Faraday Reports 2004 Third Quarter Results: 10% Increase in Sequential Operating Income; Growth Expected to Continue

Third Quarter 2004 Highlights [1] :    

• Quarter-over-quarter revenue increased 5.9% to NT$1,324 million (US$39 million)
• Quarter-over-quarter operating income increased 10.0% to NT$331 million (US$10 million)
• Net income of NT$371 million (US$11 million)
• EPS of NT$1.44

Hsinchu, Taiwan, ROC – Oct. 26, 2004 – Faraday Technology Corporation ( TSE: 3035) (“Faraday” or “the Company”), a leading fabless ASIC and IP provider, today announced its unconsolidated operating results for the third quarter of 2004.

“We are pleased to report higher profitability in the third quarter. During the quarter, Faraday experienced a steady increase in customer IC demand, driven by consumer applications as well as the Video/Display sector. Demand for flash-based storage chip recovered strongly late in the third quarter. For the remainder of the year, we expect storage applications to be the strongest performing segment. The Video/Display is expected to grow steadily owing to the momentum carried over from Q3. With strong growth ahead, our customers, shareholders, partners, and employees will all benefit from it, “ said Faraday President H.P. Lin.

H. P. Lin continued, “We are also working to accelerate our investment in the 130nm and below IP portfolio. Faraday is the only company in the world that is simultaneously developing deep-submicron IP technology and ASIC service infrastructure. The third quarter has been monumental in that we have launched our platform SoC/IP solutions in the area of networking, multimedia and wireless LAN.”

Faraday's SoC platform solution is based on our proprietary ARM-certified embedded 32-bit RISC CPU with metal programmable cell array technology as its backbone, which enables our customers to quickly produce their desired end products at drastically reduced manufacturing cost and design cycle.

“To date, we have already successfully developed platform chips in the networking and the multimedia arena. We are now developing, on behalf of our customers, platform chips in the area of surveillance cameras, VoIP phones, and portable audio/video players,” said H. P. Lin, “To maintain our leadership position and to demonstrate our commitment to cutting edge IC designs, Faraday will further strengthen its research and development of deep sub-micron SoC technologies and assure the availability of a complete portfolio of relevant IPs for integration in our customers' designs,”added by H. P. Lin.

[1] Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with ROC GAAP, which differ in some material respects from generally accepted accounting principles in the United States . They are unaudited , unconsolidated , and represent comparisons among the three-month period ending September 3 0 , 200 4 , the three-month period ending June 3 0 , 200 4, and the equivalent three-month period that ended September 3 0 , 200 3 . For all 3 Q0 4 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. dollars at the exchange rate of NT$ 34.00 to one U . S . dollar.

Cash and cash equivalents decreased by NT$393 million to NT$1,668 million due to cash outflow for dividends from the resolution of shareholders' meeting. Notes & accounts receivables increased by NT$52 million to NT$1,004 million. On a sequential basis, days sales outstanding [2] increased to 71 days, and average inventory turnover increased to 45 days.

Total debt decreased by NT$475 million to NT$1,160 million in 3Q04. The decrease was primarily due to the repayment of short-term loans. As a result, debt to equity ratio decreased to 28.6%.

Please visit Faraday's Web site ( http://www.faraday-tech.com ) for details about these and other announcements.

 <>Third Quarter of 2004 Outlook & Guidance >

[Region Distribution]

It is likely to revert back to the Q2 ratio with Taiwan at slight advantage due to increasing demand on the flash-based storage market segment.

Europe and Korea is expected to experience a slight increase in revenue due to the new IC production in the Video/Display applications.

China will also grow in revenue due to the new IC production on MP3 applications in consumer market segment.

[Technology Process Distribution]

0.25um and 0.35um is still the dominant revenue generator, however, we are also expecting a small increase in the.0.18µm production.

[Application Distribution ]

We are expecting to see a strong 4 th Quarter in the flash-base storage IC production, primarily due to the strong demand on the flash controller chips from our customers, taking the advantage of the recent lower flash cost.

Video/Display revenue is expected to grow in the steady pace mainly because of the improved production demand from Korea and Europe regions.

[ Profitability ]

Gross margin remains stable.

About Faraday Technology Corporation

Faraday Technology Corporation is a leading silicon IP and fabless ASIC vendor. The company's broad IP portfolio includes 32-bit RISC CPUs, DSPs, PHY/Controllers for USB 2.0, Ethernet, and Serial ATA. With more than 500 employees and 2003 revenue of NT$3,767 million (US$111 million), Faraday is one of the largest fabless ASIC companies in the Asia-Pacific region, and it also has a significant presence in other markets, world-wide. Headquartered in Taiwan , Faraday has service and support offices around the world, including the U.S. , Japan , Europe, and China . For more information, please visit: http://www.faraday-tech.com

The financial statements included in this release were unaudited and unconsolidated, and prepared and published in accordance with ROC GAAP. Investors are cautioned that there are many differences between ROC GAAP and U.S. GAAP.

The forward-looking statements in this release reflect the current belief of Faraday as of the date of this release and Faraday undertakes no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such date.

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