UMC's research and development group is committed to pushing the forefront of technology and providing the latest market-driven, customer-focused and cost effective integrated circuitry manufacturing solutions. Aggressive R&D spending year after year is a testament to our commitment to technology leadership. In the past six years, the ratio of R&D expenses to revenues has reached an average of more than 9%. Our R&D efforts were positively reflected in 2004, as 62% of UMC's revenue came from products built using 0.18-micron and below technologies. In addition to our standard advanced logic processes, we also continue to drive embedded memory and Mixed Signal/RF CMOS development. This cutting-edge technology portfolio powers today's sophisticated System-on-chip (SoC) designs.

With our R&D team's efforts, UMC's 90nm logic technology is currently in mass production. In addition, our multiple transistor options allow customers to meet their product's high-speed requirements while also exhibiting the lowest possible off-current leakage. It provides multiple options to accommodate a wide variety of designs and applications including computer, communication, and consumer products. Moreover, our development team, working in conjunction with UMC's production facilities, has further improved its 90nm yield enhancement to realize world leading low defect densities.

In 2003, UMC became the first foundry to deliver 90-nanometer working customer products, and these strategic customers engaging with UMC at this technology node now find themselves in the forefront of the semiconductor industry. In addition, we are cooperating with several Integrated Device Manufacturers (IDMs) in the process development stage to jointly develop tailored technologies. This will help shorten product development and manufacturing cycle times.

SoC Enabling Technologies

UMC provides the foundry industry's most complete embedded memory platform. We have successfully developed high yield 0.13-micron 1T-SRAM, 6T-SRAM, and embedded flash memories. Embedded memory solutions are also available today for UMC's volume production 90nm process. With this portfolio, UMC is the only foundry company that can provide low, medium, and high density embedded memory solutions for leading-edge SoC designs.

UMC provides a logic-based technology platform with Mixed Signal/ RF CMOS devices to deliver a high performance and low cost solution. Besides providing a common technology platform, UMC also provides a complete Mixed Signal/RF CMOS design environment to help our customers meet their time to market needs. For example, UMC announced the Electromagnetic Design Methodology (EMDM) for RF CMOS designs in Q4, 2003. This breakthrough methodology reduces simulation cycle times from hours to just minutes, and allows customers to design their own inductors with fast, accurate, and low-cost features.

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Fundamental Research

In addition to UMC's manufacturing leadership, UMC is also focused on introducing advanced technology to the market. UMC has begun using chrome-less phase-shift masks for the 90-nanometer process. Continuing this development, UMC will apply chrome-less phase-shift mask technology, using 193-nanometer wavelength lithography, for the migration to the 65-nanometer manufacturing process node. This technology not only leads to enhanced gradient of exposure intensity, but also results in a cost-effective manufacturing solution.

In addition, UMC's strained silicon process offers an alternative path to realize performance improvements without aggressive gate length shrinkage. We believe that many of our foundry partners will benefit from this enabling technology in the future. UMC had successfully demonstrated in a research project, with a 12% switching speed improvement, to lower the strained layer defect density, and to decrease substrate-costs associated with strained silicon technology.

In advanced gate engineering, high-k gate dielectrics will be debuted in tandem with metal electrodes. UMC is currently working on a fully silicided poly gate. Extensive research will be conducted on potential material options for metal gate electrodes. UMC will also focus on rolling out strained silicon process technology. UMC is performing research to increase the local stress in channels to improve the device performance.

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Patent Applications and Patents Granted

UMC has always been aggressive in pursuing new inventions and overall technology advancement. From 2003 up to the end of Q1, 2004, UMC has filed 356 patent applications. For the same period, UMC was granted 204 R.O.C patents, 204 U.S. patents, and 35 patents from other countries. Overall, up to the end of 2003, UMC had been granted more than 4,200 ROC patents and 2,700 US patents. Additionally, over the past few years, UMC has won numerous awards from the ROC government for UMC's outstanding achievements in semiconductor technology research. As always, UMC is committed to continuing with its excellent record in technology innovation and IP protection.

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