TSMC and TASMC Announce Intent to Merge; Combination to Enable Improved Manufacturing Efficiencies, Increased Foundry Capacity and Greater Focus on Core Competencies

Business Wire, Dec 30, 1999

Business Editors, High-Tech Writers

HSIN-CHU, Taiwan--(BUSINESS WIRE)--Dec. 30, 1999

Taiwan Semiconductor Manufacturing Company (TSMC)(NYSE:TSM) and TSMC-Acer Manufacturing Corporation (TASMC) today announced that they have signed an agreement to merge TASMC with and into TSMC. The consolidation date of the merger is June 30, 2000. The merger agreement was approved this morning by the boards of directors of both TSMC and TASMC. The contemplated merger shall be implemented by way of "absorption", and TSMC shall be the surviving company after the merger.

In June of 1999, TSMC acquired 30 percent of the shares of Acer Semiconductor Manufacturing, Inc. (ASMI) from the Acer Group, later renaming the facility TASMC. The Acer Group continued to be the largest and most significant shareholder in TASMC. Since June TSMC has effectively taken over management of the manufacturing facility, successfully re-engineering it into a world-class pure foundry company. These re-engineering efforts, combined with an outstanding recovery from the September 21, 1999 earthquake, have resulted in a significant manufacturing facility with excellent performance.

"TASMC has successfully re-engineered at a time when market demand for IC foundry services has dramatically increased," said Dr. Morris Chang, chairman of TSMC. "The merger of TSMC and TASMC will further improve operational efficiency through integration, enabling more timely service to our customers. In addition, the merger will further secure our leading position in the global foundry business."

"After the merger, the Acer Group will become one of the major shareholders of TSMC," Dr. Chang continued. "The Acer Group's participation within TSMC will provide stronger adhesion to the relationship between the two already close allies. Moreover, the future effects from this merger will bring positive contribution to the shareholders of TSMC and TASMC."

According to Acer Group Chairman and CEO Stan Shih, "TSMC is not only the leader in the Taiwan semiconductor industry, but also the world's largest dedicated foundry service operation. We support this merger, believing it to be in the best interests of our very supportive shareholders at the Acer Group and TASMC. In addition, this merger TSMC will result in the most reliable manufacturing service source for Acer in the future."

"The Acer Group's competitive advantages lie in its brand management strength, extensive global sales and marketing network, and system implementation and IC design," added Mr. Shih. "After the merger between TSMC and TASMC, Acer can concentrate on aggressively developing its PC, peripherals and key components business and exploring opportunities in intellectual property and digital service. Also, Acer will focus on reinforcing its IC design innovation to create new market demands for IC products. At the same time, we will work closely with TSMC to leverage each other's strengths, give mutual support, and enhance the competitiveness of both companies."

The major details of the merger agreements are as follows:

--   The consolidation date of this merger is targeted to June 30,
     2000.

--   The exchange ratio for TASMC to TSMC would be 6 to 1, and will be
     adjusted in a limited range according to TSMC's stock price.
     Should the paid-in capital of TSMC be increased during the period
     starting from the execution date of the Merger Agreement till the
     Consolidation Date due to distribution of stock dividend, the
     exchange ratios mentioned above shall be adjusted
     proportionately.

--   The Chairman of the Board, Directors and Supervisors of TSMC need
     not be reelected as a result of the merger.

TSMC senior vice president of finance Harvey Chang points out that the exchange ratio in this merger agreement is based on the net worth per share and future earning prospect of TASMC. In the meantime, in order to protect the interests of TSMC and TASMC's shareholders, this merger has employed the Collar Mechanism, which is popularly applied in many merger cases. The method includes several specified conditions in the merger agreement, and enables the exchange ratio to be adjusted according to TSMC's future stock price. The exchange ratio will be finalized by end of March 2000, before the stockholders' meetings of both companies.

According to government regulations, the merger is subject to the approval of regulatory authorities, and shall be carried out after the stockholders' meetings of both companies.

About TSMC

TSMC is the world's largest dedicated semiconductor foundry, providing the industry's leading process technology, library and IP options and other leading-edge foundry services. TSMC operates five eight-inch wafer fabs (Fab 3, 4, 5, TASMC and WaferTech), and two six-inch wafer fabs (Fabs 1 and 2). In addition, the company is ramping Fab 6, located in Tainan Taiwan, for production and has begun construction of a $1.2 billion joint venture fab with Philips Semiconductor, which is scheduled to open in Singapore in 2000. TSMC has broken ground for a new 12-inch wafer fabrication facility in Hsin-Chu and will soon break ground for fab 7 in Tainan, which will be the companies sixth eight-inch fab. In year 2000, TSMC will have the capacity for nearly 3 million 8-inch equivalent wafers. Fabrication processes offered by TSMC include CMOS logic, mixed-mode, volatile and non-volatile memory, and BiCMOS. 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.