TSMC Reports 17% Sequential Increase in Fourth Quarter Revenue with EPS of NT$1.37

Hsin-Chu, Taiwan, R.O.C., January 26, 2006 -- TSMC today announced revenue of NT$81.16 billion, net income of NT$33.9 billion, and fully diluted earnings per share of NT$1.37 per share (US$0.21 per ADS unit) for the fourth quarter ended December 31, 2005.

On a sequential basis, fourth quarter results represent a 17.2% increase in revenue, and a 38.4% increase in both net income and fully diluted EPS. Year-over-year, fourth quarter revenue increased 27.1% while net income and fully diluted EPS both increased 52.8%. All figures were prepared in accordance with R.O.C. GAAP on an unconsolidated basis.

As a result of stronger than expected demand across all major product segments, fourth quarter revenue surpassed guidance. Gross margin for the fourth quarter climbed 5 percentage points to 49.1%, due to higher levels of capacity utilization and more favorable currency exchange rates. Advanced process technologies (0.13-micron and below) accounted for 49% of wafer revenues while revenues from 90-nanometer process technology alone reached 17% of the total wafer sales. Overall utilization was 104%. Operating margin jumped from 36% in third quarter to 42.2% in fourth quarter, and net margin improved to 41.8% from 35.4% quarter over quarter.

“Due primarily to continued robust demand from our customers, our fourth quarter business exceeded our previous guidance,” said Lora Ho, VP and Chief Financial Officer of TSMC. “Meanwhile, we expect our operating performance for the coming quarter to be better than the average seasonal pattern, but an anticipated depreciation of the US dollar against the NT dollar will impact our revenue by more than 4 percent,” said Ho. “Based on our current business and foreign exchange rate expectations, management’s expectations for first quarter 2006 performance are as follows”:

· Revenue to be between NT$73 billion and NT$76 billion;
· Gross profit margin to be between 46% and 48%;
· Operating profit margin to be approximately 39%.

Ho said management also expects that 2006 capital expenditure will be in the range of US$2.6 billion to US$2.8 billion.