TSMC Announces 1Q03 Unconsolidated Results

TSMC's average selling price in U.S. dollars declined 7% versus 4Q02, reflecting weaker pricing power amid general market softness, partly offset by a more favorable product mix.

  (To view the ASP Trend, please go to
   http://www.tsmc.com.tw/chinese/tsmcinfo/invest_01.htm )

  Gross Profit Analysis:

Gross profit declined NT$296 million to NT$10.386 billion. Gross margin of 26.4% in the quarter was essentially flat with 26% in 4Q02, as efficiencies associated with a higher level of wafer output helped to neutralize the negative impact of lower ASPs.

If wafers manufactured by TSMC affiliates were excluded, the gross margin from TSMC's manufacturing activities (on a stand-alone basis) would have been 29% compared with 28% in the previous quarter.

  Gross Profit Analysis
   (Amount: NT$ Bn)                   1Q03     4Q02    1Q02     QoQ    YoY

   COGS                               28.9     30.5    23.8     (5%)    22%
   Depreciation                       13.7     13.3    11.9      3%     15%
   Other MFG Cost                     15.2     17.2    11.9    (12%)    28%

   Gross Profit                       10.4     10.7    12.0     (3%)  (14%)

   Gross Margin
   - TSMC+Aff                           26%      26%     34%
   - TSMC alone                         29%      28%     37%

  Utilization Rate:

TSMC revised its capacity utilization rate formula in the latest quarter to focus on the ratio of commercial wafer output to rated capacity in a given fiscal period. The revised formula excludes engineering wafer output in computing capacity utilization. The resulting utilization rate is a closer reflection of commercial activities in a given fiscal period. Based on the adjusted formula, capacity utilization of 67% in 1Q03 was 1% less than it would have been had the formula remained unchanged. The sequential improvement reflects a higher level of shipments in conjunction with a 4% reduction in overall capacity, almost entirely related to Vanguard. (See Table 2 on Page 6, "Capacity Managed by TSMC," and discussions below.)

  (To view the Utilization Rate Trend, please go to
   http://www.tsmc.com.tw/chinese/tsmcinfo/invest_02.htm )

  Operating Expenses:

Operating expenses declined 17% sequentially, largely due to lower R&D expenditures following the conclusion of various projects in the previous quarter. This was offset in part by higher SG&A expenses largely relating to adjustments in provisions for receivables.

   Operating Expenses Analysis
   (Amount: NT$ Bn)                    1Q03    4Q02    1Q02    QoQ     YoY

   Total Op. Exp.                       4.2     5.0     3.8   (17%)     9%
   Gen'l & Admin.                       1.4     1.1     1.0    26%     38%
   Selling & Mkting.                    0.3     0.2     0.3    15%    (5%)
   R & D                                2.5     3.7     2.5   (32%)   (1%)

  Non-Operating Items & Investment:

Net interest expense was little changed from the previous quarter. Other non-operating expense items were NT$0.1 billion worse than the preceding quarter due to the net unfavorable impact of several miscellaneous items, including fixed asset disposal gain/loss, capitalized interest, and royalties.

Investment losses decreased NT$646 million compared with the previous quarter, primarily reflecting better results by WaferTech and investment gains at InveStar.

  Non-Operating Items & Investment
   (Amount: NT$ Bn)                    1Q03    4Q02    1Q02    QoQ    YoY

   Net Int. Inc./(Exp.)                (0.3)   (0.3)   (0.4)    4%   (12%)

   Other Non-Ops.                      (0.2)   (0.1)    0.1   (68%)   n.m.

   Invest. Inc./(Loss)                 (1.5)   (2.2)   (0.9)  (30%)   60%
   - Wafertech*                        (0.5)   (1.0)    0.2   (52%)   n.m.
   - SSMC                              (0.3)   (0.2)   (0.4)   74%   (25%)
   - Vanguard                          (0.2)   (0.2)   (0.1)  (16%)   89%
   - Others                            (0.6)   (0.8)   (0.6)  (28%)   (9%)

  * Operation results only; does not include amortization of goodwill
    resulting from minority interest acquisition.

  Liquidity Analysis:

  TSMC's financial liquidity continues to improve.

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