Taiwan Semiconductor Reports 29% Increase in Sequential EPS Driven by 10% Higher Revenue HSIN-CHU, Taiwan, Oct. 28 /PRNewswire-FirstCall/ -- Taiwan Semiconductor Manufacturing Company, Ltd. (NYSE: TSM; TAIEX: 2330) today announced revenues of NT$54.877 billion, net income of NT$15.169 billion and fully diluted earnings per share of NT$0.75 (US$0.11 per ADS unit) for the third quarter ended September 30, 2003. On a sequential basis, third quarter results represent a 9.9% increase in revenue, a 29.3% increase in net income and a 29.5% increase in fully diluted EPS. All figures were prepared in accordance with R.O.C. GAAP on an unconsolidated basis. The increase in third quarter revenue resulted from a 12% increase in wafer shipments, a flat wafer average selling price (ASP), and a weaker U.S. dollar exchange rate. Gross Margin for the quarter improved significantly to 39.1% from 36.8% in the previous quarter due to higher utilization levels. Non-operating and Investment items also demonstrated improvement. Net Margin for the quarter improved to 27.6% from 23.5%. Lora Ho, vice president and chief financial officer, said the Company's key financial indicators -- cash flow, liquidity, and debt coverage -- remained healthy. 'Third quarter results of NT$54.9 billion in revenue marks a new record high for TSMC,' said Ho. 'For three consecutive fiscal quarters TSMC has gained solid improvements in its operating results. The third quarter marks TSMC's highest net income since first quarter of 2001. We expect the performance of the coming quarter to be in line with that of the third quarter.' Ho also confirmed that key industry drivers such as outsourcing, capital efficiency requirements, and the increased complexity of advanced integrated circuits continue to strongly favor the foundry segment in general and TSMC in particular. Ho said that, based upon the current business outlook, management's expectations for the fourth quarter performance are: -- Wafer shipments to grow by a mid to high single digit percentage point on a sequential basis; -- ASP to decline slightly; -- Revenues from advanced technologies to remain at about two-thirds of total wafer sale; -- Overall utilization rate will be about 95 percent; -- Demand to improve in the communications segment, but seasonally decline in the computer and consumer segments. Ho said management also expects 2003 capital expenditure to approach US$1.2 billion. Conference Call & Webcast Notice: TSMC's quarterly review conference call will be held at 8 A.M. Eastern Time (9 P.M. Taiwan Time) on Thursday, October 28, 2003. The conference call will also be webcasted live on the Internet. Investors wishing to access the live webcast should visit TSMC's web site at http://www.tsmc.com/ at least 15 minutes prior to the broadcast. Instructions will be provided on the web site to facilitate the downloading and installation of necessary audio applications. Investors without Internet access may listen to the conference call, listening mode only, by dialing 1-303-262-2142 in the U.S. and 852-3009-3050 in other locations (Password: TSMC). An archived version of the webcast will be available on the TSMC web site for six months following the Company's quarterly review conference call and webcast. Profile TSMC (TAIEX: 2330, NYSE: TSM) is the world's largest dedicated semiconductor foundry, providing the industry's leading manufacturing capacity, process technology, library and IP options, and other leading-edge foundry services. TSMC currently operates one twelve-inch wafer fab, five eight-inch wafer fabs and one six-inch fab. The Company also has substantial capacity commitments at a wholly owned U.S. subsidiary (WaferTech) and a joint-venture fab (SSMC). TSMC's 300mm wafer fab (Fab 12), the first of its kind in Taiwan, commenced commercial production in January 2002. TSMC's corporate headquarters are in Hsin-Chu, Taiwan. More information about TSMC is available through the World Wide Web at http://www.tsmc.com/ . Safe Harbor Notice: The statements included in this press release that are not historical in nature are "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. TSMC cautions readers that forward-looking statements are subject to significant risks and uncertainties and are based on TSMC's current expectations. Actual results may differ materially from those contained in such forward-looking statements for a variety of reasons including, among others, risks associated with cyclicality and market conditions in the semiconductor industry; demand and supply for TSMC's foundry manufacturing capacity in particular and for foundry manufacturing capacity in general; intense competition; the failure of one or more significant customers to continue to place the same level of orders with us; TSMC's ability to remain a technological leader in the semiconductor industry; TSMC's ability to manage its capacity; TSMC's ability to obtain, preserve and defend its intellectual property rights; natural disasters and other unexpected events which may disrupt production; and exchange rate fluctuations. Additional information as to these and other risk factors that may cause TSMC's actual results to differ materially from TSMC's forward-looking statements may be found in TSMC's Annual Report on Form 20-F, filed with the United States Securities and Exchange Commission (the 'SEC' ) on June 23, 2003, TSMC's registration statement on Form F-3, filed with the SEC on October 21, 2003, and such other documents as TSMC may file with, or submit to, the SEC from time to time. Operating Results Review: Summary: (Amount in NT$ Bn except for EPS) 3Q03 2Q03 3Q02 QoQ YoY EPS (NT$ per com. shr.) 0.75 0.58 0.15 29% 395% (US$ per ADR unit) 0.11 0.08 0.02 Net Sales 54.88 49.92 39.84 10% 38% Gross Profit 21.45 18.35 12.84 17% 67% Operating Expense (4.96) (5.01) (4.47) -1% 11% Non-op Exp. & Investment 0.22 (0.77) (2.34) -147% -73% Net Income 15.17 11.73 3.16 29% 380% Wafers Shipped (kpcs 8'-equiv.) 992 887 677 12% 47% Capacity Utilization 98% 88% 84% Remarks: EPS of NT$0.75 for 3Q03 presents a 29% increase compared with 2Q03. The operating results of 3Q03 are summarized below: Net sales grew 10% sequentially to NT$54.9 billion; resulting largely from higher wafer sales, as wafer shipments grew 12%, and wafer ASP remained flat. Gross profit rose 17% sequentially to NT$21.4 billion largely as a result of higher utilization, and gross margin improved to 39.1% from 36.8% in 2Q03. Operating expenses of NT$5.0 billion decreased 1% sequentially. Slightly lower selling and administrative overhead was the main reason behind the decrease. Research and development expenditures remained virtually flat at NT$3.1 billion. Net gain from non-operating items and investments amounted to NT$220 million. This represents a NT$988 million improvement on a sequential basis, mainly reflecting improved operating performance by TSMC subsidiary/affiliates, a reduction in net interest expenses, capital gains from the disposal of equities from venture capital investments, as well as the absence of any significant write-off of obsolete fixed assets as we did in 2Q03. Income before tax rose 33% sequentially to NT$16.7 billion. After NT$1.5 billion tax expense, TSMC's 3Q03 net income increased 29% to NT$15.2 billion while net margin improved to 27.6%. I. Revenue Analysis Revenue Analysis: Net sales of NT$54.9 billion was 10% higher than the NT$49.9 billion recorded in 2Q03. The growth in TSMC wafer sales was attributable to 12% higher wafer shipments, a flat average selling price in U.S. dollar terms, and was offset partially by a stronger NT dollars. Consumer and Communication applications were the principal revenue drivers in the quarter. The decrease in demand for Computer applications resulted from customers' digestion of inventory. Revenue from advanced technology wafers amounted to 66% of the Company's total wafer sales. Revenue from the 0.13um technology process increased to 19% of TSMC's wafer sales this quarter, up from 17% in 2Q03. Revenue from the Fabless and IDM segment remained unchanged from that in 2Q03, 73% and 26% respectively. In terms of geography, the revenue mix was little changed from the previous quarter. Revenue contributed by TSMC subsidiary/affiliates amounted to 11% (NT$5.763 billion) of net sales during the quarter versus 12% (NT$5.973 billion) in 2Q03. I - 1. Wafer Sales Analysis By Application 3Q03 2Q03 3Q02 Computer 36% 43% 36% Communication 36% 34% 34% Consumer 21% 16% 22% Industrial/Others 5% 5% 5% Memory 2% 2% 3% By Technology 3Q03 2Q03 3Q02 0.13um- 19% 17% 5% 0.15um 20% 21% 20% 0.18um 27% 24% 23% 0.25um 19% 20% 27% 0.35um 8% 9% 13% 0.50um+ 7% 9% 12% By Customer Type 3Q03 2Q03 3Q02 Fabless 73% 73% 64% IDM 26% 26% 35% System 1% 1% 1% By Geography 3Q03 2Q03 3Q02 North America 76% 77% 76% Asia Pacific 11% 12% 13% Europe 5% 4% 5% Japan 8% 7% 6% ASP Trend Average selling price in U.S. dollars was virtually flat compared to that of the previous quarter. The improvement in the product mix to the leading edge technologies was offset by the pricing pressure experienced at individual technology nodes. (To view the ASP Trend http://www.tsmc.com.tw/chinese/tsmcinfo/invest_01.htm ) II. Utilization & Capacity Utilization Rate: Overall capacity utilization improved to 98% in the latest quarter from 88% in the second quarter. This increase reflected the sequential business improvement experienced in the third quarter. (To view the Utilization Rate http://www.tsmc.com.tw/chinese/tsmcinfo/invest_02.htm ) Capacity: Total TSMC managed capacity in 3Q03 was 1,012k in terms of 8-inch equivalent wafers, representing a 2% sequential capacity growth. Total TSMC managed capacity is expected to grow by more than 5% to 1,067k pcs in terms of 8-inch equivalent wafers in 4Q03. The increase in capacity is mainly for advanced technologies. II - 2. Capacity FAB / (Wafer size) 3Q03(act.) 4Q03(est.) 2003(est.) Fab-2 (6")* 223 227 872 Fab-3 (8") 203 213 810 Fab-5 (8") 111 112 436 Fab-6 (8") 172 183 679 Fab-7 (8") 44 35 201 Fab-8 (8") 178 189 698 Fab-12 (12")* 28 40 108 TSMC-owned 8"-equivalent Kpcs 896 949 3,556 Wafer Tech (8") 89 89 353 VIS** (8") n.a. n.a. n.a. SSMC (8") 27 29 105 Total TSMC-Managed 8"-equivalent Kpcs 1,012 1,067 4,014 * 6"-wafer is converted into 8"-equivalent wafer by divided by 1.78; 12"-wafer by multiplying 2.25 III. Profit & Expense Analysis Gross Profit Analysis: Gross profit increased NT$3.1 billion to NT$21.4 billion. Gross margin improved to 39% from 37% in 2Q03. The increase in gross margin was primarily due to the increase in capacity utilization. Excluding wafers manufactured by TSMC affiliates, the gross margin from TSMC's manufacturing activities was 43%, up from 41% in the previous quarter. III - 1. Gross Profit Analysis (Amount: NT$ Bn) 3Q03 2Q03 3Q02 QoQ YoY COGS 33.4 31.6 27.0 6% 24% Depreciation 14.0 14.0 13.3 0% 8% Other MFG Cost 19.4 17.6 13.7 10% 19% Gross Profit 21.4 18.4 12.8 17% 12% Gross Margin - TSMC 39% 37% 32% - TSMC w/o affiliates 43% 41% 35% Operating Expenses: Operating expenses dropped 1% sequentially. General administration and selling & marketing expenses decreased 2% due to better cost control. Research and development expenditures remained virtually flat with continued development activities in 90nm and 65nm technologies and in 12-inch wafer manufacturing processes. III - 2. Operating Expense Analysis (Amount: NT$ Bn) 3Q03 2Q03 3Q02 QoQ YoY Total Op. Exp. 5.0 5.0 4.5 -1% 10% Gen'l Admin. 1.6 1.6 1.5 3% 8% Selling & Mkting 0.3 0.4 0.3 -25% 0% R & D 3.1 3.1 2.7 0% 15% Non-Operating Items & Investment: The sum of Non-operating Items and investments improved from a loss of NT$0.8 billion in 2Q03 to a gain of NT$0.3 billion in this quarter. The Non- operating losses shrank to NT$0.1 billion in the latest quarter reflecting a lower interest expense, absence of any significant write off of obsolete fixed assets, as we did in 2Q03. A gain of NT$0.4 billion was recorded from equity method investees, reflecting the general improvement of business operation at TSMC subsidiaries/affiliates, and net gains realized from disposal of equities from venture capital investments in the latest quarter. III - 3. Non-Operating Items & Investment (Amount: NT$ Bn) 3Q03 2Q03 3Q02 QoQ YoY Non-Operating Items (0.1) (1.6) (0.5) -91% -72% Net Int. Inc./(Exp.) (0.2) (0.3) (0.3) -37% -44% Other Non-Ops. 0.0 (1.3) (0.2) -102% -114% Invest. Inc./(Loss) 0.4 0.8 (1.8) -56% -120% WaferTech* 0.3 0.2 (0.3) 45% -195% SSMC 0.1 (0.2) (0.3) -147% -137% Vanguard 0.1 0.0 (0.3) 183% -133% Misc. (0.1) 0.8 (0.9) -117% -85% * Operation results only; does not include depreciation of impaired assets. IV. Financial Condition Review Liquidity Analysis: Total current assets were NT$24.2 billion higher on a sequential basis, mainly attributable to higher levels of cash and short-term investments. The Company's current ratio was 5.0x, slightly lower than the 5.1x in 2Q03. Net working capital of NT$108.0 billion was NT$19.0 billion greater than that in the second quarter, reflecting stronger operating cash flows. IV - 1. Liquidity Analysis (Amount: NT$ Bn) 3Q03 2Q03 3Q02 Cash & S-T Investments 94.4 69.6 64.5 Accounts Recivable 25.0 25.0 17.9 Inventory 11.8 11.4 13.3 Total Current Assets 135.2 111.0 100.4 Accounts Payable 27.2 22.0 32.3 Total Current Liabilities 27.2 22.0 41.3 Current Ratio (x) 5.0 5.1 2.4 Net Working Capital 108.0 89.0 59.1 Receivable/Inventory Days Trend: Turnover of receivables improved to the equivalent of 41 days revenue compared to 44 days experienced in the last quarter. The improvement was due to better management of collections during the quarter. On a year-to-date basis, inventories amounted to an equivalent of 38 days of cost-of-goods-sold, representing a slight decrease of 39 days in the previous quarter. (To view the Receivable/Inventory Days Trend http://www.tsmc.com.tw/chinese/tsmcinfo/invest_03.htm ) Debt Service: Net cash reserves (the excess of cash and equivalents over interest- bearing debt) increased significantly by NT$24.8 billion to NT$59.4 billion in 3Q03, reflecting TSMC's consistently strong operating cash flows. Total debt remained unchanged at NT$35 billion. IV - 3. Debt Service (Amount: NT$ Bn) 3Q03 2Q03 3Q02 Cash & S-T Investments 94.4 69.6 64.5 Total Debt 35.0 35.0 35.0 Net Cash Reserves 59.4 34.6 29.5 V. Cash Flow & Capex Summary of Cash Flow: During 3Q03, TSMC generated NT$33.9 billion operating cash inflow due mainly to a higher net income. Net cash used in investing activities totaled NT$17.4 billion, including acquisitions of fixed assets in the amount of NT$8.2 billion and increases in short-term investments of NT$8.6 billion. Increases in short-term investments include purchases of government bonds of NT$5.6 billion and money market funds of NT$ 3.0 billion. Net financing Uses of NT$0.4 billion reflect the return of guarantee deposits to certain customers. TSMC ended the quarter with NT$16.2 billion more cash and NT$8.6 billion more short-term investments than the previous quarter. In total, the cash & short-term investment was NT$24.8 billion higher sequentially. V - 1. Cash Flow Analysis (Amount: NT$ Bn) 3Q03 2Q03 3Q02 Net Income 15.2 11.7 3.2 Deprec. & Amort. 15.5 15.5 14.6 Other Op Sources/(Uses) 3.3 (4.1) 6.8 Total Op Sources/(Uses) 33.9 23.1 24.6 Net Investing Sources/(Uses) (17.4) (10.4) (21.4) Net Financing Sources/(Uses) (0.4) (13.7) (5.1) Net Cash Position Changes 16.2 (0.9) (1.9) Operating Cash Flow Trend: Operating cash flow of NT$33.9 billion was 47% higher than in the previous quarter, largely due to a higher net income while depreciation remained virtually flat, partially offset by a net increase in working capital. (To view the Operating Cash Flow Trend http://www.tsmc.com.tw/chinese/tsmcinfo/invest_04.htm ) Capital Spending: TSMC's capital expenditures during the quarter totaled US$238 million, 15% higher than in the previous quarter. Most of the spending was for capacity ramp-up in Fab-12. For the first nine months of the year, the capital expenditures totaled US$706 million. TSMC remains fully committed to providing capacity that meets both the fabrication and technological needs of its customers. The Company intends, however, to manage capacity in accordance with the strength of actual and sustainable demand so as to meet its return objectives for shareholders. V - 3. Capital Expenditure 3Q03 2Q03 3Q02 CapEx (NT$Bn) 8.2 7.2 19.6 CapEx (US$M) 238 206 562 2003 CapEx estimated to approach US$1.2 billion VI. Recap of Recent Important Events & Announcements -- TSMC Board Approved TSMC's Sponsorship of Secondary Offering of Up to 100 Million ADSs by Philips (10/08) -- TSMC Held its Topping Ceremony for Its Wholly Owned Fab in Shanghai, China (09/22) -- TSMC Board Approved the Compensation Committee Charter to Further Strengthen Company's Corporate Governance (09/02) -- TSMC Board of Directors Approved TSMC's 1H03 Financial Statements, and Ms. Lora Ho as Vice President and Chief Financial Officer of TSMC (09/02) Please visit TSMC's Web site ( http://www.tsmc.com/ ) for details about these and other announcements. TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD. UNCONSOLIDATED BALANCE SHEET As of September 30, 2003 and 2002 (Figures in Millions of New Taiwan Dollars (NTD) and U.S. Dollars (USD))(1) Sep. 30, 2003 ASSETS USD NTD % Cash 2,449 82,731 21.6 Short Term Investment 345 11,664 3.1 Accounts Receivable 739 24,967 6.5 Inventories 350 11,813 3.1 Other Current Assets 118 3,998 1.0 Total Current Assets 4,002 135,173 35.4 Long Term Investment 1,026 34,669 9.1 Fixed Assets 12,608 425,904 111.4 Less Accumulated Depreciation (6,916) (233,610) (61.1) Net Fixed Assets 5,693 192,294 50.3 Other Assets 594 20,055 5.2 Total Assets 11,314 382,191 100.0 LIABILITIES Accounts Payable & Accrued Liabilities 805 27,187 7.1 Current Portion of Bonds Payable 0 0 0.0 Total Current Liabilities 805 27,187 7.1 Bonds Payable 1,036 35,000 9.2 Other Long Term Liabilities 208 7,033 1.8 Total Liabilities 2,049 69,220 18.1 SHAREHOLDERS' EQUITY Capital Stock 6,000 202,666 53.0 Capital Surplus 1,683 56,847 14.9 Legal Reserve 616 20,802 5.4 Special Reserve 2 69 0.0 Retained Earnings 1,013 34,227 9.0 -Previous Year 88 2,970 0.8 -Current Year 925 31,256 8.2 Treasury Stock (49) (1,643) (0.4) Unrealized Loss on Long-term Investments (0) (2) (0.0) Cumulated Translation Adjustment 0 6 0.0 Total Equity 9,265 312,971 81.9 Total Liabilities & Shareholders' Equity 11,314 382,191 100.0 Note: (1) New Taiwan dollar amounts have been translated into U.S. dollars at the rate of NT$33.78 per U.S. dollar as of September 30, 2003. TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD. UNCONSOLIDATED BALANCE SHEET As of September 30, 2003 and 2002 (Figures in Millions of New Taiwan Dollars (NTD) and U.S. Dollars (USD)) (1) Sep. 30, 2002 ASSETS NTD % Cash 64,516 17.1 Short Term Investment 0 0.0 Accounts Receivable 17,904 4.7 Inventories 13,321 3.5 Other Current Assets 4,662 1.2 Total Current Assets 100,405 26.6 Long Term Investment 36,349 9.6 Fixed Assets 395,310 104.7 Less Accumulated Depreciation (177,805) (47.1) Net Fixed Assets 217,505 57.6 Other Assets 23,184 6.1 Total Assets 377,443 100.0 LIABILITIES Accounts Payable & Accrued Liabilities 32,347 8.6 Current Portion of Bonds Payable 9,000 2.4 Total Current Liabilities 41,347 11.0 Bonds Payable 35,000 9.3 Other Long Term Liabilities 7,488 2.0 Total Liabilities 83,835 22.2 SHAREHOLDERS' EQUITY Capital Stock 199,229 52.8 Capital Surplus 57,005 15.1 Legal Reserve 18,641 4.9 Special Reserve 0 0.0 Retained Earnings 19,598 5.2 -Previous Year 541 0.1 -Current Year 19,058 5.0 Treasury Stock (1,915) (0.5) Unrealized Loss on Long-term Investments (69) (0.0) Cumulated Translation Adjustment 1,118 0.3 Total Equity 293,607 77.8 Total Liabilities & Shareholders' Equity 377,443 100.0 Note: (1) New Taiwan dollar amounts have been translated into U.S. dollars at the rate of NT$33.78 per U.S. dollar as of September 30, 2003. TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD. UNCONSOLIDATED BALANCE SHEET As of September 30, 2003 and 2002 (Figures in Millions of New Taiwan Dollars (NTD) and U.S. Dollars (USD))(1) YoY ASSETS Move Inc(Dec)% Cash 18,214 28.2 Short Term Investment 11,664 - Accounts Receivable 7,063 39.4 Inventories (1,508) (11.3) Other Current Assets (665) (14.3) Total Current Assets 34,769 34.6 Long Term Investment (1,680) (4.6) Fixed Assets 30,594 7.7 Less Accumulated Depreciation (55,805) 31.4 Net Fixed Assets (25,212) (11.6) Other Assets (3,128) (13.5) Total Assets 4,749 1.3 LIABILITIES Accounts Payable & Accrued Liabilities (5,160) (16.0) Current Portion of Bonds Payable (9,000) (100.0) Total Current Liabilities (14,160) (34.2) Bonds Payable 0 0.0 Other Long Term Liabilities (455) (6.1) Total Liabilities (14,615) (17.4) SHAREHOLDERS' EQUITY Capital Stock 3,437 1.7 Capital Surplus (157) (0.3) Legal Reserve 2,161 11.6 Special Reserve 69 - Retained Earnings 14,628 74.6 -Previous Year 2,430 449.2 -Current Year 12,199 64.0 Treasury Stock 271 (14.2) Unrealized Loss on Long-term Investments 67 (96.5) Cumulated Translation Adjustment (1,112) (99.5) Total Equity 19,364 6.6 Total Liabilities & Shareholders' Equity 4,749 1.3 Note: (1) New Taiwan dollar amounts have been translated into U.S. dollars at the rate of NT$33.78 per U.S. dollar as of September 30, 2003. TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD. UNCONSOLIDATED INCOME STATEMENT For the three Months Ended September 30, 2003 and 2002 and June 30, 2003 (Expressed in Millions New Taiwan Dollars (NTD) and U.S. Dollars (USD)(1) Except for Per Share Amounts and Shares Outstanding) Year over Year Comparison 3Q 2003 % of 3Q 2002(2) YoY USD NTD Sales NTD Inc(Dec)% Net Sales 1,601 54,877 100.0 39,835 37.8 Cost of Sales (975) (33,430) (60.9) (27,000) 23.8 Gross Profit 626 21,447 39.1 12,835 67.1 Operating Expenses General and Administrative Expenses (47) (1,614) (2.9) (1,524) 5.9 Selling and Marketing Expenses (8) (277) (0.5) (278) (0.3) Research and Development Expenses (90) (3,068) (5.6) (2,665) 15.1 Total Operating Expenses (145) (4,960) (9.0) (4,468) 11.0 Income from Operations 481 16,487 30.0 8,367 97.0 Net Non-operating Income (Expenses) (4) (141) (0.3) (516) (72.7) Investment Gain (Loss) 11 361 0.7 (1,821) -- Income before Income Tax 488 16,708 30.4 6,030 177.1 Income Tax Credit (Expenses) (45) (1,539) (2.8) (2,870) (46.4) Net Income 443 15,169 27.6 3,160 380.0 Diluted Earnings Per Ordinary Share (3) 0.02 0.75 0.15 395.4 Earnings Per ADR (4) 0.11 3.72 0.75 Weighted Average Outstanding Shares ('M) (5) 20,227 20,221 Note: (1) New Taiwan dollars have been translated into U.S. dollars at the weighted average rate of NTD 34.27 per U.S. dollar for the third quarter of 2003. (2) Certain accounts in the financial statement for the three months ended September 30, 2002 have been reclassified to conform to the financial statements for the three months ended September 30, 2003. (3) EPS calculation is after deducting a cash dividend payment on NT$13,000 million of preferred stock paying an annual rate of 3.5% at the period from January 1 to May 29, 2003. The preferred stock was redeemed on May 29, 2003. (4) 1 ADR equals 5 ordinary shares. (5) Total weighted average outstanding shares were 20,226,848K shares for 3Q03 and 20,220,989K shares for 3Q02 after the retroactive adjustments for stock dividends and changes in treasury stocks. Similiary, adjustments were also made on total weighted average outstanding shares for 2Q03 (20,221,270K shares after adjustments). TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD. UNCONSOLIDATED INCOME STATEMENT For the three Months Ended September 30, 2003 and 2002 and June 30, 2003 (Expressed in Millions New Taiwan Dollars (NTD) and U.S. Dollars (USD)(1) Except for Per Share Amounts and Shares Outstanding) Sequential Comparison 3Q 2003 % of 2Q 2003 QoQ Inc(Dec) USD NTD Sales NTD % Net Sales 1,601 54,877 100.0 49,922 9.9 Cost of Sales (975) (33,430) (60.9) (31,571) 5.9 Gross Profit 626 21,447 39.1 18,351 16.9 Operating Expenses General and Administrative Expenses (47) (1,614) (2.9) (1,563) 3.3 Selling and Marketing Expenses (8) (277) (0.5) (371) (25.4) Research and Development Expenses (90) (3,068) (5.6) (3,077) (0.3) Total Operating Expenses (145) (4,960) (9.0) (5,011) (1.0) Income from Operations 481 16,487 30.0 13,340 23.6 Net Non-operating Income (Expenses) (4) (141) (0.3) (1,578) (91.1) Investment Gain (Loss) 11 361 0.7 810 (55.4) Income before Income Tax 488 16,708 30.4 12,572 32.9 Income Tax Credit (Expenses) (45) (1,539) (2.8) (842) 82.8 Net Income 443 15,169 27.6 11,730 29.3 Diluted Earnings Per Ordinary Share (3) 0.02 0.75 0.58 29.5 Earnings Per ADR (4) 0.11 3.72 2.87 Weighted Average Outstanding Shares ('M)(5) 20,227 20,221 Note: (1) New Taiwan dollars have been translated into U.S. dollars at the weighted average rate of NTD 34.27 per U.S. dollar for the third quarter of 2003. (2) Certain accounts in the financial statement for the three months ended September 30, 2002 have been reclassified to conform to the financial statements for the three months ended September 30, 2003. (3) EPS calculation is after deducting a cash dividend payment on NT$13,000 million of preferred stock paying an annual rate of 3.5% at the period from January 1 to May 29, 2003. The preferred stock was redeemed on May 29, 2003. (4) 1 ADR equals 5 ordinary shares. (5) Total weighted average outstanding shares were 20,226,848K shares for 3Q03 and 20,220,989K shares for 3Q02 after the retroactive adjustments for stock dividends and changes in treasury stocks. Similiary, adjustments were also made on total weighted average outstanding shares for 2Q03 (20,221,270K shares after adjustments). TAIWAN SEMICONDUCTOR MANUFACTURING CO, LTD. UNCONSOLIDATED INCOME STATEMENT For the Nine Months Ended September 30, 2003 and 2002 (Expressed in Millions New Taiwan Dollars (NTD) and U.S. Dollars (USD) (1) Except for Per Share Amounts and Shares Outstanding) 9 months ended Sep. 30 2003 2003 % of 2002 YoY USD NTD Sales NTD Inc(Dec)% Net Sales 4,170 144,125 100.0 119,807 20.3 100% Cost of Sales (2,718) (93,940) (65.2) (78,522) 19.6 -66% Gross Profit 1,452 50,184 34.8 41,285 21.6 34% Operating Expenses General and Administrative Expenses (132) (4,573) (3.2) (3,984) 14.8 -3% Selling and Marketing Expenses (27) (932) (0.6) (873) 6.8 -1% Research and Development Expenses (250) (8,657) (6.0) (7,903) 9.6 -7% Total Operating Expenses (410) (14,162) (9.8) (12,760) 11.0 -11% Income from Operations 1,042 36,022 25.0 28,525 26.3 24% Net Non-operating Expenses (64) (2,218) (1.5) (936) 137.0 -1% Investment Loss (10) (344) (0.2) (3,554) (90.3) -3% Income before Income Tax 968 33,460 23.2 24,035 39.2 20% Income Tax Credit (Expenses) (64) (2,204) (1.5) (4,977) (55.7) -4% Net Income 904 31,256 21.7 19,058 64.0 16% Diluted Earnings Per Ordinary Share (2) 0.04 1.54 0.93 Earnings Per ADR (3) 0.22 7.68 4.66 Weighted Average Outstanding Shares('M)(4) 20,227 20,221 Note: (1) New Taiwan dollars have been translated into U.S. dollars at the weighted average rate of NTD 34.56 per U.S. dollar for the nine months of 2003. (2) EPS calculation is after deducting a cash dividend payment on NT$13,000 million of preferred stock paying an annual rate of 3.5% at the period from January 1 to May 29, 2003. The preferred stock was redeemed on May 29, 2003. (3) 1 ADR equals 5 ordinary shares. (4) Total weighted average outstanding shares were 20,226,848K shares for the nine months ended September 30, 2003 and 20,220,989K shares for the nine months ended September 30, 2002 after the retroactive adjustments for stock dividends and changes in treasury stocks. TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD. UNCONSOLIDATED STATEMENT OF CASH FLOWS For the Nine Months Ended September 30, 2003 and 2002 (Figures in Million of New Taiwan Dollars (NTD) and U.S. Dollars (USD))(1) 9 MTHS 2003 9 MTHS 2002 USD NTD NTD Cash Flows from Operating Activities: Net Income 904 31,256 19,058 Depreciation & Amortization 1,339 46,291 41,541 Investment Loss Recognized by Equity Method 10 344 3,554 Loss on property, plant, equipment and idle assets 41 1,431 Loss(Gain) on sale of long-term investments (2) (66) 3 Deferred Tax on Investment Tax Credit 60 2,074 4,968 Changes in Working Capital & Others (120) (4,145) 1,245 Net Cash Provided from Operating Activities 2,233 77,185 70,368 Cash Flows from Investing Activities: Increase in Short-Term Investments (337) (11,664) Acquisition of Fixed Assets (706) (24,416) (36,581) Proceeds from Disposal of Properties 5 159 444 Decrease in Deposit out 7 256 194 Increase in Long-Term Investments (30) (1,051) (9,025) Proceeds from Sales of Long-Term Stock Investments 13 458 1 Increase in Deferred Assets (52) (1,792) (2,996) Decrease in Other assets 0 9 0 Net Cash Used in Investing Activities (1,101) (38,040) (47,963) Cash Flows from Financing Activities: Increase (Decrease) in Bonds Payable (116) (4,000) 15,000 Increase (Decrease) in Guarantee Deposits & Others (16) (556) (5,703) Decrease in Preferred shares (376) (13,000) 0 Cash Dividend - Preferred Shares (13) (455) (455) Bonus paid to Directors and Supervisors (2) (59) (134) Net Cash Provided from (Used in) Financing Activities (523) (18,070) 8,708 Net Increase (Decrease) in Cash and Cash Equivalents 610 21,075 31,113 Cash and Cash Equivalents at Beginning of Period 1,784 61,657 33,404 Cash and Cash Equivalents at End of Period 2,394 82,732 64,517 Note : New Taiwan dollar amounts have been translated into U.S. dollars at the rate of NTD34.56 per U.S. dollar, the same as the Balance Sheet Exchange Rate . DATASOURCE: Taiwan Semiconductor Manufacturing Company, Ltd. CONTACT: Julie Chan, +886-3-568-2080, or Eric Chiang, +886-3-568-2087, or Elizabeth Sun, +886-3-568-2085, , all of Investor Relations Division, TSMC Web site: http://www.tsmc.com/

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