##### Table of Contents



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, 2008
 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 
Depositary Receipts, each representing 5 Common Shares
    
    New York Stock Exchange
 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
 
  12,987,771,315 Common Shares of Registrant issued as of December 31, 2008 (including zero
treasury shares)
  þ o
  o þ
  þ o
  o o
  þ o o
  o
 o þ
 o þ
  o þ




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##### 



UNITED MICROELECTRONICS CORPORATION
FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2008
 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
    
    
    21ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    38ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    38ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    56ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    60ITEM 8. FINANCIAL INFORMATION
    
    
    61ITEM 9. THE OFFER AND LISTING
    
    
    62ITEM 10. ADDITIONAL INFORMATION
    
    
    64ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    83ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    85PART II
    
    
    85ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    85ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
USE OF PROCEEDS
    
    
    85ITEM 15. CONTROLS AND PROCEDURES
    
    
    85ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    87ITEM 16B. CODE OF ETHICS
    
    
    87ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    87ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    87ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    88ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    88ITEM 16G. CORPORATE GOVERNANCE
    
    
    89PART III
    
    
    90ITEM 17. FINANCIAL STATEMENTS
    
    
    90ITEM 18. FINANCIAL STATEMENTS
    
    
    90ITEM 19. EXHIBITS
    
    
    91Exhibit 1.1Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1Exhibit 99.1




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##### Table of Contents



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




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##### Table of Contents



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.
  2




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##### Table of Contents



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.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




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Year Ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions, except per share and per ADS data)Consolidated Statement of Income Data:ROC GAAPNet operating revenues
    
    
    129,191
    
    
    
    100,316
    
    
    
    112,004
    
    
    
    113,311
    
    
    
    96,814
    
    
    
    2,955Cost of goods sold
    
    
    (92,393
    )
    
    
    (90,643
    )
    
    
    (90,638
    )
    
    
    (89,768
    )
    
    
    (81,130
    )
    
    
    (2,476
    )Gross profit
    
    
    36,798
    
    
    
    9,673
    
    
    
    21,366
    
    
    
    23,543
    
    
    
    15,684
    
    
    
    479Operating expenses:Sales and marketing
    
    
    (2,775
    )
    
    
    (3,739
    )
    
    
    (3,366
    )
    
    
    (4,069
    )
    
    
    (3,483
    )
    
    
    (106
    )General and administrative
    
    
    (4,853
    )
    
    
    (4,387
    )
    
    
    (3,422
    )
    
    
    (3,724
    )
    
    
    (3,055
    )
    
    
    (93
    )Research and development
    
    
    (7,364
    )
    
    
    (9,634
    )
    
    
    (9,419
    )
    
    
    (9,631
    )
    
    
    (8,274
    )
    
    
    (253
    )Total operating expenses
    
    
    (14,992
    )
    
    
    (17,760
    )
    
    
    (16,207
    )
    
    
    (17,424
    )
    
    
    (14,812
    )
    
    
    (452
    )Operating income (loss)
    
    
    21,806
    
    
    
    (8,087
    )
    
    
    5,159
    
    
    
    6,119
    
    
    
    872
    
    
    
    27Net non-operating income (loss)
    
    
    9,938
    
    
    
    13,693
    
    
    
    31,428
    
    
    
    13,551
    
    
    
    (22,858
    )
    
    
    (698
    )Income (Loss) before income tax and minority
interest
    
    
    31,744
    
    
    
    5,606
    
    
    
    36,587
    
    
    
    19,670
    
    
    
    (21,986
    )
    
    
    (671
    )Income tax expense
    
    
    (374
    )
    
    
    (67
    )
    
    
    (3,261
    )
    
    
    (2,809
    )
    
    
    (997
    )
    
    
    (30
    )Cumulative effect of changes in accounting
principles (the net amount after deducted tax
expense $0)(1)
    
    
    
    
    
    
    (113
    )
    
    
    (1,189
    )
    
    
    
    
    
    
    
    
    
    
    Minority interest loss
    
    
    473
    
    
    
    1,601
    
    
    
    482
    
    
    
    101
    
    
    
    663
    
    
    
    20Net income (loss)
    
    
    31,843
    
    
    
    7,027
    
    
    
    32,619
    
    
    
    16,962
    
    
    
    (22,320
    )
    
    
    (681
    )Earnings (Losses) per share: (2)(3)Basic
    
    
    1.59
    
    
    
    0.36
    
    
    
    1.71
    
    
    
    1.03
    
    
    
    (1.70
    )
    
    
    (0.05
    )Diluted(5)
    
    
    1.57
    
    
    
    0.35
    
    
    
    1.66
    
    
    
    1.00
    
    
    
    (1.70
    )
    
    
    (0.05
    )Shares used in earnings (losses) per share
calculation:(3)Basic
    
    
    20,024
    
    
    
    19,657
    
    
    
    19,029
    
    
    
    16,464
    
    
    
    13,111
    
    
    
    13,111Diluted(5)
    
    
    20,343
    
    
    
    19,959
    
    
    
    19,687
    
    
    
    16,943
    
    
    
    13,170
    
    
    
    13,170Earnings (Losses) per ADS:(3)Basic
    
    
    7.95
    
    
    
    1.80
    
    
    
    8.55
    
    
    
    5.15
    
    
    
    (8.50
    )
    
    
    (0.26
    )Diluted(5)
    
    
    7.85
    
    
    
    1.75
    
    
    
    8.30
    
    
    
    5.00
    
    
    
    (8.50
    )
    
    
    (0.26
    )US GAAPNet operating revenues
    
    
    129,191
    
    
    
    96,782
    
    
    
    112,004
    
    
    
    113,311
    
    
    
    96,814
    
    
    
    2,955Cost of goods sold
    
    
    (96,895
    )
    
    
    (89,743
    )
    
    
    (93,326
    )
    
    
    (92,081
    )
    
    
    (85,912
    )
    
    
    (2,622
    )Operating income (loss)
    
    
    (24,681
    )
    
    
    (29,072
    )
    
    
    2,162
    
    
    
    (20,061
    )
    
    
    (22,420
    )
    
    
    (684
    )Net income (loss)
    
    
    (14,237
    )
    
    
    (15,669
    )
    
    
    21,797
    
    
    
    (9,264
    )
    
    
    (28,955
    )
    
    
    (884
    )Other comprehensive income (loss)
    
    
    (16,451
    )
    
    
    23,708
    
    
    
    (8,194
    )
    
    
    (4,863
    )
    
    
    (25,239
    )
    
    
    (770
    )Comprehensive income (loss)
    
    
    (30,688
    )
    
    
    8,039
    
    
    
    13,602
    
    
    
    (14,127
    )
    
    
    (54,194
    )
    
    
    (1,654
    )Earnings (losses) per share: (2)(4)Basic
    
    
    (0.88
    )
    
    
    (0.97
    )
    
    
    1.42
    
    
    
    (0.63
    )
    
    
    (2.25
    )
    
    
    (0.07
    )Diluted(5)
    
    
    (0.88
    )
    
    
    (0.97
    )
    
    
    1.37
    
    
    
    (0.63
    )
    
    
    (2.25
    )
    
    
    (0.07
    )Shares used in earnings (losses) per share
calculation:(4)Basic
    
    
    16,139
    
    
    
    16,185
    
    
    
    15,350
    
    
    
    14,599
    
    
    
    12,870
    
    
    
    12,870Diluted(5)
    
    
    16,139
    
    
    
    16,185
    
    
    
    15,891
    
    
    
    14,599
    
    
    
    12,870
    
    
    
    12,870Earnings (Losses) per ADS:(4)Basic
    
    
    (4.41
    )
    
    
    (4.84
    )
    
    
    7.10
    
    
    
    (3.17
    )
    
    
    (11.25
    )
    
    
    (0.34
    )Diluted(5)
    
    
    (4.41
    )
    
    
    (4.84
    )
    
    
    6.87
    
    
    
    (3.17
    )
    
    
    (11.25
    )
    
    
    (0.34
    )
  4




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Year Ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions, except per share and per ADS data)Consolidated Balance Sheet
Data:ROC GAAPCurrent assets
    
    
    132,936
    
    
    
    144,863
    
    
    
    132,344
    
    
    
    81,111
    
    
    
    68,888
    
    
    
    2,103Long-term investment
    
    
    32,712
    
    
    
    30,797
    
    
    
    71,964
    
    
    
    69,813
    
    
    
    32,441
    
    
    
    990Property, plant and equipment
    
    
    192,024
    
    
    
    159,114
    
    
    
    151,828
    
    
    
    137,219
    
    
    
    108,410
    
    
    
    3,309Total assets
    
    
    376,305
    
    
    
    347,049
    
    
    
    367,653
    
    
    
    299,558
    
    
    
    216,399
    
    
    
    6,606Current liabilities
    
    
    36,598
    
    
    
    36,960
    
    
    
    35,703
    
    
    
    45,195
    
    
    
    12,834
    
    
    
    392Long-term debt (excluding
current portion)
    
    
    61,288
    
    
    
    41,692
    
    
    
    30,383
    
    
    
    7,495
    
    
    
    8,130
    
    
    
    248Total liabilities
    
    
    101,202
    
    
    
    82,429
    
    
    
    70,251
    
    
    
    56,561
    
    
    
    24,740
    
    
    
    755Shareholders equity
    
    
    266,374
    
    
    
    258,284
    
    
    
    291,165
    
    
    
    236,467
    
    
    
    184,676
    
    
    
    5,637US GAAPCash and cash equivalents
    
    
    55,558
    
    
    
    63,508
    
    
    
    61,649
    
    
    
    47,678
    
    
    
    40,017
    
    
    
    1,222Working capital(6)
    
    
    96,690
    
    
    
    105,846
    
    
    
    95,927
    
    
    
    35,273
    
    
    
    55,724
    
    
    
    1,701Total assets
    
    
    452,630
    
    
    
    426,706
    
    
    
    401,628
    
    
    
    310,614
    
    
    
    214,990
    
    
    
    6,563Total liabilities
    
    
    101,599
    
    
    
    83,943
    
    
    
    71,226
    
    
    
    56,795
    
    
    
    24,099
    
    
    
    736Shareholders equity
    
    
    342,420
    
    
    
    336,425
    
    
    
    324,162
    
    
    
    247,302
    
    
    
    184,029
    
    
    
    5,617
 Year Ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions, except per share and per ADS data)Other Consolidated Data:ROC GAAPCash flow:Capital expenditure
    
    
    81,110
    
    
    
    22,163
    
    
    
    33,240
    
    
    
    28,299
    
    
    
    11,515
    
    
    
    351Cash provided by operating activities
    
    
    72,557
    
    
    
    45,091
    
    
    
    47,124
    
    
    
    48,124
    
    
    
    45,251
    
    
    
    1,381Cash used in investing activities
    
    
    (72,447
    )
    
    
    (7,533
    )
    
    
    (16,556
    )
    
    
    (21,844
    )
    
    
    (11,423
    )
    
    
    (349
    )Cash used in financing activities
    
    
    (16,137
    )
    
    
    (29,592
    )
    
    
    (45,056
    )
    
    
    (72,694
    )
    
    
    (34,380
    )
    
    
    (1,049
    )Net increase (decrease) in cash and
cash equivalents
    
    
    (17,390
    )
    
    
    7,245
    
    
    
    (14,774
    )
    
    
    (46,175
    )
    
    
    889
    
    
    
    27Gross profit margin
    
    
    28.5
    %
    
    
    9.6
    %
    
    
    19.1
    %
    
    
    20.8
    %
    
    
    16.2
    %
    
    
    16.2
    %Operating profit (loss) margin
    
    
    16.9
    %
    
    
    (8.1
    )%
    
    
    4.6
    %
    
    
    5.4
    %
    
    
    0.9
    %
    
    
    0.9
    %Net profit (loss) margin
    
    
    24.6
    %
    
    
    7.0
    %
    
    
    29.1
    %
    
    
    15.0
    %
    
    
    (23.0
    )%
    
    
    (23.0
    )%Capacity utilization rate (on an actual
basis)
    
    
    90.8
    %
    
    
    72.4
    %
    
    
    79.5
    %
    
    
    81.9
    %
    
    
    70.7
    %
    
    
    70.7
    %Dividends declared per share(7)
    
    
    0.8
    
    
    
    1.1
    
    
    
    0.5
    
    
    
    0.7
    
    
    
    1.2
    
    
    
    0.04US GAAPCash flow:Capital expenditure
    
    
    81,127
    
    
    
    22,163
    
    
    
    33,240
    
    
    
    28,299
    
    
    
    11,515
    
    
    
    351Cash provided by operating activities
    
    
    72,379
    
    
    
    45,064
    
    
    
    46,385
    
    
    
    45,785
    
    
    
    44,953
    
    
    
    1,372Cash provided by (used in) investing
activities
    
    
    (88,469
    )
    
    
    (6,081
    )
    
    
    (9,736
    )
    
    
    10,360
    
    
    
    (19,973
    )
    
    
    (610
    )Cash used in financing activities
    
    
    (16,124
    )
    
    
    (29,565
    )
    
    
    (38,222
    )
    
    
    (70,354
    )
    
    
    (34,081
    )
    
    
    (1,040
    )Net increase (decrease) in cash and
cash equivalents
    
    
    (33,639
    )
    
    
    7,951
    
    
    
    (1,859
    )
    
    
    (13,971
    )
    
    
    (7,661
    )
    
    
    (234
    )Gross profit margin
    
    
    25.0
    %
    
    
    7.3
    %
    
    
    16.7
    %
    
    
    18.7
    %
    
    
    11.3
    %
    
    
    11.3
    %Operating profit (loss) margin
    
    
    (19.1
    )%
    
    
    (30.0
    )%
    
    
    1.9
    %
    
    
    (17.7
    )%
    
    
    (23.2
    )%
    
    
    (23.2
    )%Net profit (loss) margin
    
    
    (11.0
    )%
    
    
    (16.2
    )%
    
    
    19.5
    %
    
    
    (8.2
    )%
    
    
    (29.9
    )%
    
    
    (29.9
    )%
 
 (1)
    
    Refer to Note 3 to the audited consolidated financial statements included elsewhere in this
annual report.(2)
    
    Earnings (Losses) per share is calculated by dividing net income by the weighted average
number of shares outstanding during the year.(3)
    
    Retroactively adjusted for all subsequent stock dividends and employee stock bonuses.(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.(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 35 to the audited consolidated financial statements included elsewhere in this
annual report.  5




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##### Table of Contents



Currency Translations and Exchange Rates
  AtAverage(1)
    
    
    High
    
    
    Low
    
    
    Period-End2004
    
    
    33.27
    
    
    
    34.16
    
    
    
    31.74
    
    
    
    31.742005
    
    
    32.13
    
    
    
    33.77
    
    
    
    30.65
    
    
    
    32.802006
    
    
    32.51
    
    
    
    33.31
    
    
    
    31.28
    
    
    
    32.592007
    
    
    32.85
    
    
    
    33.41
    
    
    
    32.26
    
    
    
    32.432008
    
    
    31.52
    
    
    
    33.58
    
    
    
    29.99
    
    
    
    32.76October
    
    
    32.70
    
    
    
    33.50
    
    
    
    32.14
    
    
    
    32.97November
    
    
    33.10
    
    
    
    33.42
    
    
    
    32.77
    
    
    
    33.29December
    
    
    33.16
    
    
    
    33.58
    
    
    
    32.45
    
    
    
    32.762009 (through May 1)
    
    
    33.75
    
    
    
    35.21
    
    
    
    32.82
    
    
    
    33.06January
    
    
    33.37
    
    
    
    33.70
    
    
    
    32.82
    
    
    
    33.70February
    
    
    34.24
    
    
    
    35.00
    
    
    
    33.61
    
    
    
    35.00March
    
    
    34.30
    
    
    
    35.21
    
    
    
    33.75
    
    
    
    33.87April
    
    
    33.64
    
    
    
    33.88
    
    
    
    33.05
    
    
    
    33.06May (through May 1)
    
    
    33.14
    
    
    
    33.14
    
    
    
    33.14
    
    
    
    33.14
 
 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
 The current 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




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##### Table of Contents



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;
 
    
    outbreaks of contagious diseases, including severe acute respiratory syndrome and
avian flu;
 
    
    environmental events, such as fires and earthquakes, or industrial accidents; and
 
    
    technological changes.
  7




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A decrease in demand for or selling prices of communication devices, consumer electronics and PCs
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.
  We may be unable to implement new technology as it becomes available, which may result in our loss
of customers and market share.
   8




---



##### Table of Contents



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.
   
    
    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.
  9




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##### Table of Contents



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.
   10




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##### Table of Contents



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; or
 
    
    seek to develop non-infringing technologies, which may not be feasible.
  11




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##### Table of Contents



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 Technology (Suzhou) Co.,
Ltd., a semiconductor manufacturer in China.
     The Hsinchu District Prosecutors Office has opened an investigation related to our investment in
ProMOS Technologies, and we cannot assure you of the outcome of this investigation.
   12




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##### Table of Contents



We have been offered a 15% interest in a holding company that owns Hejian, but such investment may
not materialize.
  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 shareholders may hurt our profitability and competitive
position.
  The differences between ROC and U.S. accounting standards affect the amount of our net income.
   13




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##### Table of Contents



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.
  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 increasing production at new and existing facilities;
 
    
    difficulties in upgrading or expanding existing facilities;
 
    
    manufacturing execution system or automatic transportation system failure;
 
    
    changing or upgrading our process technologies; and
 
    
    raw materials shortages and impurities.
   14




---



##### Table of Contents



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 65- and 45-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.
     15




---



##### Table of Contents



We may be subject to the risk of loss due to fire because the materials we use in our manufacturing
processes are highly flammable.
  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 regulations.
  Disruptions in the international trading environment may seriously decrease our international
sales.
    16




---



##### Table of Contents



Political, Economic and Regulatory Risks
 We face substantial political risks associated with doing business in Taiwan, particularly due to
the tense relationship between the ROC 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 ROC government, and a decrease in this support may
increase our labor costs and decrease our net income after tax.
   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.
    17




---



##### Table of Contents



Currency fluctuations could increase our costs relative to our revenues, which could adversely
affect our profitability.
  Our future tax obligations may adversely affect our profitability.
  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 ROC 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.
  18




---



##### Table of Contents



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.
   19




---



##### Table of Contents



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.
   Our public shareholders may have more difficulty protecting their interests than they would as
shareholders 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 shareholders, which may make ownership burdensome.
   20




---



##### Table of Contents



You may not be able to enforce a judgment of a foreign court in the ROC.
  
    
    the court rendering the judgment does not have jurisdiction over the subject matter
according to ROC law;
 
    
    the judgment is contrary to the public order or good morals of the ROC;
 
    
    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 ROC; or
 
    
    judgments of ROC 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
    21




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22




---



##### Table of Contents



Our Strategy
  Operate as a SoC Solution 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
  23




---



##### Table of Contents



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
    24




---



##### Table of Contents



Fab 6A
    
    Fab8A
    
    Fab8C
    
    Fab8D
    
    Fab8E
    
    Fab8F
    
    Fab8S
    
    Fab12A
    
    Fab12i
    
    UMCJCommencement of volume production
    
    1989
    
    1995
    
    1998
    
    2000
    
    FABII 1998 FAB2A 2000
    
    2000
    
    2000
    
    2002
    
    2004
    
    1996Estimated full capacity(1)(2)
    
    49,300 wafers per month
    
    68,000 wafers per month
    
    33,500 wafers per month
    
    22,000 wafers per month
    
    34,000 wafers per month
    
    32,000 wafers per month
    
    25,000 wafers per month
    
    36,000 wafers per month
    
    31,000 wafers  per month
    
    20,000 wafers  per monthWafer 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)Clean room area(3)
    
    5,250 sq. meters
    
    25,029 sq. meters
    
    19,764 sq. meters
    
    16,589 sq. meters
    
    21,576 sq. meters
    
    13,812 sq. meters
    
    8,163 sq. meters
    
    24,860 sq. meters
    
    27,224 sq. meters
    
    10,367 sq. metersType of clean rooms(4)
    
    Class-10 @0.1um, clean tunnel
    
    Class-0.1 @0.1um, clean tunnel
    
    Class-0.1 @0.1um, clean tunnel
    
    Class100 @0.3um, SMIF/mini-environment
    
    FABII: Class-1000@0.3 um FAB2A: Class100@0.3um, SMIF/mini-environment
    
    Class 100 @0.3um, SMIF/mini-environment
    
    Class 1000 @0.3um, SMIF/mini-environment
    
    Class 100 @0.3um, SMIF/mini-environment
    
    Class 100 @0.3um, SMIF/mini-environment
    
    Class-1 @0.1um, clean tunnel
 
 (1)
    
    Measured in original 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.(3)
    
    Area represents the total area of clean rooms within a fab. Clean room area of Fab 12i area
includes Module B area of 11,737 square meters.(4)
    
    Class represents the cleanliness of clean rooms in the fab. Class-10@0.1um means a standard
of air purity under which the amount of dust is limited to fewer than 10 particles of
contaminants of 0.1 micron or greater per one cubic foot per minute of air flow.
Class-0.1@0.1um means a standard of air purity under which the amount of dust is limited to
fewer than one particle of contaminant of 0.1 micron or greater per 10 cubic feet per minute
of air flow. Class-100@0.3um means a standard of air purity under which the amount of dust is
limited to fewer than 100 particles of contaminants of 0.3 micron or greater per one cubic
foot per minute of air flow. Class-1000@0.3um means a standard of air purity under which the
amount of dust is limited to fewer than 1,000 particles of contaminants of 0.3 micron or
greater per one cubic foot per minute of air flow. The general production environment may be
organized into clean tunnels or mini environments. In a clean tunnel environment, the
clean room is divided into many tunnels with partitions. A higher level of cleanliness is kept
inside the tunnel for production. Mini-environments within a clean room use Standard
Mechanical Interface technology, or SMIF, which employs input/output devices designed to
protect products from contamination while providing a standard mechanical interface to wafer
production tools. Mini-environment is generally a preferred approach because it reduces
building structural costs and operating costs, allows flexibility in equipment layout and
facilitates the ramping-up process during capacity expansion.  BuildingSize
    
    
    
    
    Land
    
    (Owned orLocation
    
    (Land/Building)
    
    
    Primary Use
    
    (Owned or Leased)
    
    Leased)(in square meters)Fab 6A, 10 Innovation 1st Rd.,
    
    
    27,898/34,609
    
    
    6-inch wafer production
    
    Leased
    
    OwnedHsinchu Science Park, Hsinchu,
    
    
    
    
    
    
    
    (expires in December 2026)Taiwan 300, ROCFab 8A, 3 Li-Hsin 2 nd Rd.,
    
    
    43,468/83,699
    
    
    8-inch wafer production
    
    Leased
    
    OwnedHsinchu Science Park, Hsinchu,
    
    
    
    
    
    
    
    (expires in March 2014)Taiwan 300, ROC.Fab 8C, 6 Li-Hsin 3 rd Rd.,
    
    
    24,678/71,428
    
    
    8-inch wafer production
    
    Leased
    
    OwnedHsinchu Science Park, Hsinchu,
    
    
    
    
    
    
    
    (expires in March 2016)Taiwan 300, ROCFab 8D, 8 Li-Hsin 3 rd Rd.,
    
    
    8,036/29,181
    
    
    8-inch wafer production
    
    Leased
    
    OwnedHsinchu Science Park, Hsinchu,
    
    
    
    
    
    
    
    (expires in March 2016)Taiwan 300, ROCFab 8E, 17 Li-Hsin Rd., Hsinchu
    
    
    35,000/76,315
    
    
    8-inch wafer production
    
    Leased
    
    OwnedScience Park, Hsinchu, Taiwan
    
    
    
    
    
    
    
    (expires in February 2016)300, ROCFab 8F, 3 Li-Hsin 6 th Rd.,
    
    
    24,180/65,736
    
    
    8-inch wafer production
    
    Leased
    
    OwnedHsinchu Science Park, Hsinchu,
    
    
    
    
    
    
    
    (expires in February 2018)Taiwan 300, ROC.
  25




---



##### Table of Contents



BuildingSize
    
    
    
    
    Land
    
    (Owned orLocation
    
    (Land/Building)
    
    
    Primary Use
    
    (Owned or Leased)
    
    Leased)(in square meters)Fab 8S, 16 Creation 1 st Rd.,
    
    
    20,404/65,614
    
    
    8-inch wafer production
    
    Leased
    
    OwnedHsinchu Science Park, Hsinchu,
    
    
    
    
    
    
    
    (expires in December 2023)Taiwan 300, ROC.Fab 12A, 18 Nan-Ke 2 nd Rd.,
    
    
    113,661/177,049
    
    
    12-inch wafer production
    
    Leased
    
    OwnedTainan Science Park, Sinshih,
    
    
    
    
    
    
    
    (expires in October 2017)Tainan, Taiwan 741, ROC.Fab 12i, 3 Pasir Ris Drive 12
    
    
    85,737/142,169
    
    
    12-inch wafer production
    
    Leased
    
    OwnedSingapore 519528
    
    
    
    
    
    
    
    (expires in March 2031)UMCJ, 1580, Yamamoto,Tateyama-City, Chiba, Japan
    
    
    387,550/61,176
    
    
    8-inch wafer production
    
    82% owned, 18% leased(expires in June 2049)
    
    96% Owned,4% LeasedUnited Tower, 3 Li-Hsin 2nd Rd.,
    
    
    8,818/85,224
    
    
    Administration office
    
    Leased
    
    OwnedHsinchu Science Park, Hsinchu,
    
    
    
    
    
    
    
    (expires in March 2014)Taiwan 300, ROC.Tunhwa South Rd. Office, 3F,
    
    
    166/2,575
    
    
    Administration office
    
    Owned
    
    Owned76,
Sec. 2, Tunhwa S. Rd., Taipei, 
Taiwan 106, ROCTesting Building, 1,
    
    
    10,762/41,318
    
    
    Leased to several
    
    Owned
    
    OwnedChin-Shan, St.
    
    
    
    
    
    companies7, Hsinchu, Taiwan 300, ROC.R&D Building, 18 Nan-Ke 2 nd
    
    
    42,000/47,501
    
    
    Research and development
    
    Leased
    
    OwnedRd., Tainan Science Park,
    
    
    
    
    
    
    
    (expires in December 2023)Sinshih,
Tainan, Taiwan 741, ROC.
 Process Technology
     26




---



##### Table of Contents



Year EndedDecember 31,2008 Range ofYear of

    
    
    ProcessCommencement
    
    
    Technologies
    
    
    Year Ended December 31,of Operation
    
    
    (in microns)
    
    
    2006
    
    
    
    
    
    2007
    
    
    2008(in thousands of 8-inch wafer equivalents, except percentages)FabFab 6A
    
    
    1989
    
    
    
    0.5
    
    
    
    328
    
    
    
    
    
    
    
    328
    
    
    
    328Fab 8A
    
    
    1995
    
    
    
    0.5 to 0.25
    
    
    
    816
    
    
    
    
    
    
    
    816
    
    
    
    816Fab 8C
    
    
    1998
    
    
    
    0.35 to 0.15
    
    
    
    400
    
    
    
    
    
    
    
    400
    
    
    
    400Fab 8D
    
    
    2000
    
    
    
    0.18 to 0.09
    
    
    
    252
    
    
    
    
    
    
    
    260
    
    
    
    260Fab 8E
    
    
    1998
    
    
    
    0.5 to 0.18
    
    
    
    406
    
    
    
    
    
    
    
    408
    
    
    
    408Fab 8F
    
    
    2000
    
    
    
    0.25 to 0.15
    
    
    
    372
    
    
    
    
    
    
    
    372
    
    
    
    374Fab 8S
    
    
    2000
    
    
    
    0.25 to 0.15
    
    
    
    276
    
    
    
    
    
    
    
    276
    
    
    
    294Fab 12A
    
    
    2002
    
    
    
    0.18 to 0.065
    
    
    
    754
    
    
    
    
    
    
    
    847
    
    
    
    884Fab 12i
    
    
    2004
    
    
    
    0.13 to 0.065
    
    
    
    413
    
    
    
    
    
    
    
    601
    
    
    
    743UMCJ
    
    
    1996
    
    
    
    0.35 to 0.15
    
    
    
    378
    
    
    
    
    
    
    
    348
    
    
    
    240Total estimated capacity
    
    
    
    
    
    
    
    
    
    
    4,395
    
    
    
    
    
    
    
    4,656
    
    
    
    4,747Total output (actual)
    
    
    
    
    
    
    
    
    
    
    3,495
    
    
    
    
    
    
    
    3,813
    
    
    
    3,355Average capacity utilization
    
    
    
    
    
    
    
    
    
    
    79.5
    %
    
    
    
    
    
    
    81.9
    %
    
    
    70.7
    %
  Year Ended December 31,2006
    
    
    2007
    
    
    2008(in thousands of 8-inch wafer equivalents, except percentages)Technology65 nanometers and under
    
    
    18
    
    
    
    0.5
    %
    
    
    34
    
    
    
    0.9
    %
    
    
    147
    
    
    
    4.3
    %90 nanometers
    
    
    320
    
    
    
    9.2
    
    
    
    492
    
    
    
    12.9
    
    
    
    701
    
    
    
    21.00.13 micron
    
    
    477
    
    
    
    13.6
    
    
    
    595
    
    
    
    15.6
    
    
    
    555
    
    
    
    16.50.15 micron
    
    
    301
    
    
    
    8.6
    
    
    
    354
    
    
    
    9.3
    
    
    
    258
    
    
    
    7.70.18 micron
    
    
    677
    
    
    
    19.4
    
    
    
    784
    
    
    
    20.5
    
    
    
    587
    
    
    
    17.50.25 micron
    
    
    252
    
    
    
    7.2
    
    
    
    206
    
    
    
    5.4
    
    
    
    110
    
    
    
    3.30.35 micron
    
    
    1,004
    
    
    
    28.7
    
    
    
    971
    
    
    
    25.5
    
    
    
    728
    
    
    
    21.70.50 micron or higher
    
    
    446
    
    
    
    12.8
    
    
    
    377
    
    
    
    9.9
    
    
    
    269
    
    
    
    8.0Total
    
    
    3,495
    
    
    
    100.0
    %
    
    
    3,813
    
    
    
    100.0
    %
    
    
    3,355
    
    
    
    100.0
    %
 Capacity and Utilization
    27




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##### Table of Contents



Equipment
     Raw Materials
      28




---



##### Table of Contents



Quality Control
     Services and Products
    29




---



##### Table of Contents



Circuit Design.
 Mask Tooling.
 Wafer Fabrication.
 Assembly and Testing.
 Customers and Markets
  Year Ended December 31,Region
    
    2006
    
    
    2007
    
    
    2008Taiwan
    
    
    34.2
    %
    
    
    38.0
    %
    
    
    29.8
    %Asia (excluding Taiwan)
    
    
    8.5
    
    
    
    6.9
    
    
    
    5.1North America
    
    
    49.7
    
    
    
    46.9
    
    
    
    55.4Europe
    
    
    7.6
    
    
    
    8.2
    
    
    
    9.7Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  30




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##### Table of Contents



Year Ended December 31,Customer Type
    
    2006
    
    
    2007
    
    
    2008Fabless design companies
    
    
    62.0
    %
    
    
    73.7
    %
    
    
    73.2
    %Integrated device manufacturers
    
    
    38.0
    
    
    
    26.1
    
    
    
    26.8System companies
    
    
    0.0
    
    
    
    0.2
    
    
    
    0.0Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
       31




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Competition
   Intellectual Property
    32




---



##### Table of Contents



Research and Development
   Our Investments
    33




---



##### Table of Contents



Environmental Matters
    34




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##### Table of Contents



Environmental, Safety and Health Management Systems
  Litigation
       35




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##### Table of Contents



Dispute with LSI
  
    
    In April 2008, LSI filed a petition with the US International Trade Commission naming us
and eighteen other companies as proposed respondents (including AMIC Technology, one of our
customers). LSIs petition is based on alleged infringement of US Patent Number 5,227,335,
claiming certain methods for forming nitrided glue layers for tungsten processing in
semiconductor fabrication. LSIs petition seeks an order prohibiting import and/or sale of
the accused devices in the US. 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 seeks 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.
  36




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##### Table of Contents




    
    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, US Patent
Numbers 5,459,354 and 5,652,689. Our complaint seeks 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 US Patents, US Patent Numbers 5,149,672; 6,153,543; 5,599,739; and
5,693,561. LSIs counterclaim seeks 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 US subsidiary.
    
    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 US Patent
Number 5,393,701. Our complaint seeks 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
     37




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##### Table of Contents



Insurance
  C. Organizational Structure
  Percentage ofOwnership as ofCompany
    
    Jurisdiction of Incorporation
    
    December 31, 2008UMC Group (USA)
    
    California, USA
    
    
    100.00
    %United Microelectronics (Europe) B.V.
    
    The Netherlands
    
    
    100.00
    %UMC Capital Corp.
    
    Cayman Islands
    
    
    100.00
    %United Microelectronics Corp. (Samoa)
    
    Samoa
    
    
    100.00
    %TLC Capital Co., Ltd
    
    Taiwan, ROC
    
    
    100.00
    %UMCi Ltd.
    
    Singapore
    
    
    100.00
    %Fortune Venture Capital Corp.
    
    Taiwan, ROC
    
    
    99.99
    %United Microdisplay Optronics Corp.
    
    Taiwan, ROC
    
    
    89.99
    %UMC Japan
    
    Japan
    
    
    52.64
    %Unitruth Investment Corp.
    
    Taiwan, ROC
    
    
    99.99
    %UMC Capital (USA)
    
    California, USA
    
    
    100.00
    %ECP VITA Ltd.
    
    British Virgin Islands
    
    
    100.00
    %Soaring Capital Corp.
    
    Samoa
    
    
    100.00
    %Unitruth Advisor (Shanghai) Co., Ltd.
    
    China
    
    
    100.00
    %
 D. Property, Plants and Equipment
  
 ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 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 ROC
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. ROC GAAP varies in certain significant respects from US GAAP. These differences
and their effects on our financial statements are described in Note 35 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, 2008 have been translated into U.S. dollar amounts using US$1.00 =
NT$32.76, the noon buying rate
of the Federal Reserve Bank of New York on December 31, 2008. The U.S. dollar translation
appears in parentheses next to the relevant NT dollar amount.
  38




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Overview
   Cyclicality of the Semiconductor Industry
  Pricing
   Capacity Utilization Rates
   39




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##### Table of Contents



Change in Product Mix and Technology Migration
   Manufacturing Yields
   Investments
   40




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##### Table of Contents



Treasury Share Programs
  Critical Accounting Policies
 General
   Revenue Recognition
    41




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##### Table of Contents



Accounts Receivable and Allowance for Doubtful Accounts
   Inventory
  Income Taxes
    42




---



##### Table of Contents



Long-lived Assets Impairment
  Goodwill Impairment
  Pension
    43




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##### Table of Contents



Investments in Debt and Equity Securities
  Derivative Instruments
  Employee Stock Options
    44




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##### Table of Contents



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.
    
    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.
  45




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##### Table of Contents



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; 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 ROC SFAS No. 34 Financial Instruments: Recognition
and Measurement, or ROC 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;
    
    impairment loss, which have been primarily derived from the loss recognized in our
long-term investments and goodwill; and
    
    loss on decline in market value and obsolescence of inventories, which have been
primarily derived from an allowance for loss on decline in market value or obsolescence
of inventories.
 Taxation
     46




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##### Table of Contents



Comparisons of Results of Operations
  Year Ended December 31,2006
    
    
    2007
    
    
    2008Net operating revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    (80.9
    )
    
    
    (79.2
    )
    
    
    (83.8
    )Gross profit
    
    
    19.1
    
    
    
    20.8
    
    
    
    16.2Operating expenses:Sales and marketing
    
    
    (3.0
    )
    
    
    (3.6
    )
    
    
    (3.6
    )General and administrative
    
    
    (3.1
    )
    
    
    (3.3
    )
    
    
    (3.1
    )Research and development
    
    
    (8.4
    )
    
    
    (8.5
    )
    
    
    (8.6
    )Operating income
    
    
    4.6
    
    
    
    5.4
    
    
    
    0.9Net non-operating income (loss)
    
    
    28.1
    
    
    
    12.0
    
    
    
    (23.6
    )Income (Loss) before income tax and minority interest
    
    
    32.7
    
    
    
    17.4
    
    
    
    (22.7
    )Income tax expense
    
    
    (2.9
    )
    
    
    (2.5
    )
    
    
    (1.0
    )Cumulative effect of changes in accounting
principles (the net amount after deducted tax
expense)
    
    
    (1.1
    )
    
    
    
    
    
    
    Minority interest loss
    
    
    0.4
    
    
    
    0.1
    
    
    
    0.7Net income (loss)
    
    
    29.1
    
    
    
    15.0
    
    
    
    (23.0
    )
 Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Net operating revenues.
 Cost of goods sold.
 Gross profit and gross margin.
  47




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##### Table of Contents



Operating income and operating margin.
 Sales and marketing expenses.
 General and administrative expenses.
 Research and development expenses.
 Net non-operating income (loss).
 Net income (loss).
 Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Net operating revenues.
 Cost of goods sold.
 Gross profit and gross margin.
 Operating income and operating margin.
 Sales and marketing expenses.
  48




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##### Table of Contents



General and administrative expenses.
 Research and development expenses.
 Net non-operating income.
 Net income.
 B. Liquidity and Capital Resources
     Operating Activities
   49




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##### Table of Contents



Investment Activities
  Financing Activities
     
    
    NT$7.5 billion seven-year unsecured domestic bonds with interest rates of 4.3% minus
12-month U.S. dollar LIBOR but at the minimum of 0%; and
    
    NT$200 million unsecured long-term bank loans due by 2011 and NT$500 million secured
long-term bank loans due by 2013. The interest rates of our long-term bank loans range
from 1.815% to 2.610%.
  Capital Expenditures
     50




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##### Table of Contents



Transactions with Related Parties
  Inflation/Deflation
  US GAAP Reconciliation
   Year Ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions)Net income (loss)Net income (loss), ROC GAAP
    
    
    32,619
    
    
    
    16,962
    
    
    
    (22,320
    )
    
    
    (681
    )US GAAP adjustmentsCompensation
    
    
    (2,106
    )
    
    
    (2,648
    )
    
    
    (1,925
    )
    
    
    (59
    )Equity investees
    
    
    (56
    )
    
    
    (4
    )
    
    
    (80
    )
    
    
    (2
    )Investment in debt and equity securities
    
    
    1,037
    
    
    
    319
    
    
    
    1,486
    
    
    
    45Exchangeable bond liabilities
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    Goodwill
    
    
    
    
    
    
    (23,761
    )
    
    
    (14,571
    )
    
    
    (445
    )Treasury stock and related disposal
    
    
    (10,842
    )
    
    
    (132
    )
    
    
    8,817
    
    
    
    269Derivative instruments
    
    
    1,126
    
    
    
    
    
    
    
    
    
    
    
    Inventory
    
    
    
    
    
    
    
    
    
    
    (362
    )
    
    
    (11
    )Income tax effect
    
    
    (180
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss), US GAAP
    
    
    21,797
    
    
    
    (9,264
    )
    
    
    (28,955
    )
    
    
    (884
    )Shareholders equityShareholders equity, ROC GAAP
    
    
    291,165
    
    
    
    236,467
    
    
    
    184,676
    
    
    
    5,637Compensation
    
    
    (685
    )
    
    
    (513
    )
    
    
    63
    
    
    
    2Equity investees
    
    
    22
    
    
    
    (498
    )
    
    
    (78
    )
    
    
    (2
    )Investment in debt and equity securities
    
    
    353
    
    
    
    236
    
    
    
    
    
    
    
    Goodwill
    
    
    37,948
    
    
    
    14,187
    
    
    
    (8
    )
    
    
    (1
    )Treasury stock and related disposal
    
    
    (4,476
    )
    
    
    (3,104
    )
    
    
    (1,196
    )
    
    
    (36
    )Pension
    
    
    (165
    )
    
    
    527
    
    
    
    934
    
    
    
    28Inventory
    
    
    
    
    
    
    
    
    
    
    (362
    )
    
    
    (11
    )Shareholders equity, US GAAP
    
    
    324,162
    
    
    
    247,302
    
    
    
    184,029
    
    
    
    5,617
 Note.
    
    Refer to Note 35 to our audited financial statements included elsewhere in this annual
report.  51




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##### Table of Contents



Compensation Expenses
   Investments in Debt and Equity Securities
   Goodwill
   52




---



##### Table of Contents



Treasury stock and related disposal
  Pension
  Inventory
  Recent Accounting Pronouncements
   53




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##### Table of Contents



C. Research, Development, Patents and Licenses, Etc.
    54




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##### Table of Contents



D. Trend Information
  E. Off-balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  Payments Due by PeriodLess than 1Total
    
    
    Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 Years(consolidated) (in NT$ millions)Long-term debt(1)Unsecured bonds
    
    
    7,500
    
    
    
    
    
    
    
    7,500
    
    
    
    
    
    
    
    Long-term loans
    
    
    700
    
    
    
    67
    
    
    
    342
    
    
    
    291
    
    
    
    Capital lease obligations(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating leases obligations(3)
    
    
    3,158
    
    
    
    338
    
    
    
    626
    
    
    
    477
    
    
    
    1,717Purchase obligations(4)
    
    
    3,368
    
    
    
    
    
    
    
    3,368
    
    
    
    
    
    
    
    Other long-term obligations(5)
    
    
    3,305
    
    
    
    2,729
    
    
    
    576
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    
    18,031
    
    
    
    3,134
    
    
    
    12,412
    
    
    
    768
    
    
    
    1,717
 
 (1)
    
    Assuming the convertible bonds are paid off upon maturity.(2)
    
    Represents our obligations to make lease payments for equipment.(3)
    
    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 and, Pasir Ris Wafer Fab Park in Singapore, and UMCJ.(4)
    
    Represents commitments for construction and purchase of raw materials. These commitments are
not recorded on our balance sheet as of December 31, 2008.(5)
    
    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.  55




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##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors, Supervisors and Senior Management
   Name
    
    Age
    
    Position
    
    Years with UsStan Hung(1)
    
    
    48
    
    
    Chairman and Director (Representative of Hsun Chieh Investment Co.)
    
    
    17Shih-Wei Sun(2)
    
    
    51
    
    
    Director (Representative of Silicon Integrated Systems Corp.) and Chief
Executive Officer
    
    
    14Henry Liu(3)
    
    
    58
    
    
    Director (Representative of Hsun Chieh Investment Co.)
    
    
    27Wen-Yang Chen(4)
    
    
    56
    
    
    Director (Representative of Hsun Chieh Investment Co.) and Senior Vice President
    
    
    29Po-Wen Yen(5)
    
    
    52
    
    
    Director (Representative of Hsun Chieh Investment Co.)
    
    
    22Chitung Liu(6)
    
    
    43
    
    
    Director (Representative of Silicon Integrated Systems Corp.) and Chief
Financial Officer
    
    
    8Paul S.C. Hsu(7)
    
    
    73
    
    
    Independent Director
    
    
    5Chung-Laung Liu(7)
    
    
    75
    
    
    Independent Director
    
    
    3Chun-Yen Chang(7)
    
    
    72
    
    
    Independent Director
    
    
    3Tzyy-Jang Tseng
    
    
    59
    
    
    Supervisor (Representative of Hsun Chieh Investment Co., Ltd.)
    
    
    8Ta-Hsing Wang
    
    
    36
    
    
    Supervisor (Representative of Silicon Integrated Systems Corp.)
    
    
    3Ting-Yu Lin
    
    
    48
    
    
    Supervisor
    
    
    3
 
 (1)
    
    Stan Hung is a representative of Hsun Chieh Investment Co. after the board of directors
meeting on July 16, 2008.(2)
    
    Shih-Wei Sun is a representative of Silicon Integrated Systems Corp. after the shareholders
meeting on June 12, 2006.(3)
    
    Henry Liu is a representative of Hsun Chieh Investment Co. after the board of directors
meeting on July 16, 2008.(4)
    
    Wen-Yang Chen was appointed as a representative of Hsun Chieh Investment Co. on October 1,
2007.(5)
    
    Po-Wen Yen was appointed as a representative of Hsun Chieh Investment Co. after the board of
directors meeting on July 16, 2008.(6)
    
    Chitung Liu was appointed as a representative of Silicon Integrated Systems Corp. on December
21, 2007.(7)
    
    Member of the Audit Committee. Stan Hung
 Shih-Wei Sun
  56




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##### Table of Contents



Henry Liu
 Wen-Yang Chen
  Po-Wen Yen
 Chitung Liu
 Paul S.C. Hsu
 Chung-Laung Liu
 Chun-Yen Chang
 Tzyy Jang Tseng
 Ta-Hsing Wang
 Ting-Yu Lin
  57




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##### Table of Contents



B. Compensation
  C. Board Practices
    D. Employees
  As of December 31,Employees
    
    2006
    
    
    2007
    
    
    2008Engineers
    
    
    6,774
    
    
    
    7,046
    
    
    
    6,461Technicians
    
    
    5,881
    
    
    
    6,067
    
    
    
    4,734Administrative Staff
    
    
    610
    
    
    
    607
    
    
    
    509Total
    
    
    13,265
    
    
    
    13,720
    
    
    
    11,704
   58




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##### Table of Contents



E. Share Ownership
     59




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##### Table of Contents



ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  As of April
    
    
    As of April
    
    
    As of April
    
    
    As of AprilAs of April 12, 2009
    
    
    15, 2008
    
    
    13, 2007
    
    
    14, 2006
    
    
    15, 2005Number of
    
    
    Percentage of
    
    
    Percentage of
    
    
    Percentage of
    
    
    Percentage of
    
    
    Percentage ofshares
    
    
    shares
    
    
    shares
    
    
    shares
    
    
    shares
    
    
    sharesbeneficially
    
    
    beneficially
    
    
    beneficially
    
    
    beneficially
    
    
    beneficially
    
    
    beneficiallyName of Beneficial Owner
    
    owned
    
    
    owned
    
    
    owned
    
    
    owned
    
    
    owned
    
    
    ownedHsun Chieh Investment Co., Ltd.(1)
    
    
    441
    
    
    
    3.33
    %
    
    
    3.2
    %
    
    
    3.2
    %
    
    
    3.0
    %
    
    
    3.1
    %Xilinx, Inc.
    
    
    0
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.6
    %
    
    
    2.2
    %
    
    
    2.2
    %Silicon Integrated Systems Corp.
    
    
    315
    
    
    
    2.38
    %
    
    
    2.3
    %
    
    
    2.3
    %
    
    
    2.2
    %
    
    
    2.2
    %Directors, supervisors and executive officers as a group
    
    
    756
    
    
    
    5.71
    %
    
    
    5.6
    %
    
    
    6.2
    %
    
    
    6.9
    %
    
    
    6.4
    %
 
 (1)
    
    36.5% owned by United Microelectronics as of March 31, 2009.   B. Related Party Transactions
    Name
    
    Ownership%AMIC Technology (Taiwan), Inc.
    
    
    25.87Silicon Integrated Systems Corp.
    
    
    16.24
  C. Interests of Experts and Counsel
   60




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ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
     Total Number of
    
    
    Number ofCash Dividend per
    
    
    Stock Dividend per
    
    
    Shares Issued as
    
    
    OutstandingShare
    
    
    Share(1)
    
    
    Stock Dividend
    
    
    Shares 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
    
    
    
    0
    
    
    
    0
    
    
    
    13,214,494,8832008
    
    
    0.75
    
    
    
    0.45
    
    
    
    562,958,816
    
    
    
    12,987,771,315
 
 (1)
    
    We declare stock dividends in a NT dollar amount per share, but we pay the stock dividends to
our shareholders in the form of shares. The amount of shares distributed to each shareholder
is calculated by multiplying the dividend declared by the number of shares held by the given
shareholder, divided by the par value of NT$10 per share. Fractional shares are not issued but
are paid in cash. B. Significant Changes
    61




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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 thousandsof shares)2003
    
    
    26.03
    
    
    
    14.92
    
    
    
    121,904.892004
    
    
    27.56
    
    
    
    16.93
    
    
    
    102,012.192005
    
    
    25.20
    
    
    
    16.75
    
    
    
    84,868.002006
    
    
    22.60
    
    
    
    17.60
    
    
    
    67,133.00First Quarter
    
    
    20.50
    
    
    
    17.60
    
    
    
    97,052.00Second Quarter
    
    
    22.60
    
    
    
    18.25
    
    
    
    73,085.00Third Quarter
    
    
    19.40
    
    
    
    17.60
    
    
    
    45,073.00Fourth Quarter
    
    
    21.25
    
    
    
    18.05
    
    
    
    56,491.872007
    
    
    23.45
    
    
    
    17.15
    
    
    
    53,166.86First Quarter
    
    
    21.60
    
    
    
    18.65
    
    
    
    54,027.04Second Quarter
    
    
    20.30
    
    
    
    19.00
    
    
    
    47,440.00Third Quarter
    
    
    21.00
    
    
    
    17.15
    
    
    
    65,808.65Fourth Quarter
    
    
    23.45
    
    
    
    18.85
    
    
    
    46,147.022008
    
    
    20.30
    
    
    
    6.80
    
    
    
    37,521.00First Quarter
    
    
    19.60
    
    
    
    16.80
    
    
    
    37,877.00Second Quarter
    
    
    20.30
    
    
    
    16.10
    
    
    
    30,251.00Third Quarter
    
    
    16.15
    
    
    
    9.58
    
    
    
    41,646.00Fourth Quarter
    
    
    10.65
    
    
    
    6.80
    
    
    
    42,824.00October
    
    
    10.65
    
    
    
    7.48
    
    
    
    45,130.00November
    
    
    9.46
    
    
    
    7.00
    
    
    
    39,165.00December
    
    
    8.00
    
    
    
    6.80
    
    
    
    43,800.002009 (through May 7)
    
    
    14.95
    
    
    
    7.10
    
    
    
    93,735.10First Quarter
    
    
    12.00
    
    
    
    7.10
    
    
    
    65,282.86January
    
    
    8.06
    
    
    
    7.10
    
    
    
    36,514.60February
    
    
    8.71
    
    
    
    7.16
    
    
    
    53,639.50March
    
    
    12.00
    
    
    
    7.80
    
    
    
    95,482.45Second Quarter
    
    
    14.95
    
    
    
    10.60
    
    
    
    156,111.15April
    
    
    13.10
    
    
    
    10.60
    
    
    
    135,492.18May (through May 7)
    
    
    14.95
    
    
    
    13.25
    
    
    
    269,515.50
 
 Source: Taiwan Stock Exchange.
 (1)
    
    Information has been adjusted to give effect to 1,968,018,212 Shares and 171,132,018 Shares
issued as stock dividend and employee bonus, respectively, in August 2002; 607,925,145 Shares
and 57,972,672 Shares issued as stock dividend and employee bonus, respectively, in July 2003;
1,288,558,185 Shares and 111,127,354 Shares issued as stock dividend and employee bonus,
respectively, in July 2004; 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.  62




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Market Price Information for Our American Depositary Shares
  Closing Price Per ADS(1)
    
    
    Average ADS DailyHigh
    
    
    Low
    
    
    Trading VolumeUS$
    
    
    US$2003
    
    
    5.65
    
    
    
    2.96
    
    
    
    4,687,6382004
    
    
    6.12
    
    
    
    3.25
    
    
    
    3,692,4642005
    
    
    4.43
    
    
    
    2.80
    
    
    
    4,279,9292006
    
    
    3.90
    
    
    
    2.82
    
    
    
    5,804,766First Quarter
    
    
    3.41
    
    
    
    3.02
    
    
    
    6,713,483Second Quarter
    
    
    3.90
    
    
    
    2.94
    
    
    
    5,581,998Third Quarter
    
    
    3.30
    
    
    
    2.82
    
    
    
    4,647,865Fourth Quarter
    
    
    3.57
    
    
    
    2.96
    
    
    
    6,290,1432007
    
    
    4.48
    
    
    
    2.93
    
    
    
    6,536,888First Quarter
    
    
    3.77
    
    
    
    3.12
    
    
    
    6,816,844Second Quarter
    
    
    3.59
    
    
    
    3.18
    
    
    
    5,783,324Third Quarter
    
    
    3.76
    
    
    
    2.93
    
    
    
    7,104,648Fourth Quarter
    
    
    4.48
    
    
    
    3.25
    
    
    
    6,454,1882008
    
    
    3.71
    
    
    
    1.51
    
    
    
    5,784,055First Quarter
    
    
    3.65
    
    
    
    2.79
    
    
    
    6,211,315Second Quarter
    
    
    3.71
    
    
    
    2.92
    
    
    
    3,943,356Third Quarter
    
    
    2.98
    
    
    
    1.75
    
    
    
    5,834,891Fourth Quarter
    
    
    2.56
    
    
    
    1.51
    
    
    
    7,166,688October
    
    
    2.45
    
    
    
    1.51
    
    
    
    8,497,000November
    
    
    2.56
    
    
    
    1.76
    
    
    
    7,695,405December
    
    
    2.09
    
    
    
    1.68
    
    
    
    5,319,2862009 (through May 7)
    
    
    3.53
    
    
    
    1.65
    
    
    
    4,784,033First Quarter
    
    
    2.82
    
    
    
    1.65
    
    
    
    4,100,685January
    
    
    2.22
    
    
    
    1.75
    
    
    
    3,940,795February
    
    
    2.08
    
    
    
    1.73
    
    
    
    3,125,700March
    
    
    2.82
    
    
    
    1.65
    
    
    
    5,088,073Second Quarter
    
    
    3.53
    
    
    
    2.61
    
    
    
    6,387,273April
    
    
    3.05
    
    
    
    2.61
    
    
    
    6,395,024May (through May 7)
    
    
    3.53
    
    
    
    3.09
    
    
    
    6,354,720
 
 Sources:
Bloomberg.
 (1)
    
    Information has been adjusted to give effect to 1,968,018,212 Shares and 171,132,018 Shares
issued as stock dividend and employee bonus, respectively, in August 2002; 607,925,145 Shares
and 57,972,672 Shares issued as stock dividend and employee bonus, respectively, in July 2003;
1,288,558,185 Shares and 111,127,354 Shares issued as stock dividend and employee bonus,
respectively, in July 2004; and 1,758,736,435 Shares and 197,285,530 Shares issued as stock
dividend and employee bonus, respectively, in August 2005; and 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.  B. Plan of Distribution
   63




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C. Markets
  D. Selling Shareholders
  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 shareholders conferred by ROC law and our articles of
incorporation.
 Objects and Purpose
  Directors
   64




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Shares
   65




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Employee Stock Option
   November
    
    
    March
    
    
    July
    
    
    October
    
    
    April
    
    
    August2003
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2005
    
    
    2005(in millions)Number of Options Granted
    
    
    57
    
    
    
    33
    
    
    
    57
    
    
    
    20
    
    
    
    23
    
    
    
    54Number of Options
Outstanding as of March
31, 2009
    
    
    33.7
    
    
    
    14.3
    
    
    
    33.6
    
    
    
    7.6
    
    
    
    11.2
    
    
    
    29.3Shares available to
option holders as of
March 31, 2009
    
    
    23.5
    
    
    
    10
    
    
    
    23.4
    
    
    
    5.3
    
    
    
    7.8
    
    
    
    20.5
 September
    
    
    January
    
    
    May
    
    
    August
    
    
    December2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2007(in millions)Number of Options Granted
    
    
    52
    
    
    
    39
    
    
    
    42
    
    
    
    28
    
    
    
    500Number of Options
Outstanding as of March
31, 2009
    
    
    37.5
    
    
    
    18.2
    
    
    
    26.6
    
    
    
    16.8
    
    
    
    429.4Shares available to
option holders as of
March 31, 2009
    
    
    26.1
    
    
    
    12.7
    
    
    
    18.6
    
    
    
    11.7
    
    
    
    429.4
  New Shares and Preemptive Rights
   66




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Shareholders
  Transfer of Shares
  Shareholders Meetings
   67




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##### Table of Contents



Voting Rights
     Dividends and Distributions
    
    
    payment of all taxes and dues;
    
    deduction of any past losses;
    
    allocation of 10% of our net income as a legal reserve; and
    
    as remuneration to directors and supervisors.
   68




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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 shareholders equity; provided
that the shares so purchased shall be cancelled thereafter.
     69




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Liquidation Rights
  Rights to Bring Shareholders Suits
  
    
    within 30 days from the date on which a shareholders resolution is adopted, a
shareholder may file a lawsuit to annul a shareholders resolution if the procedure for
convening a shareholders 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 shareholders claim.
    
    if the substance of a resolution adopted at a shareholders meeting contradicts
any applicable law or regulation or our articles of incorporation, a shareholder may
bring a suit to determine the validity of such resolution.
  
    
    Shareholders who have continuously held 3% or more of our issued shares for a
period of one year or longer may request in writing that a supervisor institute an
action against a director on our behalf. In case the supervisor fails to institute an
action within 30 days after receiving such request, the shareholders may institute an
action on our behalf. In the event shareholders institute an action, a court may, upon
the defendants motion, order such shareholders to furnish appropriate security.
    
    Shareholders 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 shareholders and such suit is filed within 30 days of such
shareholders vote.
    
    In the event that any director, supervisor, manager or shareholder 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 or our
supervisors fail to claim for recovery, any shareholder may set forth a 30-day period
for our board of directors or our supervisors to exercise the right. In the event our
directors or our supervisors fail to exercise the right during such 30-day period, such
requesting shareholder shall have the right to claim such recovery on our behalf. Our
directors and supervisors 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 Shareholders
   70




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Financial Statements
  Transfer Restrictions
  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.
   71




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Cross License Agreement, dated as of January 1, 2006, between United Microelectronics Corporation
and Renesas Technology Corp.
  Settlement and Cross License Agreement, dated as of April 1, 2009, between United Microelectronics
Corporation and LSI Corporation (and its subsidiary Agere Systems Inc.)
  Guarantee Agreement
  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 ROC laws, rules and regulations, which are not discussed
in this section.
 General
   72




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Foreign Ownership Limitations
   Foreign Investors
   Foreign Investment Approval
   Exchange Controls
   73




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##### Table of Contents



Depositary Receipts
     (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
  74




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##### Table of Contents



(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 ROC 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
 ROC Tax Considerations
  Dividends
   75




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##### Table of Contents



Capital Gains
  Securities Transaction Tax
  Preemptive Rights
  Estate Taxation and Gift Tax
  Tax Treaties
  Tax Reform
    76




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##### Table of Contents



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;
  77




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##### Table of Contents




    
    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.
   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
    78




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Taxation of Capital Gains
   79




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##### Table of Contents



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.
     
    
    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.
  80




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Information Reporting and Backup Withholding
   81




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Inheritance and Gift Tax
   F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
    I. Subsidiary Information
   82




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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      As of December 31, 2008Book Value
    
    
    Fair Value(in NT$ millions)Interest Rate Swaps: Non-Trading Purpose
    
    $
    80
    
    
    $
    80Time Deposits: Non-Trading Purpose
    
    $
    37,311
    
    
    $
    37,311Short-term Loans: Non-Trading Purpose
    
    $
    (133
    )
    
    $
    (133
    )Bonds: Non-Trading Purpose
    
    $
    (7,497
    )
    
    $
    (7,143
    )
 Interest Rate Risk
  Notional Amount
    
    Contract Period

    
    Interest Rate Received

    
    Interest Rate PaidAs of December 31, 2008NT$7,500 million
    
    May 21, 2003 to June 24, 2010
    
    4.3% minus US$12-month LIBOR
    
    
    1.48
    %As of December 31, 2007NT$7,500 million
    
    May 21, 2003 to June 24, 2008
    
    4.0% minus US$12-month LIBOR
    
    
    1.52
    %NT$7,500 million
    
    May 21, 2003 to June 24, 2010
    
    4.3% minus US$12-month LIBOR
    
    
    1.48
    %
  83




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Expected Maturity Dates
As of December 31, 2008
 2013 and2009
    
    
    
    2010
    
    
    
    2011
    
    
    
    2012
    
    
    
    thereafter
    
    
    
    Total
    
    
    
    Fair Value(in millions, except percentages)Time Deposits:Fixed Rate (US$)
    
    
    264
    
    
        
                
        
                
        
                
        
                
    
    264
    
    
    
    264Average Interest Rate
    
    
    0.6068%
    
    
        
                
        
                
        
                
        
                
    
    0.6068%
    
    
    
    0.6068%Fixed Rate (¥)
    
    
    398
    
    
        
                
        
                
        
                
        
                
    
    398
    
    
    
    398Average Interest Rate
    
    
    0.1%
    
    
        
                
        
                
        
                
        
                
    
    0.1%
    
    
    
    0.1%Fixed Rate (NT$)
    
    
    21,330
    
    
        
                
        
                
        
                
        
                
    
    21,330
    
    
    
    21,330Average Interest Rate
    
    
    0.9028%
    
    
        
                
        
                
        
                
        
                
    
    0.9028%
    
    
    
    0.9028%Unsecured Long-term
Loans:Variable Rate (NT$)
    
    
    67
    
    
    
    67
    
    
    
    66
    
    
        
                
        
                
    
    200
    
    
    
    200Average Interest Rate
    
    
    2.61%
    
    
    
    2.61%
    
    
    
    2.61%
    
    
        
                
        
                
    
    2.61%
    
    
    
    2.61%Secured Long-term
Loans:Variable Rate (NT$)
    
        
                
    
    42
    
    
    
    167
    
    
    
    167
    
    
    
    124
    
    
    
    500
    
    
    
    500Average Interest Rate
    
        
                
    
    1.815%
    
    
    
    1.815%
    
    
    
    1.815%
    
    
    
    1.815%
    
    
    
    1.815%
    
    
    
    1.815%Bonds:Unsecured (NT$)
    
        
                
    
    7,500
    
    
        
                
        
                
        
                
    
    7,500
    
    
    
    7,143Variable Rate
    
        
                
    
    0%-4.3%
    
    
        
                
        
                
        
                
    
    0%-4.3%
    
    
    
    0%-4.3%Interest Rate
Derivatives
Interest Rate Swaps:Variable to Fixed
(denomination)
    
    
    NT$7,500 million
    
    
    
    NT$7,500 million
    
    
        
                
        
                
        
                
    
    NT$7,500 million
    
    
    
    NT$80 millionAverage pay rate
    
    
    1.48%
    
    
    
    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
    
    
    
    4.3% minus 
US$ 12-month 
LIBOR
 Expected Maturity Dates
As of December 31, 2007
 2012 and2008
    
    
    
    2009
    
    
    
    2010
    
    
    
    2011
    
    
    
    thereafter
    
    
    
    Total
    
    
    
    Fair Value(in millions except percentages)Time Deposits:Fixed Rate (US$)
    
    
    385
    
    
        
                
        
                
        
                
        
                
    
    385
    
    
    
    385Average Interest Rate
    
    
    4.3%-5.1%
    
    
        
                
        
                
        
                
        
                
    
    4.3%-5.1%
    
    
    
    4.3%-5.1%Fixed Rate (¥)
    
    
    2,260
    
    
        
                
        
                
        
                
        
                
    
    2,260
    
    
    
    2,260Average Interest Rate
    
    
    0.2%-0.35%
    
    
        
                
        
                
        
                
        
                
    
    0.2%-0.35%
    
    
    
    0.2%-0.35%Fixed Rate (NT$)
    
    
    16,652
    
    
        
                
        
                
        
                
        
                
    
    16,652
    
    
    
    16,652Average Interest Rate
    
    
    1.46%-2.26%
    
    
        
                
        
                
        
                
        
                
    
    1.46%-2.26%
    
    
    
    1.46%-2.26%Fixed Rate (Euro)
    
    
    17
    
    
        
                
        
                
        
                
        
                
    
    17
    
    
    
    17Average Interest Rate
    
    
    3.6%
    
    
        
                
        
                
        
                
        
                
    
    3.6%
    
    
    
    3.6%Unsecured Short-term
Loans:Variable Rate (US$)
    
    
    11.1
    
    
        
                
        
                
        
                
    
    11.1
    
    
    
    11.1
    
    
    
    11.1Average Interest Rate
    
    
    3.43%-5.43%
    
    
        
                
        
                
        
                
    
    3.43%-5.43%
    
    
    
    3.43%-5.43%
    
    
    
    3.43%-5.43%Bonds:Unsecured (NT$)
    
    
    3,000
    
    
        
                
        
                
        
                
        
                
    
    3,000
    
    
    
    3,020Fixed Rate
    
    
    5.2170%-.2850%
    
    
        
                
        
                
        
                
        
                
    
    5.2170%-.2850%
    
    
    
    5.2170%-.2850%Unsecured (NT$)
    
    
    7,500
    
    
        
                
    
    7,500
    
    
        
                
        
                
    
    15,000
    
    
    
    14,493Variable Rate
    
    
    0%-4%
    
    
        
                
    
    0%-4.3%
    
    
        
                
        
                
    
    0%-4.3%
    
    
    
    0%-4.3%Unsecured Convertible
(US$)(1)
    
    
    381
    
    
        
                
        
                
        
                
        
                
    
    381
    
    
    
    12,387Fixed Rate
    
    
    0%
    
    
        
                
        
                
        
                
        
                
    
    0%
    
    
    
    0%Interest Rate
Derivatives
Interest Rate Swaps:Variable to Fixed
(denomination)
    
    
    NT$7,500 
million
    
    
        
                
        
                
        
                
        
                
    NT$7,500
 million
    
    NT$113 
millionAverage pay
rate
    
    
    1.52%
    
    
        
                
        
                
        
                
        
                
    
    1.52%
    
    
    
    1.52%Average receive rate
    
    
    4.0% minusUS$12-month 
LIBOR
    
    
        
                
        
                
        
                
        
                
    
    4.0% minus
US$12-month 
LIBOR
    
    
    
    4.0% minus
US$12-month 
LIBORVariable to Fixed
(denomination)
    
    NT$7,500 
million
    
    NT$7,500 
million
    
    NT$7,500 
million
    
        
                
        
                
    NT$7,500 
million
    
    NT$206 
millionAverage pay rate
    
    
    1.48%
    
    
    
    1.48%
    
    
    
    1.48%
    
    
        
                
        
                
    
    1.48%
    
    
    
    1.48%Average receive rate
    
    4.3% minus
    
    4.3% minus
    
    4.3% minus
    
        
                
        
                
    4.3% minus
    
    4.3 minusUS$12-month 
LIBOR
    
    
    
    US$12-month 
LIBOR
    
    
    
    US$12-month 
LIBOR
    
    
    
    
    
    
    
    
    
    
    
    US$12-month 
LIBOR
    
    
    
    US$12-month
 LIBOR
 (1)
    
    Assuming the convertible bonds are paid off upon maturity. Foreign Currency Risk
   84




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##### Table of Contents



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 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
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting
     85




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##### Table of Contents



Attestation Report of the Independent Registered Public Accounting Firm
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      .
   
   86




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the year ended December 31,2007
    
    
    2008NT$
    
    
    NT$
    
    
    US$(in thousands)Audit Fees(1)
    
    
    91,895
    
    
    
    108,442
    
    
    
    3,310Audit-related Fees(2)
    
    
    1,688
    
    
    
    640
    
    
    
    20Tax Fees(3)
    
    
    5,967
    
    
    
    3,275
    
    
    
    100Total
    
    
    99,550
    
    
    
    112,357
    
    
    
    3,430
 
 (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 capitalization of
retained earnings, treasury share buy-back programs, certification of UMCi to Singapore
authorities.(3)
    
    Tax fees include fees billed for professional services rendered by Ernst & Young, primarily
in connection with our tax compliance activities.  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
   87




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ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  Total Number of
    
    
    Maximum NumberCommon Shares
    
    
    ofPurchased as Part
    
    
    Shares that MayAverage Price
    
    
    of
    
    
    Yet beTotal Number of
    
    
    per Common
    
    
    Publicly
    
    
    PurchasedCommon Shares
    
    
    Share
    
    
    Announced
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    (NT$)
    
    
    Plans or Program
    
    
    ProgramFebruary (from
February 16, 2006)(1)
    
    
    239,528,000
    
    
    
    19.01
    
    
    
    239,528,000
    
    
    
    760,472,000March
    
    
    576,219,000
    
    
    
    19.32
    
    
    
    815,747,000
    
    
    
    184,253,000April (to April 15, 2006)(2)
    
    
    184,253,000
    
    
    
    21.36
    
    
    
    1,000,000,000
    
    
    
    May (from May 23, 2006)
    
    
    30,691,000
    
    
    
    19.85
    
    
    
    30,691,000
    
    
    
    369,309,000June
    
    
    218,316,000
    
    
    
    18.43
    
    
    
    249,007,000
    
    
    
    150,993,000July (to July 22, 2006)
    
    
    150,993,000
    
    
    
    19.90
    
    
    
    400,000,000
    
    
    
    
 Total Number of
    
    
    Maximum NumberCommon Shares
    
    
    ofPurchased as Part
    
    
    Shares that MayAverage Price
    
    
    of
    
    
    Yet beTotal Number of
    
    
    per Common
    
    
    Publicly
    
    
    PurchasedCommon Shares
    
    
    Share
    
    
    Announced
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    (NT$)
    
    
    Plans or Program
    
    
    Program2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Total Number of
    
    
    Maximum NumberCommon Shares
    
    
    ofPurchased as Part
    
    
    Shares that MayAverage Price
    
    
    of
    
    
    Yet beTotal Number of
    
    
    per Common
    
    
    Publicly
    
    
    PurchasedCommon Shares
    
    
    Share
    
    
    Announced
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    (NT$)
    
    
    Plans or Program
    
    
    ProgramAugust (from August
28, 2008)(3)
    
    
    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
    
    
    
    December (from
December 17, 2008)(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    
 
 (1)
    
    The 10th share buy-back plan was announced on February 15, 2006 to repurchase
1,000 million shares during the period from February 16, 2006 to April 15, 2006.(2)
    
    The 11th share buy-back plan was announced on May 22, 2006 to repurchase 400
million shares during the period from May 23, 2006 to July 22, 2006.(3)
    
    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.(4)
    
    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. 
 ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
   88




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##### Table of Contents



ITEM 16G. CORPORATE GOVERNANCE
  The Legal Framework.
 Independent Board Members.
 Board Committees.
  Equity Compensation Plans.
  89




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##### Table of Contents



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, 2007 and 2008
    
    
    F-3Consolidated Statements of Income for each of the three years ended December 31, 2006,
2007 and 2008
    
    
    F-4Consolidated Statements of Changes in Shareholders Equity for each of the three years
ended December 31, 2006, 2007 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for each of the three years ended December 31,
2006, 2007 and 2008
    
    
    F-8Notes to the Consolidated Financial Statements
    
    
    F-10
  90




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##### Table of Contents



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, ROC, 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, ROC, 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, ROC, 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, ROC, 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, ROC, 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, ROC, 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, ROC, 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, ROC, 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 Fab 12i (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 Corporation
  91




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits11.1
    
    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 Firm*99.1
    
    Form 6-K furnished to the Commission on April 29, 2009 (File No. 001-15128)
 
 *
    
    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.(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.  92




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##### Table of Contents



(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.  93




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##### Table of Contents



SIGNATURES
  UNITED MICROELECTRONICS CORPORATIONBy:
    /s/ Chitung LiuName:
    Chitung LiuTitle:
    Chief Financial Officer   94




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##### Table of Contents



United Microelectronics Corporation and Subsidiaries
 Consolidated Financial Statements for years ended December 31, 2006, 2007 and 2008
 Together with Report of Independent Registered Public Accounting Firm
  F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       
 
  
  F-2




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##### Table of Contents



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Expressed in Thousands)
 As of December 31,Notes
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    US$AssetsCurrent assetsCash and cash equivalents
    
    
    2, 4
    
    
    
    47,678,147
    
    
    
    48,566,649
    
    
    
    1,482,498Financial assets at fair value through profit or loss, current
    
    
    2, 5
    
    
    
    4,804,935
    
    
    
    1,741,055
    
    
    
    53,146Held-to-maturity financial assets, current
    
    
    2, 6
    
    
    
    
    
    
    
    352,645
    
    
    
    10,764Notes receivable
    
    
    
    
    
    
    32,712
    
    
    
    19,680
    
    
    
    601Accounts receivable, net
    
    
    2, 7
    
    
    
    15,026,513
    
    
    
    8,388,232
    
    
    
    256,051Accounts receivable  related parties, net
    
    
    2, 27
    
    
    
    332,069
    
    
    
    147,363
    
    
    
    4,498Other receivables
    
    
    
    
    
    
    457,148
    
    
    
    406,298
    
    
    
    12,402Inventories, net
    
    
    2, 8
    
    
    
    11,867,832
    
    
    
    8,117,603
    
    
    
    247,790Prepaid expenses
    
    
    
    
    
    
    692,030
    
    
    
    473,920
    
    
    
    14,466Deferred income tax assets, current
    
    
    2, 25
    
    
    
    219,881
    
    
    
    674,117
    
    
    
    20,577Total current assets
    
    
    
    
    
    
    81,111,267
    
    
    
    68,887,562
    
    
    
    2,102,793Funds and investmentsFinancial assets at fair value through profit or loss, noncurrent
    
    
    2, 5
    
    
    
    47,598
    
    
    
    173,560
    
    
    
    5,298Available-for-sale financial assets, noncurrent
    
    
    2, 9, 11, 14
    
    
    
    50,911,643
    
    
    
    16,283,917
    
    
    
    497,067Financial assets measured at cost, noncurrent
    
    
    2, 10, 14
    
    
    
    8,295,679
    
    
    
    7,656,688
    
    
    
    233,721Long-term investments accounted for under the equity method
    
    
    2, 11
    
    
    
    9,909,595
    
    
    
    8,321,221
    
    
    
    254,006Prepayment for long-term investments
    
    
    
    
    
    
    648,360
    
    
    
    5,160
    
    
    
    158Total funds and investments
    
    
    
    
    
    
    69,812,875
    
    
    
    32,440,546
    
    
    
    990,250Property, plant and equipment
    
    
    2, 12, 14, 28, 29Land
    
    
    
    
    
    
    1,922,230
    
    
    
    2,269,237
    
    
    
    69,269Buildings
    
    
    
    
    
    
    22,529,856
    
    
    
    24,354,334
    
    
    
    743,417Machinery and equipment
    
    
    
    
    
    
    446,198,339
    
    
    
    459,711,569
    
    
    
    14,032,710Transportation equipment
    
    
    
    
    
    
    85,877
    
    
    
    76,742
    
    
    
    2,343Furniture and fixtures
    
    
    
    
    
    
    3,429,067
    
    
    
    3,582,387
    
    
    
    109,352Leasehold improvements
    
    
    
    
    
    
    42,809
    
    
    
    53,432
    
    
    
    1,631Total cost
    
    
    
    
    
    
    474,208,178
    
    
    
    490,047,701
    
    
    
    14,958,722Less: Accumulated depreciation
    
    
    
    
    
    
    (346,920,945
    )
    
    
    (386,537,318
    )
    
    
    (11,799,063
    )Add: Construction in progress and prepayments
    
    
    
    
    
    
    9,931,551
    
    
    
    4,899,607
    
    
    
    149,561Property, plant and equipment, net
    
    
    
    
    
    
    137,218,784
    
    
    
    108,409,990
    
    
    
    3,309,220Goodwill
    
    
    2, 14
    
    
    
    3,498,687
    
    
    
    7,615
    
    
    
    232Deferred charges
    
    
    2
    
    
    
    1,435,126
    
    
    
    913,237
    
    
    
    27,877Deferred income tax assets, noncurrent
    
    
    2, 25
    
    
    
    4,268,053
    
    
    
    3,557,781
    
    
    
    108,601Other assets  others
    
    
    2, 13, 14, 28
    
    
    
    2,213,497
    
    
    
    2,181,777
    
    
    
    66,599Total assets
    
    
    
    
    
    
    299,558,289
    
    
    
    216,398,508
    
    
    
    6,605,572Liabilities and Shareholders EquityCurrent liabilitiesShort-term loans
    
    
    15
    
    
    
    359,071
    
    
    
    132,610
    
    
    
    4,048Financial liabilities at fair value through profit or loss, current
    
    
    2, 16
    
    
    
    246,298
    
    
    
    33,189
    
    
    
    1,013Accounts payable
    
    
    
    
    
    
    5,687,627
    
    
    
    2,591,578
    
    
    
    79,108Income tax payable
    
    
    2
    
    
    
    1,092,129
    
    
    
    775,611
    
    
    
    23,676Accrued expenses
    
    
    
    
    
    
    8,214,951
    
    
    
    7,008,700
    
    
    
    213,941Other payables
    
    
    
    
    
    
    23,538
    
    
    
    25,529
    
    
    
    779Payable on equipment
    
    
    
    
    
    
    6,036,274
    
    
    
    1,718,134
    
    
    
    52,446Current portion of long-term liabilities
    
    
    2, 17, 18, 28
    
    
    
    22,889,476
    
    
    
    66,667
    
    
    
    2,035Deferred income tax liabilities, current
    
    
    2, 25
    
    
    
    18
    
    
    
    11,943
    
    
    
    365Other current liabilities
    
    
    
    
    
    
    645,143
    
    
    
    470,042
    
    
    
    14,348Total current liabilities
    
    
    
    
    
    
    45,194,525
    
    
    
    12,834,003
    
    
    
    391,759Long-term liabilitiesFinancial liabilities at fair value through profit or loss, noncurrent
    
    
    2, 16
    
    
    
    93,932
    
    
    
    
    
    
    
    Bonds payable
    
    
    2, 17
    
    
    
    7,495,304
    
    
    
    7,497,110
    
    
    
    228,849Long-term loans
    
    
    2, 18, 28
    
    
    
    
    
    
    
    633,333
    
    
    
    19,332Accrued pension liabilities
    
    
    2, 19
    
    
    
    3,171,562
    
    
    
    3,219,092
    
    
    
    98,263Deposits-in
    
    
    
    
    
    
    14,415
    
    
    
    9,984
    
    
    
    305Deferred income tax liabilities, noncurrent
    
    
    2, 25
    
    
    
    47,548
    
    
    
    13,602
    
    
    
    415Deferred credits  intercompany profits
    
    
    2
    
    
    
    9,666
    
    
    
    
    
    
    
    Other liabilities  others
    
    
    
    
    
    
    533,638
    
    
    
    533,090
    
    
    
    16,273Total long-term liabilities
    
    
    
    
    
    
    11,366,065
    
    
    
    11,906,211
    
    
    
    363,437Total liabilities
    
    
    
    
    
    
    56,560,590
    
    
    
    24,740,214
    
    
    
    755,196Commitments and Contingent
    
    
    29Minority interests
    
    
    
    
    
    
    6,530,810
    
    
    
    6,982,125
    
    
    
    213,130Capital Stock
    
    
    2, 20, 21, 23
    
    
    
    132,144,949
    
    
    
    129,877,713
    
    
    
    3,964,521Additional Paid-in Capital
    
    
    2, 20
    
    
    
    66,126,806
    
    
    
    58,149,513
    
    
    
    1,775,016Retained earnings
    
    
    20, 23
    
    
    
    31,651,091
    
    
    
    (7,036,551
    )
    
    
    (214,791
    )Cumulative translation adjustment
    
    
    
    
    
    
    (866,562
    )
    
    
    1,347,373
    
    
    
    41,129Unrealized gain or loss on financial instruments
    
    
    
    
    
    
    22,413,852
    
    
    
    2,457,922
    
    
    
    75,028Treasury stock
    
    
    2, 20, 22
    
    
    
    (15,003,247
    )
    
    
    (119,801
    )
    
    
    (3,657
    )Total shareholders equity
    
    
    
    
    
    
    236,466,889
    
    
    
    184,676,169
    
    
    
    5,637,246Total liabilities and shareholders equity
    
    
    
    
    
    
    299,558,289
    
    
    
    216,398,508
    
    
    
    6,605,572
 The
accompanying notes are an integral part of these consolidated financial statements.
  F-3




---



##### Table of Contents



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Expressed in Thousands, Except for Earnings per Share )
 For the year ended December 31,Notes
    
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Net operating revenues
    
    
    2, 27
    
    
    
    112,003,819
    
    
    
    113,311,298
    
    
    
    96,813,546
    
    
    
    2,955,236Cost of goods sold
    
    
    2, 24
    
    
    
    (90,638,293
    )
    
    
    (89,768,276
    )
    
    
    (81,129,063
    )
    
    
    (2,476,467
    )Gross profit
    
    
    
    
    
    
    21,365,526
    
    
    
    23,543,022
    
    
    
    15,684,483
    
    
    
    478,769Operating expenses
    
    
    2, 24Sales and marketing expenses
    
    
    
    
    
    
    (3,365,678
    )
    
    
    (4,068,984
    )
    
    
    (3,483,628
    )
    
    
    (106,338
    )General and administrative expenses
    
    
    
    
    
    
    (3,422,340
    )
    
    
    (3,723,916
    )
    
    
    (3,054,683
    )
    
    
    (93,244
    )Research and development expenses
    
    
    2
    
    
    
    (9,418,877
    )
    
    
    (9,631,227
    )
    
    
    (8,274,070
    )
    
    
    (252,566
    )(16,206,895
    )
    
    
    (17,424,127
    )
    
    
    (14,812,381
    )
    
    
    (452,148
    )Operating income
    
    
    
    
    
    
    5,158,631
    
    
    
    6,118,895
    
    
    
    872,102
    
    
    
    26,621Non-operating incomeInterest revenue
    
    
    
    
    
    
    1,562,704
    
    
    
    1,330,418
    
    
    
    686,268
    
    
    
    20,948Investment gain accounted for under the equity method, net
    
    
    2, 11
    
    
    
    1,178,103
    
    
    
    625,752
    
    
    
    
    
    
    
    Dividend income
    
    
    
    
    
    
    950,546
    
    
    
    2,171,720
    
    
    
    2,093,528
    
    
    
    63,905Gain on disposal of property, plant and equipment
    
    
    2
    
    
    
    331,767
    
    
    
    669,076
    
    
    
    88,930
    
    
    
    2,715Gain on disposal of investments
    
    
    2, 17
    
    
    
    28,651,109
    
    
    
    12,040,872
    
    
    
    3,386,004
    
    
    
    103,358Exchange gain, net
    
    
    2, 33
    
    
    
    316,006
    
    
    
    137,414
    
    
    
    381,696
    
    
    
    11,651Gain on valuation of financial assets
    
    
    2, 5
    
    
    
    750,378
    
    
    
    
    
    
    
    
    
    
    
    Gain on valuation of financial liabilities
    
    
    2, 5, 16
    
    
    
    306,140
    
    
    
    20,633
    
    
    
    
    
    
    
    Other income
    
    
    17
    
    
    
    862,750
    
    
    
    933,808
    
    
    
    1,206,323
    
    
    
    36,82334,909,503
    
    
    
    17,929,693
    
    
    
    7,842,749
    
    
    
    239,400Non-operating expensesInterest expense
    
    
    2, 12, 17
    
    
    
    (648,408
    )
    
    
    (181,262
    )
    
    
    (71,161
    )
    
    
    (2,172
    )Investment loss accounted for under the equity method, net
    
    
    2, 11
    
    
    
    
    
    
    
    
    
    
    
    (10,464,849
    )
    
    
    (319,440
    )Loss on disposal of property, plant and equipment
    
    
    2
    
    
    
    (107,962
    )
    
    
    (124,071
    )
    
    
    (33,559
    )
    
    
    (1,024
    )Loss on decline in market value and obsolescence of inventories
    
    
    2
    
    
    
    (1,089,490
    )
    
    
    (372,359
    )
    
    
    (3,273,425
    )
    
    
    (99,921
    )Financial expenses
    
    
    
    
    
    
    (230,757
    )
    
    
    (137,134
    )
    
    
    (90,735
    )
    
    
    (2,770
    )Impairment loss
    
    
    2, 14
    
    
    
    (1,330,293
    )
    
    
    (575,784
    )
    
    
    (13,179,858
    )
    
    
    (402,316
    )Loss on valuation of financial assets
    
    
    2, 5, 16
    
    
    
    
    
    
    
    (2,788,343
    )
    
    
    (2,397,962
    )
    
    
    (73,198
    )Loss on valuation of financial liabilities
    
    
    2, 16
    
    
    
    
    
    
    
    
    
    
    
    (1,046,081
    )
    
    
    (31,932
    )Other losses
    
    
    2
    
    
    
    (73,799
    )
    
    
    (199,292
    )
    
    
    (143,392
    )
    
    
    (4,377
    )(3,480,709
    )
    
    
    (4,378,245
    )
    
    
    (30,701,022
    )
    
    
    (937,150
    )Income (loss) before income tax and minority interests
    
    
    
    
    
    
    36,587,425
    
    
    
    19,670,343
    
    
    
    (21,986,171
    )
    
    
    (671,129
    )Income tax expense
    
    
    2, 25
    
    
    
    (3,261,622
    )
    
    
    (2,809,874
    )
    
    
    (996,921
    )
    
    
    (30,431
    )Cumulative effect of changes in accounting principles
    
    
    
    
    
    
    (1,188,515
    )
    
    
    
    
    
    
    
    
    
    
    Minority interests loss
    
    
    
    
    
    
    482,025
    
    
    
    101,293
    
    
    
    663,017
    
    
    
    20,239Net income (loss)
    
    
    
    
    
    
    32,619,313
    
    
    
    16,961,762
    
    
    
    (22,320,075
    )
    
    
    (681,321
    )Earnings (losses) per share-basic (in dollars)
    
    
    2, 26
    
    
    
    1.71
    
    
    
    1.03
    
    
    
    (1.70
    )Shares used in per share calculation  basic
    
    
    
    
    
    
    19,028,636
    
    
    
    16,464,412
    
    
    
    13,110,984Earnings (losses) per share-diluted (in dollars)
    
    
    2, 26
    
    
    
    1.66
    
    
    
    1.00
    
    
    
    (1.70
    )Shares used in per share calculation  diluted
    
    
    
    
    
    
    19,686,965
    
    
    
    16,943,404
    
    
    
    13,170,391
 The accompanying notes are an integral part of the consolidated financial statements.
  F-4




---



##### Table of Contents



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 (Expressed in Thousands)
 Capital
    
    
    
    
    
    
    Retained Earning
    
    
    
    
    
    
    CumulativeCollected in
    
    
    Additional Paid-in
    
    
    
    
    
    
    
    
    
    
    Unappropriated
    
    
    Unrealized Gain/Loss on
    
    
    TranslationCommon Stock
    
    
    Shares
    
    
    Advance
    
    
    Capital
    
    
    Legal Reserve
    
    
    Special Reserve
    
    
    Earnings
    
    
    Financial Instruments
    
    
    Adjustment
    
    
    Treasury Stock
    
    
    Minority Interests
    
    
    TotalNT$
    
    
    
    
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Balance as of
January 1, 2006
    
    
    197,947,033
    
    
    
    19,794,703
    
    
    
    36,600
    
    
    
    85,381,599
    
    
    
    15,996,839
    
    
    
    1,744,171
    
    
    
    8,831,782
    
    
    
    (80,989
    )
    
    
    (241,153
    )
    
    
    (51,332,329
    )
    
    
    6,336,685
    
    
    
    264,620,238The effect of
adopting SFAS NO.
34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,097,170
    
    
    
    11,547
    
    
    
    
    
    
    
    
    
    
    
    24,108,717Appropriation of
2005 retained
earningsLegal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    702,669
    
    
    
    
    
    
    
    (702,669
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,422,021
    )
    
    
    1,422,021
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,161,267
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,161,267
    )Stock dividends
    
    
    895,158
    
    
    
    89,516
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (895,158
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration
to directors
and
supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,324
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,324
    )Employee bonus
- cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (305,636
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (305,636
    )Employee bonus
- stock
    
    
    458,455
    
    
    
    45,846
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (458,455
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in
capital transferred
to common stock
    
    
    895,158
    
    
    
    89,516
    
    
    
    
    
    
    
    (895,158
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of
treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,286,339
    )
    
    
    
    
    
    
    (27,286,339
    )Cancellation of
treasury stock
    
    
    (10,000,000
    )
    
    
    (1,000,000
    )
    
    
    
    
    
    
    (3,269,100
    )
    
    
    
    
    
    
    
    
    
    
    (6,371,128
    )
    
    
    
    
    
    
    
    
    
    
    19,640,228
    
    
    
    
    
    
    
    Adjustment of
treasury stock due
to loss of control
over subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,972
    )
    
    
    
    
    
    
    
    
    
    
    (9,198,144
    )
    
    
    (6,826,238
    )
    
    
    
    
    
    
    29,583,776
    
    
    
    
    
    
    
    13,501,422Net income in 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,619,313
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (482,025
    )
    
    
    32,137,288Adjustment of
additional paid-in
capital accounted
for under the
equity method
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,686
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,686
    )Adjustment of funds
and investments
disposal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,091,043
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,170
    
    
    
    
    
    
    
    
    
    
    
    (14,082,873
    )Cash dividends
allocated to
subsidaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,910Changes in
unrealized gain on
available-for-sale
financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,066,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,066,672Changes in
unrealized gain on
financial
instruments of
investees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,301,230
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,301,230Exercise of
employee stock
options
    
    
    1,079,523
    
    
    
    107,952
    
    
    
    11,405
    
    
    
    634,737
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,725,665Common stock
transferred from
capital collected
in advance
    
    
    36,600
    
    
    
    3,660
    
    
    
    (36,600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Changes in
cumulative
translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (603,486
    )
    
    
    
    
    
    
    
    
    
    
    (603,486
    )Changes in minority
interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    383,358
    
    
    
    383,358Balance as of
December 31, 2006
    
    
    191,311,927
    
    
    
    19,131,193
    
    
    
    11,405
    
    
    
    67,707,287
    
    
    
    16,699,508
    
    
    
    322,150
    
    
    
    17,774,335
    
    
    
    27,557,845
    
    
    
    (824,922
    )
    
    
    (29,394,664
    )
    
    
    6,238,018
    
    
    
    297,402,889
  F-5




---



##### Table of Contents



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Expressed in Thousands)
 Capital
    
    
    
    
    
    
    Retained Earnings
    
    
    
    
    
    
    CumulativeCollected in
    
    
    Additional Paid-in
    
    
    
    
    
    
    
    
    
    
    Unappropriated
    
    
    Unrealized Gain/Loss on
    
    
    Translation
    
    
    
    
    
    
    MinorityCommon Stock
    
    
    Shares
    
    
    Advance
    
    
    Capital
    
    
    Legal Reserve
    
    
    Special Reserve
    
    
    Earnings
    
    
    Financial Instruments
    
    
    Adjustment
    
    
    Treasury Stock
    
    
    Interests
    
    
    TotalNT$
    
    
    
    
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Balance as of
January 1, 2007
    
    
    191,311,927
    
    
    
    19,131,193
    
    
    
    11,405
    
    
    
    67,707,287
    
    
    
    16,699,508
    
    
    
    322,150
    
    
    
    17,774,335
    
    
    
    27,557,845
    
    
    
    (824,922
    )
    
    
    (29,394,664
    )
    
    
    6,238,018
    
    
    
    297,402,889Appropriation of
2006 retained
earningsLegal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,777,434
    
    
    
    
    
    
    
    (1,777,434
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    502,772
    
    
    
    (502,772
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,461,529
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,461,529
    )Remuneration
to directors
and
supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,494
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,494
    )Employee bonus
- cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,324,120
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,324,120
    )Capital reduction
    
    
    (57,393,578
    )
    
    
    (5,739,358
    )
    
    
    
    
    
    
    (1,142,437
    )
    
    
    
    
    
    
    
    
    
    
    (2,650,494
    )
    
    
    
    
    
    
    
    
    
    
    7,275,517
    
    
    
    
    
    
    
    (53,910,992
    )Adjustment of
treasury stock held
by subsidiary due
to capital
reduction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,789
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,039
    
    
    
    
    
    
    
    66,828Cancellation of
treasury stock
    
    
    (1,920,670
    )
    
    
    (192,067
    )
    
    
    
    
    
    
    (622,323
    )
    
    
    
    
    
    
    
    
    
    
    (2,655,027
    )
    
    
    
    
    
    
    
    
    
    
    5,198,020
    
    
    
    
    
    
    
    Treasury stock sold
to employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,865,841
    
    
    
    
    
    
    
    1,866,023Net income in 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,961,762
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101,293
    )
    
    
    16,860,469Adjustment of
additional paid-in
capital accounted
for under the
equity method
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,867Adjustment of funds
and investments
disposal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,310
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    
    
    
    
    
    
    
    
    11,160Cash dividends
allocated to
subsidaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,541
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,541Changes in
unrealized gain on
available-for-sale
financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,539,032
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,539,032
    )Changes in
unrealized gain on
financial
instruments of
investees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,604,961
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,604,961
    )Exercise of
employee stock
options
    
    
    135,865
    
    
    
    13,586
    
    
    
    
    
    
    
    90,590
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226,455Common stock
transferred from
capital collected
in advance
    
    
    11,405
    
    
    
    1,141
    
    
    
    (11,405
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Changes in
cumulative
translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,490
    )
    
    
    
    
    
    
    
    
    
    
    (41,490
    )Changes in minority
interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394,085
    
    
    
    394,085Balance as of
December 31, 2007
    
    
    132,144,949
    
    
    
    13,214,495
    
    
    
    
    
    
    
    66,126,806
    
    
    
    18,476,942
    
    
    
    824,922
    
    
    
    12,349,227
    
    
    
    22,413,852
    
    
    
    (866,562
    )
    
    
    (15,003,247
    )
    
    
    6,530,810
    
    
    
    242,997,699
  F-6




---



##### Table of Contents



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Expressed in Thousands)
 Capital
    
    
    
    
    
    
    Retained Earnings
    
    

    
    
    
    
    CumulativeCollected in
    
    
    Additional Paid-in
    
    
    
    
    
    
    
    
    
    
    Unappropriated Earnings
    
    
    Unrealized Gain/Loss on
    
    
    Translation
    
    
    
    
    
    
    MinorityCommon Stock
    
    
    Shares
    
    
    Advance
    
    
    Capital
    
    
    Legal Reserve
    
    
    Special Reserve
    
    
    (Accumulated Deficit)
    
    
    Financial Instruments
    
    
    Adjustment
    
    
    Treasury Stock
    
    
    Interests
    
    
    TotalNT$
    
    
    
    
    
    
    NT$
    
    
    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
    
    
    
    22,413,852
    
    
    
    (866,562
    )
    
    
    (15,003,247
    )
    
    
    6,530,810
    
    
    
    242,997,699Appropriation 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
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of
treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,278,456
    )
    
    
    
    
    
    
    (2,278,456
    )Cancellation of
treasury stock
    
    
    (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 gain 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
    )
    
    
    2,457,922
    
    
    
    1,347,373
    
    
    
    (119,801
    )
    
    
    6,982,125
    
    
    
    191,658,294
  F-7




---



##### Table of Contents



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Expressed in Thousands)
 For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Cash flows from operating activities:Net income (loss) attributable to shareholders of the parent
    
    
    32,619,313
    
    
    
    16,961,762
    
    
    
    (22,320,075
    )
    
    
    (681,321
    )Net loss attributable to minority interests
    
    
    (482,025
    )
    
    
    (101,293
    )
    
    
    (663,017
    )
    
    
    (20,239
    )Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    44,301,314
    
    
    
    37,829,718
    
    
    
    37,197,219
    
    
    
    1,135,446Amortization
    
    
    1,826,622
    
    
    
    1,383,794
    
    
    
    1,314,885
    
    
    
    40,137Bad debt expense (reversal)
    
    
    (164,908
    )
    
    
    256
    
    
    
    95,348
    
    
    
    2,911Loss on decline in market value and obsolescence of inventories
    
    
    1,089,490
    
    
    
    372,359
    
    
    
    3,273,425
    
    
    
    99,921Loss on valuation of financial assets and liabilities
    
    
    131,997
    
    
    
    2,767,710
    
    
    
    3,444,043
    
    
    
    105,130Investment loss (gain) accounted for under the equity method
    
    
    (1,178,103
    )
    
    
    (625,752
    )
    
    
    10,464,849
    
    
    
    319,440Cash dividends received under the equity method
    
    
    1,086,996
    
    
    
    660,050
    
    
    
    134,924
    
    
    
    4,119Gain on disposal of investments
    
    
    (28,651,109
    )
    
    
    (12,040,872
    )
    
    
    (3,386,004
    )
    
    
    (103,358
    )Gain on disposal of property, plant and equipment
    
    
    (223,805
    )
    
    
    (545,005
    )
    
    
    (55,371
    )
    
    
    (1,691
    )Gain on reacquisition of bonds
    
    
    (18,465
    )
    
    
    (6,205
    )
    
    
    
    
    
    
    Amortization of bond discounts
    
    
    87,369
    
    
    
    58,461
    
    
    
    7,830
    
    
    
    239Exchange gain on financial assets and liabilities
    
    
    (13,009
    )
    
    
    (45,182
    )
    
    
    (43,865
    )
    
    
    (1,339
    )Exchange loss (gain) on long-term liabilities
    
    
    (127,179
    )
    
    
    127,417
    
    
    
    (178,877
    )
    
    
    (5,460
    )Write-off of deferred charges
    
    
    
    
    
    
    
    
    
    
    12,867
    
    
    
    393Amortization of deferred income
    
    
    (99,210
    )
    
    
    (149,106
    )
    
    
    (173,303
    )
    
    
    (5,290
    )Impairment loss
    
    
    1,330,293
    
    
    
    575,784
    
    
    
    13,179,858
    
    
    
    402,316Changes in assets and liabilities:Financial assets and liabilities at fair value through profit or loss
    
    
    (5,803,828
    )
    
    
    738,675
    
    
    
    (774,040
    )
    
    
    (23,628
    )Notes and accounts receivable
    
    
    783,372
    
    
    
    (874,901
    )
    
    
    7,425,151
    
    
    
    226,653Other receivables
    
    
    97,674
    
    
    
    513,065
    
    
    
    139,861
    
    
    
    4,269Inventories
    
    
    (1,262,091
    )
    
    
    (1,354,730
    )
    
    
    699,986
    
    
    
    21,367Prepaid expenses
    
    
    (78,560
    )
    
    
    72,758
    
    
    
    187,747
    
    
    
    5,731Deferred income tax assets
    
    
    1,231,531
    
    
    
    1,646,169
    
    
    
    266,193
    
    
    
    8,126Other current assets
    
    
    13,924
    
    
    
    (9,807
    )
    
    
    
    
    
    
    Accounts payable
    
    
    (135,076
    )
    
    
    378,415
    
    
    
    (3,488,163
    )
    
    
    (106,476
    )Accrued expenses
    
    
    406,295
    
    
    
    675,927
    
    
    
    (1,556,394
    )
    
    
    (47,509
    )Other payables
    
    
    51,232
    
    
    
    (38,313
    )
    
    
    1,681
    
    
    
    51Other current liabilities
    
    
    183,773
    
    
    
    (117,122
    )
    
    
    (192,707
    )
    
    
    (5,882
    )Accrued pension liabilities
    
    
    110,883
    
    
    
    56,020
    
    
    
    49,401
    
    
    
    1,508Capacity deposits
    
    
    (4,953
    )
    
    
    (873,554
    )
    
    
    (4,447
    )
    
    
    (136
    )Other liabilities  others
    
    
    14,178
    
    
    
    87,769
    
    
    
    192,279
    
    
    
    5,869Net cash provided by operating activities
    
    
    47,123,935
    
    
    
    48,124,267
    
    
    
    45,251,284
    
    
    
    1,381,297Cash flows from investing activities:Acquisition of financial assets at fair value through profit or loss
    
    
    (427,202
    )
    
    
    
    
    
    
    (50,000
    )
    
    
    (1,526
    )Acquisition of available-for-sale financial assets
    
    
    (5,145,237
    )
    
    
    (3,912,891
    )
    
    
    (670,264
    )
    
    
    (20,460
    )Acquisition of financial assets measured at cost
    
    
    (2,281,596
    )
    
    
    (1,359,890
    )
    
    
    (917,424
    )
    
    
    (28,005
    )Acquisition of long-term investments accounted for under the equity method
    
    
    (3,524,941
    )
    
    
    (1,343,316
    )
    
    
    (2,450,628
    )
    
    
    (74,806
    )Acquisition of held-to-maturity financial assets
    
    
    
    
    
    
    
    
    
    
    (352,645
    )
    
    
    (10,765
    )Proceeds from disposal of financial assets at fair value through profit or loss
    
    
    74,092
    
    
    
    
    
    
    
    42,596
    
    
    
    1,300Proceeds from disposal of available-for-sale financial assets
    
    
    18,697,235
    
    
    
    9,226,736
    
    
    
    4,285,844
    
    
    
    130,826Proceeds from disposal of financial assets measured at cost
    
    
    903,019
    
    
    
    1,004,253
    
    
    
    425,865
    
    
    
    13,000Proceeds from disposal of long-term investments accounted for under the equity method
    
    
    8,202,027
    
    
    
    1,531,544
    
    
    
    824
    
    
    
    25Proceeds from maturity of held-to-maturity financial assets
    
    
    
    
    
    
    1,119,950
    
    
    
    
    
    
    
    Prepayment for long-term investments
    
    
    
    
    
    
    (648,360
    )
    
    
    (5,160
    )
    
    
    (158
    )Proceeds from capital reduction and liquidation of investments
    
    
    204,352
    
    
    
    342,206
    
    
    
    289,915
    
    
    
    8,850Acquisition of property, plant and equipment
    
    
    (33,239,978
    )
    
    
    (28,299,165
    )
    
    
    (11,514,548
    )
    
    
    (351,482
    )Proceeds from disposal of property, plant and equipment
    
    
    587,904
    
    
    
    1,751,144
    
    
    
    261,583
    
    
    
    7,985Acquisition of deferred charges
    
    
    (1,095,114
    )
    
    
    (1,255,453
    )
    
    
    (770,262
    )
    
    
    (23,512
    )Decrease in restricted deposits
    
    
    555,800
    
    
    
    
    
    
    
    
    
    
    
    Decrease (increase) in other assets
    
    
    (66,542
    )
    
    
    (1,038
    )
    
    
    1,301
    
    
    
    40Net cash used in investing activities
    
    
    (16,556,181
    )
    
    
    (21,844,280
    )
    
    
    (11,423,003
    )
    
    
    (348,688
    )
  F-8




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##### Table of Contents



UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Thousands)
 For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Cash flows from financing activities:Proceeds (repayment) from short-term loans
    
    
    204,265
    
    
    
    14,000
    
    
    
    (293,051
    )
    
    
    (8,945
    )Increase in long-term loans
    
    
    
    
    
    
    
    
    
    
    700,000
    
    
    
    21,368Redemption of bonds
    
    
    (10,250,000
    )
    
    
    (5,355,192
    )
    
    
    (22,716,624
    )
    
    
    (693,426
    )Reacquisition of bonds
    
    
    (1,844,683
    )
    
    
    (819,323
    )
    
    
    
    
    
    
    Remuneration paid to directors and supervisors
    
    
    (6,324
    )
    
    
    (15,494
    )
    
    
    (11,939
    )
    
    
    (365
    )Increase (decrease) in deposits-in
    
    
    (6,379
    )
    
    
    2,136
    
    
    
    (4,436
    )
    
    
    (135
    )Cash dividends
    
    
    (7,155,865
    )
    
    
    (12,446,080
    )
    
    
    (9,371,107
    )
    
    
    (286,053
    )Payment of employee bonus
    
    
    (305,636
    )
    
    
    (2,324,120
    )
    
    
    (286,541
    )
    
    
    (8,747
    )Treasury stock sold to employees
    
    
    
    
    
    
    1,866,023
    
    
    
    
    
    
    
    Capital reduction
    
    
    
    
    
    
    (53,844,157
    )
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (27,286,339
    )
    
    
    
    
    
    
    (2,278,456
    )
    
    
    (69,550
    )Exercise of employee stock options
    
    
    1,725,665
    
    
    
    226,455
    
    
    
    
    
    
    
    Increase (decrease) in minority shareholders
    
    
    (130,269
    )
    
    
    2,202
    
    
    
    (117,496
    )
    
    
    (3,587
    )Net cash used in financing activities
    
    
    (45,055,565
    )
    
    
    (72,693,550
    )
    
    
    (34,379,650
    )
    
    
    (1,049,440
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (247,242
    )
    
    
    238,502
    
    
    
    1,439,871
    
    
    
    43,952Effect of subsidiaries change
    
    
    (38,539
    )
    
    
    
    
    
    
    
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    (14,773,592
    )
    
    
    (46,175,061
    )
    
    
    888,502
    
    
    
    27,121Cash and cash equivalents at beginning of period
    
    
    108,626,800
    
    
    
    93,853,208
    
    
    
    47,678,147
    
    
    
    1,455,377Cash and cash equivalents at end of period
    
    
    93,853,208
    
    
    
    47,678,147
    
    
    
    48,566,649
    
    
    
    1,482,498Supplemental disclosures of cash flow information:Cash paid for interest
    
    
    971,038
    
    
    
    522,300
    
    
    
    400,238
    
    
    
    12,217Cash paid for income tax
    
    
    167,433
    
    
    
    2,094,070
    
    
    
    1,000,974
    
    
    
    30,555Investing activities partially paid by cash:Acquisition of property, plant and equipment
    
    
    38,054,650
    
    
    
    24,205,072
    
    
    
    7,196,408
    
    
    
    219,671Add: Payable at beginning of period
    
    
    5,315,695
    
    
    
    10,130,367
    
    
    
    6,036,274
    
    
    
    184,257Less: Payable at end of period
    
    
    (10,130,367
    )
    
    
    (6,036,274
    )
    
    
    (1,718,134
    )
    
    
    (52,446
    )Cash paid for acquiring property, plant and equipment
    
    
    33,239,978
    
    
    
    28,299,165
    
    
    
    11,514,548
    
    
    
    351,482Investing and financing activities not affecting cash flows:Principal amount of exchangeable bonds exchanged by bondholders
    
    
    69,621
    
    
    
    3,285,254
    
    
    
    
    
    
    
    Book value of available-for-sale financial assets delivered for exchange
    
    
    (20,242
    )
    
    
    (895,055
    )
    
    
    
    
    
    
    Elimination of related balance sheet accounts
    
    
    15,302
    
    
    
    392,118
    
    
    
    
    
    
    
    Recognition of gain on disposal of available-for-sale financial assets
    
    
    64,681
    
    
    
    2,782,317
    
    
    
    
    
    
    
    
  F-9




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##### Table of Contents



1.
    
    HISTORY AND ORGANIZATION
   2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   General Descriptions of Reporting Entities
 Principles of Consolidation
    F-10




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##### Table of Contents



The consolidated entities are as follows:
 As of December 31, 2007
 Percentage ofInvestor
    
    Subsidiary
    
    Business nature
    
    ownership (%)UMC
    
    UMC GROUP (USA) (UMC-USA)
    
    IC Sales
    
    
    100.00UMC
    
    UNITED MICROELECTRONICS (EUROPE) B.V (UME-BV)
    
    IC Sales
    
    
    100.00UMC
    
    UMC CAPITAL CORP.
    
    Investment holding
    
    
    100.00UMC
    
    UNITED MICROELECTRONICS CORP. (SAMOA)
    
    Investment holding
    
    
    100.00UMC
    
    TLC CAPITAL CO., LTD. (TLC)
    
    Consulting and planning for investment in new business
    
    
    100.00UMC
    
    UMCI LTD. (UMCI)
    
    Sales and manufacturing of integrated circuits
    
    
    100.00UMC
    
    FORTUNE VENTURE CAPITAL CORP. (FORTUNE)
    
    Consulting and planning for investment in new business
    
    
    99.99UMC
    
    UNITED MICRODISPLAY OPTRONICS CORP. (UMO)
    
    Sales and manufacturing of LCOS
    
    
    85.24UMC
    
    UMC JAPAN (UMCJ)
    
    Sales and manufacturing of integrated circuits
    
    
    50.09FORTUNE
    
    UNITRUTH INVESTMENT CORP. (UNITRUTH)
    
    Investment holding
    
    
    100.00UMC CAPITAL CORP.
    
    UMC CAPITAL (USA)
    
    Investment holding
    
    
    100.00UMC CAPITAL CORP.
    
    ECP VITA LTD.
    
    Insurance
    
    
    100.00UMO
    
    UMO(HK) LIMITED (Note)
    
    Investment holding
    
    
    100.00
 Note:
    
    UMO(HK) LIMITED has filed for liquidation in October, 2008, and it is not included in the
consolidated financial statements of 2008.  F-11




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##### Table of Contents



As of December 31, 2008
 Percentage ofInvestor
    
    Subsidiary
    
    Business nature
    
    ownership (%)UMC
    
    UMC-USA
    
    IC Sales
    
    
    100.00UMC
    
    UME BV
    
    IC Sales
    
    
    100.00UMC
    
    UMC CAPITAL CORP.
    
    Investment holding
    
    
    100.00UMC
    
    UNITED MICROELECTRONICS CORP. (SAMOA)
    
    Investment holding
    
    
    100.00UMC
    
    TLC
    
    Consulting and planning for investment in new business
    
    
    100.00UMC
    
    UMCI
    
    Sales and manufacturing of integrated circuits
    
    
    100.00UMC
    
    FORTUNE
    
    Consulting and planning for investment in new business
    
    
    99.99UMC
    
    UMO
    
    Sales and manufacturing of LCOS
    
    
    89.99UMC
    
    UMCJ
    
    Sales and manufacturing of integrated circuits
    
    
    52.64FORTUNE
    
    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
    
    
    100.00
 Use of Estimates
  Foreign Currency Transactions
   F-12




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##### Table of Contents



Translation of Foreign Currency Financial Statements
  Convenience Translation into US Dollars
  Cash Equivalents
  Financial assets and financial liabilities
   F-13




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##### Table of Contents



a.
    
    Financial assets and financial liabilities at fair value through profit or loss
   b.
    
    Held-to-maturity financial assets
   c.
    
    Financial assets measured at cost
   F-14




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##### Table of Contents



d.
    
    Available-for-sale financial assets
   Allowance for Doubtful Accounts
  Inventories
  Long-term Investments Accounted for Under the Equity Method
   F-15




---



##### Table of Contents



F-16




---



##### Table of Contents



Property, Plant and Equipment
   Buildings
    
    3 ~ 55 yearsMachinery and equipment
    
    5 ~ 6 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
   F-17




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##### Table of Contents



Deferred Charges
   Convertible and Exchangeable Bonds
      F-18




---



##### Table of Contents



Pension Plan
    Employee Stock Option Plan
  Employee Bonus and Remunerations Paid to Directors and Supervisors
   F-19




---



##### Table of Contents



Treasury Stock
  Revenue Recognition
   Research and Development Expenditures
  Capital Expenditures Versus Operating Expenditures
   F-20




---



##### Table of Contents



Income Tax
     Earnings
(Losses) per Share
   F-21




---



##### Table of Contents



Asset Impairment
    New Accounting Pronouncements
  3.
    
    ACCOUNTING CHANGES
 Employee Stock Options
   F-22




---



##### Table of Contents



Employee Bonus and Remunerations Paid to Directors and Supervisors
  4.
    
    CASH AND CASH EQUIVALENTS
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000CashCash on hand
    
    
    2,665
    
    
    
    2,478Checking and savings accounts
    
    
    6,031,675
    
    
    
    5,098,037Time deposits
    
    
    35,697,615
    
    
    
    37,311,317Subtotal
    
    
    41,731,955
    
    
    
    42,411,832Cash equivalents
    
    
    5,946,192
    
    
    
    6,154,817Total
    
    
    47,678,147
    
    
    
    48,566,649
 5.
    
    FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000CurrentListed stocks
    
    
    4,800,385
    
    
    
    1,448,506Convertible bonds
    
    
    
    
    
    
    232,799Forward contract
    
    
    
    
    
    
    59,750Open-end funds
    
    
    4,550
    
    
    
    Subtotal
    
    
    4,804,935
    
    
    
    1,741,055NoncurrentConvertible bonds
    
    
    47,598
    
    
    
    60,010Interest rate swaps
    
    
    
    
    
    
    113,550Subtotal
    
    
    47,598
    
    
    
    173,560Total
    
    
    4,852,533
    
    
    
    1,914,615
   F-23




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##### Table of Contents



6.
    
    HELD-TO-MATURITY FINANCIAL ASSETS, CURRENT
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Floating rate notes
    
    
    
    
    
    
    324,297Bonds
    
    
    
    
    
    
    28,348Total
    
    
    
    
    
    
    352,645
 7.
    
    ACCOUNTS RECEIVABLE, NET
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Accounts receivable
    
    
    15,628,817
    
    
    
    9,005,705Less: Allowance for sales returns and discounts
    
    
    (600,052
    )
    
    
    (607,944
    )Less: Allowance for doubtful accounts
    
    
    (2,252
    )
    
    
    (9,529
    )Net
    
    
    15,026,513
    
    
    
    8,388,232
 8.
    
    INVENTORIES, NET
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Raw materials
    
    
    1,158,782
    
    
    
    916,269Supplies and spare parts
    
    
    2,223,092
    
    
    
    2,357,131Work in process
    
    
    8,201,214
    
    
    
    5,954,712Finished goods
    
    
    1,236,551
    
    
    
    2,883,045Total
    
    
    12,819,639
    
    
    
    12,111,157Less: Allowance for loss on decline in
market value and obsolescence
    
    
    (951,807
    )
    
    
    (3,993,554
    )Net
    
    
    11,867,832
    
    
    
    8,117,603
   F-24




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##### Table of Contents



9.
    
    AVAILABLE-FOR-SALE FINANCIAL ASSETS, NONCURRENT
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Common stocks
    
    
    50,757,743
    
    
    
    16,067,389Depositary receipts
    
    
    
    
    
    
    177,264Funds
    
    
    153,900
    
    
    
    39,264Total
    
    
    50,911,643
    
    
    
    16,283,917
     F-25




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##### Table of Contents



10.
    
    FINANCIAL ASSETS MEASURED AT COST, NONCURRENT
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Common stocks
    
    
    5,282,110
    
    
    
    4,567,436Preferred stocks
    
    
    2,303,264
    
    
    
    2,413,108Convertible bonds
    
    
    16,394
    
    
    
    27,899Funds
    
    
    693,911
    
    
    
    648,245Total
    
    
    8,295,679
    
    
    
    7,656,688
  11.
    
    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 31,2007
    
    
    2008Percentage of
    
    
    
    
    
    
    Percentage ofOwnership or
    
    
    
    
    
    
    Ownership orInvestee Companies
    
    Amount
    
    
    Voting Rights
    
    
    Amount
    
    
    Voting RightsNT$000
    
    
    %
    
    
    NT$000
    
    
    %Unlisted companiesPACIFIC VENTURE CAPITAL CO.,
LTD. (PACIFIC) (Note A)
    
    
    127,379
    
    
    
    49.99
    
    
    
    7,379
    
    
    
    49.99UWAVE TECHNOLOGY CORP. (UWAVE)
(Note B)
    
    
    
    
    
    
    48.64
    
    
    
    
    
    
    
    48.64ACHIEVE MADE INTERNATIONAL LTD.
    
    
    24,920
    
    
    
    43.29
    
    
    
    29,297
    
    
    
    48.03MTIC HOLDING PTE LTD.
    
    
    82,230
    
    
    
    49.94
    
    
    
    263,192
    
    
    
    46.49YUNG LI INVESTMENTS, INC.
    
    
    276,345
    
    
    
    45.16
    
    
    
    251,165
    
    
    
    45.16MEGA MISSION LIMITED PARTNERSHIP
    
    
    2,441,703
    
    
    
    45.00
    
    
    
    1,504,963
    
    
    
    45.00AEVOE INTERNATIONAL LTD.
    
    
    13,552
    
    
    
    38.62
    
    
    
    24,190
    
    
    
    43.92UNITECH CAPITAL INC.
    
    
    954,691
    
    
    
    42.00
    
    
    
    525,898
    
    
    
    42.00ANOTO TAIWAN CORP.
    
    
    24,635
    
    
    
    39.20
    
    
    
    12,287
    
    
    
    39.20NEXPOWER TECHNOLOGY CORP.
    
    
    784,668
    
    
    
    34.55
    
    
    
    2,945,835
    
    
    
    38.76HSUN CHIEH INVESTMENT CO., LTD.
    
    
    4,122,988
    
    
    
    36.49
    
    
    
    1,396,484
    
    
    
    36.49UC FUND II
    
    
    202,075
    
    
    
    35.45
    
    
    
    117,041
    
    
    
    35.45WALTOP INTERNATIONAL CORP.
    
    
    141,041
    
    
    
    40.00
    
    
    
    171,728
    
    
    
    34.79XGI TECHNOLOGY INC.
    
    
    32,410
    
    
    
    31.53
    
    
    
    74,731
    
    
    
    33.57CRYSTAL MEDIA INC.
    
    
    46,439
    
    
    
    32.87
    
    
    
    40,670
    
    
    
    32.60CTC CAPITAL PARTNERS I, L. P.
    
    
    145,021
    
    
    
    32.11
    
    
    
    147,728
    
    
    
    31.40
  F-26




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##### Table of Contents



As of December 31,2007
    
    
    2008Percentage of
    
    
    
    
    
    
    Percentage ofOwnership or
    
    
    
    
    
    
    Ownership orInvestee Companies
    
    Amount
    
    
    Voting Rights
    
    
    Amount
    
    
    Voting RightsNT$000
    
    
    %
    
    
    NT$000
    
    
    %ALLIANCE OPTOTEK CORP.
    
    
    76,505
    
    
    
    27.76
    
    
    
    58,386
    
    
    
    27.63AMIC TECHNOLOGY CORP.
    
    
    101,452
    
    
    
    25.95
    
    
    
    30,902
    
    
    
    25.87UNIMICRON HOLDING LIMITED
    
    
    
    
    
    
    
    
    
    
    566,380
    
    
    
    25.25HIGH POWER LIGHTING CORP.
    
    
    46,070
    
    
    
    23.00
    
    
    
    48,044
    
    
    
    22.29MOBILE DEVICES INC.
    
    
    46,522
    
    
    
    21.79
    
    
    
    48,436
    
    
    
    21.03TRANSLINK CAPITAL PARTNERS I L.
P. (Note C)
    
    
    46,758
    
    
    
    16.73
    
    
    
    56,485
    
    
    
    11.82SMEDIA TECHNOLOGY CORP.
(SMEDIA) (Note D)
    
    
    172,191
    
    
    
    45.74
    
    
    
    
    
    
    
    Total
    
    
    9,909,595
    
    
    
    
    
    
    
    8,321,221
 Note A:
    
    On June 27, 2006, PACIFIC set July 3, 2006 as its liquidation date through a decision at
its shareholders meeting. The liquidation has not been completed as of December 31, 2008.Note B:
    
    On June 29, 2007, UWAVE reached the decision to liquidate the company at its
shareholders meeting. The liquidation has not been completed as of December 31, 2008.Note C:
    
    According to the partnership contract, the Company has significant influence over
TRANSLINK, and it is accounted for under the equity method.Note D:
    
    As of December 31, 2008, SMEDIA, CHIP ADVANCED TECHNOLOGY INC. (CHIP ADVANCED)
(accounted for as financial assets measured at cost, noncurrent),USBEST TECHNOLOGY INC.
(USBEST) (accounted for as financial assets measured at cost, noncurrent) and ITE TECH. INC.
(ITE) merged into ITE TECH. INC. (ITE) and were continued as ITE TECH. INC. (classified as an
available-for-sale financial asset, noncurrent) after the merger. During the transaction, 1
share of SMEDIA was exchanged for 0.26 share of ITE, 1 share of CHIP ADVANCED was exchanged
for 0.41 share of ITE, and 1 share of USBEST was exchanged for 1.05 shares of ITE. b.
    
    Total gain (loss) arising from investments accounted for under the equity method were a
gain of NT$626 million and a loss of NT$10,465 million for the years ended December 31, 2007
and 2008, respectively. Investment income (loss) amounted to a gain of NT$810 million and a
loss of NT$9,445 million for the years ended December 31, 2007 and 2008, respectively, and
the related long-term investment balances of NT$5,418 million and NT$3,040 million as of
December 31, 2007 and 2008, respectively, were determined based on the investees financial
statements audited by other auditors.
 c.
    
    The long-term equity investments were not pledged.
  F-27




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##### Table of Contents



12.
    
    PROPERTY, PLANT AND EQUIPMENT
 As of December 31, 2007AccumulatedCost
    
    
    Depreciation
    
    
    Book ValueNT$000
    
    
    NT$000
    
    
    NT$000Land
    
    
    1,922,230
    
    
    
    
    
    
    
    1,922,230Buildings
    
    
    22,529,856
    
    
    
    (7,944,046
    )
    
    
    14,585,810Machinery and equipment
    
    
    446,198,339
    
    
    
    (336,320,744
    )
    
    
    109,877,595Transportation equipment
    
    
    85,877
    
    
    
    (65,574
    )
    
    
    20,303Furniture and fixtures
    
    
    3,429,067
    
    
    
    (2,549,736
    )
    
    
    879,331Leasehold improvement
    
    
    42,809
    
    
    
    (40,845
    )
    
    
    1,964Construction in progress
and prepayments
    
    
    9,931,551
    
    
    
    
    
    
    
    9,931,551Total
    
    
    484,139,729
    
    
    
    (346,920,945
    )
    
    
    137,218,784
 As of December 31, 2008AccumulatedCost
    
    
    Depreciation
    
    
    Book ValueNT$000
    
    
    NT$000
    
    
    NT$000Land
    
    
    2,269,237
    
    
    
    
    
    
    
    2,269,237Buildings
    
    
    24,354,334
    
    
    
    (9,897,661
    )
    
    
    14,456,673Machinery and equipment
    
    
    459,711,569
    
    
    
    (373,639,088
    )
    
    
    86,072,481Transportation equipment
    
    
    76,742
    
    
    
    (66,334
    )
    
    
    10,408Furniture and fixtures
    
    
    3,582,387
    
    
    
    (2,891,844
    )
    
    
    690,543Leasehold improvement
    
    
    53,432
    
    
    
    (42,391
    )
    
    
    11,041Construction in progress
and prepayments
    
    
    4,899,607
    
    
    
    
    
    
    
    4,899,607Total
    
    
    494,947,308
    
    
    
    (386,537,318
    )
    
    
    108,409,990
 a.
    
    Total interest expense before capitalization amounted to NT$648 million, NT$266 million
and NT$109 million for the years ended December 31, 2006, 2007 and 2008, respectively.
  For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000Machinery and equipment
    
    
    
    
    
    
    80,382
    
    
    
    21,679Other property, plant and equipment
    
    
    
    
    
    
    4,246
    
    
    
    16,265Total interest capitalized
    
    
    
    
    
    
    84,628
    
    
    
    37,944Interest rates applied
    
    
    
    
    
    
    0.67%~0.92
    %
    
    
    0.11%~1.22
    %
 b.
    
    Please refer to Note 28 for property plant and equipment pledged as collateral.
  F-28




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##### Table of Contents



13.
    
    OTHER ASSETS  OTHERS
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Leased assets
    
    
    1,202,453
    
    
    
    1,157,729Deposits-out
    
    
    745,457
    
    
    
    772,849Others
    
    
    265,587
    
    
    
    251,199Total
    
    
    2,213,497
    
    
    
    2,181,777
  14.
    
    IMPAIRMENT LOSS
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000Available-for-sale financial assets, noncurrent
    
    
    825,863
    
    
    
    371,194
    
    
    
    8,386,596Long-term investments accounted for under the
equity method
    
    
    33,217
    
    
    
    
    
    
    
    Financial assets measured at cost, noncurrent
    
    
    215,071
    
    
    
    196,898
    
    
    
    943,084Goodwill
    
    
    
    
    
    
    
    
    
    
    3,491,073Technology know how
    
    
    256,142
    
    
    
    
    
    
    
    Property, plant and equipment
    
    
    
    
    
    
    7,692
    
    
    
    39,148Others assets
    
    
    
    
    
    
    
    
    
    
    319,957Total
    
    
    1,330,293
    
    
    
    575,784
    
    
    
    13,179,858
   F-29




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##### Table of Contents



15.
    
    SHORT-TERM LOANS
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Unsecured bank loans
    
    
    359,071
    
    
    
    132,610Interest rates
    
    
    3.43%~5.43
    %
    
    
    3.72
    %
  16.
    
    FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000CurrentInterest rate swaps
    
    
    224,775
    
    
    
    33,189Forward contract
    
    
    21,523
    
    
    
    Subtotal
    
    
    246,298
    
    
    
    33,189NoncurrentInterest rate swaps
    
    
    93,932
    
    
    
    Total
    
    
    340,230
    
    
    
    33,189
  17.
    
    BONDS PAYABLE
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Unsecured domestic bonds payable
    
    
    18,000,000
    
    
    
    7,500,000Convertible bonds payable
    
    
    12,395,500
    
    
    
    Less: discounts on bonds payable
    
    
    (10,720
    )
    
    
    (2,890
    )Total
    
    
    30,384,780
    
    
    
    7,497,110Less: Current portion
    
    
    (22,889,476
    )
    
    
    Net
    
    
    7,495,304
    
    
    
    7,497,110
  F-30




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##### Table of Contents



a.
    
    During the period from April 16 to April 27, 2001, UMC issued five-year and seven-year
unsecured bonds totaled NT$15,000 million, each with a face value of NT$7,500 million. The
interest is paid annually with stated interest rates of 5.1195% through 5.1850% and 5.2170%
through 5.2850%, respectively. The five-year and seven-year bonds were due starting from
April 2004 to April 2006 and April 2006 to April 2008, respectively, both in three yearly
installments at the rates of 30%, 30% and 40%. On April 27, 2006 and April 27, 2008, the
five-year and seven-year bonds were fully repaid, respectively.
 b.
    
    On May 10, 2002, UMC issued zero coupon exchangeable bonds listed on the Euro MTF Market of
the Luxembourg Stock Exchange (LSE). The terms and conditions of the bonds were as follows:
 (a)
    
    Issue Amount: US$235 million(b)
    
    Period: May 10, 2002 ~ May 10, 2007(c)
    
    Redemption
 i.
    
    UMC may redeem the bonds, in whole or in part, after three months of the
issuance and prior to the maturity date, at their principal amount if the closing
price of the AU Optronics Corp. (AUO) common shares 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 120% of the exchange price then
in effect translated into US dollars at the rate of NT$34.645=US$1.00.ii.
    
    UMC may redeem the bonds, in whole, but not in part, 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 in part, of the bonds, at any time, in the
event of certain changes in the R.O.C. tax rules which would require UMC to gross up
for payments of principal, or to gross up for payments of interest or premium.iv.
    
    UMC could have, at the option of the bondholders, redeemed such bonds on
February 10, 2005 at its principal amount.
 (d)
    
    Terms of Exchange
 i.
    
    Underlying securities: ADSs or common shares of AUO.ii.
    
    Exchange Period: The bonds were exchangeable at any time on or after June
19, 2002 and prior to April 10, 2007, into AUO common shares or AUO ADSs; 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 were subject to certain restrictions.iii.
    
    Exchange Price and Adjustment: The exchange price was NT$44.3 per share,
determined on the basis of a fixed exchange rate of NT$34.645=US$1.00. The exchange
price will be subject to adjustments upon the occurrence of certain events set out
in the indenture.
  F-31




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##### Table of Contents



(e)
    
    Exchange of the Bonds
  (f)
    
    Redemption at maturity date
  c.
    
    During the period from May 21 to June 24, 2003, UMC issued five-year and seven-year
unsecured bonds totaled 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 are repayable
in 2008 and 2010, respectively, upon the maturity of the bonds. On June 24, 2008, the
five-year bonds were fully redeemed.
 d.
    
    On October 5, 2005, UMC issued zero coupon convertible bonds on the LSE. The terms and
conditions of the bonds are as follows:
 (a)
    
    Issue Amount: US$381.4 million
 (b)
    
    Period: October 5, 2005 ~ February 15, 2008
 (c)
    
    Redemption
 i.
    
    On or at any time after April 5, 2007, if the closing price of the ADSs listed on
the NYSE has been at least 130% of either the conversion price or the last adjusted
conversion price, for 20 out of 30 consecutive ADS trading days, UMC may redeem all, but
not in part, of the bonds.
 ii.
    
    If at least 90% of the principal amount of the bonds had already been redeemed,
repurchased, cancelled or converted, UMC may redeem all, but not in part, of the bonds.
 iii.
    
    In the event that UMCs ADSs or shares have officially ceased to be listed or
permitted for trading on the NYSE or the TSE, as the case may be, each bondholder would
have had the right, at such bondholders option, to require UMC to repurchase all, but
not in part, of such bondholders bonds at their principal amount.
  F-32




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##### Table of Contents



iv.
    
    In the event of certain changes in taxation in the R.O.C. resulting in UMC becoming
required to pay additional amounts, UMC may redeem all, but not in part, of the bonds at
their principal amount; bondholders may elect not to have their bonds redeemed by UMC in
such event, in which case the bondholders would not be entitled to receive payments of
such additional amounts.
 v.
    
    If a significant change of control occurs with respect to UMC, each bondholder
would have had the right at such bondholders option, to require UMC to repurchase all,
but not in part, of such bondholders bonds at their principal amount.
 vi.
    
    UMC redeemed the principal amount of the bonds on its maturity date, February 15,
2008.
 (d)
    
    Conversion
 i.
    
    Conversion Period: Except for the closed period, the bonds may be converted into
UMCs ADSs on or after November 4, 2005 and on or prior to February 5, 2008.
 ii.
    
    Conversion Price and Adjustment: The conversion price was US$4.253 per ADS. The
applicable conversion price was subject to adjustments upon the occurrence of certain
events set out in the indenture.
 (e)
    
    Redemption at maturity date:At the maturity date of February 15, 2008, UMC had redeemed the bonds at the principal
amount.
 e.
    
    On March 25, 2002, UMCs subsidiary, UMC JAPAN (UMCJ), issued LSE- listed zero coupon
convertible bonds with an aggregate principal amount of JPY17,000 million and the issue price
was set at 101.75% of the principal amount. The terms and conditions of the bonds are as
follows:
 (a)
    
    Final Redemption
  (b)
    
    Redemption at the Option of UMCJ
 i.
    
    On or at any time after March 25, 2005, UMCJ may redeem all, but not in part, of
the bonds if the closing price of the shares on the Japan OTC Market is at least 120% of
the conversion price then in effect for at least 20 out of 30 consecutive trading days
ending on the trading day immediately prior to the date of the notice of redemption; or
if the principal amount that has not been redeemed, repurchased and cancelled or
converted was equal to or less than 10% of original aggregate principal amount.ii.
    
    In case of a corporate split or share exchange, UMCJ may redeem all, but not in
part, of the bonds on or prior to the effective date of the transaction, provided that
UMCJ was not able to ensure that the bondholders have the right to receive shares which
they would have received had the conversion rights been exercised prior to the
transaction.iii.
    
    If a change in controls of UMCJ had occurred, bondholders would be able to require
UMCJ to redeem their bonds on the date that was 85 days after the change of control
occurs.
  F-33




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##### Table of Contents



(c)
    
    Conversion PeriodAt any time on or after May 3, 2002, up to and including March 19, 2007, the bonds may
be converted into the common shares of UMCJ.(d)
    
    Conversion PriceThe conversion price was set at JPY400,000 per share, subject to adjustments upon the
occurrence of certain events set out in the indenture.(e)
    
    Reacquisition of the BondsAs of December 31, 2007, UMCJ has reacquired and cancelled a total amount of JPY11,630
million of the bonds from the open market. There was no reacquisition during the year
ended December 31, 2007.(f)
    
    Redemption at maturity dateAt the maturity date of March 26, 2007, UMCJ redeemed all the remaining bonds in the
principal amount of JPY5,370 million.
 f.
    
    On November 25, 2003, UMCJ issued its second LSE-listed zero coupon convertible bonds
with an aggregate principal amount of JPY21,500 million and the issue price was set at
101.25% of the principal amount. The terms and conditions of the bonds were as follows:
 (a)
    
    Final RedemptionUnless previously converted, purchased and cancelled or redeemed, the bonds must be
redeemed on November 25, 2013 at their principal amount.(b)
    
    Redemption at the Option of UMCJ
 i.
    
    On or at any time after November 27, 2006, UMCJ may redeem all, but not
in part, of the bonds if the closing price of the shares on the Japan OTC Market is
at least 120% of the conversion price then in effect for at least 20 out of 30
consecutive trading days ending on the trading day immediately prior to the date of
the notice of redemption; or if the principal amount that had been redeemed,
repurchased and cancelled or converted is equal to or less than 10% of original
aggregate principal amount.
 ii.
    
    In case of a corporate split or share exchange, UMCJ may redeem all, but
not in part, of the bonds on or prior to the effective date of the transaction,
provided that UMCJ is not able to ensure that the bondholders have the right to
receive shares which they would have received had the conversion rights been
exercised prior to the transaction.
 iii.
    
    If a change in controls of UMCJ had occurred, bondholders would be able
to require UMCJ to redeem their bonds on the date that was 70 days after the change
of control occurs.
  F-34




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##### Table of Contents



iv.
    
    UMCJ would have, at the option of the bondholders, redeemed such bonds on
November 26, 2007 at its principal amount.
 (c)
    
    Conversion PeriodThe conversion period was any time on or after January 5, 2004 and on or prior to
November 11, 2013. The bonds may convert into the common shares of UMCJ.(d)
    
    Conversion PriceThe conversion price was set at JPY187,500 per share, subject to adjustment upon the
occurrence of certain events set out in the indenture.(e)
    
    Reacquisition of the BondsAs of December 31, 2007, UMCJ has reacquired and cancelled JPY16,270 million and JPY8,430
million, respectively, of the bonds from the open market. As of December 31, 2007, UMCJ
had redeemed bonds in the principal amount of JPY5,230 million upon request from
bondholders. The gain on the reacquisition amounting to JPY178 million was recognized as
other income for the year ended December 31, 2007. As of December 31, 2007, UMCJ had
reacquired or redeemed all the bonds in the principal amount upon request from
bondholders.
 g.
    
    Repayment of the above-mentioned bonds in the future year is as follows:
 Bonds repayable (Year)
    
    AmountNT$0002010
    
    
    7,500,000
 18.
    
    LONG-TERM LOANS
 a.
    
    Details of long-term loans are as follows:
 Lender
    
    December 31, 2008
    
    
    RedemptionNT$000Unsecured Long-Term Loan from Taiwan Cooperative Bank
    
    
    200,000
    
    
    Repayable quarterly from March 30, 2009 to December 30, 2011 and interest is paid monthly.Secured Long-Term Loan from Bank of Taiwan
    
    
    500,000
    
    
    Repayable quarterly from December 30, 2010 to September 30, 2013 and interest is paid monthly.Subtotal
    
    
    700,000Less: Current Portion
    
    
    (66,667
    )Total
    
    
    633,333Interest Rate
    
    
    1.815%~2.610
    %
  F-35




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##### Table of Contents



b.
    
    The above long-term loans will be repaid by installments with the last payment on
September 30, 2013. Repayments in the coming years respectively are as follows:
 Long-Term Loans repayable (Year)
    
    AmountNT$0002009
    
    
    66,6672010
    
    
    108,3332011
    
    
    233,3332012
    
    
    166,6672013
    
    
    125,000Total
    
    
    700,000
 c.
    
    The Company did not have any long-term loans as at December 31, 2007.
 d.
    
    Please refer to Note 28 for property, plant and equipment pledged as collateral for
long- term loans.
 19.
    
    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 option 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 and NT$395 million were contributed by the Company for
the years ended December 31, 2008 and 2007, 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 and 2007, the Company made
contributions of NT$112 million and NT$126 million, respectively.
  F-36




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##### Table of Contents



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 31,2007
    
    
    2008NT$000
    
    
    NT$000Projected benefit obligation at beginning of year
    
    
    (5,090,744
    )
    
    
    (4,648,257
    )Service cost
    
    
    (124,193
    )
    
    
    (130,570
    )Interest cost
    
    
    (136,017
    )
    
    
    (155,276
    )Benefits paid
    
    
    54,122
    
    
    
    150,704Gain on projected benefit obligation
    
    
    683,868
    
    
    
    393,328Exchange loss and others
    
    
    (35,293
    )
    
    
    (173,229
    )Projected benefit obligation at end of year
    
    
    (4,648,257
    )
    
    
    (4,563,300
    )
 d.
    
    Change in pension assets during the year:
 For the years ended December 31,2007
    
    
    2008NT$000
    
    
    NT$000Fair value of plan assets at beginning of year
    
    
    1,822,322
    
    
    
    1,962,569Actual loss on plan assets
    
    
    (7,497
    )
    
    
    (182,392
    )Contributions from employer
    
    
    167,331
    
    
    
    172,938Benefits paid
    
    
    (54,122
    )
    
    
    (150,704
    )Exchange gain and others
    
    
    34,535
    
    
    
    170,996Fair value of plan assets at end of year
    
    
    1,962,569
    
    
    
    1,973,407
  F-37




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##### Table of Contents



e.
    
    The funding status of the pension plan is as follows:
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Benefit obligationVested benefit obligation
    
    
    (717,040
    )
    
    
    (938,677
    )Non-vested benefit obligation
    
    
    (1,728,007
    )
    
    
    (1,781,909
    )Accumulated benefit obligation
    
    
    (2,445,047
    )
    
    
    (2,720,586
    )Effect from projected salary increase
    
    
    (2,203,210
    )
    
    
    (1,842,714
    )Projected benefit obligation
    
    
    (4,648,257
    )
    
    
    (4,563,300
    )Fair value of plan assets
    
    
    1,962,569
    
    
    
    1,973,407Funded status
    
    
    (2,685,688
    )
    
    
    (2,589,893
    )Unrecognized net transitional benefit obligation
    
    
    89,727
    
    
    
    57,953Unrecognized gain
    
    
    (575,124
    )
    
    
    (678,124
    )Adjustment required to recognize minimum liabilities
    
    
    (305
    )
    
    
    (352
    )Others
    
    
    (172
    )
    
    
    (8,676
    )Accrued pension liabilities recognized on the
consolidated balance sheet
    
    
    (3,171,562
    )
    
    
    (3,219,092
    )
 f.
    
    The components of the net periodic pension cost are as follows:
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000Service cost
    
    
    128,775
    
    
    
    124,193
    
    
    
    130,570Interest cost
    
    
    136,780
    
    
    
    136,017
    
    
    
    155,276Expected return on plan assets
    
    
    (44,778
    )
    
    
    (63,880
    )
    
    
    (67,691
    )Amortization of unrecognized
transitional net benefit obligation
    
    
    60,441
    
    
    
    28,606
    
    
    
    28,291Amortization of unrecognized pension gain
    
    
    (891
    )
    
    
    (915
    )
    
    
    (15,789
    )Others
    
    
    
    
    
    
    
    
    
    
    (8,513
    )Net periodic pension cost
    
    
    280,327
    
    
    
    224,021
    
    
    
    222,144
  For the year ended December 31, 2006UMCUMC
    
    
    FORTUNE
    
    
    UMO
    
    
    JAPANDiscount rate
    
    
    2.75
    %
    
    
    2.75
    %
    
    
    3.75
    %
    
    
    2.00
    %Rate of salary increase
    
    
    4.50
    %
    
    
    2.00
    %
    
    
    4.00
    %
    
    
    2.68
    %Expected return on plan assets
    
    
    2.50
    %
    
    
    2.75
    %
    
    
    2.75
    %
    
    
    2.00
    %
 For the year ended December 31, 2007UMCUMC
    
    
    FORTUNE
    
    
    UMO
    
    
    JAPANDiscount rate
    
    
    3.50
    %
    
    
    3.00
    %
    
    
    3.50
    %
    
    
    2.00
    %Rate of salary increase
    
    
    4.50
    %
    
    
    3.00
    %
    
    
    4.00
    %
    
    
    2.58
    %Expected return on plan assets
    
    
    2.75
    %
    
    
    3.00
    %
    
    
    2.75
    %
    
    
    5.00
    %
  F-38




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##### Table of Contents



For the year ended December 31, 2008UMCUMC
    
    
    FORTUNE
    
    
    UMO
    
    
    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
    %
  Year
    
    AmountNT$0002009
    
    
    110,1142010
    
    
    62,0952011
    
    
    66,9892012
    
    
    75,6362013
    
    
    94,2772014-2018
    
    
    730,578
  20.
    
    CAPITAL STOCK
 a.
    
    UMC had 26,000 million common shares authorized to be issued, and 13,214 million shares
were issued as of December 31, 2007, each at a par value of NT$10.
 b.
    
    UMC has issued a total of 220 million ADSs, which were traded on the NYSE as of
December 31, 2007. The total number of common shares of UMC represented by all issued ADSs
was 1,098 million shares as of December 31, 2007. One ADS represents five common shares.
 c.
    
    Among the employee stock options issued by UMC on October 7, 2002, January 3, 2003,
July 1, 2004 and October 13, 2004, 14 million shares were exercised during the year ended
December 31, 2007. The issuance process through the authority had been completed.
 d.
    
    As resolved during the shareholders meeting on June 11, 2007, UMC carried out a
capital reduction of NT$57,394 million, which represented approximately 5,739 million
 shares or approximately 30% of its outstanding shares, for the purpose of increasing
shareholders return on equity and reducing idle funds. The capital reduction is comprised
of NT$53,911 million of cash distribution, and the proportionate cancellation of 348
million shares of treasury stock. The effective date of capital reduction was August 7,
2007 and the transaction was submitted and approved by the competent authority.
  F-39




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##### Table of Contents



e.
    
    On July 17, 2007, UMC cancelled 192 million shares of treasury stock, which were
repurchased during the period from May 10, 2004 to May 21, 2004 for the purpose of
transferring to employees.
 f.
    
    As to the treasury stocks
acquired during the periods of September 30, 2005 to November 29,
2005 and May 23, 2006 to July 13, 2006, UMC sold 32 million and 65 million shares,
respectively, to employees in December 2007 and 97 million shares were added to the total
amount of shares outstanding.
 g.
    
    As recommended by the board of directors, and approved by the shareholders at the
meeting held on June 13, 2008, UMC issued 678 million new shares from capitalization of
retained earnings and additional paid-in capital that amounted to NT$6,776 million, of
which NT$1,001 million was stock dividend, NT$1,146 million was employee bonus, and
NT$4,629 million was additional paid-in capital.
 h.
    
    On September 10, 2008, UMC cancelled 349 million shares of treasury stock, which were
repurchased during the period from May 18, 2005 to July 15, 2005 for conversion of the
convertible bonds into shares.
 i.
    
    On December 17, 2008, UMC cancelled 142 million and 214 million shares of treasury
stock, which were repurchased during the periods from October 4, 2005 to November 2, 2005
and May 25, 2006 to July 13, 2006 for the purpose of transferring to employees. In
addition, on December 17, 2008, UMC cancelled 200 million shares of treasury stock, which
were repurchased during the period from August 28, 2008 to October 2, 2008 to maintain
UMCs credit and shareholders equity.
 j.
    
    UMC had 26,000 million common shares authorized to be issued, and 12,988 million shares
were issued as of December 31, 2008, each at a par value of NT$10.
 k.
    
    UMC had issued a total of 230 million ADSs, which were traded on the NYSE as of
December 31, 2008. The total number of common shares of the Company represented by all
issued ADSs was 1,148 million shares as of December 31, 2008. One ADS represents five
common shares.
  F-40




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##### Table of Contents



21.
    
    EMPLOYEE STOCK OPTIONS
  Total number of
    
    
    Total number of
    
    
    Shares available tooptions granted
    
    
    options outstanding
    
    
    option holders
    
    
    Exercise priceDate of grant
    
    (in thousands)
    
    
    (in thousands)
    
    
    (Note)
    
    
    (NTD) (Note)October 7, 2002
    
    
    939,000
    
    
    
    
    
    
    
    
    
    
    $
    21.42January 3, 2003
    
    
    61,000
    
    
    
    39,441
    
    
    
    27,497
    
    
    $
    24.15November 26, 2003
    
    
    57,330
    
    
    
    33,749
    
    
    
    23,529
    
    
    $
    33.70March 23, 2004
    
    
    33,330
    
    
    
    14,598
    
    
    
    10,177
    
    
    $
    31.25July 1, 2004
    
    
    56,590
    
    
    
    34,191
    
    
    
    23,837
    
    
    $
    28.24October 13, 2004
    
    
    20,200
    
    
    
    7,753
    
    
    
    5,405
    
    
    $
    24.28April 29, 2005
    
    
    23,460
    
    
    
    11,246
    
    
    
    7,840
    
    
    $
    22.37August 16, 2005
    
    
    54,350
    
    
    
    29,923
    
    
    
    20,862
    
    
    $
    29.47September 29, 2005
    
    
    51,990
    
    
    
    37,998
    
    
    
    26,491
    
    
    $
    26.89January 4, 2006
    
    
    39,290
    
    
    
    18,371
    
    
    
    12,808
    
    
    $
    23.17May 22, 2006
    
    
    42,058
    
    
    
    27,875
    
    
    
    19,433
    
    
    $
    25.19August 24, 2006
    
    
    28,140
    
    
    
    16,946
    
    
    
    11,814
    
    
    $
    24.09December 13, 2007
    
    
    500,000
    
    
    
    437,393
    
    
    
    437,393
    
    
    $
    18.03Total
    
    
    1,906,738
    
    
    
    709,484
    
    
    
    627,086
 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-41




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##### Table of Contents



a.
    
    A summary of the Companys stock option plan and related information for the years ended
December 31, 2008 and 2007, are as follows:
 For the years ended December 31,2007
    
    
    2008Weighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-average
    
    
    
    
    
    
    
    
    
    
    averageShares
    
    
    Exercise
    
    
    
    
    
    
    Shares
    
    
    Exerciseavailable to
    
    
    Price per
    
    
    
    
    
    available to
    
    
    Price perOption
    
    
    option holders
    
    
    shares
    
    
    Option
    
    
    option holders
    
    
    shares(in thousands)
    
    
    (in thousands)
    
    
    (NTD)
    
    
    (in thousands)
    
    
    (in thousands)
    
    
    (NTD)Outstanding at beginning of
period
    
    
    913,958
    
    
    
    637,180
    
    
    $
    23.73
    
    
    
    1,287,407
    
    
    
    1,048,832
    
    
    $
    21.06Granted
    
    
    500,000
    
    
    
    500,000
    
    
    $
    18.03
    
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    (14,311
    )
    
    
    (9,977
    )
    
    $
    21.59
    
    
    
    
    
    
    
    
    
    
    $
    Forfeited
    
    
    (112,240
    )
    
    
    (78,371
    )
    
    $
    23.37
    
    
    
    (186,196
    )
    
    
    (148,647
    )
    
    $
    21.54Expired
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    (391,727
    )
    
    
    (273,099
    )
    
    $
    21.42Outstanding at end of period
    
    
    1,287,407
    
    
    
    1,048,832
    
    
    $
    21.06
    
    
    
    709,484
    
    
    
    627,086
    
    
    $
    20.79Exercisable at end of period
    
    
    641,427
    
    
    
    447,181
    
    
    $
    23.38
    
    
    
    217,154
    
    
    
    151,393
    
    
    $
    27.62Weighted-average fair value
of options granted during
the period
    
    $
    5.4
    
    
    
    
    
    
    
    
    
    
    $
    
 b.
    
    The information on the Companys outstanding stock options as of December 31, 2008, is as
follows:
 Outstanding Stock Options
    
    
    Exercisable Stock OptionsWeighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-Weighted-
    
    
    average
    
    
    
    
    
    
    
    
    
    averageShares
    
    
    average
    
    
    Exercise
    
    
    
    
    
    
    Shares
    
    
    Exerciseavailable to
    
    
    Expected
    
    
    Price per
    
    
    
    
    
    
    available to
    
    
    Price perAuthorization
    
    Range of Exercise
    
    
    Option
    
    
    option holders
    
    
    Remaining
    
    
    share
    
    
    Option
    
    
    option holders
    
    
    shareDate
    
    Price (NTD)
    
    
    (in thousands)
    
    
    (in thousands)
    
    
    Years
    
    
    (NTD)
    
    
    (in thousands)
    
    
    (in thousands)
    
    
    (NTD)2002.09.11
    
    $
    21.42~$24.15
    
    
    
    39,441
    
    
    
    27,497
    
    
    
    0.00
    
    
    $
    24.15
    
    
    
    39,441
    
    
    
    27,497
    
    
    $
    24.152003.10.08
    
    $
    28.24~$33.70
    
    
    
    82,538
    
    
    
    57,543
    
    
    
    1.20
    
    
    $
    31.00
    
    
    
    82,538
    
    
    
    57,543
    
    
    $
    31.002004.09.30
    
    $
    22.37~$29.47
    
    
    
    86,920
    
    
    
    60,598
    
    
    
    2.56
    
    
    $
    26.96
    
    
    
    65,039
    
    
    
    45,343
    
    
    $
    26.942005.12.22
    
    $
    23.17~$25.19
    
    
    
    63,192
    
    
    
    44,055
    
    
    
    3.34
    
    
    $
    24.31
    
    
    
    30,136
    
    
    
    21,010
    
    
    $
    24.332007.10.09
    
    $
    18.03
    
    
    
    437,393
    
    
    
    437,393
    
    
    
    4.95
    
    
    $
    18.03
    
    
    
    
    
    
    
    
    
    
    $
    709,484
    
    
    
    627,086
    
    
    
    4.04
    
    
    $
    20.79
    
    
    
    217,154
    
    
    
    151,393
    
    
    $
    27.62
 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 the years ended December 31, 2006, 2007 and 2008 were NT$0.
  For the year ended December 31, 2006Basic earnings
    
    
    
    Diluted earningsper share
    
    
    per shareNT$000
    
    
    NT$000Net income
    
    
    32,619,313
    
    
    
    32,653,291Earnings per share (NTD)
    
    $
    1.71
    
    
    $
    1.66Pro forma net income
    
    
    32,149,409
    
    
    
    32,183,387Pro forma earnings per share (NTD)
    
    $
    1.69
    
    
    $
    1.63
  F-42




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##### Table of Contents



For the year ended December 31, 2007Basic earnings
    
    
    
    Diluted earningsper share
    
    
    per shareNT$000
    
    
    NT$000Net income
    
    
    16,961,762
    
    
    
    16,961,414Earnings per share (NTD)
    
    $
    1.03
    
    
    $
    1.00Pro forma net income
    
    
    16,544,506
    
    
    
    16,544,158Pro forma earnings per share (NTD)
    
    $
    1.00
    
    
    $
    0.98
 For the year ended December 31, 2008Basic loss
    
    
    Diluted lossper share
    
    
    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 loss per share (NTD)
    
    $
    (1.77
    )
    
    $
    (1.78
    )
  22.
    
    TREASURY STOCK
 a.
    
    Changes in treasury stock during the years ended December 31, 2006, 2007 and 2008 are
as follows:For the year ended December 31, 2006(In thousands of shares)
 As of
    
    
    
    
    
    
    
    
    
    
    As ofPurpose
    
    January 1, 2006
    
    
    Increase
    
    
    Decrease
    
    
    December 31, 2006For transfer to employees
    
    
    442,067
    
    
    
    400,000
    
    
    
    
    
    
    
    842,067For conversion of the
convertible bonds into
shares
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000To maintain UMCs credit
and shareholders equity
    
    
    
    
    
    
    1,000,000
    
    
    
    1,000,000
    
    
    
    Total shares
    
    
    942,067
    
    
    
    1,400,000
    
    
    
    1,000,000
    
    
    
    1,342,067
  F-43




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##### Table of Contents



For the year ended December 31, 2007
 (In thousands of shares)
 As of
    
    
    
    
    
    
    
    
    
    
    As ofPurpose
    
    January 1, 2007
    
    
    Increase
    
    
    Decrease
    
    
    December 31, 2007For transfer to employees
    
    
    842,067
    
    
    
    
    
    
    
    486,351
    
    
    
    355,716For conversion of the
convertible bonds into
shares
    
    
    500,000
    
    
    
    
    
    
    
    151,417
    
    
    
    348,583Total shares
    
    
    1,342,067
    
    
    
    
    
    
    
    637,768
    
    
    
    704,299
 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 shareholders equity
    
    
    
    
    
    
    200,000
    
    
    
    200,000
    
    
    
    Total shares
    
    
    704,299
    
    
    
    200,000
    
    
    
    904,299
    
    
    
    
 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, 2007 and 2008 was 1,321 million shares and
1,299 million shares, while the ceiling amount was NT$90,262 million and NT$44,203 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 shareholders except for subscription to new stock issuance. Starting June 22, 2005,
stocks held by subsidiaries no longer have voting rights according to the revised Companies
Act.
 d.
    
    As of December 31, 2007, UMCs subsidiary, FORTUNE VENTURE CAPITAL CORP., held 15
million shares of UMCs stock, with a book value of NT$20.15 per share. The closing price
on December 31, 2007 was NT$20.15.
  F-44




---



##### Table of Contents



e.
    
    On December 16, 2008, the board of directors approved the repurchase of 300 million
 shares of treasury stock during the period from December 17, 2008 to February 16, 2009 for
transferring to employees as part of the 13th treasury stock buy back plan. As
of the date of the Report of Independent Auditors, UMC has repurchased 300 million shares.
 23.
    
    RETAINED EARNINGS AND DIVIDEND POLICIESAccording 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 shareholders meeting.
   F-45




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2006
    
    
    2007Cash Dividend
    
    NT$0.70 per share
    
    
    NT$0.75 per shareStock Dividend
    
    
    
    
    
    NT$0.08 per shareEmployee bonus  Cash (in thousand NTD)
    
    
    2,324,120
    
    
    
    286,541Employee bonus  Stock (in thousand NTD)
    
    
    
    
    
    
    1,146,166Directors and Supervisors remuneration
(in thousand NTD)
    
    
    15,494
    
    
    
    11,939
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24.
    
    OPERATING COSTS AND EXPENSES
  For the year ended December 31,2006
    
    
    2007
    
    
    2008Operating
    
    
    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
    
    
    9,003,173
    
    
    
    3,616,996
    
    
    
    12,620,169
    
    
    
    11,168,190
    
    
    
    4,418,228
    
    
    
    15,586,418
    
    
    
    8,982,685
    
    
    
    3,514,894
    
    
    
    12,497,579Labor and health insurance
    
    
    546,631
    
    
    
    192,257
    
    
    
    738,888
    
    
    
    552,236
    
    
    
    205,800
    
    
    
    758,036
    
    
    
    533,776
    
    
    
    208,522
    
    
    
    742,298Pension
    
    
    571,888
    
    
    
    184,781
    
    
    
    756,669
    
    
    
    556,421
    
    
    
    193,574
    
    
    
    749,995
    
    
    
    543,357
    
    
    
    195,083
    
    
    
    738,440Other personnel expenses
    
    
    99,293
    
    
    
    72,899
    
    
    
    172,192
    
    
    
    122,884
    
    
    
    86,776
    
    
    
    209,660
    
    
    
    202,502
    
    
    
    106,008
    
    
    
    308,510Depreciation
    
    
    42,059,492
    
    
    
    2,183,770
    
    
    
    44,243,262
    
    
    
    35,665,112
    
    
    
    2,083,539
    
    
    
    37,748,651
    
    
    
    34,696,769
    
    
    
    2,407,371
    
    
    
    37,104,140Amortization
    
    
    197,673
    
    
    
    1,621,260
    
    
    
    1,818,933
    
    
    
    68,854
    
    
    
    1,314,890
    
    
    
    1,383,744
    
    
    
    52,172
    
    
    
    1,262,713
    
    
    
    1,314,885
 25.
    
    INCOME TAX
 (1)
    
    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 year ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000Income tax on pre-tax income at statutory tax rate
    
    
    8,844,990
    
    
    
    5,323,188
    
    
    
    (6,280,440
    )Permanent and temporary differencesInvestment loss
    
    
    140,238
    
    
    
    210,215
    
    
    
    5,761,967Gain on disposal of investments
    
    
    (7,029,300
    )
    
    
    (2,985,360
    )
    
    
    (797,159
    )Others
    
    
    (71,620
    )
    
    
    (2,397,516
    )
    
    
    1,490,514Subtotal
    
    
    (6,960,682
    )
    
    
    (5,172,661
    )
    
    
    6,455,322Change in investment tax credit
    
    
    (1,335,540
    )
    
    
    1,457,098
    
    
    
    (748,496
    )Change in loss carry-forward
    
    
    (105,508
    )
    
    
    909,702
    
    
    
    (592,169
    )Change in valuation allowance against deferred
income tax assetsInvestment tax credit
    
    
    505,077
    
    
    
    (530,601
    )
    
    
    1,706,802Loss carry-forward
    
    
    440,665
    
    
    
    33,754
    
    
    
    592,169Others
    
    
    (59,905
    )
    
    
    (13,452
    )
    
    
    (78,073
    )Subtotal
    
    
    885,837
    
    
    
    (510,299
    )
    
    
    2,220,898Change in tax rate
    
    
    1,269
    
    
    
    237
    
    
    
    Estimated 10% income tax on unappropriated
earnings
    
    
    
    
    
    
    9
    
    
    
    139Adjustment of prior years tax expense
    
    
    (164,111
    )
    
    
    (19,620
    )
    
    
    (9,499
    )Income tax on interest revenue separately taxed
    
    
    1,713
    
    
    
    3,239
    
    
    
    14,035Income basic tax
    
    
    2,021,375
    
    
    
    818,262
    
    
    
    32,124Others
    
    
    72,279
    
    
    
    719
    
    
    
    (94,993
    )Income tax expense
    
    
    3,261,622
    
    
    
    2,809,874
    
    
    
    996,921
  F-47




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(2)
    
    Significant components of deferred income tax assets and liabilities are as follows:
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Deferred income tax assetsInvestment tax credit
    
    
    13,535,633
    
    
    
    13,674,858Loss carry-forward
    
    
    2,339,326
    
    
    
    3,544,145Pension
    
    
    814,228
    
    
    
    839,683Allowance on sales returns and discounts
    
    
    170,584
    
    
    
    166,513Allowance loss on decline in market
value and on obsolescence of inventories
    
    
    160,946
    
    
    
    501,885Others
    
    
    582,097
    
    
    
    728,167Total deferred income tax assets
    
    
    17,602,814
    
    
    
    19,455,251Valuation allowance
    
    
    (11,374,792
    )
    
    
    (14,275,819
    )Net deferred income tax assets
    
    
    6,228,022
    
    
    
    5,179,432Deferred income tax liabilitiesUnrealized exchange gain
    
    
    (26,535
    )
    
    
    (12,782
    )Depreciation
    
    
    (1,352,946
    )
    
    
    (860,262
    )Others
    
    
    (408,173
    )
    
    
    (100,035
    )Total deferred income tax liabilities
    
    
    (1,787,654
    )
    
    
    (973,079
    )Total net deferred income tax assets
    
    
    4,440,368
    
    
    
    4,206,353Deferred income tax assets  current
    
    
    7,470,657
    
    
    
    8,929,423Deferred income tax liabilities  current
    
    
    (229,784
    )
    
    
    (99,215
    )Valuation allowance
    
    
    (7,021,010
    )
    
    
    (8,168,034
    )Net
    
    
    219,863
    
    
    
    662,174Deferred income tax assets  noncurrent
    
    
    10,132,157
    
    
    
    10,525,828Deferred income tax liabilities  noncurrent
    
    
    (1,557,870
    )
    
    
    (873,864
    )Valuation allowance
    
    
    (4,353,782
    )
    
    
    (6,107,785
    )Net
    
    
    4,220,505
    
    
    
    3,544,179Total net deferred income tax assets
    
    
    4,440,368
    
    
    
    4,206,353
 (3)
    
    UMCs income tax returns for all the fiscal years up to 2006 have been assessed and
approved by the Tax Authority.(4)
    
    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-48




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(5)
    
    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, 2008, the Companys unused investment tax credit was as follows:
 Balance of unused investmentExpiration Year
    
    Investment tax credits earned
    
    
    tax creditsNT$000
    
    
    NT$0002008
    
    
    6,301,168
    
    
    
    5,691,8982009
    
    
    2,409,936
    
    
    
    2,409,9362010
    
    
    2,192,113
    
    
    
    2,192,1132011
    
    
    1,827,118
    
    
    
    1,827,1182012
    
    
    1,553,793
    
    
    
    1,553,793Total
    
    
    14,284,128
    
    
    
    13,674,858
 (6)
    
    As of December 31, 2008, the unutilized accumulated losses for the Company were as
follows:
 Expiration Year
    
    Accumulated loss
    
    
    Unutilized accumulated lossNT$000
    
    
    NT$0002009
    
    
    273,711
    
    
    
    273,7112010
    
    
    
    
    
    
    2011
    
    
    
    
    
    
    2012
    
    
    4,522,435
    
    
    
    4,522,4352013
    
    
    1,470,739
    
    
    
    1,470,7392014
    
    
    495,775
    
    
    
    495,7752015
    
    
    1,935,466
    
    
    
    1,935,4662016
    
    
    183,801
    
    
    
    183,8012017
    
    
    232,161
    
    
    
    232,1612018
    
    
    235,787
    
    
    
    235,787Total
    
    
    9,349,875
    
    
    
    9,349,875
 (7)
    
    The balance of UMCs imputation credit accounts as of December 31, 2007 and 2008 were
NT$413 million and NT$205 million, respectively. The actual creditable ratio for 2007 and
the expected creditable ratio for 2008 was 7.95% and 0%, respectively.
 (8)
    
    UMCs earnings generated in the year ended December 31, 1997 and prior years have been
fully appropriated.
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26.
    
    EARNINGS (LOSSES) PER SHARE
  For the year ended December 31,(shares expressed in thousands)
    
    2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000Net income (loss)
    
    
    32,619,313
    
    
    
    16,961,762
    
    
    
    (22,320,075
    )Effect of dilution:Employee stock options
    
    
    
    
    
    
    
    
    
    
    Convertible bonds
    
    
    33,978
    
    
    
    (348
    )
    
    
    (129,910
    )Adjusted net income (loss) assuming dilution
    
    
    32,653,291
    
    
    
    16,961,414
    
    
    
    (22,449,985
    )Weighted average shares outstanding
    
    
    19,028,636
    
    
    
    16,464,412
    
    
    
    13,110,984Effect of dilution:Employee stock options
    
    
    113,978
    
    
    
    6,317
    
    
    
    Convertible bonds
    
    
    544,351
    
    
    
    472,675
    
    
    
    59,407Adjusted weighted average shares outstanding
assuming dilution
    
    
    19,686,965
    
    
    
    16,943,404
    
    
    
    13,170,391Retroactively adjusted weighted average shares outstanding
    
    
    19,028,636
    
    
    
    16,464,412
    
    
    
    13,110,984Retroactively adjusted weighted average shares outstanding assuming dilution
    
    
    19,686,965
    
    
    
    16,943,404
    
    
    
    13,170,391Earnings
(Losses) per share  basic (in dollars)
    
    
    1.71
    
    
    
    1.03
    
    
    
    (1.70
    )Earnings
(Losses) per share  diluted (in dollars)
    
    
    1.66
    
    
    
    1.00
    
    
    
    (1.70
    )
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27.
    
    RELATED PARTY TRANSACTIONS
 (1)
    
    Name and Relationship of Related Parties
 Name of related parties
    
    Relationship with the CompanyUNITECH CAPITAL INC.
    
    Equity InvesteeMEGA MISSION LIMITED PARTNERSHIP
    
    Equity InvesteeMTIC HOLDINGS PTE. LTD.
    
    Equity InvesteeUNIMICRON HOLDING LIMITED
    
    Equity InvesteeHSUN CHIEH INVESTMENT CO., LTD.
    
    Equity InvesteeAMIC TECHNOLOGY CORP.
    
    Equity InvesteePACIFIC VENTURE CAPITAL CO., LTD.
    
    Equity InvesteeXGI TECHNOLOGY INC.
    
    Equity InvesteeNEXPOWER TECHNOLOGY CORP.
    
    Equity InvesteeSILICON INTEGRATED SYSTEMS CORP.
    
    The Companys directorUWAVE TECHNOLOGY CORP.
    
    Subsidiarys equity investeeUCA TECHNOLOGY INC. (Liquidated on March 17, 2008)
    
    Subsidiarys equity investeeSMEDIA TECHNOLOGY CORP. (Extinguished on December 31,2008)
    
    Subsidiarys equity investeeCRYSTAL MEDIA INC.
    
    Subsidiarys equity investeeMOBILE DEVICES INC.
    
    Subsidiarys equity investeeALLIANCE OPTOTEK CORP.
    
    Subsidiarys equity investeeStan Hung and 24 other seats
    
    The Companys director in 2007 (Including resignation during the year)Tzyy-Jang Tseng and 12 other seats
    
    The Companys supervisors in 2007 (Including resignation during the year)Shih-Wei Sun and 25 other officers
    
    The Companys key management personnel in 2007 (Including resignation during the year)Stan Hung and 23 other seats
    
    The Companys director in 2008 (Including resignation during the year)Tzyy-Jang Tseng and 10 other seats
    
    The Companys supervisors in 2008 (Including resignation during the year)Shih-Wei Sun and 29 other officers
    
    The Companys key management personnel in 2008 (Including resignation during the year)
 (2)
    
    Significant Related Party Transactions
 a.
    
    Operating revenues
 For the year ended December 31,2006
    
    
    2007
    
    
    2008Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNT$000
    
    
    
    
    
    NT$000
    
    
    
    
    
    NT$000SILICON
    
    
    2,046,127
    
    
    
    2
    
    
    
    1,596,040
    
    
    
    1
    
    
    
    1,031,393
    
    
    
    1Others
    
    
    1,879,669
    
    
    
    2
    
    
    
    523,721
    
    
    
    1
    
    
    
    543,219
    
    
    
    1Total
    
    
    3,925,796
    
    
    
    4
    
    
    
    2,119,761
    
    
    
    2
    
    
    
    1,574,612
    
    
    
    2
  F-51




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b.
    
    Accounts receivable, net
 As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageSILICON
    
    
    392,383
    
    
    
    2
    
    
    
    117,468
    
    
    
    1Others
    
    
    99,664
    
    
    
    1
    
    
    
    135,968
    
    
    
    2Total
    
    
    492,047
    
    
    
    3
    
    
    
    253,436
    
    
    
    3Less: Allowance for
sales returns and
discounts
    
    
    (159,978
    )
    
    
    
    
    
    
    (2,107
    )Less: Allowance for
doubtful Accounts
    
    
    
    
    
    
    
    
    
    
    (103,966
    )Net
    
    
    332,069
    
    
    
    
    
    
    
    147,363
 c.
    
    Key management personnel compensation disclosure
 For the years ended December 31,Item
    
    2007
    
    
    2008NT$000
    
    
    NT$000Salary, compensation, allowance,
income from professional practice
and bonus
    
    
    216,008
    
    
    
    203,321
 Please refer to Annual Report for related information of key management personnel
compensation.28.
    
    ASSETS PLEDGED AS COLLATERALAs of December 31, 2007
 Party to which asset(s)Amount
    
    
    was pledged
    
    
    Purpose of pledgeDeposit-out (Time
deposit)
    
    $
    621,596
    
    
    Customs
    
    Customs duty guarantee
  F-52




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As of December 31, 2008
 Party to which asset(s)Amount
    
    
    was pledged
    
    
    Purpose of pledgeDeposit-out (Time
deposit)
    
    $
    620,224
    
    
    Customs
    
    Customs duty guaranteeEquipment
    
    
    6,162,081
    
    
    Bank of Taiwan
    
    Collateral for long term loanTotal
    
    $
    6,782,305
 29.
    
    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$7.8
billion. Royalties and development fees payable in future years are NT$3.3 billion as of
December 31, 2008.(2)
    
    The Company signed several construction contracts for the expansion of its factory
space. As of December 31, 2008, these construction contracts have amounted to
approximately NT$2.9 billion and the unpaid portion of the contracts, which was not
accrued, was approximately NT$0.5 billion.(3)
    
    The Company entered into several operating lease contracts for land. These renewable
operating leases will expire in various years through 2032. Future minimum lease payments
under those leases are as follows:
 For the years ended December 31,
    
    AmountNT$0002009
    
    
    338,3562010
    
    
    323,4392011
    
    
    302,1532012
    
    
    247,2452013
    
    
    229,9232014 and thereafter
    
    
    1,717,205Total
    
    
    3,158,321
 Rental expense for the years ended December 31,2006, 2007 and 2008 was NT$1,125 million,
NT$336 million and NT$373 million, respectively.(4)
    
    On February 15, 2005, the Hsinchu District Prosecutors 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 Corp.
(Hejian) did not involve any investment or technology transfer.
  F-53




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F-54




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F-55




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30.
    
    SIGNIFICANT DISASTER LOSSNone.31.
    
    SIGNIFICANT SUBSEQUENT EVENTNone.32.
    
    RECLASSIFICATIONCertain comparative amounts have been reclassified to conform to the current years
presentation.
  F-56




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33.
    
    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, short-term
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 accounts receivable and accounts payable, which arise
directly from its operations.UMC also enters into derivative transactions, including interest rate swaps 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 risk.Cash 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 long-term loans bear floating interest rates. The fluctuation of market
interest will result in changes in the Companys future cash flows.
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Foreign currency riskThe Company has foreign currency risk arising from purchases and 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 amounts of the hedged items. In principle,
the Company does not carry out any forward contracts for uncertain commitments.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.
   Liquidity risk
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(2)
    
    Information of financial instruments
 a.
    
    Fair value of financial instruments
 As of December 31,2007
    
    
    2008Book Value
    
    
    Fair Value
    
    
    Book Value
    
    
    Fair ValueNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Financial AssetsNon-derivativeCash and cash
equivalents
    
    
    47,678,147
    
    
    
    47,678,147
    
    
    
    48,566,649
    
    
    
    48,566,649Financial assets at
fair value through
profit or loss,
current
    
    
    4,804,935
    
    
    
    4,804,935
    
    
    
    1,681,305
    
    
    
    1,681,305Held-to-maturity
financial assets,
current
    
    
    
    
    
    
    
    
    
    
    352,645
    
    
    
    351,924Note, accounts and
other receivable
    
    
    15,848,442
    
    
    
    15,848,442
    
    
    
    8,961,573
    
    
    
    8,961,573Financial assets at
fair value through
profit or loss,
noncurrent
    
    
    47,598
    
    
    
    47,598
    
    
    
    60,010
    
    
    
    60,010Available-for-sale
financial assets,
noncurrent
    
    
    50,911,643
    
    
    
    50,911,643
    
    
    
    16,283,917
    
    
    
    16,283,917Financial assets
measured at cost,
noncurrent
    
    
    8,295,679
    
    
    
    
    
    
    
    7,656,688
    
    
    
    Long-term
investments
accounted for under
the equity method
    
    
    9,909,595
    
    
    
    9,615,972
    
    
    
    8,321,221
    
    
    
    7,965,944Prepayment for
long-term
investments
    
    
    648,360
    
    
    
    
    
    
    
    5,160
    
    
    
    Deposits-out
    
    
    745,457
    
    
    
    745,457
    
    
    
    772,349
    
    
    
    772,349DerivativeInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    113,550
    
    
    
    113,550Forward contract
    
    
    
    
    
    
    
    
    
    
    59,750
    
    
    
    59,750Financial LiabilitiesNon-derivativeShort-term loans
    
    
    359,071
    
    
    
    359,071
    
    
    
    132,610
    
    
    
    132,610Payables
    
    
    21,054,519
    
    
    
    21,054,519
    
    
    
    12,119,552
    
    
    
    12,119,552Capacity deposits
(current portion)
    
    
    4,688
    
    
    
    4,688
    
    
    
    
    
    
    
    Bonds payable
(current portion
included)
    
    
    30,384,780
    
    
    
    29,900,297
    
    
    
    7,497,110
    
    
    
    7,143,323Long-term loans
(current portion
included)
    
    
    
    
    
    
    
    
    
    
    700,000
    
    
    
    700,000DerivativeInterest rate swaps
    
    
    318,707
    
    
    
    318,707
    
    
    
    33,189
    
    
    
    33,189Forward contract
    
    
    21,523
    
    
    
    21,523
    
    
    
    
    
    
    
    
  F-59




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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, notes and accounts receivable, short-term loans, payables
and current portion of capacity deposits.
 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 held-to-maturity financial assets and long-term
investments accounted for under the 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.
    
    The fair value of deposits-out is based on their book value since the
deposit periods are
principally within one year and renewed upon maturity.vi.
    
    The fair value of bonds payable is determined by the market price.vii.
    
    The fair value of long-term loan is determined using discounted cash
flow analysis, based on the Company 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 were settled in advance at the balance sheet date.
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c.
    
    The fair value of the Companys financial instruments is determined by the
quoted market prices or by using a valuation technique:
 Non-derivative
    
    Market Quotation
    
    
    Valuation TechniqueFinancial Instruments
    
    2007.12.31
    
    
    2008.12.31
    
    
    2007.12.31
    
    
    2008.12.31NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Financial assetsFinancial assets at fair
value through profit or
loss, current
    
    
    4,804,935
    
    
    
    1,681,305
    
    
    
    
    
    
    
    Held-to-maturity
financial assets, current
    
    
    
    
    
    
    351,924
    
    
    
    
    
    
    
    Financial assets at
fair value through
profit or loss,
noncurrent
    
    
    47,598
    
    
    
    60,010
    
    
    
    
    
    
    
    Available-for-sale
financial assets,
noncurrent
    
    
    49,359,916
    
    
    
    15,673,267
    
    
    
    1,551,727
    
    
    
    610,650Long-term investments
accounted for under
the equity method
    
    
    
    
    
    
    
    
    
    
    9,615,972
    
    
    
    7,965,944Financial liabilitiesShort-term loans
    
    
    
    
    
    
    
    
    
    
    359,071
    
    
    
    132,610Bonds payable
    
    
    29,900,297
    
    
    
    7,143,323
    
    
    
    
    
    
    
    Long-term loans
(current portion
included)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700,000
 Derivative
    
    Market Quotation
    
    
    Valuation TechniqueFinancial Instruments
    
    2007.12.31
    
    
    2008.12.31
    
    
    2007.12.31
    
    
    2008.12.31NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Financial assetsInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,550Forward contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,750Financial liabilitiesInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    318,707
    
    
    
    33,189Forward contract
    
    
    
    
    
    
    
    
    
    
    21,523
    
    
    
    
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d.
    
    For the years ended December 31, 2007 and 2008, the total change in fair value
estimated by using valuation techniques and recognized in the consolidated statement of
income during the years were a gain of NT$406 million and a loss of NT$143 million,
respectively.
 e.
    
    The Companys financial assets with cash flow interest rate risk exposure were
NT$114 million; The Companys financial liabilities with cash flow interest rate risk
exposure were NT$319 million and NT$33 million as of December 31, 2007 and 2008,
respectively.
 f.
    
    During the years ended December 31, 2007 and 2008, total interest revenue for
financial assets or liabilities that are not at fair value through profit or loss were
NT$1,330 million and NT$686 million, respectively, while interest expense for the years
ended December 31, 2007 and 2008 were NT$266 million and NT$109 million, respectively.
 (3)
    
    As of December 31, 2008, the Company held floating rate note and bonds recorded as
held-to-maturity financial assets for the earning of interest income. The details are
disclosed as follows:
 As of December 31, 2008
 Underlying Securities
    
    Amount
    
    
    Rate
    
    
    Due DateNT$000MORGAN STANLEY & CO.INC.
    
    
    324,297
    
    
    
    4.30
    %
    
    
    2009.01.22Floating rate notesGOLDMAN SACHS GROUP INC.
    
    
    28,348
    
    
    
    6.50
    %
    
    
    2009.02.25Bonds
 (4)
    
    The Company entered into interest rate swaps for hedging interest
rate risk arising from the counter-floating rate of its domestic bonds and forward contracts for hedging the
exchange rate risk arising from net assets or liabilities denominated in foreign currency.
The Company 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 purposes. The relevant information on the derivative
financial instruments entered into by the Company is as follows:
 a.
    
    The Company 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 are the same as
those of the domestic bonds, which are five and seven years. The floating rate is reset
annually. The details of interest rate swap agreements are summarized as follows:As of December 31, 2007 and 2008, the Company had the following interest rate swap
agreements outstanding:
 As of December 31, 2007
 Notional Amount
    
    Contract Period
    
    
    Interest Rate Received
    
    
    Interest Rate PaidNT$7,500 million
    
    May 21, 2003 to June 24, 2008
    
    4.0% minus USD
    
    
    1.52
    %12-Month LIBORNT$7,500 million
    
    May 21, 2003 to June 24, 2010
    
    4.3% minus USD
    
    
    1.48
    %12-Month LIBOR
  F-62




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As of December 31, 2008
 Notional Amount
    
    Contract Period
    
    
    Interest Rate Received
    
    
    Interest Rate PaidNT$7,500 million
    
    May 21, 2003 to June 24, 2010
    
    
    4.3% minus USD12-Month LIBOR
    
    
    1.48
    %
 b.
    
    The details of forward contracts entered into by the Company are summarized as
follows:
 As of December 31, 2007
 Type
    
    Notional Amount
    
    Contract PeriodForward contracts
    
    Sell USD 239 million
    
    December 4, 2007 to January 31, 2008As of December 31, 2008Type
    
    Notional Amount
    
    Contract PeriodForward contracts
    
    Sell USD 188 million
    
    November 13, 2008 to February 3, 2009
 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.
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d.
    
    The presentation of derivative financial instruments in the financial
statements is summarized as follows:As of December 31, 2008, UMCs interest rate swap agreements were classified
as financial assets at fair value through profit or loss amounted to NT$114 million;
as of December 31, 2007 and 2008, UMCs interest rate swap agreements were
classified as financial liabilities at fair value through profit or loss amounted to
NT$319 million and NT$33 million, respectively. Related valuation gains of NT$82
million and of NT$174 million were recorded under non-operating revenue for the
years ended December 31, 2007 and 2008, respectively.
  (5)
    
    Details of subsidiaries that hold UMCs stock are as follows:As of December 31, 2007
 No. of SharesSubsidiary
    
    (in thousands)
    
    
    Amount
    
    
    PurposeNT$000FORTUNE VENTURE
CAPITAL CORP.
    
    
    15,386
    
    
    
    310,035
    
    
    Long-term investment
 As of December 31, 2008
 No. of SharesSubsidiary
    
    (in thousands)
    
    
    Amount
    
    
    PurposeNT$000FORTUNE VENTURE
CAPITAL CORP.
    
    
    16,079
    
    
    
    119,465
    
    
    Long-term investment
 34.
    
    SEGMENT INFORMATION
 (1)
    
    Operations in different industriesThe Company operates as one operating and reportable segment in semiconductor industry
because the chief operating decision maker reviews the operating results of the entire
consolidated company to make decisions about allocating resources and assessing performance
for the entire company.
  F-64




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(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 31,2006
    
    
    2007
    
    
    2008Net
    
    
    
    
    
    
    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
    
    
    38,310,762
    
    
    
    95,599,934
    
    
    
    43,029,375
    
    
    
    82,780,850
    
    
    
    28,871,703
    
    
    
    61,364,804Asia, excluding
Taiwan
    
    
    9,511,367
    
    
    
    61,023,016
    
    
    
    7,792,941
    
    
    
    59,112,031
    
    
    
    4,903,801
    
    
    
    48,193,900North America
    
    
    55,616,919
    
    
    
    33,004
    
    
    
    53,177,099
    
    
    
    23,042
    
    
    
    53,640,645
    
    
    
    13,787Europe
    
    
    8,564,771
    
    
    
    3,891
    
    
    
    9,311,883
    
    
    
    4,002
    
    
    
    9,397,397
    
    
    
    2,843112,003,819
    
    
    
    156,659,845
    
    
    
    113,311,298
    
    
    
    141,919,925
    
    
    
    96,813,546
    
    
    
    109,575,334
 35.
    
    US GAAP RECONCILIATIONThe accompanying consolidated financial statements have been prepared in conformity with
generally accepted accounting principles in the Republic of China (ROC GAAP), which differ in
certain material respects from generally accepted accounting principles in the United States (US
GAAP). Such differences are disclosed below.
 (1)
    
    CompensationRemuneration to directors and supervisorsThe Companys Articles of Incorporation (AOI) requires cash remuneration to its directors
and supervisors from appropriating a portion of net profit, if any. Under ROC GAAP, for
periods prior to January 1, 2008, such payments were charged directly to retained earnings
in the period when shareholders approve such payment. Effective January 1, 2008, in
accordance with ARDF Interpretation 96-052, remunerations to directors and supervisors are
charged to compensation expense in the period when services are rendered and are no longer
accounted for as a reduction of retained earnings. Under US GAAP, such cash payments are
recorded as compensation expenses in the period when services are rendered.
  F-65




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Employee bonus
  Treasury stock purchased by employees
  Employee stock options
   F-66




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F-67




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For the year ended December 31, 2008Available 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
    
    
    1,287,407
    
    
    
    1,048,832
    
    
    
    21.06
    
    
    
    0.64Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (186,196
    )
    
    
    (148,647
    )
    
    
    21.54
    
    
    
    0.66Expired
    
    
    (391,727
    )
    
    
    (273,099
    )
    
    
    21.42
    
    
    
    0.65Outstanding at end
of period
    
    
    709,484
    
    
    
    627,086
    
    
    
    20.79
    
    
    
    0.63Fully vested and
expected to vest at
end of period
    
    
    633,546
    
    
    
    551,947
    
    
    
    21.14
    
    
    
    0.65Exercisable at end
of period
    
    
    217,154
    
    
    
    151,393
    
    
    
    27.62
    
    
    
    0.84
  F-68




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For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000Net effects in income
    
    
    (539,422
    )
    
    
    (454,524
    )
    
    
    (895,191
    )Net effects on inventory capitalization
    
    
    42,735
    
    
    
    42,310
    
    
    
    62,806
  For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000Net income impact of
compensation adjustments:Employee bonus Accrual
    
    
    (774,706
    )
    
    
    (596,961
    )
    
    
    Adjustment for final award
    
    
    (823,618
    )
    
    
    (1,549,414
    )
    
    
    (979,016
    )Total employee bonus
    
    
    (1,598,324
    )
    
    
    (2,146,375
    )
    
    
    (979,016
    )Remuneration to directors
and supervisors
    
    
    (15,494
    )
    
    
    (11,939
    )
    
    
    Treasury stock purchased by
employees
    
    
    
    
    
    
    (77,954
    )
    
    
    Employee stock options
    
    
    (571,940
    )
    
    
    (402,134
    )
    
    
    (912,888
    )Allocation to inventories,
net of prior period
allocations to inventories
which are sold in current
period
    
    
    79,715
    
    
    
    (9,516
    )
    
    
    (33,104
    )Total US GAAP adjustment to
net income relating to
compensation
    
    
    (2,106,043
    )
    
    
    (2,647,918
    )
    
    
    (1,925,008
    )
  F-69




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As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000Shareholders equity impact of compensation
adjustments:Employee bonus
    
    
    (543,361
    )
    
    
    Remuneration to directors and supervisors
    
    
    (11,939
    )
    
    
    Treasury stock purchased by employees
    
    
    6,999
    
    
    
    Employee stock options
    
    
    35,311
    
    
    
    62,806Total US GAAP adjustment to shareholders equity
relating to compensation
    
    
    (512,990
    )
    
    
    62,806
 (2)
    
    Equity Investees  Variance between US GAAP and ROC GAAPThe Companys proportionate share of the income (loss) and shareholders equity from an
equity investee under ROC GAAP may differ from US GAAP if the equity investees net income
(loss) and shareholders 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, 2006, 2007 and 2008
were NT$326 million, NT$(2,937) million and NT$(3,110) million, respectively.
  F-70




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Proceeds from
    
    
    Gross realized
    
    
    Gross realizedsales
    
    
    gains
    
    
    lossesNT$000
    
    
    NT$000
    
    
    NT$000For the year ended
December 31, 2006
    
    
    19,027,266
    
    
    
    14,883,772
    
    
    
    141,136For the year ended
December 31, 2007
    
    
    14,725,724
    
    
    
    9,690,626
    
    
    
    13,732For the year ended
December 31, 2008
    
    
    4,270,983
    
    
    
    2,983,484
    
    
    
    129,539
  F-71




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Information on available-for-sale equity securities, including depositary receipts and
funds, still held at each balance sheet date is as follows:
 Total
    
    
    Totalunrealized
    
    
    unrealized
    
    
    Net unrealizedFair Value
    
    
    gains
    
    
    losses
    
    
    gainsNT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000As of December 31, 2006
    
    
    52,311,172
    
    
    
    32,620,220
    
    
    
    
    
    
    
    32,620,220As of December 31, 2007
    
    
    49,376,537
    
    
    
    27,979,084
    
    
    
    332,974
    
    
    
    27,646,110As of December 31, 2008
    
    
    16,283,917
    
    
    
    4,483,928
    
    
    
    3,730,656
    
    
    
    753,272
 The fair value of available-for-sale equity securities with unrealized losses were NT$
3,691 million and NT$5,325 million as of December 31, 2007 and 2008, respectively. For
the years ended December 31, 2006, 2007 and 2008, NT$14,077 million, NT$9,564 million
and NT$(4,114) 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 have any available-for-sale securities with continuous unrealized loss
position longer than 12 months, and did not transfer any available-for-sale securities
to trading securities for the years ended December 31, 2006, 2007 and 2008.(b)
    
    Impairment of investments in securitiesUnder ROC 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, ROC GAAP does not provide additional definition or guidance on how to
assess the likelihood of future recovery. Under US 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
provided by SFAS 115 and FSP FAS 1151/1241. 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-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 ROC GAAP were reconciled to increase net income by NT$779 million, NT$162
million, and NT$1,415 million for the years ended December 31, 2006, 2007, and 2008,
respectively, because such impairment losses have been recognized in prior years under
US GAAP.
  F-72




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(c)
    
    Difference in application of equity accountingUnder ROC GAAP, an investor company that has an ownership interest of at least 20
percent of an investee is generally required to account for the investee under the
equity method. However, there is a presumption that the investor company can exercise
significant influence if the ownership percentage of the investee is the highest among
shareholders, and therefore equity accounting can be applied, despite an ownership
interest of less than 20 percent. Under US GAAP, the investor company is required to
account for an investment under the equity method when the investment gives it the
ability to exercise significant influence over operating and financial policies of an
investee. The fact that an investor companys ownership percentage of an investee is
the highest among shareholders does not, by itself, lead to the conclusion that the
investor can exercise significant influence. Rather, it should be considered together
with other facts and circumstances to determine if the investor is able to exercise
significant influence. Thus, the difference between US GAAP and ROC GAAP in the
application of equity method resulted in an increase in investment income accounted for
under the equity method of NT$629 million, nil, and nil for the years ended December 31,
2006, 2007 and 2008, respectively, and an increase in unrealized losses on
available-for-sale securities of NT$2,090 million for each of the years ended December
31, 2006, 2007 and 2008.(d)
    
    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 ROC 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 US GAAP, 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.
  F-73




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(e)
    
    Fair value measurementIn September 2006, FASB issued SFAS No.157, Fair Value Measurements (SFAS 157), which
became effective January 1, 2008 for the Company. SFAS 157 defines fair value, provides
a framework for measuring fair value under current standards in GAAP, and requires
additional disclosure about fair value measurements. In accordance to SFAS 157, 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 such as interest rate swap and
forward contracts are classified as either assets or liabilities carried at
fair value through profit or loss. Their 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. The fair values of the
available-for-sale financial assets and noncurrent financial assets measured at cost
with restrictions on the sale or transfer are determined based on identical but
unrestricted financial assets quoted market price with discounts for the restrictions
that are insignificant.Level 3 inputs are unobservable inputs for the asset or liability. The fair value
measurements of the private equity instruments are determined by using the market
approach by reference to the market multiples derived from industry-comparable companies
and managements judgment.
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The following table summarizes the assets and liabilities measured at fair value on a
recurring basis at December 31, 2008:
 Fair value measurements atreporting date 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
    
    
    1,741,055
    
    
    
    1,681,305
    
    
    
    59,750
    
    
    
    Financial assets at
fair value through
profit or loss,
noncurrent
    
    
    173,560
    
    
    
    60,010
    
    
    
    113,550
    
    
    
    Available-for-sale
financial assets,
noncurrent
    
    
    16,283,917
    
    
    
    15,673,267
    
    
    
    610,650
    
    
    
    Financial liabilities
at fair value through
profit or loss
    
    
    33,189
    
    
    
    
    
    
    
    33,189
    
    
    
    
 The following table summarizes the assets measured at fair value on a
nonrecurring basis at December 31, 2008:
 Fair value measurements atreporting date 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
    
    
    375,790
    
    
    
    
    
    
    
    52,145
    
    
    
    323,645
    
    
    
    841,052
 Pursuant to the provisions of APB 18, The Equity Method of Accounting for Investments
in Common Stock (APB 18), financial assets measured at cost with a carrying
amount of NT$1,217 million were written down to their fair value, NT$376 million,
resulting in an NT$841 million impairment charge, included in earnings for the
period.(4)
    
    Exchangeable Bond LiabilitiesThe Company issued a U.S. dollar-denominated exchangeable bond in May 2002 for
US$235 million. The underlying securities into which the bond can be exchanged were a
third party entitys common stocks traded on the Taiwan Stock Exchange (denominated in
New Taiwan Dollars) or its ADS securities traded on the New York Stock Exchange
(denominated in U.S. Dollars). The exchangeable bond contains a fixed foreign exchange
feature, which determined the rate at which the bond would be converted into common
stock if exchanged. Also, the terms of the bonds permitted the Company to redeem the
bond at the early redemption price if certain conditions were met. Under ROC GAAP, the
exchangeable bond issued prior to January 1, 2006 was entirely recorded as a liability
at an amount equal to the proceeds received and any discount or premium to the par
value was amortized to the consolidated statements of income by using the effective
interest rate method. Under US GAAP, pursuant to SFAS 133, if not closely related to
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the host contract, the embedded compound derivative instrument, which comprised a call
option and the exchange option with a fixed foreign exchange rate feature, was required
to be bifurcated and accounted for fair value with any changes in fair value recorded
to the consolidated statements of income. The difference between the bond face value
and the amount attributed to the embedded derivative was amortized to interest expenses
over the term of the bond instrument. Upon the adoption of ROC SFAS 34 and ROC SFAS 36
on January 1, 2006, the bifurcation requirement under two GAAPs for the embedded
derivative not clearly and closely related to its host contract came to be consistent.
Accordingly, the cumulative effect of changes in accounting principles for exchangeable
bond, totaling NT$ 691 million for the year ended December 31, 2006, recognized under
ROC GAAP was reversed under US GAAP. The changes in fair value of the compound
derivative resulted in a gain (loss) of NT$359 million and NT$(38) million recognized
for the years ended December 31, 2006 and 2007, respectively. The Company also
recognized interest expense arising from the amortization of bond discount of NT$45
million and NT$11 million for the years ended December 31, 2006 and 2007, respectively.
As of December 31, 2007, the fair value of the compound derivative instrument was nil.
This exchangeable bond was fully repaid in 2007.(5)
    
    GoodwillUnder ROC 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 US GAAP, EITF No. 99-12 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
purchase 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.Under ROC GAAP, in accordance with an amendment to ROC SFAS 25 and ROC 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.
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Under US GAAP, in accordance with SFAS No. 141, Business Combinations (SFAS 141), and SFAS
No. 142, Goodwill and Other Intangible Assets (SFAS 142), 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 Company has determined that it has one
reporting unit whose fair value is best determined by its quoted market prices on the New
York Stock Exchange (for its ADS securities) and on the Taiwan Stock Exchange (for its
common stock). 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.Pursuant to the impairment test noted above, the derived fair values of our goodwill were
below its carrying values as of December 31, 2007. As such, the Company recognized a
goodwill impairment charge of nil and NT$23,761 million for the years ended December 31,
2006 and 2007, respectively. The impairment loss recognized during 2007 was based on the
Companys best estimates, as the Company was still in the process of valuing its assets and
liabilities by the issuance of the December 31, 2007 financial statements. The Company
completed the hypothetical purchase price allocation in 2008, which resulted in a complete
write-off of its goodwill balance of NT$18,062 million. In accordance with FAS 142, the
adjustments to the 2007 estimate are recorded in 2008 based on the completion of the final
evaluation of the impairment loss in the current year.(6)
    
    Earnings per Share (EPS)Under ROC GAAP, basic earnings per share are calculated by dividing net income
attributable to common shareholders by the weighted average number of shares
outstanding during the year. The shares distributed for employee bonus are treated
as outstanding at the beginning of each period. 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, capitalization of
additional paid-in capital and employee bonus. Anti-dilutive effects are not
included in the dilutive EPS calculation. Upon the adoption of ARDF Interpretation No.
97-169 Impacts of Employee Stock Bonuses on Earnings Per Share in 2008, the shares
distributed for employee bonus are treated as outstanding as of their grant date in
the calculation of basic earnings per share after 2008. 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 in and after 2008. Starting from 2009,
employees bonus shares distributed are not adjusted retroactively.
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Under US GAAP, basic earnings per share are calculated by dividing net income
attributable to common shareholders 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 shareholders 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
shareholders 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 ROC GAAP and
calculated the dilutive effect of outstanding employee options by applying treasury
stock method under US GAAP.Under ROC GAAP, the Companys capital reduction in 2007 was required to be treated
prospectively for EPS purposes. Under US GAAP, the capital reduction was treated as a
reverse stock split with a return of capital, and the return of capital generated a bonus
element for EPS purposes. Accordingly, the weighted average number of shares outstanding
for both basic and diluted EPS were adjusted retroactively for 2006 and 2007 presented as
follows:
 For the years ended December 31,2006
    
    
    2007In thousands
    
    
    In thousandsWeighted Average Shares
Outstanding  BasicWeighted average shares prior to
capital reduction
    
    
    18,616,579
    
    
    
    16,118,477Impact of reverse stock split
and return of capital
    
    
    (3,266,164
    )
    
    
    (1,519,039
    )Calculated weighted average
shares after capital reduction
    
    
    15,350,415
    
    
    
    14,599,438Weighted Average Shares
Outstanding  DilutedEffect of dilutive securities
prior to capital reduction
    
    
    655,640
    
    
    
    Impact of reverse stock split
and return of capital
    
    
    (115,027
    )
    
    
    Calculated effect of dilutive
securities after capital
reduction
    
    
    540,613
    
    
    
    
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The reconciliation of the numerators and denominators used in computing the basic and
diluted earnings per share under US GAAP are as below:
 For the year ended December  31, 2008Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountIn thousands
    
    
    In thousands
    
    
    In dollar NT$Net Loss
    
    
    (28,955,100
    )
    
    
    
    
    
    
    Basic EPS and diluted EPSLoss available to common
shareholders
    
    
    (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.
 For the year ended December  31, 2007Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountIn thousands
    
    
    In thousands
    
    
    In dollar NT$Net Loss
    
    
    (9,264,302
    )
    
    
    
    
    
    
    Basic EPS and diluted EPSLoss available to common
shareholders
    
    
    (9,264,302
    )
    
    
    14,599,438
    
    
    
    (0.63
    )
 As of December 31, 2007, there were 1,287,407 thousand issued and outstanding stock options,
and zero coupon convertible bonds with a principal amount of US$381.4 million, which were
not included in the computation of diluted earnings per share due to their antidilutive
effect.
 For the year ended December  31, 2006Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountIn thousands
    
    
    In thousands
    
    
    In dollar NT$Net Income
    
    
    21,796,730
    
    
    
    
    
    
    
    Basic EPSIncome available to common
shareholders
    
    
    21,796,730
    
    
    
    15,350,415
    
    
    
    1.42Effect of dilutive securitiesEmployee stock options
    
    
    
    
    
    
    87,008
    
    
    
    Employee bonus
    
    
    
    
    
    
    8,658
    
    
    
    Convertible bond
    
    
    30,580
    
    
    
    444,947
    
    
    
    Diluted EPSIncome attributable to
common shareholders
including assumed
conversions
    
    
    21,827,310
    
    
    
    15,891,028
    
    
    
    1.37
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As of December 31, 2006, there were 312,648 thousand issued and outstanding stock options,
which were not included in the computation of diluted earnings per share due to their
antidilutive effect.(7)
    
    Treasury Stock and related DisposalSome of the Companys subsidiaries and investees also hold the Companys stocks as
investments. Under ROC GAAP, reciprocal shareholdings held by subsidiaries, but not
equity investees, are recorded as treasury stocks on the Companys books. Under US
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, 2007 and 2008, the Company both recognized treasury stocks of NT$2,092
million for reciprocal shareholdings held by equity-method investees. The Company also
reversed unrealized losses of NT$7,024 million and nil for the years ended December 31,
2007 and 2008, respectively, and eliminated investment gains (losses) of NT$90 million,
NT$155 million and NT$(8,817) million for the years ended December 31, 2006, 2007 and
2008, respectively.During 2006, the Company disposed part of its investment in Hsun Chieh Investment Co., Ltd.
(Hsun Chieh), one of the Companys consolidated entities in 2005. After the disposal,
the Companys ownership percentage decreased to 36.49 percent. Therefore, the Company
lost its control over Hsun Chieh and has accounted for the investment in Hsun Chieh
under the equity method. Under ROC GAAP, since the Company no longer possesses
controlling power over Hsun Chieh, the Company recognized gain from disposal of
investments in Hsun Chieh of NT$13,152 million. Under US GAAP, however, since Hsun
Chieh holds the Companys stocks as investments, the disposal gain related to the
reciprocal shareholdings was recognized as additional paid-in capital. Accordingly,
the Company recognized disposal gain of NT$2,201 million and additional paid-in capital
of NT$1,688 million under US GAAP.
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(8)
    
    Stock DividendsUnder ROC GAAP, the stock dividends are recorded at par value and charged to
retained earnings. Under US 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. The cumulative effect of reconciling stock dividends
decreased retained earnings and increased additional paid-in capital for the years
ended December 31, 2007 and 2008 by approximately NT$290,743 million and NT$291,285
million, respectively.(9)
    
    Reclassification of Time DepositsUnder ROC GAAP, cash and cash equivalents include time deposits. Under US 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
ROC GAAP but should be included in marketable securities under US GAAP.(10)
    
    PensionBoth ROC SFAS 18 and SFAS No. 87, Employers Accounting for Pensions (SFAS 87)
require a minimum pension liability to be measured as the excess of accumulated benefit
obligation over the fair value of the plan assets, and allow 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.In September 2006, FASB issued SFAS No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans (SFAS 158), which amended SFAS 87, SFAS
88, SFAS 106 and SFAS 132R, and replaced SFAS 87s requirement to report a minimum
pension liability. SFAS 158 did not change the components of net periodic benefit cost
but required 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).
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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, 2008Prior service
    
    
    TransitionNet gain (loss)
    
    
    cost
    
    
    obligationNT$000
    
    
    NT$000
    
    
    NT$000The amounts arose during the period
    
    
    270,496
    
    
    
    
    
    
    
    The amounts reclassified as
components of net periodic benefit cost
    
    
    (23,983
    )
    
    
    
    
    
    
    30,394The amounts recognized in AOCI as
of December 31, 2008
    
    
    852,140
    
    
    
    
    
    
    
    (56,336
    )The amounts expected to be
recognized as components of net
periodic benefit cost during 2009
    
    
    (36,167
    )
    
    
    
    
    
    
    28,167
 (11)
    
    Tax Effect of US GAAP AdjustmentsUnder US GAAP, the income tax expense was NT$3,470 million, NT$2,912 million and
NT$896 million for the years ended December 31, 2006, 2007 and 2008, 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 ROC GAAP, the 10% tax on undistributed earnings
is recorded as an expense at the time shareholders resolve that its earnings shall be
retained. Under US 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 shareholders 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 2007 and 2008, the Company accrued NT$1,051 million and
nil, respectively, for 10% tax on undistributed earnings in Taiwan under US GAAP. The
additional tax expense was offset by a corresponding reduction in the valuation
allowance under US GAAP. Further, in 2007 and 2008, certain subsidiaries incurred
NT$102 million and NT$(91) million of tax on undistributed earnings in Taiwan for which
no tax credits were available for offset, and the income tax expense or benefit was
recognized accordingly.As of December 31, 2008, the Company reported valuation allowance NT$14,218
million to reduce deferred tax assets to an amount that is more likely than not to be
realized, representing an increase of NT$4,017 million from the prior year. The
majority of the ROC GAAP to US GAAP reconciliation adjustments are permanent in nature
and, therefore, resulted in no incremental impact on income taxes under US GAAP.
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In July 2006, the FASB issued FASB Interpretation No. 48 Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48) to
create a single model to address accounting for uncertainty in income tax positions.
FIN 48 clarifies that tax positions 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. The Company
adopted the provisions of FIN 48 on January 1, 2007. Unlike FIN 48, ROC SFAS No.22,
Accounting for Income Taxes 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 31,2007
    
    
    2008NT$
    
    
    NT$(In millions)Balance at January 1,
    
    
    260
    
    
    
    202Additions based on tax positions taken
during the current year
    
    
    55
    
    
    
    19Reductions related to settlements with
taxing authorities
    
    
    (113
    )
    
    
    (147
    )Reductions for tax positions of prior years
    
    
    
    
    
    
    (16
    )Balance at the end of the year
    
    
    202
    
    
    
    58
 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, 2007 and 2008,
no interest or penalties were accrued.The Company is subject to taxation in Taiwan and other foreign jurisdictions. As of
December 31, 2008, tax years of 2007-2008 are open to Tax Authoritys examination in
Taiwan, while in other foreign jurisdictions, years 2001-2008 are open to relevant Tax
Authoritys examination.
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(12)
    
    Gross Profit and Operating IncomeUnder ROC GAAP, inventory loss provision, scrap revenues, gains and losses from
disposal of property, plant and equipment, gains and losses from foreign currency
exchange, impairment losses of goodwill and long-lived assets are presented as
non-operating income or expenses in the consolidated statements of income. Under US
GAAP, the inventory loss provision and scrap revenues are included in the
determination of gross profit. Moreover, gains and losses from disposal of property,
plant and equipment, gains and losses from foreign currency exchange, and impairment
losses of goodwill and long-lived assets are included in the determination of
operating income.
 (13)
    
    InventoryUnder US 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 SFAS
No. 151, Inventory Costs (SFAS
151). ROC GAAP does not provide definite guidance for such abnormal items and the use of
normal capacity is not mandatory before the adoption of ROC SFAS 10 on January 1, 2009.
Accordingly, the Company recognized an adjustment of NT$ 362 million under US GAAP to
increase cost of goods sold for the year ended December 31, 2008.
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For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Net income (loss), ROC GAAP
    
    
    32,619,313
    
    
    
    16,961,762
    
    
    
    (22,320,075
    )
    
    
    (681,321
    )Compensation
    
    
    (2,106,043
    )
    
    
    (2,647,918
    )
    
    
    (1,925,008
    )
    
    
    (58,761
    )Equity investees
    
    
    (56,785
    )
    
    
    (4,069
    )
    
    
    (80,182
    )
    
    
    (2,448
    )Investments in debt and equity
securitiesChange in fair value of
investments in securities
    
    
    (352,311
    )
    
    
    207,286
    
    
    
    15,913
    
    
    
    485Impairment of investments
in securities
    
    
    779,368
    
    
    
    162,481
    
    
    
    1,415,330
    
    
    
    43,203Difference in application
of equity accounting
    
    
    628,724
    
    
    
    
    
    
    
    
    
    
    
    Adjustments due to change
in ownership of investees
    
    
    (18,808
    )
    
    
    (51,089
    )
    
    
    54,838
    
    
    
    1,675Exchangeable bond liabilities
    
    
    199,389
    
    
    
    
    
    
    
    
    
    
    
    Derivative instruments
    
    
    1,126,322
    
    
    
    
    
    
    
    
    
    
    
    Goodwill
    
    
    
    
    
    
    (23,760,601
    )
    
    
    (14,571,104
    )
    
    
    (444,783
    )Treasury stock and related disposal
    
    
    (10,842,272
    )
    
    
    (132,154
    )
    
    
    8,817,085
    
    
    
    269,142Inventory
    
    
    
    
    
    
    
    
    
    
    (361,897
    )
    
    
    (11,047
    )Income tax effect
    
    
    (180,167
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss), US GAAP
    
    
    21,796,730
    
    
    
    (9,264,302
    )
    
    
    (28,955,100
    )
    
    
    (883,855
    )Basic earnings (losses) per share
under US GAAP (in dollars)
    
    
    1.42
    
    
    
    (0.63
    )
    
    
    (2.25
    )
    
    
    (0.07
    )Diluted earnings (losses) per
share under US GAAP (in dollars)
    
    
    1.37
    
    
    
    (0.63
    )
    
    
    (2.25
    )
    
    
    (0.07
    )Weighted-average number of shares
outstanding-basic (in thousands)
    
    
    15,350,415
    
    
    
    14,599,438
    
    
    
    12,870,072
    
    
    
    12,870,072Weighted-average number of shares
outstanding-diluted (in thousands)
    
    
    15,891,028
    
    
    
    14,599,438
    
    
    
    12,870,072
    
    
    
    12,870,072
  For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Net income (loss)
    
    
    21,796,730
    
    
    
    (9,264,302
    )
    
    
    (28,955,100
    )
    
    
    (883,855
    )Other comprehensive income (loss),
net of taxCumulative translation adjustment
    
    
    (592,598
    )
    
    
    (43,470
    )
    
    
    2,214,202
    
    
    
    67,589Unrealized losses on securities
    
    
    (7,601,764
    )
    
    
    (5,511,035
    )
    
    
    (27,731,377
    )
    
    
    (846,501
    )Unrecognized pension cost
    
    
    
    
    
    
    691,695
    
    
    
    278,486
    
    
    
    8,500Other comprehensive loss
    
    
    (8,194,362
    )
    
    
    (4,862,810
    )
    
    
    (25,238,689
    )
    
    
    (770,412
    )Comprehensive income (loss)
    
    
    13,602,368
    
    
    
    (14,127,112
    )
    
    
    (54,193,789
    )
    
    
    (1,654,267
    )
  F-85




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##### Table of Contents



AccumulatedCumulative
    
    
    Unrealized
    
    
    
    
    
    
    othertranslation
    
    
    gains (losses)
    
    
    Unrecognized
    
    
    comprehensiveadjustment
    
    
    on securities
    
    
    pension cost
    
    
    income (loss)NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    NT$000Balance at
December 31, 2005
    
    
    (242,805
    )
    
    
    41,661,536
    
    
    
    
    
    
    
    41,418,731Other comprehensive loss
    
    
    (592,598
    )
    
    
    (7,601,764
    )
    
    
    
    
    
    
    (8,194,362
    )Adjustment to initially
apply FASB 158, net of tax
    
    
    
    
    
    
    
    
    
    
    (170,432
    )
    
    
    (170,432
    )Balance at
December 31, 2006
    
    
    (835,403
    )
    
    
    34,059,772
    
    
    
    (170,432
    )
    
    
    33,053,937Other comprehensive income
(loss)
    
    
    (43,470
    )
    
    
    (5,511,035
    )
    
    
    691,695
    
    
    
    (4,862,810
    )Balance at
December 31, 2007
    
    
    (878,873
    )
    
    
    28,548,737
    
    
    
    521,263
    
    
    
    28,191,127Other comprehensive income
(loss)
    
    
    2,214,202
    
    
    
    (27,731,377
    )
    
    
    278,486
    
    
    
    (25,238,689
    )Balance at
December 31, 2008
    
    
    1,335,329
    
    
    
    817,360
    
    
    
    799,749
    
    
    
    2,952,438
  As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    US$000Total shareholders equity, ROC GAAP
    
    
    236,466,889
    
    
    
    184,676,169
    
    
    
    5,637,246Compensation
    
    
    (512,990
    )
    
    
    62,806
    
    
    
    1,917Equity investees
    
    
    (498,358
    )
    
    
    (78,454
    )
    
    
    (2,394
    )Investments in debt and equity securitiesChange in fair value
of investments in
securities
    
    
    (139,909
    )
    
    
    
    
    
    
    Adjustments due to
change in ownership
of investees
    
    
    375,885
    
    
    
    
    
    
    
    Goodwill
    
    
    14,187,604
    
    
    
    (7,615
    )
    
    
    (234
    )Treasury stock and related disposal
    
    
    (3,104,443
    )
    
    
    (1,195,662
    )
    
    
    (36,498
    )Pension
    
    
    527,312
    
    
    
    933,593
    
    
    
    28,498Inventory
    
    
    
    
    
    
    (361,897
    )
    
    
    (11,047
    )Total shareholders equity, US GAAP
    
    
    247,301,990
    
    
    
    184,028,940
    
    
    
    5,617,488
  F-86




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##### Table of Contents



For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Balance at January 1,
    
    
    336,424,995
    
    
    
    324,162,015
    
    
    
    247,301,990
    
    
    
    7,548,901Compensation
    
    
    1,096,989
    
    
    
    2,346,111
    
    
    
    2,202,324
    
    
    
    67,224Cash dividends
    
    
    (7,161,267
    )
    
    
    (12,461,529
    )
    
    
    (9,382,647
    )
    
    
    (286,406
    )Capital reduction
    
    
    
    
    
    
    (53,910,992
    )
    
    
    
    
    
    
    Adjustment of additional paid-in
capital and retained earnings
accounted for under the equity
method
    
    
    (1,171,139
    )
    
    
    198,631
    
    
    
    263,934
    
    
    
    8,057Cumulative translation adjustment
on foreign long-term investment
    
    
    (592,598
    )
    
    
    (43,470
    )
    
    
    2,214,202
    
    
    
    67,589Change in fair value of marketable
securities
    
    
    (7,096,919
    )
    
    
    (6,213,532
    )
    
    
    (20,707,489
    )
    
    
    (632,097
    )Treasury stock and related disposal
    
    
    (20,690,009
    )
    
    
    1,570,908
    
    
    
    (9,186,760
    )
    
    
    (280,426
    )Exercise of employees stock options
    
    
    1,725,665
    
    
    
    226,455
    
    
    
    
    
    
    
    Pension
    
    
    (170,432
    )
    
    
    691,695
    
    
    
    278,486
    
    
    
    8,501Net Income (loss)
    
    
    21,796,730
    
    
    
    (9,264,302
    )
    
    
    (28,955,100
    )
    
    
    (883,855
    )Balance at December 31,
    
    
    324,162,015
    
    
    
    247,301,990
    
    
    
    184,028,940
    
    
    
    5,617,488
  As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    US$000Current assets
    
    
    81,207,177
    
    
    
    68,588,471
    
    
    
    2,093,664Non-current assets
    
    
    229,406,951
    
    
    
    146,401,725
    
    
    
    4,468,916Current liabilities
    
    
    45,934,151
    
    
    
    12,864,154
    
    
    
    392,677Non-current liabilities
    
    
    10,860,541
    
    
    
    11,234,375
    
    
    
    342,930Minority interests
    
    
    6,517,446
    
    
    
    6,862,727
    
    
    
    209,485
 For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Net operating revenues
    
    
    112,003,819
    
    
    
    113,311,298
    
    
    
    96,813,546
    
    
    
    2,955,236Cost of goods sold
    
    
    (93,325,956
    )
    
    
    (92,081,440
    )
    
    
    (85,911,764
    )
    
    
    (2,622,459
    )Operating income (loss)
    
    
    2,161,698
    
    
    
    (20,060,578
    )
    
    
    (22,420,256
    )
    
    
    (684,379
    )Net income (loss)
    
    
    21,796,730
    
    
    
    (9,264,302
    )
    
    
    (28,955,100
    )
    
    
    (883,855
    )
  F-87




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##### Table of Contents



As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    US$000Cash and Cash Equivalents:As reported under ROC GAAP
    
    
    47,678,147
    
    
    
    48,566,649
    
    
    
    1,482,498Reclassification to marketable securities
    
    
    
    
    
    
    (8,550,000
    )
    
    
    (260,989
    )As adjusted under US GAAP
    
    
    47,678,147
    
    
    
    40,016,649
    
    
    
    1,221,509Available-for-sale financial assets:As reported under ROC GAAP
    
    
    50,911,643
    
    
    
    16,283,917
    
    
    
    497,067Reclassification to financial assets measured
at cost
    
    
    (834,747
    )
    
    
    
    
    
    
    Change in fair value of marketable securities
    
    
    (700,359
    )
    
    
    
    
    
    
    As adjusted under US GAAP
    
    
    49,376,537
    
    
    
    16,283,917
    
    
    
    497,067Long-term Investment under cost method, equity
method & others:As reported under ROC GAAP
    
    
    18,853,634
    
    
    
    15,983,069
    
    
    
    487,885Reclassification from available-for-sale financial assets
    
    
    834,747
    
    
    
    
    
    
    
    Equity investees
    
    
    139,175
    
    
    
    73,366
    
    
    
    2,238Treasury stock and related disposal
    
    
    (3,104,443
    )
    
    
    (1,195,662
    )
    
    
    (36,498
    )As adjusted under US GAAP
    
    
    16,723,113
    
    
    
    14,860,773
    
    
    
    453,625Held-to-maturity financial assets:As reported under ROC GAAP
    
    
    
    
    
    
    352,645
    
    
    
    10,765Reclassification from cash and cash equivalents
    
    
    
    
    
    
    8,550,000
    
    
    
    260,989As adjusted under US GAAP
    
    
    
    
    
    
    8,902,645
    
    
    
    271,754
  F-88




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##### Table of Contents



As of December 31,2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    US$000Inventory:As reported under ROC GAAP
    
    
    11,867,832
    
    
    
    8,117,603
    
    
    
    247,790Normal capacity adjustment
    
    
    
    
    
    
    (361,897
    )
    
    
    (11,047
    )Compensation
    
    
    95,910
    
    
    
    62,806
    
    
    
    1,917As adjusted under US GAAP
    
    
    11,963,742
    
    
    
    7,818,512
    
    
    
    238,660Goodwill:As reported under ROC GAAP
    
    
    3,498,687
    
    
    
    7,615
    
    
    
    232Goodwill due to merger, acquisition and
ownership increase
    
    
    98,778,711
    
    
    
    98,778,711
    
    
    
    3,015,223Accumulated impairment loss on goodwill
    
    
    (84,215,222
    )
    
    
    (98,786,326
    )
    
    
    (3,015,455
    )As adjusted under US GAAP
    
    
    18,062,176
    
    
    
    
    
    
    
    Accrued Expenses:As reported under ROC GAAP
    
    
    8,214,951
    
    
    
    7,008,700
    
    
    
    213,941Compensation
    
    
    608,900
    
    
    
    
    
    
    
    As adjusted under US GAAP
    
    
    8,823,851
    
    
    
    7,008,700
    
    
    
    213,941Minority Interests:As reported under ROC GAAP
    
    
    6,530,810
    
    
    
    6,982,125
    
    
    
    213,130Consolidation of non wholly-owned subsidiaries
    
    
    (13,364
    )
    
    
    (119,398
    )
    
    
    (3,645
    )As adjusted under US GAAP
    
    
    6,517,446
    
    
    
    6,862,727
    
    
    
    209,485
  F-89




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##### Table of Contents



For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$000
    
    
    NT$000
    
    
    NT$000
    
    
    US$000Cash flows from operating activities, ROC
GAAP
    
    
    47,123,935
    
    
    
    48,124,267
    
    
    
    45,251,284
    
    
    
    1,381,297Remuneration paid to directors and
supervisors
    
    
    (6,324
    )
    
    
    (15,494
    )
    
    
    (11,939
    )
    
    
    (365
    )Employee bonus
    
    
    (305,636
    )
    
    
    (2,324,120
    )
    
    
    (286,541
    )
    
    
    (8,747
    )Reclassification of trading securities
    
    
    (427,202
    )
    
    
    
    
    
    
    
    
    
    
    Cash flows from operating activities, US
GAAP
    
    
    46,384,773
    
    
    
    45,784,653
    
    
    
    44,952,804
    
    
    
    1,372,185Cash flows from investing activities, ROC
GAAP
    
    
    (16,556,181
    )
    
    
    (21,844,280
    )
    
    
    (11,423,003
    )
    
    
    (348,688
    )Net effect of time deposits
reclassified to marketable securities
    
    
    12,914,438
    
    
    
    32,204,107
    
    
    
    (8,550,000
    )
    
    
    (260,989
    )Proceeds from disposal of long-term
investments accounted for under the
equity method
    
    
    (6,521,580
    )
    
    
    
    
    
    
    
    
    
    
    Reclassification of trading securities
    
    
    427,202
    
    
    
    
    
    
    
    
    
    
    
    Cash flows from investing activities, US
GAAP
    
    
    (9,736,121
    )
    
    
    10,359,827
    
    
    
    (19,973,003
    )
    
    
    (609,677
    )Cash flows from financing activities, ROC
GAAP
    
    
    (45,055,565
    )
    
    
    (72,693,550
    )
    
    
    (34,379,650
    )
    
    
    (1,049,440
    )Remuneration paid to directors and
supervisors
    
    
    6,324
    
    
    
    15,494
    
    
    
    11,939
    
    
    
    365Employee bonus
    
    
    305,636
    
    
    
    2,324,120
    
    
    
    286,541
    
    
    
    8,747Proceeds from disposal of treasury stock
    
    
    6,521,580
    
    
    
    
    
    
    
    
    
    
    
    Cash flows from financing activities, US
GAAP
    
    
    (38,222,025
    )
    
    
    (70,353,936
    )
    
    
    (34,081,170
    )
    
    
    (1,040,328
    )Net increase (decrease) in cash and cash
equivalents, ROC GAAP
    
    
    (14,773,592
    )
    
    
    (46,175,061
    )
    
    
    888,502
    
    
    
    27,121Net effect of time deposits
reclassified to marketable securities
    
    
    12,914,438
    
    
    
    32,204,107
    
    
    
    (8,550,000
    )
    
    
    (260,989
    )Net decrease in cash and cash equivalents,
US GAAP
    
    
    (1,859,154
    )
    
    
    (13,970,954
    )
    
    
    (7,661,498
    )
    
    
    (233,868
    )Cash and cash equivalents at beginning of
year, US GAAP
    
    
    63,508,255
    
    
    
    61,649,101
    
    
    
    47,678,147
    
    
    
    1,455,377Cash and cash equivalents at end of year,
US GAAP
    
    
    61,649,101
    
    
    
    47,678,147
    
    
    
    40,016,649
    
    
    
    1,221,509
  F-90




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##### Table of Contents



Concentration of credit risk
  Summarized Financial Information required by Rule 4-08(g) of Regulation S-X
  As of December 31,2007
    
    
    2008NT$
    
    
    NT$(In millions)Current assets
    
    
    13,131
    
    
    
    14,096Non-current assets
    
    
    17,484
    
    
    
    14,179Current liabilities
    
    
    5,416
    
    
    
    5,697Long-term liabilities
    
    
    72
    
    
    
    673Redeemable Preferred Stock
    
    
    175
    
    
    
    555Minority Interests
    
    
    
    
    
    
    
  F-91




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##### Table of Contents



For the year ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$(In millions)Net sales
    
    
    12,648
    
    
    
    11,936
    
    
    
    4,967Gross profit (loss)
    
    
    5,125
    
    
    
    5,096
    
    
    
    (26,751
    )Income (loss) from
continuing operations
before extraordinary
items and cumulative
effect of a change in
accounting principle
    
    
    1,468
    
    
    
    1,847
    
    
    
    (28,478
    )Net income (loss)
    
    
    1,339
    
    
    
    1,655
    
    
    
    (28,498
    )
 New Accounting Pronouncements
    F-92




---



##### Table of Contents



F-93




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitIndex
    
    Description of Exhibits*1.1
    
    Articles of Incorporation of the Company as last amended on June 13, 2008*8.1
    
    List of Significant Subsidiaries of United Microelectronics Corporation*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 Firm*99.1
    
    Form 6-K furnished to the
Commission on April 29, 2009 (File No. 001-15128)
  95