TSMC Reports Second Quarter EPS of NT$1.32

HSIN-CHU, Taiwan, July 27 /PRNewswire/ --

TSMC today announced consolidated revenue of NT$82.12 billion, net income of NT$34 billion, and fully diluted earnings per share of NT$1.32 (US$0.20 per ADS unit) for the second quarter ended June 30, 2006.

Year-over-year, second quarter revenue increased 36.9% while net income and fully diluted EPS increased 85.1% and 84.8%, respectively. On a sequential basis, second quarter results represent a 5.5% increase in revenue, and a 4.3% increase in net income and in fully diluted EPS. All figures were prepared in accordance with R.O.C. GAAP on a consolidated basis.

As a result of stronger demand in certain product segments, second quarter revenue reached beyond the high end of guidance. 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. Gross margin rose from 48.5% in the previous quarter to 51.8% in the second quarter. Operating margin was 43% compared to 39.7% in the previous quarter, while net margin decreased slightly to 41.4% from 42% quarter over quarter.

"Driven primarily by sequentially stronger demand from our customers in communications and consumer segments, our second quarter business rose 5.5% amid weaker demand from our customers in the computer segment," said Lora Ho, VP and Chief Financial Officer of TSMC. "Going forward, however, we expect the overall demand in the third quarter to be level or slightly down from the second quarter, in response to the correction of inventory in the supply chain," said Ho. "Based on our current business outlook, management's expectations for third quarter 2006 performance are as follows":

-- Revenue to be between NT$79 billion and NT$82 billion; -- Gross profit margin to be between 48% and 50%; -- Operating profit margin to be between 39% and 41%.

Conference Call & Webcast Notice:

TSMC's quarterly review conference call will be held at 8 a.m. Eastern Time (8 p.m. Taiwan Time) on Thursday, July 27, 2006. The conference call will also be webcast live on the Internet. Investors wishing to access the live webcast should visit TSMC's web site at http://www.tsmc.com at least 15 minutes prior to the broadcast. Instructions will be provided on the web site to facilitate the download and installation of necessary audio applications. Investors without Internet access may listen to the conference call, in listen-only mode, by dialing +1-617-786-2963 in the U.S., +852-3002-1672 in Hong Kong, +65-6823-2164 in Singapore, and +44-207-365-8426 in the U.K. (Password: TSMC). An archived version of the webcast will be available on TSMC's web site for six months following the Company's quarterly review conference call and webcast.

Profile

TSMC (TAIEX: 2330; NYSE: TSM) is the world's largest dedicated semiconductor foundry, providing the industry's leading manufacturing capacity, process technology, library and IP options, and other leading-edge foundry services. TSMC currently operates two twelve-inch wafer fabs, five eight-inch wafer fabs and one six-inch fab. The Company also has substantial capacity commitments at two wholly owned subsidiaries, WaferTech in the U.S. and TSMC (Shanghai) Company, Ltd. in China, and at a joint-venture fab, SSMC, in Singapore. TSMC is the first foundry to run 65-nanometer customer design prototype wafers. 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 .

2Q06 Quarterly Management Report July 27, 2006 Topics in This Report -- Revenue Analysis -- Capacity -- Profit & Expense Analysis -- Financial Condition Review -- Cash Flow & CapEx -- Reconciliation of Consolidated and Unconsolidated Financial Results -- Recap of Recent Important Events & Announcements Operating Results Review Summary: (Amounts are on consolidated basis and are in NT$ billion except noted 2Q06 1Q06 4Q05 QoQ YoY otherwise) EPS (NT$ per com. shr.) 1.32 1.26 0.71 4.3% 84.8% (US$ per ADR unit) 0.20 0.20 0.11 Consolidated Net Sales 82.12 77.85 59.98 5.5% 36.9% Gross Profit 42.50 37.73 24.25 12.6% 75.2% Gross Margin 51.8% 48.5% 40.4% Operating Expense (7.18) (6.82) (7.04) 5.2% 1.9% Non-Operating Items(i) 0.95 3.62 0.69 (73.8%) 37.7% Consolidated Net Income 34.00 32.61 18.37 4.3% 85.1% Net Profit Margin 41.4% 41.9% 30.6% Wafer Shipment (kpcs 8 inch-equiv.) 1,869 1,738 1,275 7.5% 46.6% (i) Includes cumulative effects of change in accounting principle.

Remarks:

The second quarter consolidated EPS of NT$1.32 represents an 84.8% increase over the same period last year and a 4.3% sequential increase. The consolidated operating results of 2Q06 are summarized below:

Second quarter net sales increased by 36.9% year-over-year to reach NT$82.12 billion compared to NT$59.98 billion reported in 2Q05. On a sequential basis, net sales increased by 5.5% compared to NT$77.85 billion reported in the previous quarter. Growth was driven by strong demand in the consumer and communication segments.

Gross profit for 2Q06 was NT$42.5 billion, representing a year-over-year increase of 75.2% and a sequential increase of 12.6%. Gross margin rose from 48.5% in the previous quarter to 51.8% in the second quarter, an improvement of 3.3 percentage points.

Operating expenses were NT$7.18 billion or 8.8% of the net sales. The combined result from non-operating income and long-term investments was a gain of NT$0.95 billion.

Consolidated net income attributable to shareholders of the parent company was NT$34 billion, up 85.1% over the same period last year and up 4.3% sequentially. Net profit margin was 41.4%.

I. Consolidated Revenue Analysis I . Wafer Sales Analysis By Application 2Q06 1Q06 2Q05 Computer 30% 37% 38% Communication 44% 39% 37% Consumer 20% 18% 18% Industrial/Others 5% 5% 6% Memory 1% 1% 1% By Technology 2Q06 1Q06 2Q05 N90- 24% 20% 2% 0.11/0.13um 25% 29% 41% 0.15/0.18um 32% 32% 34% 0.25/0.35um 14% 14% 17% 0.50um+ 5% 5% 6% By Customer Type 2Q06 1Q06 2Q05 Fabless/System 72% 74% 74% IDM 28% 26% 26% By Geography 2Q06 1Q06 2Q05 North America 77% 78% 77% Asia Pacific 10% 11% 9% Europe 9% 7% 8% Japan 4% 4% 6%

Consolidated Revenue Analysis:

Consolidated net sales were NT$82.12 billion for 2Q06, mainly driven by strong demand from our customers in communication and consumer segments.

On a sequential basis, revenues from consumer and communication applications increased by 21% and 19%, respectively, while revenues from computer applications declined by 16%.

Revenue from advanced technologies (0.13-micron and below) accounted for 49% of total wafer sales, flat from the previous quarter. Revenue from 90nm process technology continued to increase and accounted for 24% of total wafer sales during the second quarter, compared to 20% in the first quarter of 2006.

IDM accounted for 28% of total wafer sales during the quarter, up from 26% in the previous quarter.

Geographically, North America accounted for 77% of total wafer sales. Meanwhile, sales from Asia Pacific, Europe and Japan accounted for 10%, 9% and 4% of wafer sales, respectively.

II. Capacity II. Capacity 1Q06 2Q06 3Q06 4Q06 2006 Fab / (Wafer size) (A) (A) (Est.) (Est.) (Est.) Fab-2 (6")(i) 244 258 258 266 1,025 Fab-3 (8") 246 252 262 258 1,021 Fab-5 (8") 135 138 147 153 573 Fab-6 (8") 215 222 233 248 918 Fab-7 (8") 33 23 4 0 60 Fab-8 (8") 231 233 234 248 946 Fab-12 (12")(ii) 142 150 157 166 616 Fab-14 (12")(ii) 61 66 86 105 318 WaferTech (8") 99 100 101 104 404 TSMC (Shanghai) (8") 48 52 73 90 262 TSMC total capacity (8" equiv.Kpcs) 1,602 1,650 1,748 1,860 6,860 SSMC (8") 49 50 51 52 202 Total managed capacity (8" equiv.Kpcs) 1,651 1,700 1,799 1,912 7,062 Note: (i) Figures represent number of 6" wafers. Conversion to 8"-equivalent wafers is by dividing this number by 1.78 (ii) Figures represent number of 12" wafers. Conversion to 8"-equivalent wafers is by multiplying this number by 2.25

Capacity:

Total TSMC managed capacity in 2Q06 was 1,700K 8-inch equivalent wafers, 3% higher than the 1,651K 8-inch equivalent wafers in 1Q06.

TSMC managed capacity in 3Q06 will increase to 1,799K 8-inch equivalent wafers, representing a 5.8% sequential growth.

Overall installed capacity for year 2006 is expected to be approximately 7,062K 8-inch equivalent wafers, representing a slight increase from our previous forecast provided in April 2006.

III. Consolidated Profit & Expense Analysis III - 1. Consolidated Gross Profit Analysis (Amount: NT$ billion) 2Q06 1Q06 2Q05 COGS 39.6 40.1 35.7 Depreciation 16.5 16.2 17.5 Other MFG Cost 23.1 23.9 18.2 Gross Profit 42.5 37.7 24.3 Gross Margin 51.8% 48.5% 40.4%

Consolidated Gross Profit Analysis:

Consolidated gross profit for the second quarter of 2006 was NT$42.5 billion, representing a year-over-year increase of 75.2% and a sequential increase of 12.6%. Consolidated gross margin improved by 3.3 percentage points sequentially to 51.8%, largely due to higher levels of wafer output and productivity improvements.

III - 2. Consolidated Operating Expenses (i) (Amount: NT$ billion) 2Q06 1Q06 2Q05 Total Operating Exp. 7.18 6.82 7.04 SG&A 3.13 3.04 3.48 Research & Development 4.05 3.78 3.56 (i) Certain prior period amounts have been reclassified to conform with current period presentation.

Consolidated Operating Expenses:

Consolidated operating expenses for 2Q06 were NT$7.18 billion, slightly higher than the previous quarter. Higher operating expenses were largely the result of increased R&D expenditures on various 65nm projects. Total operating expenses represented 8.8% of net sales, flat from the previous quarter.

III - 3. Consolidated Non-Operating Items (i) (Amount: NT$ million) 2Q06 1Q06 2Q05 Non-Operating Income/(Exp.) 299 1,417 464 Net Interest Income/(Exp.) 924 775 268 Other Non-Operating (625) 642 196 L-T Investments 650 600 226 SSMC 471 462 140 Others 179 138 86 Change in Accounting Principle(ii) 0 1,607 0 Total Non-Operating Items 949 3,624 690 (i) Certain prior period amounts have been reclassified to conform with current period presentation. (ii) For financial statement purposes, cumulative effect of changes in accounting principles is presented as a separate line item after income tax expenses.

Consolidated Non-Operating Items:

Combined result from non-operating income and long-term investments was a gain of NT$949 million for 2Q06.

Consolidated non-operating income totaled NT$299 million during the second quarter of 2006, compared to an income of NT$1,417 million in the previous quarter. The decrease in non-operating income was mainly due to the mark-to-market adjustment recorded as a result of the decline in the market value of certain marketable securities held through TSMC venture capital funds.

Consolidated net investment income was NT$650 million in this quarter, compared to an income of NT$600 million in 1Q06. The increase was primarily due to improved operating performance at TSMC's affiliates.

During the first quarter of 2006, TSMC adopted SFAS No. 34, which requires marketable securities with readily determinable market value measured at fair value with unrealized gains and losses on trading securities recognized in earnings for the current period. As a result of adopting SFAS No. 34, TSMC recognized a one-time gain of NT$1.6 billion in 1Q06 as the cumulative effect of changes in accounting principles.

IV - 1. Liquidity Analysis (i) (Amount: NT$ Billion) 2Q06 1Q06 2Q05 Cash & Marketable Securities 211.6 192.3 138.1 Accounts Receivable - Trade 38.0 38.0 32.1 Inventory 20.1 18.4 15.2 Total Current Assets 279.7 259.3 194.0 Accounts Payable 27.5 22.4 19.0 Accrued Liabilities and Others 82.8 18.5 71.1 Total Current Liabilities 110.3 40.9 90.1 Current Ratio (x) 2.5 6.3 2.2 Net Working Capital 169.4 218.4 103.9 (i) Certain prior period amounts have been reclassified to conform with current period presentation.

Liquidity Analysis:

Consolidated cash & marketable securities increased by NT$19.3 billion in this quarter, mainly due to strong cash flows from operating activities. As a result, TSMC ended the quarter with total current assets of NT$279.7 billion, NT$20.4 billion higher than the previous quarter.

Consolidated current liabilities were NT$110.3 billion at the end of the quarter, NT$69.4 billion higher than the previous quarter, mainly due to an NT$65 billion payable accrued for cash dividends and employee bonuses.

As a result, net consolidated working capital decreased to NT$169.4 billion and current ratio decreased to 2.5x.

IV - 2. Consolidated Receivable/Inventory Days 2Q06 1Q06 2Q05 Days of Receivable 44 46 48 Days of Inventory 47 44 41

Consolidated Receivable/Inventory Days Trend:

Consolidated days of receivable decreased to 44 days in 2Q06, compared to 46 days in the previous quarter.

Consolidated days of inventory increased to 47 days from 44 days in the first quarter of 2006.

IV - 3. Consolidated Debt Service (i) (Amount: NT$ Billion) 2Q06 1Q06 2Q05 Cash & Marketable Securities 211.6 192.3 138.1 Interest-Bearing Debt 27.2 27.2 37.6 Net Cash Reserves 184.4 165.1 100.5 (i) Certain prior period amounts have been reclassified to conform with current period presentation.

Consolidated Debt Service:

As a result of strong operating performance during the quarter, consolidated net cash reserves -- defined as the excess of cash and short-term marketable securities over interest-bearing debt -- increased by NT$19.3 billion to NT$184.4 billion in 2Q06.

Consolidated interest-bearing debt remained flat at NT$27.2 billion as of June 30, 2006.

V. Cash Flow & CapEx V - 1. Consolidated Cash Flow Analysis (Amount: NT$ billion) 2Q06 1Q06 2Q05 Net Income 34.0 32.6 18.4 Depreciation & Amortization 17.9 17.7 19.5 Other Op Sources/(Uses) (1.5) (1.4) (9.3) Total Op Sources/(Uses) 50.4 48.9 28.6 Capital Expenditure (21.4) (11.5) (14.2) Marketable Financial Instruments (7.8) (12.8) 2.8 Other Investing Sources/(Uses) (1.1) 0.2 (0.4) Net Investing Sources/(Uses) (30.3) (24.1) (11.8) Repayment of Corporate Bonds (0.0) (0.0) (0.9) Other Financing Sources/(Uses) 0.1 0.1 0.9 Net Financing Sources/(Uses) 0.1 0.1 (0.0) Net Cash Position Changes 20.2 24.9 16.8 Exchange Rate Changes & Others (0.0) (0.2) 0.1 Ending Cash Balance 141.5 121.3 88.4 (i) Certain prior period amounts have been reclassified to conform with current period presentation.

Summary of Consolidated Cash Flow:

During this quarter, TSMC generated NT$50.4 billion from operating activities, mainly from net income of NT$34 billion and depreciation & amortization of NT$17.9 billion.

Net cash used in investment activities totaled NT$30.3 billion, mainly as a result of an NT$21.4 billion in capital spending and an NT$7.8 billion net increase in marketable financial instruments.

Net cash provided by financing activities was NT$0.1 billion during this quarter.

As a result, TSMC ended the quarter with a cash balance of NT$141.5 billion, NT$20.2 billion higher than in 1Q06.

V - 2. Consolidated Operating and Free Cash Flows

Consolidated Operating and Free Cash Flows:

TSMC continues to generate strong free cash flows. Consolidated free cash flows totaled NT$29 billion in 2Q06, NT$8.4 billion lower than the NT$37.4 billion generated in the previous quarter, mainly due to higher level of capital expenditures in 2Q06. To view V - 2. Consolidated Operating and Free Cash Flows, please visit http://www.tsmc.com/uploadfile/ir/quarterly/index_charts.pdf .

V - 3. Capital Spending (Amount: US$ Million) 1Q06 2Q06 YTD TSMC 344 653 997 TSMC (Shanghai) & WaferTech 12 11 23 Total TSMC 356 664 1,020

Capital Spending:

Capital spending for TSMC consolidated group totaled US$664 million during the quarter. Most of the spending was for the purchase of 12-inch production equipment.

For year 2006, total capital expenditure for TSMC consolidated group is expected to be in the range of US$2.6 billion to US$2.8 billion, unchanged from our previous guidance provided in January 2006.

VI. Reconciliation of Consolidated and Unconsolidated Financial Results

VI - 1. TSMC Consolidation Entities

Consolidated Structure

TSMC consolidated results include the results from its overseas sales offices (TSMC North America, TSMC Europe, TSMC Japan and TSMC Korea), manufacturing subsidiaries (TSMC (Shanghai) and WaferTech), strategic alliance (Global Unichip Corp.), venture capital funds, and others. These entities are collectively referred to as "TSMC consolidating entities" hereafter. To view VI - 1. TSMC Consolidation Entities, please visit http://www.tsmc.com/uploadfile/ir/quarterly/index_charts.pdf .

VI - 2. Consolidated v. Unconsolidated Income Statement (Amount: NT$ billion) Consolidated Unconsolidated Difference Net Sales 82.1 81.2 0.9 COGS (39.6) (40.3) 0.7 Gross Profit 42.5 40.9 1.6 Gross Margin % 51.8% 50.3% 1.4% Operating Expenses Research & Development (4.1) (3.7) (0.3) SG&A (3.1) (2.2) (0.9) Total Operating Expenses (7.2) (5.9) (1.3) Operating Income 35.3 35.0 0.3 Operating Margin % 43.0% 43.1% 0.0% Non-Operating Items 0.9 1.3 (0.3) Income Tax Benefit (Expense) (2.3) (2.2) (0.0) Minority Interest 0.0 0.0 0.0 Net Income 34.0 34.0 0.0 Net Margin % 41.4% 41.9% -0.5%

Income Statement

Consolidated net sales for 2Q06 were NT$82.1 billion, NT$0.9 billion higher than the unconsolidated net sales. Higher consolidated net sales reflect sales contributions from TSMC consolidating entities. Consolidated gross margin was 51.8%, compared to 50.3% on the unconsolidated basis. The higher consolidated gross margin reflects the true gross margin from TSMC consolidating subsidiaries.

Consolidated operating expenses were NT$7.2 billion for 2Q06, NT$1.3 billion higher than the unconsolidated operating expenses. The higher consolidated operating expenses were mainly attributable to additional sales & marketing expenses from TSMC overseas sales offices and additional G&A and R&D expenses from other TSMC consolidating entities. Total consolidated operating expenses accounted for 8.8% of consolidated net sales, compared to 7.2% on the unconsolidated basis.

On a consolidated basis, the combined result from non-operating income and long-term investments was a gain of NT$0.9 billion, NT$0.3 billion lower than that on the unconsolidated basis. Higher unconsolidated gain from non-operating items reflects TSMC's share of income from the consolidating subsidiaries.

Consolidated net income attributable to shareholders of the parent company was NT$34 billion, same as that on the unconsolidated basis. Consolidated net margin was 41.4%, 0.5% lower than the unconsolidated net margin, reflecting higher consolidated net sales.

VI - 3. Consolidated v. Unconsolidated Balance Sheet (Selected Balance Sheet Items) (Amount: NT$ billion) Consolidated Unconsolidated Difference Cash & Marketable Securities 211.6 195.9 15.7 Accounts Receivable - Trade 38.0 36.1 1.9 Inventory 20.1 18.4 1.7 Total Current Assets 279.7 259.9 19.8 Long-Term Investments 42.8 83.2 (40.4) Fixed Assets, Net 251.1 223.2 27.9 Total Assets 593.7 581.6 12.1 Total Current Liabilities 110.3 107.2 3.1 L/T Interest-Bearing Debt 24.7 17.0 7.7 Total Liabilities 146.2 134.8 11.5 Total Equity 447.5 446.8 0.7

Balance Sheet

On a consolidated basis, as a result of higher cash and marketable securities, total current assets were NT$279.7 billion, NT$19.8 billion higher than the unconsolidated total current assets.

Consolidated long-term investments were NT$42.8 billion for 2Q06, compared to NT$83.2 billion on the unconsolidated basis. Higher unconsolidated long-term investments reflect TSMC's investments in its consolidating subsidiaries.

Consolidated net fixed assets totaled NT$251.1 billion, NT$27.9 billion higher than the unconsolidated net fixed assets, mainly due to manufacturing facilities located at TSMC's consolidating entities.

Total consolidated liabilities were NT$146.2 billion, compared to NT$134.8 billion on the unconsolidated basis, as total unconsolidated liabilities does not reflect the borrowings by TSMC's consolidating entities.

VI - 4. Consolidated v. Unconsolidated Cash Flows (Amount: NT$ billion) Consolidated Unconsolidated Difference Cash Flows Provided by 50.4 47.0 3.4 Operating Activities Depreciation & Amortization 17.9 16.2 1.7 Cash Flows Used in Investing Activities (30.3) (29.4) (0.9) Capital Expenditures (21.4) (21.1) (0.3) Cash Flows Provided by Financing Activities 0.1 0.1 (0.0) Net Cash Increase (Decrease) 20.2 17.7 2.5

Cash Flows

Consolidated cash flows provided by operating activities were NT$50.4 billion in 2Q06, NT$3.4 billion higher than that on the unconsolidated basis, as consolidated operating cash flows included additional depreciation & amortization expenses from TSMC consolidating entities.

Consolidated cash flows used in investing activities totaled NT$30.3 billion in 2Q06, slightly higher than that on the unconsolidated basis.

Consolidated cash flows provided by financing activities were NT$0.1 billion in 2Q06, same as that on the unconsolidated basis.

VII. Recap of Recent Important Events & Announcements - TSMC and ARM Collaboration Achieves Significant Power Reduction on First 65nm Low-Power Test Chip (2006/07/18) - TSMC Continues Industry Leadership with Reference Flow 7.0 (2006/07/17) - TSMC Bolsters Design Ecosystem with DFM-Compliant EDA Tools and Data Kit for 65nm Design (2006/07/17) - TSMC Sets June 20, 2006 as the ex-Dividend Date for Common Share Dividend (2006/06/06) - TSMC is Production-Ready for 65nm X Architecture Designs (2006/05/25) - TSMC 65-Nanometer Process Moves to Volume Production (2006/05/17) - TSMC Senior Vice President of R&D Dr. Shang-Yi Chiang to Retire (2006/05/17) - TSMC Board of Directors Unanimously Re-elects Dr. Morris Chang as Chairman (2006/05/16) - TSMC Shareholders Approve NT$2.5 Cash and 3% Stock Dividend (2006/05/16) - TSMC Unveils First 65-Nanometer Data-Driven DFM Design Ecosystem (2006/05/15) TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES Condensed Balance Sheets (Consolidated) (Figures in Million of New Taiwan Dollars (NTD) and U.S. Dollars (USD)) (1) June 30, 2006(Audited) ASSETS USD NTD % Current Assets Cash and Cash Equivalents $4,366 $141,452 23.8 Investments in Marketable Financial Instruments 2,165 70,139 11.8 Accounts Receivable - Trade 1,172 37,969 6.4 Inventories, Net 619 20,051 3.4 Other Current Assets 311 10,079 1.7 Total Current Assets 8,633 279,690 47.1 Long-Term Investments 1,320 42,778 7.2 Properties, Plant and Equipment 21,023 681,123 114.7 Less: Accumulated Depreciation (13,272) (429,993) (72.4) Properties, Plant and Equipment, Net 7,751 251,130 42.3 Other Assets 622 20,145 3.4 Total Assets $18,326 $593,743 100.0 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term loan payable $-- $-- $-- Accounts Payables 317 10,282 1.7 Payables to Contractors and Equipment Suppliers 531 17,214 2.9 Accrued Expenses and Other Current Liabilities 2,479 80,300 13.6 Current Portion of Bonds Payable 77 2,505 0.4 Total Current Liabilities 3,404 110,301 18.6 Bonds Payable 525 17,000 2.9 Other Long Term Liabilities 585 18,943 3.1 Total Liabilities 4,514 146,244 24.6 Shareholders' Equity Attributable to Shareholders of the Parent Common Stock 7,970 258,234 43.5 Capital Surplus 1,661 53,822 9.1 Retained Earnings 4,220 136,723 23.0 Treasury Stock (28) (918) (0.2) Others (32) (1,029) (0.1) Total equity attributable to shareholders of the parent 13,791 446,832 75.3 Minority interest 21 667 0.1 Total shareholders' equity 13,812 447,499 75.4 Total Liabilities & Shareholders' Equity $18,326 $593,743 100.0 Note: (1) Amounts in NTD have been translated into USD at the rate of NT$32.399 as of June 30, 2006. (2) Certain prior period balances have been reclassified to conform to the current period presentation.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES Condensed Balance Sheets (Consolidated) (Figures in Million of New Taiwan Dollars (NTD) and U.S. Dollars (USD)) (1) March 31, 2006 June 30, 2005 (Unaudited)(2) (Audited)(2) ASSETS NTD % NTD % Current Assets Cash and Cash Equivalents $121,251 21.8 $88,405 17.3 Investments in Marketable Financial Instruments 71,006 12.8 49,724 9.7 Accounts Receivable - Trade 38,012 6.8 32,095 6.3 Inventories, Net 18,409 3.3 15,159 3.0 Other Current Assets 10,572 2.0 8,618 1.6 Total Current Assets 259,250 46.7 194,001 37.9 Long-Term Investments 34,726 6.3 39,207 7.7 Properties, Plant and Equipment 655,396 118.0 622,025 121.6 Less: Accumulated Depreciation (413,852) (74.5) (365,019) (71.3) Properties, Plant and Equipment, Net 241,544 43.5 257,006 50.3 Other Assets 19,772 3.5 21,207 4.1 Total Assets $555,292 100.0 $511,421 100.0 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term loan payable $-- $-- $316 0.1 Accounts Payables 10,687 1.9 7,605 1.5 Payables to Contractors and Equipment Suppliers 11,680 2.1 11,384 2.2 Accrued Expenses and Other Current Liabilities 15,996 2.9 60,251 11.7 Current Portion of Bonds Payable 2,505 0.5 10,505 2.1 Total Current Liabilities 40,868 7.4 90,061 17.6 Bonds Payable 17,000 3.1 19,500 3.8 Other Long Term Liabilities 18,813 3.3 16,919 3.3 Total Liabilities 76,681 13.8 126,480 24.7 Shareholders' Equity Attributable to Shareholders of the Parent Common Stock 247,331 44.5 247,261 48.3 Capital Surplus 57,208 10.3 56,721 11.1 Retained Earnings 175,378 31.6 84,383 16.5 Treasury Stock (918) (0.2) (1,552) (0.3) Others (1,066) (0.1) (2,613) (0.5) Total equity attributable to shareholders of the parent 477,933 86.1 384,200 75.1 Minority interest 678 0.1 741 0.2 Total shareholders' equity 478,611 86.2 384,941 75.3 Total Liabilities & Shareholders' Equity $555,292 100.0 $511,421 100.0 Note: (1) Amounts in NTD have been translated into USD at the rate of NT$32.399 as of June 30, 2006. (2) Certain prior period balances have been reclassified to conform to the current period presentation.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES Condensed Balance Sheets (Consolidated) (Figures in Million of New Taiwan Dollars (NTD) and U.S. Dollars (USD)) (1) QoQ YoY ASSETS Amount % Amount % Current Assets Cash and Cash Equivalents $20,201 16.7 $53,047 60.0 Investments in Marketable Financial Instruments (867) (1.2) 20,415 41.1 Accounts Receivable - Trade (43) (0.1) 5,874 18.3 Inventories, Net 1,642 8.9 4,892 32.3 Other Current Assets (493) (4.7) 1,461 17.0 Total Current Assets 20,440 7.9 85,689 44.2 Long-Term Investments 8,052 23.2 3,571 9.1 Properties, Plant and Equipment 25,727 3.9 59,098 9.5 Less: Accumulated Depreciation (16,141) 3.9 (64,974) 17.8 Properties, Plant and Equipment, Net 9,586 4.0 (5,876) (2.3) Other Assets 373 1.9 (1,062) (5.0) Total Assets $38,451 6.9 $82,322 16.1 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term loan payable $-- -- ($316) (100.0) Accounts Payables (405) (3.8) 2,677 35.2 Payables to Contractors and Equipment Suppliers 5,534 47.4 5,830 51.2 Accrued Expenses and Other Current Liabilities 64,304 402.0 20,049 33.3 Current Portion of Bonds Payable -- -- (8,000) (76.2) Total Current Liabilities 69,433 169.9 20,240 22.5 Bonds Payable -- -- (2,500) (12.8) Other Long Term Liabilities 130 0.7 2,024 12.0 Total Liabilities 69,563 90.7 19,764 15.6 Shareholders' Equity Attributable to Shareholders of the Parent Common Stock 10,903 4.4 10,973 4.4 Capital Surplus (3,386) (5.9) (2,899) (5.1) Retained Earnings (38,655) (22.0) 52,340 62.0 Treasury Stock -- -- 634 (40.9) Others 37 (3.5) 1,584 (60.6) Total equity attributable to shareholders of the parent (31,101) (6.5) 62,632 16.3 Minority interest (11) (1.6) (74) (10.0) Total shareholders' equity (31,112) (6.5) 62,558 16.3 Total Liabilities & Shareholders' Equity $38,451 6.9 $82,322 16.1 Note: (1) Amounts in NTD have been translated into USD at the rate of NT$32.399 as of June 30, 2006. (2) Certain prior period balances have been reclassified to conform to the current period presentation.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES Unaudited Condensed Income Statements (Consolidated) For the Three Months Ended June 30, 2006, March 31, 2006 And June 30, 2005 (Expressed in Million New Taiwan Dollars ("NTD") and U.S. Dollars ("USD") (1) Except for Per Share Amounts and Shares Outstanding) Q2 2006 USD NTD % Net Sales $2,552 $82,118 100.0 Cost of Sales (1,231) (39,620) (48.2) Gross Profit 1,321 42,498 51.8 Operating Expenses Research and Development Expenses(4) (126) (4,053) (4.9) General and Administrative Expenses(4) (69) (2,226) (2.7) Sales and Marketing Expenses (28) (896) (1.2) Total Operating Expenses (223) (7,175) (8.8) Income from Operations 1,098 35,323 43.0 Non-Operating Income, Net 9 299 0.4 Investment Gains 20 650 0.8 Income before Income Tax 1,127 36,272 44.2 Income Tax (Expenses) Benefits (71) (2,281) (2.8) Net Income Before Cumulative Effect of Changes in Accounting Principles 1,056 33,991 41.4 Cumulative Effect of Changes in Accounting Principles (Net of Tax) -- -- -- Net Income $1,056 $33,991 41.4 Attributable to: Shareholders of the parent $1,056 $34,002 41.4 Minority Interest -- (11) -- $1,056 $33,991 41.4 Earnings per Share - Diluted $0.04 $1.32 Earnings per ADR (2) $0.20 $6.59 Weighted Average Outstanding Shares - Diluted ('M) (3) 25,809 Note: (1) Amounts in NTD have been translated into USD at the weighted average rate of NTD32.174 for the second quarter of 2006. (2) 1 ADR equals 5 ordinary shares. (3) Total diluted weighted average outstanding shares were 25,809M shares for 2Q06 and 25,771M shares for 2Q05 after the retroactive adjustments for stock dividends and stock bonus. (4) Certain prior period balances have been reclassified to conform to the current period presentation.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES Unaudited Condensed Income Statements (Consolidated) For the Three Months Ended June 30, 2006, March 31, 2006 And June 30, 2005 (Expressed in Million New Taiwan Dollars ("NTD") and U.S. Dollars ("USD") (1) Except for Per Share Amounts and Shares Outstanding) Q1 2006 Q2 2005 NTD % NTD % Net Sales $77,850 100.0 $59,978 100.0 Cost of Sales (40,123) (51.5) (35,724) (59.6) Gross Profit 37,727 48.5 24,254 40.4 Operating Expenses Research and Development Expenses(4) (3,787) (4.9) (3,561) (5.9) General and Administrative Expenses(4) (1,821) (2.3) (2,253) (3.8) Sales and Marketing Expenses (1,217) (1.6) (1,227) (2.0) Total Operating Expenses (6,825) (8.8) (7,041) (11.7) Income from Operations 30,902 39.7 17,213 28.7 Non-Operating Income, Net 1,417 1.8 464 0.8 Investment Gains 600 0.8 226 0.4 Income before Income Tax 32,919 42.3 17,903 29.8 Income Tax (Expenses) Benefits (1,855) (2.4) 491 0.8 Net Income Before Cumulative Effect of Changes in Accounting Principles 31,064 39.9 18,394 30.7 Cumulative Effect of Changes in Accounting Principles (Net of Tax) 1,607 2.1 -- -- Net Income $32,671 42.0 $18,394 30.7 Attributable to: Shareholders of the parent $32,607 41.9 $18,369 30.6 Minority Interest 64 0.1 25 0.1 $32,671 42.0 $18,394 30.7 Earnings per Share - Diluted $1.26 $0.71 Earnings per ADR (2) $6.32 $3.56 Weighted Average Outstanding Shares - Diluted ('M) (3) 25,802 25,771 Note: (1) Amounts in NTD have been translated into USD at the weighted average rate of NTD32.174 for the second quarter of 2006. (2) 1 ADR equals 5 ordinary shares. (3) Total diluted weighted average outstanding shares were 25,809M shares for 2Q06 and 25,771M shares for 2Q05 after the retroactive adjustments for stock dividends and stock bonus. (4) Certain prior period balances have been reclassified to conform to the current period presentation.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES Unaudited Condensed Income Statements (Consolidated) For the Three Months Ended June 30, 2006, March 31, 2006 And June 30, 2005 (Expressed in Million New Taiwan Dollars ("NTD") and U.S. Dollars ("USD") (1) Except for Per Share Amounts and Shares Outstanding) QoQ YoY Amount % Amount % Net Sales $4,268 5.5 $22,140 36.9 Cost of Sales 503 (1.3) (3,896) 10.9 Gross Profit 4,771 12.6 18,244 75.2 Operating Expenses Research and Development Expenses(4) (266) 7.0 (492) 13.8 General and Administrative Expenses(4) (405) 22.2 27 (1.2) Sales and Marketing Expenses 321 (26.4) 331 (27.0) Total Operating Expenses (350) 5.1 (134) 1.9 Income from Operations 4,421 14.3 18,110 105.2 Non-Operating Income, Net (1,118) (78.9) (165) (35.6) Investment Gains 50 8.3 424 187.6 Income before Income Tax 3,353 10.2 18,369 102.6 Income Tax (Expenses) Benefits (426) 23.0 (2,772) (564.6) Net Income Before Cumulative Effect of Changes in Accounting Principles 2,927 9.4 15,597 84.8 Cumulative Effect of Changes in Accounting Principles (Net of Tax) (1,607) (100.0) -- -- Net Income $1,320 4.0 $15,597 84.8 Attributable to: Shareholders of the parent $1,395 4.3 $15,633 85.1 Minority Interest (75) (116.5) (36) (142.4) $1,320 4.0 $15,597 84.8 Earnings per Share - Diluted $0.06 4.3 $0.60 84.8 Earnings per ADR (2) $0.27 4.3 $3.03 84.8 Weighted Average Outstanding Shares - Diluted ('M) (3) Note: (1) Amounts in NTD have been translated into USD at the weighted average rate of NTD32.174 for the second quarter of 2006. (2) 1 ADR equals 5 ordinary shares. (3) Total diluted weighted average outstanding shares were 25,809M shares for 2Q06 and 25,771M shares for 2Q05 after the retroactive adjustments for stock dividends and stock bonus. (4) Certain prior period balances have been reclassified to conform to the current period presentation.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES Audited Condensed Income Statements (Consolidated) For the Six Months Ended June 30, 2006 And 2005 (Expressed in Million New Taiwan Dollars ("NTD") and U.S. Dollars ("USD") (1) Except for Per Share Amounts and Shares Outstanding) 2006 USD NTD % Net Sales $4,959 $159,968 100.0 Cost of Sales (2,472) (79,743) (49.8) Gross Profit 2,487 80,225 50.2 Operating Expenses Research and Development Expenses (243) (7,840) (4.9) General and Administrative Expenses (125) (4,047) (2.5) Sales and Marketing Expenses (66) (2,113) (1.4) Total Operating Expenses (434) (14,000) (8.8) Income from Operations 2,053 66,225 41.4 Non-Operating Income, Net 53 1,716 1.1 Investment income 39 1,250 0.8 Income before Income Tax 2,145 69,191 43.3 Income Tax (Expenses) Benefits (128) (4,136) (2.6) Net Income Before Cumulative Effect of Changes in Accounting Principles 2,017 65,055 40.7 Cumulative Effect of Changes in Accounting Principles (Net of Tax) 50 1,607 1.0 Net Income $2,067 $66,662 41.7 Attributable to: Shareholders of the parent $1,056 $66,609 41.6 Minority Interest -- 53 0.0 $1,056 $66,662 41.7 Earnings per Share - Diluted $0.08 $2.58 Earnings per ADR (2) $0.40 $12.90 Weighted Average Outstanding Shares - Diluted ('M) (3) 25,808 Note: (1) Amounts in NTD have been translated into USD at the weighted average rate of NTD 32.256 for the six months of 2006. (2) 1 ADR equals 5 ordinary shares. (3) Total diluted weighted average outstanding shares were 25,808M shares for the six months ended June 30, 2006 and 25,770M shares for the six months ended June 30, 2005 after the retroactive adjustments for stock dividends and stock bonus.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES Audited Condensed Income Statements (Consolidated) For the Six Months Ended June 30, 2006 And 2005 (Expressed in Million New Taiwan Dollars ("NTD") and U.S. Dollars ("USD") (1) Except for Per Share Amounts and Shares Outstanding) 2005 YoY NTD % Amount % Net Sales $116,836 100.0 $43,132 36.9 Cost of Sales (70,904) (60.7) (8,839) 12.5 Gross Profit 45,932 39.3 34,293 74.7 Operating Expenses Research and Development Expenses (6,973) (6.0) (867) 12.4 General and Administrative Expenses (4,766) (4.1) 719 (15.1) Sales and Marketing Expenses (1,811) (1.5) (302) 16.7 Total Operating Expenses (13,550) (11.6) (450) 3.3 Income from Operations 32,382 27.7 33,843 104.5 Non-Operating Income, Net 1,203 1.0 513 42.6 Investment income 623 0.5 627 100.6 Income before Income Tax 34,208 29.3 34,983 102.3 Income Tax (Expenses) Benefits 1,004 0.9 (5,140) (512.0) Net Income Before Cumulative Effect of Changes in Accounting Principles 35,212 30.1 29,843 84.8 Cumulative Effect of Changes in Accounting Principles (Net of Tax) -- -- 1,607 -- Net Income $35,212 30.1 $31,450 89.3 Attributable to: Shareholders of the parent $35,187 30.1 $31,422 89.3 Minority Interest 25 -- 28 112.0 $35,212 30.1 $31,450 89.3 Earnings per Share - Diluted $1.37 $1.22 89.0 Earnings per ADR (2) $6.83 $6.08 89.0 Weighted Average Outstanding Shares - Diluted ('M) (3) 25,770 Note: (1) Amounts in NTD have been translated into USD at the weighted average rate of NTD 32.256 for the six months of 2006. (2) 1 ADR equals 5 ordinary shares. (3) Total diluted weighted average outstanding shares were 25,808M shares for the six months ended June 30, 2006 and 25,770M shares for the six months ended June 30, 2005 after the retroactive adjustments for stock dividends and stock bonus.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES Condensed Statements of Cash Flows (Consolidated) For the Six Months Ended June 30, 2006 and for the Three months Ended June 30, 2006, March 31, 2006 and June 30, 2005 (Figures in Million of New Taiwan Dollars (NTD) and U.S. Dollars (USD)) (1) 6 Months 2006 2Q 2006 1Q 2006 2Q 2005 (Audited) (Un- (Un- (Un- audited) audited) audited)(2) USD NTD NTD NTD NTD Cash Flows from Operating Activities: Net Income $2,065 $66,609 $34,002 $32,607 $18,369 Net Income attributable to minority interest 2 53 (11) 64 24 Depreciation & Amortization 1,104 35,622 17,888 17,734 19,464 Deferred Income Tax 8 251 860 (609) (634) Investment Income From Equity Method Investees (39) (1,250) (650) (600) (226) Changes in Working Capital & Others (62) (1,980) (1,698) (282) (8,384) Net Cash Provided by Operating Activities 3,078 99,305 50,391 48,914 28,613 Cash Flows from Investing Activities: Acquisitions: Marketable Financial Instruments(3) (2,250) (72,581) (39,850) (32,731) (26,003) Financial assets carried at cost (9) (290) (168) (122) (103) Property, Plant and Equipment (1,020) (32,901) (21,391) (11,510) (14,239) Long-term investments by equity method (1) (48) (48) -- -- Proceeds from disposal or maturity of: Marketable Financial Instruments(3) 1,612 52,006 32,075 19,931 28,765 Financial assets carried at cost -- -- -- -- 12 Property, Plant and Equipment 8 247 (215) 462 (54) Long-term investments by equity method -- -- -- -- -- Decrease in Others (25) (795) (653) (142) (222) Net Cash Used In Investing Activities (1,685) (54,362) (30,250) (24,112) (11,844) Cash Flows from Financing Activities: Repurchase of treasury stock -- -- -- -- (26) Cash Dividend - Common Shares (8) -- -- -- -- Bonus Paid to Employees, Directors and Supervisors -- (257) (257) -- (231) Repayment of Long Term Bonds Payable -- (3) (2) (1) (944) Increase in Guarantee Deposits 14 461 139 322 1,147 Proceeds from Exercise of Stock Options 10 326 209 117 82 Decrease in Others (10) (337) (15) (322) (3) Net Cash Provided by Financing Activities 6 190 74 116 25 Net Increase in Cash and Cash Equivalents 1,399 45,133 20,215 24,918 16,794 Effect of exchange rate changes on cash and cash equivalents and others (5) (165) (14) (151) (95) Effect of first inclusion for consolidation of certain subsidiaries -- -- -- -- 166 Cash and Cash Equivalents at Beginning of Period 2,991 96,484 121,251 96,484 71,540 Cash and Cash Equivalents at End of Period $4,385 $141,452 $141,452 $121,251 $88,405 Note: (1) Amounts in NTD have been translated into USD at the rate of NTD32.256 , the weighted average rate for the six months ended June 30, 2006. (2) Certain prior period balances have been reclassified to (3) Marketable financial instruments include available-for-sale and held-to-maturity financial assets, which non-current portions are classified as long-term investments in Balance Sheet.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED Condensed Balance Sheets (Unconsolidated) (Figures in Million of New Taiwan Dollars (NTD) and U.S. Dollars (USD)) (1) March 31, 2006 June 30, 2006 (Audited) (Unaudited) ASSETS USD NTD % NTD % Current Assets Cash and Cash Equivalents $3,942 $127,713 22.0 $109,990 20.2 Investments in Marketable Financial Instruments 2,104 68,164 11.7 67,994 12.5 Accounts Receivable - Trade 1,114 36,077 6.2 35,780 6.6 Inventories, Net 567 18,376 3.2 16,901 3.1 Other Current Assets 295 9,570 1.6 10,123 1.9 Total Current Assets 8,022 259,900 44.7 240,788 44.3 Long Term Investments 2,569 83,217 14.3 75,439 13.9 Properties, Plant and Equipment 18,872 611,448 105.1 586,213 107.8 Less: Accumulated Depreciation (11,982) (388,229) (66.7) (373,691) (68.7) Properties, Plant and Equipment, Net 6,890 223,219 38.4 212,522 39.1 Other Assets 471 15,287 2.6 14,975 2.7 Total Assets $17,952 $581,623 100.0 $543,724 100.0 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts Payables $310 $10,053 1.7 $10,874 2.0 Payables to Contractors and Equipment Suppliers 523 16,952 2.9 11,621 2.1 Accrued Expenses and Other Current Liabilities 2,400 77,730 13.4 13,352 2.4 Current Portion of Bonds Payable 77 2,500 0.4 2,500 0.6 Total Current Liabilities 3,310 107,235 18.4 38,347 7.1 Bonds Payable 525 17,000 2.9 17,000 3.1 Other Long Term Liabilities 325 10,556 1.9 10,444 1.9 Total Liabilities 4,160 134,791 23.2 65,791 12.1 Shareholders' Equity Common Stock 7,970 258,234 44.4 247,331 45.5 Capital Surplus 1,661 53,822 9.3 57,208 10.5 Retained Earnings 4,220 136,723 23.5 175,378 32.3 Others (31) (1,029) (0.2) (1,066) (0.2) Treasury Stock (28) (918) (0.2) (918) (0.2) Total Shareholders' Equity 13,792 446,832 76.8 477,933 87.9 Total Liabilities & Shareholders' Equity $17,952 $581,623 100.0 $543,724 100.0 Note: (1) Amounts in NTD have been translated into USD at the rate of NT$32.399 as of June 30, 2006. (2) Certain prior period balances have been reclassified to conform to the current period presentation.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED Condensed Balance Sheets (Unconsolidated) (Figures in Million of New Taiwan Dollars (NTD) and U.S. Dollars (USD)) (1) June 30, 2005 (Audited)(2) QoQ YoY ASSETS NTD % Amount % Amount % Current Assets Cash and Cash Equivalents $78,597 15.8 $17,723 16.1 $49,116 62.5 Investments in Marketable Financial Instruments 49,530 9.9 170 0.2 18,634 37.6 Accounts Receivable - Trade 30,116 6.0 297 0.8 5,961 19.8 Inventories, Net 14,114 2.8 1,475 8.7 4,262 30.2 Other Current Assets 9,470 1.9 (553) (5.5) 100 1.1 Total Current Assets 181,827 36.4 19,112 7.9 78,073 42.9 Long Term Investments 76,434 15.3 7,778 10.3 6,783 8.9 Properties, Plant and Equipment 555,917 111.3 25,235 4.3 55,531 10.0 Less: Accumulated Depreciation (330,854) (66.2) (14,538) 3.9 (57,375) 17.3 Properties, Plant and Equipment, Net 225,063 45.1 10,697 5.0 (1,844) (0.8) Other Assets 16,108 3.2 312 2.1 (821) (5.1) Total Assets $499,432 100.0 $37,899 7.0 $82,191 16.5 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts Payables $7,827 1.6 ($821) 69.4 $2,226 (28.3) Payables to Contractors and Equipment Suppliers 10,004 2.0 5,331 45.9 6,948 69.4 Accrued Expenses and Other Current Liabilities 58,393 11.7 64,378 482.2 19,337 34.0 Current Portion of Bonds Payable 10,500 2.1 -- -- (8,000) (76.2) Total Current Liabilities 86,724 17.4 68,888 179.6 20,511 23.7 Bonds Payable 19,500 3.9 -- -- (2,500) (12.8) Other Long Term Liabilities 9,008 1.8 112 1.1 1,548 17.2 Total Liabilities 115,232 23.1 69,000 104.9 19,559 17.0 Shareholders' Equity Common Stock 247,261 49.5 10,903 4.4 10,973 4.4 Capital Surplus 56,721 11.3 (3,386) (5.9) (2,899) (5.1) Retained Earnings 84,383 16.9 (38,655) (22.0) 52,340 62.0 Others (2,613) (0.5) 37 (3.4) 1,584 (60.6) Treasury Stock (1,552) (0.3) 0 0.0 634 (40.9) Total Shareholders' Equity 384,200 76.9 (31,101) (6.5) 62,632 16.3 Total Liabilities & Shareholders' Equity $499,432 100.0 $37,899 7.0 $82,191 16.5 Note: (1) Amounts in NTD have been translated into USD at the rate of NT$32.399 as of June 30, 2006. (2) Certain prior period balances have been reclassified to conform to the current period presentation.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED Unaudited Condensed Income Statements (Unconsolidated) For the Three Months Ended June 30, 2006, March 31, 2006 and June 30, 2005 (Expressed in Million New Taiwan Dollars (NTD) and U.S. Dollars (USD) (1) Except for Per Share Amounts and Shares Outstanding) Q2 2006 Q1 2006 USD NTD % NTD % Net Sales $2,525 $81,227 100.0 $77,293 100.0 Cost of Sales (1,254) (40,340) (49.7) (40,651) (52.6) Gross Profit 1,271 40,887 50.3 36,642 47.4 Operating Expenses Research and Development Expenses (115) (3,707) (4.6) (3,549) (4.6) General and Administrative Expenses (57) (1,825) (2.1) (1,555) (2.0) Sales and Marketing Expenses (12) (382) (0.5) (671) (0.9) Total Operating Expenses (184) (5,914) (7.2) (5,775) (7.5) Income from Operations 1,087 34,973 43.1 30,867 39.9 Non-Operating Income, Net 27 846 1.0 816 1.1 Investment Gains (Losses) 13 432 0.5 2,972 3.8 Income before Income Tax 1,127 36,251 44.6 34,655 44.8 Income Tax Benefits (Expenses) (70) (2,249) (2.7) (1,802) (2.3) Net Income Before Cumulative Effect of Changes in Accounting Principles 1,057 34,002 41.9 32,853 42.5 Cumulative Effect of Changes in Accounting Principles (Net of Tax) -- -- -- (246) 0.3 Net Income $1,057 $34,002 41.9 $32,607 42.2 Earnings per Share - Diluted 0.04 1.32 1.26 Earnings per ADR (2) 0.20 6.59 6.32 Weighted Average Outstanding Shares-Diluted ('M) (3) 25,809 25,802 Note: (1) Amounts in NTD have been translated into USD at the weighted average rate of NTD32.174 for the second quarter of 2006. (2) 1 ADR equals 5 ordinary shares. (3) Total diluted weighted average outstanding shares were 25,809M shares for 2Q06 and 25,771M shares for 2Q05 after the retroactive adjustments for stock dividends and stock bonus.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED Unaudited Condensed Income Statements (Unconsolidated) For the Three Months Ended June 30, 2006, March 31, 2006 and June 30, 2005 (Expressed in Million New Taiwan Dollars (NTD) and U.S. Dollars (USD) (1) Except for Per Share Amounts and Shares Outstanding) Q2 2005 QoQ YoY NTD % Amount % Amount % Net Sales $58,516 100.0 $3,934 5.1 $22,711 38.8 Cost of Sales (35,311) (60.3) 311 (0.8) (5,029) 14.2 Gross Profit 23,205 39.7 4,245 11.6 17,682 76.2 Operating Expenses Research and Development Expenses (3,283) (5.6) (158) 4.5 (424) 12.9 General and Administrative Expenses (1,799) (3.1) (270) 17.4 (26) 1.4 Sales and Marketing Expenses (339) (0.6) 289 (43.1) (43) 12.7 Total Operating Expenses (5,421) (9.3) (139) 2.4 (493) 9.1 Income from Operations 17,784 30.4 4,106 13.3 17,189 96.7 Non-Operating Income, Net 537 0.9 30 3.6 309 57.5 Investment Gains (Losses) (588) (1.0) (2,540) (85.5) 1,020 (173.5) Income before Income Tax 17,733 30.3 1,596 4.6 18,518 104.4 Income Tax Benefits (Expenses) 636 1.1 (447) 24.8 (2,885) (453.3) Net Income Before Cumulative Effect of Changes in Accounting Principles 18,369 31.4 1,149 3.5 15,633 85.1 Cumulative Effect of Changes in Accounting Principles (Net of Tax) -- -- 246 (100.0) -- -- Net Income $18,369 31.4 $1,395 4.3 $15,633 85.1 Earnings per Share - Diluted 0.71 0.06 4.3 0.60 84.8 Earnings per ADR (2) 3.56 0.27 4.3 3.03 84.8 Weighted Average Outstanding Shares- Diluted ('M) (3) 25,771 Note: (1) Amounts in NTD have been translated into USD at the weighted average rate of NTD32.174 for the second quarter of 2006. (2) 1 ADR equals 5 ordinary shares. (3) Total diluted weighted average outstanding shares were 25,809M shares for 2Q06 and 25,771M shares for 2Q05 after the retroactive adjustments for stock dividends and stock bonus.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED Audited Condensed Income Statements (Unconsolidated) For the Six Months Ended June 30, 2006 and 2005 (Expressed in Million New Taiwan Dollars (NTD) and U.S. Dollars (USD) (1) Except for Per Share Amounts and Shares Outstanding) 2006 USD NTD % Net Sales $4,914 $158,521 100.0 Cost of Sales (2,510) (80,992) (51.1) Gross Profit 2,404 77,529 48.9 Operating Expenses Research and Development Expenses (225) (7,256) (4.6) General and Administrative Expenses (105) (3,380) (2.1) Sales and Marketing Expenses (33) (1,053) (0.7) Total Operating Expenses (363) (11,689) (7.4) Income from Operations 2,041 65,840 41.5 Non-Operating Income, Net 51 1,662 1.1 Investment Gains (Losses) 106 3,404 2.1 Income before Income Tax 2,198 70,906 44.7 Income Tax Benefits (Expenses) (125) (4,051) (2.5) Net Income Before Cumulative Effect of Changes in Accounting Principles 2,073 66,855 42.2 Cumulative Effect of Changes in Accounting Principles (Net of Tax) (8) (246) (0.2) Net Income $2,065 $66,609 42.0 Earnings per Share-Diluted 0.08 2.58 Earnings per ADR (2) 0.40 12.90 Weighted Average Outstanding Shares-Diluted ('M) (3) 25,808 Note: (1) Amounts in NTD have been translated into USD at the weighted average rate of NTD 32.256 for the six months of 2006. (2) 1 ADR equals 5 ordinary shares. (3) Total diluted weighted average outstanding shares were 25,808M shares for the six months ended June 30, 2006 and 25,770M shares for the six months ended June 30, 2005 after the retroactive adjustments for stock dividends and stock bonus.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED Audited Condensed Income Statements (Unconsolidated) For the Six Months Ended June 30, 2006 and 2005 (Expressed in Million New Taiwan Dollars (NTD) and U.S. Dollars (USD) (1) Except for Per Share Amounts and Shares Outstanding) 2005 YoY NTD % Amount % Net Sales $114,169 100.0 $44,352 38.8 Cost of Sales (69,315) (60.7) (11,677) 16.8 Gross Profit 44,854 39.3 32,675 72.8 Operating Expenses Research and Development Expenses (6,632) (5.8) (624) 9.4 General and Administrative Expenses (3,744) (3.3) 364 (9.7) Sales and Marketing Expenses (618) (0.5) (435) 70.5 Total Operating Expenses (10,994) (9.6) (695) 6.3 Income from Operations 33,860 29.7 31,980 94.4 Non-Operating Income, Net 924 0.8 738 79.9 Investment Gains (Losses) (786) (0.7) 4,190 (533.1) Income before Income Tax 33,998 29.8 36,908 108.6 Income Tax Benefits (Expenses) 1,189 1.0 (5,240) (440.6) Net Income Before Cumulative Effect of Changes in Accounting Principles 35,187 30.8 31,668 90.0 Cumulative Effect of Changes in Accounting Principles (Net of Tax) -- -- (246) 100.0 Net Income $35,187 30.8 $31,422 89.3 Earnings per Share-Diluted 1.37 1.22 89.0 Earnings per ADR (2) 6.83 6.08 89.0 Weighted Average Outstanding Shares-Diluted ('M) (3) 25,770 Note: (1) Amounts in NTD have been translated into USD at the weighted average rate of NTD 32.256 for the six months of 2006. (2) 1 ADR equals 5 ordinary shares. (3) Total diluted weighted average outstanding shares were 25,808M shares for the six months ended June 30, 2006 and 25,770M shares for the six months ended June 30, 2005 after the retroactive adjustments for stock dividends and stock bonus.

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED Condensed Statement of Cash Flows (Unconsolidated) For the Six Months Ended June 30, 2006 and the Three Months Ended June 30, 2006, March 31, 2006 and June 30, 2005 (Figures in Million of New Taiwan Dollars (NTD) and U.S. Dollars (USD)) (1) 6 Months 2006 2Q 2006 1Q 2006 2Q 2005(2) (Audited) (Un- (Un- (Un- audited) audited) audited) USD NTD NTD NTD NTD Cash Flows from Operating Activities: Net Income $2,065 $66,609 $34,002 $32,607 $18,369 Depreciation & Amortization 997 32,155 16,180 15,975 17,661 Deferred Income Tax 9 294 862 (569) (597) Investment Loss (Income) Recognized by Equity Method (106) (3,404) (432) (2,972) 588 Changes in Working Capital & Others (27) (875) (3,581) 2,707 (8,254) Net Cash Provided by Operating Activities 2,938 94,779 47,031 47,748 27,767 Cash Flows from Investing Activities: Acquisitions: Marketable Financial Instruments(3) (2,250) (72,581) (39,850) (32,731) (26,003) Long Term Investments by Equity Method (9) (275) (255) (19) (234) Property, Plant and Equipment (997) (32,171) (21,056) (11,115) (13,033) Proceeds from Disposal or Maturity of: Marketable Financial Instruments(3) 1,610 51,939 32,014 19,924 27,798 Property, Plant and Equipment 22 711 250 461 1,310 Decrease in Others (18) (603) (501) (102) (226) Net Cash Used in Investing Activities (1,642) (52,980) (29,398) (23,582) (10,387) Cash Flows from Financing Activities: Increase in Guarantee Deposits 14 461 139 322 1,147 Proceeds from Exercise of Stock Options 10 326 208 118 82 Bonus to Directors and Supervisors (8) (257) (257) -- (231) Net Cash Provided by Financing Activities 16 530 90 440 998 Net Increase in Cash and Cash Equivalents 1,312 42,329 17,723 24,606 18,378 Cash and Cash Equivalents at Beginning of Period 2,647 85,384 109,990 85,384 60,219 Cash and Cash Equivalents at End of Period $3,959 $127,713 $127,713 $109,990 $78,597 Note: (1) Amounts in NTD have been translated into USD at the rate of NTD32.256 , the weighted average rate for the six months ended June 30, 2006. (2) Certain prior period amounts have been reclassified to conform to the current period presentation. (3) Marketable financial instruments include available-for-sale and held-to-maturity financial assets, which non-current portions are classified as long-term investments in Balance Sheet.

Safe Harbor Notice:

The statements included in this press release that are not historical in nature are "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. TSMC cautions readers that forward-looking statements are subject to significant risks and uncertainties and are based on TSMC's current expectations. Actual results may differ materially from those contained in such forward-looking statements for a variety of reasons including, among others, risks associated with cyclicality and market conditions in the semiconductor industry; demand and supply for TSMC's foundry manufacturing capacity in particular and for foundry manufacturing capacity in general; intense competition; the failure of one or more significant customers to continue to place the same level of orders with us; TSMC's ability to remain a technological leader in the semiconductor industry; TSMC's ability to manage its capacity; TSMC's ability to obtain, preserve and defend its intellectual property rights; natural disasters and other unexpected events which may disrupt production; and exchange rate fluctuations. Additional information as to these and other risk factors that may cause TSMC's actual results to differ materially from TSMC's forward-looking statements may be found in TSMC's Annual Report on Form 20-F, filed with the United States Securities and Exchange Commission (the "SEC") on April 20, 2006, and such other documents as TSMC may file with, or submit to, the SEC from time to time. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

CONTACT Elizabeth Sun / Eric Chiang / Harrison Hsueh / Julie Wei Investor Relations Division TSMC Email: invest@tsmc.com Tel: +886-3-568-2085/ 2087/ 2088/ 2086 Web sites: http://www.tsmc.com http://www.tsmc.com/uploadfile/ir/quarterly/index_charts.pdf