Dear Shareholders:

The year 2002 saw Vanguard International Semiconductor Corporation (VIS) accelerating our conversion to a specialty IC foundry company. Monthly revenues continued to grow throughout the year. However, the global semiconductor market suffered a massive decline of over 30% in 2001, and barely managed to avoid any further shrinkage in 2002. Overall, the entire industry still faced extremely adverse conditions. Total revenues of VIS for 2002 amounted to NT$ 8.307 billion, with an after-tax loss of NT$ 3.25 billion and a loss of NT$ 1.48 per share. Total revenues in 2002 were down NT$802 million from the same period in the previous year, while the after-tax loss shrank by a substantial total of NT$5.44 billion.

Building a Market Niche

Building on the basis of our reliable process technologies, rich intellectual property resources and highly customized services, VIS was able to provide customers with readily available production capacity and technological support in 2002. VIS helped our customers, including fabless semiconductor companies and integrated device manufacturers (IDMs), raise their added values by offering high-quality, reliable foundry services and the most cost-effective solutions, thus laying a solid foundation for our own long-term development.

Technology Advancement

To fully meet customer demands, VIS has strived to expand the depth and width of our technological services. To add to our depth, VIS has successfully advanced logic foundry production from the 0.5µm/0.35µm level to the 0.25µm/0.18µm level. The previous 0.18µm memory process technology has also been advanced to the 0.165µm level. To broaden our technological range, VIS has developed Mixed-Mode technology, High Voltage Device, Mask-ROM, CMOS Imaging Sensor technology and flash memory technology based on the core CMOS Logic technology. These latest achievements have allowed VIS to provide a comprehensive array of IC foundry services, thus helping our clients enhance their global competitiveness and improving VIS's overall profitability by creating win-win partnerships with our clients.

Future Prospects

VIS will continue to focus on our conversion to a specialty IC foundry company. The efforts in the past year have been well received in the market, making VIS one of the best choices available for IC manufacturing. The ever-growing client base is turning into the driving force behind the long-term development of VIS. Looking ahead, VIS will seize every growth opportunity in the industry and strive to improve our operating performances significantly. VIS is aiming at turning a profit within the shortest period of time possible, actively increasing our market share and strengthening our leadership position in the specialty IC foundry field.

In closing, on behalf of VIS, we would like to express our deepest gratitude to all of our clients, shareholders, and employees for your continuing support.