Explainations on the Qualified Indepedent Auditors' Report of TSMC 1998 Semi-annual Financial Reports

Science-Based Industrial Park, Hsin-Chu, Taiwan, August 26, 1998 - Taiwan Semiconductor Manufacturing Company Ltd. (TAIEX:2330, NYSE: TSM), ("TSMC" or "the Company") announced today that the qualified independent auditors' report associated with the 1998 semi-annual financial statements was resulted from the investees' un-audited financial statements. Some of the Company's overseas investees are not required to have their financial statements audited by their independent auditors in the same period pursuant to related regulations.

As stated in Independent Auditors' Report of TSMC's 1998 semi-annual financial reports, the carrying value of certain long-term stock investments accounted for by the equity method as of June 30, 1998 and 1997 and their related investment income or loss for the six months then ended are based on un-audited financial statements of investees in the same period. Other than that, the financial statements present fairly the financial position of the Company.