TSMC Reports Fourth Quarter EPS of NT$1.08

Hsinchu, Taiwan, R.O.C., January 25, 2007 -- TSMC today announced consolidated revenue of NT$74.96 billion, net income of NT$27.91 billion, and diluted earnings per share of NT$1.08 (US$0.16 per ADS unit) for the fourth quarter ended December 31, 2006.

Year-over-year, fourth quarter revenue decreased 5.4% while net income and diluted EPS decreased 17.7% and 17.8%, respectively. On a sequential basis, fourth quarter results represent a 9.1% decrease in revenue, and a decrease of 14.1% both in net income and in diluted EPS. All figures were prepared in accordance with R.O.C. GAAP on a consolidated basis.

Fourth quarter business was affected by inventory correction, and revenue came to the mid point of the guidance. Advanced process technologies (0.13-micron and below) accounted for 48% of wafer revenues with 90-nanometer process technology accounting for 22% and 65-nanometer approaching 1% of total wafer sales. Gross margin of 46% reached the mid point of the guidance, while operating margin of 36.6% was close to the high end of guidance. Net margin decreased 2.2 percentage points to 37.2% from the previous quarter.

“The current inventory correction which started in the third quarter of last year is expected to continue through the first quarter of 2007, but we expect the overall demand of our business to begin to recover by the end of first quarter,” said Lora Ho, VP and Chief Financial Officer of TSMC. “Relative to the fourth quarter, the wireless communication segment appears to experience a more severe decline than the consumer and computer segments in the first quarter,” said Ho. “Based on our current business outlook, management’s expectations for first quarter 2007 performance are as follows”:

· Revenue to be between NT$62 billion and NT$64 billion;
· Gross profit margin to be between 37% and 39%;
· Operating profit margin to be between 26% and 28%.

Ho said management also expects that 2007 capital expenditure will be in the range of US$2.6 billion to US$2.8 billion.