TSMC and TASMC Announce to MergeCombination to Enable Improved Manufacturing Efficiencies, Increased Foundry Capacity and Greater Focus on Core Competencies

December 30, 1999, Hsin-chu, Taiwan - 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 targeted on 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% 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 grown at a rapid pace," 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."

Acer Group Chairman and CEO, Stan Shih states, "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, with this merger TSMC will be 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 can 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 on 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.