TSMC Adjusted 1996 Financial Forecasts

Science-Based Industrial Park, Hsin-Chu, Taiwan, September 26, 1996 - Taiwan Semiconductor Manufacturing Company (TSMC) today announced its re-adjusted 1996 financial forecasts. Net sales for 1996 are now estimated at NT$38.65 billion; net income will be NT$18.82 billion, and earnings per share NT$7.08.

Mr. Gary Tseng, vice-president and spokesman of TSMC, stated that in the first half of this year, TSMC performed very well both in sales and in net income. However, as the utilization rate and average selling price of TSMC products have been declining since July, management feels that the previously forecast financial targets will be difficult to achieve. TSMC has reviewed this year*s business environment and has re-adjusted its financial forecasts accordingly. Although the adjustments to the forecasts are smaller than 20% and thus no public announcement is required by the SEC, TSMC has nevertheless decided that this important information should be disclosed to the shareholders.

TSMC is the largest dedicated foundry in the world. As a result of its superior technology, quality, service, and its diversified end-product applications, the company*s production capacity was fully utilized yielding very good performance in sales and net income during the first half of this year. However, as the worldwide foundry market is increasingly over-supplied, in July and August TSMC*s utilization rate and average selling price registered slight decreases. Moreover, demand has weakened further since September. And the company anticipates that utilization rate and average selling price will continue to decline through the balance of this year.

The re-adjusted net sales forecast has been decreased by 11.4% from the previous NT$43.62 billion to NT$38.65 billion. The net income forecast has also been decreased by 16.4%, from NT$22.52 billion to NT$18.82 billion. Profit margin remains at a high level of 48.7%. Projected earnings per share have decreased from NT$8.40 to NT$7.08. According to the forecasts, net sales for the second half of this year will be NT$17.36 billion, an increase of 7.1% from last year*s second-half sales of NT$16.21 billion. While net income for the second half of this year will be NT$7.51 billion, a decrease of 15.9% from last year*s second-half net income of NT$8.93 billion.

In view of the current market situation, the company has adjusted its capacity expansion plan. The fourth quarter capacity of Fab III will be expanded from 20,000 8-inch wafers per month to 25,000 wafers per month. Fab IV will commence operation at the beginning of next year. Construction work on Fab V will be completed by the middle of next year as originally planned. Equipment installation will be scheduled according to the market conditions.