TSMC Reports Third Quarter EPS of NT$1.26

Hsin-Chu, Taiwan, R.O.C., October 26, 2006 -- TSMC today announced consolidated revenue of NT$82.48 billion, net income of NT$32.49 billion, and diluted earnings per share of NT$1.26 (US$0.19 per ADS unit) for the third quarter ended September 30, 2006.

Year-over-year, third quarter revenue increased 17% while net income and diluted EPS increased 32.7% and 32.5%, respectively. On a sequential basis, third quarter results represent a 0.4% increase in revenue, and a decrease of 4.4% both in net income and in diluted EPS. All figures were prepared in accordance with R.O.C. GAAP on a consolidated basis.

Although third quarter business was affected by inventory correction, better than expected demand in computer related applications led to third quarter revenue surpassing the guidance slightly. Advanced process technologies (0.13-micron and below) accounted for 49% of wafer revenues while revenues from 90-nanometer process technology alone was 24% of the total wafer sales. Both gross and operating margins reached the high end of guidance with gross margin being 49.9% and operating margin 40.8%. Net margin decreased 2 percentage points to 39.4% from the previous quarter.

“The current inventory correction which started in the third quarter is expected to continue during the fourth quarter,” said Lora Ho, VP and Chief Financial Officer of TSMC. “We expect the overall demand in all three major segments to decline sequentially,” said Ho. “Based on our current business outlook, management’s expectations for fourth quarter 2006 performance are as follows”:

• Revenue to be between NT$74 billion and NT$76 billion;
• Gross profit margin to be between 45% and 47%;
• Operating profit margin to be between 35% and 37%.