Question-and-Answer Session
Operator
At this time we will open the floor for questions (Operator Instructions). Your first question comes from the line of Randy Abrams with Credit Suisse.
Randy Abrams - Credit Suisse
Yes, good evening guys. You cited a few factors in gross margins but wanted to understand in the quarter your revenues came in above the range. Gross margins came in at the mid point. Relative to your expectations what played out a bit differently to drive gross margins more or less in line despite slightly better revenue?
Lora Ho
It's true that our first quarter revenue has exceeded our guidance slightly while the margin remained the middle point of our guidance. One thing to note is that starting from this year, starting from last year actually; we have tried to include a consolidation report. There are a few entities, for example, the TUC and Hsin Chu (ph).
Their revenue has been growing pretty significantly in the first quarter and their gross margin has been lowered in TSMC so with the growing of the real revenue total margin for TSMC's side will be diluted slightly because of that reason. So the first quarter is mainly because of this.
Randy Abrams - Credit Suisse
Okay and turning over to SOI it came up a bit this afternoon but wanted to talk about your expectations for other applications beyond processors such as base fabs to move to SOI or do you think it's still sees a niche to existing applications?
Rick Tsai
Randy, are you asking about the microprocessors?
Randy Abrams - Credit Suisse
Yes your expectations for SOI if you think it will remain a niche or do you think it will broaden out to other applications, like there's some talk about base band graphics moving over to SOI.
Rick Tsai
Well, I believe SOI will still be mainly for microprocessors, custom design type of applications. I think people will look at that just to ensure that they are not missing something but as I also said in the afternoon, I really don't see SOI playing a key role in the lower cost of various ID integrated applications.
Randy Abrams - Credit Suisse
Okay and one final question, you've a close partnership with Vanguard. With them purchasing a second fab do you start to-- does the relationship start to change where they compete a bit more into some of the accounts or do you-- are you fully behind that and still see it as the same type of partnership?
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