I. Spokesperson and Acting Spokesperson Contact Information€¦ · Organization (ERSO), and in...

-1- Annual Report 2011

I. Spokesperson and Acting Spokesperson Contact Information

Spokesperson

Name: Daniel Chien

Title: Vice President & CFO

Tel: 886-3-5646600

Email: [email protected]

Acting spokesperson

Name: Will Pei

Title: Manager, Finance Division

Tel: 886-3-5646600

Email: [email protected]

II. GUC Address and Telephone Number

Address: No. 10, Li-Hsin 6th Rd., Hsinchu Science Park, Taiwan, R.O.C.

Tel: 886-3-5646600

III. Common Share Transfer Agent and Registrar

Company: the Transfer Agency Department of Chinatrust Commercial Bank

Address: 3F, 83, Sec. 1, Chung-Ching S. Rd., Taipei, Taiwan 100, R.O.C.

Website: http://www.chinatrust.com.tw

Tel: 886-2-23613033

IV. Auditors

Auditors: Hung-Peng Lin、Shu-Chieh Huang

Company: Deloitte & Touche

Address: 6F, 2, Prosperity Rd. I, Hsinchu Science Park, Taiwan, R.O.C.

Website: http://www.deloitte.com.tw

Tel: 886-3-5780899

V. Company Website

Website: http://www.guc-asic.com


Table of Content

Letter to Shareholders····························································· 3

Company Profile ······································································ 7

Corporate Governance ·························································· 18

Operation Report··································································· 31

Consolidated Financial Highlights ······································· 45

Financial Report ·································································· 47


Dear Shareholders,

2011 was a year of re-position for GUC. GUC’s 2011 revenue and profitability

showed an annual sequential decline due to the economic recession in the U.S. and

European countries. However, GUC still continued to expand in markets outside of

Europe and the U.S. while enhancing technology capabilities. We hope to build on

our success in delivering world class Flexible ASIC Services, allowing IC visionary

customers to reach the next level of leadership in their markets. We are confident in

our ability to capture future outsourcing business opportunities from international

system companies.

Although GUC’s 2011 revenue and profitability didn’t meet expectations, GUC still

delivered outstanding sequential annual growth in advanced process technologies due

to the enhancement of quality in advanced technologies and increase in quantity of

silicon intellectual property. GUC was awarded the Global Semiconductor Alliance

“2011 Outstanding APAC Semiconductor Company Award.”

Financial Performance

Total revenue for 2011 was NT$9,147 million, down 11 percent compared to

NT$10,271 million in 2010. Net income was NT$527 million, down 13 percent

compared to the previous year. 2011 EPS was NT$3.94, down 14 percent compared

to 2010 EPS of NT$4.56. Among other highlights in 2011, GUC achieved gross

margin of 20.2%, operating margin of 6.2% and ROE of 16.2%.

Technology Leadership

Over the past few years, GUC has dedicated significant resources to developing

advanced technologies while enhancing its low power design expertise and

System-in-Package (SiP) technology. During this time, GUC also built a robust

segment-specific IP portfolio. The Gartner Group ranked GUC as the 14th largest

ASIC company in 2010. In 2011, advanced process technologies, including

90-nanometer, 65-nanometer, 40-nanometer and 28-nanometer, showed sequential

annual revenue growth while accounting for 59% of total revenue. Revenue of

40-namometer alone accounted for 38% of NRE revenue in 2011, up year-over-year

Letter to Shareholders


in terms of percentage.

GUC’s significant technology breakthrough and innovative achievement in 2011 are

as follows:

1. Achieved 1st silicon success in developing high technical barrier 10G KR IP in

40nm for 10G EPON and GPON market.

2. Achieved key IPs- DDR2/ DDR3/LPDDR PHY and controller, SATA2/3 PHY,

USB3.0 controller, miniLVDS and LVDS. Achieved 1st silicon success and

compliance logos for SATA2/3 PHY and USB3.0 controller. Customers have

adopted them smoothly into HDTV and various SoC products.

3. Achieved 1st silicon success in developing ADC and DAC IPs in 40nm for smart

phone. Customers have adopted them into LTE/GSM cell phone product.

4. Successfully developed 40-nanometer thermal sensor IP for DVFS function

(Dynamic Voltage Frequency Scaling) of smartphone application processors.

5. Successfully developed 1.2 GHz in 40LP and 28HPM high speed ARM

Cortex-A9 dual cores for smartphone and tablet PC applications.

6. Successfully developed and applied advanced 40nm on-chip memory BIST

(Built-in Self Test) and repair design flow to customer’s high-end digital TV SoC

project.

7. Successfully developed and offered Integrated Passive Device (IPD) service to

effectively enhance miniaturization of WiFi module in mobile application.

8. Successfully completed advanced 28-nanometer technology test chip tape-out for

a customer.

Corporate Developments

1. Flexible and customized IC design services: We see GUC’s Flexible ASIC Model as the

new generation approach to a traditional semiconductor business. Going forward, we

will focus on penetrating specific segments in mobile, networking, computing, and

consumer electronics markets where we are establishing design expertise and domain

knowledge.

2. Value Selling: GUC is one of the few global providers of 28-nanometer designs and has

developed significant experience on 40-nanometer designs, particularly in low power

applications. GUC continues to develop advanced process design capabilities and

in-house IP. To gradually enhance corporate profitability, GUC has always been

strongly aligned with TSMC’s advanced process technology, offering total solution to


fabless, integrated device manufacturer (IDM) and system customers.

3. Project Management: Due to shorter life cycles of electronic products,

time-to-market has become one of the key factors to gaining market shares for IC

design companies. GUC assigns experienced engineers as project managers to

be responsible for customers’ projects in order to fully integrate corporate

resources while helping customers mass produce their products as soon as

possible.

The Impact of External Competiveness, Regulatory,

Environment, and Macroeconomics

The technology trend for IC companies is to continue miniaturizing chips through

advanced process while improving chip functions, lowering production cost, and

power consumption in order to pursue high system integration and make products

slim and small. In terms of market trend, the emerging market is the main source of

momentum for global economic growth. These two trends are in line with our

corporate development strategy – enhance advanced process technology capability

and continue to strengthen markets outside of Europe and the U.S.. We believe that

with right strategy and strict execution, we will triumph in competitive environments

and endure the challenges of environmental factors.

Prospect

According to most research institutes, 2012 worldwide semiconductor market could

show sequential growth while more customers are expected to request for advanced

process design services. With Flexible ASIC Service Model and advanced high-end

process design capabilities, GUC will offer the best one-stop complete solution to

customers.

Last but not least, we would like to sincerely thank our industrious employees, our

customers and our suppliers for their trust and support. Looking into 2012, we hope

to have a breakthrough, especially with revenue contribution from in-house IP

becoming another revenue growth driver. We will continue to deliver stable

long-term investment return to our shareholders.


Global Unichip Corporat ion

F. C. Tseng

Chairman

Jim Lai

President


Company Overview

GLOBAL UNICHIP CORP. (GUC) is the Flexible ASIC LeaderTM whose customers

target IC devices to leading edge computing, communications and consumer

applications. Based in Hsin-chu, Taiwan GUC has developed a global reputation

with a presence in China, Europe, Japan, Korea, and North America. GUC is

publicly traded on the Taiwan Stock Exchange under the symbol 3443.

Organization

Company Profile


Board Member

Dr. F.C. Tseng

Chairman; Vice Chairman of TSMC

Dr. F.C. Tseng is the Vice Chairman of TSMC and Chairman of Global Unichip Corp.

Prior to this post, Dr. Tseng served as Deputy Chief Executive Officer, President, and

Senior Vice President of Operations of TSMC. Dr. Tseng spent two years as President

of Vanguard International Semiconductor Corporation (VIS), which was derived from

the Industrial Technology Research Institute's (ITRI) Sub-micron Process Technology

Development Project and was Taiwan's first eight-inch IC facility.

Dr. Tseng led 110 specialists to spin off from ITRI's Electronics Research & Service

Organization (ERSO), and in 1987 he co-founded TSMC as a pioneer specializing in

the "foundry only" semiconductor manufacturing business. Dr. Tseng established a

solid technical base for TSMC's six-inch and eight-inch fabs.

From 1973 to 1986, Dr. Tseng served at ITRI-ERSO, where in 1976 he was one of the

pioneers in setting up the IC project in Taiwan. He was responsible for installing the

7.5 mm metal-gate CMOS process into the 3-inch line, which later was converted

smoothly to 4-inch under his management. In 1978, Dr. Tseng was promoted to plant

manager of the IC demonstration plant, where he was responsible for the production

and development of silicon-gate CMOS from 5 mm to 1.2. Under his supervision, he

established the capability to develop an advanced CMOS process.

He holds a Ph.D. in Electrical Engineering from National Cheng Kung University in

Taiwan. Dr. Tseng was named as one of the "Outstanding Alumni" by National

Cheng Kung University in 2000, and one of the "Ten Outstanding Engineers" in 1991

and "The Excellent Engineers" in 1982 respectively by the Chinese Institute of

Engineers and by Electronic Buyer's News as one of the Hot 25-Industry Executives

who made a difference in 1999.


Mr. K.C. Shih

Founder

K.C. Shih has more than 30 years of experience working in the high-tech industry. Mr.

Shih observed the emergence of the post-PC era when the demand for IC is migrating

from ASIC to SoC. In 1998, he founded Global Unichip Corp. with Dr. Nicky Lu and

Dr. Steve Lin, to be the world's first dedicated SoC Design Foundry. In recognition of

its leading market position and successful business model, TSMC invested and took

partnership with Global Unichip Corp. in 2003. Global Unichip Corp. has

successfully demonstrated its leadership in advanced SoC designs (i.e. 90nm, 65nm,

40nm and 28nm) and has listed on the Taiwan Stock Exchange in 2006.

In 1990, Mr. Shih was the President of Cadence Design Systems Inc. Mr. Shih then

founded Faraday Technology Corporation in partnership with UMC and served as the

Vice Chairman and CEO. Faraday is the first IC Design Service Company in the

world. Based on its ASIC expertise, Faraday provides ASIC technology and design

service to customers in Taiwan, the USA and other countries. In 1998, Faraday

successfully went public in Taiwan, its stock price was once the highest on the

Taiwan stock-exchange board.

In 1983, Mr. Shih founded Suntek to develop under-$1,000 UNIX PC with NS32000,

targeting college students on the college local area network. Evaluating from revenue

figures, one may say that Suntek did not make the grade; however, it has indeed made

a profound impact on Acer.

While at M.I.T., Mr. Shih was an original member of the MULTICS team. MULTICS

was the first multi-processing, multi-programming, network operating system running

on ARPAnet. It was later re-written to become UNIX at Bell Labs. He then worked at

DEC involving in the design of the famous VAX computer. In 1980, he joined


National Semiconductor as Director of the MESA project, in charge of the NS32000

32bit microprocessor development.

Mr. Shih earned his Bachelor of Science degree in Physics from Chung Yuan

Christian University, Taiwan, his Master of Science degree from University of

Massachusetts, and Ph.D. studies in Electrical Engineering at M.I.T.

Mr. Jim Lai

President

Jim Lai has 27 years of experience in semiconductor and ASIC industries. Jim

currently serves as president of Global Unichip Corp.

Mr. Lai was promoted from TSMC North America to GUC in 2003 when TSMC

became the major shareholder of GUC. From 1992 to 2003, Jim served various

positions at TSMC North America, including director of emerging account, director

of design services and business manager responsible for the ASIC business unit.

Prior to TSMC, Mr. Lai co-founded ASICtronics, one of the earliest design service

companies to provide ASIC design consultation and libraries in the USA. Prior to

ASICtronics, Mr. Lai worked at Toshiba America, Knights Technology and LSI

Logic in various engineering positions in ASIC and CAD groups.

Mr. Lai received his Master of Science degree in Electrical Engineering from

University of California, Santa Barbara in 1984 and his Bachelor of Science degree in

Electrical Engineering from National Taiwan University in 1981.


Ms. Lora Ho

SVP, CFO, and Spokesperson of TSMC

Lora Ho is Senior Vice President of Taiwan Semiconductor Manufacturing Company

Limited (TSMC), Chief Financial Officer and Spokesperson.

Prior to joining TSMC in 1999, Ms. Ho served as Vice President of Finance and Chief

Financial Officer at Acer Semiconductor Manufacturing, Inc. (formerly known as

TI-Acer Inc.) from 1990 to 1999. Before that, Ms. Ho held various positions in the

accounting and finance fields that included Financial Controller at Thomas & Betts

Industries, Deputy Manager of Finance at Wyse Technology Taiwan Ltd., and Cost

Accounting Manager for Cyanamid Taiwan Corporation.

Ms. Ho was awarded "The Outstanding Financial Executive" in1993, in view of her

outstanding contribution to Financial Management during her service at TI- Acer Inc.

Ms. Ho received her EMBA from National Taiwan University in 2003 and her B.A.

degree from National Chengchi University in 1978.

Dr. Cliff Hou

Vice President, Design and Technology Platform of TSMC

Dr. Cliff Hou is Vice President and Head of Design and Technology Platform of

TSMC. Prior to this post, he was the Senior Director of Design Technology Division

and Director of Design Methodology Division at TSMC. Dr. Hou established

TSMC’s Technology Design Kits Development Teams and Reference Flow


Development Teams. He also leads Design-for-Manufacturability (DFM) task force at

TSMC.

Dr. Hou received his B. S. degree in 1983 from National Chiao-Tung University, and

his Ph.D. degree in Electrical and Computer Engineering from Syracuse University in

1992.

Prior to joining TSMC in 1997, Dr. Hou was an Associate Professor at Kaohsiung

Polytechnic Institute in 1992, and prior to that, he worked at ITRI/CCL for front-end

design environment development and integration from 1993 to 1995 and at a local

consulting company for 0.5um and 0.35um physical verification methodology and

flow development from 1995 to 1997.

Dr. Hou has 15 U.S. patents and also serves as Technical Committee Member of

VLSI Symposium.

Mr. Benson W. C. Liu

Independent Director; Former Chairman and CEO of Bristol-Myers

Squibb (Taiwan) Ltd

Mr. Benson W.C. Liu, Independent Director, was the Chairman and General Manager

of Bristol-Myers Squibb Taiwan (BMST) from Jan.1999 through March 2005. Mr.

Liu joined BMST in 1978 as Accounting Manager and he progressed within the

Company through Finance Manager, Controller, Finance Director, VP Finance and

Administration and finally Chairman and General Manager.

Mr. Liu retired from BMST in March 2005 after 28 years of dedicated services to this

leading global Pharmaceutical and Health Care Company. Prior to joining BMST, Mr.

Liu was an auditor of Deloitte, Taiwan for 5 years. He holds a bachelor degree in

Accounting from Soochow University, a master degree in International Business

Administration from Northrop University, USA.


Mr. Liu is active in participating public services through NPO organizations like

Chinese Corporate Governance Association and Chinese Professional Manager

Association. In August 2011, He was appointed by the Board of Vanguard

International Semiconductor Corporation as a board member of Compensation

Committee during the period from September 2011 to June 2012. He was awarded

Financial Manager of the Year by the Chinese Professional Manager Association in

1985, Outstanding Alumni of the Accounting Department of Soochow University in

1986 and Financial Manager of The Year of Bristol-Myers Squibb Company

International Group in 1989.

Dr. Chein-Wei Jen

Independent Director; Former Dean of Institute of Electronics at

National Chiao Tung University, Taiwan

Dr. Chein-Wei Jen has retired from the Department of Electronics Engineering,

National Chiao Tung University, Taiwan since 2004. During his academic career he

also served as the Chairman of the Department of Electronics Engineering, from 1989

to 1991 and the Director of the Institute of Electronics from 1991 to 1994 at the same

university.

He has supervised over 25 PhD students and many Master students in the area of

System-on-Chip design, processor architecture, and multimedia signal processing.

Most of his students are now working in the academic and IC Design industry in

Taiwan. He holds seven patents and published over 50 journal papers and 100

conference papers in these areas. He has also received numerous research paper

awards and service awards from technical societies.

From 2004 to 2007 he was invited to join ITRI which is a government-sponsored

R&D organization in Taiwan and served as the Director of SoC Technology Center in

ITRI. From 2002 to 2007 he also served as one of the Coordinators of the National

SoC Program in Taiwan.

Dr. Jen received his B.S. degree from National Chiao Tung University in 1970, his


M.S. degree from Stanford University in 1977, and his Ph. D. degree from National

Chiao Tung University in 1983.

Dr. Wen-Yeu Wang

Independent Director; Ph. D., Stanford Law School, Professor of

College of Law at National Taiwan University

Dr. Wang is professor of law and director, Center for Corporate and Financial Law,

College of Law, National Taiwan University. He received law degrees from NTU,

Columbia (LL.M.) and Stanford (J.S.D.), respectively. During his tenure, he visited

and taught at well known law schools, including National University of Singapore and

PRC’s Peking University. In addition, he was a visiting professor of law at Stanford

from 1995-96, teaching a seminar on financial transactions; in fall 2007 he taught

“Corporate Governance in Greater China” seminar at Columbia. Principal research

subjects include business associations, financial regulations, and law and economics.

Before pursuing an academic career, professor Wang had practiced commercial law at

the international law firms of Lee and Li, Taipei (from 1985-1989), and Sullivan &

Cromwell, a Wall Street firm in New York City (1989-1991), respectively. Areas of

specialty include corporate law and business transactions.

From 2004 to 2006, professor Wang served as a commissioner at the Fair Trade

Commission. In addition, he has served in many important public and private

functions, i.e., as director or supervisor of the Taiwan Stock Exchange, Taiwan

Futures Exchange, and Taiwan Cooperative Bank. He also served as independent

director or reorganization supervisor for Taiwanese public companies; as arbitrators or

mediators in various commercial disputes. He has also participated in the drafting or

amendment of major economic and financial legislation, such as the Company Law

and the Securities and Exchange Law.


Dr. Chung-Yu Wu

Independent Director; Former President of National Chiao Tung

University, Taiwan

Dr. Chung-Yu Wu is Professor of Electronics Engineering Department of National

Chiao Tung University. He has served different roles at National Chiao Tung

University, including President of National Chiao Tung University, Dean of College

of Electric Engineering and Computer Science, Dean and Vice for Research and

Development, Funding Director of Division of Engineering and Applied Science,

Director of Institute of Electronics and Department of Electronics Engineering,

Chairman of Department of Electronics Engineering.

Dr. Wu received his B.S. degree from National Chiao Tung University in 1972, his

M.S. degree from National Chiao Tung University in 1976, and his Ph. D. degree

from National Chiao Tung University in 1980. He did his post-doctor research at

EECS from the University of California, Berkeley in 2002.


Management Team

Mr. JJ Lin

Executive Vice President

Mr. JJ Lin is GUC’s Executive Vice President of Operations and Marketing Division.

He joined GUC in August 2011. Prior to GUC, he served as CEO of Xintec and

VisEra Technologies Company from 2006 to 2011, and various positions at TSMC,

such as Fab 12 director.

Mr. JJ Lin received his Master of Science degree from National Tsinghua University

and his EMBA from National Taiwan University.

Mr. James Cheng

Senior Vice President

James currently serves as Senior Vice President in Sales.

Prior to joining GUC in 2003, Mr. Cheng served as Sales Deputy Director at TSMC

North America.

Mr. Cheng received his Master of Science degree in Electrical Engineering from

Columbia University, USA.

Mr. C. C. Hsieh (Note 1)

Vice President and Chief Technology Officer

C. C. served as Vice President from 2003 to 2011. Prior to joining GUC in 2003, Mr.

Hsieh served as Senior Technical Manager at TSMC.

Mr. Hsieh received his Master of Science degree in Electrical Engineering from

National Tsing Hwa University, Taiwan.

Mr. Michael Chang

Vice President

Michael currently serves as Vice President in Research & Development.

Mr. Chang possesses over twenty five years of designing ASIC and SoC experience,

and has served many key R&D positions.

Prior to joining GUC in 2006, Mr. Chang has served as Sr. Director of ASIC Design

in ESS, VP of VLSI design in Divio, and VP of R&D at Prolific Technology.

Mr. Chang received his Master of Science degree in Electrical Engineering and

Computer Science from Arizona State University, USA.


Mr. Lung Chu

Vice President

Lung currently serves as Vice President at GUC and President of GUC’s subsidiary in

China. Prior to joining GUC in 2009, Mr. Chu was the President of Cadence Asia

Pacific and Corporate VP of Cadence Design System Inc. Before Cadence, he

worked at Magma, KLA-Tencor, Avant!, General Electric, Philips Semiconductor,

Cupertino and Apple Computer in a variety of sales and senior management positions.

Mr. Chu possesses over 25 years of experience in the EDA industry.

Mr. Chu graduated from National Taiwan University with a B.S. He received his

Master of Science degree in Electrical Engineering from Case Western Reserve

University, USA. He earned his M.S. in Electrical Engineering and MBA degree from

San Jose State University.

Mr. Daniel Chien

Vice President & CFO

Daniel currently serves as Vice President and CFO at GUC.

Prior to joining GUC in 2006, Mr. Chien served as CFO in ALi Corp.

Mr. Chien received his MBA degree from the University of Texas at Arlington, USA.

Ms. Amy Yang

Accounting Deputy Director

Amy currently serves as Accounting Deputy Director at GUC.

Prior to joining GUC in 2005, Mrs. Yang served as Senior Accounting Manager in

Altek Corp.

Mrs. Yang received her Bachelor of Science degree in Accounting from Providence

University, Taiwan.

Note 1: Mr. C.C. Hsieh has been a consultant at GUC since January 1, 2012.


Statement of Internal Control System

Date: February 16, 2012

Based on the results of a thorough self-examination, GUC hereby makes the following statement with regard to the company’s internal control system in 2011:

1. GUC recognizes that the establishment, implementation and functioning of an internal control system falls onto the responsibility of the Board of

Directors and the management. Such a control system has been established

in GUC, aiming to reasonably assure the achievement of the following

objectives:

(1) operational effectiveness and efficiency including the safeguard of

profitability, performance and assets;

(2) reliable financial reporting, and

(3) compliance with applicable laws and regulations.

2. It should be noted that any internal control system has its limits, no matter how well designed. An effective internal control system serves to provide

reasonable assurance of the above-mentioned three objectives, yet the

effectiveness may be subject to changes of environment or circumstances.

To counter such limits, GUC has adopted an internal control system with

self-surveillance mechanism. Thus GUC is able to rectify as soon as a

deficiency is identified.

3. Based on the criteria set in the “Standards for Establishing an Internal Control System by Public Companies” (hereafter mentioned as

“Standards”), GUC judges the effectiveness of its internal control system

in terms of design and implementation. Taken into account the process of

management control, the Standards identify five components of a

company’s internal control system:

(1) control environment; (2) risk assessment; (3) control activities; (4)

information and communication, and (5) monitoring.

Each component has several sub-items.

4. GUC has adopted the above-mentioned criteria to evaluate the

effectiveness of its internal control system in terms of design and

implementation.

5. Based on the findings of the evaluation mentioned in the proceeding

paragraph, GUC asserts that, during the year 2011, the design and

implementation of its internal control system (including the supervision

and management of GUC subsidiaries) are effective and assure achieving

Corporate Governance


the objectives of operational effectiveness and efficiency, reliable

financial reporting and compliance with applicable laws and regulations.

6. This Statement serves as an integral part of GUC’s 2011 Annual Report

and Prospectus, and will be made public. Any falsehood, concealment or

illegality in contents made public will entail legal liability under Articles

20, 32, 171, and 174 of the Securities Exchange Law.

7. The Statement was passed by the Board of Directors’ meeting on February

16, 2012, with the consent of the nine attending Directors affirming the

contents of this Statement.

Global Unichip Corporat ion

F. C. Tseng

Chairman

Jim Lai

President


Board and Audit Committee Meeting Status

Six regular board meetings were convened in 2011. The status of attendance by board

members was as following:

Note 1: Dr. Wu was elected the independent director on June 2, 2011. From June 2

to December 31, 2011, there were three board meetings convened.

Six regular audit committee meetings were convened in 2011. The status of

attendance by committee members was as follows:

Note 2: Dr. Wu was elected the independent director on June 2, 2011. From June 2

to December 31, 2011, there were three board meetings convened.

Title Name Attendance in person By proxy Attendance rate (%)Independent

DirectorBenson Liu 6 0 100%

Independent

DirectorDr. Chein-Wei Jen 6 0 100%

Independent

DirectorDr. Wen-Yeu Wang 6 0 100%

Independent

DirectorDr. Chung-Yu Wu (Note 2) 3 0 100%

Title Name Attendance in person By proxy Attendance rate (%)

ChairmanDr. F.C. Tseng

Representative of TSMC6 0 100%

DirectorJim Lai


DirectorLora Ho


DirectorDr. Cliff Hou


Director

K.C. Shih

Representative of

Global On Investment Corp.

6 0 100%

Independent

DirectorBenson Liu 6 0 100%

Independent

DirectorDr. Chein-Wei Jen 6 0 100%

Independent

DirectorDr. Wen-Yeu Wang 6 0 100%

Independent

DirectorDr. Chung-Yu Wu (Note 1) 3 0 100%


Corporate Social Responsibility

As a world-class design and turnkey services company and a good corporate citizen, GUC has always sought to fulfill its corporate social responsibilities (CSR). This is the right thing to do because we believe our success is deeply entwined with our stewardship of the natural environment, efficient use of resources and meeting the expectations of our shareholders. We would like to share with the public our progress made in social commitment, employee health enhancement, environment protection, and our environmental awards over the past few years.

Item Implementation Status

Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies” and reasons

1. Exercising Corporate Governance

(1)The company declares its corporate social responsibility policy and examines the results of the implementation.

Even though GUC has not established Corporate Social Responsibility Best Practice Principles, GUC implements and complies with the contents of CSR Best Practice Principles.

GUC has not established Corporate Social Responsibility Best Practice Principles.

(2)The company establishes exclusively (or concurrently) dedicated units to be in charge of proposing and enforcing the corporate social responsibility policies.

More details are provided on pages 28 and 29 of 2011 Annual Report.

None.




(3)The company organizes regular training on business ethics and promotion of matters prescribed in the preceding Article for directors, supervisors and employees, and should incorporate the foregoing into its employee performance appraisal system to establish a clear and effective reward and discipline system.

GUC periodically holds seminars of corporate ethics and promotions of matters prescribed in the preceding Articles for employees. Attendance records and sheets are filed.

GUC periodically holds seminars of corporate ethics and promotions of matters prescribed in the preceding Articles for employees. GUC does not incorporate the foregoing into its employee performance appraisal system.

2. Fostering a Sustainable Environment

(1)The company endeavors to utilize all resources more efficiently and uses renewable materials which have a low impact on the environment.

GUC endeavors to utilize all resources more efficiently, implement plans for resource recycling and garbage separation, and reduce the usage of paper cups and disposable plastic tableware for environmental protection.

GUC is an IC design service company which outsources all of wafer fabrication and production to third parties. Therefore, there is no information regarding greenhouse gas emission and reduction.




(2)The company establishes proper environmental management systems based on the characteristics of their industries.

None.


(3)The company establishes dedicated units or assigns dedicated personnel for environment management to maintain the environment.

GUC assigns “Operation Support/Employee and Facilities Service Department” for environment management to maintain the environment.


(4)The company monitors the impact of climate change on its operations and should establish company strategies for energy conservation and carbon and greenhouse gas reduction.

GUC has no information regarding reducing energy consumption, CO2 emission reduction, and greenhouse gas emission reduction because GUC outsources all of wafer fabrication and production to third parties. However, as a member of the global village, GUC has internal policies regarding reducing energy consumption and CO2 emission reduction. For instance, GUC sets interior air con temperature at 26oC and installs water-saving products.





3. Preserving Public Welfare (1)The company complies with

relevant labor laws and regulations, protects the legal rights and interests of employees, and has in place appropriate management methods and procedures.

GUC complies with relevant labor laws and regulations, protects the legal rights and interests of employees, and has in place of appropriate management methods and procedures.

None

(2)The company provides safe and healthy work environments for its employees, and organizes training on safety and health for its employees on a regular basis.

GUC provides safe and healthy work environment for employees, and periodically organizes training on safety and health. More details are provided on page 29 of 2011 Annual Report and GUC’s official website.

None




(3)The company establishes and discloses policies on consumer rights and interests and provides a clear and effective procedure for accepting consumer complaints.

GUC not only establishes clear policies on consumer rights and interests, but also provides effective procedures of customer service management, accepting consumer complaints, and customer service satisfaction. GUC’s consumers and customers can directly log onto GUC Online of GUC’s official website for B2B information communication.

None

(4)The company cooperates with its suppliers to jointly foster a stronger sense of corporate social responsibility.

More details are provided on page 28 of 2011 Annual Report.

None

(5)The company, through commercial activities, non-cash property endowments, volunteer service or other free professional services, participates in community development and charities events.


None




4. Enhancing Information Disclosure

(1)The measures of disclosing relevant and reliable information relating to their corporate social responsibility.

GUC discloses its CSR information on its official website.

GUC discloses its CSR information on its official website.

(2)The company produces corporate social responsibility reports disclosing the status of their implementation of the corporate social responsibility policy.

GUC does not publish the CSR report. GUC does not publish the CSR report.

5. If the Company has established corporate social responsibility principles based on “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies”, please describe any discrepancy between the principles and their implementation:

GUC has not established corporate social responsibility principles based on “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies”. Nevertheless, GUC implements and complies with the contents of CSR Best Practice Principles.




6. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices (e.g., systems and measures that the company has adopted with respect to environmental protection, community participation, contribution to society, service to society, social and public interests, consumer rights and interests, human rights, safety and health, other corporate social responsibilities and

activities, and the status of implementation.）:


7. If the products or corporate social responsibility reports have received assurance from external institutions, they should state so below:

None.


Environmental protection

GUC believes its environmental protection should not only comply with domestic

legal requirements, but also implement governmental plans for resource recycling,

waste disposal and garbage separation. In addition, GUC reduces the usage of paper

cups and disposable plastic tableware for environmental protection and the best use of

resources. GUC has been committed to prevent pollution, ensure efficient use of

resources, prevent accidents, improve employee safety and health and protect property.

The aim is to create a work environment that upholds the well-beings of our

employees and communities.

GUC was recognized by the “Outstanding Achievement in Environmental Protection”

offered by the Hsinchu Science Park Administrations Bureau, and was certified as

“SONY Green Partner” and QC080000. Our commitments and implementations are

as follows:

1. Execute the standards of “Green Energy-saving Design” and provide

energy-saving products that comply with environmental protection regulations

and customers’ requirements.

2. Use package materials that comply with environmental protection regulations for

waste reduction and resource recycling.

3. Increase employees’ fundamental responsibility and awareness of environmental

protection, source recycling and energy saving through educational training and

propaganda.

4. Continue to execute energy-saving management and resource recycling.

5. Comply with governmental environmental protection regulations and fully assist

the authorities in carrying out environmental protection affairs.

Social Commitment

GUC’s activities of community involvement, social contribution, social work, public

welfare during the period from 1 January 2011 to the printing date of 2011 Annual

Report were as follows:

1. Encouraged GUC’s employees to donate blood.

2. Helped the blind of Hsinchu Blind Welfare Association. They offered their

professional massage therapy to GUC’s employees at favorable prices.

3. Participated in the public welfare activities hosted by Accton’s Public Welfare

House to donate Christmas gifts to the children.

4. Sponsored National Taiwan University Academic Development Foundation for its

IC-related or system-on-chip research.

5. Sponsored Taiwan Association of Cloud Computing to host its 7th Embedded

System Conference.


6. Sponsored Taiwan IC Design Society’s academic conferences.

7. Sponsored Industrial Technology Research Institute to host 2011 International

VLSI Conference.

8. Shared GUC audit committee’s experience with Taiwan Corporate Governance

Association.

Safety and Health-related Management

In terms of safety and health-related activities, GUC considers environmental

protection, safety and health agenda as important corporate cornerstone. GUC

continues to enhance quality of service and product to achieve “zero accident” and

“sustainable environmental development” and to become a world-class benchmarking

company of environmental protection, safety and health. To provide a working

environment which can improve welfare of all employees, GUC complies with

Taiwan’s related regulations and is aggressively geared to international standards,

including accident prevention, safety and health improvement for employees and

corporate asset protection. We have implemented the following policies:

1. Offer educational training programs to improve employees’ awareness of safety,

health and environmental protection issues.

2. Continue to improve environment quality to reduce risks of safety and health.

3. Map out every health enhancement plan to ensure employees’ physical and

psychological wellness.

4. Regularly conduct safety and environment educational program to increase

employees’ awareness of safety and health issues.

5. Ensure our operation and service to meet or exceed applicable regulations and

standards of environment protection, safety and health.

6. Conduct our operation in an environmentally-sound way, so as to achieve green

design and provide green products and green services.

7. Establish a safe working environment, prevent occupational injury and illness, and

keep employees healthy.

8. Stay abreast of global issues of environment protection, safety and health,

evaluate risks and take effective risk management measures.

9. Enhance employees’ awareness on issues of environment protection, safety and

health and sense of accountability for these issues, and build a friendly culture of

environment protection, safety and health.

10. Establish a green supply chain and enhance performance of environment

protection, safety and health with suppliers through experience sharing and

collaboration.

11. Aggressively communicate with shareholders, actively disclose and share


experience and information of safety and health, and encourage improvement in

the industry and society.


1. Business

1-1. Major Business

1-1.1. Main business activities of GUC:

(A) Engage in research & development, production, testing and sales of: � Embedded memory, logic, and analog components for various application ICs; � Cell libraries for various application ICs; and � EDA tools for various application ICs.

(B) Provide technological support and consulting services related to the aforementioned products.

1-1.2. Revenue mix

Unit: NT$ Thousand, except %

2010 2011 Sales breakdown

Amount % Amount %

ASIC& Wafers 7,981,521 77.71 7,322,859 80.06

NRE 1,995,122 19.42 1,629,286 17.81

Others 294,749 2.87 195,098 2.13

Total 10,271,392 100.00 9,147,243 100.00

1-1.3. Main products and services:

(A) ASIC & wafers: Provide complete services from design, wafer

manufacturing to packaging and testing.

(B) NRE (Non-Recurring Engineering): Provide circuit design cell library

and various IPs required in the process of product design; provide

circuit layouts needed for mask making; subcontract mask making,

wafer manufacturing, dicing and packaging to vendors; conduct final

testing to get prototype samples for customers.

(C) MPW (Multiple-Project Wafer): MPW integrates multiple design

projects of different customers on one single mask and by one wafer

engineer run. It is an effective and fast time-to-market chip

Operation Report


verification service with cost-sharing in masking and wafer

engineering run. Design engineers, before the phase of mass

production, are able to timely verify their prototype designs with

advanced process technologies and much lower costs.

(D) IP (Intellectual Property): These are silicon-verified reusable IC

designs with specific functions. With the rapid advancement of

semiconductor processing technologies, the design industry is

trending toward multi-functional chips and SoC (System on a Chip).

Reusable IP help customers avoid redundant designs and resources.

1-1.4. New product development plan

- To develop high-end and high-in-demand Intellectual Properties

(IPs): high speed interface like SerDes、 XAUI、PCIe、eDP、sRIO

etc and GPON/EPON、Burst CDR、DDR Memory Controller、

LVDS、Voltage Regulator、Power Management Solution、

ADC/DAC、Data Converter、Clock Generator, etc.

- To offer complete silicon IP, SOC integration and design platform

solution for applications of networking PON, mobile devices

which include smartphone and tablet PC, and digital television.

- Continue to offer high-end design and turnkey services in 90nm,

65nm, 40nm, and 28nm technologies.

1-2. Industry Brief

1-2.1. Current status of the industry and future development

GUC is the first company dedicated in developing IP and providing SoC design and turnkey services in Taiwan. The IC design industry is characterized by the miniaturization in size, cost and time-to-market. SoC (System on a Chip), which encompasses multiple and powerful functions in one single tiny chip, is certainly the future to be. The design however involves much higher complexity and difficulties, wherein the concept of piling building blocks was introduced. SIPs are just like building blocks. With access to verified and reusable SIP, engineers are able to design and develop a complete system within short timeframe.

According to industrial estimation, in the near future, more than 90% of each ten-million gate level SoC design, excluding memory, will be formed by IP. Only the design firms who are able to acquire a quantity of high-performance IP within short time frame and successfully and rapidly integrate all IP into one design system will excel. The trend has given rise to a niche division-of-work in the semiconductor supply chain, that is, the supply of professional and commercialized IP.

Another industry trend is the closer than ever collaboration between foundries and design service firms. As the logic gate counts in IC design go higher,


they require much higher precision and expertise in the wafer manufacturing process. It is therefore critical for foundries and design service firms to tie-in Cell Library and manufacturing process together at the beginning of product development. Furthermore, as the process technology approaching nanometer scale, it will also enhance tie between foundries and design service firms.

The IC design industry in Taiwan has been enjoying great opportunities. The revenue of Taiwan’s fabless IC design firms rank second in the world, only after the US. There are more than 200 fabless IC design houses in Taiwan, well supported by the most advanced technologies provided from the world’s two leading foundries, TSMC and UMC. As more and more design houses adopt high-end process technologies to heighten the performance of their design products and the complexity increased has brought about various challenges for design service providers in the fields of IP synthesis and verification, and in DFT/DFM. Furthermore, the fees for their non-recurring engineering services, companies have to focus on their core design competence. In addition, IDM ASIC customers will adopt fabless ASIC companies while more and more IDMs are going fab-lite and the system companies’ differentiation is becoming a trend, those are design services providers committed to find commercial opportunities from these in the future.

1-2.2. The supply chain of Taiwan semiconductor industry

The top-down supply chain of Taiwan’s semiconductor industry is divided into design, wafer manufacturing, packaging and testing. Since 1980s, the semiconductor industry in Taiwan has been led by foundry business, followed by packaging and testing, then design service. The pie was changed since 1997 when the revenues from IC design services surpassed those from packaging and testing business, making design sector as significant as foundries and packing/testing in Taiwan.

The division-of-labor of Taiwan semiconductor industry (up, mid-down stream):

IC designIC

manufacturingSubstrate Lead frame

IC packaging

IC testingChemical

Materials

IC design services

(IPs ; EDA tools)

: core industry

: related industry

Up stream Mid stream Down stream


1-2.3. Product development trend and competition

IC design used to be a simple task without the application of complex design methodologies. The picture has been changed along with the industry trending toward miniaturization and the convergence of system on a chip (SoC). To cope with the development of the technology changes, it is important for design service providers to exercise internal Design Reuse and apply abundant external IP to develop SoC.

Thanks to the semiconductor cluster in Taiwan with thorough supply chain of booming IC design houses, foundries, and packaging and testing support, design service providers have expanded significantly, with a current number of more than 20 in Taiwan. As most Taiwanese IC design companies have alliance either with TSMC or with UMC, accordingly design service providers belong to either one of the two groups. There are also some services providers choose to work with Korean wafer foundries or with the newly arisen foundries in China.

Along with the global IC projects migrate from 65nm to 40nm or even more advanced process technologies, wafer foundries must place significant emphasis on design services which have evolved from purely providing placement & routing toward executing register transfer level (RTL) and developing synthesis. That trend signals closer collaboration between foundries and design service providers. In the future, it will be the service providers who have the know-how and capabilities to develop IP platform for SoC applications and to synthesize process services, to stand out competition and take the lead.

1-3. Technological Research and Development

1-3.1. R&D expenditures

Unit: NT$ Thousand

1-3.2. Latest technologies and new products

2011 � Achieved 1st silicon success in developing high technical barrier 10G

KR IP in 40nm for 10G EPON and GPON market.

� Achieved key IPs- DDR2/ DDR3/LPDDR PHY and controller,

SATA2/3 PHY, USB3.0 controller, miniLVDS and LVDS. Achieved

1st silicon success and compliance logos for SATA2/3 PHY and USB3.0

controller. Customers have adopted them smoothly into HDTV and

various SoC products.

� Achieved 1st silicon success in developing ADC and DAC IPs in 40nm

for smart phone. Customers have adopted them into LTE/GSM cell

Year

Item 2011

R&D expenditures 814,985


phone product.

� Successfully developed 40-nanometer thermal sensor IP for DVFS

function (Dynamic Voltage Frequency Scaling) of smartphone

application processors.

� Successfully developed 1.2 GHz in 40LP and 28HPM high speed ARM

Cortex-A9 dual cores for smartphone and tablet PC applications.

� Successfully developed and applied advanced 40nm on-chip memory

BIST (Built-in Self Test) and repair design flow to customer’s high-end

digital TV SoC project.

� Successfully developed and offered Integrated Passive Device (IPD)

service to effectively enhance miniaturization of WiFi module in mobile

application.

� Successfully completed advanced 28-nanometer technology test chip

tape-out for a customer.

1-4. Long Term and Short Term Business Development Plan

1-4.1 Short-term

(A) Develop world-class flagship customers via GUC’s Europe, US,

China, Korea and Japan offices advantaged by geographical

proximity.

(B) Provide multiple platforms and total solutions to different

applications and markets to shorten customers’ time to market.

(C) Promote advanced technology MPW projects to lower customers’

risk.

(D) Raise entry barriers by developing advanced know-how and

product differentiation. Provide support services for the advanced

minus 90nm, 65nm, 40nm and 28nm below process technologies.

(E) Continuously provide quality service to existing customers to retain

long term collaboration.

(F) Enhance cooperation with upstream and downstream partners.

(G) Provide complete IP solutions and SoC development according to

product applications.

(H) Carry out one-stop shopping strategy and provide full services to

end customers.

1-4.1 Long-term


(A) Establish offices in global market to promote brand name and

worldwide market share.

(B) Enhance new business opportunities when more and more IDMs

are going fab-lite.

(C) Differentiate ourselves from competitors by providing high

value-added IP.

(D) Develop leading-edge process flow and products via closer

cooperation with foundries.

(E) Focus on core technologies and seek technological cooperation

with domestic and foreign system integrators.

(F) Strengthen strategic alliance and cooperation with IP suppliers.

(G) Strengthen frontend SoC design capability and develop all kinds of

application platform structures.

(H) Continue to fortify cooperation with upstream and downstream

vendors.

2. Market and Sales Distribution

2-1. Market Analysis

2-1.1 Sales by region:

Unit: NT$ Thousand

Year 2010 2011

Region Sales Amount Percentage (%) Sales Amount Percentage (%)

Asia 6,457,275 62.87 4,477,312 48.95

North America 1,670,073 16.26 1,077,189 11.77

Europe 820,583 7.99 706,785 7.73

Taiwan 1,323,461 12.88 2,885,957 31.55

Total 10,271,392 100.00 9,147,243 100.00 * : Sales information is based on the amounts billed to customers in the corresponding region.

2-1.2 Market share and growth potential

(A) Market share

Currently there are around 10 design service firms in Taiwan, creating a


total revenue of NT$19.6 billion in 2011. With a revenue of NT$9.147 billion in

2011, GUC had a market share of 47%.

(B) Future market supply and demand situation

According to forecasts made by Gartner, global semiconductor industry will

keep growing in the near future and estimated worldwide semiconductor revenue

may reach US$316 billion. In 2011, the total IC industry revenue of Taiwan

amounted to NT$1,563 billion, indicating a 11.7% decline over the previous year.

The IC design alone declined about 15.2 % as well. In terms of sales growth,

Asia Pacific area will remain as the region of the fastest growth.

Figures of 2011 Taiwan IC Industry Revenue (table 1)

Unit: NT$ 100 Million

2008 2009 2010 2010

Growth

Rate

2011 2011

Growth

Rate

2012

(e)

IC Industry

Total Rev.

13,791 12,789 17,693 38.3% 15,627 -11.7% 16,644

IC Design 3,749 3,859 4,548 17.9% 3,856 -15.2% 4,126

IC Manufacturing 6,542 5,766 8,997 56.0% 7,867 -12.6% 8,321

Foundry 4,469 4,082 5,830 42.8% 5,729 -1.7% 6,173

IDM 2,073 1,684 3,167 88.1% 2,138 -32.5% 2,148

IC Package 2,437 2,198 2,870 30.6% 2,696 -6.1% 2,900

IC Test 1,063 966 1,278 32.3% 1,208 -5.5% 1,297

IC Product 5,822 5,543 7,715 39.2% 5,994 -22.3% 6,274

Global Semi

Growth Rate

-2.8% -9.0% 31.8% 31.8% 0.4%

Note： (e) means (estimate) Source：TSIA ；IEK(2012/03)

(C) Potential growth

With IP and SoC become the main stream in the IC design industry,

traditional IC manufacturers and designers have been constantly facing the

pressures from the gap between IC design productivity versus process

advancement and long verification time caused by increasing complexity due to

different logic and physical flow related parameter adjustment. These problems

can be overcome via partnership with design service vendors who have the

know-how of integrating different SIP. Furthermore, in an effort to improve

time-to-market efficiency and to maximize cost-saving, some large-scale IC

design firms and IDMs have turned to the option of outsourcing design services,

taking fab-less or fab-lite models. All indicate the growing demand for design

foundry service. The design service providers will play a central role in the

landscape of semiconductor supply chain.

It is foreseen that the industry will keep growth momentum. Our company


has been committed in the research and development of the design flow and

technologies in the advanced 90nm, 65nm, 40nm, and 28nm process nodes as

well as in the development and improvement of multi-media platform.

Furthermore, GUC will focus on providing more complete system application

solution for networking PON, smartphone & tablet and DTV. Besides, the

company’s another focus of research lies on the ultra-high-speed interface IP

such as SerDes, XAUI, PCIe, SATA, and eDP which are widely applied in high

value-added telecommunication equipments and will also develop 2.5D/3D/IPD

design flow and assembly & testing technology. By way of developing and

launching above-mentioned new technologies and new applications, GUC is

confident of continuing revenue growth in the year of 2012.

2-1.3. Competitiveness, strength, weaknesses and counter strategies

(A) Competitive advantages

a. Abundant experience in IP development and integration

GUC has successfully developed a series of IP in accordance with

design reuse guidelines. GUC not only licenses its self-developed IP

to IC design houses and system houses at home and abroad, but also

provide services in integrating IP into customer projects.

b. Capability to design and develop application platform

With strong design capability, GUC can independently develop fully-verified application in multimedia, Solid State Drive, surveillance and mobile TV platform on which the number of IP can be modified according to customer demand. Customers can therefore rapidly prototype their product designs and shorten the time to market. In addition, GUC has further developed an ESL certification platform, Janus I, to speed up customers’ design flow. Such platform and accompanying design capabilities are only available in few large IDM or design houses.

c. Mature and complete design and verification flow

GUC’s design and verification flow has been proven by numerous

customer projects. Such flow serves to shorten the time needed for

IC verification, hence reducing risks. Customers are able to complete

product design within the shortest timeframe.

d. Keep hold on advanced process design technology


GUC has been committed in conducting advanced process

technology projects and have has successfully completed many 90nm

and 65nm projects. This year, we are proud to get several advanced

40nm design projects and to work on 28nm advance designs together

with important clients and strategic partners. Our abundant hands-on

experiences will support and guarantee the realization of our

customers’ advanced technology projects.

e. Technology-oriented R&D team

GUC has always been putting emphasis on developing its own

technologies. Over the past years, GUC has formed an

experience-rich R&D team with reliable design resources and

know-how. Customers are well-supported by our R&D force to

develop international-standard products.

f. Complete SIP partnership

In order to increase the quantity and types of SIP available for

customers, GUC in addition to developing home-grown SIP, also

collaborates closely with leading worldwide SIP vendors such as

ARM, MIPS, Synopsys, TCI, AnalogBits, Cadence and TSMC.

GUC guarantees to provide complete IP solutions for customers’

projects.

g. Multiple service model

GUC provides one-stop shopping service to customers with thorough

SoC solutions, and supports customers from design phase to mass

production phase. GUC has built up all the important service links in

the IC manufacturing flow. Customers are free to choose different

services and deliveries based on their technology capacity and needs.

h. Providing IP trading service through IP Mall

GUC offers a IP trading platform for our IP providers and users.

Customers therefore have accesses to information and services of

certain IP, as well as the verification information and quality

assurance of these IPs through a single contact window.

(B) Strength, weaknesses and counter strategy for long-term

development


a. Strength

a-1. Specialized division of work in the semiconductor industry

Taiwan’s IC industry has a unique infrastructure of vertical

disintegration, characterized by a cluster of IC design, advanced IC

foundry and back-end packaging and testing firms. The infrastructure

creates an extremely favorable environment for the development of

design services. For example, newly developed SIP can be rapidly

verified by the two world-class IC foundries to minimize failures and

risks. With the closely-tied cooperation between IC foundries and

service foundries, Taiwanese design service firms are able to offer

process-verified SIP to foreign customers who are accordingly very

likely to become the clients of the two IC foundries in Taiwan.

Taiwan has a good chance to become the international ISP trading

center.

a-2. Abundant IC design companies and downstream system

companies

There are a huge number of Taiwanese system manufacturers

engaged in ICT applications and consumer electronics. Whether these

system manufacturers are OEM vendors or own brand-name

developers, their systems in line with technology trend require

multiple and powerful functions integrated on one single chip. The

cooperation between design service firms and system integrators

plays a critical role in enhancing Taiwan’s SoC industry.

a-3. Government support

The Taiwanese government has been actively implementing the

policy of building Taiwan into a Green Silicon Island. Plans and

measures have been taken to successfully develop the ICT-related

and semiconductor industries. These efforts have created a pool of

qualified talents and well-established infrastructure raising Taiwan’s

global competitiveness.

b. Weaknesses and counter measures

b-1. Shortage of design talents

The IC industry boom in Taiwan is challenged by short of design


talents. The costs for design service firms are very high to find,

recruit and retain qualified talents.

Counter measures:

I. Provide internal and professional external trainings to cultivate

own talents. Strengthen cooperation and exchange with leading

industrial players and the academies to sustain our technology

competitive edge.

II. Strengthen project management capability and global logistics

operation.

III. Reduce dependence on manpower by applying innovative and

automate design and production flow.

b-2. Growth prospect causes fierce competition

As design service becomes the future to be, the industry has attracted

a great deal of new entries into competition.

Counter measures:

I. Develop niche and high value-added SIP to differentiate GUC

from competitors and to avoid price-cut competition.

II. Provide special-application platform in response to

time-to-market demands.

2-2. Product Application and Production Flow

The company’s production flow includes two major steps: front-end design

service and mass production.

Step 1: The process of front end design:

Step 2: Once the sample has been verified by customer, mass production process

Product specification

evaluation and signoff

Front-end

Design service

Circuit layout and

verification

Customer design

check

Sample

manufacturing

Sample

delivery


starts:

2-3. Raw Material Supply

GUC products are mainly based on wafer supplied mainly by TSMC, the world’s

leading silicon foundry as well as GUC’s largest shareholder and long-term

strategic partner. It goes without saying that upstream supply for GUC is solid

and stable.

2-4. Major Customers Contributing More Than 10% of Gross Sales, Years

2010~2011

2-4.1. Major customers contributing more than 10% of gross sales in years 2010

and 2011

Unit: NT$ Thousand

2010 2011

No. Customer

name

Sales

amount

% of annual

total sales

Connection

with

company

Customer

name

Sales

amount

% of annual

total sales

Connection

with

company

1. M Note None M 1,718,387 19% None

2. L 2,220,248 22% None L 1,280,491 14% None

2. l 1,691,748 16% None l 1,010,158 11% None

Note: The customer’s sales amount fell below 10% of gross sales in 2010.

Wafer

manufacturing

Chip Probe IC

Packaging

IC Testing Final

Product


2-4.2. Name of suppliers taking 10% or more total purchase share in years 2010

and 2011

Unit: NT$ Thousand

2010 2011

No. Supplier

name Amount Percentage

Connection with

company

Supplier

name Amount Percentage

Connection with

company

1 TSMC 2,214,631 50.82% Parent company

of GUC TSMC 2,808,864 74.70%

TSMC , prior to

July 2011, TSMC

was a parent

company. Since

July 2011, TSMC

has no

controlling

interest in GUC

and accounts for

its investment in

GUC using the

equity method.

2

TSMC

North

America

780,070 17.90% A subsidiary of

TSMC

TSMC

North

America

473,290 12.59% A subsidiary of

TSMC

3 Smart

Modular 762,765 17.50% None

Smart

Modular Note Note Note

4 Wintec

Industries 563,013 12.92% None

Wintec

Industries Note Note Note

Note: The supplier took less than 10% of total purchase share in 2010 and 2011.

Explanation: GUC buys mainly silicon wafers and mainly from IC foundries. Smart Modular and Wintec

Industries buy memory products and supplies memory chips.


2-5. Production Output in 2010 and 2011

Units: Chip/Piece and NT$ Thousand

2010 2011 Major products

Quantity Amount Quantity Amount

ASIC & Wafers 31,322,816 5,783,349 36,939,028 4,918,166

NRE 0 1,406,289 0 1,172,914

Others 5,510 170,317 4,678 45,568

Total NA. 7,359,955 NA. 6,136,648

2-6. Sales Amount in 2010 and 2011

Units: Chip/piece and NT$ Thousand

Year 2010 2011

Domestic Sales Export Sales Domestic Sales Export Sales Sales Volume

& Value/

Major Quantity Amount Quantity Amount Quantity Amount Quantity Amount

ASIC & Wafers 5,096,119 934,289 26,035,716 7,047,232 5,487,019 2,503,273 29,200,332 4,819,586

NRE 0 299,267 0 1,695,855 0 273,810 0 1,355,476

Others 1,503 89,905 4,007 204,844 300 108,874 4,378 86,224

Total 5,097,622 1,323,461 26,039,723 8,894,931 5,487,319 2,885,957 29,204,710 6,261,286

3. GUC Worldwide Employees

Period 2010 2011 As of 02/29/2012

Managers 7 8 7 Function

Professionals 477 486 478

Total employees 484 494 485

Average age 35.96 36.18 36.31

Average years of seniority 3.36 4.19 4.35

Ph. D 4% 3% 3%

Master 64% 65% 65%

Bachelor 32% 32% 32% Education level

High School 0% 0% 0%


Consolidated Financial Highlights

- 47 -

Global Unichip Corp. and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2011 and 2010 and Independent Auditors’ Report

- - 48

REPRESENTATION LETTER The entities that are required to be included in the combined financial statements of Global Unichip

Corp. as of and for the year ended December 31, 2011, under the Criteria Governing the

Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial

Statements of Affiliated Enterprises are the same as those included in the consolidated financial

statements prepared in conformity with the revised Statement of Financial Accounting Standards

No. 7, “Consolidated Financial Statements.” In addition, the information required to be disclosed

in the combined financial statements is included in the consolidated financial statements.

Consequently, Global Unichip Corp. and Subsidiaries do not prepare a separate set of combined

financial statements.

Very truly yours, GLOBAL UNICHIP CORP. By DR. F. C. TSENG Chairman February 16, 2012

- - 49

INDEPENDENT AUDITORS’ REPORT The Board of Directors and Shareholders Global Unichip Corp. We have audited the accompanying consolidated balance sheets of Global Unichip Corp. and subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Global Unichip Corp. and subsidiaries as of December 31, 2011 and 2010, and the consolidated results of their operations and their consolidated cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China. February 16, 2012

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial

position, results of operations and cash flows in accordance with accounting principles and practices generally

accepted in the Republic of China and not those of any other jurisdiction. The standards, procedures and

practices to audit such consolidated financial statements are those generally accepted and applied in the

Republic of China.

For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements

have been translated into English from the original Chinese version prepared and used in the Republic of China.

If there is any conflict between the English version and the original Chinese version or any difference in the

interpretation of the two versions, the Chinese-language auditors’ report and consolidated financial statements

shall prevail.

- - 50

GLOBAL UNICHIP CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Par Value)

2011 2010 2011 2010

ASSETS Amount % Amount % LIABILITIES AND SHAREHOLDERS’ EQUITY Amount % Amount % CURRENT ASSETS CURRENT LIABILITIES

Cash $ 1,706,126 35 $ 870,211 19 Accounts payable $ 593,324 12 $ 492,953 11 Notes and accounts receivable (Note 2) 1,368,193 28 1,442,285 31 Payables to related parties (Note 16) 157,184 3 232,642 5 Receivables from related parties (Note 16) - - 1,792 - Income tax payable (Notes 2 and 12) 37,673 1 37,084 1 Allowance for doubtful receivables (Notes 2, 3 and 4) - - (10,163) - Accrued profit sharing to employees and bonus to Allowance for sales returns and discounts (Note 2) (585) - - - directors (Notes 2 and 10) 64,367 1 59,373 1 Other financial assets 531 - 2,323 - Payables to contractors and equipment suppliers 14,726 - 24,119 1 Inventories (Notes 2 and 5) 822,792 17 1,277,520 27 Customer advances 332,052 7 344,516 7 Deferred income tax assets (Notes 2 and 12) 24,338 - 95,215 2 Accrued expenses and other current liabilities (Note 8) 328,334 7 231,571 5 Prepaid expenses and other current assets (Note 18) 268,760 6 206,277 4

Total current liabilities 1,527,660 31 1,422,258 31 Total current assets 4,190,155 86 3,885,460 83

LONG-TERM LIABILITIES PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 6) Other long-term payables (Note 8) 29,872 1 58,854 1

Cost Buildings 242,718 5 242,718 5 OTHER LIABILITIES Machinery and equipment 19,113 - 18,160 - Accrued pension cost (Notes 2 and 9) 3,325 - 3,070 - Research and development equipment 375,672 8 389,571 8 Guarantee deposits 3,027 - 2,913 - Transportation equipment 11,376 - 9,196 - Office equipment 19,776 - 19,222 1 Total other liabilities 6,352 - 5,983 - Miscellaneous equipment 209,403 4 209,096 5

878,058 17 887,963 19 Total liabilities 1,563,884 32 1,487,095 32 Accumulated depreciation (511,328) (10) (469,380) (10) Construction in progress and prepayments for equipment 303 - - - CAPITAL STOCK - NT$10 PAR VALUE

Authorized: 150,000 thousand shares Net property, plant and equipment 367,033 7 418,583 9 Issued: 134,011 thousand shares in 2011

133,566 thousand shares in 2010 1,340,119 27 1,335,669 28 OTHER ASSETS

Deferred pension costs (Notes 2 and 9) 903 - - - CAPITAL SURPLUS (Note 10) 569,623 12 567,265 12 Assets leased to others, net (Notes 2 and 6) 176 - 180 - Refundable deposits (Note 16) 11,236 - 10,504 - RETAINED EARNINGS (Note 10) Deferred charges, net (Notes 2 and 7) 264,996 6 315,655 7 Appropriated as legal capital reserve 287,137 6 226,687 5 Deferred income tax assets (Notes 2 and 12) 30,955 1 - - Appropriated as special capital reserve 5,163 - - - Pledged time deposits (Note 17) 20,000 - 40,000 1 Unappropriated earnings 1,119,921 23 1,058,829 23

Total other assets 328,266 7 366,339 8 OTHERS (Note 2)

Cumulative translation adjustments (393) - (5,163) - Total shareholders’ equity 3,321,570 68 3,183,287 68 TOTAL $ 4,885,454 100 $ 4,670,382 100 TOTAL $ 4,885,454 100 $ 4,670,382 100 The accompanying notes are an integral part of the consolidated financial statements.

- - 51

GLOBAL UNICHIP CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Consolidated Earnings Per Share)

2011 2010

Amount % Amount % GROSS SALES (Notes 2 and 16) $ 9,175,421 $ 10,299,550 SALES RETURNS AND ALLOWANCES (Note 2) 28,178 28,158 NET SALES 9,147,243 100 10,271,392 100 COST OF SALES (Notes 5, 13 and 16) 7,241,245 79 8,278,860 81 GROSS PROFIT 1,905,998 21 1,992,532 19 OPERATING EXPENSES (Notes 13 and 16)

Sales and marketing 238,984 3 246,951 2 General and administrative 205,136 2 205,562 2 Research and development 882,019 10 955,097 9

Total operating expenses 1,326,139 15 1,407,610 13

INCOME FROM OPERATIONS 579,859 6 584,922 6 NON-OPERATING INCOME AND GAINS

Foreign exchange gain, net (Note 2) 13,430 1 - - Interest income 10,409 - 5,766 - Gain on reversal of bad debts (Note 4) 3,332 - 96,317 1 Gain on settlement and disposal of financial

instruments (Notes 2 and 15) 2,032 - 451 - Others (Notes 2 and 17) 5,671 - 23,177 -

Total non-operating income and gains 34,874 1 125,711 1

NON-OPERATING EXPENSES AND LOSSES

Loss on disposal of property, plant and equipment (Notes 2 and 6) 1,504 - - -

Foreign exchange loss, net (Note 2) - - 46,323 - Others 1,220 - 7 -

Total non-operating expenses and losses 2,724 - 46,330 -

INCOME BEFORE INCOME TAX 612,009 7 664,303 7 INCOME TAX EXPENSE (Notes 2 and 12) 84,603 1 59,802 1 NET INCOME $ 527,406 6 $ 604,501 6

(Continued)

- - 52

GLOBAL UNICHIP CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Consolidated Earnings Per Share)

2011 2010 Before

Income

Tax

After

Income

Tax

Before

Income

Tax

After

Income

Tax

CONSOLIDATED EARNINGS PER SHARE (NT$,

Note 14)

Basic earnings per share $ 4.57 $ 3.94 $ 5.01 $ 4.56 Diluted earnings per share $ 4.55 $ 3.92 $ 4.94 $ 4.49

The accompanying notes are

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