TSMC 1999 1Q Earnings Release

Hsin-Chu, Taiwan, R. O. C., April 20th, 1999- Taiwan Semiconductor Manufacturing Company Ltd. (TAIEX: 2330, NYSE: TSM), ("TSMC" or "the Company") the world's largest dedicated semiconductor foundry company, announced today the results of its operations for the first quarter ended March 31, 1999. All figures were prepared in accordance with generally accepted accounting principles in Taiwan.

1Q99 Results: Year-over-Year Comparison

Highlights Net sales declined 20.6% to NT$12,501 million. Operating income declined 27.4% to NT$4,873 million. Net income declined 41.1% to NT$4,090 million. Diluted earnings per share declined 41.1% to NT$0.68 from NT$1.15?

Net Sales:

Net sales in 1Q99 totaled NT$12,501 million, down 20.6% compared with NT$15,736 for the same period of 1998, as a combined result of lower unit sales of 8-inch equivalent wafers and a lower average selling price (ASP). The unit sales of 8-inch equivalent wafers fell 8.8% to 319.6K units in 1Q99 from 350.5K in the same period of 1998. Pure price erosion was 18.2%, which was partially offset by favorable product mix and favorable foreign exchange rate. In US dollar terms, quarterly ASP declined 12.6% to US$1,101 per 8" equivalent wafer. The ASP in the New Taiwan dollar declined by 13.6% YoY to NT$35.9K in 1Q99. New Taiwan dollar appreciated from the weighted average rate of NT$33.00 to NT$32.58 per US dollar during this period.

Gross Margins:

The gross margin declined to 49.6% in 1Q99 compared with 52.3% in 1Q98 due to a net impact of price erosion and lower capacity utilization. Capacity utilization decreased to 88% in 1Q99 from 102% in 1Q98.

Operating Expenses:

Operating expenses in the 1Q99 declined 12.9% from the same period a year ago to NT$1,326 million due to cost control efforts. Operating expenses as percent of net sales slightly increased to 10.6% in 1Q99 from 9.7% in the same period of 1998.

Non-Operating Income/Expenses:

Net non-operating expense increased to NT$536 million in 1Q99 from NT$196 million in 1Q98. Non-operating income increased to NT$221 million in 1Q99 from NT$143 million in 1Q98 mailing due to NT$70 million increase in interest income. Non-operating expenses increased to NT$757 million in 1Q99 from NT$340 million in 1Q98 due mainly to NT$388 million charge for WafterTech!|s 85% capacity obligation. Investment loss increased to NT$226 million in 1Q99 compared to investment gain of NT$20 million in 1Q98. Loss came from WaferTech (NT$174 million), Vanguard International Semiconductor Company (NT$34 million). Consequently, the profit margin before tax declined to 32.9% in 1Q99 from 41.5% a year ago.

Net Income:

Net income tax expenses for 1Q99 was NT$22 million, down from NT$414 million of tax credit in 1Q98. Net income declined 41.1% to NT$4,090 million in 1Q99. Diluted earnings per share were NT$0.68 for 1Q99, down from NT$1.15 in the same period of 1998.

Operations Highlights

Sales to the fabless segment as percent of total sales reached 73% in 1Q99 versus 71% in 1Q98. Sales to North America regions as percent of total sales dropped to 48% versus 52% in 1Q98. Product mix in logic represented 90% vs 74% in 1Q98 of TSMC revenue, while memory represented 10% vs 26% in 1Q98. Under the new classification, revenue breakdown by end market for 1Q99 was computer 40%, communication 26%, consumer 18%, memory 12%, and industrial/others 4%. Historical annual breakdown under the new classification for 1998 was computer 38%, communication 25%, consumer 15%, memory 18%, and industrial/other 4%. Breakdown for 1997 was computer 38%, communication 21%, consumer 15%, memory 23%, and industrial/others 3%.

1Q99 Results: Sequential Comparison

Sequential recovery in order volume continued. Net sales increased 7.5% to NT$12,501 million. Operating income increased 68.5