Motorola Expands TSMC Manufacturing Ties -- Agreement signals next milestone in chipmaker’s asset-light strategy

AUSTIN, Texas – June 26, 2002 – To provide customers an assured supply of semiconductor products based on fully compatible process technologies, Motorola Inc. (NYSE:MOT) today announced a broadened agreement with foundry partner Taiwan Semiconductor Manufacturing Corporation (TSMC). The arrangement will increase Motorola’s external manufacturing over the next several years.

Based on a long foundry-partner relationship, the two companies have significantly enhanced the portfolio of products that TSMC will build for Motorola. This agreement solidifies the company’s asset-light strategy for manufacturing utilization.

"Motorola’s asset-light strategy is aimed at providing customers with embedded solutions based on leadership technologies and world-class manufacturing,” said Bill Walker, senior vice president and general manager of Motorola’s Semiconductor Products Sector. “While our recently announced partnership with STMicroelectronics, Philips and TSMC is dedicated to breakthrough technology development, this relationship guarantees us additional access to world-class external manufacturing capacity aligned with the jointly developed process technology. TSMC’s help in the rapid execution of our asset-light strategy will further enable us to meet our customers’ needs.”

For Motorola, the expanded partnership will result in a significant portion of Motorola’s outsourced semiconductor manufacturing being provided by TSMC. The agreement with TSMC enables Motorola to broaden manufacturing capability for a wide range of technologies, featuring leading-edge CMOS technology, which will be crucial to producing Motorola’s system-on-chip products for high-end applications. TSMC will manufacture products that are fully compatible with Motorola’s process technologies, and will enable Motorola to provide an assured supply to its customers.

Walker noted that this agreement helps the company provide seamless manufacturing capacity for its customers. The relationship offers Motorola an assured supply of external capacity, while reducing fixed costs and lowering the risk associated with major internal capacity expansions. In addition, it allows Motorola the flexibility to work with other foundry partners as needed.

"This agreement further extends our long-term relationship with Motorola and recognizes the value we see in our strategic IDM partners,” said TSMC President Rick Tsai. “In anticipation of this agreement, TSMC earlier this year increased its 2002 capital appropriation to US $2.5 billion for projects including expansion of 300mm manufacturing capacity at Fabs 12 and 14. The appropriation also allows us to expand the availability of leading-edge technologies. Our total manufacturing capacity is expected to nearly double to 8 million wafers by the end of 2006, allowing us to easily satisfy the immediate and future needs of Motorola and all of our foundry customers around the globe."

Aggressive partnering with joint ventures and foundries is a vital part of Motorola’s plan to focus its resources on growth of its highly demanded embedded solutions in markets where the company is positioned to excel.

Motorola began implementing its asset-light business model a year ago by reducing fixed asset expenditures through factory consolidations. The company is now executing on the second phase of its asset-light model through forming partnerships and joint ventures to minimize risk and provide the benefits of cost-sharing to acquire access to advanced research, development and future manufacturing. Motorola is focused on developing differentiating technologies that lead to exciting higher-value products, as well as licensing its intellectual property and proliferating technology for increased revenue.

Financial terms of the agreement were not disclosed by the two companies.

About Motorola

As the world's # 1 producer of embedded processors, Motorola's Semiconductor Products Sector creates DigitalDNA? system-on-chip solutions for a connected world. Our strong focus on wireless communications and networking enables customers to develop smarter, simpler, safer and synchronized products for the person, work team, home and automobile. Motorola's worldwide semiconductor sales were $4.9 billion (USD) in 2001.

Motorola, Inc. (NYSE:MOT) is a global leader in providing integrated communications solutions and embedded electronic solutions. Sales in 2001 were $30 billion.

About TSMC

TSMC is the world's largest dedicated semiconductor foundry, providing the industry's leading process technology and the foundry industry's largest portfolio of process-proven library, IP, design tools and reference flows. The company has one advanced 300mm wafer fab in production and one under construction, in addition to six eight-inch fabs and one six-inch wafer fab. TSMC also has substantial capacity commitments at two joint venture fabs (Vanguard and SSMC) and at its wholly-owned subsidiary, WaferTech. In early 2001, TSMC became the first IC manufacturer to announce a 90-nanometer technology alignment program with its customers. TSMC's corporate headquarters are in Hsin-Chu, Taiwan. For more information about TSMC please go to

Statements about the impact of the agreement between Motorola and TSMC are forward-looking statements based on current expectations and involve risks and uncertainties. Motorola wishes to caution the reader that the factors below and those on pages F-35 through F-40 of the appendix to Motorola's Proxy Statement for the 2002 annual meeting of stockholders and in its other SEC filings could cause Motorola's actual results to differ materially from those stated in the forward-looking statements. These factors include:(i) a change in demand for semiconductor products, which affects Motorola's manufacturing requirements;(ii) the potential for unanticipated results under the agreement;(iii) the level of the two companies’ success at developing process technology; and (iv) the overall success of Motorola's asset-light strategy.