Chartered Reports Results for Third Quarter 2009

Chartered Semiconductor Manufacturing Ltd. (Nasdaq:CHRT)(SGX-ST:CHARTEREDSC), one of the world’s top dedicated semiconductor foundries, today announced its results for third quarter 2009.

"Chartered revenues and revenues including our share of SMP were up approximately 19 percent in third quarter 2009 compared to the previous quarter. Revenues from 65-nanometer (nm) and below technologies, including those from 45nm, grew around 27 percent and accounted for approximately 31 percent of our total business base revenues. We ended the quarter with a net loss attributable to Chartered of $4.7 million, including transaction costs of $8.4 million relating to the proposed acquisition of Chartered by Advanced Technology Investment Company (ATIC) of Abu Dhabi, which is a substantial improvement of approximately $35 million over the prior quarter,” said George Thomas, senior vice president and CFO of Chartered.

Summary of Third Quarter 2009 Performance

• Revenues were $415.2 million in third quarter 2009, down 10.4 percent from $463.7 million in third quarter 2008. Revenues including Chartered’s share of SMP were $439.8 million, down 9.7 percent from $487.2 million in the year-ago quarter, primarily due to a decline in semiconductor demand across all sectors. Sequentially, revenues were up 19.0 percent compared to $349.0 million in second quarter 2009. Revenues including Chartered’s share of SMP were up 19.2 percent from $368.8 million in second quarter 2009, primarily due to strength in the communications sector and to a lesser extent the computer sector.
• Gross profit was $88.0 million, or 21.2 percent of revenues, compared to a gross profit of $65.6 million, or 14.1 percent of revenues in the year-ago quarter. The increase was primarily due to a favorable product mix arising from higher shipments of certain advanced technologies and lower cost per wafer resulting from higher production volumes in these advanced technologies over which fixed costs are allocated, partially offset by lower selling prices. The fixed costs in third quarter 2009 included the impact of an upward revision of projected useful lives and a corresponding elimination of projected residual values for 12-inch process equipment used for leading-edge technologies. This upward revision of projected useful lives and elimination of projected residual values, which was made in fourth quarter 2008, resulted in a favorable impact of $27.1 million for third quarter 2009. Gross profit in third quarter 2009 also included an income of $8.9 million relating to unfulfilled purchase obligations from a customer. Compared to the previous quarter, gross profit was up from $30.9 million, or 8.9 percent, primarily due to higher revenues resulting from higher shipments and lower cost per wafer resulting from higher production volumes over which fixed costs are allocated, partially offset by lower selling prices.
• Research and development (R&D) expenses were $43.9 million, a decrease of 0.7 percent from $44.2 million in the year-ago quarter, primarily due to lower depreciation on R&D equipment and lower payroll-related expenses, partially offset by lower reimbursement of expenses from grants and higher cost of development activities related to the advanced 32nm and 28nm technologies. Compared to the previous quarter, R&D expenses were down 4.2 percent from $45.8 million in second quarter 2009, primarily due to lower depreciation on R&D equipment.
• Sales and marketing expenses were $14.9 million, down 23.5 percent compared to $19.5 million in the year-ago quarter, primarily due to lower Electronic Design Automation (EDA) expenses, lower financial support for pre-contract customer design validation activities and lower payroll-related expenses. Compared to the previous quarter, sales and marketing expenses were up 9.4 percent from $13.6 million, primarily due to higher financial support for pre-contract customer design validation activities, partially offset by lower payroll-related expenses.
• General and administrative (G&A) expenses were $18.5 million, up 65.1 percent compared to $11.2 million in the year-ago quarter and up 76.3 percent from $10.5 million in second quarter 2009, primarily due to investment banking and legal fees and other expenses amounting to $8.4 million related to the proposed acquisition of Chartered by ATIC.
• Other operating expenses, net, were $6.5 million, compared to $1.4 million in the year-ago quarter and $5.6 million in the previous quarter. Other operating expenses, net, included an accounting charge of $3.2 million relating to a write-off of guaranteed capacity in a vendor’s facility due to the planned closure of their facility and an exchange loss of $2.5 million in third quarter 2009.

• Equity in income of Chartered’s minority-owned joint-venture fab, SMP (Fab 5), was $8.9 million compared to equity in income of $8.7 million in the year-ago quarter and $6.7 million in the previous quarter, primarily due to higher revenues resulting from higher shipments and lower cost per wafer resulting from higher production volumes over which fixed costs are allocated, partially offset by lower selling prices.
• Net interest expense was $13.2 million, compared to $13.6 million in the year-ago quarter. Interest income in third quarter 2009 included recognition of an accelerated amount of $2.2 million in imputed interest on the deposit placed with a vendor for guaranteed capacity in the vendor's facility. Due to the planned closure of their facility, the deposit is expected to be repayable by the vendor in January 2010. The decline in net interest expense in third quarter 2009 compared to the year-ago quarter was primarily due to lower interest expense arising from lower interest rates and higher interest income, partially offset by lower interest capitalization associated with the ramp of Fab 7. Compared to the previous quarter, net interest expense was down 5.5 percent from $14.0 million, primarily due to higher interest income and lower interest expense arising from lower interest rates and lower outstanding debt, partially offset by lower interest capitalization associated with the ramp of Fab 7.

• The net profit of Chartered’s consolidated joint venture fab, Chartered Silicon Partners (CSP or Fab 6), was $15.0 million. As a result of the adoption of Financial Accounting Standards Board Accounting Standards Codification (ASC 810) on noncontrolling interests in consolidated financial statements with effect from January 1, 2009, a 49 percent share of CSP’s profit amounting to $7.4 million was allocated to the noncontrolling interest in CSP. No profit or loss was allocated to the noncontrolling interest in CSP in third quarter 2008. In second quarter 2009, a 49 percent share of CSP’s loss amounting to $2.1 million was allocated to the noncontrolling interest in CSP.
• Net income was $2.7 million, or 0.6 percent of revenues, compared to a net loss of $24.4 million, or negative 5.3 percent of revenues in the year-ago quarter, and a net loss of $41.5 million or negative 11.9 percent of revenues in the previous quarter. Net loss attributable to Chartered was $4.7 million in third quarter 2009.
  
  Net loss for third quarter 2008 included a tax expense of $10.8 million, which was due primarily to the provision of additional valuation allowance on a portion of existing deferred tax assets which were assessed, based on the projection of future taxable income, to be not realizable. Net loss for second quarter 2009 included a tax benefit of $8.8 million. This tax benefit arose primarily from recognition of deferred tax assets for Fab 3E’s unabsorbed wear-and-tear allowances and tax losses, which became available for carry forward upon approval from the Singapore tax authorities in second quarter 2009. This tax benefit is net of valuation allowances against a portion of the deferred tax assets that is assessed to be not realizable for offset against future taxable income. Such future taxable income is based on Chartered’s projection, which is contingent upon future market conditions.

• Basic and diluted loss per American Depositary Share (ADS) and basic and diluted loss per share in third quarter 2009 were ($0.08) and ($0.01) respectively, compared with basic and diluted loss per ADS and basic and diluted loss per share of ($0.70) and ($0.07) respectively in third quarter 2008. The basic and diluted loss per ADS and loss per share figures have been adjusted for the 27-for-10 rights offering and the 10-into-1 share consolidation which were completed during second quarter 2009.

Wafer Shipments and Average Selling Prices (eight-inch equivalent)

• Shipments in third quarter 2009 were 449.3 thousand wafers, a decrease of 12.6 percent compared to 514.3 thousand wafers in third quarter 2008. Shipments in third quarter 2009 increased by 25.2 percent compared to 358.9 thousand wafers shipped in second quarter 2009. Shipments including Chartered’s share of SMP were 482.4 thousand wafers, a decrease of 11.4 percent compared to 544.5 thousand wafers in third quarter 2008. Shipments including Chartered’s share of SMP in third quarter 2009 increased by 25.3 percent compared to 385.1 thousand wafers shipped in second quarter 2009.
• ASP was $879 per wafer in third quarter 2009, compared to $921 per wafer in second quarter 2009. ASP including Chartered’s share of SMP was $870 per wafer in third quarter 2009 compared to $910 per wafer in second quarter 2009.

Capacity and Utilization

Capacity utilization in third quarter 2009 was 75 percent compared to 85 percent in the year-ago quarter, and 60 percent in second quarter 2009. Capacity utilization is based on total shipments and total capacity, both of which include Chartered’s share of SMP.

Market Dynamics

The following business statistics tables provide information on revenues including Chartered’s share of SMP by market sector, region and technology.

Outlook

In light of the proposed acquisition by ATIC, Chartered will not be providing guidance for its fourth quarter ending December 31, 2009 and will not host a conference call or web cast. Considering that Chartered is in the midst of the acquisition, in order to be able to provide fourth quarter guidance, it would need to make several assumptions and estimates which are dependent on whether and when the acquisition will be completed. This can result in significant uncertainty while forecasting its results for the fourth quarter ending December 31, 2009.

APPENDIX A

US GAAP Reconciliation Table

In order to provide investors additional information regarding the company’s financial results as determined in accordance with US GAAP, in this report Chartered also provides information on its total business base revenues, which include the Company’s share of Silicon Manufacturing Partners ("Revenues including Chartered’s share of SMP”). SMP is a minority-owned joint-venture company and under US GAAP reporting, SMP revenues are not consolidated into Chartered’s revenues ("Revenues”). References to revenues including Chartered’s share of SMP in this report are therefore not in accordance with US GAAP. To ensure clarity, the tables below provide a reconciliation.

About Chartered

Chartered Semiconductor Manufacturing Ltd. (Nasdaq: CHRT, SGX-ST: CHARTEREDSC), one of the world’s top dedicated semiconductor foundries, offers leading-edge technologies down to 40/45 nanometer (nm), enabling today’s system-on-chip designs. The company further serves its customers’ needs through a collaborative, joint development approach on a technology roadmap that extends to 22nm. Chartered’s strategy is based on open and comprehensive design enablement solutions, manufacturing enhancement strategies, and a commitment to flexible sourcing. In Singapore, the company owns or has an interest in six fabrication facilities, including a 300mm fabrication facility and five 200mm facilities. Information about Chartered can be found at www.charteredsemi.com.

Safe Harbor Statement under the provisions of the United States Private Securities Litigation Reform Act of 1995

This news release contains forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from historical results or those anticipated. Among the factors that could cause actual results to differ materially are decreased consumer confidence, credit crisis, financial market turmoil and the deteriorating global economic conditions; changes in the demands from our customers; demand and supply outlook in the semiconductor market; competition from existing foundries and new foundry companies resulting in pricing pressures; excess inventory, life cycle, market outlook and trends for specific products; products mix; unforeseen delays, interruptions, performance level of our fabrication facilities; our progress on leading-edge products; changes in capacity plans, allocation and process technology mix; unavailability of materials, equipment, manpower and expertise; access to or delays in technological advances or our development of process technologies; the successful implementation of our partnership, technology and supply alliances (including our joint development agreements with IBM and the other joint development partners); the growth rate of fabless companies, the outsourcing strategy of integrated device manufacturers ("IDM”) and our expectation that IDMs will utilize foundry capacity more extensively. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained. In addition to the foregoing factors, a description of certain other risks and uncertainties which cause actual results to differ materially can be found in "Item 3. Key Information — D. Risk Factors" in our 2008 annual report on Form 20-F filed with the US SEC. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management's current analysis of future events. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

All currency figures stated in this report are in US dollars.

The financial statement amounts in this report are determined in accordance with US GAAP.

In order to provide investors additional information regarding the Company’s financial results as determined in accordance with US GAAP, in this report Chartered also provides information on its total business base revenues, which include the Company’s share of Silicon Manufacturing Partners ("Revenues including Chartered’s share of SMP”). Silicon Manufacturing Partners (SMP or Fab 5) is a minority-owned joint-venture company and under US GAAP reporting, SMP revenues are not consolidated into Chartered’s revenues ("Revenues”). References to revenues including Chartered’s share of SMP in this report are therefore not in accordance with US GAAP. To ensure clarity, in Appendix A of this report we have included a reconciliation table which provides comparable data based on revenues determined in accordance with US GAAP, which do not include the Company’s share of SMP.