    
    
    831Deferred income tax liabilities, noncurrent
    
    
    2, 24
    
    
    
    9,751
    
    
    
    20,807
    
    
    
    714Other liabilities-others
    
    
    2, 10
    
    
    
    243,344
    
    
    
    162,524
    
    
    
    5,577Total long-term liabilities
    
    
    
    
    
    
    4,296,319
    
    
    
    10,306,342
    
    
    
    353,683Total liabilities
    
    
    
    
    
    
    39,542,195
    
    
    
    55,750,967
    
    
    
    1,913,211Commitments and Contingent
    
    
    28Capital Stock
    
    
    2, 19, 20
    
    
    
    129,877,713
    
    
    
    129,879,123
    
    
    
    4,457,074Additional Paid-in Capital
    
    
    2, 10, 20, 22
    
    
    
    44,365,049
    
    
    
    45,048,975
    
    
    
    1,545,950Retained earnings
    
    
    2, 10, 22
    
    
    
    10,648,813
    
    
    
    28,195,559
    
    
    
    967,589Cumulative translation adjustment
    
    
    2, 10
    
    
    
    (318,188
    )
    
    
    (5,279,000
    )
    
    
    (181,160
    )Unrealized gain or loss on financial instruments
    
    
    2, 8
    
    
    
    30,915,079
    
    
    
    27,715,983
    
    
    
    951,132Treasury stock
    
    
    2, 19, 21
    
    
    
    (1,890,145
    )
    
    
    (6,223,357
    )
    
    
    (213,568
    )Total stockholders equity of the Company
    
    
    
    
    
    
    213,598,321
    
    
    
    219,337,283
    
    
    
    7,527,017Minority interests
    
    
    
    
    
    
    497,935
    
    
    
    5,798,746
    
    
    
    198,996Total stockholders equity
    
    
    
    
    
    
    214,096,256
    
    
    
    225,136,029
    
    
    
    7,726,013Total liabilities and stockholders equity
    
    
    
    
    
    
    253,638,451
    
    
    
    280,886,996
    
    
    
    9,639,224
 The accompanying notes are an integral part of these consolidated financial statements
  F-3




---



##### 



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Expressed in Thousands, Except for Earnings per Share)
 For the years ended December 31,Notes
    
    
    2008
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Net operating revenues
    
    
    2, 26
    
    
    
    96,813,546
    
    
    
    91,389,765
    
    
    
    126,441,544
    
    
    
    4,339,106Cost of goods sold
    
    
    2, 3, 7, 18, 20, 23
    
    
    
    (84,101,685
    )
    
    
    (75,974,607
    )
    
    
    (89,517,205
    )
    
    
    (3,071,970
    )Gross profit
    
    
    
    
    
    
    12,711,861
    
    
    
    15,415,158
    
    
    
    36,924,339
    
    
    
    1,267,136Operating expenses
    
    
    2, 18, 20, 23Sales and marketing expenses
    
    
    
    
    
    
    (3,483,628
    )
    
    
    (2,800,226
    )
    
    
    (2,565,821
    )
    
    
    (88,052
    )General and administrative expenses
    
    
    
    
    
    
    (3,054,683
    )
    
    
    (2,723,288
    )
    
    
    (3,598,361
    )
    
    
    (123,485
    )Research and development expenses
    
    
    
    
    
    
    (8,274,070
    )
    
    
    (8,044,155
    )
    
    
    (8,740,479
    )
    
    
    (299,948
    )(14,812,381
    )
    
    
    (13,567,669
    )
    
    
    (14,904,661
    )
    
    
    (511,485
    )Operating income (loss)
    
    
    
    
    
    
    (2,100,520
    )
    
    
    1,847,489
    
    
    
    22,019,678
    
    
    
    755,651Non-operating incomeInterest revenue
    
    
    
    
    
    
    686,268
    
    
    
    170,495
    
    
    
    143,480
    
    
    
    4,924Investment gain accounted for under the equity method, net
    
    
    2, 10
    
    
    
    
    
    
    
    180,263
    
    
    
    114,608
    
    
    
    3,933Dividend income
    
    
    
    
    
    
    2,093,528
    
    
    
    941,170
    
    
    
    1,344,017
    
    
    
    46,123Gain on disposal of property, plant and equipment
    
    
    2
    
    
    
    88,930
    
    
    
    12,721
    
    
    
    50,383
    
    
    
    1,729Gain on disposal of investments
    
    
    2, 26
    
    
    
    3,386,004
    
    
    
    1,965,468
    
    
    
    2,020,797
    
    
    
    69,348Exchange gain, net
    
    
    2
    
    
    
    381,696
    
    
    
    
    
    
    
    
    
    
    
    Gain on valuation of financial assets
    
    
    2, 5
    
    
    
    
    
    
    
    512,586
    
    
    
    
    
    
    
    Other income
    
    
    
    
    
    
    905,520
    
    
    
    1,258,535
    
    
    
    1,019,469
    
    
    
    34,9857,541,946
    
    
    
    5,041,238
    
    
    
    4,692,754
    
    
    
    161,042Non-operating expensesInterest expense
    
    
    2, 11
    
    
    
    (71,161
    )
    
    
    (58,255
    )
    
    
    (16,800
    )
    
    
    (576
    )Investment loss accounted for under the equity method, net
    
    
    2, 10
    
    
    
    (10,464,849
    )
    
    
    
    
    
    
    
    
    
    
    Loss on disposal of property, plant and equipment
    
    
    2
    
    
    
    (33,559
    )
    
    
    (2,529
    )
    
    
    (9,259
    )
    
    
    (318
    )Exchange loss, net
    
    
    2
    
    
    
    
    
    
    
    (135,202
    )
    
    
    (150,905
    )
    
    
    (5,179
    )Financial expenses
    
    
    
    
    
    
    (90,735
    )
    
    
    (90,957
    )
    
    
    (64,595
    )
    
    
    (2,217
    )Impairment loss
    
    
    2, 13
    
    
    
    (13,179,858
    )
    
    
    (4,007,078
    )
    
    
    (113,879
    )
    
    
    (3,908
    )Loss on valuation of financial assets
    
    
    2, 5
    
    
    
    (2,397,962
    )
    
    
    
    
    
    
    (217,895
    )
    
    
    (7,477
    )Loss on valuation of financial liabilities
    
    
    2, 15
    
    
    
    (1,046,081
    )
    
    
    (822,321
    )
    
    
    (665,116
    )
    
    
    (22,825
    )Other losses
    
    
    
    
    
    
    (143,392
    )
    
    
    (99,385
    )
    
    
    (90,362
    )
    
    
    (3,101
    )(27,427,597
    )
    
    
    (5,215,727
    )
    
    
    (1,328,811
    )
    
    
    (45,601
    )Income (loss) before income tax and minority interests
    
    
    
    
    
    
    (21,986,171
    )
    
    
    1,673,000
    
    
    
    25,383,621
    
    
    
    871,092Income tax expense
    
    
    2, 24
    
    
    
    (996,921
    )
    
    
    (651,068
    )
    
    
    (1,606,114
    )
    
    
    (55,117
    )Extraordinary gain
    
    
    32
    
    
    
    
    
    
    
    648,958
    
    
    
    68,449
    
    
    
    2,349Net income (loss)
    
    
    
    
    
    
    (22,983,092
    )
    
    
    1,670,890
    
    
    
    23,845,956
    
    
    
    818,324Attributable to:the Company
    
    
    
    
    
    
    (22,320,075
    )
    
    
    3,874,028
    
    
    
    23,898,905
    
    
    
    820,141Minority interests
    
    
    
    
    
    
    (663,017
    )
    
    
    (2,203,138
    )
    
    
    (52,949
    )
    
    
    (1,817
    )Net income (loss)
    
    
    
    
    
    
    (22,983,092
    )
    
    
    1,670,890
    
    
    
    23,845,956
    
    
    
    818,324Earnings (losses) per share-basic (in dollars)
    
    
    2, 25
    
    
    
    (1.70
    )
    
    
    0.31
    
    
    
    1.91Shares used in per share calculation-basic
    
    
    
    
    
    
    13,110,984
    
    
    
    12,699,072
    
    
    
    12,496,485Earnings (losses) per share-diluted (in dollars)
    
    
    2, 25
    
    
    
    (1.70
    )
    
    
    0.30
    
    
    
    1.87Shares used in per share calculation-diluted
    
    
    
    
    
    
    13,170,391
    
    
    
    12,786,448
    
    
    
    12,767,590
 The accompanying notes are an integral part of these consolidated financial statements
  F-4




---



##### 



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Expressed in Thousands)
 Capital
    
    
    
    
    
    
    Retained EarningsUnappropriated
    
    
    
    
    
    
    UnrealizedEarnings
    
    
    Cumulative
    
    
    Gain/Loss onAdditional Paid-in
    
    
    
    
    
    
    
    
    
    
    (Accumulated
    
    
    Translation
    
    
    FinancialCommon Stock
    
    
    Shares
    
    
    Capital
    
    
    Legal Reserve
    
    
    Special Reserve
    
    
    deficit)
    
    
    Adjustment
    
    
    Instruments
    
    
    Treasury Stock
    
    
    Minority Interests
    
    
    TotalNT$
    
    
    
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Balance as of January 1, 2008
    
    
    132,144,949
    
    
    
    13,214,495
    
    
    
    66,126,806
    
    
    
    18,476,942
    
    
    
    824,922
    
    
    
    12,349,227
    
    
    
    (866,562
    )
    
    
    22,413,852
    
    
    
    (15,003,247
    )
    
    
    6,530,810
    
    
    
    242,997,699Appropriation and distribution of 2007 retained earningsLegal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,234,923
    
    
    
    
    
    
    
    (1,234,923
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (824,922
    )
    
    
    824,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,382,647
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,382,647
    )Stock dividends
    
    
    1,000,816
    
    
    
    100,081
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000,816
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,939
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,939
    )Employee bonus-cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (286,541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (286,541
    )Employee bonus-stock
    
    
    1,146,166
    
    
    
    114,617
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,146,166
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital transferred to common stock
    
    
    4,628,772
    
    
    
    462,877
    
    
    
    (4,628,772
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,278,456
    )
    
    
    
    
    
    
    (2,278,456
    )Treasury stock retired
    
    
    (9,042,990
    )
    
    
    (904,299
    )
    
    
    (3,579,454
    )
    
    
    
    
    
    
    
    
    
    
    (4,539,458
    )
    
    
    
    
    
    
    
    
    
    
    17,161,902
    
    
    
    
    
    
    
    Net loss in 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,320,075
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (663,017
    )
    
    
    (22,983,092
    )Adjustment of additional paid-in capital accounted for under the
equity method
    
    
    
    
    
    
    
    
    
    
    202,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202,610Adjustment of funds and investments disposal
    
    
    
    
    
    
    
    
    
    
    16,783
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (267
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,516Cash dividends allocated to subsidaries
    
    
    
    
    
    
    
    
    
    
    11,540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,540Changes in unrealized loss on available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,771,498
    )
    
    
    
    
    
    
    
    
    
    
    (21,771,498
    )Changes in unrealized gain on financial instruments of investees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,815,568
    
    
    
    
    
    
    
    
    
    
    
    1,815,568Changes in cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,214,202
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,214,202Changes in minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,114,332
    
    
    
    1,114,332Balance as of December 31, 2008
    
    
    129,877,713
    
    
    
    12,987,771
    
    
    
    58,149,513
    
    
    
    19,711,865
    
    
    
    
    
    
    
    (26,748,416
    )
    
    
    1,347,373
    
    
    
    2,457,922
    
    
    
    (119,801
    )
    
    
    6,982,125
    
    
    
    191,658,294
  F-5




---



##### 



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Expressed in Thousands)
 Capital
    
    
    
    
    
    
    Retained EarningsUnappropriated
    
    
    
    
    
    
    UnrealizedEarnings
    
    
    Cumulative
    
    
    Gain/Loss onAdditional Paid-in
    
    
    
    
    
    
    
    
    
    
    (Accumulated
    
    
    Translation
    
    
    FinancialCommon Stock
    
    
    Shares
    
    
    Capital
    
    
    Legal Reserve
    
    
    Special Reserve
    
    
    deficit)
    
    
    Adjustment
    
    
    Instruments
    
    
    Treasury Stock
    
    
    Minority Interests
    
    
    TotalNT$
    
    
    
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Balance as of January 1, 2009
    
    
    129,877,713
    
    
    
    12,987,771
    
    
    
    58,149,513
    
    
    
    19,711,865
    
    
    
    
    
    
    
    (26,748,416
    )
    
    
    1,347,373
    
    
    
    2,457,922
    
    
    
    (119,801
    )
    
    
    6,982,125
    
    
    
    191,658,294Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,393,337
    )
    
    
    
    
    
    
    (2,393,337
    )Legal reserve and additional paid-in capital used to cover
accumulated deficits
    
    
    
    
    
    
    
    
    
    
    (7,036,551
    )
    
    
    (19,711,865
    )
    
    
    
    
    
    
    26,748,416
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income in 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,874,028
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,203,138
    )
    
    
    1,670,890Compensation cost of employee stock options
    
    
    
    
    
    
    
    
    
    
    136,306
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,306Treasury stock sold to employees
    
    
    
    
    
    
    
    
    
    
    26,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    622,993
    
    
    
    
    
    
    
    649,140Adjustment of additional paid-in capital accounted for under the
equity method
    
    
    
    
    
    
    
    
    
    
    (6,911,617
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,911,617
    )Adjustment of funds and investments disposal
    
    
    
    
    
    
    
    
    
    
    1,251
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (991
    )
    
    
    (10,592
    )
    
    
    
    
    
    
    
    
    
    
    (10,332
    )Adjustment of retained earnings accounted for under the equity method
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,774,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,774,785Changes in unrealized gain on available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,143,875
    
    
    
    
    
    
    
    
    
    
    
    20,143,875Changes in unrealized gain on financial instruments of investees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,323,874
    
    
    
    
    
    
    
    
    
    
    
    8,323,874Changes in cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,664,570
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,664,570
    )Changes in minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,281,052
    )
    
    
    (4,281,052
    )Balance as of December 31, 2009
    
    
    129,877,713
    
    
    
    12,987,771
    
    
    
    44,365,049
    
    
    
    
    
    
    
    
    
    
    
    10,648,813
    
    
    
    (318,188
    )
    
    
    30,915,079
    
    
    
    (1,890,145
    )
    
    
    497,935
    
    
    
    214,096,256
  F-6




---



##### 



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Expressed in Thousands)
 UnrealizedCapital
    
    
    
    
    
    
    Retained Earnings
    
    
    Cumulative
    
    
    Gain/Loss onAdditional Paid-in
    
    
    
    
    
    
    
    
    
    
    Unappropriated
    
    
    Translation
    
    
    FinancialCommon Stock
    
    
    Shares
    
    
    Capital
    
    
    Legal Reserve
    
    
    Special Reserve
    
    
    Earnings
    
    
    Adjustment
    
    
    Instruments
    
    
    Treasury Stock
    
    
    Minority Interests
    
    
    TotalNT$
    
    
    
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Balance as of January 1, 2010
    
    
    129,877,713
    
    
    
    12,987,771
    
    
    
    44,365,049
    
    
    
    
    
    
    
    
    
    
    
    10,648,813
    
    
    
    (318,188
    )
    
    
    30,915,079
    
    
    
    (1,890,145
    )
    
    
    497,935
    
    
    
    214,096,256Appropriation and distribution of 2009 retained earningsLegal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,064,881
    
    
    
    
    
    
    
    (1,064,881
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,233,002
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,233,002
    )Net income in 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,898,905
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52,949
    )
    
    
    23,845,956Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,843,588
    )
    
    
    
    
    
    
    (4,843,588
    )Compensation cost of employee stock options
    
    
    
    
    
    
    
    
    
    
    254,106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    254,106Treasury stock sold to employees
    
    
    
    
    
    
    
    
    
    
    420,648
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    510,376
    
    
    
    
    
    
    
    931,024Adjustment of funds and investments disposal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )Adjustment of retained earnings accounted for under the equity
method
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (119,157
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (119,157
    )Cash dividends allocated to subsidaries
    
    
    
    
    
    
    
    
    
    
    8,040
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,040Changes in unrealized loss on available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,268,275
    )
    
    
    
    
    
    
    
    
    
    
    (1,268,275
    )Changes in unrealized loss on financial instruments of investees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,930,821
    )
    
    
    
    
    
    
    
    
    
    
    (1,930,821
    )Exercise employee stock options
    
    
    1,410
    
    
    
    141
    
    
    
    1,132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,542Changes in cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,960,782
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,960,782
    )Changes in minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,353,760
    
    
    
    5,353,760Balance as of December 31, 2010
    
    
    129,879,123
    
    
    
    12,987,912
    
    
    
    45,048,975
    
    
    
    1,064,881
    
    
    
    
    
    
    
    27,130,678
    
    
    
    (5,279,000
    )
    
    
    27,715,983
    
    
    
    (6,223,357
    )
    
    
    5,798,746
    
    
    
    225,136,029
  F-7




---



##### 



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Expressed in Thousands)
 For the years ended December 31,2008
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Cash flows from operating activities:Net income (loss) attributable to stockholders of the Company
    
    
    (22,320,075
    )
    
    
    3,874,028
    
    
    
    23,898,905
    
    
    
    820,141Net loss attributable to minority interests
    
    
    (663,017
    )
    
    
    (2,203,138
    )
    
    
    (52,949
    )
    
    
    (1,817
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Extraordinary gain
    
    
    
    
    
    
    (648,958
    )
    
    
    (82,469
    )
    
    
    (2,830
    )Depreciation
    
    
    37,197,219
    
    
    
    33,530,254
    
    
    
    29,951,312
    
    
    
    1,027,842Amortization
    
    
    1,314,885
    
    
    
    699,541
    
    
    
    544,321
    
    
    
    18,679Bad debt expense (reversal)
    
    
    95,348
    
    
    
    (22,225
    )
    
    
    20,748
    
    
    
    712Loss (Gain) on decline (recovery) in market value, scrap and obsolescence of
inventories
    
    
    3,273,425
    
    
    
    (2,414,592
    )
    
    
    82,453
    
    
    
    2,829Cash dividends received under the equity method
    
    
    134,924
    
    
    
    901
    
    
    
    48,753
    
    
    
    1,673Investment loss (gain) accounted for under the equity method
    
    
    10,464,849
    
    
    
    (180,263
    )
    
    
    (114,608
    )
    
    
    (3,933
    )Loss on valuation of financial assets and liabilities
    
    
    3,444,043
    
    
    
    309,735
    
    
    
    883,011
    
    
    
    30,302Impairment loss
    
    
    13,179,858
    
    
    
    4,007,078
    
    
    
    113,879
    
    
    
    3,908Gain on disposal of investments
    
    
    (3,386,004
    )
    
    
    (1,965,468
    )
    
    
    (2,020,797
    )
    
    
    (69,348
    )Gain on disposal of property, plant and equipment
    
    
    (55,371
    )
    
    
    (10,192
    )
    
    
    (41,124
    )
    
    
    (1,411
    )Gain on disposal of non-current assets held for sale
    
    
    
    
    
    
    (91,413
    )
    
    
    (449
    )
    
    
    (15
    )Amortization of financial assets discounts
    
    
    
    
    
    
    
    
    
    
    (7,253
    )
    
    
    (249
    )Amortization of bond discounts
    
    
    7,830
    
    
    
    20,018
    
    
    
    227,139
    
    
    
    7,795Amortization of administrative expenses from syndicated loans
    
    
    
    
    
    
    
    
    
    
    273
    
    
    
    9Exchange loss (gain) on financial assets and liabilities
    
    
    (43,865
    )
    
    
    4,754
    
    
    
    (327,341
    )
    
    
    (11,233
    )Exchange gain on long-term liabilities
    
    
    (178,877
    )
    
    
    (27,466
    )
    
    
    (498,520
    )
    
    
    (17,108
    )Exchange loss on disposal of non-current assets held for sale
    
    
    
    
    
    
    
    
    
    
    266
    
    
    
    9Amortization of deferred income
    
    
    (173,303
    )
    
    
    (202,460
    )
    
    
    (145,764
    )
    
    
    (5,002
    )Stock-based payment
    
    
    
    
    
    
    162,157
    
    
    
    646,968
    
    
    
    22,202Effect from subsidiaries over which significant control is no longer held
    
    
    
    
    
    
    4,014
    
    
    
    7,063
    
    
    
    242Write-off of deferred changes
    
    
    12,867
    
    
    
    
    
    
    
    
    
    
    
    Changes in assets and liabilities:Financial assets and liabilities at fair value through profit or loss
    
    
    (774,040
    )
    
    
    182,985
    
    
    
    612,802
    
    
    
    21,029Notes and accounts receivable
    
    
    7,425,151
    
    
    
    (8,370,011
    )
    
    
    (2,315,832
    )
    
    
    (79,473
    )Other receivables
    
    
    139,861
    
    
    
    397,038
    
    
    
    1,388,687
    
    
    
    47,656Inventories
    
    
    699,986
    
    
    
    1,292,621
    
    
    
    (3,334,002
    )
    
    
    (114,413
    )Prepaid expenses
    
    
    187,747
    
    
    
    (295,626
    )
    
    
    (530,125
    )
    
    
    (18,192
    )Deferred income tax assets and liabilities
    
    
    266,193
    
    
    
    462,075
    
    
    
    69,112
    
    
    
    2,372Notes and accounts payable
    
    
    (3,488,163
    )
    
    
    3,103,407
    
    
    
    1,776,366
    
    
    
    60,960Accrued expenses
    
    
    (1,556,394
    )
    
    
    1,116,047
    
    
    
    5,449,005
    
    
    
    186,994Other current liabilities
    
    
    8,224
    
    
    
    (359,497
    )
    
    
    (2,833,837
    )
    
    
    (97,249
    )Accrued pension liabilities
    
    
    49,401
    
    
    
    41,432
    
    
    
    38,378
    
    
    
    1,317Other liabilities-others
    
    
    (6,971
    )
    
    
    10,670
    
    
    
    105,629
    
    
    
    3,625Capacity deposits
    
    
    (4,447
    )
    
    
    
    
    
    
    
    
    
    
    Net cash provided by operating activities
    
    
    45,251,284
    
    
    
    32,427,446
    
    
    
    53,560,000
    
    
    
    1,838,023Cash flows from investing activities:Acquisition of financial assets at fair value through profit or loss
    
    
    (50,000
    )
    
    
    (388,701
    )
    
    
    (163,620
    )
    
    
    (5,615
    )Proceeds from disposal of financial assets at fair value through profit or loss
    
    
    42,596
    
    
    
    275,400
    
    
    
    
    
    
    
    Acquisition of available-for-sale financial assets
    
    
    (670,264
    )
    
    
    (108,222
    )
    
    
    (232,092
    )
    
    
    (7,965
    )Proceeds from disposal of available-for-sale financial assets
    
    
    4,285,844
    
    
    
    2,790,430
    
    
    
    3,485,293
    
    
    
    119,605Acquisition of financial assets measured at cost
    
    
    (917,424
    )
    
    
    (984,369
    )
    
    
    (835,525
    )
    
    
    (28,673
    )Proceeds from disposal of financial assets measured at cost
    
    
    425,865
    
    
    
    316,295
    
    
    
    333,977
    
    
    
    11,461Acquisition of long-term investments accounted for under the equity method
    
    
    (2,450,628
    )
    
    
    (3,063,705
    )
    
    
    (863,841
    )
    
    
    (29,644
    )Proceeds from disposal of long-term investments accounted for under the equity method
    
    
    824
    
    
    
    
    
    
    
    157,734
    
    
    
    5,413Acquisition of held-to-maturity financial assets
    
    
    (352,645
    )
    
    
    (64,233
    )
    
    
    
    
    
    
    Proceeds from disposal of held-to-maturity financial assets
    
    
    
    
    
    
    408,364
    
    
    
    
    
    
    
    Prepayment for long-term investments
    
    
    (5,160
    )
    
    
    (322,290
    )
    
    
    
    
    
    
    Proceeds from capital reduction and liquidation of investments
    
    
    289,915
    
    
    
    239,284
    
    
    
    52,914
    
    
    
    1,816Net cash received from acquisition of subsidiaries
    
    
    
    
    
    
    7,500
    
    
    
    1,859,186
    
    
    
    63,802Net cash paid for disposal of subsidiaries
    
    
    
    
    
    
    (23,890
    )
    
    
    (269,865
    )
    
    
    (9,261
    )Other receivables
    
    
    
    
    
    
    
    
    
    
    27,108
    
    
    
    930Acquisition of property, plant and equipment
    
    
    (11,514,548
    )
    
    
    (17,617,854
    )
    
    
    (61,290,347
    )
    
    
    (2,103,306
    )Proceeds from disposal of property, plant and equipment
    
    
    261,583
    
    
    
    38,458
    
    
    
    76,044
    
    
    
    2,610Proceeds from disposal of non-current assets held for sale
    
    
    
    
    
    
    462,376
    
    
    
    405,098
    
    
    
    13,902Increase in deferred charges
    
    
    (770,262
    )
    
    
    (1,146,421
    )
    
    
    (382,050
    )
    
    
    (13,111
    )Increase in restricted assets
    
    
    
    
    
    
    
    
    
    
    (26,077
    )
    
    
    (895
    )Decrease (increase) in other assets-others
    
    
    1,301
    
    
    
    (52,637
    )
    
    
    (177,321
    )
    
    
    (6,085
    )Net cash used in investing activities
    
    
    (11,423,003
    )
    
    
    (19,234,215
    )
    
    
    (57,843,384
    )
    
    
    (1,985,016
    )
  F-8




---



##### 



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Expressed in Thousands)
 For the years ended December 31,2008
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Cash flows from financing activities:Increase (decrease) in short-term loans
    
    
    (293,051
    )
    
    
    (8,240
    )
    
    
    4,202,660
    
    
    
    144,223Proceeds from long-term loans
    
    
    700,000
    
    
    
    400,000
    
    
    
    1,345,000
    
    
    
    46,156Repayments of long-term loans
    
    
    
    
    
    
    (300,000
    )
    
    
    (33,450
    )
    
    
    (1,148
    )Increase in financial liabilities at fair value through profit
or loss
    
    
    
    
    
    
    1,340,741
    
    
    
    
    
    
    
    Proceeds from bonds issued
    
    
    
    
    
    
    5,330,477
    
    
    
    
    
    
    
    Bond issuance costs
    
    
    
    
    
    
    (51,202
    )
    
    
    
    
    
    
    Redemption of bonds
    
    
    (22,716,624
    )
    
    
    
    
    
    
    (7,500,000
    )
    
    
    (257,378
    )Cash dividends
    
    
    (9,371,107
    )
    
    
    
    
    
    
    (6,224,963
    )
    
    
    (213,622
    )Remuneration paid to directors and supervisors
    
    
    (11,939
    )
    
    
    
    
    
    
    
    
    
    
    Payment of employee bonus
    
    
    (286,541
    )
    
    
    
    
    
    
    
    
    
    
    Exercise employee stock options
    
    
    
    
    
    
    
    
    
    
    2,542
    
    
    
    87Treasury stock acquired
    
    
    (2,278,456
    )
    
    
    (2,393,337
    )
    
    
    (4,843,588
    )
    
    
    (166,218
    )Treasury stock sold to employees
    
    
    
    
    
    
    623,166
    
    
    
    510,517
    
    
    
    17,519Proceeds from disposal of treasury stock
    
    
    
    
    
    
    
    
    
    
    27,211
    
    
    
    934Increase (decrease) in deposits-in
    
    
    (4,436
    )
    
    
    6,422
    
    
    
    9,620
    
    
    
    330Increase (decrease) in minority stockholders
    
    
    (117,496
    )
    
    
    (4,239
    )
    
    
    2,330,577
    
    
    
    79,979Net cash provided by (used in) financing activities
    
    
    (34,379,650
    )
    
    
    4,943,788
    
    
    
    (10,173,874
    )
    
    
    (349,138
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    1,439,871
    
    
    
    (550,708
    )
    
    
    (424,597
    )
    
    
    (14,571
    )Net increase (decrease) in cash and cash equivalents
    
    
    888,502
    
    
    
    17,586,311
    
    
    
    (14,881,855
    )
    
    
    (510,702
    )Cash and cash equivalents at beginning of period
    
    
    47,678,147
    
    
    
    48,566,649
    
    
    
    66,152,960
    
    
    
    2,270,177Cash and cash equivalents at end of period
    
    
    48,566,649
    
    
    
    66,152,960
    
    
    
    51,271,105
    
    
    
    1,759,475Supplemental disclosures of cash flow information:Cash paid for interest
    
    
    400,238
    
    
    
    124,244
    
    
    
    239,265
    
    
    
    8,211Less: Cash paid for capitalized interest
    
    
    (70,982
    )
    
    
    (39,106
    )
    
    
    (224,029
    )
    
    
    (7,688
    )Cash paid for interest excluding capitalized interest
    
    
    329,256
    
    
    
    85,138
    
    
    
    15,236
    
    
    
    523Cash paid for income tax
    
    
    1,000,974
    
    
    
    709,186
    
    
    
    117,584
    
    
    
    4,035Investing activities partially paid by cash:Acquisition of property, plant and equipment
    
    
    7,196,408
    
    
    
    21,387,628
    
    
    
    67,591,402
    
    
    
    2,319,540Discount on property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    (1,592
    )
    
    
    (55
    )Add: Payable at beginning of period
    
    
    6,036,274
    
    
    
    1,718,134
    
    
    
    5,487,908
    
    
    
    188,329Add: Effect of acquisition of subsidiaries
    
    
    
    
    
    
    
    
    
    
    833,110
    
    
    
    28,590Less: Payable at end of period
    
    
    (1,718,134
    )
    
    
    (5,487,908
    )
    
    
    (12,620,481
    )
    
    
    (433,098
    )Cash paid for acquiring property, plant and equipment
    
    
    11,514,548
    
    
    
    17,617,854
    
    
    
    61,290,347
    
    
    
    2,103,306
  F-9




---



##### 



1.
    
    HISTORY AND ORGANIZATION
 United Microelectronics Corporation (UMC) was incorporated in May 1980 and commenced operations
in April 1982. UMC is a full service semiconductor wafer foundry, and provides a variety of
services to satisfy customer needs. UMCs common shares were publicly listed on the Taiwan Stock
Exchange (TSE) in July 1985 and its American Depositary Shares (ADSs) were listed on the New York
Stock Exchange (NYSE) in September 2000.
 The numbers of employees as of December 31, 2009 and 2010 were 13,051 and 15,656, respectively.
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 The consolidated financial statements were prepared in conformity with requirements of the
Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting
principles generally accepted in the Republic of China (R.O.C.).
 Summary of significant accounting policies is as follows:
 General Descriptions of Reporting Entities
 Principles of Consolidation
 Investees in which UMC, directly or indirectly, holds more than 50% of voting rights or de facto
control with less than 50% of voting rights, are consolidated into UMCs financial statements.
(UMC and the consolidated entities are hereinafter referred to as the Company.)
 Transactions between consolidated entities are eliminated in the consolidated financial
statements. The difference between the acquisition cost and the net equity of a subsidiary as of
the acquisition date was amortized, and goodwill arising from new acquisitions is analyzed and
accounted for under the R.O.C. Statement of Financial Accounting Standard (R.O.C. SFAS) No. 25,
Business Combination  Accounting Treatment under Purchase Method (R.O.C. SFAS 25), in which
goodwill is not subject to amortization.
  F-10




---



##### 



The consolidated entities are as follows:   As of December 31, 2009
 Percentage ofInvestor
    
    Subsidiary
    
    Business nature
    
    ownership (%)UMC
    
    UMC GROUP (USA) (UMC-USA)
    
    IC Sales
    
    
    100.00UMC
    
    UNITED MICROELECTRONICS (EUROPE) B.V. (UME BV)
    
    Market development
    
    
    100.00UMC
    
    UMC CAPITAL CORP.
    
    Investment holding
    
    
    100.00UMC
    
    UNITED MICROELECTRONICS CORP. (SAMOA) (Note A)
    
    Investment holding
    
    
    100.00UMC
    
    TLC CAPITAL CO., LTD. (TLC)
    
    New business investment
    
    
    100.00UMC
    
    UMCI LTD. (UMCI) (Note B)
    
    Sales and manufacturing of integrated circuits
    
    
    100.00UMC
    
    UMC NEW BUSINESS INVESTMENT CORP. (NBI)
    
    Investment holding
    
    
    100.00UMC
    
    ALPHA WISDOM LIMITED (AWL)
    
    Investment holding
    
    
    100.00UMC
    
    GREEN EARTH LIMITED
    
    Investment holding
    
    
    100.00UMC
    
    FORTUNE VENTURE CAPITAL CORP. (FORTUNE)
    
    Consulting and planning for investment in new
business
    
    
    99.99UMC
    
    UMC JAPAN (UMCJ)
    
    Sales and manufacturing of integrated circuits
    
    
    52.26FORTUNE
    
    UNITRUTH INVESTMENT CORP. (UNITRUTH)
    
    Investment holding
    
    
    100.00UMC CAPITAL CORP.
    
    UMC CAPITAL (USA)
    
    Investment holding
    
    
    100.00UMC CAPITAL CORP.
    
    ECP VITA LTD.
    
    Insurance
    
    
    100.00TLC
    
    SOARING CAPITAL CORP.
    
    Investment holding
    
    
    100.00SOARING CAPITAL
CORP.
    
    UNITRUTH ADVISOR (SHANGHAI) CO., LTD.
    
    Investment holding and advisory
    
    
    100.00NBI
    
    UNITED LIGHTING OPTO-ELECTRONIC INC. (UNITED
LIGHTING)
    
    LED lighting manufacturing and sale
    
    
    95.54NBI
    
    EVERRICH ENERGY CORP. (EVERRICH)
    
    Solar engineering integrated design services
    
    
    93.75EVERRICH
    
    EVERRICH ENERGY INVESTMENT (HK) LIMITED
(EVERRICH-HK)
    
    Investment holding
    
    
    100.00EVERRICH-HK
    
    YONGSHENG (SHANDONG) ENERGY CO.,LTD
    
    Solar engineering integrated design services
    
    
    100.00AWL
    
    UMCJ
    
    Sales and manufacturing of integrated circuits
    
    
    42.53
  F-11




---



##### 



As of December 31, 2010
 Percentage ofInvestor
    
    Subsidiary
    
    Business nature
    
    ownership (%)UMC
    
    UMC-USA
    
    IC Sales
    
    
    100.00UMC
    
    UME BV
    
    Market development
    
    
    100.00UMC
    
    UMC CAPITAL CORP.
    
    Investment holding
    
    
    100.00UMC
    
    GREEN EARTH LIMITED
    
    Investment holding
    
    
    100.00UMC
    
    TLC
    
    New business investment
    
    
    100.00UMC
    
    NBI
    
    Investment holding
    
    
    100.00UMC
    
    AWL
    
    Investment holding
    
    
    100.00UMC
    
    FORTUNE
    
    Consulting and planning for investment in new business
    
    
    100.00UMC
    
    UMCJ
    
    Sales and manufacturing of integrated circuits
    
    
    55.56UMC
    
    NEXPOWER TECHNOLOGY CORP. (NEXPOWER)
    
    Sales and manufacturing of solar power batteries
    
    
    44.42FORTUNE
    
    UNITRUTH
    
    Investment holding
    
    
    100.00FORTUNE
    
    MOS ART PACK CORP. (MOS)
    
    IC Packaging
    
    
    54.72FORTUNE
    
    NEXPOWER
    
    Sales and manufacturing of solar power batteries
    
    
    5.08UNITRUTH
    
    MOS
    
    IC Packaging
    
    
    18.62UNITRUTH
    
    NEXPOWER
    
    Sales and manufacturing of solar power batteries
    
    
    2.27UMC CAPITAL CORP.
    
    UMC CAPITAL (USA)
    
    Investment holding
    
    
    100.00UMC CAPITAL CORP.
    
    ECP VITA LTD.
    
    Insurance
    
    
    100.00TLC
    
    SOARING CAPITAL CORP.
    
    Investment holding
    
    
    100.00TLC
    
    NEXPOWER
    
    Sales and manufacturing of solar power batteries
    
    
    5.90SOARING CAPITAL CORP.
    
    UNITRUTH ADVISOR (SHANGHAI) CO., LTD.
    
    Investment holding and advisory
    
    
    100.00
  F-12




---



##### 



Percentage ofInvestor
    
    Subsidiary
    
    Business nature
    
    ownership (%)NBI
    
    WAVETEK MICROELECTRONICS CORPORATION
    
    GaAs Foundry service
    
    
    99.79NBI
    
    UNITED LIGHTING
    
    Sales and manufacturing of LED lighting
    
    
    94.65NBI
    
    EVERRICH
    
    Solar engineering integrated design services
    
    
    91.12NBI
    
    UNISTARS CORP.
    
    High brightness LED packages
    
    
    65.63NBI
    
    TOPCELL SOLAR INTERNATIONAL CO., LTD. (TOPCELL)
    
    Solar power cell manufacturing and sale
    
    
    51.49UNITED LIGHTING
    
    UNITED LIGHTING OPTO-ELECTRONIC INVESTMENT (HK) LIMITED
    
    Investment holding
    
    
    100.00EVERRICH
    
    EVERRICH-HK
    
    Investment holding
    
    
    100.00EVERRICH-HK
    
    EVERRICH (SHANDONG) ENERGY CO., LTD (formerly YONGSHENG (SHANDONG) ENERGY CO.)
    
    Solar engineering integrated design services
    
    
    100.00AWL
    
    UMCJ
    
    Sales and manufacturing of integrated circuits
    
    
    44.44NEXPOWER
    
    JENENERGY SYSTEM CORPORATION (JENENERGY)
    
    Energy Technology Service
    
    
    66.67JENENERGY
    
    SMART ENERGY ENTERPRISES LIMITED (SMART ENERGY)
    
    Investment holding
    
    
    100.00SMART ENERGY
    
    SMART ENERGY SHANDONG CORPORATION
    
    Design of photovoltaic system and consulting services
related to photovoltaic technology, etc.
    
    
    100.00
 Note A:
    
    On November 4, 2010, UNITED MICROELECTRONICS CORP. (SAMOA) has filed for
liquidation through a decision at its stockholders meeting. The Company ceased using the
equity method from that day, and SAMOA is not included as a consolidated subsidiary as of
December 31, 2010.Note B:
    
    On July 30, 2010, UMCI has filed for liquidation through a decision at its
stockholders meeting. The Company ceased using the equity method from that day, and UMCI
is not included as a consolidated subsidiary as of December 31, 2010.  F-13




---



##### 



Use of Estimates
 The preparation of the Companys consolidated financial statements in conformity with generally
accepted accounting principles requires management to make reasonable estimates and assumptions
that will affect the amount of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of revenues and
expenses during the reported periods. The actual results may differ from those estimates.
 Foreign Currency Transactions
 Transactions denominated in foreign currencies are remeasured into the local functional
currencies and recorded based on the exchange rates prevailing at the transaction dates. Monetary
assets and liabilities denominated in foreign currencies are remeasured into the local functional
currencies at the exchange rates prevailing at the balance sheet date, with the related exchange
gains or losses included in the consolidated statements of income. Translation gains or losses
from investments in foreign entities are recognized as a cumulative translation adjustment in
consolidated stockholders equity.
 Non-monetary assets and liabilities denominated in foreign currencies that are reported at fair
value with changes in fair value charged to the consolidated statements of income, are
remeasured at the exchange rate at the balance sheet date, with related exchange gains or
losses recorded in the consolidated statements of income. Non-monetary assets and
liabilities denominated in foreign currencies that are reported at fair value with changes
in fair value charged to stockholders equity, are remeasured at the exchange rate at the
balance sheet date, with related exchange gains or losses recorded as adjustment items to a
cumulative translation adjustment in consolidated stockholders equity. Non-monetary assets
and liabilities denominated in foreign currencies and reported at cost are remeasured at
historical exchange rates.
 Translation of Foreign Currency Financial Statements
 The financial statements of foreign subsidiaries and UMCs Singapore branch (the Branch) are
translated into New Taiwan Dollars using the spot rates at the balance sheet date for asset and
liability accounts and weighted average exchange rates for profit and loss accounts. The
cumulative translation effects from the subsidiaries and the Branch using functional currencies
other than New Taiwan Dollars are included in the cumulative translation adjustment in
consolidated stockholders equity.
 Convenience Translation into US Dollars
 Translations of amount from New Taiwan dollars (NT$) into United States dollars for the readers
convenience were calculated at the noon buying rate of US$1.00 to NT$29.14 on December 30, 2010
in The City of New York for cable transfers of NT$ as certified for customs purposes by the
Federal Reserve Bank of New York. No representation is made that the NT$ amounts could have been,
or could be, converted into United States dollars at such rate.
  F-14




---



##### 



Cash Equivalents
 Cash equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash and with maturity dates that do not present significant risks on changes in value
resulting from changes in interest rates, including reverse repurchase agreements with banks in
Taiwan for commercial paper, government bonds, or other highly secure assets for short-term
liquidity management.
 Financial Assets and Financial Liabilities
 In accordance with R.O.C. Statement of Financial Accounting Standard (R.O.C. SFAS) No. 34,
Financial Instruments: Recognition and Measurement (R.O.C. SFAS 34) and the Guidelines
Governing the Preparation of Financial Reports by Securities Issuers, financial assets are
classified as either financial assets at fair value through profit or loss, financial assets
measured at cost, or available-for-sale financial assets. Financial liabilities are recorded at
fair value through profit or loss.
 The Company accounts for purchase or sale of financial instruments as of the trade date,
which is the date the Company commits to purchase or sell the asset or liability. Financial
assets and financial liabilities are initially recognized at fair value plus acquisition or
issuance costs.
 a.
    
    Financial assets and financial liabilities at fair value through profit or lossFinancial instruments held for short-term sale or repurchase purposes and derivative financial
instruments not qualified for hedge accounting are classified as financial assets or
liabilities at fair value through profit or loss.This category of financial instruments is measured at fair value and changes in fair value are
recognized in the consolidated statements of income. Stock of listed companies, bonds, and
closed-end funds are measured at closing prices as of the balance sheet date. Open-end funds
are measured at the unit price of the net assets as of the balance sheet date. The fair value
of derivative financial instruments is determined by using valuation techniques commonly used
by market participants in the industry.b.
    
    Financial assets measured at costUnlisted stock, funds, and other securities without reliable market prices are measured at
cost. When objective evidence of impairment exists, the Company recognizes an impairment loss,
which cannot be reversed in subsequent periods.c.
    
    Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial instruments not classified as
financial assets at fair value through profit or loss, held-to-maturity financial assets, loans
and receivables. Subsequent measurement is calculated at fair value. Investments in listed
companies are measured at closing prices as of the balance sheet date. Any gain or loss arising
from the change in fair value, excluding impairment loss and exchange gain or loss arising from
monetary financial assets denominated in foreign currencies, is recognized as an adjustment to
consolidated stockholder equity until such investment is reclassified or disposed of, upon
which the cumulative gain or loss previously charged to consolidated stockholders equity will
be recorded in the consolidated statements of income.
  F-15




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##### 



The Company recognizes an impairment loss when objective evidence of impairment exists. Any
reduction in the impairment loss of equity investments in subsequent periods will be
recognized as an adjustment to consolidated stockholders equity. The impairment loss of a
debt security may be reversed and recognized in the consolidated statement of income if the
security recovers and the Company concludes the recovery is related to improvements in the
factors or events that originally caused the impairment.
 Allowance for Doubtful Accounts
 An allowance for doubtful accounts is provided based on managements judgment of the
collectability and aging analysis of accounts and other receivables.
 Inventories
 Inventories are accounted for on a perpetual basis. Raw materials are recorded at actual purchase
costs, while the work in process and finished goods are recorded at standard costs and
subsequently adjusted to costs using the weighted-average method at the end of each month.
Allocation of fixed production overheads to the costs of conversion is based on the normal
capacity of the production facilities. Prior to January 1, 2009, inventories are stated
individually by category at the lower of aggregate cost or market value as of the balance sheet
date. The market values of raw materials and supplies are determined on the basis of replacement
cost while the market values of work in process and finished goods are determined by net
realizable values. Effective January 1, 2009, inventories are valued at the lower of cost and net
realizable value item by item. Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion and the estimated costs
necessary to make the sale.
 Non-current Assets Held for Sale
 Non-current assets that are available for immediate sale in their present condition subject only
to terms that are usual and customary for sales of such assets and that are highly probable to be
sold within one year are classified as non-current assets held for sale. A held for sale
non-current asset is measured at the lower of its carrying amount or fair value less costs to
sell and is recorded separately on the balance sheet. No further amortization or depreciation
will be recorded once an asset is classified as held for sale.
  F-16




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##### 



Impairment losses of non-current assets held for sale are recognized for the excess of the
carrying amounts over fair values less costs to sell and reported as losses in the current
period. A gain is recognized for any subsequent increase in fair value less costs to sell of an
asset, but not in excess of the total amount of the accumulated impairment loss and the amount
allowed to be reversed in accordance with the R.O.C. SFAS No. 35, Impairment of Assets (R.O.C.
SFAS 35).
 Long-term Investments Accounted for Under the Equity Method (including interests in Joint
Ventures)
 Investments in which the Company has ownership of at least 20% or exercises significant influence
on operating decisions are accounted for under the equity method. The difference of the
acquisition cost and the underlying equity in the investees net assets as of acquisition date
was amortized, and goodwill arising from new acquisitions is analyzed and accounted for under
R.O.C. SFAS 25, in which goodwill is not subject to amortization.
 Investment in jointly controlled entity is accounted for under the equity method.
 When an equity investee offsets its accumulated deficit with its additional paid-in capital, the
Company would debit additional paid-in capital and credit retained earnings in proportionate to
its existing equity ownership to the extent that credit is available on the additional paid-in
capital.
 The change in the Companys proportionate share in the net assets of an investee resulting from
its acquisition of additional stock issued by the investee at a rate not proportionate to its
existing equity ownership is charged to the additional paid-in capital and long-term investments
accounts.
 If the balance of the additional paid-in capital is less than the amount needed, the excess would
be charged to the retained earnings.
 Unrealized intercompany gains and losses arising from sales from the Company to equity method
investees are eliminated in proportion to the Companys ownership percentage at the end of the
period until realized through transactions with third parties. Intercompany gains and losses
arising from transactions between the Company and majority-owned (above 50%) subsidiaries are
eliminated entirely until realized through transactions with third parties.
 Unrealized intercompany gains and losses due to sales from equity method investees to the Company
are eliminated in proportion to the Companys weighted-average ownership percentage of the
investee until realized through transactions with third parties.
 Unrealized intercompany gains and losses arising from transactions between two equity method
investees are eliminated in proportion to the Companys multiplied weighted-average ownership
percentage with the investees until realized through transactions with third parties. Those
intercompany gains and losses arising from transactions between two majority-owned subsidiaries
are eliminated in proportion to the Companys weighted-average ownership percentage in the
subsidiary that incurred the gain or loss.
  F-17




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##### 



If the recoverable amount of investees accounted for under the equity method is less than its
carrying amount, the difference is recognized as impairment loss in the current period.
 The total value of an investment and advances after recognition of the investment losses cannot
be negative. If the Company has the positive intention to continue to support the investees, or
the losses of investees are only temporary, the Company will continue to recognize investment
losses with its proportionate share. If, after the investment loss is recognized, the net book
value of the investment is less than zero, the investment is reclassified to liabilities on the
consolidated balance sheet.
 The Company ceases to use the equity method upon a loss of ability to exercise significant
influence over an investee. In accordance with R.O.C. SFAS 34, the carrying value of the
investment upon the loss of significant influence remains as the carrying value of the
investment. Any amount of the investees additional paid-in capital and other adjustment items
recorded in the consolidated stockholders equity of the Company are eliminated in proportion to
the amount of the investment sold and recorded as a gain or loss on disposal of investments. Cash
dividends received during the year of change are applied as a reduction of the carrying amount of
the investment. Dividends received in subsequent years are recorded in accordance with R.O.C.
SFAS No. 32, Accounting for Revenue Recognition.
 Gain or loss on disposal of long-term investments is based on the difference between selling
price and book value of investments sold. Any amount of the investees additional paid-in capital
and other adjustment items recorded in the consolidated stockholders equity of the Company are
eliminated in proportion to the amount of the investment sold and recorded as gain or loss on
disposal of investments.
 Property, Plant and Equipment
 Property, plant and equipment are stated at cost. Interest incurred on loans used to finance
the construction of property, plant and equipment is capitalized and depreciated accordingly.
Maintenance and repairs are charged to expense as incurred. Significant renewals and improvements
are treated as capital expenditures and are depreciated over their estimated useful lives. Upon
disposal of property, plant and equipment, the original cost and accumulated depreciation are
written off and the related gain or loss is classified as non-operating income or expense. Idle
assets are classified as other assets at the lower of net book or net realizable value, with the
difference charged to non-operating expenses.
  F-18




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Depreciation is recognized on a straight-line basis using the estimated economic life of the
assets:
 Buildings
    
    3~55 yearsMachinery and equipment
    
    5~8 yearsTransportation equipment
    
    4~5 yearsFurniture and fixtures
    
    2~20 yearsLeased assets and leasehold improvements
    
    The lease period or estimated economic life, whichever is shorter
 Intangible Assets
 Goodwill generated from business combinations is no longer subject to amortization. After initial
recognition, goodwill shall be carried at cost less any accumulated impairment losses.
 Deferred Charges
 Deferred charges are stated at cost and amortized on a straight-line basis as follows:
 Intellectual property license fees
    
    The shorter of contract term or estimated economic life of the related technologySoftware
    
    2~5 years
 Bonds
 Originally, the issuance costs of bonds were classified as deferred charges and amortized
over the life of the bonds. Effective January 1, 2006, the unamortized amounts as of December 31,
2005 were reclassified as a bond discount and recorded as a deduction to bonds payable. The
amounts are amortized using the effective interest method over the remaining life of the bonds.
If the difference between the straight-line method and the effective interest method is
immaterial, the amortization of the bond discount may be amortized using the straight-line method
and recorded as interest expenses.
 In accordance with R.O.C. SFAS 34, since the economic and risk characteristics of the
embedded derivative instrument and the host contract are not clearly and closely related,
derivative financial instruments embedded in exchangeable bonds are bifurcated and accounted as
financial liabilities at fair value through profit or loss.
 When exchangeable bondholders exercise their right to exchange their bonds for reference shares,
the book value of the bonds is offset against the book value of the investments in reference
shares and the related stockholders equity accounts, with the difference recognized as a gain or
loss on disposal of investments.
  F-19




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Pension Plan
 All regular employees are entitled to a defined benefit pension plan that is managed by an
independently administered pension fund committee. Fund assets are deposited under the
committees name in the Bank of Taiwan and hence, not associated with the Company. Therefore,
fund assets are not to be included in the Companys financial statements. Pension benefits for
employees of the Branch and overseas subsidiaries are provided in accordance with the local
regulations.
 The Labor Pension Act of the R.O.C. (the Act), which adopts a defined contribution plan, became
effective on July 1, 2005. Employees eligible for the Labor Standards Law, a defined benefit
plan, were allowed to elect either the pension calculation under the Act or continue to be
subject to the pension calculation under the Labor Standards Law. Those employees that elected to
be subject to the Act will have their seniority achieved under the Labor Standards Law retained
upon election of the Act, and the Company will make monthly contributions of no less than 6% of
these employees monthly wages to the employees individual pension accounts.
 The accounting for UMCs pension liability is computed in accordance with R.O.C. SFAS No.18,
Accounting for Pension. Net pension costs of the defined benefit plan are recorded based on an
independent actuarial valuation. Pension cost components such as service cost, interest cost,
expected return on plan assets, the amortization of net obligation at transition, pension gain or
loss, and prior service cost, are all taken into consideration. UMC recognizes expenses from the
defined contribution pension plan in the period in which the contribution becomes due.
 Share-Based Payment
 The Company used the intrinsic value method to recognize compensation cost for its employee stock
options issued between January 1, 2004 and December 31, 2007, in accordance with Accounting
Research and Development Foundation (ARDF) Interpretation Nos. 92-070~072. For options granted on
or after January 1, 2008, the Company recognizes compensation cost using the fair value method in
accordance with R.O.C. SFAS No. 39 Accounting for Share-Based Payment. (R.O.C. SFAS 39)
 Employee Bonus and Remunerations Paid to Directors and Supervisors
 Employee bonus and remunerations paid to directors and supervisors are charged to expense at fair
value and are no longer accounted for as an appropriation of retained earnings.
 Treasury Stock
 In accordance with R.O.C. SFAS No. 30, Accounting for Treasury Stock, treasury stock held by
the Company is accounted for under the cost method. The cost of treasury stock is shown as a
deduction to consolidated stockholders equity, while any gain or loss from selling treasury
stock is treated as an adjustment to additional paid-in capital. The Companys stock held by its
subsidiaries is also treated as treasury stock. Cash dividends received by subsidiaries from UMC
are recorded as additional paid-in capital-treasury stock transactions.
  F-20




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##### 



For treasury stock sold to employees, the Company recognizes compensation cost in accordance with
R.O.C. SFAS 39 and ARDF Interpretation No. 96-266 Accounting for Treasury Stock Purchased by
Employees and ARDF Interpretation No. 98-111 Determining the Grant Date of Share-Based
Payment.
 Revenue Recognition
 The Company recognizes revenue when persuasive evidence of an arrangement exists, the product or
service has been delivered, the sellers price to the buyer is fixed or determinable and
collectability is reasonably assured. Most of the Companys sales transactions have shipping
terms of Free on Board (FOB) or Free Carrier (FCA) shipment in which title and the risk of loss
or damage are transferred to the customer upon delivery of the product to a carrier approved by
the customer.
 Allowance for sales returns and discounts are estimated based on history of customer complaints,
historical experiences, management judgment and any other known factors that might significantly
affect collectability. Such allowances are recorded in the same period in which sales are made.
Shipping and handling costs are included in sales expenses.
 Research and Development Expenditures
 Research and development expenditures are charged to expenses as incurred.
 Capital Expenditure versus Operating Expenditure
 Expenditures are capitalized when it is probable that the Company will receive future economic
benefits associated with the expenditures.
 Income Tax
 The Company adopted R.O.C. SFAS No. 22, Accounting for Income Taxes for inter-period and
intra-period income tax allocation. The provision for income taxes includes deferred income tax
assets and liabilities that are a result of temporary differences between carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes, loss carry-forward and investment tax credits. A valuation allowance on deferred income
tax assets is provided to the extent that it is more likely than not that the tax benefits will
not be realized. A deferred tax asset or liability is classified as current or noncurrent in
accordance with the classification of its related asset or liability. However, if a deferred tax
asset or liability does not relate to an asset or liability in the financial statements, its
classification is based on the expected reversal date of the temporary difference.
  F-21




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##### 



According to R.O.C. SFAS No. 12, Accounting for Income Tax Credits, the Company recognizes the
tax benefit from the purchase of equipment and technology, research and development expenditures,
employee training, and certain equity investment by the flow-through method.
 Income tax (10%) on unappropriated earnings is recorded as expense in the year when the
stockholders have resolved that the earnings shall be retained.
 The Income Basic Tax Act of the R.O.C. (the IBTA) became effective on January 1, 2006. Set
up by the Executive Yuan, the IBTA is a supplemental 10% tax that is payable if the income tax
payable determined by the R.O.C. Income Tax Act is below the minimum amount as prescribed by the
IBTA. The IBTA is calculated based on taxable income as defined by the IBTA, which includes most
income that is exempted from income tax under various legislations. The impact of the IBTA has
been considered in the Companys income tax for the current reporting period.
 Earnings per Share
 Earnings per share is computed according to R.O.C. SFAS No. 24, Earnings Per Share. Basic
earnings per share is computed by dividing net income by the weighted-average number of common
shares outstanding during the current reporting period. Diluted earnings per share is computed by
taking basic earnings per share into consideration plus additional common shares that would have
been outstanding if the dilutive share equivalents had been issued. Net income is also adjusted
for interest and other income or expenses derived from any underlying dilutive share equivalents.
The weighted-average of outstanding shares is adjusted retroactively for stock dividends and
bonus share issues that are approved in the stockholders meetings prior to 2008.
 Asset Impairment
 Pursuant to R.O.C. SFAS 35, the Company assesses indicators of impairment for all its assets
within the scope of the standard at each balance sheet date. If impairment is indicated, the
Company compares the assets carrying amount with the recoverable amount of the assets or the
cash-generating unit (CGU) associated with the asset and writes down the carrying amount to the
recoverable amount where applicable. The recoverable amount is defined as the higher of fair
value less the costs to sell, and the values in use. For previously recognized losses, the
Company assesses at the balance sheet date if any indication that the impairment loss no longer
exists or may have diminished. If there is any such indication, the Company recalculates the
recoverable amount of the asset, and if the recoverable amount has increased as a result of the
increase in the estimated service potential of the assets, the Company reverses the impairment
loss so that the resulting carrying amount of the asset does not exceed the amount (net of
amortization or depreciation) that would otherwise result had no impairment loss been recognized
for the assets in prior years.
  F-22




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##### 



In addition, a goodwill-allocated CGU or group of CGUs is tested for impairment each year,
regardless of whether impairment is indicated. If an impairment test reveals that the carrying
amount, including goodwill, of CGU or group of CGUs is greater than its recoverable amount, it
results in an impairment loss. The loss is first recorded against the CGUs goodwill, with any
remaining loss allocated to other assets on a pro rata basis proportionate to their carrying
amounts. The write-down of goodwill cannot be reversed in subsequent periods under any
circumstances.
 Impairment losses and reversals are classified as non-operating expenses and income,
respectively.
 New Accounting Pronouncements
 In April 2009, the Accounting Research and Development Foundation in Taiwan issued R.O.C.
SFAS No. 41, Disclosures for Operating Segment Information (R.O.C. SFAS 41), which establishes
disclosure requirements to assist financial statement users to evaluate the different types of
business activities in which an enterprise engages and the different economic environments in
which it operates. The determination of operating segments is significantly based on how an
enterprises chief operating decision maker views and manages the business. This standard
requires an enterprise to report separately information about each operating segment that meets
certain criteria. The standard is effective for fiscal years beginning after January 1, 2011. The
impact that the adoption of R.O.C. SFAS 41 will have on our financial reporting disclosure will
depend on the applicable future business model.
 3.
    
    ACCOUNTING CHANGES
 Inventories
 Effective January 1, 2009, the Company adopted the newly revised R.O.C. SFAS No.10, Accounting
for Inventories (R.O.C. SFAS 10). The main revisions are a. inventories are valued at the lower
of cost and net realizable value item by item; b. unallocated overheads resulted from low
production or idle capacity are recognized as costs of goods sold in the period in which they are
incurred; and c. abnormal amounts of production costs, and loss on decline in the market value of
inventories (or gains on recovery in market value of inventories) are recognized as cost of goods
sold. As a result of adopting the revised R.O.C. SFAS 10, the consolidated net income and
consolidated earnings per share for the year ended December 31, 2009, are NT$365 million and
NT$0.03 lower, respectively.
  F-23




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4.
    
    CASH AND CASH EQUIVALENTS
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000CashCash on hand
    
    
    3,463
    
    
    
    4,080Checking and savings accounts
    
    
    10,907,465
    
    
    
    13,149,234Time deposits
    
    
    46,464,891
    
    
    
    34,360,417Subtotal
    
    
    57,375,819
    
    
    
    47,513,731Cash equivalents
    
    
    8,777,141
    
    
    
    3,757,374Total
    
    
    66,152,960
    
    
    
    51,271,105
 5.
    
    FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000CurrentListed stocks
    
    
    1,547,335
    
    
    
    636,446Corporate bonds
    
    
    384,980
    
    
    
    494,086Forward contracts
    
    
    75,366
    
    
    
    9,411Interest rate swap agreements
    
    
    88,410
    
    
    
    Subtotal
    
    
    2,096,091
    
    
    
    1,139,943NoncurrentConvertible bonds
    
    
    
    
    
    
    79,920Total
    
    
    2,096,091
    
    
    
    1,219,863
 During the years ended December 31, 2008, 2009 and 2010, net gains (losses) arising from the
changes in fair value of financial assets at fair value through profit or loss were NT$(2,366)
million, NT$513 million and NT$(222) million, respectively.
 6.
    
    ACCOUNTS RECEIVABLE, NET
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Accounts receivable
    
    
    17,010,650
    
    
    
    18,363,983Less: Allowance for sales returns and
discounts
    
    
    (580,618
    )
    
    
    (185,612
    )Less: Allowance for doubtful accounts
    
    
    (12,231
    )
    
    
    (67,850
    )Net
    
    
    16,417,801
    
    
    
    18,110,521
  F-24




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7.
    
    INVENTORIES, NET
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Raw materials
    
    
    732,130
    
    
    
    2,156,204Supplies and spare parts
    
    
    2,041,004
    
    
    
    2,205,471Work in process
    
    
    6,755,426
    
    
    
    8,240,687Finished goods
    
    
    1,038,400
    
    
    
    1,946,170Total
    
    
    10,566,960
    
    
    
    14,548,532Less: Allowance for loss on decline in market
value and obsolescence
    
    
    (1,425,575
    )
    
    
    (1,515,909
    )Net
    
    
    9,141,385
    
    
    
    13,032,623
 a.
    
    The circumstances that caused the net realizable value of inventory to be lower
than its cost no longer exist. As a result, the Company recognized gains of NT$2,597
million and NT$90 million on recovery of market value of inventories during the years
ended December 31, 2009 and 2010, respectively.b.
    
    Inventories were not pledged.
 8.
    
    AVAILABLE-FOR-SALE FINANCIAL ASSETS
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000CurrentCommon stocks
    
    
    6,250,694
    
    
    
    7,044,673NoncurrentCommon stocks
    
    
    34,797,889
    
    
    
    29,796,192Depositary receipts
    
    
    256,959
    
    
    
    403,805Funds
    
    
    52,094
    
    
    
    54,068Subtotal
    
    
    35,106,942
    
    
    
    30,254,065Total
    
    
    41,357,636
    
    
    
    37,298,738
 During the years ended December 31, 2008, 2009 and 2010, the net unrealized gains (losses)
adjustments to consolidated stockholders equity due to changes in fair value of
available-for-sale assets were NT$(31,619) million, NT$27,726 million and NT$(1,003)
million, respectively. Additionally, the Company recognized gains (losses) of NT$(5,532)
million, NT$1,858 million and NT$1,960 million due to the disposal of available-for-sale
assets during the years ended December 31, 2008, 2009 and 2010, respectively.
  F-25




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As of March 1, 2007, HIGHLINK (an equity method investee) and EPITECH TECHNOLOGY CORP.
(EPITECH) (classified as an available-for-sale financial asset, noncurrent) merged into
EPISTAR CORP. and were continued as EPISTAR CORP. (classified as an available-for-sale
financial asset, noncurrent after the merger). During the transaction, 5.5 shares of
HIGHLINK and 3.08 shares of EPITECH were exchanged for 1 share of EPISTAR CORP. 5 million
shares of EPISTAR CORP. were exchanged from HIGHLINK that originally were acquired through
private placement of HIGHLINK in February 2006 and its subsequent stock dividends since
February 2006. Additionally, the Company acquired 6.7 million shares of SIMPLO TECHNOLOGY
CO., LTD. (SIMPLO) through private placement in July 2006 and its subsequent stock
dividends. The exchanges of these shares listed above were restricted by Article 43
paragraph 8 of the Securities and Exchange Law. The above-mentioned restriction of EPISTAR
and SIMPLO was removed on May 10 and August 23, 2009, respectively.
 UMC issued bonds that are exchangeable at any time on or after January 1, 2010 and prior to
November 22, 2014, into common stocks originally classified as available-for-sale financial
assets, noncurrent. Therefore, UMC reclassified the exchangeable shares to current assets.
 9.
    
    FINANCIAL ASSETS MEASURED AT COST, NONCURRENT
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Common stocks
    
    
    4,634,168
    
    
    
    4,972,813Preferred stocks
    
    
    2,273,083
    
    
    
    2,063,117Funds
    
    
    644,047
    
    
    
    591,181Convertible bonds
    
    
    77,225
    
    
    
    24,753Total
    
    
    7,628,523
    
    
    
    7,651,864
 The Company acquired 80 thousand shares of RALINK TECHNOLOGY CORP. (RALINK) through
private placement in July 2007 and its subsequent stock dividends, 4.4 million shares of
INPAQ TECHNOLOGY CO., LTD. (INPAQ) through private placement in November 2007 and its
subsequent stock dividends, 4.6 million shares of FIRST INTERNATIONAL TELECOM CORP. (FIRST
INTERNATIONAL TELECOM) through private placement in March 2008, 4 million shares of E-ONE
MOLI ENERGY CORP. (E-ONE) through private placement in June 2009, 2 million shares of A-DATA
TECHNOLOGY CO., LTD. (A-DATA) through private placement in September 2009 and 2.5 million
 shares of CRYSTALWISE THCHNOLOGY INC. (CRYSTALWISE) through private placement in August
2010. In addition, 500 units of convertible bonds acquired through private placement in
September 2009 were converted to 2 million common shares of TOPOINT TECHNOLOGY CO., LTD.
(TOPOINT) in September 2010. The exchange of these securities listed above is restricted by
Article 43 paragraph 8 of the Securities and Exchange Law. The above-mentioned restriction
of RALINK, INPAQ, FIRST INTERNATIONAL TELECOM, E-ONE, A-DATA, TOPOINT and CRYSTALWISE will
be removed on September 29, 2010, January 31, 2011, April 25, 2011, August 31, 2012,
September 30, 2012, September 23, 2012 and September 23, 2013, respectively.
  F-26




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##### 



10.
    
    LONG-TERM INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
 a.
    
    Details of long-term investments accounted for under the equity method are as
follows:
 As of December 31,2009
    
    
    2010Percentage
    
    
    
    
    
    
    Percentageof
    
    
    
    
    
    
    ofOwnership
    
    
    
    
    
    
    Ownershipor Voting
    
    
    
    
    
    
    or VotingInvestee Companies
    
    Amount
    
    
    Rights
    
    
    Amount
    
    
    RightsNT$000
    
    
    %
    
    
    NT$000
    
    
    %Unlisted companiesUMCI LTD. (UMCI) (Note A)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.00UNITED MICRODISPLAY OPTRONICS CORP. (UMO) (Note B)
    
    
    35,237
    
    
    
    89.99
    
    
    
    35,237
    
    
    
    89.99UNITED LED CORPORATION HONG KONG LIMITED (UNITED
HK) (Note C)
    
    
    
    
    
    
    
    
    
    
    208,260
    
    
    
    50.00LIST EARN ENTERPRISE INC.
    
    
    9,804
    
    
    
    49.00
    
    
    
    9,177
    
    
    
    49.00SHENYANG PIONEER U-LIGHTING OPTO-ELECTRONIC CO.,
LTD. (SHENYANG U-LIGHTING) (Note C)
    
    
    
    
    
    
    
    
    
    
    3,022
    
    
    
    49.00ACHIEVE MADE INTERNATIONAL LTD.
    
    
    60,790
    
    
    
    48.54
    
    
    
    43,267
    
    
    
    48.54ALLIANCE OPTOTEK CORP.
    
    
    207,762
    
    
    
    48.05
    
    
    
    165,759
    
    
    
    48.43MTIC HOLDINGS PTE. LTD.
    
    
    248,901
    
    
    
    46.49
    
    
    
    234,732
    
    
    
    46.49YUNG LI INVESTMENTS, INC.
    
    
    248,873
    
    
    
    45.16
    
    
    
    221,710
    
    
    
    45.16MEGA MISSION LIMITED PARTNERSHIP
    
    
    2,093,900
    
    
    
    45.00
    
    
    
    2,115,285
    
    
    
    45.00AEVOE INTERNATIONAL LTD.
    
    
    46,358
    
    
    
    43.77
    
    
    
    88,029
    
    
    
    43.77WALTOP INTERNATIONAL CORP.
    
    
    223,090
    
    
    
    46.58
    
    
    
    219,428
    
    
    
    42.59POWER LIGHT TECH CO., LTD.
    
    
    121,625
    
    
    
    42.62
    
    
    
    41,581
    
    
    
    42.33
  F-27




---



##### 



As of December 31,2009
    
    
    2010Percentage
    
    
    
    
    
    
    Percentageof
    
    
    
    
    
    
    ofOwnership
    
    
    
    
    
    
    Ownershipor Voting
    
    
    
    
    
    
    or VotingInvestee Companies
    
    Amount
    
    
    Rights
    
    
    Amount
    
    
    RightsNT$000
    
    
    %
    
    
    NT$000
    
    
    %UNITECH CAPITAL INC.
    
    
    900,893
    
    
    
    42.00
    
    
    
    801,039
    
    
    
    42.00EXOJET TECHNOLOGY CORP.
    
    
    
    
    
    
    
    
    
    
    68,311
    
    
    
    37.52HSUN CHIEH INVESTMENT CO., LTD.
    
    
    3,617,026
    
    
    
    36.49
    
    
    
    3,613,285
    
    
    
    36.49UC FUND II
    
    
    98,655
    
    
    
    35.45
    
    
    
    76,967
    
    
    
    35.45CRYSTAL MEDIA INC.
    
    
    38,735
    
    
    
    32.27
    
    
    
    31,761
    
    
    
    31.80CTC CAPITAL PARTNERS I, L. P.
    
    
    143,863
    
    
    
    31.40
    
    
    
    122,277
    
    
    
    31.40SOLAR GATE TECHNOLOGY CO., LTD.
    
    
    
    
    
    
    
    
    
    
    59,653
    
    
    
    25.00SHANDONG HUAHONG ENERGY INVEST CO., INC.
    
    
    
    
    
    
    
    
    
    
    314,338
    
    
    
    24.30ANOTO TAIWAN CORP.
    
    
    5,819
    
    
    
    24.12
    
    
    
    3,878
    
    
    
    24.12HIGH POWER LIGHTING CORP.
    
    
    43,418
    
    
    
    22.29
    
    
    
    37,012
    
    
    
    22.29UNIMICRON HOLDING LIMITED
    
    
    538,880
    
    
    
    25.25
    
    
    
    536,709
    
    
    
    21.93DAIWA QUANTUM CAPITAL PARTNERS I, L. P. (DAIWA)
(Note D)
    
    
    
    
    
    
    
    
    
    
    57,644
    
    
    
    12.50TRANSLINK CAPITAL PARTNERS I L. P. (TRANSLINK)
(Note D)
    
    
    74,875
    
    
    
    10.55
    
    
    
    77,255
    
    
    
    10.55TRANSLINK CAPITAL PARTNERS II L. P. (TRANSLINK)
(Note D)
    
    
    
    
    
    
    
    
    
    
    7,623
    
    
    
    9.76PACIFIC VENTURE CAPITAL CO., LTD. (PACIFIC) (Note E)
    
    
    7,379
    
    
    
    49.99
    
    
    
    
    
    
    
    NEXPOWER TECHNOLOGY CORP.
    
    
    3,301,451
    
    
    
    45.97
    
    
    
    
    
    
    
    XGI TECHNOLOGY INC.
    
    
    62,977
    
    
    
    31.93
    
    
    
    
    
    
    
    AMIC TECHNOLOGY CORP. (AMIC) (Note F)
    
    
    
    
    
    
    25.87
    
    
    
    
    
    
    
    MOBILE DEVICES INC.
    
    
    38,631
    
    
    
    20.18
    
    
    
    
    
    
    
    Total
    
    
    12,168,942
    
    
    
    
    
    
    
    9,193,239
 Note A:
    
    On July 30, 2010, UMCI has filed for liquidation through a decision at its
stockholders meeting. The liquidation has not been completed as of December 31, 2010.
As of December 31, 2010, the ending balance of the Companys long-term investment
towards UMCI was a credit balance of NT$0.3 million and it was recorded as Other
liabilities-others.  F-28




---



##### 



Note B:
    
    On June 26, 2009, UMO has filed for liquidation through a decision at its
stockholders meeting. The liquidation has not been completed as of December 31, 2010.Note C:
    
    The Company uses the equity method to account for its investment in UNITED HK
and SHENYANG U-LIGHTING, which are jointly controlled entities.Note D:
    
    According to the partnership contract, the Company has significant
influence over DAIWA and TRANSLINK, and they are accounted for under the equity method.Note E:
    
    PACIFIC has filed for liquidation through a decision at its
stockholders meeting on June 27, 2006. PACIFIC obtained the approval of liquidation
completion from the Taipei District Court on May 14, 2010.Note F:
    
    The Companys investment in AMIC was reclassified to Financial assets
measured at cost, noncurrent in June 2010 because the Companys ownership in AMIC
decreased, and it ceased to have significant influence. b.
    
    The change of investees equity was charged to the Companys equity. For the years
ended December 31, 2009 and 2010, the changes charged to additional paid-in capital were
decreases of NT$6,912 million and nil, respectively, and the changes charged to retained
earnings were an increase of NT$6,775 million and a decrease of NT$119 million,
respectively.
 c.
    
    Total gains (losses) arising from investments accounted for under the equity method
were NT$(10,465) million, NT$180 million and NT$115 million for the years ended December
31, 2008, 2009 and 2010, respectively. Net investment income (loss) amounted to NT$(9,445)
million, NT$(11) million and NT$310 million for the years ended December 31, 2008, 2009
and 2010, respectively, and the related long-term investment balances of NT$5,355 million
and NT$5,282 million as of December 31, 2009 and 2010, respectively, were determined based
on the investees financial statements audited by the other independent auditors.
 d.
    
    The long-term equity investments were not pledged.
  F-29




---



##### 



11.
    
    PROPERTY, PLANT AND EQUIPMENT
 As of December 31, 2009Accumulated
    
    
    AccumulatedCost
    
    
    Depreciation
    
    
    Impairment
    
    
    Book ValueNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Land
    
    
    1,056,823
    
    
    
    
    
    
    
    (287,901
    )
    
    
    768,922Buildings
    
    
    21,097,255
    
    
    
    (9,388,142
    )
    
    
    (1,057,850
    )
    
    
    10,651,263Machinery and equipment
    
    
    453,597,613
    
    
    
    (393,557,900
    )
    
    
    (512,540
    )
    
    
    59,527,173Transportation equipment
    
    
    68,580
    
    
    
    (61,430
    )
    
    
    
    
    
    
    7,150Furniture and fixtures
    
    
    3,324,352
    
    
    
    (2,845,876
    )
    
    
    (10,677
    )
    
    
    467,799Leasehold improvement
    
    
    53,411
    
    
    
    (45,762
    )
    
    
    
    
    
    
    7,649Construction in
progress and
prepayments
    
    
    18,166,404
    
    
    
    
    
    
    
    
    
    
    
    18,166,404Total
    
    
    497,364,438
    
    
    
    (405,899,110
    )
    
    
    (1,868,968
    )
    
    
    89,596,360
 As of December 31, 2010Accumulated
    
    
    AccumulatedCost
    
    
    Depreciation
    
    
    Impairment
    
    
    Book ValueNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Land
    
    
    1,555,904
    
    
    
    
    
    
    
    (266,981
    )
    
    
    1,288,923Buildings
    
    
    26,156,284
    
    
    
    (10,364,578
    )
    
    
    (978,742
    )
    
    
    14,812,964Machinery and equipment
    
    
    498,122,888
    
    
    
    (415,015,124
    )
    
    
    (469,930
    )
    
    
    82,637,834Transportation equipment
    
    
    72,938
    
    
    
    (60,302
    )
    
    
    
    
    
    
    12,636Furniture and fixtures
    
    
    3,594,261
    
    
    
    (2,979,520
    )
    
    
    (9,619
    )
    
    
    605,122Leasehold improvement
    
    
    728,030
    
    
    
    (72,741
    )
    
    
    
    
    
    
    655,289Construction in
progress and
prepayments
    
    
    32,749,232
    
    
    
    
    
    
    
    
    
    
    
    32,749,232Total
    
    
    562,979,537
    
    
    
    (428,492,265
    )
    
    
    (1,725,272
    )
    
    
    132,762,000
 a.
    
    Total interest expense before capitalization amounted to NT$109 million, NT$180
million and NT$352 million for the years ended December 31, 2008, 2009 and 2010,
respectively.
 Details of capitalized interest are as follows:
 For the years ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000Land
    
    
    
    
    
    
    
    
    
    
    383Buildings
    
    
    16,203
    
    
    
    43,241
    
    
    
    48,454Machinery and equipment
    
    
    21,679
    
    
    
    78,092
    
    
    
    284,605Furniture and fixtures
    
    
    21
    
    
    
    55
    
    
    
    1,557Others
    
    
    41
    
    
    
    85
    
    
    
    29Total interest capitalized
    
    
    37,944
    
    
    
    121,473
    
    
    
    335,028Interest rates applied
    
    
    0.11%~1.22
    %
    
    
    1.07%~3.90
    %
    
    
    1.04%~3.51
    %
 b.
    
    Please refer to Note 27 for property, plant and equipment pledged as collateral.
  F-30




---



##### 



12.
    
    OTHER ASSETS-OTHERS
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Leased assets
    
    
    1,041,586
    
    
    
    1,089,990Deposits-out
    
    
    753,990
    
    
    
    946,414Long-term prepayment
    
    
    
    
    
    
    545,140Others
    
    
    128,892
    
    
    
    113,225Total
    
    
    1,924,468
    
    
    
    2,694,769
 Please refer to Note 27 for Deposits-out pledged as collateral.
 13.
    
    IMPAIRMENT LOSS
 For the years ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000Available-for-sale financial
assets, noncurrent
    
    
    8,386,596
    
    
    
    
    
    
    
    Long-term investments
accounted for under the
equity method
    
    
    
    
    
    
    
    
    
    
    20,802Financial assets measured at
cost, noncurrent
    
    
    943,084
    
    
    
    494,091
    
    
    
    93,077Goodwill
    
    
    3,491,073
    
    
    
    
    
    
    
    Property, plant and equipment
    
    
    39,148
    
    
    
    3,331,557
    
    
    
    Others assets
    
    
    319,957
    
    
    
    181,430
    
    
    
    Total
    
    
    13,179,858
    
    
    
    4,007,078
    
    
    
    113,879
 After considering objective evidence and the result of the impairment loss testing, the Company
recognized impairment losses amounted to NT$9,330 million, NT$494 million and NT$114 million
for its available-for-sale financial assets, noncurrent, financial assets measured at cost,
noncurrent and long-term investments accounted for under the equity method, respectively, for
the years ended December 31, 2008, 2009 and 2010. As of December 31, 2009, the Company
determined that certain fixed assets and other assets would not generate future cash flows. The
Company determined the recoverable amounts of these assets based on the fair values less costs
to sell. The impairment test revealed that the total carrying amount of these assets was
greater than their total recoverable amount, and the Company recognized an impairment loss
amounted to NT$122 million. According to the assessment report and as a result of the
impairment loss testing, the Company recognized an impairment loss amounted to NT$3,391 million
for its property, plant, equipment and other assets for the year ended December 31, 2009.
  F-31




---



##### 



14.
    
    SHORT-TERM LOANS
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Unsecured bank loans
    
    
    128,682
    
    
    
    4,124,115
 For the years ended December 31,2009
    
    
    2010Interest rates
    
    
    0.58%~3.72
    %
    
    
    0.54%~2.37
    %
 The Companys unused short-term lines of credits amounted to NT$12,088 million and NT$17,271
million as of December 31, 2009 and 2010, respectively.
 15.
    
    FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Derivatives embedded in exchangeable bonds
    
    
    1,914,879
    
    
    
    2,248,384Forward contracts
    
    
    
    
    
    
    6,553Total
    
    
    1,914,879
    
    
    
    2,254,937
 During the years ended December 31, 2008, 2009 and 2010, net losses arising from financial
liabilities at fair value through profit or loss were NT$1,046 million, NT$815 million and
NT$546 million, respectively.
 16.
    
    BONDS PAYABLE
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Unsecured domestic bonds payable
    
    
    7,500,000
    
    
    
    Unsecured exchangeable bonds payable
    
    
    6,472,692
    
    
    
    5,886,654Less: Discounts on bonds payable
    
    
    (1,205,555
    )
    
    
    (890,898
    )Total
    
    
    12,767,137
    
    
    
    4,995,756Less: Current or exchangeable portion
    
    
    (12,767,137
    )
    
    
    (4,995,756
    )Net
    
    
    
    
    
    
    
  F-32




---



##### 



a.
    
    During the period from May 21 to June 24, 2003, UMC issued five-year and seven-year
unsecured bonds totaled to NT$15,000 million, each with a face value of NT$7,500 million.
The interest is paid annually with stated interest rates of 4.0% minus USD 12-Month LIBOR
and 4.3% minus USD 12-Month LIBOR, respectively. Stated interest rates are reset annually
based on the prevailing USD 12-Month LIBOR. The five-year bonds and seven-year bonds were
fully repaid on June 24, 2008 and June 24, 2010, respectively.
 b.
    
    On December 2, 2009, UMC issued SGX-ST listed zero coupon exchangeable bonds. The
terms and conditions of the bonds are as follows:
 (a)
    
    Issue Amount: US$127.2 million
 (b)
    
    Period: December 2, 2009 ~ December 2, 2014 (Maturity date)
 (c)
    
    Redemption
 i.
    
    UMC may redeem the bonds, in whole or in part, after 12 months of
the issuance and prior to the maturity date, at the principal amount of the bonds
with an interest calculated at the rate of -0.5% per annum (the Early Redemption
Price) if the closing price of the common shares of Unimicron Technology
Corporation (Unimicron) on the TSE, translated into US dollars at the prevailing
exchange rate, for a period of 20 consecutive trading days, the last of which
occurs not more than 10 days prior to the date upon which notice of such
redemption is published, is at least 130% of the exchange price then in effect
translated into US dollars at the rate of NTD32.197=USD1.00.ii.
    
    UMC may redeem the bonds, in whole, but not in part, at the Early
Redemption Price if at least 90% in principal amount of the bonds has already
been exchanged, redeemed or purchased and cancelled.iii.
    
    UMC may redeem all, but not part, of the bonds, at the Early
Redemption Price at any time, in the event of certain changes in the R.O.C.s tax
rules which would require UMC to gross up for payments of principal, or to gross
up for payments of interest or premium.
  F-33




---



##### 



iv.
    
    All, or any portion, of the bonds will be redeemable in US dollars
at the option of bondholders on December 2, 2011 at 99% of the principal amount.v.
    
    Bondholders have the right to require UMC to redeem all or any
portion of the bonds at the Early Redemption Price if the common shares of the
exchanged securities are officially delisted on the TSE for a period of five
consecutive trading days.vi.
    
    In the event that a change of control as defined in the indenture
of the bonds occurs to UMC or Unimicron, the bondholders shall have the right to
require UMC to redeem the bonds, in whole or in part, at the Early Redemption
Price.
 (d)
    
    Terms of Exchange
 i.
    
    Underlying Securities: Common shares of Unimicronii.
    
    Exchange Period: The bonds are exchangeable at any time on or after
January 1, 2010 and prior to November 22, 2014, into Unimicron common shares;
provided, however, that if the exercise date falls within 5 business days from
the beginning of, and during, any closed period, the right of the exchanging
holder of the bonds to vote with respect to the shares it receives will be
subject to certain restrictions.iii.
    
    Exchange Price and Adjustment: The exchange price was originally
NTD51.1875 per share, determined on the basis of a fixed exchange rate of
NTD32.197=USD1.00. The exchange price will be subject to adjustments upon the
occurrence of certain events set out in the indenture. The exchange price is
NTD49.6829 per share on December 31, 2010.
 (e)
    
    Redemption on the Maturity Date: On the maturity date, UMC will redeem the
bonds at 97.53% of the principal amount unless, prior to such date:
 i.
    
    UMC shall have redeemed the bonds at the option of UMC, or the
bonds shall have been redeemed at option of the bondholder;
 ii.
    
    The bondholders shall have exercised the exchange right before
maturity; or
 iii.
    
    The bonds shall have been redeemed or purchased by UMC and
cancelled.
  F-34




---



##### 



c.
    
    On December 2, 2009, UMC issued SGX-ST listed zero coupon exchangeable bonds. The
terms and conditions of the bonds are as follows:
 (a)
    
    Issue Amount: US$80 million
 (b)
    
    Period: December 2, 2009 ~ December 2, 2014 (Maturity date)
 (c)
    
    Redemption
 i
    
    UMC may redeem the bonds, in whole or in part, after 12 months of
the issuance and prior to the maturity date, at the principal amount of the bonds
with an interest calculated at the rate of -0.5% per annum (the Early Redemption
Price) if the closing price of the common shares of Novatek Microelectronics
Corp., Ltd. (Novatek) on the TSE, translated into US dollars at the prevailing
exchange rate, for a period of 20 consecutive trading days, the last of which
occurs not more than 10 days prior to the date upon which notice of such
redemption is published, is at least 130% of the exchange price then in effect
translated into US dollars at the rate of NTD32.197=USD1.00.
 ii
    
    UMC may redeem the bonds, in whole, but not in part, at the Early
Redemption Price if at least 90% in principal amount of the bonds has already
been exchanged, redeemed or purchased and cancelled.
 iii
    
    UMC may redeem all, but not part, of the bonds, at the Early
Redemption Price at any time, in the event of certain changes in the R.O.C.s tax
rules which would require UMC to gross up for payments of principal, or to gross
up for payments of interest or premium.
 iv
    
    All, or any portion, of the bonds will be redeemable in US dollars
at the option of bondholders on December 2, 2011 at 99% of the principal amount.
 v
    
    Bondholders have the right to require UMC to redeem all or any
portion of the bonds at the Early Redemption Price if the common shares of the
exchanged securities are officially delisted on the TSE for a period of five
consecutive trading days.
 vi
    
    In the event that a change of control as defined in the indenture
of the bonds occurs to UMC or Novatek, the bondholders shall have the right to
require UMC to redeem the bonds, in whole or in part, at the Early Redemption
Price.
 (d)
    
    Terms of Exchange
 i
    
    Underlying Securities: Common shares of Novatek.
 ii
    
    Exchange Period: The bonds are exchangeable at any time on or after
January 1, 2010 and prior to November 22, 2014, into Novatek common shares;
provided, however, that if the exercise date falls within 5 business days from
the beginning of, and during, any closed period, the right of the exchanging
holder of the bonds to vote with respect to the shares it receives will be
subject to certain restrictions.
  F-35




---



##### 



iii
    
    Exchange Price and Adjustment: The exchange price was originally
NTD108.58 per share, determined on the basis of a fixed exchange rate of
NTD32.197=USD1.00. The exchange price will be subject to adjustments upon the
occurrence of certain events set out in the indenture. The exchange price is
NTD102.4836 per share on December 31, 2010.
 (e)
    
    Redemption on the Maturity Date: On the maturity date, UMC will redeem
the bonds at 97.53% of the principal amount unless, prior to such date:
 i.
    
    UMC shall have redeemed the bonds at the option of UMC, or
the bonds shall have been redeemed at option of the bondholder;
 ii.
    
    The bondholders shall have exercised the exchange right
before maturity; or
 iii.
    
    The bonds shall have been redeemed or purchased by UMC and
cancelled.
 d.
    
    Repayments of the above-mentioned bonds in the future year are as follows:
 Bonds repayable (Year)
    
    AmountNT$0002014
    
    
    5,886,654
 17.
    
    LONG-TERM LOANS
 a.
    
    Details of long-term loans as of December 31, 2009 and 2010 are as follows:
 As of DecemberLender
    
    31, 2009
    
    
    RedemptionNT$000Secured Long-Term Loan from Bank of Taiwan
    
    
    700,000
    
    
    Repayable quarterly from March 30, 2011 to December 30, 2013 and interest is paid monthly.Unsecured Long-Term Loan from Mega International Commercial Bank
    
    
    100,000
    
    
    Repayable quarterly from May 25, 2010 to May 25, 2012 and interest is paid monthly.Subtotal
    
    
    800,000Less: Current portion
    
    
    (33,450
    )Total
    
    
    766,550For the year endedDecember 31, 2009Interest Rates
    
    
    1.28%~1.82
    %
  F-36




---



##### 



As of DecemberLender
    
    31, 2010
    
    
    RedemptionNT$000Secured Long-Term Loan from Bank of Taiwan (1)
    
    
    700,000
    
    
    Repayable quarterly from March 30, 2011 to December 30, 2013 and interest is paid monthly.Secured Long-Term Loan from First Commercial Bank (1)
    
    
    153,240
    
    
    Repayable semiannually from December 6, 2010 to November 14, 2015 and interest is paid monthly.Secured Long-Term Loan from First Commercial Bank (2)
    
    
    71,760
    
    
    Repayable semiannually from November 15, 2010 to November 14, 2015 and interest is paid monthly.Secured Long-Term Loan from First Commercial Bank (3)
    
    
    620,000
    
    
    Repayable semiannually from June 30, 2012 to December 31, 2015 and interest is paid monthly.Secured Syndicated Loans from Bank of Taiwan and 7 others
    
    
    4,060,000
    
    
    Repayable semiannually from February 10, 2012 to August 10, 2015 and interest is paid monthly.Secured Syndicated Loans from Taiwan Cooperative Bank and 5 others
    
    
    1,350,000
    
    
    Repayable semiannually from October 25, 2010 to April 25, 2015 and interest is paid monthly.Unsecured Long-Term Loan from Mega International Commercial Bank (1)
    
    
    66,550
    
    
    Repayable quarterly from May 25, 2010 to May 25, 2012 and interest is paid monthly.Unsecured Long-Term Loan from Mega International Commercial Bank (2)
    
    
    200,000
    
    
    Repayable quarterly from December 28, 2012 to December 28, 2015 and interest is paid monthly.Unsecured Long-Term Loan from First Commercial Bank (1)
    
    
    100,000
    
    
    Repayable quarterly from May 22, 2011 to February 22, 2013 and interest is paid monthly.
  F-37




---



##### 



As of DecemberLender
    
    31, 2010
    
    
    RedemptionNT$000Unsecured Long-Term Loan from First Commercial Bank (2)
    
    
    200,000
    
    
    Repayable quarterly from September 30, 2011 to June 30, 2013 and interest is paid monthly.Subtotal
    
    
    7,521,550Less: Administrative expenses from syndicated loans
    
    
    (11,727
    )Less: Current portion
    
    
    (710,433
    )Total
    
    
    6,799,390For the year endedDecember 31, 2010Interest Rates
    
    
    1.14%~2.49
    %
 According to the syndicated loan agreement, NEXPOWER was subject to maintain certain
annual and semi-annual current ratio, debit ratio and interest coverage ratio. As of
December 31, 2010, NEXPOWER met the conditions mentioned above.
 b.
    
    The long-term loans on December 31, 2010 will be repaid by installments with the last
payment on December 31, 2015. Repayments in the coming years respectively are as follows:
 Long-Term Loans repayable (Year)
    
    AmountNT$0002011
    
    
    710,4332012
    
    
    1,935,6682013
    
    
    1,872,3722014
    
    
    1,576,5382015
    
    
    1,426,539Total
    
    
    7,521,550
 c.
    
    Please refer to Note 27 for property, plant and equipment pledged as collateral for
long- term loans.
  F-38




---



##### 



18.
    
    PENSION PLAN
 a.
    
    The Labor Pension Act of the R.O.C. (the Act), which adopts a defined
contribution plan, became effective on July 1, 2005. Employees eligible for the Labor
Standards Law, a defined benefit plan, were offered the options to elect the pension
calculation under the Act or continue to be subject to the pension calculation under the
Labor Standards Law. Those employees that elected to be subject to the Act will have
their seniority achieved under the Labor Standards Law retained upon election of the
Act, and the Company will make monthly contributions of no less than 6% of these
employees monthly wages to the employees individual pension accounts. The Company has
made monthly contributions based on each individual employees salary or wage to
employees pension accounts beginning July 1, 2005 and a total of NT$399 million, NT$354
million and NT$422 million were contributed by the Company for the years ended December
31, 2008, 2009 and 2010, respectively. Pension benefits for employees of the Branch and
subsidiaries overseas are provided in accordance with the local regulations, and during
the years ended December 31, 2008, 2009 and 2010, the Company made contributions of
NT$112 million, NT$162 million and NT$170 million, respectively.b.
    
    The defined benefit plan under the Labor Standards Law is disbursed based on the
units of service years and the average salary in the last month of the service year. Two
units per year are awarded for the first 15 years of services while one unit per year is
awarded after the completion of the fifteenth year. The total units shall not exceed 45
units. In accordance to the plan, the Company contributes an amount equivalent to 2% of
the employees total salaries and wages on a monthly basis to the pension fund deposited
at the Bank of Taiwan in the name of an administered pension fund committee. Government
authority will collect the fund as a Labor Retirement Fund and determine the allocation
and investment policy of the assets. The defined benefit plan assets and obligations are
measured as of December 31. The unrecognized net asset or obligation at transition based
on actuarial valuation is amortized on a straight-line basis over 15 years.c.
    
    Change in benefit obligation during the year:
 For the years ended December 31,2009
    
    
    2010NT$000
    
    
    NT$000Projected benefit obligation at beginning of year
    
    
    (4,563,300
    )
    
    
    (5,189,112
    )Service cost
    
    
    (109,946
    )
    
    
    (103,864
    )Interest cost
    
    
    (117,538
    )
    
    
    (113,884
    )Benefits paid
    
    
    166,056
    
    
    
    72,777Loss on projected benefit obligation
    
    
    (607,063
    )
    
    
    (577,564
    )Exchange gain (loss)
    
    
    42,679
    
    
    
    (27,021
    )Projected benefit obligation at end of year
    
    
    (5,189,112
    )
    
    
    (5,938,668
    )
  F-39




---



##### 



d.
    
    Change in pension assets during the year:
 For the years endedDecember 31,2009
    
    
    2010NT$000
    
    
    NT$000Fair value of plan assets at beginning of year
    
    
    1,973,407
    
    
    
    1,995,970Actual return on plan assets
    
    
    78,775
    
    
    
    15,075Contributions from employer
    
    
    148,389
    
    
    
    159,049Benefits paid
    
    
    (166,057
    )
    
    
    (72,777
    )Exchange gain (loss) and others
    
    
    (38,544
    )
    
    
    20,876Fair value of plan assets at end of year
    
    
    1,995,970
    
    
    
    2,118,193
 e.
    
    The funding status of the pension plan is as follows:
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Benefit obligationVested benefit obligation
    
    
    (866,292
    )
    
    
    (874,090
    )Non-vested benefit obligation
    
    
    (1,973,956
    )
    
    
    (2,392,090
    )Accumulated benefit obligation
    
    
    (2,840,248
    )
    
    
    (3,266,180
    )Effect from projected salary increase
    
    
    (2,348,864
    )
    
    
    (2,672,488
    )Projected benefit obligation
    
    
    (5,189,112
    )
    
    
    (5,938,668
    )Fair value of plan assets
    
    
    1,995,970
    
    
    
    2,118,193Funded status
    
    
    (3,193,142
    )
    
    
    (3,820,475
    )Unrecognized net transitional benefit obligation
    
    
    29,662
    
    
    
    1,368Unrecognized loss (gain)
    
    
    (97,977
    )
    
    
    571,661Prior service cost
    
    
    
    
    
    
    (51,970
    )Accrued pension liabilities recognized on the
consolidated balance sheet
    
    
    (3,261,457
    )
    
    
    (3,299,416
    )
 f.
    
    The components of the net periodic pension cost are as follows:
 For the years ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000Service cost
    
    
    130,570
    
    
    
    109,950
    
    
    
    103,864Interest cost
    
    
    155,276
    
    
    
    117,538
    
    
    
    113,884Expected return on plan assets
    
    
    (67,691
    )
    
    
    (44,831
    )
    
    
    (55,487
    )Amortization of unrecognized
transitional net benefit
obligation
    
    
    28,291
    
    
    
    28,291
    
    
    
    28,293Amortization of unrecognized
pension loss (gain)
    
    
    (15,789
    )
    
    
    (21,123
    )
    
    
    12,069Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    (5,197
    )Others
    
    
    (8,513
    )
    
    
    906
    
    
    
    (48
    )Net periodic pension cost
    
    
    222,144
    
    
    
    190,731
    
    
    
    197,378
  F-40




---



##### 



For the year ended December 31, 2008UMC
    
    
    FORTUNE
    
    
    UMC JAPANDiscount rate
    
    
    2.75
    %
    
    
    2.50
    %
    
    
    2.00
    %Rate of salary increase
    
    
    3.50
    %
    
    
    3.00
    %
    
    
    2.58
    %Expected return on plan assets
    
    
    1.50
    %
    
    
    2.50
    %
    
    
    3.84
    %
 For the year ended December 31, 2009UMC
    
    
    FORTUNE
    
    
    UMC JAPANDiscount rate
    
    
    2.25
    %
    
    
    2.25
    %
    
    
    2.00
    %Rate of salary increase
    
    
    4.00
    %
    
    
    3.00
    %
    
    
    2.55
    %Expected return on plan assets
    
    
    2.25
    %
    
    
    2.25
    %
    
    
    4.00
    %
 For the year ended December 31, 2010UMC
    
    
    FORTUNE
    
    
    UMC JAPANDiscount rate
    
    
    1.75
    %
    
    
    2.00
    %
    
    
    2.00
    %Rate of salary increase
    
    
    4.00
    %
    
    
    3.00
    %
    
    
    2.55
    %Expected return on plan assets
    
    
    1.75
    %
    
    
    2.00
    %
    
    
    3.65
    %
  Year
    
    AmountNT$0002011
    
    
    88,2752012
    
    
    64,8862013
    
    
    86,9652014
    
    
    117,0992015
    
    
    137,1542016-2020
    
    
    990,890
   F-41




---



##### 



19.
    
    CAPITAL STOCK
 a.
    
    UMC had 26,000 million common shares authorized to be issued, and 12,988 million
shares were issued as of December 31, 2009, each at a par value of NT$10.
 b.
    
    UMC had issued a total of 230 million ADSs, which were traded on the NYSE as of
December 31, 2009. The total number of common shares of UMC represented by all issued
ADSs was 1,148 million shares as of December 31, 2009. One ADS represents five common
shares.
 c.
    
    On December 14, 2009, UMC sold 78 million shares of treasury stock to employees,
which were repurchased during the periods from January 7 to February 16, 2009, for the
purpose of transferring to employees.
 d.
    
    Among the employee stock options issued by UMC on December 13, 2007, 141 thousand
shares were exercised during the year ended December 31, 2010. The issuance process
through the authority had been completed.
 e.
    
    UMC had 26,000 million common shares authorized to be issued, and 12,988 million
shares were issued as of December 31, 2010, each at a par value of NT$10.
 f.
    
    UMC had issued a total of 230 million ADSs, which were traded on the NYSE as of
December 31, 2010. The total number of common shares of UMC represented by all issued
ADSs was 1,148 million shares as of December 31, 2010. One ADS represents five common
shares.
 g.
    
    On December 31, 2010, UMC sold 64 million shares of treasury stock to employees,
which were repurchased during the periods from January 7 to February 16, 2009, for the
purpose of transferring to employees.
 20.
    
    EMPLOYEE STOCK OPTIONS
 On September 11, 2002, October 8, 2003, September 30, 2004, December 22, 2005, October 9,
2007 and May 12, 2009, the Company was authorized by the Securities and Futures Bureau of
the Financial Supervisory Commission, Executive Yuan, to issue employee stock options with a
total number of 1 billion, 150 million, 150 million, 350 million, 500 million, and 500
million units, respectively. Each unit entitles an optionee to subscribe to 1 share of the
Companys common stock. Settlement upon the exercise of the options will be made through the
issuance of new shares by the Company. The exercise price of the options was set at the
closing price of the Companys common stock on the date of grant. The contractual life is 6
years and an optionee may exercise the options in accordance with certain schedules as
prescribed by the plan after 2 years from the date of grant. Detailed information relevant
to the employee stock options is disclosed as follows:
  F-42




---



##### 



Sharesavailable to
    
    
    ExerciseTotal number of
    
    
    Total number of
    
    
    option holders
    
    
    priceoptions granted
    
    
    options outstanding
    
    
    (in thousands)
    
    
    (NTD)Date of grant
    
    (in thousands)
    
    
    (in thousands)
    
    
    (Note)
    
    
    (Note)October 7, 2002
    
    
    939,000
    
    
    
    
    
    
    
    
    
    
    $
    21.42January 3, 2003
    
    
    61,000
    
    
    
    
    
    
    
    
    
    
    $
    24.15November 26, 2003
    
    
    57,330
    
    
    
    
    
    
    
    
    
    
    $
    33.70March 23, 2004
    
    
    33,330
    
    
    
    
    
    
    
    
    
    
    $
    31.25July 1, 2004
    
    
    56,590
    
    
    
    
    
    
    
    
    
    
    $
    28.24October 13, 2004
    
    
    20,200
    
    
    
    
    
    
    
    
    
    
    $
    24.28April 29, 2005
    
    
    23,460
    
    
    
    8,135
    
    
    
    5,671
    
    
    $
    22.37August 16, 2005
    
    
    54,350
    
    
    
    24,187
    
    
    
    16,863
    
    
    $
    29.47September 29, 2005
    
    
    51,990
    
    
    
    33,335
    
    
    
    23,240
    
    
    $
    26.89January 4, 2006
    
    
    39,290
    
    
    
    13,770
    
    
    
    9,600
    
    
    $
    23.17May 22, 2006
    
    
    42,058
    
    
    
    20,560
    
    
    
    14,334
    
    
    $
    25.19August 24, 2006
    
    
    28,140
    
    
    
    11,705
    
    
    
    8,160
    
    
    $
    24.09December 13, 2007
    
    
    500,000
    
    
    
    372,648
    
    
    
    372,648
    
    
    $
    18.03June 19, 2009
    
    
    300,000
    
    
    
    268,360
    
    
    
    268,360
    
    
    $
    10.40Total
    
    
    2,206,738
    
    
    
    752,700
    
    
    
    718,876
 Note:
    
    The employee stock options granted prior to August 7, 2007, the effective date of
capital reduction, were adjusted in accordance with the capital reduction rate. Each
option unit entitles an optionee to subscribe for about 0.7 share of the Companys
common stock. The exercise price of the options is also adjusted according to capital
reduction rate. Each stock option unit granted after August 7, 2007 remains to be
subscribed for 1 share of the Companys common stock.  F-43




---



##### 



a.
    
    A summary of the Companys stock option plan, and related information for the years
ended December 31, 2009 and 2010, is as follows:
 For the years ended December 31,2009
    
    
    2010Weighted-Shares
    
    
    average
    
    
    
    
    
    
    Shares
    
    
    Weighted-available to
    
    
    Exercise
    
    
    
    
    
    
    available to
    
    
    averageoption
    
    
    Price per
    
    
    
    
    
    
    option
    
    
    Exercise PriceOptions
    
    
    holders
    
    
    share
    
    
    Options
    
    
    holders
    
    
    per share(in thousands)
    
    
    (in thousands)
    
    
    (NTD)
    
    
    (in thousands)
    
    
    (in thousands)
    
    
    (NTD)Outstanding at beginning of period
    
    
    709,484
    
    
    
    627,086
    
    
    $
    20.79
    
    
    
    861,771
    
    
    
    809,566
    
    
    $
    16.59Granted
    
    
    300,000
    
    
    
    300,000
    
    
    $
    10.40
    
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    (141
    )
    
    
    (141
    )
    
    $
    18.03Forfeited
    
    
    (76,492
    )
    
    
    (67,867
    )
    
    $
    19.43
    
    
    
    (61,477
    )
    
    
    (57,466
    )
    
    $
    16.42Expired
    
    
    (71,221
    )
    
    
    (49,653
    )
    
    $
    28.41
    
    
    
    (47,453
    )
    
    
    (33,083
    )
    
    $
    28.56Outstanding at end of period
    
    
    861,771
    
    
    
    809,566
    
    
    $
    16.59
    
    
    
    752,700
    
    
    
    718,876
    
    
    $
    16.05Exercisable at end of period
    
    
    355,715
    
    
    
    308,157
    
    
    $
    21.19
    
    
    
    385,101
    
    
    
    351,785
    
    
    $
    19.78Weighted-average fair value of
options granted during the period
(NTD)
    
    $
    2.84
    
    
    
    
    
    
    
    
    
    
    $
    
 b.
    
    The information on the Companys outstanding stock options as of December 31, 2010, is
as follows:
 Outstanding Stock Options
    
    
    Exercisable Stock OptionsWeighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-Shares
    
    
    Weighted-
    
    
    average
    
    
    
    
    
    
    
    
    
    
    averageavailable to
    
    
    average
    
    
    Exercise
    
    
    
    
    
    
    Shares
    
    
    ExerciseRange of
    
    
    
    
    
    
    option
    
    
    Expected
    
    
    Price per
    
    
    
    
    
    
    available to
    
    
    Price perAuthorization
    
    Exercise
    
    
    Options
    
    
    holders
    
    
    Remaining
    
    
    share
    
    
    Options
    
    
    option holders
    
    
    shareDate
    
    Price (NTD)
    
    
    (in thousands)
    
    
    (in thousands)
    
    
    Years
    
    
    (NTD)
    
    
    (in thousands)
    
    
    (in thousands)
    
    
    (NTD)2004.09.30
    
    $
    22.37~$29.47
    
    
    
    65,657
    
    
    
    45,774
    
    
    
    0.65
    
    
    $
    27.28
    
    
    
    65,009
    
    
    
    45,322
    
    
    $
    27.262005.12.22
    
    $
    23.17~$25.19
    
    
    
    46,035
    
    
    
    32,094
    
    
    
    1.34
    
    
    $
    24.31
    
    
    
    45,005
    
    
    
    31,376
    
    
    $
    24.302007.10.09
    
    $
    18.03
    
    
    
    372,648
    
    
    
    372,648
    
    
    
    2.95
    
    
    $
    18.03
    
    
    
    275,087
    
    
    
    275,087
    
    
    $
    18.032009.05.12
    
    $
    10.40
    
    
    
    268,360
    
    
    
    268,360
    
    
    
    4.46
    
    
    $
    10.40
    
    
    
    
    
    
    
    
    
    
    $
    752,700
    
    
    
    718,876
    
    
    
    3.30
    
    
    $
    16.05
    
    
    
    385,101
    
    
    
    351,785
    
    
    $
    19.78
  F-44




---



##### 



c.
    
    The Company used the intrinsic value method to recognize compensation costs for its
employee stock options issued between January 1, 2004 and December 31, 2007. Compensation
costs for these options were nil for the years ended December 31, 2008, 2009 and 2010. For
options granted on or after January 1, 2008, the Company recognized compensation cost of
nil, NT$136 million and NT$254 million using the fair value method in accordance with
R.O.C. SFAS 39 for the years ended December 31, 2008, 2009 and 2010, respectively.
 The Company granted options prior to adopting R.O.C. SFAS 39. Pro forma information on net
income (loss) and earnings (losses) per share using the fair value method is as follows:
 For the year ended December 31, 2008Basic losses per share
    
    
    Diluted losses per shareNT$000
    
    
    NT$000Net loss
    
    
    (22,320,075
    )
    
    
    (22,449,985
    )Losses per share (NTD)
    
    $
    (1.70
    )
    
    $
    (1.70
    )Pro forma net loss
    
    
    (23,245,013
    )
    
    
    (23,374,923
    )Pro forma losses per share (NTD)
    
    $
    (1.77
    )
    
    $
    (1.78
    )
 For the year ended December 31, 2009Basic earnings per share
    
    
    Diluted earnings per shareNT$000
    
    
    NT$000Net income
    
    
    3,874,028
    
    
    
    3,874,028Earnings per share (NTD)
    
    $
    0.31
    
    
    $
    0.30Pro forma net income
    
    
    3,064,107
    
    
    
    3,064,107Pro forma earnings per
share (NTD)
    
    $
    0.24
    
    
    $
    0.24
 For the year ended December 31, 2010Basic earnings per share
    
    
    Diluted earnings per shareNT$000
    
    
    NT$000Net income
    
    
    23,898,905
    
    
    
    23,898,905Earnings per share (NTD)
    
    $
    1.91
    
    
    $
    1.87Pro forma net income
    
    
    23,538,509
    
    
    
    23,538,509Pro forma earnings per
share (NTD)
    
    $
    1.88
    
    
    $
    1.84
  F-45




---



##### 



The fair value of the options outstanding as of December 31, 2009 and 2010 were estimated at
the date of grant using the Black-Scholes options pricing model with the following
weighted-average assumptions. The factors before and after the adoption of R.O.C. SFAS 39 to
account for share-based payment were as follows:
 Factors
    
    Before
    
    
    AfterExpected dividend yields
    
    
    1.37%~1.71
    %
    
    
    1.98
    %Volatility factors of the
expected market price of the
Companys common stock
    
    
    36.29%~49.10
    %
    
    
    40.63
    %Risk-free interest rate
    
    
    1.85%~2.85
    %
    
    
    1.01
    %Weighted-average expected life
    
    4~5 years
    
    3.16~5.03 years
 21.
    
    TREASURY STOCK
 a.
    
    Changes in treasury stock during the years ended December 31, 2008, 2009 and 2010 are
as follows:For the year ended December 31, 2008(In thousands of shares)
 As of
    
    
    
    
    
    
    
    
    
    
    As ofPurpose
    
    January 1, 2008
    
    
    Increase
    
    
    Decrease
    
    
    December 31, 2008For transfer to employees
    
    
    355,716
    
    
    
    
    
    
    
    355,716
    
    
    
    For conversion of the
convertible bonds into
shares
    
    
    348,583
    
    
    
    
    
    
    
    348,583
    
    
    
    To maintain UMCs credit
and stockholders equity
    
    
    
    
    
    
    200,000
    
    
    
    200,000
    
    
    
    Total shares
    
    
    704,299
    
    
    
    200,000
    
    
    
    904,299
    
    
    
    
 For the year ended December 31, 2009(In thousands of shares)
 As of
    
    
    
    
    
    
    
    
    
    
    As ofPurpose
    
    January 1, 2009
    
    
    Increase
    
    
    Decrease
    
    
    December 31, 2009For transfer to
employees
    
    
    
    
    
    
    300,000
    
    
    
    78,091
    
    
    
    221,909
 For the year ended December 31, 2010(In thousands of shares)
 As of
    
    
    
    
    
    
    
    
    
    
    As ofPurpose
    
    January 1, 2010
    
    
    Increase
    
    
    Decrease
    
    
    December 31, 2010For transfer to employees
    
    
    221,909
    
    
    
    300,000
    
    
    
    63,975
    
    
    
    457,934
  F-46




---



##### 



b.
    
    According to the Securities and Exchange Law of the R.O.C., the total shares of
treasury stock shall not exceed 10% of UMCs issued stock, and the total purchase amount
shall not exceed the sum of the retained earnings, additional paid-in capital  premiums,
and realized additional paid-in capital. As such, the maximum number of shares of treasury
stock that UMC could hold as of December 31, 2009 and 2010, were 1,299 million shares and
1,299 million shares, while the ceiling amount were NT$54,852 million and NT$72,540
million, respectively.
 c.
    
    In compliance with Securities and Exchange Law of the R.O.C., treasury stock should
not be pledged, nor should it be entitled to voting rights or receiving dividends. Stock
held by subsidiaries is treated as treasury stock. These subsidiaries have the same rights
as other stockholders except for subscription to new stock issuance and voting rights.
 d.
    
    As of December 31, 2009, UMCs subsidiary, FORTUNE VENTURE CAPITAL CORP., held 16
million shares of UMCs stock, with a book value of NT$17.20 per share. The closing price
on December 31, 2009 was NT$17.20.
 As of December 31, 2010, UMCs subsidiary, FORTUNE VENTURE CAPITAL CORP., held 16 million
shares of UMCs stock, with a book value of NT$16.30 per share. The closing price on
December 31, 2010 was NT$16.30.
 22.
    
    RETAINED EARNINGS AND DIVIDEND POLICIES
 According to UMCs Articles of Incorporation, current years earnings, if any, shall be
distributed in the following order:
 a.
    
    Payment of all taxes and dues;
 b.
    
    Offset prior years operation losses;
 c.
    
    Set aside 10% of the remaining amount after deducting items (a) and (b) as a legal
reserve;
 d.
    
    Set aside 0.1% of the remaining amount after deducting items (a), (b), and (c) as
directors and supervisors remuneration; and
 e.
    
    After deducting items (a), (b), and (c) above from the current years earnings, no
less than 5% of the remaining amount together with the prior years unappropriated
earnings is to be allocated as employee bonus, which will be settled through issuance of
new shares of UMC, or cash. Employees of UMCs subsidiaries, meeting certain requirements
determined by the board of directors, are also eligible for the employee bonus.
 f.
    
    The distribution of the remaining portion, if any, will be recommended by the board
of directors and resolved in the stockholders meeting.
  F-47




---



##### 



The policy for dividend distribution should reflect factors such as the current and future
investment environment, fund requirements, domestic and international competition and capital
budgets; as well as the benefit of stockholders, stock dividend equilibrium, and long-term
financial planning. The board of directors shall make the distribution proposal annually and
present it at the stockholders meeting. UMCs Articles of Incorporation further provide that
no more than 80% of the dividends to stockholders, if any, must be paid in the form of stock
dividends. Accordingly, at least 20% of the dividends must be paid in the form of cash.
 According to the regulation of Taiwan SFC, UMC is required to appropriate a special reserve in
the amount equal to the sum of debit elements under stockholders equity, such as unrealized
loss on financial instruments and negative cumulative translation adjustment, at every
year-end. Such special reserve is prohibited from distribution. However, if any of the debit
elements is reversed, the special reserve in the amount equal to the reversal may be released
for earnings distribution or offsetting accumulated deficit.
 During the years ended December 31, 2009 and 2010, the amounts of the employee bonus and
remunerations to directors and supervisors were estimated. The board of directors estimated the
amount by taking into consideration of the Companys Articles of Incorporation, government
regulations and industrial average. Estimated amount of employee bonus and remunerations paid
to directors and supervisors are charged to current income. If the board modified the estimates
significantly in the subsequent periods, the Company will recognize the change as an adjustment
to current income. Moreover, if the amounts were modified by the stockholders meeting in the
following year, the adjustment will be regarded as a change in accounting estimate and will be
reflected in the consolidated statement of income in the following year. Upon stockholders
approval of the employee stock bonus, the distribution amount is determined by dividing the
total approved bonus amount with the closing market price of the Companys stock one day prior
to the approved date. Information about appropriations of the bonus to employees and directors
can be obtained from the Market Observation Post System on the website of the TSE.
 The appropriation and compensation of 2010 unappropriated retained earnings, which was
recommended by the board of directors but not approved by stockholders yet, can be obtained
from the Market Observation Post System on the website of the TSE.
  F-48




---



##### 



The distributions of cash dividend, employee bonus and directors remuneration for 2009 was
approved through stockholders meeting held on June 15, 2010. The details of distribution are
as follows:
 2009Cash Dividend
    
    NT$0.50 per shareEmployee bonus  Cash (in NT thousand dollars)
    
    
    965,003Directors remuneration (in NT thousand dollars)
    
    
    9,584
 Employee bonus and directors remuneration which were approved through the stockholders
meeting, were consistent with the resolutions of meeting of Board of Directors held on March
17, 2010 and were expensed in 2009.
 On June 10, 2009, the stockholders meeting approved to offset UMCs 2008 deficit of NT$26,748
million: by transferring NT$19,712 million from the legal reserve and NT$7,036 million from the
additional paid-in capital to unappropriated earnings.
 23.
    
    OPERATING COSTS AND EXPENSES
 The Companys personnel, depreciation, and amortization expenses are summarized as follows:
 For the years ended December 31,2008
    
    
    2009
    
    
    2010Operating
    
    
    Operating
    
    
    
    
    
    
    Operating
    
    
    Operating
    
    
    
    
    
    
    Operating
    
    
    Operatingcosts
    
    
    expenses
    
    
    Total
    
    
    costs
    
    
    expenses
    
    
    Total
    
    
    costs
    
    
    expenses
    
    
    TotalNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Personnel expensesSalaries
    
    
    8,982,685
    
    
    
    3,514,894
    
    
    
    12,497,579
    
    
    
    9,838,712
    
    
    
    3,844,526
    
    
    
    13,683,238
    
    
    
    13,201,139
    
    
    
    5,135,151
    
    
    
    18,336,290Labor and health
insurance
    
    
    533,776
    
    
    
    208,522
    
    
    
    742,298
    
    
    
    518,137
    
    
    
    187,090
    
    
    
    705,227
    
    
    
    624,384
    
    
    
    205,606
    
    
    
    829,990Pension
    
    
    543,357
    
    
    
    195,083
    
    
    
    738,440
    
    
    
    534,531
    
    
    
    176,309
    
    
    
    710,840
    
    
    
    605,086
    
    
    
    184,373
    
    
    
    789,459Other personnel
expenses
    
    
    202,502
    
    
    
    106,008
    
    
    
    308,510
    
    
    
    93,581
    
    
    
    37,150
    
    
    
    130,731
    
    
    
    145,400
    
    
    
    59,881
    
    
    
    205,281Depreciation
    
    
    34,696,769
    
    
    
    2,407,371
    
    
    
    37,104,140
    
    
    
    31,199,053
    
    
    
    2,273,178
    
    
    
    33,472,231
    
    
    
    27,941,023
    
    
    
    1,972,982
    
    
    
    29,914,005Amortization
    
    
    52,172
    
    
    
    1,262,713
    
    
    
    1,314,885
    
    
    
    49,217
    
    
    
    650,324
    
    
    
    699,541
    
    
    
    146,452
    
    
    
    397,869
    
    
    
    544,321
 24.
    
    INCOME TAX
 (1)
    
    Income tax expense consisted of :
 For the years ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000CurrentDomestic
    
    
    667,728
    
    
    
    135,626
    
    
    
    1,432,898Foreign
    
    
    28,217
    
    
    
    52,697
    
    
    
    84,390Subtotal
    
    
    695,945
    
    
    
    188,323
    
    
    
    1,517,288DeferredDomestic
    
    
    281,831
    
    
    
    469,608
    
    
    
    103,115Foreign
    
    
    19,145
    
    
    
    (6,863
    )
    
    
    (14,289
    )Subtotal
    
    
    300,976
    
    
    
    462,745
    
    
    
    88,826Income tax expense
    
    
    996,921
    
    
    
    651,068
    
    
    
    1,606,114
  F-49




---



##### 



(2)
    
    Reconciliation between the income tax expense and the income tax calculated on pre-tax
financial statement income (loss) based on the statutory tax rate is as follows:
 For the years ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000Income tax on pre-tax income (loss) at
statutory tax rate
    
    
    (5,496,543
    )
    
    
    418,250
    
    
    
    4,315,216Permanent and temporary differencesInvestment loss (gain)
    
    
    5,166,188
    
    
    
    (947,692
    )
    
    
    (479,686
    )Gain on disposal of investments
    
    
    (799,575
    )
    
    
    (493,075
    )
    
    
    (289,103
    )Others
    
    
    1,262,988
    
    
    
    (18,835
    )
    
    
    (1,220,481
    )Subtotal
    
    
    5,629,601
    
    
    
    (1,459,602
    )
    
    
    (1,989,270
    )Change in investment tax credit
    
    
    (748,496
    )
    
    
    3,626,357
    
    
    
    2,363,985Change in loss carry-forward
    
    
    (388,528
    )
    
    
    (511,099
    )
    
    
    2,136,325Change in valuation allowance against
deferred income tax assetsInvestment tax credit
    
    
    1,706,802
    
    
    
    (2,996,460
    )
    
    
    (3,095,208
    )Loss carry-forward
    
    
    388,528
    
    
    
    511,099
    
    
    
    (2,136,325
    )Others
    
    
    (57,174
    )
    
    
    624,690
    
    
    
    (295,209
    )Subtotal
    
    
    2,038,156
    
    
    
    (1,860,671
    )
    
    
    (5,526,742
    )Effect of higher tax rate of subsidiary
    
    
    20,909
    
    
    
    15,476
    
    
    
    41,549Change in tax rate
    
    
    
    
    
    
    322,857
    
    
    
    202,628Adjustment of prior years tax expense
    
    
    (9,483
    )
    
    
    (79
    )
    
    
    1,778Income tax on interest revenue
separately taxed
    
    
    14,035
    
    
    
    
    
    
    
    Income basic tax
    
    
    32,124
    
    
    
    126,775
    
    
    
    2,289Others
    
    
    (94,854
    )
    
    
    (27,196
    )
    
    
    58,356Income tax expense
    
    
    996,921
    
    
    
    651,068
    
    
    
    1,606,114
  F-50




---



##### 



(3)
    
    Significant components of deferred income tax assets and liabilities are as follows:
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Deferred income tax assetsInvestment tax credit
    
    
    9,987,957
    
    
    
    7,022,761Depreciation
    
    
    1,029,536
    
    
    
    920,046Loss carry-forward
    
    
    3,907,416
    
    
    
    4,507,561Pension
    
    
    656,412
    
    
    
    492,887Allowance on sales returns and discounts
    
    
    117,371
    
    
    
    45,130Allowance for loss on decline in market
value and obsolescence of inventories
    
    
    223,656
    
    
    
    233,151Others
    
    
    379,023
    
    
    
    369,780Total deferred income tax assets
    
    
    16,301,371
    
    
    
    13,591,316Valuation allowance
    
    
    (12,504,629
    )
    
    
    (9,738,404
    )Net deferred income tax assets
    
    
    3,796,742
    
    
    
    3,852,912Deferred income tax liabilitiesUnrealized exchange gain
    
    
    (49,481
    )
    
    
    (108,200
    )Depreciation
    
    
    (33,324
    )
    
    
    Others
    
    
    (38,188
    )
    
    
    (52,466
    )Total deferred income tax liabilities
    
    
    (120,993
    )
    
    
    (160,666
    )Total net deferred income tax assets
    
    
    3,675,749
    
    
    
    3,692,246Deferred income tax assets-current
    
    
    5,014,780
    
    
    
    2,581,472Deferred income tax liabilities-current
    
    
    (77,918
    )
    
    
    (125,839
    )Valuation allowance
    
    
    (4,403,639
    )
    
    
    (1,632,482
    )Net
    
    
    533,223
    
    
    
    823,151Deferred income tax assets-noncurrent
    
    
    11,286,591
    
    
    
    11,009,844Deferred income tax liabilities-noncurrent
    
    
    (43,075
    )
    
    
    (34,827
    )Valuation allowance
    
    
    (8,100,990
    )
    
    
    (8,105,922
    )Net
    
    
    3,142,526
    
    
    
    2,869,095Total net deferred income tax assets
    
    
    3,675,749
    
    
    
    3,692,246
 (4)
    
    UMCs income tax returns for all the fiscal years up to 2007 have been assessed and approved
by the R.O.C. Tax Authority.(5)
    
    UMC was granted several four or five-year income tax exemption periods with respect to income
derived from the expansion of operations. The income tax exemption periods will expire on
December 31, 2015.
  F-51




---



##### 



(6)
    
    The Company earns investment tax credits for the amount invested in production equipment,
research and development, employee training, and investment in high technology industry and
venture capital.As of December 31, 2010, the Companys unused investment tax credits were as follows:
 Balance of unusedExpiration Year
    
    Investment tax credits earned
    
    
    investment tax creditsNT$000
    
    
    NT$0002011
    
    
    2,126,675
    
    
    
    2,126,6752012
    
    
    2,006,005
    
    
    
    2,006,0052013
    
    
    1,897,059
    
    
    
    1,897,0592014
    
    
    993,022
    
    
    
    993,022Total
    
    
    7,022,761
    
    
    
    7,022,761
 (7)
    
    As of December 31, 2010, the unutilized accumulated losses for the Company were as follows:
 Expiration Year
    
    Accumulated loss
    
    
    Unutilized accumulated lossNT$000
    
    
    NT$0002012
    
    
    4,445,310
    
    
    
    4,445,3102013
    
    
    1,259,973
    
    
    
    1,259,9732014
    
    
    189,182
    
    
    
    189,1822015
    
    
    1,583,999
    
    
    
    1,583,9992016
    
    
    2,280,097
    
    
    
    2,280,0972017
    
    
    760,363
    
    
    
    760,3632018
    
    
    144,028
    
    
    
    144,0282019
    
    
    678,165
    
    
    
    678,1652020
    
    
    557,822
    
    
    
    557,8222021
    
    
    467,080
    
    
    
    467,080Total
    
    
    12,366,019
    
    
    
    12,366,019
 (8)
    
    The balance of UMCs imputation credit accounts as of December 31, 2009 and 2010 were
NT$1,100 million and NT$497 million, respectively. The actual creditable ratio for 2009 and
the expected creditable ratio for 2010 were 11.45% and 1.83%, respectively.(9)
    
    UMCs earnings generated in the year ended December 31, 1997 and prior years have been fully
appropriated.(10)
    
    According to R.O.C. Income Tax Act amended on May 27, 2009, effective January 1, 2010, the
statutory tax rate of the Company was decreased from 25% to 20%, which was further
reduced to 17% in accordance with the amendment dated June 15, 2010.
  F-52




---



##### 



25.
    
    EARNINGS (LOSSES) PER SHARE
 For the years ended December 31, 2009 and 2010, there were employee stock options outstanding
and the Company calculated the effect of employee bonus in accordance with the ARDF
Interpretation No. 97-169. The Company is considered as a complex capital structure. Therefore,
in consideration of such complex structure, the calculated basic and diluted earnings (losses)
per share for the years ended December 31, 2008, 2009 and 2010, are disclosed as follows:
 For the years ended December 31,(shares expressed in thousands)
    
    2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000Net income (loss)
    
    
    (22,320,075
    )
    
    
    3,874,028
    
    
    
    23,898,905Effect of dilution:Employee stock options
    
    
    
    
    
    
    
    
    
    
    Employee bonus
    
    
    
    
    
    
    
    
    
    
    Convertible bonds
    
    
    (129,910
    )
    
    
    
    
    
    
    Adjusted net income (loss) assuming dilution
    
    
    (22,449,985
    )
    
    
    3,874,028
    
    
    
    23,898,905Weighted average shares outstanding
    
    
    13,110,984
    
    
    
    12,699,072
    
    
    
    12,496,485Effect of dilution:Employee stock options
    
    
    
    
    
    
    31,271
    
    
    
    88,117Employee bonus
    
    
    
    
    
    
    56,105
    
    
    
    182,988Convertible bonds
    
    
    59,407
    
    
    
    
    
    
    
    Adjusted weighted average shares outstanding
assuming dilution
    
    
    13,170,391
    
    
    
    12,786,448
    
    
    
    12,767,590Retroactively adjusted weighted average shares
outstanding
    
    
    13,110,984
    
    
    
    12,699,072
    
    
    
    12,496,485Retroactively adjusted weighted average shares
outstanding assuming dilution
    
    
    13,170,391
    
    
    
    12,786,448
    
    
    
    12,767,590Earnings (losses) per share-basic (in dollars)
    
    
    (1.70
    )
    
    
    0.31
    
    
    
    1.91Earnings (losses) per share-diluted (in dollars)
    
    
    (1.70
    )
    
    
    0.30
    
    
    
    1.87
 The employee stock options were not dilutive when calculating the diluted losses per share for
the year ended December 31, 2008; therefore, they were not included in the diluted losses per
share calculation.
 26.
    
    RELATED PARTY TRANSACTIONS
 (1)
    
    Name and Relationship of Related Parties
  F-53




---



##### 



Name of related parties
    
    Relationship with the CompanyUNITED MICROELECTRONICS CORP. (SAMOA)
    
    Equity
Investee (Liquidation completed on November 30, 2010)UMCI LTD.
    
    Equity
Investee (has filed for liquidation on July 30, 2010)UNITECH CAPITAL INC.
    
    Equity InvesteeMEGA MISSION LIMITED PARTNERSHIP
    
    Equity InvesteeMTIC HOLDINGS PTE. LTD.
    
    Equity InvesteeUNIMICRON HOLDING LIMITED
    
    Equity InvesteeHSUN CHIEH INVESTMENT CO., LTD.
    
    Equity InvesteeUNITED MICRODISPLAY OPTRONICS CORP.
    
    Equity
Investee (has filed for liquidation on June 26, 2009)AMIC TECHNOLOGY CORP.
    
    Equity
Investee (ceased to be an equity investee since June 2010)PACIFIC VENTURE CAPITAL CO., LTD.
    
    Equity Investee (Liquidation completed on May 14, 2010)XGI TECHNOLOGY INC. (XGI)
    
    Equity
Investee (ceased to be an equity investee since June 2010)SILICON INTEGRATED SYSTEMS CORP. (SIS)
    
    The Companys directorAEVOE INTERNATIONAL LTD.
    
    Subsidiarys equity investeeCRYSTAL MEDIA INC.
    
    Subsidiarys equity investeeMOBILE DEVICES INC.
    
    Subsidiarys
equity investee (ceased to be an equity investee since July 2010)POWER LIGHT TECH CO., LTD. (PLT)
    
    Subsidiarys equity investeeSHENYANG PIONEER U-LIGHTING OPTO-ELECTRONIC CO., LTD.
    
    Subsidiarys equity investee (since July, 2010)UNITED LED CORPORATION HONG KONG LIMITED
    
    Subsidiarys equity investee (since February, 2010)ALLIANCE OPTOTEK CORP.
    
    Subsidiarys equity investeeWALTOP INTERNATIONAL CORP.
    
    Subsidiarys equity investeeSOLAR GATE TECHNOLOGY CO., LTD.
    
    Subsidiarys equity investee (since March, 2010)UNITED LED CORPORATION
    
    Subsidiarys
equity investee (ceased to be an equity investee since June 2010)UNIMICRON CORPORATION
    
    Subsidiarys director (since October, 2010)CRYSTALWISE TECHNOLOGY INC.
    
    Same chairman with UMC (since September, 2010)JINING SUNRICH SOLARENERGY CORPORATION (JINING SUNRICH)
    
    Same general manager with subsidiariesAll
members of director, supervisors and key managers
    
    The Companys key management personnel
  F-54




---



##### 



(2)
    
    Significant Related Party Transactions
 a.
    
    Operating revenues
 For the years ended December 31,2008
    
    
    2009
    
    
    2010Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNT$000
    
    
    
    
    
    
    NT$000
    
    
    
    
    
    
    NT$000SIS
    
    
    1,031,393
    
    
    
    1
    
    
    
    1,057,278
    
    
    
    1
    
    
    
    777,318
    
    
    
    1Others
    
    
    543,219
    
    
    
    1
    
    
    
    128,375
    
    
    
    0
    
    
    
    303,829
    
    
    
    0Total
    
    
    1,574,612
    
    
    
    2
    
    
    
    1,185,653
    
    
    
    1
    
    
    
    1,081,147
    
    
    
    1
 The sales price to the above-related parties was determined through mutual agreement based
on the market conditions. The collection period for overseas sales to related parties was
net 60 days, while the terms for domestic sales were month-end 45~60 days. The collection
period for third party overseas sales was net 30~60 days, while the terms for third party
domestic sales were month-end 30~60 days.b.
    
    Accounts receivable, net
 As of December 31,2009
    
    
    2010Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNT$000
    
    
    
    
    
    
    NT$000JINING SUNRICH
    
    
    
    
    
    
    
    
    
    
    613,330
    
    
    
    3SIS
    
    
    216,237
    
    
    
    1
    
    
    
    112,201
    
    
    
    1Others
    
    
    101,626
    
    
    
    1
    
    
    
    34,682
    
    
    
    0Total
    
    
    317,863
    
    
    
    2
    
    
    
    760,213
    
    
    
    4Less: Allowance for sales
returns and discounts
    
    
    (2,273
    )
    
    
    
    
    
    
    (569
    )Less: Allowance for doubtful
accounts
    
    
    (74,882
    )
    
    
    
    
    
    
    Net
    
    
    240,708
    
    
    
    
    
    
    
    759,644
  F-55




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##### 



c.
    
    Significant asset transactions
 For the year ended December 31, 2010Item
    
    
    Disposal amount
    
    
    Disposal gainNT$000
    
    
    NT$000SIS
    
    Disposal of XGI stock
    
    
    38,030
    
    
    
    14,690
 d.
    
    During the period from October 29 to December 14, 2009, UMCs subsidiary, AWL
acquired 42.53 percent ownership in UMCJ amounting to 403 thousand shares by an open
purchase from the Japan Jasdaq Securities Exchange for approximately US$58 million. The
purchase price of JPY12,500 per share was made by a tender offer which considered the
shares current trading value and future industry competition and operating strategies.
AWL complied with Regulations Governing the Acquisition or Disposition of Assets by
Public Companies of R.O.C. and obtained a fairness opinion from a security expert and a
Certified Public Accountant to evaluate the reasonableness of the purchase price. Gains
arising from the sidestream transaction amounting to NT$330 million were recognized by
UMCs equity investees, including HSUN CHIEH INVESTMENT CO., LTD. and MEGA MISSION LIMITED
PARTNERSHIP. UMC eliminated NT$121 million in proportion to its ownership percentage while
recognizing the investment gain or loss of these investees.
 e.
    
    Key management personnel compensation disclosure
 For the years ended December 31,Item
    
    2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000Salary, compensation,
allowance, income from
professional practice
and bonus
    
    
    203,321
    
    
    
    507,136
    
    
    
    343,682
 27.
    
    ASSETS PLEDGED AS COLLATERAL
 As of December 31, 2009
 Party to which asset(s)Amount
    
    
    was pledged
    
    Purpose of pledgeNT$000Deposit-out
(Time deposit)
    
    
    640,623
    
    
    Customs
    
    Customs duty guaranteeDeposit-out
(Time deposit)
    
    
    26,624
    
    
    Securities and Futures Investors Protection Center
    
    Negotiation guaranteeMachinery and
equipment
    
    
    4,339,852
    
    
    Bank of Taiwan
    
    Collateral for long-term loansTotal
    
    
    5,007,099
  F-56




---



##### 



As of December 31, 2010
 Amount
    
    
    Party to which asset(s)was pledged
    
    Purpose of pledgeNT$000Deposit-out
(Time deposit)
    
    
    645,841
    
    
    Customs
    
    Customs duty guaranteeDeposit-out
(Time deposit)
    
    
    99,859
    
    
    Science Park Administration
    
    Collateral for land leaseDeposit-out
(Time deposit)
    
    
    43,800
    
    
    Liquefied Natural Gas Business Division, CPC Corporation, Taiwan
    
    Energy resources guaranteeDeposit-out
(Time deposit)
    
    
    26,624
    
    
    Securities and Futures Investors Protection Center
    
    Negotiation guaranteeDeposit-out
(Time deposit)
    
    
    990
    
    
    Bureau of Energy, Ministry of Economic Affairs
    
    Energy resources guarantee and construction guaranteeMachinery and equipment
    
    
    8,826,232
    
    
    Bank of Taiwan, First Commercial Bank, Syndicated Loans from Bank of Taiwan and 7 others and Syndicated Loans from Taiwan Cooperative Bank and 5 others
    
    Collateral for long- term loansConstruction in progress and prepayments
    
    
    46,036
    
    
    First Commercial Bank
    
    Collateral for long- term loansTotal
    
    
    9,689,382
 28.
    
    COMMITMENT AND CONTINGENT LIABILITIES
 (1)
    
    The Company has entered into several patent license agreements and development
contracts of intellectual property for a total contract amount of approximately NT$5.7
billion. Royalties and development fees payable in future years are NT$1.6 billion as of
December 31, 2010.(2)
    
    The Company signed several construction contracts for the expansion of its factory
premise. As of December 31, 2010, these construction contracts amounted to approximately
NT$7.2 billion and the unpaid portion of the contracts, which was not accrued, was
approximately NT$1.2 billion.
  F-57




---



##### 



(3)
    
    The Company entered into several operating lease contracts for land and office. These
renewable operating leases will expire in various years through 2049. Future minimum lease
payments under those leases are as follows:
 For the years ended December 31,
    
    AmountNT$0002011
    
    
    405,5962012
    
    
    352,5842013
    
    
    306,0102014
    
    
    267,4822015
    
    
    215,7992016 and thereafter
    
    
    1,462,150Total
    
    
    3,009,621
 Rental expense for the years ended December 31, 2008, 2009 and 2010 was NT$373
million, NT$328 million and NT$379 million, respectively.(4)
    
    On February 15, 2005, the Hsinchu District Prosecutors Office conducted a search of
UMCs facilities. On February 18, 2005, UMCs former Chairman Mr. Robert H.C. Tsao,
released a public statement, explaining that its assistance to HeJian Technology (Suzhou)
Co., Ltd. (HeJian) did not involve any investment or technology transfer.Furthermore, from the very beginning there was a verbal indication that, at the proper time,
UMC would be compensated appropriately for its assistance, and circumstances permitting, at
some time in the future, it will push through the merger between two companies. However, no
promise was made by UMC and no written agreement was made and executed. Upon UMCs request
to materialize the said verbal indication by compensating in the form of either cash or
equity, the Chairman of the holding company of HeJian offered 15% of the approximately 700
million outstanding shares of the holding company of HeJian in return for UMCs past
assistance and for continued assistance in the future.Immediately after UMC had received such offer, it filed an application with the Investment
Commission of the Ministry of Economic Affairs on March 18, 2005 (Ref. No.
94-Lian-Tung-Tzu-0222), for their executive guidance for the successful transfer of said
shares to UMC. The stockholders meeting dated June 13, 2005 resolved that to the extent
permitted by law, UMC shall try to get the 15% of the outstanding shares offered by the
holding company of HeJian as an asset of UMC. The holding company of HeJian offered 106
million shares of its outstanding common shares in return for UMCs assistance. The holding
company of HeJian has put all such shares in escrow. UMC was informed of such escrow on
August 4, 2006. The subscription price per share of the holding company of HeJian in the
last offering was US$1.1. Therefore, the total market value of the said shares is worth more
than US$110 million. However, UMC may not acquire the ownership of nor exercise the rights
of the said shares with any potential stock dividend or cash dividend distributed in the
future until the R.O.C. laws and regulations allow UMC to acquire and exercise. In the event
that any stock dividend or cash dividend is distributed, UMCs stake in the holding company
of HeJian will accumulate accordingly.
  F-58




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##### 



For the Companys assistance to HeJian, the Companys former Chairman Mr. Robert H.C. Tsao,
former Vice Chairman Mr. John Hsuan, and Mr. Duen-Chian Cheng, the General Manager of Fortune
Venture Capital Corp., which is 100% owned by the Company, were indicted for violating the
Business Entity Accounting Act and breach of trust under the Criminal Law by Hsinchu District
Prosecutors Office on January 9, 2006. Mr. Robert H.C. Tsao and Mr. John Hsuan had officially
resigned from their positions of the Companys Chairman, Vice Chairman and directors prior to
the announcement of the prosecution; for this reason, at the time of the prosecution, Mr.
Robert H.C. Tsao and Mr. John Hsuan no longer served as the Companys directors and had not
executed their duties as the Companys Chairman and Vice Chairman.In the future, if a guilty judgment is pronounced by the court, such consequences would be
Mr. Robert H.C. Tsao, Mr. John Hsuan and Mr. Duen-Chian Chengs personal concerns only; UMC
would not be subject to indictment regarding this case. Mr. Robert H.C. Tsao, Mr. John Hsuan
and Mr. Duen-Chian Cheng were pronounced innocent of the charge by Hsinchu District Court on
October 26, 2007. On November 15, 2007, Taiwans Hsinchu District Prosecutors Office filed an
appeal. On December 31, 2008, Taiwan High Court rejected the prosecutors appeal and
sustained Hsinchu District Courts decision. On January 20, 2009, Taiwan High Prosecutors
Office filed an appeal against Mr. Robert H.C. Tsao and Mr. John Hsuan with the Supreme
Court. On December 3, 2009, the Supreme Court reversed the Taiwan High Courts decision and
remanded the case for new trial. On September 14, 2010, the Taiwan High Court found Mr.
Robert H.C. Tsao and Mr. John Hsuan not guilty. The Prosecution Office of the Taiwan High
Court did not appeal the ruling and the matter is considered closed.On February 15, 2006, UMC was fined in the amount of NT$5 million for unauthorized investment
activities in Mainland China, implicating violation of Article 35 of the Act Governing
Relations Between Peoples of the Taiwan Area and the Mainland Area by the R.O.C. Ministry of
Economic Affairs (MOEA). However, as UMC believes it was illegally and improperly fined, UMC
had filed an administrative appeal against MOEA to the Executive Yuan on March 16, 2006. On
October 19, 2006, Executive Yuan denied the
administrative appeal filed by UMC. UMC had filed an administrative litigation case against
MOEA on December 8, 2006. Taipei High Administrative Court announced and reversed MOEAs
administrative sanction on July 19, 2007. MOEA filed an appeal against UMC on August 10,
2007. On December 10, 2009, the Supreme Administrative Court reversed the Taipei High
Administrative Courts decision and remanded the case for new trial. On July 21, 2010, Taipei
High Administrative Court ruled against UMC, and UMC appealed the ruling on August 23, 2010.
The case is currently under the review of the Supreme Administrative Court.
  F-59




---



##### 



(5)
    
    The Company convened its 19th session, 10th term of its Board of Directors meeting on
April 29, 2009. During the meeting, its board approved to propose the acquisition (the
Acquisition) by UMC of the holding company of HeJian. The stockholders meeting of the
Company on June 10, 2009 approved the Acquisition. However, an investment regulation
governing foreigners holdings of Taiwanese securities, along with restrictions from the
amended Operating Rules of the Taiwan Stock Exchange Corporation for issuing new shares to
acquire foreign unlisted companies, precluded the issuance of common shares or ADR as
payment options. Furthermore, HeJians stockholders did not agree to accept cash-only
payments. As such, considering contractual timeliness and changes of the overall environment
after signing the contract, the Board resolved at its Board of Directors meeting held on
November 18, 2010 to terminate the Merger Agreement and sent out a termination notice in
accordance with the Merger Agreement subsequent to the resolution. Going forward, UMC will
continue seeking possible alternatives with HeJians stockholders and proceed with the
acquisition in compliance with related rules and regulations.
 29.
    
    SIGNIFICANT DISASTER LOSS
  30.
    
    SIGNIFICANT SUBSEQUENT EVENT
 On April 1 2011, with the approval of each companys board of directors, one of the Companys
equity investee, POWER LIGHT merged with UNITED LIGHTING, which is a subsidiary of the Company.
The main business of both POWER LIGHT and UNITED LIGHTING is manufacturing and selling LED
lighting and the Company expects to integrate group resources and improve operating performance
through this merger. POWER LIGHT, the surviving company, was renamed UNITED LIGHTING
OPTO-ELECTRONIC INC.. As the Company was still in the process of valuing related assets and
liabilities, the adjustments would be recorded in 2011 based on the completion of the final
evaluation. After the business combination, the Companys ownership interest was approximately
55% of the new surviving company.
 On March 14, 2011, MOS, one of the Companys subsidiaries, filed for liquidation through a
decision approved at its stockholders meeting. The Company owns 73.34% in MOS and its
investment on December 31, 2010 was NT$298 million. The Company does not expect this transaction
to have a material impact on the financial statements.
 On March 16, 2011, the Companys board of directors resolved to issue the 5th unsecured zero
coupon euro convertible bonds for purchasing machinery and equipment with the amount of no more
than US$500 million. The convertible bonds issuance will be subjected to the approval of
Securities and Futures Bureau, Financial Supervisory Commission, Executive Yuan, R.O.C..
 On March 16, 2011, the Companys board of directors proposed an offer to the stockholders of
Best Elite International Limited, which owns 100% of Infoshine, to purchase approximately 30% of
their preferred shares for further integration of HeJian. Referring to the latest book value and
market condition, Series A-1 holders would be offered around US$0.261931 per share, and Series B
and B-1 stockholders would be offered around US$0.576248 per share. The acquisition amount would
total approximately US$87 million, assuming that an equal amount of stockholders from each
series accepts this offer.
  F-60




---



##### 



31.
    
    RECLASSIFICATION
 Certain comparative amounts have been reclassified to conform to the current years presentation.
 32.
    
    FINANCIAL INSTRUMENTS
 (1)
    
    Financial risk management objectives and policiesThe Companys principal financial instruments, other than derivatives, are comprised of cash
and cash equivalents, common stock, preferred stock, bonds, open-end funds, bank loans, and
bonds payable. The main purpose of these financial instruments is to manage financing for the
Companys operations. The Company also holds various other financial assets and liabilities
such as notes receivable, accounts receivable, notes payable and accounts payable, which
arise directly from its operations.UMC also enters into derivative transactions, including interest rate swap agreements and
forward currency contracts. The purpose of these derivative transactions is to mitigate
interest rate risk and foreign currency exchange risks arising from UMCs operations and
financing activities.The main risks arising from the Companys financial instruments include cash flow interest
rate risk, foreign currency risk, commodity price risk, credit risk, and liquidity riskCash flow interest rate riskUMC utilizes interest rate swap agreements to avoid its cash flow interest rate risk on the
counter-floating rate of its unsecured domestic bonds issued during the period from May 21 to
June 24, 2003. The terms of the interest rate swap agreements are the same as those of the
domestic bonds, which are five and seven years. The floating rate is reset annually.The Companys bank loans bear floating interest rates. The fluctuation of market interest
will result in changes in the Companys future cash flows.Foreign currency riskThe Company has foreign currency risk arising from purchases or sales. The Company utilizes
spot or forward contracts to avoid foreign currency risk. The notional amounts of the foreign
currency contracts are the same as the amount of the hedged items. In principle, the Company
does not carry out any forward contracts for uncertain commitments.
  F-61




---



##### 



Commodity price riskThe Companys exposure to commodity price risk is minimal.Credit riskThe Company only trades with established and creditworthy third parties. It is the Companys
policy that all customers who wish to trade on credit terms are subject to credit
verification procedures. In addition, receivable balances are monitored on an ongoing basis,
which consequently minimizes the Companys exposure to bad debts.With respect to credit risk arising from the other financial assets of the Company, it is
comprised of cash and cash equivalents and certain derivative instruments, the Companys
exposure to credit risk arising from the default of counter-parties is limited to the
carrying amount of these instruments.Although the Company only trades with established third parties, it will request collateral
to be provided by third parties with less favorable financial positions.Liquidity riskThe Companys objective is to maintain a balance of funding continuity and flexibility
through the use of financial instruments such as cash and cash equivalents, bank loans and
bonds.
 (2)
    
    Information of financial instruments
 a.
    
    Fair value of financial instruments
 As of December 31,2009
    
    
    2010Financial Assets
    
    Book Value
    
    
    Fair Value
    
    
    Book Value
    
    
    Fair ValueNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Non-derivativeCash and cash equivalents
    
    
    66,152,960
    
    
    
    66,152,960
    
    
    
    51,271,105
    
    
    
    51,271,105Financial assets at fair value
through profit or loss
    
    
    1,932,315
    
    
    
    1,932,315
    
    
    
    1,210,452
    
    
    
    1,210,452Receivables
    
    
    17,490,054
    
    
    
    17,490,054
    
    
    
    19,555,557
    
    
    
    19,555,557Restricted assets
    
    
    
    
    
    
    
    
    
    
    26,077
    
    
    
    26,077Available-for-sale financial assets
    
    
    41,357,636
    
    
    
    41,357,636
    
    
    
    37,298,738
    
    
    
    37,298,738Financial assets measured at cost
    
    
    7,628,523
    
    
    
    
    
    
    
    7,651,864
    
    
    
    Long-term investments accounted
for under the equity method
    
    
    12,168,942
    
    
    
    11,643,258
    
    
    
    9,193,239
    
    
    
    8,959,237Prepayment for long-term
investments
    
    
    322,290
    
    
    
    
    
    
    
    
    
    
    
    Deposits-out
    
    
    753,990
    
    
    
    753,990
    
    
    
    946,414
    
    
    
    946,414
  F-62




---



##### 



As of December 31,2009
    
    
    2010Financial Assets
    
    Book Value
    
    
    Fair Value
    
    
    Book Value
    
    
    Fair ValueNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000DerivativeInterest rate swap agreements
    
    
    88,410
    
    
    
    88,410
    
    
    
    
    
    
    
    Forward contracts
    
    
    75,366
    
    
    
    75,366
    
    
    
    9,411
    
    
    
    9,411Financial LiabilitiesNon-derivativeShort-term loans
    
    
    128,682
    
    
    
    128,682
    
    
    
    4,124,115
    
    
    
    4,124,115Payables
    
    
    19,605,034
    
    
    
    19,605,034
    
    
    
    30,906,920
    
    
    
    30,906,920Bonds payable (current portion included)
    
    
    12,767,137
    
    
    
    12,352,056
    
    
    
    4,995,756
    
    
    
    5,157,977Long-term loans (current portion included)
    
    
    800,000
    
    
    
    800,000
    
    
    
    7,509,823
    
    
    
    7,509,823DerivativeDerivatives embedded in exchangeable bonds
    
    
    1,914,879
    
    
    
    1,914,879
    
    
    
    2,248,384
    
    
    
    2,248,384Forward contracts
    
    
    
    
    
    
    
    
    
    
    6,553
    
    
    
    6,553
 b.
    
    The methods and assumptions used to measure the fair value of financial instruments
are as follows:
 i.
    
    The book values of short-term financial instruments approximate their fair
value due to their short maturities. Short-term financial instruments include cash and
cash equivalents, receivables, restricted assets, short-term loans and payables.
  F-63




---



##### 



ii.
    
    The fair value of financial assets at fair value through profit or loss and
available-for-sale financial assets are based on the quoted market prices. If there
are restrictions on the sale or transfer of an available-for-sale financial asset, the
fair value of the asset will be determined based on similar but unrestricted financial
assets quoted market price with appropriate discounts for the restrictions.iii.
    
    The fair value of long-term investments accounted for under equity method are
based on the quoted market prices. If market prices are unavailable, the Company
estimates the fair value based on the book values.iv.
    
    The fair value of financial assets measured at cost and prepayment for
long-term investments are unable to be estimated since there is no active market in
trading those unlisted investments.v.
    
    Deposits-out is certificates of deposit collateralized at Customs or other
institutions. The fair value of deposits-out is based on their carrying amount since
the deposit periods are primarily within one year and renewed upon maturity.vi.
    
    The fair value of bonds payable is determined by the market price or other
information.vii.
    
    The fair value of long-term loans is determined using discounted cash flow
analysis, based on the Companys current incremental borrowing rates for borrowings
with similar types.viii.
    
    The fair value of derivative financial instruments is based on the amount
the Company expects to receive (positive) or to pay (negative) assuming that the
contracts are settled in advance at the balance sheet date or is determined by the
other information.
  F-64




---



##### 



c.
    
    The fair value of the Companys financial instruments is determined by the quoted
prices in active markets, or if the market for a financial instrument is not active, the
Company establishes fair value by using a valuation technique:
 Active Market Quotation
    
    
    Valuation TechniqueNon-derivative Financial Instruments
    
    2009.12.31
    
    
    2010.12.31
    
    
    2009.12.31
    
    
    2010.12.31NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Financial assetsFinancial assets at fair value
through profit or loss
    
    
    1,932,315
    
    
    
    1,210,452
    
    
    
    
    
    
    
    Available-for-sale financial assets
    
    
    40,156,409
    
    
    
    37,298,738
    
    
    
    1,201,227
    
    
    
    Long-term investments accounted
for under the equity method
    
    
    
    
    
    
    
    
    
    
    11,643,258
    
    
    
    8,959,237Financial liabilitiesShort-term loans
    
    
    
    
    
    
    
    
    
    
    128,682
    
    
    
    4,124,115Bonds payable (current portion included)
    
    
    7,187,123
    
    
    
    
    
    
    
    5,164,933
    
    
    
    5,157,977Long-term loans (current portion included)
    
    
    
    
    
    
    
    
    
    
    800,000
    
    
    
    7,509,823Derivative Financial InstrumentsFinancial assetsInterest rate swap agreements
    
    
    
    
    
    
    
    
    
    
    88,410
    
    
    
    Forward contracts
    
    
    
    
    
    
    
    
    
    
    75,366
    
    
    
    9,411Financial liabilitiesDerivatives embedded in
exchangeable bonds
    
    
    
    
    
    
    
    
    
    
    1,914,879
    
    
    
    2,248,384Forward contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,553
 d.
    
    For the years ended December 31, 2008, 2009 and 2010, the total change in fair value
estimated by using valuation techniques and recognized in the consolidated statement of
income were net losses of NT$143 million, NT$449 million and NT$139 million,
respectively.
 e.
    
    UMCs derivative financial assets with cash flow interest rate risk exposure were
NT$88 million and nil as of December 31, 2009 and 2010, respectively.
  F-65




---



##### 



f.
    
    During the years ended December 31, 2008, 2009 and 2010, total interest revenues
for financial assets or liabilities that are not at fair value through profit or loss
were NT$686 million, NT$170 million and NT$143 million, respectively, while interest
expenses for the years ended December 31, 2008, 2009 and 2010 were NT$109 million,
NT$180 million and NT$352 million, respectively.
 (3)
    
    UMC entered into interest rate swap agreements and forward contracts for hedging the
interest rate risk arising from the counter-floating rate of its domestic bonds and for
hedging the exchange rate risk arising from the net assets or liabilities denominated in
foreign currency.UMC entered into these derivative financial instruments in connection with its hedging
strategy to reduce the market risk of the hedged items, and these financial instruments were
not held for trading purpose. The relevant information on the derivative financial
instruments entered into by UMC is as follows:
 a.
    
    UMC utilized interest rate swap agreements to hedge its interest rate risk on the
counter-floating rate of its unsecured domestic bonds issued during the period from May
21 to June 24, 2003. The terms of the interest rate swap agreements were the same as
those of the domestic bonds, which were five and seven years. The floating rate was
reset annually. The above mentioned five-year and seven-year interest rate swap
agreements matured on June 2008 and 2010, respectively.As of December 2009, UMC had the following interest rate swap agreements outstanding:As of December 31, 2009
 Interest Rate
    
    Interest RateNotional Amount
    
    Contract Period
    
    Received
    
    PaidNT$7,500 million
    
    May 21, 2003 to June 24, 2010
    
    4.3% minus USD 12-Month LIBOR
    
    
    1.48
    %
 b.
    
    The details of forward contracts entered into by UMC are summarized as follows:As of December 31, 2009
 Type
    
    Notional Amount
    
    Contract PeriodForward contracts
    
    Sell USD 267 million
    
    November 16, 2009 to January 26, 2010
 As of December 31, 2010
 Type
    
    Notional Amount
    
    Contract PeriodForward contracts
    
    Sell USD 26 million
    
    December 20, 2010 to January 27, 2011
  F-66




---



##### 



c.
    
    Transaction risk
 (a)
    
    Credit riskThere is no significant credit risk exposure with respect to the above transactions
as the counter-parties are reputable financial institutions with good global
standing.(b)
    
    Liquidity and cash flow riskThe cash flow requirements on the interest rate swap agreements are limited to the
net interest payables or receivables arising from the differences in the swap rates.
The cash flow requirements on forward contracts are limited to the forward contracts
principal amount, which is the same as the underlying net assets or liabilities
denominated in their foreign currencies at the settlement day. Therefore, no
significant cash flow risk is anticipated since the working capital is sufficient to
meet the cash flow requirements.(c)
    
    Market riskInterest rate swap agreements and forward contracts are intended for hedging
purposes. Gains or losses arising from the fluctuations in interest rates and
exchange rates are likely to be offset against the gains or losses from the hedged
items. As a result, no significant exposure to market risk is anticipated.
 d.
    
    The presentation of derivative financial instruments in the financial statements
is summarized as follows:As of December 31, 2009 and 2010, UMCs interest rate swap agreements were classified as
financial assets at fair value through profit or loss amounted to NT$88 million and nil,
respectively. A related valuation gain (loss) of NT$174 million, NT$(25) million and NT$0.2
million were recorded under non-operating income and expenses for the years ended December
31, 2008, 2009 and 2010, respectively.As of December 31, 2009 and 2010, the forward contracts were classified as financial assets
at fair value through profit or loss amounted to NT$75 million and NT$9 million,
respectively, while the forward contracts were classified as financial liabilities at fair
value through profit or loss amounted to nil and NT$7 million, respectively. And for the
changes in valuation, gains (losses) of NT$(317) million, NT$163 million and NT$194 million
were recorded under non-operating income for the years ended December 31, 2008, 2009 and
2010, respectively.
  F-67




---



##### 



(4)
    
    On June 7, 2010, UMC acquired 59 thousand shares of UMC JAPAN from minority stockholders
for approximately JPY 735 million. In accordance with R.O.C. SFAS 25, the fair value of the
acquired identifiable net assets in excess of the purchase price was allocated
proportionately to UMC JAPANs noncurrent assets. After those noncurrent assets acquired
were reduced to zero, UMC recognized the remaining excess as an extraordinary gain of NT$82
million.
 (5)
    
    The Company uses the equity method to account for its investments in UNITED LED
CORPORATION HONG KONG LIMITED and SHENYANG PIONEER U-LIGHTING OPTO-ELECTRONIC CO., LTD.,
jointly controlled entities, since June 1, 2010 and July 6, 2010, respectively. The
summarized financial information which the Company recognized is
as follows:
 Items
    
    As of December 31, 2010NT$000Current assets
    
    
    207,895Noncurrent assets
    
    
    473,221Current liabilities
    
    
    216,250Long-term liabilities
    
    
    253,585
 Items
    
    For the year ended 
December 31, 2010NT$000Revenues
    
    
    23,038Expenses
    
    
    44,361
 (6)
    
    The Company acquired controlling interests in MOS, TOPCELL and NEXPOWER through acquiring
newly issued shares in February 2010, March 2010 and November 2010, respectively, and
consolidated the income/earnings and expenses/losses of these three subsidiaries from the
respective acquisition dates. Cash paid for acquisition and cash balance of subsidiaries
acquired were as follows:
 For the year endedItems
    
    December 31, 2010NT$000Cash paid for acquisition of subsidiaries
    
    
    4,348,690Add: Cash received from minority stockholders for
acquiring newly issued shares
    
    
    1,396,310Less: Prepayment for long-term investments
    
    
    (371,310
    )Less: Cash balance of subsidiaries
    
    
    (7,232,876
    )Net cash received from acquisition of subsidiaries
    
    
    (1,859,186
    )
  F-68




---



##### 



(7)
    
    The functional currency of UMC and some of its subsidiaries is New Taiwan Dollar, while
other subsidiaries have functional currencies in US Dollar, Japanese Yen or Chinese RMB. The
exchange rates used to translate assets and liabilities denominated in foreign currencies
are disclosed as follows:
 As of December 31, 2009
    
    
    As of December 31, 2010Foreign
    
    
    
    
    
    
    
    
    
    
    ForeignCurrency
    
    
    Exchange
    
    
    NTD
    
    
    Currency
    
    
    Exchange
    
    
    NTD(thousand)
    
    
    Rate
    
    
    (thousand)
    
    
    (thousand)
    
    
    Rate
    
    
    (thousand)Financial AssetsMonetary itemsUSD
    
    $
    926,453
    
    
    
    31.93
    
    
    $
    29,581,612
    
    
    $
    1,019,599
    
    
    
    29.04
    
    
    $
    29,610,971JPY
    
    
    21,091,404
    
    
    
    0.35
    
    
    
    7,280,754
    
    
    
    23,849,754
    
    
    
    0.36
    
    
    
    8,484,568EUR
    
    
    1,123
    
    
    
    45.93
    
    
    
    51,576
    
    
    
    32,220
    
    
    
    38.66
    
    
    
    1,245,710SGD
    
    
    30,648
    
    
    
    22.79
    
    
    
    698,475
    
    
    
    48,602
    
    
    
    22.59
    
    
    
    1,097,930CNY
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,473
    
    
    
    4.38
    
    
    
    282,291Non-Monetary itemsUSD
    
    
    8,857
    
    
    
    31.93
    
    
    
    282,789
    
    
    
    42,223
    
    
    
    29.03
    
    
    
    1,225,740CHF
    
    
    1,106
    
    
    
    30.95
    
    
    
    34,231
    
    
    
    3,080
    
    
    
    31.01
    
    
    
    95,511Long-term investments
accounted for under the
equity methodUSD
    
    
    124,370
    
    
    
    31.90
    
    
    
    3,968,018
    
    
    
    135,689
    
    
    
    29.00
    
    
    
    3,935,272SGD
    
    
    11,010
    
    
    
    22.61
    
    
    
    248,901
    
    
    
    10,409
    
    
    
    22.55
    
    
    
    234,732CNY
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,663
    
    
    
    4.33
    
    
    
    314,338Joint controlled entitiesUSD
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,229
    
    
    
    28.81
    
    
    
    208,260CNY
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    689
    
    
    
    4.39
    
    
    
    3,022Financial LiabilitiesMonetary itemsUSD
    
    
    542,147
    
    
    
    32.03
    
    
    
    17,364,955
    
    
    
    738,856
    
    
    
    29.13
    
    
    
    21,523,131JPY
    
    
    4,563,544
    
    
    
    0.35
    
    
    
    1,594,046
    
    
    
    9,976,591
    
    
    
    0.36
    
    
    
    3,584,958EUR
    
    
    2,209
    
    
    
    46.32
    
    
    
    102,316
    
    
    
    22,471
    
    
    
    39.02
    
    
    
    876,797SGD
    
    
    22,530
    
    
    
    22.97
    
    
    
    517,505
    
    
    
    25,127
    
    
    
    22.77
    
    
    
    572,136CNY
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,534
    
    
    
    4.39
    
    
    
    24,302
  F-69




---



##### 



33.
    
    SEGMENT INFORMATION
 (1)
    
    Operations in different industriesDue to acquisitions and investments in 2010, the Company now has two operating
segments. The Companys semiconductor fabrication operating segments revenue, profit
and identifiable assets as of and for the year ended December 31, 2010 are more than
98% of the Companys consolidated totals while the other operating segment represents
less than 2% of the Companys consolidated revenue, profit or loss and identifiable
assets and does not meet the quantitative threshold for disclosure.(2)
    
    Operations in different geographic areasThe geographic region to which revenue is assigned is based on the location of the Company
or its subsidiaries to which revenue earned from external customers is attributable.
 For the year ended December 31,2008
    
    
    2009
    
    
    2010Net
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    Netoperating
    
    
    Long-lived
    
    
    operating
    
    
    Long-lived
    
    
    operating
    
    
    Long-livedrevenues
    
    
    assets
    
    
    revenues
    
    
    assets
    
    
    revenues
    
    
    assetsNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Taiwan
    
    
    28,871,703
    
    
    
    61,364,804
    
    
    
    34,893,626
    
    
    
    51,684,058
    
    
    
    47,418,808
    
    
    
    98,349,844Asia, excluding
Taiwan
    
    
    4,903,801
    
    
    
    48,193,900
    
    
    
    9,690,051
    
    
    
    38,952,619
    
    
    
    19,167,739
    
    
    
    35,800,844North America
    
    
    53,640,645
    
    
    
    13,787
    
    
    
    45,894,083
    
    
    
    7,680
    
    
    
    59,854,997
    
    
    
    4,346Europe
    
    
    9,397,397
    
    
    
    2,843
    
    
    
    912,005
    
    
    
    1,204
    
    
    
    
    
    
    
    1,68496,813,546
    
    
    
    109,575,334
    
    
    
    91,389,765
    
    
    
    90,645,561
    
    
    
    126,441,544
    
    
    
    134,156,718
  F-70




---



##### 



34.
    
    U.S. GAAP RECONCILIATION
 The accompanying consolidated financial statements have been prepared in conformity with
generally accepted accounting principles in the Republic of China (R.O.C. GAAP), which differ in
certain material respects from generally accepted accounting principles in the United States
(U.S. GAAP). Such differences are disclosed below.
 (1)
    
    CompensationEmployee bonusPursuant to the Companys Articles of Incorporation (AOI), certain employees of the Company
are entitled to minimum bonus when certain objectively determinable financial criteria are
met as at the year-end. The Companys AOI specifies that employee bonus can be settled in the
form of cash or common shares or a combination of both, subject to stockholders approval at
the annual stockholders meeting in the subsequent year. Under both R.O.C. and U.S. GAAP,
employee bonus is charged to compensation expense and accrued based on managements estimate.
The employee bonus is initially accrued as at the year-end based on managements estimate
according to AOI with adjustment in the subsequent year after stockholders approval.
Compensation expense relating to stock bonus is determined based on the fair market value of
the Companys common stock on the grant date. According to the R.O.C. ARDF Interpretation
96-052, Accounting for Employee Bonus and Remunerations to Directors and Supervisors,
compensation expense relating to stock bonus is determined based on the fair value of the
Companys common stock at the date before the stockholders meeting. Under U.S. GAAP,
compensation expense relating to stock bonus is measured at the fair market value on the date
of stock distribution.Employee stock optionsUnder R.O.C. GAAP, for stock options granted prior to January 1, 2008, the Company applied
the intrinsic value method to recognize the difference between the market price of the stock
at grant date and the exercise price of its employee stock options as compensation expense.
For stock options granted on or after January 1, 2008, the Company adopted R.O.C. SFAS 39 to
recognize compensation cost using the fair value method which is consistent with U.S. GAAP.
The Company amortized share-based compensation expense over the vesting period based on the
grant-date fair value. The fair value of liability awards is remeasured at each reporting
date with fair value changes charged to compensation expenses accordingly. Compensation
expense is recognized on a graded-vesting basis over the requisite service period of the
options.
  F-71




---



##### 



The Company uses Black-Scholes option-pricing model in estimating the fair value of stock
options. The main inputs and assumptions used in the model include the grant date stock
price, exercise price of the option, volatility of the Companys stock, the expected option
term, the risk-free rate and the Companys dividend yield. The Company determines expected
volatility based on historical stock price volatility over the time period equal to the
expected term of the employee stock options because the Companys shares have been publicly
traded for a long time. For the options granted prior to 2008, the Company determined the
expected term as the mid-point between the vesting period and the contractual term by using
the simplified method. For the options granted after 2008, the Company determined the
expected term based on historical stock option exercise data. The Company uses the average
yield at grant date of Taiwan Government Bond with the remaining term similar to the expected
option term as the risk-free interest rate. In addition, the Company used the historical
distribution of cash dividends and the historical average market price of the Companys
common stock to estimate future dividend yields. The estimates of option fair value are not
expected to foresee future events or the values realized by employees who receive stock
option. In addition, later events are not indicative of the rationality of the initial
estimates of option fair value used by the Company.
 The Company adjusts share-based compensation on an annual basis for changes in expected
forfeitures based on the examination of latest employee stock options forfeiture activity.
The effect of adjusting the forfeiture rate used for expense amortization is recognized in
the corresponding period that the expected forfeiture rate is changed.
 On September 11, 2002, October 8, 2003, September 30, 2004, December 22, 2005, October 9,
2007 and May 12, 2009, the Company issued employee stock options. The total number of options
approved under these six series was 2.65 billion units, with each unit entitling the optionee
to subscribe for 1 share of the Companys common stock. The exercise price of options was set
at the closing price of the Companys common stock on the date of grant. The Company will
issue new shares upon exercise of employee stock options. The contractual life of the options
is 6 years. Employees may exercise up to 50% of the options after 2 years, up to 75% after 3
years, and up to 100% after 4 years. The terms of the first four series were modified to
reflect the impact of the capital reduction in 2007, that each unit of option is entitled to
subscribe for about 0.7 share of the Companys common stock and the exercise price increased
accordingly. The Company did not have any incremental compensation costs associated with this
modification. As of December 31, 2010, the total number of option units outstanding was 753
million units and exercise price ranged from NT$10.40 to NT$29.47.
 No stock options were granted in 2008 and 2010. The assumptions used in the Black-Scholes
option-pricing model for options granted for the year ended 2009 are as follows: expected
dividend yields of 1.98%; volatility factors of the expected market price of UMCs common
stock of 40.63%; risk-free interest rate of 1.01%; and expected life of the option of 3.16 ~
5.03 years. As of December 31, 2010, the weighted-average remaining contractual life of
outstanding options, fully vested and expected to vest options, and exercisable options was
3.3 years, 3.23 years and 2.51 years, respectively.
  F-72




---



##### 



A summary of employee stock options activities as of December 31, 2010 and changes during the
year then ended is presented below:
 For the year ended December 31, 2010Available shares
    
    
    Weighted-average(adjusted for capital
    
    
    Exercise Price perNumber of options
    
    
    reduction)
    
    
    share as adjusted(In thousands)
    
    
    (In thousands)
    
    
    NT$
    
    
    US$Outstanding at beginning of
period
    
    
    861,771
    
    
    
    809,566
    
    
    
    16.59
    
    
    
    0.57Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (141
    )
    
    
    (141
    )
    
    
    18.03
    
    
    
    0.62Forfeited
    
    
    (61,477
    )
    
    
    (57,466
    )
    
    
    16.42
    
    
    
    0.56Expired
    
    
    (47,453
    )
    
    
    (33,083
    )
    
    
    28.56
    
    
    
    0.98Outstanding at end of period
    
    
    752,700
    
    
    
    718,876
    
    
    
    16.05
    
    
    
    0.55Fully vested and expected
to vest at end of period
    
    
    709,192
    
    
    
    675,876
    
    
    
    16.38
    
    
    
    0.56Exercisable at end of period
    
    
    385,101
    
    
    
    351,785
    
    
    
    19.78
    
    
    
    0.68
 The weighted-average grant-date fair value of options granted during 2008, 2009, and 2010 was
nil, NT$2.8 and nil, respectively. There were no options exercised in 2008 and 2009. The
total intrinsic value of the options exercised during 2010 was nil. The total fair value of
options vested during 2008, 2009 and 2010 was NT$427 million, NT$1,278 million and NT$574
million, respectively. Aggregate intrinsic value of outstanding options, fully vested and
expected to vest options, and exercisable options at December 31, 2010 are NT$1,583 million,
NT$1,337 million, and nil, respectively. As of December 31, 2010, unrecognized compensation
expenses related to nonvested options granted under the employee stock options plan totaled
NT$383 million. The weighted-average period of expense expected to be recognized is 2.01
years.
  F-73




---



##### 



Under US GAAP, the total share-based compensation effects in income and capitalization as
part of inventory relating to employee stock options and treasury stock purchased by
employees are summarized as follows:
 For the year ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000Net effects in income
    
    
    (895,191
    )
    
    
    (978,077
    )
    
    
    (1,006,152
    )Net effects on inventory capitalization
    
    
    62,806
    
    
    
    64,415
    
    
    
    64,177
 The following tables reflect the above noted differences between U.S. GAAP and R.O.C. GAAP
relating to compensations:
 For the year ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000Net income impact of compensation adjustments:Adjustment for final award
    
    
    (979,016
    )
    
    
    
    
    
    
    Total employee bonus
    
    
    (979,016
    )
    
    
    
    
    
    
    Employee stock options
    
    
    (912,888
    )
    
    
    (804,065
    )
    
    
    (363,953
    )Allocation to inventories, net of prior
period allocations to inventories which are
sold in current period
    
    
    (33,104
    )
    
    
    1,609
    
    
    
    (32,898
    )Total U.S. GAAP adjustment to net income
relating to compensation
    
    
    (1,925,008
    )
    
    
    (802,456
    )
    
    
    (396,851
    )
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000Stockholders equity impact of compensation adjustments:Employee stock options
    
    
    64,415
    
    
    
    31,517Total U.S. GAAP adjustment to stockholders equity
relating to compensation
    
    
    64,415
    
    
    
    31,517
  F-74




---



##### 



(2)
    
    Equity Investees  Variance between U.S. GAAP and R.O.C. GAAPThe Companys proportionate share of the income (loss) and stockholders equity from an
equity investee under R.O.C. GAAP may differ from U.S. GAAP if the equity investees net
income (loss) and stockholders equity are different under the two GAAPs. Those differences
for the equity investees include accounting for compensation, income tax and investments in
debt and equity securities.(3)
    
    Investments in Debt and Equity Securities(a) Change in fair value of investmentsUnrealized gains (losses) on trading securities held at December 31, 2008, 2009 and 2010 were
NT$(3,110) million, NT$91 million and NT$(590) million, respectively.When the Company loses its significant influence on an investment accounted for under the
equity method and reclassifies it as an available-for-sale security, the proportionate share
of an investees equity adjustments for other comprehensive income should remain as a part of
the carrying amount of the investment under R.O.C. GAAP and the dividends received from the
available-for-sale security which were declared from pre-acquisition profits are deducted
from the cost of the security. However, under U.S. GAAP, the proportionate share of an
investees equity adjustments for other comprehensive income should be offset against the
carrying amount of the investment at the time significant influence is lost, and the
dividends received from the available-for-sale security are accounted for as dividend income.
Accordingly, the accumulated other comprehensive income related to the unrealized gains on
available-for-sale securities as of December 31, 2008, 2009 and 2010 were decreased by
NT$1,038 million, NT$975 million and NT$975 million, respectively. The difference in cost
basis resulted in an adjustment to increase (decrease) disposal gain of NT$16 million,
NT$(97) million and NT$(1) million for the year ended December 31, 2008, 2009 and 2010,
respectively, under U.S. GAAP for the disposal of these investments.Prior to 2006, certain available-for-sale investments under U.S. GAAP were accounted as
equity method investments under R.O.C. GAAP. The differences in the application of equity
method led to different current cost basis under R.O.C. GAAP and U.S. GAAP and resulted in an
adjustment to increase accumulated other comprehensive income related to unrealized losses on
available-for-sale securities of NT$2,090 million as of December 31, 2008, 2009 and 2010.
  F-75




---



##### 



Information on sales of available-for-sale equity securities for the years ended December 31,
2008, 2009 and 2010 is as follows:
 Proceeds from
    
    
    Gross realized
    
    
    Gross realizedsales
    
    
    gains
    
    
    lossesNT$000
    
    
    NT$000
    
    
    NT$000For the year ended
December 31, 2008
    
    
    4,270,983
    
    
    
    2,983,484
    
    
    
    129,539For the year ended
December 31, 2009
    
    
    2,793,590
    
    
    
    1,767,765
    
    
    
    For the year ended
December 31, 2010
    
    
    3,694,372
    
    
    
    1,959,472
    
    
    
    
 Information on available-for-sale equity securities, including depositary receipts and funds,
still held at each balance sheet date is as follows:
 Total
    
    
    Total
    
    
    Netunrealized
    
    
    unrealized
    
    
    unrealized
    
    
    AdjustedFair Value
    
    
    gains
    
    
    losses
    
    
    gains
    
    
    CostNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000As of December 31,
2008
    
    
    16,283,917
    
    
    
    4,483,928
    
    
    
    3,730,656
    
    
    
    753,272
    
    
    
    15,530,645As of December 31,
2009
    
    
    41,357,636
    
    
    
    26,801,606
    
    
    
    81,156
    
    
    
    26,720,450
    
    
    
    14,637,186As of December 31,
2010
    
    
    37,298,738
    
    
    
    23,853,204
    
    
    
    45,951
    
    
    
    23,807,253
    
    
    
    13,491,485
 The Company had investments with gross unrealized losses of NT$81 million and NT$46 million
as of December 31, 2009 and 2010, respectively, on available-for-sale equity securities with
fair value of NT$456 million and NT$190 million as of December 31, 2009 and 2010,
respectively. This includes gross unrealized losses related to individual securities of NT$48
million and nil for the years ended December 31, 2009 and 2010, respectively, with fair value
of NT$227 million and nil as of December 31, 2009 and 2010, respectively, that had been in a
continuous loss position for 12 months or more. The individual securities that were in
continuous loss position for more than 12 months at December 31, 2009 subsequently recovered
in 2010. For the years ended December 31, 2008, 2009 and 2010, NT$(4,114) million, NT$1,769
million and NT$1,959 million, respectively, were reclassified from other comprehensive income
to the consolidated statements of income upon the disposal or impairment of
available-for-sale securities. Such amounts were determined by average cost method. The
Company did not transfer any available-for-sale securities to trading securities for the
years ended December 31, 2008, 2009 and 2010.
 (b) Impairment of investments in securities
 Under R.O.C. GAAP, for long-term investments over which the Company does not have the ability
to exercise significant influence or control, unrealized losses would be reported on the
consolidated statements of income if evidence indicates that the value of an investment has
been impaired and is unlikely to recover in the future. Nevertheless, R.O.C. GAAP does not
provide additional definition or guidance on how to assess the likelihood of future recovery.
Under U.S. GAAP, for individual securities classified as either available-for-sale or
held-to-maturity, the Company determines whether a decline in fair value below cost is other
than temporary pursuant to guidance from ASC 320-10-35, InvestmentsDebt and Equity
Securities. In general, a decline in market value below cost for a continuous period of six
months is considered to be other than temporary unless there is persuasive evidence to the
contrary. When determining the impairment or other-than-
  F-76




---



##### 



temporary decline, the Company considers, among other factors, all available information concerning the future prospects of
investments including the investees financial statements, analyst reports and industry
specific publications, and observes whether there are significant adverse changes in the
general market condition where the investees operate, significant deteriorations in their
earnings performance, any significant going concerns issues and subsequent market fluctuation
and recovery. The Company also considers its ability and intention to hold these investments
for a reasonable period of time that will be sufficient to allow for any anticipated recovery
in the securitys market value. If the decline in fair value is judged to be other than
temporary, the cost basis of the individual security is written down to fair value with a
charge against earnings. Accordingly, the impairment losses of certain investments recorded
under R.O.C. GAAP were reconciled to increase (decrease) net income by NT$1,415 million, nil
and NT$(19) million for the years ended December 31, 2008, 2009 and 2010, respectively,
because the different cost recognized under R.O.C. GAAP and U.S. GAAP.(c) Adjustments due to change in ownership of investeesWhen an investee issues additional shares and the Company subscribes for these shares at a
percentage higher or lower than its current ownership percentage in the investee, when the
employees of the Companys subsidiaries or equity investees exercise their stock options, or
when the convertible bondholders of the Companys subsidiaries or equity investees exercise
their conversion rights, the Companys ownership interest in such subsidiary or equity
investee may change. Under R.O.C. GAAP, the change in the Companys proportionate share in
the net assets of its investee resulting from the issuance of additional shares of the
investees stock, at the rate not proportionate to its existing equity ownership in such
investee, is recorded to the additional paid-in capital and long-term investments account.
Under U.S. GAAP, prior to January 1, 2009, a dilution of ownership interest is recognized as
a gain or loss in the consolidated statements of income. On the other hand, the increase in
ownership interest is treated as a purchase of additional shares and the difference between
the total cost of the investment and the proportionate share of the fair value of net assets
is allocated to goodwill. Effective January 1, 2009, pursuant to ASC 810-10-45,
Noncontrolling Interests in a Subsidiary, a change in the Companys ownership interest that
does not result in a change of control shall be accounted for as equity transactions. In
December 2009 and May 2010, the Company acquired additional ownership interests in one of its
subsidiaries. Under R.O.C. GAAP, the acquisition was accounted for using the purchase method
of accounting, and after reducing the book values of those non-current assets acquired of
NT$1,752 million and NT$226 million for the year ended December 31, 2009 and 2010,
respectively, to zero, the Company recognized an extraordinary gain of NT$649 million and
NT$68 million for the year ended December 31, 2009 and 2010, respectively, as the fair value
of the net assets acquired exceeds their cost. However, under U.S. GAAP, the acquisition was
accounted for as an equity transaction. The difference between the fair value of the
consideration paid and the book value
of the noncontrolling interests is adjusted against stockholders equity. As such, the
Company reversed the extraordinary gain and the write-down of non-current assets recognized
under R.O.C. GAAP, and recorded additional paid-in capital of NT$2,497 million and NT$310
million as of December 31, 2009 and 2010, respectively, under U.S. GAAP.
  F-77




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##### 



In June 2010, a non-affiliated company invested NT$259 million for newly issued shares of one
of the Companys consolidated entities, which reduced the Companys ownership interest from
100% to 50%. Due to this transaction, the Company jointly controlled the entity and accounted
for the entity as a joint venture. Under R.O.C. GAAP, the reduction of equity interest is
adjusted against additional paid-in capital. However, under U.S. GAAP, the Company accounted
for the deconsolidation of a subsidiary and fair value remeasurement of the remaining holding
interests by recognizing a gain or loss in net income attributable to the Company.
Accordingly, the Company recognized an additional NT$5 million net loss for the year ended
December 31, 2010 under U.S. GAAP.(d) Fair value measurementASC 820-10, Fair Value Measurements and Disclosures, defines fair value, provides a framework
for measuring fair value under current standards in U.S. GAAP, and requires additional
disclosure about fair value measurements. The fair value hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1)
and the lowest priority to unobservable inputs (Level 3). Each level of inputs used are
described as following:Level 1 inputs are unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the measurement date;Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly, such as quoted prices
for similar assets or liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, and valuations with inputs which are
observable for substantially the full term of the asset or liability. The Companys
derivative financial instruments  forward contracts are classified as assets and liabilities
carried at fair value through profit or loss. The fair values are determined by using the
market-based observable inputs including the expected interest forward rate, expected
volatility in interest rates, spot exchange rate and swap point. On December 2, 2009, the
Company issued exchangeable bonds which contain a compound derivative instrument, comprising
of the exchange option with a fixed foreign exchange rate feature and a call option. The
compound derivative instrument is classified as liabilities carried at fair value through
profit or loss. The derivatives are fair valued by using the option pricing model. The
valuation model uses the market-based observable inputs including share price, volatility,
credit spread, and swap rates. In 2010, few of the Companys private equity instruments
classified as financial assets measured at cost, noncurrent, were impaired. The fair value of
these assets was determined based on the transaction price of their newly issued shares,
which the Company considered to be quoted prices in a market that was not active and was
supported by valuation analyses using a market approach.
  F-78




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##### 



Level 3 inputs are unobservable inputs that are significant to the fair value of the asset or
liability. In 2010, one of the Companys long-term investment accounted for under equity
method was impaired. Due to the absence of quoted market price, the fair value measurement of
the non-publicly traded equity instruments was determined using the discounted cash flow
model, considering the investees current and future expected operating performance, industry
trends, and competitive advantages.
 The following table summarizes the assets and liabilities measured at fair value on a
recurring basis at December 31, 2010:
 Fair value measurements at reportingdate usingItems
    
    Fair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Financial assets at fair value through
profit or loss, current
    
    
    1,139,943
    
    
    
    1,130,532
    
    
    
    9,411
    
    
    
    Financial assets at fair value through
profit or loss, noncurrent
    
    
    79,920
    
    
    
    79,920
    
    
    
    
    
    
    
    Available-for-sale financial assets, current
    
    
    7,044,673
    
    
    
    7,044,673
    
    
    
    
    
    
    
    Available-for-sale financial assets,
noncurrent
    
    
    30,254,065
    
    
    
    30,254,065
    
    
    
    
    
    
    
    Financial liabilities at fair value through
profit or loss, current
    
    
    2,254,937
    
    
    
    
    
    
    
    2,254,937
    
    
    
    
 The following table summarizes the assets measured at fair value on a nonrecurring basis for
the year ended December 31, 2010:
 Fair value measurements duringreporting period usingItems
    
    Fair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total LossesNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Financial assets
measured at cost,
noncurrent
    
    
    67,695
    
    
    
    
    
    
    
    67,695
    
    
    
    
    
    
    
    (93,077
    )Long-term
investments
accounted for under
the equity method
    
    
    41,581
    
    
    
    
    
    
    
    
    
    
    
    41,581
    
    
    
    (39,846
    )
 Financial assets measured at cost and long-term investments accounted for under the equity
method with a total carrying amount of NT$242 million were written down to their fair value,
NT$109 million, resulting in an NT$133 million impairment charges, included in earnings for
the period.(4)
    
    Goodwill and Business CombinationsUnder R.O.C. GAAP, the fair value of the net assets received is deemed to be the value of the
consideration for the acquisition of the remaining interests in United Semiconductor, United
Silicon, UTEK Semiconductor and United Integrated Circuits in January 2000. The acquisition
cost of the merger with SiSMC was determined using the market price of the
shares exchanged by the Company. Under U.S. GAAP, before applying ASC 805, Business
Combinations, it requires that the securities exchanged be valued based on the market prices
a few days before and after the date when the terms of the acquisition are agreed to and
announced. The acquisition was accounted for using the acquisition method of accounting and
the purchase price was determined using the market value of the shares exchanged. The
difference between the fair value of the shares exchanged and the fair value of the net
assets acquired created goodwill.
  F-79




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##### 



Under R.O.C. GAAP, in accordance with an amendment to R.O.C. SFAS 25 and R.O.C. SFAS 35,
goodwill ceased to be amortized and is subject to annual impairment tests or whenever events
and circumstances change indicating goodwill may be impaired. Our assessment of impairment
includes identifying the goodwill-allocated cash generating unit (CGU), determining the
recoverable amount of CGU by using a discounted cash flow analysis, and ultimately comparing
the recoverable amount with the carrying amount of CGU including goodwill. If the CGUs
carrying amount is greater than its recoverable amount, an impairment loss is recognized. The
impairment of goodwill cannot be reversed.
 Under U.S. GAAP, in accordance with ASC 805-30-30, Goodwill or Gain from Bargain Purchase,
Including Considerations Transferred,and ASC 350-20-35, IntangiblesGoodwill and Other,
goodwill ceased to be amortized and is subject to an annual impairment test or more
frequently when events and circumstances indicate a possible impairment may exist. The fair
value of the reporting unit is allocated to individual assets and liabilities to derive the
fair value of the goodwill assigned to the reporting unit. If the carrying value of the
goodwill is greater than its derived fair value, it is written down to its fair value with an
impairment loss reported on the consolidated statements of income. Impairment of goodwill
cannot be subsequently reversed.
 On November 30, 2010, the Company acquired additional stocks issued by NEXPOWER, which
increased the Companys ownership interest from 45.79% to 57.67%. The Company obtained
control over NEXPOWER and the results of NEXPOWERs operations have been included in the
consolidated financial statements since that date. As a result of the acquisition, the
Company expects to achieve the integration of the Companys overall resources.
 Under R.O.C. GAAP, the change in the Companys proportionate share in the net assets of an
investee resulting from its acquisition of additional stock issued by the investee at a rate
not proportionate to its existing equity ownership is charged to the additional paid-in
capital and long-term investments accounts. However, under U.S. GAAP, this acquisition is
regarded as a business combination. The sum of the fair value of the consideration
transferred, non-controlling interests and equity interest previously held by the acquirer
exceeding the fair value of identifiable net assets is recorded as goodwill. The fair value
of consideration transferred, non-controlling interests and equity interest previously held
by the acquirer were determined based on the price of newly issued shares, which was
supported by valuation analysis using market approach. The fair value of consideration
transferred was NT$3,500 million, paid in cash, and the fair value of noncontrolling
interests was NT$5,128 million.
  F-80




---



##### 



The following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the acquisition date.
 As of November 30, 2010
    
    NT$ millionCash
    
    
    5,853Receivables
    
    
    938Inventories
    
    
    1,133Property, plant and equipment
    
    
    9,403Other assets
    
    
    144Total identifiable assets acquired
    
    
    17,471Current liabilities
    
    
    1,433Non-current liabilities
    
    
    5,422Total liabilities assumed
    
    
    6,855Net identifiable assets acquired
    
    
    10,616Goodwill
    
    
    1,499Net assets acquired
    
    
    12,115
 The goodwill recognized is attributable primarily to expected consolidation synergies of
NEXPOWER, and none of the goodwill is expected to be deductible for income tax purposes. As
of December 31, 2010, there were no changes in the recognized amounts of goodwill resulting
from the acquisition of NEXPOWER.
 Prior to the acquisition date, the Company accounted for its 45.79% interest in NEXPOWER as
an equity-method investment. The acquisition-date fair value of the previous equity interest
was NT$3,487 million and the Company recognized a gain of NT$443 million as a result of
remeasuring its equity interest previously held in NEXPOWER before the business combination.
 The amounts of revenue and losses of NEXPOWER included in the Companys consolidated income
statement from the acquisition date to the period ending December 31 2010 are NT$590 million
and NT$(75) million, respectively.
 The following represents the pro forma consolidated income statement as if NEXPOWER had been
included in the consolidated results of the Company for entire years ending December 31, 2009
and 2010:
 For the year ended December 31,2009
    
    
    2010NT$ million
    
    
    NT$ millionRevenue
    
    
    92,152
    
    
    
    129,440Earnings
    
    
    2,478
    
    
    
    23,550
  F-81




---



##### 



(5)
    
    Earnings per Share (EPS)Under R.O.C. GAAP, basic earnings per share are calculated by dividing net income
attributable to common stockholders by the weighted average number of shares outstanding
during the year. Diluted earnings per share are calculated by taking basic earnings per share
into consideration plus additional common shares that would have been outstanding if the
dilutive share equivalents had been issued. Net income was also adjusted for the interest and
other income or expenses derived from any underlying dilutive share equivalents. The weighted
average shares outstanding are adjusted retroactively for stock dividends issued and
capitalization of additional paid-in capital. Anti-dilutive effects are not included in the
dilutive EPS calculation. The shares distributed for employee bonus are treated as
outstanding as of their grant date in the calculation of basic earnings per share. For
employee bonus that may be distributed in shares, the number of shares to be distributed is
taken into consideration assuming the distribution will be made entirely in shares when
calculating diluted earnings per share.Under U.S. GAAP, basic earnings per share are calculated by dividing net income attributable
to common stockholders by the weighted average number of shares outstanding during the year.
The shares distributed for employee bonus are included in the computation of basic earnings
per share from the grant date. The reciprocal shareholdings held by equity investees are also
deducted from the computation of weighted-average number of shares outstanding. Diluted
earnings per share are calculated by taking basic earnings per share into consideration plus
additional common shares that would have been outstanding if the dilutive share equivalents
had been issued. The net income attributable to common stockholders would also be adjusted
for the interest and other income or expenses derived from any underlying dilutive share
equivalents. For employee bonus that may be distributed in shares, the number of shares to be
distributed is not taken into consideration until they are granted or the stockholders
approval is obtained. Additionally, the dilutive effect of outstanding employee options
generally should be reflected in diluted EPS by application of treasury stock method. The
assumed proceeds include the exercise price of the options, any tax benefits that will be
credited on exercise to additional paid-in capital, and the average measured but unrecognized
compensation expense during the period. Accordingly, the Company reversed the dilutive
adjustment under R.O.C. GAAP and calculated the dilutive effect of outstanding employee
options by applying treasury stock method under U.S. GAAP.
  F-82




---



##### 



The reconciliation of the numerators and denominators used in computing the basic and diluted
earnings per share under U.S. GAAP are as below:
 For the year Ended December 31, 2010Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountIn thousands
    
    
    In thousands
    
    
    In dollar NT$Net Income attributable to the Company
    
    
    23,616,120
    
    
    
    
    
    
    
    Basic EPSIncome available to common stockholders
    
    
    23,616,120
    
    
    
    12,335,428
    
    
    
    1.91Effect of dilutive securitiesEmployee stock options
    
    
    
    
    
    
    63,658
    
    
    
    Diluted EPSIncome attributable to common
stockholders including assumed
conversions
    
    
    23,616,120
    
    
    
    12,399,086
    
    
    
    1.90
 As of December 31, 2010, there were 484,340 thousand issued and outstanding stock options
which were not included in the computation of diluted earnings per share due to their
antidilutive effect.
 For the year Ended December 31, 2009Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountIn thousands
    
    
    In thousands
    
    
    In dollar NT$Net Income attributable to the Company
    
    
    2,571,988
    
    
    
    
    
    
    
    Basic EPSIncome available to common stockholders
    
    
    2,571,988
    
    
    
    12,538,016
    
    
    
    0.21Effect of dilutive securitiesEmployee stock options
    
    
    
    
    
    
    21,812
    
    
    
    Diluted EPSIncome attributable to common
stockholders including assumed
conversions
    
    
    2,571,988
    
    
    
    12,559,828
    
    
    
    0.20
  F-83




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##### 



As of December 31, 2009, there were 572,107 thousand issued and outstanding stock options
which were not included in the computation of diluted earnings per share due to their
antidilutive effect.
 For the year Ended December 31, 2008Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountIn thousands
    
    
    In thousands
    
    
    In dollar NT$Net Loss attributable to the Company
    
    
    (28,955,100
    )
    
    
    
    
    
    
    Basic EPS and diluted EPSLoss available to common stockholders
    
    
    (28,955,100
    )
    
    
    12,870,072
    
    
    
    (2.25
    )
 As of December 31, 2008, there were 709,484 thousand issued and outstanding stock options
which were not included in the computation of diluted earnings per share due to their
antidilutive effect. The effects of the zero coupon convertible bonds with principal amount
of US$381.4 million that matured on February 15, 2008 were also excluded in the computation
of diluted earnings per share due to their antidilutive effect.(6)
    
    Treasury Stock and related DisposalSome of the Companys subsidiaries and investees also hold the Companys stocks as
investments. Under R.O.C. GAAP, reciprocal shareholdings held by subsidiaries, but not equity
investees, are recorded as treasury stocks on the Companys books. Under U.S. GAAP, however,
reciprocal shareholdings, whether being held by subsidiaries or equity investees, are
recorded as treasury stocks on the Companys books. Therefore, as of December 31, 2009 and
2010, the Company recognized treasury stocks of NT$2,092 million for reciprocal shareholdings
held by equity-method investees. The Company also reversed accumulated other comprehensive
income related to unrealized gains of nil, NT$1,573 million and NT$1,428 million for the
years ended December 31, 2008, 2009 and 2010, respectively, and eliminated investment gains
(losses) of NT$(8,817) million, nil and NT$81 million for the years ended December 31, 2008,
2009 and 2010, respectively.(7)
    
    Stock DividendsUnder R.O.C. GAAP, the stock dividends are recorded at par value and charged to retained
earnings. Under U.S. GAAP, if the ratio of distribution is less than 25 percent of the same
kind of outstanding shares, the fair value of the shares issued should be charged to retained
earnings. Since no stock dividends were issued during 2009 and 2010, the cumulative effect of
reconciling stock dividends decreased retained earnings and increased additional paid-in
capital remains the same as of December 31, 2009 and 2010 by approximately NT$291,285
million.(8)
    
    Reclassification of Time DepositsUnder R.O.C. GAAP, cash and cash equivalents include time deposits. Under U.S. GAAP, cash
equivalents are short-term, highly liquid investments that are readily convertible to cash
with original maturities of three months or less. Thus, time deposits with original
maturities of
more than three months are classified as cash equivalents under R.O.C. GAAP but should be
included in marketable securities under U.S. GAAP.
  F-84




---



##### 



(9)
    
    PensionUnder R.O.C. GAAP, R.O.C. SFAS 18 requires a minimum pension liability to be measured as the
excess of accumulated benefit obligation over the fair value of the plan assets, and allows
the unrecognized items, including prior service costs and credits, gains or losses, and
transition obligations or assets, to be reported in disclosure shown as a plans funded
status.Under U.S. GAAP, ASC 715-30, Defined Benefit PlansPension, requires an employer to
recognize an asset for a plans overfunded status or a liability for a plans underfunded
status with an offsetting adjustment to accumulated other comprehensive income (AOCI).The amounts related to pensions recognized in AOCI, net of tax, excluding amounts related to
equity-method investees, are shown as below:
 As of December 31, 2010Prior
    
    
    TransitionNet gain/(loss)
    
    
    service cost
    
    
    obligationNT$000
    
    
    NT$000
    
    
    NT$000The amounts arose during the period
    
    
    (689,411
    )
    
    
    57,119
    
    
    
    The amounts reclassified as
components of net periodic benefit
cost
    
    
    12,131
    
    
    
    (5,193
    )
    
    
    28,169The amounts recognized in AOCI as
of December 31, 2010
    
    
    (572,482
    )
    
    
    51,926
    
    
    
    The amounts expected to be
recognized as components of net
periodic benefit cost during 2011
    
    
    (7,478
    )
    
    
    3,093
    
    
    
    
 (10)
    
    Tax Effect of U.S. GAAP Adjustments
 Under U.S. GAAP, the income tax expense was NT$896 million, NT$641 million and NT$1,624
million for the years ended December 31, 2008, 2009 and 2010, respectively. Undistributed
earnings generated after 1997 are subject to a 10% tax in compliance with the Income Tax Law
of the R.O.C.. Under R.O.C. GAAP, the 10% tax on undistributed earnings is recorded as an
expense at the time stockholders resolve that its earnings shall be retained. Under U.S.
GAAP, 10% income tax impact is provided in the period the income is earned, assuming that no
earnings are distributed. Any reduction in the liability will be recognized when the income
is distributed upon the stockholders approval in the subsequent year. Tax on undistributed
earnings may be offset by the Companys available tax credits carried forward, where
applicable. As such, the incremental tax accrued on undistributed earnings may be offset by a
corresponding reduction in valuation allowance, where applicable. In 2008, 2009 and 2010, the
Company accrued nil, NT$307 million and NT$2,156 million, respectively, for 10% tax on
undistributed earnings in Taiwan under U.S. GAAP. The additional tax expense was offset by a
corresponding reduction in the valuation allowance under U.S. GAAP. Further, in 2008, 2009
and 2010, certain subsidiaries incurred NT$(91) million, NT$(14) million and
NT$10 million of tax on undistributed earnings in Taiwan for which no tax credits were
available for offset, and the income tax expense was recognized accordingly.
  F-85




---



##### 



As of December 31, 2010, the Company reported valuation allowance NT$7,501 million to reduce
deferred tax assets to an amount that is more likely than not realizable, representing a
decrease of NT$4,636 million from the prior year. The majority of the R.O.C. GAAP to U.S.
GAAP reconciliation adjustments are permanent in nature with no incremental impact on income
taxes under U.S. GAAP as a result of corresponding valuation allowances.
 Under U.S. GAAP, the Company adopted the provisions regarding uncertainty in income tax
positions prescribed in ASC 740-10, Income Taxes. ASC 740-10 clarifies that tax position are
measured based on the maximum amount that is more likely than not to be realized. Tax
positions that are not at least more likely than not to be sustained on their technical
merits are not recognized. Unlike ASC 740-10, R.O.C. SFAS 22 contained no guidance on uniform
criteria for an enterprise to recognize and measure potential tax benefits associated with
uncertain tax positions.
 A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as
follows:
 For the year ended December 31,2009
    
    
    2010NT$
    
    
    NT$(In millions)Balance at January 1,
    
    
    58
    
    
    
    60Additions based on tax positions taken during the current year
    
    
    14
    
    
    
    Reductions related to settlements with taxing authorities
    
    
    (39
    )
    
    
    Additions for tax positions of prior years
    
    
    27
    
    
    
    22Balance at December 31,
    
    
    60
    
    
    
    82
 None of the aforementioned unrecognized tax benefits, if recognized, would affect the
Companys effective tax rate. In addition, settlement of any of the uncertain tax positions
would not require the use of cash as any adjustment would be offset in total by available tax
loss carry-forward and/or tax credits in open tax years. Further, the Company is unaware of
any positions for which it is reasonably possible that the total amounts of unrecognized tax
benefits will significantly increase or decrease within the next twelve months.
 The Company reports interest and penalties relating to unrecognized tax benefits as interest
expenses and other expenses, respectively. As of December 31, 2009 and 2010, no interest or
penalties were accrued.
  F-86




---



##### 



The Company is subject to taxation in Taiwan and other foreign jurisdictions. As of December
31, 2010, tax years of 2008-2010 are open to Tax Authoritys examination in Taiwan, while in
other foreign jurisdictions, years 2005-2010 are open to relevant Tax Authoritys
examination.
 (11)
    
    Gross Profit and Operating Income
 Under R.O.C. GAAP, gains and losses from disposal of property, plant and equipment, gains and
losses from foreign currency exchange, and impairment losses of long-lived assets, are
presented as non-operating income or expenses in the consolidated statement of income. Under
U.S. GAAP, these non-operating income or expenses would be reclassified to be included in the
determination of operating income.
 (12)
    
    Inventory
 Under U.S. GAAP, the allocation of fixed production overhead to inventory is based on the
normal capacity of the production facilities. Unallocated overheads are recognized as an
expense in the period in which they are incurred. Other items such as abnormal freight,
handling costs and amounts of wasted materials are treated as current period charges rather
than as a portion of the inventory cost pursuant to ASC 330, Inventory. Before the adoption
of R.O.C. SFAS 10 on January 1, 2009, R.O.C. GAAP did not provide definite guidance for such
abnormal items and the use of normal capacity was not mandatory. Accordingly, the Company
recognized an adjustment to the cost of goods sold of NT$362 million for the year ended
December 31, 2008. As R.O.C. SFAS 10 and ASC 330 are essentially the same, the inventory
difference from 2008 reversed in 2009 when the associated inventory was sold, and there would
be no further adjustments from January 1, 2010.
 Under R.O.C. GAAP the write down of inventory for the lower of cost or net realizable value
may be reversed in subsequent periods if market conditions improve. Under U.S. GAAP, the
write down to lower of cost or market creates a new cost basis that subsequently cannot be
marked up. Upon the sale of the related inventory, the difference between these two GAAPs is
resolved. During the years ended December 31, 2008, 2009 and 2010, there was no material
difference between cost of sales under R.O.C. GAAP and U.S. GAAP as a result of this GAAP
difference.
 (13)
    
    Quasi reorganization
 In June 2009, the Company and one of its equity-method investees reduced its additional
paid-in-capital by NT$7,037 million and NT$8,134 million, respectively, to eliminate the
accumulated deficit in the preceding years without revaluing the assets of the Company under
R.O.C. GAAP. Since all conditions necessary under the U.S. GAAP quasi reorganization rules
were not met, the Company reversed the deficit reclassification under U.S. GAAP.
  F-87




---



##### 



Reconciliation of Consolidated Net Income (Loss)
 For the year ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Net income (loss) attributable to the
Company, R.O.C. GAAP
    
    
    (22,320,075
    )
    
    
    3,874,028
    
    
    
    23,898,905
    
    
    
    820,141Compensation
    
    
    (1,925,008
    )
    
    
    (802,456
    )
    
    
    (396,851
    )
    
    
    (13,619
    )Equity investees
    
    
    (80,182
    )
    
    
    (32,247
    )
    
    
    (40,759
    )
    
    
    (1,399
    )Investments in debt and equity
securitiesChange in fair value of
investments in securities
    
    
    15,913
    
    
    
    (96,591
    )
    
    
    (786
    )
    
    
    (27
    )Impairment of investments in
securities
    
    
    1,415,330
    
    
    
    
    
    
    
    
    
    
    
    Adjustments due to change in
ownership of investees
    
    
    54,838
    
    
    
    (732,643
    )
    
    
    (233,761
    )
    
    
    (8,021
    )Goodwill and Business Combinations
    
    
    (14,571,104
    )
    
    
    
    
    
    
    469,896
    
    
    
    16,125Treasury stock and related disposal
    
    
    8,817,085
    
    
    
    
    
    
    
    (80,524
    )
    
    
    (2,763
    )Inventory
    
    
    (361,897
    )
    
    
    361,897
    
    
    
    
    
    
    
    Net income (loss) attributable to the
Company, U.S. GAAP
    
    
    (28,955,100
    )
    
    
    2,571,988
    
    
    
    23,616,120
    
    
    
    810,437Add: Net loss attributable to
noncontrolling interests, U.S.
GAAP
    
    
    (676,938
    )
    
    
    (2,207,629
    )
    
    
    (72,378
    )
    
    
    (2,484
    )Net income (loss), U.S. GAAP
    
    
    (29,632,038
    )
    
    
    364,359
    
    
    
    23,543,742
    
    
    
    807,953Basic earnings (losses) per share
under U.S. GAAP (in dollars)
    
    
    (2.25
    )
    
    
    0.21
    
    
    
    1.91
    
    
    
    0.07Diluted earnings (losses) per share
under U.S. GAAP (in dollars)
    
    
    (2.25
    )
    
    
    0.20
    
    
    
    1.90
    
    
    
    0.07Weighted-average number of shares
outstanding-basic (in thousands)
    
    
    12,870,072
    
    
    
    12,538,016
    
    
    
    12,335,428
    
    
    
    12,335,428Weighted-average number of shares
outstanding-diluted (in thousands)
    
    
    12,870,072
    
    
    
    12,559,828
    
    
    
    12,399,086
    
    
    
    12,399,086
  F-88




---



##### 



For the year ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Net income (loss)
    
    
    (29,632,038
    )
    
    
    364,359
    
    
    
    23,543,742
    
    
    
    807,953Attributable to:the Company
    
    
    (28,955,100
    )
    
    
    2,571,988
    
    
    
    23,616,120
    
    
    
    810,437noncontrolling interests
    
    
    (676,938
    )
    
    
    (2,207,629
    )
    
    
    (72,378
    )
    
    
    (2,484
    )Other comprehensive income (loss), net of
taxCumulative translation adjustment
    
    
    3,670,946
    
    
    
    (1,890,175
    )
    
    
    (5,192,884
    )
    
    
    (178,205
    )Attributable to:the Company
    
    
    2,214,202
    
    
    
    (1,723,657
    )
    
    
    (4,971,823
    )
    
    
    (170,619
    )noncontrolling interests
    
    
    1,456,744
    
    
    
    (166,518
    )
    
    
    (221,061
    )
    
    
    (7,586
    )Unrealized gains (losses) on securities
    
    
    (27,731,377
    )
    
    
    26,982,940
    
    
    
    (3,056,478
    )
    
    
    (104,889
    )Attributable to:the Company
    
    
    (27,731,377
    )
    
    
    26,982,940
    
    
    
    (3,056,478
    )
    
    
    (104,889
    )noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrecognized pension cost
    
    
    167,890
    
    
    
    (606,330
    )
    
    
    (590,007
    )
    
    
    (20,248
    )Attributable to:the Company
    
    
    278,486
    
    
    
    (719,680
    )
    
    
    (600,625
    )
    
    
    (20,612
    )noncontrolling interests
    
    
    (110,596
    )
    
    
    113,350
    
    
    
    10,618
    
    
    
    364Other comprehensive income (loss)
    
    
    (23,892,541
    )
    
    
    24,486,435
    
    
    
    (8,839,369
    )
    
    
    (303,342
    )Comprehensive income (loss)
    
    
    (53,524,579
    )
    
    
    24,850,794
    
    
    
    14,704,373
    
    
    
    504,611Comprehensive income (loss) attributable
to noncontrolling interests
    
    
    669,210
    
    
    
    (2,260,797
    )
    
    
    (282,821
    )
    
    
    (9,706
    )Comprehensive income (loss) attributable
to the Company
    
    
    (54,193,789
    )
    
    
    27,111,591
    
    
    
    14,987,194
    
    
    
    514,317
  F-89




---



##### 



AccumulatedCumulative
    
    
    Unrealized
    
    
    
    
    
    
    othertranslation
    
    
    gains (losses)
    
    
    Unrecognized
    
    
    comprehensiveadjustment
    
    
    on securities
    
    
    pension cost
    
    
    income (loss)NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Balance at December 31, 2008
    
    
    1,335,329
    
    
    
    817,360
    
    
    
    799,749
    
    
    
    2,952,438Other comprehensive income
(loss)
    
    
    (1,723,657
    )
    
    
    26,982,940
    
    
    
    (719,680
    )
    
    
    24,539,603Balance at December 31, 2009
    
    
    (388,328
    )
    
    
    27,800,300
    
    
    
    80,069
    
    
    
    27,492,041Other comprehensive income
(loss)
    
    
    (4,971,823
    )
    
    
    (3,056,478
    )
    
    
    (600,625
    )
    
    
    (8,628,926
    )Balance at December 31, 2010
    
    
    (5,360,151
    )
    
    
    24,743,822
    
    
    
    (520,556
    )
    
    
    18,863,115
  As of December 312009
    
    
    2010NT$000
    
    
    NT$000
    
    
    US$000Stockholders equity, R.O.C. GAAP
    
    
    214,096,256
    
    
    
    225,136,029
    
    
    
    7,726,013Compensation
    
    
    64,415
    
    
    
    31,517
    
    
    
    1,082Equity investees
    
    
    (149,798
    )
    
    
    (142,469
    )
    
    
    (4,889
    )Investments in debt and equity securitiesAdjustments due to
change in ownership
of investees
    
    
    1,717,221
    
    
    
    1,765,401
    
    
    
    60,583Goodwill and Business Combinations
    
    
    (7,615
    )
    
    
    1,301,125
    
    
    
    44,652Treasury stock and related disposal
    
    
    (2,769,095
    )
    
    
    (2,624,152
    )
    
    
    (90,053
    )Pension
    
    
    289,107
    
    
    
    (344,827
    )
    
    
    (11,833
    )Stockholders equity, U.S. GAAP
    
    
    213,240,491
    
    
    
    225,122,624
    
    
    
    7,725,555
  F-90




---



##### 



For the year ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Balance at January 1,
    
    
    253,819,436
    
    
    
    190,891,667
    
    
    
    213,240,491
    
    
    
    7,317,793Compensation
    
    
    2,202,324
    
    
    
    969,277
    
    
    
    1,549,083
    
    
    
    53,160Cash dividends
    
    
    (9,382,647
    )
    
    
    
    
    
    
    (6,233,002
    )
    
    
    (213,898
    )Adjustment of additional paid-in capital
and retained earnings accounted for under
the equity method
    
    
    263,934
    
    
    
    (84,851
    )
    
    
    (52,670
    )
    
    
    (1,807
    )Changes in additional paid-in capital for
purchases of subsidiary shares from
noncontrolling interests
    
    
    
    
    
    
    2,497,039
    
    
    
    408,011
    
    
    
    14,002Cumulative translation adjustment on
foreign long-term investment
    
    
    2,214,202
    
    
    
    (1,722,666
    )
    
    
    (4,971,823
    )
    
    
    (170,619
    )Change in fair value of marketable
securities
    
    
    (20,707,489
    )
    
    
    28,556,633
    
    
    
    (3,201,421
    )
    
    
    (109,863
    )Treasury stock and related disposal
    
    
    (9,186,760
    )
    
    
    (3,343,777
    )
    
    
    (4,618,121
    )
    
    
    (158,480
    )Exercise of employees stock options
    
    
    
    
    
    
    
    
    
    
    2,542
    
    
    
    87Pension
    
    
    278,486
    
    
    
    (719,680
    )
    
    
    (600,625
    )
    
    
    (20,612
    )Changes in noncontrolling interests
    
    
    345,281
    
    
    
    (6,375,139
    )
    
    
    5,984,039
    
    
    
    205,355Net income (loss) attributable to the
Company
    
    
    (28,955,100
    )
    
    
    2,571,988
    
    
    
    23,616,120
    
    
    
    810,437Balance at December 31,
    
    
    190,891,667
    
    
    
    213,240,491
    
    
    
    225,122,624
    
    
    
    7,725,555
  F-91




---



##### 



Summarized U.S. GAAP consolidated balance sheet and statement of operations information is
presented below:
 As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    US$000Current assets
    
    
    102,427,031
    
    
    
    93,790,493
    
    
    
    3,218,618Non-current assets
    
    
    150,278,758
    
    
    
    187,596,718
    
    
    
    6,437,775Current liabilities
    
    
    35,265,487
    
    
    
    45,468,186
    
    
    
    1,560,337Non-current liabilities
    
    
    4,199,811
    
    
    
    10,796,401
    
    
    
    370,501
 For the year ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Net operating revenues
    
    
    96,813,546
    
    
    
    91,389,765
    
    
    
    126,441,544
    
    
    
    4,339,106Cost of goods sold
    
    
    (85,923,000
    )
    
    
    (76,209,202
    )
    
    
    (89,929,148
    )
    
    
    (3,086,107
    )Operating income (loss)
    
    
    (22,431,492
    )
    
    
    (2,322,977
    )
    
    
    21,393,686
    
    
    
    734,169Net income (loss)
    
    
    (29,632,038
    )
    
    
    364,359
    
    
    
    23,543,742
    
    
    
    807,953Less: Net loss
attributable to
noncontrolling
interests
    
    
    (676,938
    )
    
    
    (2,207,629
    )
    
    
    (72,378
    )
    
    
    (2,484
    )Net income (loss)
attributable to the
Company
    
    
    (28,955,100
    )
    
    
    2,571,988
    
    
    
    23,616,120
    
    
    
    810,437
  F-92




---



##### 



As of December 31,2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    US$000Cash and Cash Equivalents:As reported under R.O.C. GAAP
    
    
    66,152,960
    
    
    
    51,271,105
    
    
    
    1,759,475Reclassification to marketable securities
    
    
    (11,740,000
    )
    
    
    (237,499
    )
    
    
    (8,150
    )As adjusted under U.S. GAAP
    
    
    54,412,960
    
    
    
    51,033,606
    
    
    
    1,751,325Long-term Investment under cost method,
equity method & others:As reported under R.O.C. GAAP
    
    
    20,119,755
    
    
    
    16,845,103
    
    
    
    578,075Equity Investees
    
    
    92,909
    
    
    
    56,821
    
    
    
    1,950Treasury stock and related disposal
    
    
    (2,769,095
    )
    
    
    (2,624,152
    )
    
    
    (90,053
    )As adjusted under U.S. GAAP
    
    
    17,443,569
    
    
    
    14,277,772
    
    
    
    489,972Held-to-maturity financial assets:As reported under R.O.C. GAAP
    
    
    
    
    
    
    
    
    
    
    Reclassification from cash and cash
equivalents
    
    
    11,740,000
    
    
    
    237,499
    
    
    
    8,150As adjusted under U.S. GAAP
    
    
    11,740,000
    
    
    
    237,499
    
    
    
    8,150Inventory:As reported under R.O.C. GAAP
    
    
    9,141,385
    
    
    
    13,032,623
    
    
    
    447,242Compensation
    
    
    64,415
    
    
    
    31,517
    
    
    
    1,082Ownership change in consolidated entities
    
    
    
    
    
    
    (10,321
    )
    
    
    (355
    )As adjusted under U.S. GAAP
    
    
    9,205,800
    
    
    
    13,053,819
    
    
    
    447,969Property, plant and equipment, net:As reported under R.O.C. GAAP
    
    
    89,596,360
    
    
    
    132,762,000
    
    
    
    4,556,005Business combination and ownership
change in consolidated entities
    
    
    1,613,779
    
    
    
    1,803,820
    
    
    
    61,902As adjusted under U.S. GAAP
    
    
    91,210,139
    
    
    
    134,565,820
    
    
    
    4,617,907Goodwill:As reported under R.O.C. GAAP
    
    
    7,615
    
    
    
    304,728
    
    
    
    10,457Business combination and ownership
change in consolidated entities
    
    
    98,778,711
    
    
    
    99,993,048
    
    
    
    3,431,471Accumulated impairment loss on goodwill
    
    
    (98,786,326
    )
    
    
    (98,786,326
    )
    
    
    (3,390,059
    )As adjusted under U.S. GAAP
    
    
    
    
    
    
    1,511,450
    
    
    
    51,869Other assets:As reported under R.O.C. GAAP
    
    
    1,924,468
    
    
    
    2,694,769
    
    
    
    92,477Ownership change in consolidated entities
    
    
    72,945
    
    
    
    35,808
    
    
    
    1,230As adjusted under U.S. GAAP
    
    
    1,997,413
    
    
    
    2,730,577
    
    
    
    93,707
  F-93




---



##### 



For the year ended December 31,2008
    
    
    2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Cash flows from
operating
activities, R.O.C.
GAAP
    
    
    45,251,284
    
    
    
    32,427,446
    
    
    
    53,560,000
    
    
    
    1,838,023Remuneration
paid to
directors and
supervisors
    
    
    (11,939
    )
    
    
    
    
    
    
    
    
    
    
    Employee bonus
    
    
    (286,541
    )
    
    
    
    
    
    
    
    
    
    
    Cash flows from
operating
activities, U.S.
GAAP
    
    
    44,952,804
    
    
    
    32,427,446
    
    
    
    53,560,000
    
    
    
    1,838,023Cash flows from
investing
activities, R.O.C.
GAAP
    
    
    (11,423,003
    )
    
    
    (19,234,215
    )
    
    
    (57,843,384
    )
    
    
    (1,985,016
    )Net effect of
time deposits
reclassified to
marketable
securities
    
    
    (8,550,000
    )
    
    
    (3,190,000
    )
    
    
    11,502,501
    
    
    
    394,733Cash flows from investing
activities, U.S.
GAAP
    
    
    (19,973,003
    )
    
    
    (22,424,215
    )
    
    
    (46,340,883
    )
    
    
    (1,590,283
    )Cash flows from
financing
activities, R.O.C.
GAAP
    
    
    (34,379,650
    )
    
    
    4,943,788
    
    
    
    (10,173,874
    )
    
    
    (349,138
    )Remuneration
paid to
directors and
supervisors
    
    
    11,939
    
    
    
    
    
    
    
    
    
    
    
    Employee bonus
    
    
    286,541
    
    
    
    
    
    
    
    
    
    
    
    Cash flows from
financing
activities, U.S.
GAAP
    
    
    (34,081,170
    )
    
    
    4,943,788
    
    
    
    (10,173,874
    )
    
    
    (349,138
    )Net increase
(decrease) in cash
and cash
equivalents, R.O.C.
GAAP
    
    
    888,502
    
    
    
    17,586,311
    
    
    
    (14,881,855
    )
    
    
    (510,702
    )Net effect of
time deposits
reclassified to
marketable
securities
    
    
    (8,550,000
    )
    
    
    (3,190,000
    )
    
    
    11,502,501
    
    
    
    394,733Net increase
(decrease) in cash
and cash
equivalents, U.S.
GAAP
    
    
    (7,661,498
    )
    
    
    14,396,311
    
    
    
    (3,379,354
    )
    
    
    (115,969
    )Cash and cash
equivalents at
beginning of year,
U.S. GAAP
    
    
    47,678,147
    
    
    
    40,016,649
    
    
    
    54,412,960
    
    
    
    1,867,294Cash and cash
equivalents at end
of year, U.S. GAAP
    
    
    40,016,649
    
    
    
    54,412,960
    
    
    
    51,033,606
    
    
    
    1,751,325
  F-94




---



##### 



For the year ended December 31,2009
    
    
    2010NT$000
    
    
    NT$000
    
    
    US$000Net income attributable to the Company
    
    
    2,571,988
    
    
    
    23,616,120
    
    
    
    810,437Transfers (to) from noncontrolling interestsIncrease in the Companys paid-in capital
for purchase of subsidiaries common shares from noncontrolling interests
    
    
    2,497,039
    
    
    
    408,011
    
    
    
    14,002Increase in the Companys paid-in capital
for a subsidiary acquisition of its own common shares
    
    
    7,536
    
    
    
    
    
    
    
    Decrease in the Companys paid-in capital
for subsidiaries employees exercise of the stock options
    
    
    (14,536
    )
    
    
    (25,500
    )
    
    
    (875
    )Net transfers from noncontrolling interests
    
    
    2,490,039
    
    
    
    382,511
    
    
    
    13,127Change from net income attributable to the
Company and transfers from noncontrolling
interests
    
    
    5,062,027
    
    
    
    23,998,631
    
    
    
    823,564
 Concentration of credit risk
 The Company designs, develops, manufactures and markets a variety of semiconductor products.
Financial instruments that potentially subject the Company to significant concentrations of
credit risk consist principally of cash and cash equivalents and trade accounts and notes
receivable. The Company limits its exposure to credit loss by depositing its cash and cash
equivalents with high credit quality financial institutions. The Companys revenues and trade
accounts and notes receivable are derived primarily from the sale of production foundry
wafers, including memory and logic products and wafers. For the years ended December 31,
2008, 2009, and 2010, the Company distributed its products on a global basis but mainly to
divisions in North America (55.41%, 50.22%, and 47.34%, respectively), Asia (34.89%, 48.78%,
and 52.66%, respectively), and Europe and others (9.70%, 1.00%, and nil, respectively). The
Companys sales are primarily derived from wafer sales and denominated in currencies other
than NT Dollars, primarily US Dollars. One customers revenue represented 14% of the
consolidated revenue for the year ended December 31, 2008, one customers revenue represented
12% of the consolidated revenue for the year ended December 31, 2009, and two customers
revenue represented 11% and 11%, respectively, of the consolidated revenue for the year ended
December 31, 2010. The Company routinely assesses the financial strength of substantially all
customers. The Company also requires collateral for certain sales to mitigate the credit
risk.
  F-95




---



##### 



Summarized Financial Information required by ASC 235-10-S99-1
 Notes to Financial Statements
 On group basis:
 As of December 31,2009
    
    
    2010NT$
    
    
    NT$(In millions)Current assets
    
    
    17,660
    
    
    
    15,371Non-current assets
    
    
    25,402
    
    
    
    19,793Current liabilities
    
    
    7,212
    
    
    
    7,308Long-term liabilities
    
    
    5,065
    
    
    
    1,047Redeemable Preferred Stock
    
    
    574
    
    
    
    587
 For the year ended December 31,2008
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    NT$(In millions)Net sales
    
    
    4,967
    
    
    
    6,224
    
    
    
    9,611Gross Profit (loss)
    
    
    (26,751
    )
    
    
    2,173
    
    
    
    2,208Income (loss) from
continuing operations
before extraordinary items
and cumulative effect of a
change in accounting
principle
    
    
    (28,478
    )
    
    
    612
    
    
    
    254Net income (loss)
    
    
    (28,498
    )
    
    
    615
    
    
    
    244
 On an individual basis:
 As of December 31,2009
    
    
    2010NT$
    
    
    NT$(In millions)Current assets
    
    
    7,556
    
    
    
    7,786Current liabilities
    
    
    2,569
    
    
    
    2,434
 For the year ended December 31,2008
    
    
    2009
    
    
    2010NT$
    
    
    NT$
    
    
    NT$(In millions)Net sales
    
    
    (1,711
    )
    
    
    1,685
    
    
    
    785Gross Profit (loss)
    
    
    (1,766
    )
    
    
    1,609
    
    
    
    684Income (loss) from
continuing operations
before extraordinary items
and cumulative effect of a
change in accounting
principle
    
    
    (1,766
    )
    
    
    1,609
    
    
    
    684Net income (loss)
    
    
    (1,766
    )
    
    
    1,609
    
    
    
    684
  F-96




---



##### 



New Accounting Pronouncements
 In October 2009, the FASB issued ASU 2009-13 Revenue recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements. Multiple-deliverable arrangements will be
separated in more circumstances than under existing U.S. GAAP. The amendment establishes a
selling price hierarchy for determining the selling price of a deliverable. The selling price
used for each deliverable will be based on vendor-specific objective evidence, if available,
or otherwise on third-party evidence; if neither vendor-specific objective evidence nor
third-party evidence is available, it will be based on estimated selling price. The
amendments replaced the term fair value in the revenue allocation guidance with selling
price, eliminated the residual method of allocation and expanded the disclosure requirements.
The amendments are expected to be effective for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010. The Company does not
expect this amendment to have a material impact on our consolidated financial statements.
 In March 2010, the FASB updated ASC 815, Derivatives and Hedging. The amended guidance
clarifies whether embedded credit derivatives should be bifurcated and accounted for
separately. In general, an embedded credit derivative feature that transfers credit risk
only in the form of subordination of one financial instrument to another is not required to
be analyzed for potential bifurcation and separate accounting. If this scope exception does
not apply, other embedded derivative features should be analyzed to determine if they should
be bifurcated and accounted for separately. This Update is effective at the beginning of the
first fiscal quarter beginning after June 15, 2010. The Company does not expect this
amendment to have a material impact on our consolidated financial statements.
 In April 2010, FASB issued ASU 2010-13 Compensation-Stock Compensation (Topic 718) Effect of
Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market
in Which the Underlying Equity Security Trades. This Update provides amendments to Topic 718
to clarify that an employee share-based payment award with an exercise price denominated in
the currency of a market in which a substantial portion of the entitys equity securities
trades should not be considered to contain a condition that is not a market, performance, or
service condition. Therefore, such an award is not to be classified as a liability if it
otherwise qualifies as equity classification. The amendments in this Update are effective for
interim and annual periods beginning on or after December 15, 2010, with earlier application
permitted. The guidance should be applied by recording a cumulative-effect adjustment to the
opening balance of retained earnings for all outstanding awards as of the beginning of the
fiscal year in which the amendments are initially applied. The Company does not expect this
amendment to have a material impact on our consolidated financial statement.
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In April 2010, the FASB issued ASU 2010-17 Revenue Recognition (Topic 605) Milestone Method
of Revenue Recognition. The amendment provides guidance on defining a milestone and
determining when it may be appropriate to apply the milestone method of revenue recognition
for research or development transactions. The amendment states that in order to use the
milestone method, the milestone must be considered substantive in its entirety. As a
result, each milestone should be evaluated whether to meet all the criteria to be considered
substantive and additional disclosures are required. The new pronouncement will be effective
prospectively for milestones achieved in fiscal years, and interim periods within those years
beginning on or after June 15, 2010. The Company does not expect this statement to have a
material impact on our consolidated financial statements.
 In December 2010, the FASB issued ASU 2010-28 IntangiblesGoodwill and Other (Topic 350)
When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or
Negative Carrying Amounts. This ASU addresses how companies should test for goodwill
impairment when the book value of a reporting entity is zero or negative. For reporting units
with zero or negative carrying amounts, an entity is required to assess the qualitative
factors listed in ASC 350-20-35-30 if it is more likely than not that the goodwill impairment
exists. If an entity concludes that goodwill impairment exists, the entity must perform step
2 of the goodwill impairment test. This update will be effective for fiscal years beginning
after December 15, 2010. The Company does not expect this statement to have a material impact
on our consolidated financial statements.
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