1998 Second Quarter Report

Science-Based Industrial Park, Hsin-Chu, Taiwan, July 20, 1998 - Taiwan Semiconductor Manufacturing Company Ltd. (TSMC or the Company) (NYSE: TSM) announced today the results of its operations for the second quarter of 1998. Net sales for the second quarter of 1998 amounted to NT$11,601 million and net income totaled NT$3,758 million, yielding a profit margin of 32.4%.

For the six months ended June 30, 1998, net sales were NT$27,337 million and net income was NT$10,705 million. With a total of 6,047 million shares outstanding, earnings per share for the first half-year were NT$1.77.

Net sales for the 1998's second quarter declined by 26.3% from the first quarter. Mr. YC Huang, Spokesman of TSMC, pointed out that soft demand in worldwide semiconductor industry led to a 21.1% drop in unit sales of 8-inch equivalent wafers. This drop, coupled with lower average-selling-price (ASP) as a result of unfavorable product mix, accounted for the net sales decline for the second quarter. Meanwhile, gross margin in the second quarter fell to 45.3% from the first quarter's 52.3% due to the lower ASP and lower utilization rate in the second quarter. Net income in the second quarter saw a 45.9% decrease from the first quarter partly because of the investment losses at Vanguard International Semiconductor and WaferTech.

Table 1: TSMC's second quarter results
(Unit: NT$million, except for EPS)

2Q'98 Amount

1Q'98 Amount

Growth rate

2Q'97 Amount

Net sales

11,601

15,736

-26.3%

9,283

Gross profit

5,258

8,231

-36.1%

3,915

Income from operations

3,773

6,709

-43.8%

2,750

Income before tax

2,881

6,533

-55.9%

2,834

Net income

3,758

6,947