Chartered Reports Results for Second Quarter 2007

MILPITAS, Calif.—(BUSINESS WIRE)—July 26, 2007— Chartered Semiconductor Manufacturing (Nasdaq: CHRT)(SGX-ST:CHARTERED), one of the world's top dedicated semiconductor foundries, today announced its results for second quarter 2007.

"In second quarter 2007, we saw shipment growth of approximately 17 percent, driven by strength in 0.13-micron and above technologies, which more than offset the lower 90-nanometer (nm) shipments to the computer sector. With strength coming mainly from more mature technologies which command relatively lower prices, this shipment growth translated to revenues that were essentially flat at the Chartered level and up 2.2 percent including our share of SMP, compared to the previous quarter. Revenues from 0.13-micron and below technologies, including those from 65nm, accounted for 50 percent of our total business revenues. Revenues from 65nm alone, including both SOI and bulk technologies, were six percent of our total business base revenues. We ended the quarter with a net loss of around $25 million which was higher than our previous guidance as a result of additional tax expense that had to be recognized in the quarter," said George Thomas, senior vice president and CFO of Chartered.

Summary of Second Quarter 2007 Performance

-- Revenues were $324.3 million in second quarter 2007, down 11.1 percent from $364.8 million in second quarter 2006. Revenues including Chartered's share of SMP were $353.0 million, down 10.3 percent from $393.7 million in the year-ago quarter, primarily due to weakness in the consumer sector, partially offset by strength in the communications and computer sectors. Sequentially, revenues were up 0.2 percent compared to $323.8 million in first quarter 2007. Revenues including Chartered's share of SMP were up 2.2 percent from $345.3 million in first quarter 2007, primarily due to strength in the communications and consumer sectors, significantly offset by weakness in the computer sector.

-- Gross profit was $59.9 million, or 18.5 percent of revenues, down from a gross profit of $88.5 million, or 24.2 percent of revenues in the year-ago quarter, primarily due to lower revenues resulting from a less favorable product mix arising from lower shipments of 90nm products which have higher fixed costs. Gross profit was also affected to a lesser extent by lower selling prices, partially offset by higher shipments from 0.13-micron and above technologies. Gross profit was down 16.5 percent sequentially from $71.7 million, or 22.2 percent of revenues in first quarter 2007, primarily due to a less favorable product mix arising from lower shipments of 90nm products which have higher fixed costs, partially offset by higher shipments from 0.13-micron and above technologies.

-- Other revenue primarily relates to rental income from SMP (Fab 5) and was $5.6 million compared to $5.3 million in the year-ago quarter.

-- Research and development (R&D) expenses were $38.5 million, an increase of 1.7 percent from the year-ago quarter, primarily due to higher development activities related to the advanced 45nm technology node and higher activities related to development of design kits and intellectual property solutions for advanced technologies. Compared to the previous quarter, R&D expenses were up 2.5 percent, primarily due to lower reimbursement of expenses related to grants.

-- Sales and marketing expenses were $13.4 million, up 11.9 percent compared to $11.9 million in the year-ago quarter, primarily due to higher expenses related to Electronic Design Automation (EDA) offerings. Compared to the previous quarter, sales and marketing expenses were down 6.2 percent from $14.2 million, primarily due to lower financial support for pre-contract customer design validation activities and lower expenses related to EDA offerings.

-- General and administrative (G&A) expenses were $9.7 million, essentially flat compared to the year-ago quarter.

-- Equity in income of Chartered's minority-owned joint-venture fab, SMP (Fab 5), was $10.2 million compared to $7.9 million in the year-ago quarter, primarily due to lower cost per wafer resulting from lower depreciation and higher production volumes over which fixed costs are allocated. Compared to the previous quarter, equity in income of SMP was up 67.5 percent from $6.1 million, 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.

-- Net interest expense was $8.7 million, compared to $10.4 million in the year-ago quarter, primarily due to higher interest capitalization associated with the ramp of Fab 7, partially offset by lower interest income arising from lower principal balances. Compared to the previous quarter, net interest expense was up 7.7 percent due to lower interest income arising from lower principal balances.

-- The financial position of Chartered's consolidated joint venture fab, Chartered Silicon Partners (CSP or Fab 6), continued to be in a shareholders' deficit in second quarter 2007, and therefore none of the loss of $3.9 million in the second quarter was allocated to the minority interest. At the end of second quarter 2007, CSP's shareholders' deficit was $432.4 million.

-- Net loss was $24.7 million, or negative 7.6 percent of revenues, compared to a net income of $12.9 million, or 3.5 percent of revenues in the year-ago quarter and a net income of $6.3 million or 2 percent of revenues in the previous quarter. Net loss was higher than previous guidance primarily due to a higher than expected tax expense, resulting from a higher effective tax rate (ETR). The higher ETR used in second quarter 2007 was mainly due to forecast losses, arising primarily from the leading-edge technologies, which were not deductible against taxable income. These forecast non-deductible losses were higher than what was expected for the year in first quarter 2007. The tax expense in second quarter 2007 also included a cumulative adjustment to bring first quarter 2007 tax expense level up to reflect the revised ETR. ETR is calculated as a percentage of the forecast tax expense for the year over the forecast profit before tax for the same period and is the methodology used under US GAAP to account for tax expense in interim periods.

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