TSMC Board of Directors Propose NT$5 Stock Dividend

Science-Based Industrial Park, Hsin-Chu, Taiwan, March 4, 1997 - Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) today held its first Board of Directors Meeting for 1997. At the meeting the board adopted a proposal to distribute stock dividends for this year amounting to NT$5 per share. The proposal has been slated for discussion at the shareholders meeting to be held May 13.

TSMC spokesman, Mr. Gary Tseng, outlined several important proposals and decisions made at the board meeting as follows:

Financial statements for 1996 prepared by the auditors were approved. Net sales for 1996 were NT$39.4 billion; net income was NT$19.4 billion, and earnings per share were NT$7.31. A proposal for dividend distribution of 1996 profits was adopted. After allocations are made for retained earnings and legal reserves, a stock dividend of NT$5 per share will be proposed to the shareholders. The company's financial forecasts for 1997 were approved. The goal for net sales is set at NT$35.22 billion, and the goal for net income is NT$9.14 billion. These goals are lower by 10.6% and 52.9% respectively, than figures for actual net sales and net income in 1996. Company articles will be amended to increase capital to NT$85 billion. Capital expenditure of no more than NT$330 million was allocated to conduct geographical research and layout design for Fab VI. The time and date for the 1997 regular shareholders meeting was set. The meeting will be held at 9:00 AM on May 13 (Tuesday) in the Auditorium of the Activity Center at Hsin Chu Science-Based Industrial Park. Dr. Steve D. Tso was appointed R&D vice-president of TSMC.

TSMC entered the IC foundry business ten years ago. Since then the company has become the leader of the industry, and is now the largest IC foundry company in the world. The recent intensification of competition in the IC foundry industry can be attributed in large part to TSMC's success, as new entrants into the IC foundry business vie with one another to follow in TSMC's footsteps and match its success. Although the IC industry is expected to register overall growth of 10% to 15% this year, growth of the IC foundry market is predicted to surpass that of the industry as a whole. Rapidly increasing supply will thus keep foundry prices under considerable pressure. Anticipating this pressure, TSMC has forecast a decline in sales and profit for 1997.

With more and more companies entering the IC foundry business, the market for foundry production is facing over-supply and price deterioration. Nevertheless, TSMC management considers that in the long-run there is still plenty of room for the company to grow. Mr. Gary Tseng pointed out that TSMC is currently in the leading position in the IC foundry market, and stressed that TSMC is well-prepared to adapt itself to take advantage of long-term growth in the industry. In addition to reducing manufacturing costs and controlling operating expenses to ease the pressure of falling prices, this year TSMC is working to maintain its leading position in the industry by focusing on its unique Virtual Fab strategy with the following aims and objectives: (1) expedite the development of 0.25um and 0.18um new-generation technologies; (2) continue building new fabs, maintaining a 30% annual growth in capacity in order to meet the needs of TSMC's customers; (3) establish a representative office in Japan; (4) upgrade the customer service information system. The achievement of these objectives will provide a solid base for the company's long-term development, putting TSMC in excellent position to reap great rewards when the industry surges into its next peak period.

Leadership in manufacturing technology and product quality have always been the competitive advantages of TSMC. To maintain its competitive edge in technology, the company will increase its R&D expenditures by 50% from last year's