RISK FACTORS

      You should carefully consider the risks described below before making an investment decision. In particular, as we are a non-U.S. company, there are risks associated with investing in our ADSs that are not typical with investments in the shares of U.S. companies. Before making an investment decision, you should carefully consider all of the information contained in this prospectus, including the following risk factors.

Risks Relating to Our Business

Since we are dependent on the highly cyclical semiconductor industry and conditions in the markets for the end use applications of our products, our revenues and earnings may fluctuate significantly.

      Our semiconductor packaging and testing business is affected by market conditions in the highly cyclical semiconductor industry. All of our customers operate in this industry, and variations in order levels from our customers and service fee rates may result in volatility in our revenues and earnings. From time to time, the semiconductor industry has experienced significant, and sometimes prolonged, downturns. Because our business is, and will continue to be, dependent on the requirements of semiconductor companies for independent packaging and testing services, any future downturn in the semiconductor industry would reduce demand for our services. For example, a worldwide slowdown in demand for semiconductor devices led to excess capacity and increased competition beginning in early 1998. As a result, price declines in 1998 accelerated more rapidly and adversely affected our operating results in 1998. With the upturn in the semiconductor industry in the second half of 1999 and the continued strong performance during the first half of 2000, prices for packaging and testing services improved. However, if the industry were to encounter another downturn, there may again be downward pressure on the average selling prices for our packaging and testing services. If we cannot reduce our costs to sufficiently offset any decline in average selling prices, our profitability will suffer.

      Market conditions in the semiconductor industry depend to a large degree on conditions in the markets for the end use applications of the semiconductor products, such as personal computers, communications and consumer electronics. Any deterioration of conditions in the markets for the end use applications of the semiconductors we package and test would reduce demand for our services and, in turn, would likely have a material adverse effect on our financial condition and results of operations. In 1999 and the first half of 2000, 77.6% and 72.6%, respectively, of our sales was attributable to the packaging and testing of semiconductors used in personal computer and communications applications. Both industries are subject to intense competition and significant shifts in demand which could put pricing pressure on the packaging and testing services provided by us and have a negative effect on our revenues and earnings.

A reversal or slowdown in the outsourcing trend for semiconductor packaging and testing services could adversely affect our growth prospects and profitability.

      In recent years, semiconductor manufacturers that have their own in-house packaging and testing capabilities, known as integrated device manufacturers, have increasingly outsourced stages of the semiconductor production process, including packaging and testing, to independent companies to reduce costs and shorten production cycles. In addition, the availability of advanced independent semiconductor manufacturing services has also enabled the growth of so called “fabless” semiconductor companies that focus exclusively on design and marketing, and which outsource their manufacturing, packaging and testing requirements to independent companies. We cannot assure you that these integrated device manufacturers and fabless semiconductor companies will continue to outsource their packaging and testing requirements to

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If we are unable to compete favorably in the highly competitive semiconductor packaging and testing markets, our profits may decrease.

      The semiconductor packaging and testing markets are very competitive. We face competition from a number of sources, including other independent semiconductor packaging and testing companies, especially those which offer turnkey packaging and testing services. We believe that the principal competitive factors in the markets for our products and services are:

	•	technological expertise;
	•	ability to work closely with customers at the product development stage;
	•	production yield;
	•	responsiveness and flexibility;
	•	cycle time;
	•	capacity;
	•	production time;
	•	range and quality of packaging types and testing platforms available; and
	•	price.

      We face increasing competition from other packaging and testing companies in Asia. In particular, most of our customers obtain packaging or testing services from more than one source. Furthermore, some of our competitors may have access to more advanced technologies and greater financial and other resources than we do. Many of our competitors have shown a willingness to quickly and sharply reduce prices, as they did in 1998, in order to maintain capacity utilization in their facilities during periods of reduced demand. Although prices have since stabilized, any renewed erosion in the prices for our packaging and testing services could cause our profits to decrease and have a material adverse effect on our financial condition and results of operations.

Our profitability depends on our ability to respond to rapid technological changes in the semiconductor industry.

      The semiconductor industry is characterized by rapid increases in the diversity and complexity of semiconductors. As a result, we expect that we will need to constantly offer more sophisticated packaging and testing technologies and processes in order to respond to competitive industry conditions and customer requirements. If we fail to develop, or obtain access to, advances in packaging or testing technologies or processes, we may become less competitive and less profitable. In addition, advances in technology typically lead to declining average prices for semiconductors packaged or tested with older technologies or processes. As a result, if we cannot reduce the costs associated with our services, the profitability on a given service, and our overall profitability, may decrease over time.

Our operating results are subject to significant fluctuations, which could negatively impact the market value of your investment.

      Our operating results have varied significantly from period to period and may continue to vary in the future. Downward fluctuations in our operating results may result in decreases in the

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	•	our ability to quickly adjust to unanticipated declines or shortfalls in demand and market prices for our packaging and testing services, due to our high percentage of fixed costs;
	•	timing of capital expenditures in anticipation of future orders;
	•	changes in prices of our packaging and testing services;
	•	volume of orders relative to our packaging and testing capacity;
	•	our ability to obtain adequate packaging and testing equipment on a timely basis; and
	•	changes in costs and availability of raw materials, equipment and labor.

      Due to the factors listed above, it is possible that our future operating results or growth rates may be below the expectations of research analysts and investors. If so, the market price of our ADSs and common shares, and thus the market value of your investment, may fall.

Due to our high percentage of fixed costs, we will be unable to maintain our profitability at past levels if we are unable to achieve relatively high capacity utilization rates.

      Our operations are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses in connection with the acquisition of new packaging and testing equipment and new facilities. Our profitability depends in part not only on absolute pricing levels for our services, but also on utilization rates for our packaging and testing equipment, commonly referred to as “capacity utilization rates”. In particular, increases or decreases in our capacity utilization rates can have a significant effect on gross margins since the unit cost of packaging and testing services generally decreases as fixed costs are allocated over a larger number of units. In the first half of 1999, we experienced lower than anticipated capacity utilization rates in our operations due to lower than expected growth in demand, which led to reduced margins during that period. Although our capacity utilization rates have improved recently, we cannot assure you that we will be able to maintain or surpass our past profitability levels if we cannot consistently achieve or maintain relatively high capacity utilization rates.

If we are unable to manage our expansion effectively, our growth prospects may be limited and our future profitability may be affected.

      We have significantly expanded our packaging and testing operations in recent years, and expect to continue to expand our operations in the future. In particular, we intend to expand our operations geographically, attract new customers and broaden our product range to include products packaged and tested for a variety of end use applications. In the past, we have expanded through both internal growth and the acquisition of new operations. Rapid expansion puts strain on our managerial, technical, financial, operational and other resources. As a result of our expansion, we have implemented and will continue to need to implement additional operational and financial controls and hire and train additional personnel. Any failure to manage our growth effectively could lead to inefficiencies and redundancies and result in reduced growth prospects and profitability.

We need to successfully integrate and manage our acquisitions to maintain profitability.

      We intend to grow in part through the acquisition of semiconductor packaging and testing operations that complement our existing business. This strategy will involve reviewing and potentially reorganizing acquired business operations, corporate structures and systems and financial controls. The success of our acquisition strategy may be limited because of unforeseen expenses, difficulties, complications and delays encountered in connection with these acquisitions. We may not be able to acquire or manage profitably additional businesses or to

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      In 1999, we acquired the packaging and testing operations of ISE Labs, ASE Chung Li and ASE Korea, as well as a controlling 22.6% interest in Universal Scientific. We continue to evaluate acquisition opportunities and plan to make additional acquisitions in the future if suitable opportunities arise. These acquisitions may dilute our earnings per share as a result of the specific scope of the businesses or condition of the operations being acquired. In particular, these acquisitions may involve risks, including:

	•	integration and management of the operations;
	•	retention of select management personnel;
	•	integration of purchasing operations and information systems;
	•	coordination of sales and marketing efforts;
	•	cost of any pending or potential litigation against the acquired businesses prior to our acquisition;
	•	management of an increasingly larger and more geographically disparate business; and
	•	diversion of management’s attention from other ongoing business concerns.

      We depend on select management personnel from acquired businesses for the continued operation of these businesses. If we are unable to retain these management personnel, we may have difficulty achieving profitability in our recently acquired businesses. Although some of these management personnel have entered into employment agreements with us, they may nevertheless leave before the expiration of these agreements. We are not insured against the loss of any of our personnel.

      If we are unable to successfully integrate and manage our recent acquisitions, as well as any future acquisitions that we might pursue, our growth plans may not be met and our profitability may decline.

Because of the highly cyclical nature of our industry, our capital requirements are difficult to plan. If we cannot obtain additional capital when we need it, our growth prospects and future profitability may be adversely affected.

      Our capital requirements are difficult to plan in our highly cyclical and rapidly changing industry. We will need capital to fund the expansion of our facilities as well as research and development activities in order to remain competitive. We believe that our current cash and cash equivalents, cash flow from operations and the proceeds from this offering will be sufficient to meet our anticipated needs at least through the end of 2000, including for working capital and capital expenditure requirements. However, future acquisitions or market or other developments may cause us to require additional funds. Our ability to obtain external financing in the future is subject to a variety of uncertainties, including:

	•	our future financial condition, results of operations and cash flows;
	•	general market conditions for financing activities by semiconductor companies; and
	•	economic, political and other conditions in Taiwan and elsewhere.

      If we are unable to obtain funding in a timely manner or on acceptable terms, our growth prospects and future profitability may decline.

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We depend on select personnel and could be affected by the loss of their services.

      We depend on the continued service of our executive officers and skilled technical and other personnel. Our business could suffer if we lose the services of any of these personnel and cannot adequately replace them. In particular, we will be required to increase substantially the number of these employees in connection with our expansion plans, and there is intense competition for their services in the semiconductor industry. We may not be able to either retain our present personnel or attract additional qualified personnel as and when needed. In addition, we may need to increase employee compensation levels in order to attract and retain our existing officers and employees and the additional personnel that we expect to require. A portion of the workforce at our facilities in Taiwan are foreign workers employed by us under work permits which are subject to government regulations on renewal and other terms. Consequently, our business could also suffer if the Taiwan regulations relating to the import of foreign workers were to become significantly more restrictive or if we are otherwise unable to attract or retain these workers at reasonable cost.

      Criminal charges were brought in December 1998 by the district attorney for Taipei against Jason C.S. Chang, our Chairman, Richard H.P. Chang, our Vice Chairman and Chief Executive Officer, and Chang Yao Hung-ying, our director, and others. ASE Inc. is not a party to these proceedings and we do not expect that these charges will result in any liability to us. If convicted, they would have to resign from their respective positions in our company and in ASE Group companies. See “Business — Legal Proceedings”.

If we are unable to obtain additional packaging and testing equipment or facilities in a timely manner and at a reasonable cost, our competitiveness and future profitability may be adversely affected.

      The semiconductor packaging and testing business is capital intensive and requires significant investment in expensive equipment manufactured by a limited number of suppliers. The market for semiconductor packaging and testing equipment is characterized, from time to time, by intense demand, limited supply and long delivery cycles. Our operations and expansion plans depend on our ability to obtain a significant amount of these equipment from a limited number of suppliers, including, in the case of testers, Credence Systems Corporation, Teradyne, Inc., Hewlett-Packard Asia Pacific Limited, Schlumberger Technologies, Advantest Corporation, Electroglas, Inc. and Megatest Corporation and, in the case of wire bonders, Kulicke & Soffa Industries Inc. and Shinkawa Limited. There is currently significant global demand for capital equipment, particularly testers, and the lead time for the delivery of capital equipment may be six months or more following the time when orders are placed. We have no binding supply agreements with any of our suppliers and acquire our packaging and testing equipment on a purchase order basis, which exposes us to changing market conditions and other substantial risks. For example, shortages of capital equipment could result in an increase in the price of equipment and longer delivery times. Semiconductor packaging and testing also requires us to operate sizeable facilities. We are currently constructing additional facilities in Malaysia and Taiwan to meet anticipated demand. See “Business — Facilities.” If we are unable to obtain equipment or facilities in a timely manner, we may be unable to fulfill our customers’ orders, which could negatively impact our growth prospects as well as financial condition and results of operations.

Fluctuations in exchange rates could result in foreign exchange losses.

      Currently, the majority of our revenues from packaging and testing services are denominated in U.S. dollars and NT dollars. Our costs of revenues and operating expenses associated with packaging and testing services, on the other hand, are incurred in several currencies, including NT dollars, U.S. dollars, Malaysian ringgit, Korean won, Philippine pesos, Singapore dollars and Hong Kong dollars. In addition, a substantial portion of our capital expenditures, primarily for the

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The loss of a major customer or disruption of our strategic alliance with TSMC may result in a decline in our revenues and profitability.

      Although we have over 200 customers, due in part to the concentration of market share in the semiconductor industry, we have derived and expect to continue to derive a large portion of our revenues from a small group of customers during any particular period. Our five largest customers together accounted for approximately 32.3%, 34.3%, 40.0% and 49.7% of our sales in 1997, 1998, 1999 and the six months ended June 30, 2000, respectively. Other than Motorola in 1999, no customer accounted for more than 10% of our net revenues in 1997, 1998 or 1999. For the six months ended June 30, 2000, no customer other than Motorola and VIA Technologies, Inc. accounted for more than 10% of our net revenues. In connection with our acquisition in July 1999 of Motorola’s in-house packaging and testing operations in Chung Li and Korea, we entered into manufacturing services agreements which expire in 2004 for Motorola’s continuing business at the Chung Li and Korea facilities. As a result, Motorola accounted for approximately 16% of our 1999 sales and approximately 25.6% of our sales for the first half of 2000. There has been significant variation in the composition of our largest five customers over time. This variation is due primarily to the high level of competition in the semiconductor industry in which our customers operate. The demand for our services from each customer is directly dependent upon that customer’s level of business activity, which could vary significantly from year to year. As a result, we have been less dependent on any particular customer over time.

      Our strategic alliance with Taiwan Semiconductor Manufacturing Company Limited, the world’s largest dedicated semiconductor foundry, enables us to offer total semiconductor manufacturing services to our customers. This strategic alliance is terminable at will by either party. A termination of this strategic alliance, and our failure to enter into a substantially similar alliance, may adversely affect our competitiveness and our revenues and profitability.

      All of our key customers operate in the cyclical semiconductor business and have in the past, and may in the future, vary order levels significantly from period to period. Moreover, over half of our customers are fabless semiconductor companies which outsource substantially all of their wafer fabrication and packaging requirements. Many of these companies are relatively small, have limited operating histories and financial resources, and are highly exposed to the cyclicality of the industry. We cannot assure you that these customers or any other customers will continue to place orders with us in the future at the same levels as in prior periods. The loss of one or more of our significant customers, or reduced orders by any one of them, and our inability to replace these customers or make up for such orders could reduce our profitability. In addition, we have in the past reduced, and may in the future be requested to reduce, our prices to limit the level of order cancellations. These price reductions would in turn be likely to reduce our margins and profitability.

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We depend on our agents for sales and customer service in North America and Europe. Any serious interruption in our relationship with these agents, or substantial loss in their effectiveness, could significantly reduce our revenues and profitability.

      We depend on non-exclusive agents for sales and customer service in North America and Europe. Our sales agents help us identify customers, monitor delivery acceptance and payment by customers and, within parameters set by us, help us negotiate price, delivery and other terms with our customers. Purchase orders are placed directly with us by our customers. Our customer service agents provide customer service and after-sales support to our customers.

      Currently, our sales and customer service agents perform services only for us and ASE Test, our subsidiary, but they are not owned or controlled by us. These agents are free to perform sales and support services for others, including our competitors. In particular, we may not be able to find an adequate replacement for these agents or to develop sufficient capabilities internally on a timely basis. Any serious interruption in our relationship with these agents or substantial loss in their effectiveness in performing their sales and customer service functions could significantly reduce our revenues and profitability.

Our revenue and profitability may decline if we are unable to obtain adequate supplies of raw materials in a timely manner and at a reasonable price.

      Our packaging operations require that we obtain adequate supplies of raw materials on a timely basis. Shortages in the supply of raw materials experienced by the semiconductor industry have in the past resulted in occasional price increases and delivery delays. For example, in 1997 and 1998, the industry experienced a shortage in the supply of advanced substrates used in ball grid array, or BGA, packaging. In 1997 we established ASE Material Inc., a company engaged in the development, production and sales of substrates and leadframes, to partially reduce this risk. However, ASE Material will not meet all of our raw materials requirements and consequently we will remain dependent on market supply and demand. We cannot assure you that we will be able to obtain adequate supplies of raw materials in a timely manner and at a reasonable price. Our revenues and earnings could decline if we were unable to obtain adequate supplies of high quality raw materials in a timely manner or if there were significant increases in the costs of raw materials that we could not pass on to our customers.

Any environmental claims or failure to comply with any present or future environmental regulations may require us to spend additional funds and may materially and adversely affect our financial condition and results of operations.

      We are subject to a variety of laws and regulations relating to the use, storage, discharge and disposal of chemical by-products of, and water used in, our packaging process. Although we have not suffered material environmental claims in the past, the failure to comply with any present or future regulations could result in the assessment of damages or imposition of fines against us, suspension of production or a cessation of our operations. New regulations could require us to acquire costly equipment or to incur other significant expenses. Any failure on our part to control the use of, or adequately restrict the discharge of, hazardous substances could subject us to future liabilities that may have a material adverse effect on our financial condition and results of operations.

Our controlling shareholders may take actions that are not in, or may conflict with, our public shareholders’ best interest.

      After this offering, members of the Chang family will own, directly or indirectly, a controlling interest of approximately 26% of our outstanding common shares. Accordingly, these

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	•	our management and policies;
	•	the timing and distribution of dividends; and
	•	the election of our directors and supervisors.

      Members of the Chang family may take actions that you may not agree with or that are not in our or our public shareholders’ best interest.

We are an ROC company, and because the rights of shareholders under ROC law differ from those under U.S. law, you may have difficulty protecting your shareholder rights.

      Our corporate affairs are governed by our Articles of Incorporation and by the laws governing corporations incorporated in the ROC. The rights of shareholders and the responsibilities of management and the members of the board of directors under ROC law are different from those applicable to a corporation incorporated in the United States. For example, directors and controlling shareholders of ROC companies do not owe fiduciary duties to minority shareholders. Therefore, public shareholders of ROC companies may have more difficulty in protecting their interest in connection with actions taken by management or members of the board of directors than they would as public shareholders of a U.S. corporation.

Risks Relating to Countries in Which We Conduct Operations

Risks Relating to Taiwan, Republic of China

      Our principal executive offices and our principal packaging and testing facilities are located in Taiwan and approximately 72% and 75% of our net revenues in 1999 and the six months ended June 30, 2000, respectively, from packaging and testing services are derived from our operations in Taiwan. The Republic of China has a unique international political status. Both the Republic of China and the People’s Republic of China assert sovereignty over all of China, including Taiwan. The People’s Republic of China government does not recognize the legitimacy of the Republic of China government. Although significant economic and cultural relations have been established in recent years between the Republic of China and the People’s Republic of China, relations have often been strained and the government of the People’s Republic of China government has indicated that it may use military force to gain control over Taiwan in some circumstances, such as the declaration of independence by the Republic of China. Relations between the Republic of China and the People’s Republic of China have been particularly strained in recent years. Following the results of the presidential elections for the Republic of China held on March 2000, the new President of the Republic of China was sworn in on May 20, 2000. We cannot predict how the election of the new President will affect relations between the two governments. Past developments in relations between the Republic of China and the People’s Republic of China have on occasion depressed the market price of the shares and ADSs of Taiwanese companies. Relations between the Republic of China and the People’s Republic of China and other factors affecting the political or economic conditions in Taiwan could have a material adverse effect on our financial condition and results of operations, as well as the market price and the liquidity of our ADSs and common shares.

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      Taiwan is susceptible to earthquakes. On September 21, October 22 and November 2, 1999, Taiwan experienced severe earthquakes which caused significant property damage and loss of life, particularly in the central part of Taiwan. These earthquakes damaged production facilities and adversely affected the operations of many companies involved in the semiconductor and other industries. We experienced no structural damage to our facilities and no damage to our machinery and equipment as a result of these earthquakes. There were, however, interruptions to our production schedule primarily as a result of power outage caused by the earthquakes. Our production facilities as well as many of our suppliers and customers and providers of complementary semiconductor manufacturing services, including foundries, are located in Taiwan. If our customers are affected, it could result in a decline in the demand for our packaging and testing services. If our suppliers and providers of complementary semiconductor manufacturing services are affected, our production schedule could be interrupted or delayed. As a result, a major earthquake in Taiwan could severely disrupt the normal operation of business and have a material adverse effect on our financial condition and results of operations.

Risks Relating to Ownership of ADSs

If an active market for our ADSs fails to develop or be sustained, the price of our ADSs may fall.

      Before this offering, there has been no market outside the ROC for our common shares and there has been no market for our ADSs anywhere. Following this offering, the Taiwan Stock Exchange will remain the only market for the common shares. Application has been made to list the ADSs on the New York Stock Exchange. We cannot predict the extent to which this offering will result in the development of an active, liquid public trading market for our ADSs or how liquid the market will be. Active, liquid trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors, compared to less active and less liquid markets. Liquidity of a securities market is often a function of the volume of the underlying shares that are publicly held by unrelated parties.

      Although ADS holders are entitled to withdraw the common shares underlying the ADSs from the depositary at any time, ROC law requires that the common shares be held in an account in the ROC or sold for the benefit of the holder on the Taiwan Stock Exchange. In connection with any withdrawal of common shares from our ADS facility, the ADSs evidencing these common shares will be cancelled. Unless additional ADSs are issued, the effect of withdrawals will be to reduce the number of outstanding ADSs and, if a significant number of withdrawals are effected, to reduce the liquidity of the ADSs. We cannot assure you that the ADS depositary will be able to arrange for a sale of deposited shares in a timely manner or at a specified price, particularly during periods of illiquidity or volatility with respect to our common shares.

As a holder of ADSs, your voting rights are limited by the terms of the deposit agreement. You will not be able to exercise your voting rights on an individual basis.

      As a holder of ADRs evidencing ADSs, you will not be able to exercise voting rights on an individual basis. You may exercise your voting rights with respect to the underlying common shares only in accordance with the provisions of the deposit agreement. In particular, for any resolution to be proposed at a shareholders meeting, only holders who (1) have provided voting instructions in a timely manner in accordance with the provisions of the deposit agreement, and (2) together own at least 51% of the outstanding ADSs voting in the same manner, will be able to vote the common shares representing their ADSs in the manner set forth in their voting

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      During any period in which your ADSs represent the irrevocable right to receive our common shares evidenced by certificates of payment deposited with the custodian, you may exercise your voting rights in the same manner as if your ADSs represented our common shares.

You may not be able to participate in rights offerings and may experience dilution of your holdings.

      We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act of 1933 with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. We can give no assurances that we can establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. In addition, if the depositary is unable to obtain the requisite approval from the Central Bank of China for the conversion of the subscription payments into NT dollars or if the depositary determines that it is unlikely to obtain the required approval, we may decide with the depositary not to make the rights available to holders of ADSs. See “— Risks Relating to Ownership of ADSs — Changes in exchange controls which restrict your ability to convert proceeds received from your ownership of ADSs may have an adverse effect on the value of your investment” and “Annex B — Foreign Investment and Exchange Controls in the ROC” in this prospectus. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.

      If the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case you will receive no value for these rights.

The value of your investment may be reduced by possible future sales of common shares by us or our shareholders.

      Except for the sale of additional ADSs to the underwriters, we and some of our shareholders have agreed with the underwriters not to dispose of any of our common shares or securities convertible into or exchangeable for common shares, including ADSs, during the period beginning from the date of this prospectus continuing through the date 90 days after the date of this prospectus, except with the prior written consent of the representatives of the underwriters. Approximately 555.6 million common shares are subject to the lock-up agreement. The representatives may, in their discretion, waive or terminate these restrictions. See “Common Shares Available for Future Sale” for a discussion of restrictions that may apply to future sales of our ADSs or common shares by us and our affiliates.

      While we are not aware of any plans by any major shareholders to dispose of significant numbers of common shares, we cannot assure you that one or more existing shareholders or owners of securities convertible or exchangeable into or exercisable for our common shares will not dispose of significant numbers of common shares. In addition, following completion of this offering, several of our subsidiaries and affiliates will continue to hold common shares, depositary shares representing common shares and options to purchase common shares. We or they may decide to sell those securities in the future. See “Principal Shareholders” for a description of our significant shareholders and ASE Group companies that hold our common shares. We cannot predict the effect, if any, that future sales of ADSs or common shares, or the availability of ADSs or common shares for future sale, will have on the market price of ADSs or common shares

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Changes in exchange controls which restrict your ability to convert proceeds received from your ownership of ADSs may have an adverse effect on the value of your investment.

      Under current ROC law, the depositary, without obtaining further approvals from the Central Bank of China or any other governmental authority or agency of the ROC, may convert NT dollars into other currencies, including U.S. dollars, for:

	•	the proceeds of the sale of common shares represented by ADSs or received as stock dividends from the common shares; and
	•	any cash dividends or distributions received from the common shares.

      In addition, the depositary may also convert into NT dollars incoming payments for purchases of common shares for deposit in the depositary receipt facility against the creation of additional ADSs. The depositary is required to obtain approval from the Central Bank of China on a payment-by-payment basis for conversion into NT dollars of subscription payments for rights offerings. The depositary may also be required to obtain foreign exchange approval from the Central Bank of China on a payment-by-payment basis for conversion from NT dollars into foreign currencies of the proceeds from the sale of subscription rights of new common shares. Although it is expected that the Central Bank of China will grant this approval as a routine matter, we cannot assure you that in the future any approval will be obtained in a timely manner, or at all.

      Under current ROC law, a holder, without obtaining further approval from the Central Bank of China, may convert from NT dollars into other currencies, including U.S. dollars, the following:

	•	the proceeds of the sale of any underlying common shares withdrawn from the depositary receipt facility or received as a stock dividend; and
	•	any cash dividends or distribution received.

      Under the ROC Foreign Exchange Control Law, the Executive Yuan of the ROC government may, without prior notice but subject to subsequent legislative approval, impose foreign exchange controls in the event of, among others, a material change in international economic conditions. We cannot assure you that foreign exchange controls or other restrictions will not be introduced in the future.

The market value of your investment may fluctuate due to the volatility of the ROC securities market.

      The ROC securities market is smaller and more volatile than the securities markets in the United States and in other European countries. The Taiwan Stock Exchange has experienced substantial fluctuations in the prices and volumes of sales of listed securities and there are currently limits on the range of daily price movements on the Taiwan Stock Exchange. In the past ten years, the Taiwan Stock Exchange Index peaked at 12,495.3 in February 1990, and subsequently fell to a low of 2,560.5 in October 1990. On August 25, 2000, the Taiwan Stock Exchange Index closed at 8,026.32. The Taiwan Stock Exchange has experienced problems such as market manipulation, insider trading and payment defaults. The recurrence of these or similar problems could have a material adverse effect on the market price and liquidity of the securities of ROC companies, including our ADSs and common shares, in both the domestic and the international markets.

You will not be able to withdraw the underlying common shares of our ADSs for a period of three months after the initial delivery of the ADSs.

      Under ROC regulations applicable to offerings of ADSs, newly-issued shares of ROC companies initially offered in ADS form may not be withdrawn from the ADS facility until three months following the initial delivery of the ADSs. As a result, for a period of three months following closing of this offering, owners of the ADSs offered by this prospectus will not be able to withdraw the underlying common shares from our ADS facility or sell the underlying common shares on the Taiwan Stock Exchange. Although the common shares that will be represented by

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You may have difficulty enforcing any judgment obtained in the United States against us or our directors and supervisors or executive officers.

      Our company is incorporated under the laws of the ROC. Substantially all of our directors, supervisors and executive officers reside in the ROC. In addition, a substantial portion of our assets and the assets of those persons are located in the ROC. As a result, it may not be possible for investors to effect service of process upon us or those persons within the United States, or it may be difficult to enforce against us or them judgments obtained in the U.S. courts, including those based upon the civil liability provisions of the federal securities laws of the United States. In addition, we have been advised by Lee and Li, our ROC counsel, that there is doubt as to whether ROC courts will enter judgments in original actions brought in ROC courts based solely upon the civil liability provisions of the federal securities laws of the United States. See “Enforceability of Civil Liabilities”.

Purchasers of ADSs may incur dilution as a result of the practice among ROC technology companies of issuing stock bonuses to employees.

      Similar to other ROC technology companies, we issue from time to time bonuses in the form of common shares valued at par under our employee stock bonus plan. Because these shares are issued at par value, the issuance of these shares may have a dilutive effect on your ADSs.