[UMC Letterhead]

Confidential Treatment Requested.

26 June 1996

Alliance Semiconductor Corporation
3099 N. First Street
San Jose, CA 95134
Attention: N.D. Reddy, President
fax (408) 383-4990; fon (408) 383-4900

S3 Incorporated
2770 San Thomas Expressway
Santa Clara, CA 95051
Attention: Terry Holdt, President
fax (408) 980-5445; fon (408) 980-5400

Dear Dan and Terry:

We greatly appreciated the chance to discuss with you the various
issues during our telephone conference today. On behalf of UMC and USC, I would
like to confirm the agreements we reached.

First, S3, Alliance and UMC each committed to enter binding purchase
orders with USC for wafers in their respective amounts according to the "W/O
Plan By Customer" dated June 24, 1996. For your convenience, a duplicate copy of
this wafer purchase commitment is attached.

Second, at the request of S3 and Alliance and based on the above
capacity commitments, UMC agreed to "finance" their respective final
installments under the Foundry Venture Agreement. In particular, S3 and Alliance
each confirmed that they will pay one-half of their current commitments for
receipt in Taiwan on or before July 4, 1996. This means S3 will pay NTD 700
Million; Alliance will pay NTD 450 Million. UMC will purchase the remainder of
the shares, in an amount equal to a total of NTD 2.85 Billion.

As part of this arrangement, UMC agreed to extend S3 and Alliance an
option to "repurchase" before the end of 1996, the shares involved in the
one-half reduction as described above. In particular, upon advance written
notice, S3 will have the option to purchase from UMC up to 70 Million standard
shares of USC, and Alliance will have the option to purchase from UMC up to 45
Million standard shares. As discussed, the purchase price under these options
will

be at NTD 10 per share, plus interest on the total purchase amount. This
interest will be calculated at a cumulative rate of 8.5% [CONFIDENTIAL MATERIAL
DELETED*] with interest accruing as of July 4, 1996. As agreed, UMC will keep
these options open until the end of this year, but the options will expire if
not fully exercised (including full payment for the shares involved) prior to
December 31, 1996. Alliance and S3 can exercise these options all at once, or in
installments, and thus can select their closing dates (so long as they occur
before the end of 1996) at times which they find convenient.

UMC also agreed that through the end of 1996, S3 may retain its
production capacity percentage of 31.25% and Alliance may retain its production
capacity percentage of 25%. Of course, to the extent Alliance and S3 exercise
their options in full, these capacity allocations will continue as described
under the Foundry Capacity and Foundry Venture Agreements.

We are quite pleased with the cooperation shown in these agreements,
and request that you confirm our arrangements in the space provided below. Of
course, we will forward the formal stock purchase agreements (incorporating the
changes discussed today) later this week.

Your sincerely,

/s/
Robert H.C. Tsao

Agreed on behalf of Alliance Semiconductor

/s/
N.D. Reddy, President

Agreed on behalf of S3 Incorporated:

/s/
Terry Holdt, President

* Confidential treatment requested for deleted material. All such deleted
material has been filed separately with the Commission pursuant to Rule
24b-2 promulgated under the Exchange Act ("Rule 24b-2").

DATE: 6/24/1996

W/O PLAN BY CUSTOMER

UNIT:PCS

- ------------------ ------------- ------------- ------------- -------------- ------------- ------------- -------------
Customer/ Jun Jul Aug Sep Oct Nov Dec
Mon
- ------------------ ------------- ------------- ------------- -------------- ------------- ------------- -------------

UMC
- ------------------
S3
- ------------------
ALLIANCE [CONFIDENTIAL MATERIAL DELETED*]
- ------------------
TOTAL
- ------------------
CAPACITY
- ------------------
LOADING
(%)
- ------------------ ------------- ------------- ------------- -------------- ------------- ------------- -------------
<FN>

* Confidential treatment requested for deleted material. All such deleted
material has been filed separately with the Commission pursuant to Rule
24b-2.

</FN>