Bowen Huang - Head, IR Chitung Liu - CFO Po Wen Yen - CEO.

Randy Abrams - Credit Suisse Bill Lu - Morgan Stanley Michael Chou - Deutsche Bank Daniel Heyler - Bank of America Merrill Lynch Gokul Hariharan - JPMorgan Eric Chen - UBS Michael Gold - Thomson Reuters Roland Shu - Citigroup Donald Lu - Goldman Sachs Andrew Lu - Barclays Rick Hsu - Daiwa Capital Markets.

Welcome, everyone, to UMC's 2015 first quarter earnings conference call. All lines have been put on mute to prevent background noise. After the presentation, there will be a question-and-answer session. Please follow the instructions given at that time if you would like to ask a question.

For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within an hour after the conference has finished. Please visit our website, www.umc.com, under the Investor Relations/Investor Events section. And now, I would like to introduce Mr. Bowen Huang, Head of Investor Relations at UMC.

Mr. Huang, you may begin..

Thank you, and welcome to UMC's conference call for the first quarter of 2015. I am joined by Mr. Po Wen Yen, the CEO of UMC, and Mr. Chitung Liu, the CFO of UMC. In a moment, we will see our CFO present the first quarter financial results, followed by our CEO's key message to address UMC's focus and the second-quarter guidance.

Once our CEO and CFO complete their remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors' financial sections. During this conference, we may make forward-looking statements based on management's current expectations and beliefs.

These forward-looking statements are subject to a number of risk and uncertainties that could cause actual results to differ materially, including the risk that may be beyond Company's control. For these risks, please refer to UMC's filing with the SEC in the U.S. and the d. I would now like to introduce UMC's CFO, Mr.

Chitung Liu, to discuss UMC's first quarter 2015 business results..

Thank you, Bowen. I would like to go through the first quarter 2015 investor conference presentation material which can be downloaded from our website. Starting on page 3. Consolidated revenue was NT$37.65 billion, with gross margin at 24.3% and operating margin at 10.9%.

The net income attributable to the stockholder of parent was NT$3.98 billion and earnings per ordinary shares were NT$0.32. And for first quarter the capacity utilization rate was 33% flat compared to the first of 2014 and shipment growth to NT$1.481 million [indiscernible] equivalent.

I will now turn to page 4 of our presentation, which can see a statement of our comprehensive income, comparative income, income statement. So, first quarter consolidated revenue grew 1.1% to NT$37.65 billion. Gross margin was NT$9.15 billion or 24.3%. And operating income was NT$4.1 billion or 10.9%.

And EPS is NT$0.32, for ADS, earnings per ADS is NT$0.51. On page 5 we can see the year-over-year comparison. The revenue in gross was 18.8% and gross profit gross rate was 55% from NT$5.9 billion in 2014 and to NT$9.1 billion in 2015. And net income also grew 237% to NT$3.98 billion.

So on page 6, we can see our final balance sheet which is in similar condition compared to the previous quarter. Cash on hand is NT$53.6 billion and total stockholder equities is NT$239 billion. So on next page we can see the operating segment breakdown.

So UMC foundry main business, our revenue was almost around NT$36 billion with a segment net income around NT$4 billion. Our new business which is mainly composed of solar and LED operations, revenue was NT$1.67 billion with a segment loss of NT$343 million.

On page 8 you can see our blended ASP in the first quarter of 2015 when uptake due to the increased portion of our 28 nanometer shipment. On page 9, we offer here the sales breakdown by geography. Asia came down to 40% compared to the 42% in the previous quarter while North America increased 2% from 45% to 47%.

So on page 10, IBM remained around 10% of our total revenue breakdown. On page 11, we see further concentration in communication segment due to the increased leading edge wafer shipment mainly in the communication sector. Consumers went down to 26% from 28% in the previous quarter. On page 12, we can see 28 continue to grow as a percentage of revenue.

In first quarter of 2015, we see 28 reached 9% from 7% in the previous quarter. Total revenue below 40 nanometer is 33% in the first quarter. And on page 13, our capacity continued to grow which mainly focused on 28 nanometer and also some 40 nanometer in Singapore. So total available capacity in the second quarter is 1.659 million 8-inch equivalent.

Our capacity expenditure will remain unchanged at around NT$1.8 billion for year 2015. And now that pretty much concludes my financial overview. I will like to turn the call to our CEO Mr. Po Wen Yen..

Thank you Chitung Liu. Hello everyone. I would like to update everyone UMC's first quarter operating results. In the first quarter of 2015, our foundry revenue grew to NT$26 billion. Overall capacity utilization remained at 93%, bringing wafer shipments to 1.48m 8-inch equivalent wafers.

While our 8-inch fab continued to run at full capacity, 12-inch fab recorded a higher wafer shipments during 1Q 2015. Revenue contribution from 28 nanometer and 40 nanometer increased to 9% and 24% respectively reflecting strong wafer demand for our leading edge technologies but helped enhance blended wafer ASP.

For 2Q 2015, we anticipate wafer shipments to remain at similar levels as 1Q 2015. Despite end-market uncertainties and customer inventory adjustments, we will pay close attention to market development and adapt to any possible changes that may unfold.

While progress continues on advanced logic, we have also qualified 55 nanometer low-power revenue contribution from SST and Faraday to target auto, general purpose MCU, SIM and smartcard and Internet Of Things IC design.

The proliferations of connected devices will help UMC to realize more growth opportunities as these products will adopt our comprehensive logic and mixed-mode and specialty technologies.

With regards to UMC's global expansion progress, in March we held a groundbreaking ceremony in Xiamen China to kick-off the construction of our new 12 inch fab project. When the building structure is completed, we expect the fab cleanroom to be ready for equipment move-in by 2Q 2016, with initial production scheduled for late 2016.

Our flagship 12 inch Tainan fab, we recently held a public earth day event to promote environmental awareness to the community. As Taiwan experiences the west drought in 10 years, UMC has committed to adopt more stringent measures on water and energy conservation and step up our efforts on waste reduction.

With UMC's effective construction infrastructure in place, our fabs' water recycling efficiency has reached up to 88%, saving more than 20m tons of water in 2014. We have set higher goals to further reduce resource use by additional 10% over current levels by 2020.

In addition, UMC's Board of Directors proposed a dividend payout of NT$0.55 per share for fiscal 2014, which strikes a balance between business expansion and return on shareholder equity.

We believe our commitment to manufacturing excellence with a focus in global expansion will secure UMC's long-term returns and enhance profitability to ensure shareholder value. Now please allow me some time to summarize the recent highlights in Chinese. I have finished my remarks, and now let me go over the second-quarter 2015 guidance.

The foundry segment wafer shipments to remain same. The foundry segment ASP in U.S. dollars to remain flat. The UMC foundry segment gross profit margin will be in mid-20%range. Capacity utilization rate for foundry segment will be approximately 90%.

The guidance for new business segment's revenue to be approximately NT$1.75 billion and net loss attributable to UMC parent company to be approximately NT$280 million. That concludes my comments. We are now ready for questions. Operator, please open the lines up. Thanks..

[Operator Instructions]. And the first question comes from Randy Abrams, Credit Suisse. Please ask your question..

The first question on -- to follow-up on the guidance for flat overall shipments in ASPs, could you talk about within that the 28 and 40, how you expect those advance notes to perform, inversely average and also if any differences by end market.

And if you take the flat outlook, are you viewing it as a one quarter slowdown and if you have any initial view on how second half looks after the pause in second quarter?.

We did see the focus adjustments from some customers and due to the inventory adjustment and software spread the demand, in a computer and communication segments. And UMC hasn’t neglected the changes in our 2Q guidance.

So due to the uncertainty end market and high volatility in focus numbers, it is still too early to understand the total impact in second half 2015. .

Okay. And if I could follow on for the advance capacity, if you could give a view on the 28 ramp-up where it still moved up as a percent of sales, how you see 28 continuing the ramp through the year as a percent of revenue, how broad the customer base looks and also how the 40 node is progressing as 28 ramps.

Were you still adding capacity in Singapore, so your view on both of those nodes in ramp up?.

Yes, our 28 nanometer production ramp will continue and revenue contribution in 2Q will continue to increase. And our 40 nanometer will also maintain the revenue contribution in the 2Q. .

Okay.

If you could maintain the revenue contribution so it stays similar levels for 40 and 28, could you give an idea of 28 by end of year, like where it could be on percent of revenue?.

Yes, our 28 4Q revenue target, as I just explained because the focus adjustment has -- we are unable to predict the 4Q revenue target at this time..

Okay. .

However the 2Q revenue target 28 revenue contribution will still continue to grow. .

Okay.

And could you talk on the 8-inch, is that staying, it's been tight or even in a bit of shortage if you're expecting the tightness on 8-inch to continue or you're also seeing adjustments there or some impact from applications moving to 12 inch?.

It's for the demand size we just see a very solid demand in 8-inch capacity. And its certainly become an application the products [indiscernible]. We're expecting some, we've moved from 8-inch to 12. .

Okay. But it sounds like even with the migration you expect 8-inch to be full through the year. .

I will say, somewhat it's still very strong. .

And the next question is from Bill Lu, Morgan Stanley. Go ahead, please..

So following up on 28 nanometers, I understand that visibility isn't great right now. But can you just give us a bit of an update on number one, the customer diversification efforts, where you are in terms of getting additional customers on to 28.

And then secondly, can you give us an update on the profit levels for 28 nanometers?.

Okay. Thank you for your question and we have more than 20 customers engaged with UMC on 28 nanometers and one is 60 kick-offs in the Q1, in the 1Q continue. And regarding the 28 nanometer process, we have a very comprehensive process provision of 28 nanometers, especially on low power version the [indiscernible] etc.

that’s conditional traditional [indiscernible] version, we have UMC's proprietary high performance, low power, we call it HALP and this provided 10% better performance versus traditional poly-SiON low power version.

And for the High-K/Metal Gate version, the high performance version, we have HPL which is more compact version and we also have HPN and HPN's evolving version on cost saving verison, HPC. So we in our 28 nanometer process, we have a comprehensive and also a good customer engagement on each version. .

I guess just to see if I can get a bit more details, out of those 20 customers that you're working with, again, I understand the volume is uncertain, but how many of those customers do you think will be in production by the end of the year?.

We expect there will be more than five products faced into the production by the end of this year. .

Five products from five different customers or --.

More than five. .

Okay.

And do you have a specific target in terms of profitability by the end of the year for 28?.

Because for the past few quarters we have a more product complete our customers call and however the 28 nanometer profitability will quite depends on the loading and the product portfolio, so we don't have a clear target now. .

Understood. A question for Chitung, if you look at the first quarter, your OpEx came down pretty significantly and I think a lot of that came out of R&D.

Can you just talk a little bit more about that and also how we should model this for the rest of the year?.

Well I think for the full year, the OpEx should be similar to that in 2014. Quarter we've got a saving from IBM technology transfer inspiration. By quarter two we do expect the R&D activity to pick up, but the overall full year it should be similar to 2014. .

Okay, got. So that's where you got it from last time. So really no change I guess, I just had the quarter-on-quarter progression. Well, that's fine. Thank you very much..

Thanks..

Thank you..

The next question comes from Michael Chou, Deutsche Bank. Go ahead, please..

Just some housekeeping question. What is your currency assumption for--.

Michael could you speak up loudly, please. .

Just some housekeeping questions.

What is your currency assumption for Q2?.

For quarter two it just take whatever the number from Bloomberg, so its dynamic. We don't really have the forecast. .

Okay. Second question is, sorry I didn’t really hear that clearly, you said there is more than five products from more than five customers or should I say just more than five products from several customers, but it's not more than five customers..

It's more than five products for several customers, not from five customers. .

So, does that imply that you may have less than five customers?.

We have more than 20 customers engaged with UMC and if we talk about the potential scale and we have only five products in production..

More than five products in production. .

Yes. .

Okay, can we expect that you will have more product for this production next year?.

Sure, certainly, yes..

Okay, given the demand uncertainty, since that you cannot predict the Q4 [indiscernible] sales portion, when do you think you can have the a better visibility, maybe end of Q2 or early Q3?.

We have no visibilities, it's very difficult to predict when we will have the visibility. But normally quarter three should be a strong quarter than this quarter four, but right now as our CEO just mentioned, its quite volatile out there. So we rather wait until the next quarter. .

Okay, so follow-up, can we say your second half outlook should be [indiscernible] first half outlook. .

No comment on the second half..

Okay.

The final question is, what will be your tax rate this year? Do you still maintain the [indiscernible] target?.

Yes, roughly mid to low teens. .

And the next one is from Daniel Heyler, Bank of America Merrill Lynch..

I had a question, looking at the wafer revenue, you did NT$34.7 billion in the fourth quarter and NT$35.9 billion, so yet the 20 nanometer mix increased from 7% of sales to 9%. It doesn’t look as though if you factor in currency that you're getting much of a mix lift in revenue from 28 and I'm wondering why that is.

Are you still operating on a good die basis there as a wafer base, maybe just elaborate on that dynamic there. Thanks..

Q4 we have a one-off license fee income from Fijitsu I'm not sure if you deduct that from our wafer sales. So if you deduct that, its JPY50b and maybe you will work out for your formula..

Okay.

So then on as you look at -- you talked about five products, plan production I assumed you’ve got a couple in introduction now, are those being built on wafer bases, are you still on a good die basis there?.

We are based on good die base. .

It's on good die basis mostly. .

So what I was trying to get a bit of a feel for is, if you could explain for us more why the challenges have been so formidable in bringing up 28 because there is only effectively one supplier here, the second supplier of gate last, I mean most of the gate first nobody wants at global foundry, so there is competition from global foundries, Samsung is not there and SMIC is late.

You’ve been kind of in a spot there to take market share. What are the technology challenges and how can be confident that these can be addressed over the next three to six months? Thank you..

As I explained that our [indiscernible] in the process, we have a comprehensive process versions and we also cover every versions, this technology and each versions we have customer engaged we [indiscernible] and even some of them are enter into production speech and some of them are complete the process and each version we think it's pretty much on track and we at UMC also continue to evolve more cost over comments, competitive versions followed by HPN and there are several of them continue to evolve.

And this we 10 UMCs [indiscernible] advantage. So we're pretty confident on our 28 nanometer, this is engagement in a long run. .

So what you're saying is, you needed to introduce, to be competitive, you needed to introduce more varieties to improve your competitiveness and that's taking longer than you anticipated, because of the effort in expanding your variety of 28, is that what you're alluding to?.

Yes we have more variety provided UMC's best cross over performance value to our customers link, because that playlist, application they require different process performance and in the meanwhile UMC's -- we follow UMC's record, we have pretty progress starting from 2Q 2014 last year and you can see it from our 28 nanometer revenue growth, quarter over quarter and also we follow UMC's yield, performance.

We think we are on pretty good track and for December 28 ALP low power process, [indiscernible] and 9% range and for our metal gate, high performance metal [indiscernible] at around 88% range so on good track. .

I'm sorry, but I have to kind of disagree I guess, because in most cases, one node would be three quarters to get to 20 contribution of revenue, the 20% of your revenue a normal ramp would be three quarters, three to four quarters to get a contribution of 20% revenue and you’ve already been ramping four quarters and filling 9% of revenue.

So I guess it does look slow to me, maybe you disagree and I'm just wondering if you could help us understand what's going to change to accelerate this. And even one customer, helping you working very closely with you, we just would like a little more clarity in where this going to go in the next few quarters. Thank you..

Thank you for your comments and I guess there are some application I need to go to the market for to grow the markets -- their response. So it will take us some while to realize that customer's engagement it will become a high volume products. So it will take a while, we’re still pretty confident on our 28 nanometer engagement..

And then the next question comes from [indiscernible] BNP. Go ahead, please..

Just want to know the Q1 gross margin and operating margin for the foundry business. .

Well our foundry business gross margin was 25.8%, operating margin was 12.1%..

I see. So for Q2 you are guiding for better product mix I assume, more at 28 nanometer shipment, but come how the blended ASP will still be flattish on U.S. dollar basis. .

Well the incremental impact is diminishing for one and our depreciation expenses for the full year we will see 15% to 20% growth, 2015 over 2014. Every quarter we will see roughly 5%, 6% quarterly increase, so that kind of net net impact. .

Okay.

And the last question on the CapEx front, the full year CapEx is $1.8 billion, can you give us an update on the capacity growth for this year for both 8-inch and 12-inch?.

Capacity for this year for 12-inch is 8%, 7% and for the whole company 3.85%. .

And the next one is from Gokul Hariharan, JPMorgan. Please ask your question..

My question is on the 28 nanometer capacity build out. So are you guys still on track for the 28k, 29k by end of the year.

And given that your visibility on the demand seems to have been a little bit weaker now, if for example demand does weaken further in Q3, and the smartphone recovery doesn’t really happen, is that capacity ramp up on 28 going to be reconsidered or you have customers who are committed given that you have so many productivity.

So you are still going to be building up to around 30k anyway. .

What we appeared in up to 30k anyway, but the additional 9K which will happen on new factories will suffice, the target there is beginning of 2016 and we do have some leeway or rooms in couple of existing schedule but for the time being we keep these schedule unchanged. .

Okay, and just to follow-up that, where do you think your 28 nanometer capacity eventually is going to sell. Are you going to build out to as much as what you had in 65, if it were going to be kind of lower than that kind of scale.

I think you don't have a higher number at this point, but depending on what you're seeing from customers and your evaluation of the length of the node..

We've seen 28 nanometer is a long-lasting, long-life node. And given our variety in recipes we are very confident in our 28 nanometer market share. So we're saying it’s a big node where we will invest for it, but we will also follow the discipline customer driven pace in terms of our expanding our 28 nanometer capacity.

We don't have a final target but its going to be a big node, a major node for us. .

Okay, and also since you plan to start moving in equipment for the Xiamen fabs from middle of next year, does it have any impact on the UMC parent CapEx plans or that is going to be completely funded out the JV so that's kind of slightly separate from what you spend on the Xiamen fabs?.

What we Xiamen fab is wholly owned subsidiaries even though there is some outside investors. IMC where [indiscernible] is controlling ever since, so its one of our own fabs and we are including all the Xiamen CapEx into UMC's CapEx from this point onwards. So for all 2016 CapEx, that would include 100% of the Xiamen CapEx..

And the next question is from Eric Chen from UBS..

Two quick follow-up that you don't -- when you mention about your Xiamen fab, the CapEx, the only CapEx from this year or 1%, 2% of CapEx, is mainly from the next year, the whole CapEx budget. .

This year, what we commented was only the share construction, probably less than $200 million in terms of cash payout, but it will be a little bit more next year. We will include it in our next year's CapEx. .

Okay and how about a capacity schedule? The less than end of next year, what kind of capacity we should expect for your Xiamen fab?.

Capacity is, initial ramp is 6000 wafers in 40 nanometer or 55 nanometer in combination and sometimes in 2017, we reached the first stage which is 20,000 wafer per month. .

Okay, so total 20,000 wafer in the year 2017. .

Late in 2017. .

Okay.

And by the way, I probably missed, in terms of the 20nm process capacity schedule, and how many at the end of this year and what kind of number we should expect [at the mid of] next year?.

Capacity will reach 20,500 wafer per month mid-2015. We are building additional 9,000 wafers, which should be completed sometime in early 2016..

Okay.

So I mean, no additional capacity expansions in the second half this year, right?.

Well, we will continue to build the new fab, big size, and at the same time moving equipment. And it will be beginning of the next year to be effective to produce for those newly equipped 9,000 wafers..

Okay, just take time. Okay.

And okay, how about ASP for the 28nm process, blended ASP? Can we expect it will go up in the second quarter, and given the revenue portion from High-K-Metal Gate increase?.

As I mentioned, we expect to be flattish in terms of blended ASP in quarter two, because the increased percentage is diminishing compared to the previous two quarters..

And the next one is from Michael Gold, Thomson Reuters. Go ahead, please..

I also want to ask about the Xiamen fab.

And I'm just curious if there's any way that you can give some color on what kind of products, the chips that you're going to be making there will go into, is mostly going to be mobile devices, communication devices, whatnot? And are most of the clients going to be mainland Chinese IC design houses? And will the products mostly be destined for the Chinese consumer market? Thank you very much..

Yes, we -- as Chitung mentioned, the initial stage, we'll build 55nm and 40nm [indiscernible]. And that is mainly for high-voltage, embedded high-voltage product and embedded Flash for MCU and security chips..

And so mostly will go into mobile devices, communication devices?.

Yes, yes. We certainly will consider to work with customers, deploy the mobile devices for IOT application..

Right.

And most of these are destined -- eventually destined for the Chinese market itself?.

Yes, it's mainly for the Chinese market. We're really trying to achieve [indiscernible] effect, not really tapping the existing customer base but rather enlarge our overall customer base, penetrating into China, exclusive domestic Chinese market. So that was the idea for the Xiamen operation..

And then next one is from Roland Shu, Citigroup. Go ahead, please..

First question is, is 20nm still on your product roadmap?.

No. 20nm is not on UMC's product roadmap..

Okay. So now you are doing for 28nm [indiscernible] and ramping up 28nm.

So what's next generation, so you will go directly to 14?.

Yes --.

Or is there any node in between 20 and 14?.

Yes, we have technology roadmap on our 14, 16 FinFET technology. And so far in the past quarter the -- our 16, 14 FinFET technology, we have good progress and we met the high-performance device targets. And the SOU [ph] demonstrated and also the IP, and customer [indiscernible] verification is in progress.

And our internal test vehicle for reliability test is also clear. So we are hoping the technology revenues will be -- it will be ready for customer -- end of this 2Q15. So, pretty much on track..

Okay.

So, again, can you clarify, so when you talk about 14 and 16nm, is this at the same node, or this -- and you are going to offer two different designs, 14nm and 16nm, specific to customers?.

Yes, more -- thank you for your question. More specifically, we are, UMC, we are talking about 16..

Sixteen?.

Yes..

Second question on your -- is regarding to your 8-inch fab utilization. Since you're always talking about 8-inch fab continue to run at full capacity.

So I just try to understand, what do you mean full capacity? This means utilization 100% or more than 100%? Because I think if I ask the question is, I just compare your 8-inch capacity and the revenue last year with 2010, and since we include [indiscernible] capacity since 2013, so the overall capacity, 8-inch capacity actually in 2014 increased about 20% compared to 2010, but the revenue was actually -- was still slightly below what you generated in 2010.

So I just try to understand whether or not we are talking about the full capacity but still, there is still gap of the utilization, or we're already seeing very big change on the product mix that caused this on your revenue did not increase according to this capacity expansion?.

Yes. We're actually right at around 97% utilization rate and 3% haven't fully utilized this because we are doing some process to conversion, that is for some [indiscernible] applications customers need. And so -- and also in the meantime, we are also expanding our 8-inch capacity and some capacity may take some time to qualify to release the capacity.

So in our calculation, the 97% utilization is fully utilized condition..

So is there any further upside to -- for utilization to go above 100% [indiscernible] for the other foundry [indiscernible] from time to time they will post utilization at 8-inch 110% or 120%.

So, is there any possibility for UMC to see the same upside on the utilization for 8-inch?.

In UMC's case, we think it's possible, but we believe we have different formulas to define that capacity utilization rate..

Okay. Understood. So, 97% actually was the utilization in first quarter.

So, how about in second quarter, for 8-inch?.

Yes, still around the same level as the first quarter..

And the next one is from Donald Lu, Goldman Sachs. Go ahead, please.

I have two questions. First is, can you comment on which application is strong or weak in the second quarter this year. The second question is, one of your large customers has recently put down near NTD1 billion prepayment to one of your largest competitors.

And would that affect your loading at 28nm this year? And also going forward, looking at the customer concentration, would you see increasing customer concentration for your leading node technology? Thank you..

Thank you. I believe your first question is around 2Q, which application -- actually we see that it's almost flat for all the three major applications, including communication, computer and consumer. And the second question is related to the -- yes.

I'm not sure it's related to -- you mentioned our number one customer, their investment plan on our competition. We don't comment on our competition. And we do see that the short-term inventory correction is -- we have some [indiscernible]. And I believe you another question, is about -- what is you --.

I guess related to that is, what is the customer concentration today for 28 versus 40nm, for example, at the similar stage? I checked your 40nm revenue, it was exactly three years ago your 40nm was 9% of total revenue in Q1 of 2012. So I just want to see whether the customer concentration has increased for the leading edge at the same stage for UMC..

All right. So, Donald, the 28nm concentration rate is really high right now, given that we only have a little bit more than five products in production. But as you mentioned, we have more than 20 customers engaged. I think eventually our -- by default, concentration rate has to come down with the increased number of products in 28nm production..

Okay..

It's not that high level, but it should go down..

The next question comes from Andrew Lu, Barclays. Go ahead, please..

Two quick ones, first one is, Chitung, can you remind us the depreciation cost year over year for this year?.

Depreciation will be 15% to 20% higher than that of last year..

Is this the same as the last guidance or slightly lower? I remember last time you said about 20%..

15 to 20, and it's moving in between these two boundaries given it depends on the speed of our CapEx..

The second one is, solar, the new business, mostly is solar, right? I remember earlier you sold the business to someone else.

So, are we going to see one quarter start to have no revenue for new business?.

No, we have a few members. One of the member, Topcell, will be merged into Motech mid of this year. So we will still have remaining solar operations such as NexPower..

So the revenue roughly will be this range based on the market situation, right?.

The next one is from Randy Abrams, Credit Suisse. Go ahead, please..

Okay. I just actually want to follow up on the question on the new business.

After the Topcell deconsolidates after second quarter, will there be a change in second half? And I guess just a target for that, if we should start to see losses get closer to breakeven from second half, or there's not much material change with what happens to Topcell when it actually merges with Motech?.

We will no longer consolidate Topcell result into UMC's operation after the divestment. But we will still have the other such as NexPower consolidation financial statement, which is also in rollout right now..

Okay.

But what's I guess the revenue and profit impact after that event?.

The revenue and tax impact on Topcell will be discontinued..

Okay. No.

But what's -- is there a magnitude how much we should assume comes out of your revenue and losses?.

Actually itself, new business itself is actually quite volatile, depends on the solar market. So it's hard to generalize, give numbers..

Okay. And if I could ask on the Xiamen where you're consolidating it now. What's the percent ownership? I would assume there's a minority interest.

Like how much of the capital would UMC be putting up versus your partners now? And then what percent of the cost or like some of the costs will get shared, so, how does the accounting flow through your statements?.

Accounting-wise will be fully consolidated..

Okay.

And then how much of the -- how much would there be minority interest?.

Financially we own 33% in the beginning, but eventually will increase to 90%..

Okay. And the last question, I wanted to ask on just business environment where it's a bit softer now for yourselves and your peers. Have you noted any change in pricing environment going after orders and projects? Some of these are multi-source customers.

Or do you use specific applications at UMC where it's still pretty in line with the original pricing understanding. But just wondering if it's getting a bit more aggressive given the competition and mix outlook..

Our guidance for ASP for the next quarter is still flattish. And so we do believe overall it's still quite firm out there, especially 8-inch capacity remains poor. The visibility for second half is rather limited right now..

Ladies and gentlemen, we are running out of time. We're taking the last question. And the last question is from Rick Hsu, Daiwa Capital Markets. Please ask your question..

So just one question from me. If you look at the supply chain guidance, I look at the revenue guidance for the backend guys and compare with the front-end, I think this time the second -- for second quarter, the backend guys will likely outperform the front-end in terms of revenue growth sequentially.

So I think that should imply some wafer bank drawdown or inventory depletion.

So, do you guys see the same situation right now? And do you agree with what TSMC said about inventory should normalized by the end of the second quarter?.

We cannot agree or disagree with our competitor, but we do see our customers revising their forecasts and some due to the inventory correction. I think that's what we see right now..

So in your own view, do you -- when you anticipate the industry inventory to normalize?.

Quarter two is still okay. I mean we're looking for a trend of flat wafer shipment in second quarter. That's, compared to the normal season pattern, it's not that bad result.

What we are lacking or we don't have right now is the visibility or clear visibility for second half, which may take a few months, wait until the next earnings call, we can provide a more comprehensive overview for third quarter..

Thank you for all your questions. That concludes today's Q&A session. I'll turn things over to UMC Head of Investor Relations for closing remarks..

Thank you everyone for joining us today. We appreciate your questions. As always, if you have any follow-up questions, please feel free to contact UMC at ir.umc.com. Have a good day. Bye, bye..

Thank you. Ladies and gentlemen, that concludes our conference for first quarter 2015. Thank you for your participation in UMC's conference. There will be a webcast replay within an hour. Please visit www.umc.com, under the Investor Relations, Investors, Events section. You may now disconnect. Goodbye..