4Q09 marked the third consecutive growth quarter, mainly driven by strong demand from Computer related applications during the quarter. Revenues from Computer applications grew 22% sequentially, while Communication declined 8% after strong momentum in the prior two quarters and Consumer declined 15% following seasonal pattern.

As demand for 40/45nm technology remained strong and yield continued to improve, revenues from 40/45nm again more than doubled during the quarter and accounted for 9% of total wafer sales. Meanwhile, demand from 65nm and 90nm continued to be robust and accounted for 30% and 16%, respectively. Overall, revenues from 0.13-micron and below increased three percentage points sequentially and represented 70% of total wafer sales.

Revenues from IDM customers accounted for 21% of total wafer sales in 4Q09, up one percentage point from 3Q09.

From a geographic perspective, revenues from customers based in North America accounted for 71% of total wafer sales, while sales from Asia Pacific, China, Europe and Japan accounted for 13%, 3%, 10%, and 3% of total wafer sales, respectively.

    II. Profit & Expense Analysis



    II - 1. Gross Profit Analysis

    (In NT billions)                       4Q09   3Q09   4Q08    2009    2008

    COGS                                  47.39  47.08  44.37  166.41  191.41
    Depreciation                          18.60  18.37  19.29   74.48   74.70
    Other MFG Cost                        28.79  28.71  25.08   91.93  116.71

    Gross Profit                          44.70  42.86  20.19  129.33  141.75

    Gross Margin                          48.5%  47.7%  31.3%   43.7%   42.5%

Gross Profit Analysis:

Gross margin for the quarter was 48.5%, increased by 0.8 percentage point from 47.7% in 3Q09, due to a higher level of capacity utilization and continued cost improvement, partially offset by the unfavorable exchange rate.

On a full year basis, gross margin for 2009 was 43.7%, increased 1.2 percentage points from 2008, mainly due to a favorable exchange rate and cost improvement, partially offset by an adverse inventory valuation adjustment under ROC SFAS No.10.

    II - 2. Operating Expenses

    (In NT billions)                       4Q09   3Q09   4Q08    2009    2008

    Total Operating Exp.                  11.05  10.87   8.17   37.37   37.31
    SG&A                                   4.48   4.67   3.34   15.78   15.83
    Research & Development                 6.57   6.20   4.83   21.59   21.48
    Total Operating Exp. as a % of Sales  12.0%  12.1%  12.7%   12.6%   11.1%

Operating Expenses:

Total operating expenses for 4Q09 increased by NT$0.18 billion to NT$11.05 billion, representing 12.0% of net sales.

SG&A expenses decreased by NT$0.19 billion from 3Q09, primarily due to lower legal fees.

Research and development expenditures increased by NT$0.37 billion sequentially, mainly due to increased development activities in 28nm and 22nm technologies.

For full year 2009, total operating expenses were NT$37.37 billion, similar to that in 2008. However, due to a lower net sales base, total operating expenses accounted for 12.6% of net sales in 2009, compared with 11.1% in the prior year.

    II - 3. Non-Operating Items

    (In NT billions)                      4Q09  3Q09   4Q08   2009   2008

    Non-Operating Inc./(Exp.)             1.43  0.52   1.41   3.45   6.34
       Net Interest Income/(Exp.)         0.35  0.42   1.18   2.21   4.76
       Other Non-Operating                1.08  0.10   0.23   1.24   1.58

    L-T Investments                       0.30  0.45  (0.34)  0.05   0.70
       SSMC                               0.29  0.26  (0.07)  0.43   0.76
       Others                             0.01  0.19  (0.27) (0.38) (0.06)

    Total Non-Operating Items             1.73  0.97   1.07   3.50   7.04

Non-Operating Items:

Combined result from non-operating income and long-term investments was a gain of NT$1.73 billion for 4Q09.

Non-operating income was NT$1.43 billion for 4Q09, a NT$0.91 billion increase from 3Q09, primarily due to the receipt of litigation compensation.

Net investment gain was NT$0.30 billion, lower than NT$0.45 billion in the prior quarter, mainly due to lower profits from certain invested companies.

On a full year basis, total non-operating items decreased by NT$3.54 billion to NT$3.50 billion in 2009, mostly due to less interest income and weaker business in certain invested companies.

    III. Financial Condition Review



      III - 1. Liquidity Analysis
              (Selected Balance Sheet Items)
      (In NT billions)                         4Q09        3Q09        4Q08

      Cash & Marketable Securities           195.80      180.32      211.45
      Accounts Receivable - Trade             35.38       35.88             18.50
            Inventory                                                              20.91              19.18              14.88
            Total  Current  Assets                                      259.80            244.24            252.62
            Accounts  Payable                                                40.61              26.30              14.04
            Current  Portion  of  Bonds  Payable                  0.00                0.00                8.00
            Accrued  Bonus  to  Employees                            13.43                8.62              15.37
            Accrued  Liabilities  and  Others                    25.09              20.09              19.40
            Total  Current  Liabilities                              79.13              55.01              56.81
            Current  Ratio  (x)                                                  3.3                  4.4                  4.4
            Net  Working  Capital                                        180.67            189.23            195.81