As filed with the Securities and Exchange Commission on June 30, 2003

===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 20-F

[_]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
     EXCHANGE ACT OF 1934
                                       OR
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the fiscal year ended December 31, 2002
                                       OR
[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                       Commission file number: 001-16125

                             [CHINESE TEXT OMITTED]
             (Exact Name of Registrant as Specified in Its Charter)

                    Advanced Semiconductor Engineering, Inc.
                (Translation of Registrant's Name into English)

                               REPUBLIC OF CHINA
                (Jurisdiction of Incorporation or Organization)

                               26 Chin Third Road
                         Nantze Export Processing Zone
                           Nantze, Kaohsiung, Taiwan
                               Republic of China
                    (Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

         Title of Each Class           Name of Each Exchange on which Registered
         -------------------           -----------------------------------------
Common Shares, par value NT$10.00 each        The New York Stock Exchange*

    *Traded in the form of American Depositary Receipts evidencing American
            Depositary Shares, each representing five Common Shares

Securities registered or to be registered pursuant to Section 12(g) of the Act:

                                      None
                                (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
                                  of the Act:

                                      None
                                (Title of Class)

     Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report:

               3,254,800,000 Common Shares, par value NT$10 each

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

          Yes [X]  No [_]

     Indicate by check mark which financial statement item the Registrant has
elected to follow.

          Item 17 [_]  Item 18 [X]


<PAGE>


                               TABLE OF CONTENTS
                               -----------------

                                                                            Page
                                                                            ----

INTRODUCTION...................................................................1
     USE OF CERTAIN TERMS......................................................1
     SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.........................1
PART I.........................................................................2
      Item 1.  Identity of Directors, Senior Management and Advisers...........2
      Item 2.  Offer Statistics and Expected Timetable.........................2
      Item 3.  Key Information.................................................2
                SELECTED FINANCIAL DATA........................................2
                EXCHANGE RATES.................................................4
                CAPITALIZATION AND INDEBTEDNESS................................5
                REASON FOR THE OFFER AND USE OF PROCEEDS.......................5
                RISK FACTORS...................................................5
      Item 4.  Information on the Company.....................................17
                HISTORY AND DEVELOPMENT OF THE COMPANY........................17
                BUSINESS OVERVIEW.............................................18
                ORGANIZATIONAL STRUCTURE......................................36
                PROPERTIES....................................................38
      Item 5.  Operating and Financial Review and Prospects...................41
                OPERATING RESULTS AND TREND INFORMATION.......................41
                LIQUIDITY AND CAPITAL RESOURCES...............................54
                RESEARCH AND DEVELOPMENT......................................57
      Item 6.  Directors, Senior Management and Employees.....................58
                DIRECTORS AND SENIOR MANAGEMENT AND BOARD PRACTICE............58
                COMPENSATION..................................................61
                EMPLOYEES.....................................................62
                SHARE OWNERSHIP...............................................63
      Item 7.  Major Shareholders and Related Party Transactions..............64
                MAJOR SHAREHOLDERS............................................64
                RELATED PARTY TRANSACTIONS....................................64
      Item 8.  Financial Information..........................................66
                CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.......66
                LEGAL PROCEEDINGS.............................................66
                DIVIDENDS AND DIVIDEND POLICY.................................67
                SIGNIFICANT CHANGES...........................................68
      Item 9.  Listing Details................................................68
                MARKET PRICE INFORMATION AND MARKETS..........................68
      Item 10.  Additional Information........................................70
                ARTICLES OF INCORPORATION.....................................70
                MATERIAL CONTRACTS............................................74
                EXCHANGE CONTROLS.............................................76
                TAXATION......................................................77
                DOCUMENTS ON DISPLAY..........................................80
      Item 11.  Quantitative and Qualitative Disclosures about Market Risk....80
                MARKET RISK...................................................80
      Item 12.  Description of Securities Other Than Equity Securities........82
PART II.......................................................................82
      Item 13.  Defaults, Dividend Arrearages and Delinquencies...............82
      Item 14.  Material Modifications to the Rights of Security Holders
                and Use of Proceeds...........................................82
                MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS......82
      Item 15.  Controls and Procedures.......................................82
PART III......................................................................83
      Item 17.  Financial Statements..........................................83
      Item 18.  Financial Statements..........................................83
      Item 19.  Exhibits......................................................83


                                       i
<PAGE>


                                  INTRODUCTION


                              USE OF CERTAIN TERMS

     All references herein to (i) the "Company", "ASE Group", "ASE Inc.", "we",
"us", or "our" are to Advanced Semiconductor Engineering, Inc. and, unless the
context requires otherwise, its subsidiaries, (ii) "ASE Test" are to ASE Test
Limited and its subsidiaries, (iii) "ASE Test Taiwan" are to ASE Test, Inc., a
company incorporated in the ROC, (iv) "ASE Test Malaysia" are to ASE
Electronics (M) Sdn. Bhd., a company incorporated under the laws of Malaysia,
(v) "ISE Labs" are to ISE Labs, Inc., a corporation incorporated in the State
of California, (vi) "ASE Philippines" are to ASE Holdings Electronics
(Philippines) Inc., a company incorporated in the Philippines, (vii) "Universal
Scientific" are to Universal Scientific Industrial Co., Ltd., a company
incorporated in the ROC, (viii) "ASE Material" are to ASE Material Inc., a
company incorporated in the ROC, (ix) "ASE Korea" are to ASE (Korea) Inc., a
company incorporated under the laws of the Republic of Korea, (x) "ASE Chung
Li" are to ASE (Chung Li) Inc., a company incorporated in the ROC and (xi)
"Hung Ching" are to Hung Ching Development & Construction Co. Ltd.

     All references to the "Republic of China", the "ROC" and "Taiwan" are to
the Republic of China, including Taiwan and certain other possessions. All
references to "Korea" or "South Korea" are to the Republic of Korea.

     We publish our financial statements in New Taiwan Dollars, the lawful
currency of the ROC. In this annual report, references to "United States
Dollars", "U.S. Dollars" and "US$" are to United States Dollars and references
to "New Taiwan Dollars", "NT Dollars" and "NT$" are to New Taiwan Dollars.
Unless otherwise noted, all translations from NT Dollars to U.S. Dollars were
made at the noon buying rate in the City of New York for cable transfers in NT
Dollars per U.S. Dollar as certified for customs purposes by the Federal
Reserve Bank of New York (the "Noon Buying Rate") as of December 31, 2002,
which was NT$34.70=US$1.00. All amounts translated into U.S. Dollars in this
annual report are provided solely for your convenience and no representation is
made that the NT Dollar or U.S. Dollar amounts referred to herein could have
been or could be converted into U.S. Dollars or NT Dollars, as the case may be,
at any particular rate or at all.


               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This annual report on Form 20-F contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, including statements regarding our
future results of operations and business prospects. Although these
forward-looking statements, which may include statements regarding our future
results of operations, financial condition or business prospect, are based on
our own information and information from other sources we believe to be
reliable, you should not place undue reliance on these forward-looking
statements, which apply only as of the date of this annual report. Our actual
results of operations, financial condition or business prospects may differ
materially from those expressed or implied in these forward looking statements
for a variety of reasons, including risks associated with the highly
competitive nature of the semiconductor industry, our ability to introduce new
packaging and testing technologies in order to remain competitive, our ability
to successfully integrate future acquisitions, risks associated with
international business activities, our business strategy, general economic and
political conditions, possible disruptions in commercial activities caused by
natural disasters or industrial accidents, our future expansion plans and
capital expenditures, fluctuations in foreign currency exchange rates, and
other factors. For a discussion of these risks and other factors, please see
"Item 3. Key Information -- Risk Factors".


                                       1
<PAGE>

                                     PART I

Item 1.  Identity of Directors, Senior Management and Advisers.

     Not applicable.

Item 2.  Offer Statistics and Expected Timetable.

     Not applicable.

Item 3.  Key Information.

SELECTED FINANCIAL DATA

     The following selected consolidated financial data have been derived from
our consolidated financial statements. Our consolidated statements of income
for the years ended December 31, 2000, 2001 and 2002 and our consolidated
balance sheets as of December 31, 2001 and 2002 have been audited by T.N. Soong
& Co., independent public auditors. Our consolidated financial statements, and
the report of T.N. Soong & Co. on those financial statements, are included in
this annual report. The selected consolidated financial information for those
periods and as of those dates are qualified by reference to those financial
statements and that report, and should be read in conjunction with them and
with "Item 5. Operating and Financial Review and Prospects". Effective April
22, 2002, T.N. Soong & Co. became an associate member firm of Deloitte Touche
Tohmatsu. T.N. Soong & Co. was formerly a member firm of Andersen Worldwide SC.
The selected consolidated statement of income data for the years ended December
31, 1998 and 1999 and the selected consolidated balance sheet data as of
December 31, 1998, 1999 and 2000 set forth below are derived from our audited
consolidated financial statements not included in this annual report. These
financial statements were also audited by T.N. Soong & Co. Our consolidated
financial statements are prepared and presented in accordance with generally
accepted accounting principles in the ROC, or ROC GAAP, which differ in some
material respects from generally accepted accounting principles in the United
States, or US GAAP. Notes 26 and 27 to our consolidated financial statements
contain additional disclosures required under US GAAP and provide descriptions
of the significant differences between ROC GAAP and US GAAP and reconciliations
of net income to US GAAP for the years ended December 31, 2000, 2001 and 2002
and the reconciliations of shareholders' equity to US GAAP as of December 31,
2001 and 2002.

<TABLE>
                                                                            As of and for the Year Ended December 31,
                                                              1998           1999           2000           2001          2002
                                                         -------------  -------------  -------------  -------------  -------------
                                                               NT$            NT$            NT$            NT$           NT$
                                                            (in millions, except share, ADS and earnings per share and per ADS data)
<S>                                                      <C>            <C>            <C>            <C>            <C>
ROC GAAP:
Income Statement Data:
Net revenues ...........................................      20,762.4       32,609.6       50,893.4       38,367.8       45,586.8
Cost of revenues .......................................     (15,468.1)     (23,959.6)     (35,567.3)     (32,957.0)     (38,492.2)
                                                             ---------      ---------      ---------      ---------      ---------
Gross profit ...........................................       5,294.3        8,650.0       15,326.1        5,410.8        7,094.6
Total operating expenses ...............................      (2,453.4)      (3,801.4)      (5,449.0)      (5,872.9)      (7,779.8)
                                                             ---------      ---------      ---------      ---------      ---------
Operating income (loss) ................................       2,840.9        4,848.6        9,877.1         (462.1)        (685.2)
Net non-operating income (expense) .....................        (859.6)       4,213.8       (1,473.5)      (2,523.4)      (2,024.5)
Income tax benefit (expense) ...........................         150.8         (459.5)      (1,065.8)         199.2        1,140.3
Income before acquisition ..............................          --            (65.1)          --             --             --
Extraordinary loss .....................................          --             --             --           (144.6)         (34.6)
Minority interest in net loss (income) of subsidiary ...        (528.1)        (743.1)      (1,500.6)         788.7        1,733.0
                                                             ---------      ---------      ---------      ---------      ---------
Net income (loss) ......................................       1,604.0        7,794.7        5,837.2       (2,142.2)         129.0
                                                             =========      =========      =========      =========      =========
Earnings per common share:
    Basic(1) ...........................................          0.51           2.49           1.84          (0.66)          0.04
    Diluted(1) .........................................          0.49           2.45           1.80          (0.66)          0.04
Dividends per common share(2) ..........................          7.20           1.07           3.15           1.70
Earnings per pro forma equivalent ADS:
    Basic(1) ...........................................          2.56          12.43           9.22          (3.29)          0.21
    Diluted(1) .........................................          2.43          12.27           9.01          (3.29)          0.21


<CAPTION>
                                                             2002
                                                         -------------
                                                              US$

<S>                                                      <C>
ROC GAAP:
Income Statement Data:
Net revenues ...........................................       1,313.7
Cost of revenues .......................................      (1,109.2)
                                                              --------
Gross profit ...........................................         204.5
Total operating expenses ...............................        (224.2)
                                                              --------
Operating income (loss) ................................         (19.7)
Net non-operating income (expense) .....................         (58.4)
Income tax benefit (expense) ...........................          32.9
Income before acquisition ..............................          --
Extraordinary loss .....................................          (1.0)
Minority interest in net loss (income) of subsidiary ...          49.9
                                                              --------
Net income (loss) ......................................           3.7
                                                              ========
Earnings per common share:
    Basic(1) ...........................................          0.00
    Diluted(1) .........................................          0.00
Dividends per common share(2) ..........................
Earnings per pro forma equivalent ADS:
    Basic(1) ...........................................          0.01
    Diluted(1) .........................................          0.01
</TABLE>


                                       2
<PAGE>


<TABLE>
                                                                            As of and for the Year Ended December 31,
                                                         -------------------------------------------------------------------------
                                                              1998           1999           2000           2001          2002
                                                         -------------  -------------  -------------  -------------  -------------
                                                               NT$            NT$            NT$            NT$           NT$
                                                            (in millions, except share, ADS and earnings per share and per ADS data)
<S>                                                      <C>            <C>            <C>            <C>            <C>
Number of common shares(3) ............................. 3,135,196,466  3,135,196,466  3,166,809,827  3,254,800,000  3,090,678,225
Number of pro forma equivalent ADSs ....................   627,039,293    627,039,293    633,361,965    650,960,000    618,135,645
Balance Sheet Data:
Current assets:
    Cash and cash equivalents ..........................       8,173.9       11,809.1       14,166.5       11,770.7       10,381.9
    Short-term investments .............................         647.2          216.3        1,682.7        4,601.2        2,038.0
    Notes and accounts receivable ......................       3,636.7        7,463.4        9,260.6        7,126.1        8,998.5
    Inventories ........................................       1,744.8        2,449.7        3,246.3        2,768.4        3,131.7
    Other ..............................................         771.9        1,411.8        2,431.6        3,383.2        2,481.7
                                                         -------------  -------------  -------------  -------------  -------------
    Total ..............................................      14,974.5       23,350.3       30,787.7       29,649.6       27,031.8
Long-term investments ..................................       7,317.0        9,674.4       10,712.2        9,530.4        6,566.7
Properties .............................................      20,356.8       38,107.5       60,566.2       60,555.1       63,088.9
Other assets ...........................................       1,125.9          952.8        1,275.6        1,342.3        2,640.2
Consolidated debits ....................................       3,237.3        5,245.8        4,999.5        5,248.9        5,541.8
                                                         -------------  -------------  -------------  -------------  -------------
Total assets ...........................................      47,011.5       77,330.8      108,341.2      106,326.3      104,869.4
                                                         =============  =============  =============  =============  =============
Short-term bank borrowings/loans(4) ....................       6,810.2        9,868.2       13,768.0       13,983.1       13,453.8
Long-term bank borrowings/loans(5) .....................      12,235.0       24,551.5       25,976.9       30,674.3       30,553.7
Other liabilities and minority interest ................       6,091.5       12,854.1       24,927.1       19,722.6       21,431.2
                                                         -------------  -------------  -------------  -------------  -------------
Total liabilities and minority interest ................      25,136.7       47,273.8       64,672.0       64,380.0       65,438.7
                                                         =============  =============  =============  =============  =============
Shareholders' equity ...................................      21,874.8       30,057.0       43,669.2       41,946.3       39,430.7
Other Data:
Net cash outflow from acquisition of fixed assets ......      (6,945.0)      (9,869.2)     (30,063.6)     (11,565.7)     (12,657.9)
Depreciation and amortization ..........................       3,237.2        5,554.4        8,593.8       11,127.3       12,286.3
Net cash inflow (outflow) from operations ..............       5,194.2        7,017.2       17,459.9       11,578.4       11,313.8
Net cash inflow (outflow) from sale of investments .....         290.5        7,889.3           --             --             --
Net cash inflow (outflow) from investing activities(6) .      (8,558.3)     (11,782.7)     (33,392.0)     (15,051.2)     (13,167.2)
Net cash inflow (outflow) from financing activities(7) .         589.3        8,569.0       17,607.3          603.5          530.5
Segment Data:
Net revenues:
    Packaging ..........................................      16,867.4       24,523.0       38,028.8       28,898.2       35,515.4
    Testing ............................................       3,131.3        7,793.2       12,768.4        9,459.2       10,060.6
    Other ..............................................         763.7          293.4           96.2           10.4           10.8
Gross profit:
    Packaging ..........................................       3,693.8        5,753.0       10,016.9        4,625.8        6,255.4
    Testing ............................................       1,484.6        3,105.2        5,294.4          782.8          841.2
    Other ..............................................         115.9         (208.2)          14.8            2.2           (2.0)
US GAAP:
Income Statement Data:
Net revenues ...........................................                                    50,893.4       38,367.8       45,586.8
Cost of revenues .......................................                                    37,081.2       34,538.3       39,308.2
                                                                                       -------------  -------------  -------------
Gross profit ...........................................                                    13,812.2        3,829.5       6,5278.6
Total operating expenses ...............................                                     5,820.8        6,209.9        9,294.2
                                                                                       -------------  -------------  -------------
Operating income (loss) ................................                                     7,991.4       (2,380.4)      (3,015.6)
Net non-operating income (expense) .....................                                    (1,502.5)      (2,511.8)      (2,747.7)
Income tax benefit (expense) ...........................                                    (1,059.2)         206.2        1,151.1
Extraordinary loss .....................................                                        --           (144.6)         (34.6)
Minority interest in net loss (income) of subsidiary ...                                    (1,499.7)         784.0        1,572.5
                                                                                       -------------  -------------  -------------
Net income (loss) ......................................                                     3,390.0       (4,046.6)      (3,074.3)
                                                                                       =============  =============  =============
Earnings per common share:
    Basic(1) ...........................................                                        1.34          (1.32)         (0.99)
    Diluted (1) ........................................                                        1.29          (1.32)         (0.99)
Earnings per common share:
    Basic(1) ...........................................                                        6.69          (6.59)         (4.97)


<CAPTION>
                                                             2002
                                                         -------------
                                                              US$

<S>                                                      <C>
Number of common shares(3) ............................. 3,090,678,225
Number of pro forma equivalent ADSs ....................   618,135,645
Balance Sheet Data:
Current assets:
    Cash and cash equivalents ..........................         299.2
    Short-term investments .............................          58.7
    Notes and accounts receivable ......................         259.3
    Inventories ........................................          90.3
    Other ..............................................          71.5
                                                         -------------
    Total ..............................................         779.0
Long-term investments ..................................         189.3
Properties .............................................       1,818.1
Other assets ...........................................          76.1
Consolidated debits ....................................         159.7
                                                         -------------
Total assets ...........................................       3,022.2
                                                         =============
Short-term bank borrowings/loans(4) ....................         387.8
Long-term bank borrowings/loans(5) .....................         880.5
Other liabilities and minority interest ................         617.6
                                                         -------------
Total liabilities and minority interest ................       1,885.9
                                                         =============
Shareholders' equity ...................................       1,136.3
Other Data:
Net cash outflow from acquisition of fixed assets ......        (364.8)
Depreciation and amortization ..........................         354.1
Net cash inflow (outflow) from operations ..............         326.0
Net cash inflow (outflow) from sale of investments .....          --
Net cash inflow (outflow) from investing activities(6) .        (379.5)
Net cash inflow (outflow) from financing activities(7) .          15.3
Segment Data:
Net revenues:
    Packaging ..........................................       1,023.5
    Testing ............................................         289.9
    Other ..............................................           0.3
Gross profit:
    Packaging ..........................................         180.3
    Testing ............................................          24.2
    Other ..............................................          (0.0)
US GAAP:
Income Statement Data:
Net revenues ...........................................       1,313.7
Cost of revenues .......................................       1,132.8
                                                         -------------
Gross profit ...........................................         180.9
Total operating expenses ...............................         267.8
                                                         -------------
Operating income (loss) ................................         (86.9)
Net non-operating income (expense) .....................         (79.2)
Income tax benefit (expense) ...........................          33.2
Extraordinary loss .....................................          (1.0)
Minority interest in net loss (income) of subsidiary ...          45.3
                                                         -------------
Net income (loss) ......................................         (88.6)
                                                         =============
Earnings per common share:
    Basic(1) ...........................................         (0.03)
    Diluted (1) ........................................         (0.03)
Earnings per common share:
    Basic(1) ...........................................         (0.14)
</TABLE>


                                       3
<PAGE>

<TABLE>
                                                                            As of and for the Year Ended December 31,
                                                         -------------------------------------------------------------------------
                                                              1998           1999           2000           2001          2002
                                                         -------------  -------------  -------------  -------------  -------------
                                                               NT$            NT$            NT$            NT$           NT$
                                                            (in millions, except share, ADS and earnings per share and per ADS data)
<S>                                                      <C>            <C>            <C>            <C>            <C>
    Diluted (1) ........................................                                        6.47          (6.59)         (4.97)
Number of common shares(8) .............................                               2,938,004,535  3,071,234,458  3,090,678,225
Number of pro forma equivalent ADSs ....................                                 587,600,907    614,246,892    618,135,645
Balance Sheet Data:
Current Assets
Cash and cash equivalents ..............................                                                   11,770.7       10,381.9
Short-term investments .................................                                                    4,642.1        2,040.0
Notes and accounts receivable ..........................                                                    7,126.1        8,998.5
Inventories ............................................                                                    2,768.4        3,131.7
Other ..................................................                                                    3,383.2        2,481.7
                                                                                                          ---------      ---------
Total ..................................................                                                   29,690.5       27,033.8
Long-term investments ..................................                                                    6,608.3        5,609.3
Properties .............................................                                                   60,363.1       62,797.4
Other assets ...........................................                                                    1,371.0        2,679.7
Consolidated debts .....................................                                                    4,331.6        3,227.0
                                                                                                          ---------      ---------
Total assets ...........................................                                                  102,364.5      101,347.2
                                                                                                          =========      =========
Short-term bank borrowings/loans(4) ....................                                                   13,383.1       13,453.8
Long-term bank borrowings/loans(5) .....................                                                   30,674.3       30,553.7
Other liabilities and minority interest ................                                                   19,746.8       21,622.9
                                                                                                          ---------      ---------
Total liabilities and minority interest ................                                                   64,404.2       65,630.4
                                                                                                          =========      =========
Shareholders' equity ...................................                                                   37,960.3       35,716.8


<CAPTION>
                                                             2002
                                                         -------------
                                                              US$

<S>                                                      <C>
    Diluted (1) ........................................         (0.14)
Number of common shares(8) ............................. 3,090,678,225
Number of pro forma equivalent ADSs ....................   618,135,645
Balance Sheet Data:
Current Assets
Cash and cash equivalents ..............................         299.2
Short-term investments .................................          58.8
Notes and accounts receivable ..........................         259.3
Inventories ............................................          90.3
Other ..................................................          71.5
                                                         -------------
Total ..................................................         779.1
Long-term investments ..................................         161.7
Properties .............................................       1,809.7
Other assets ...........................................          77.2
Consolidated debts .....................................          93.0
                                                         -------------
Total assets ...........................................       2,920.7
                                                         =============
Short-term bank borrowings/loans(4) ....................         387.7
Long-term bank borrowings/loans(5) .....................         880.5
Other liabilities and minority interest ................         623.2
                                                         -------------
Total liabilities and minority interest ................       1,891.4
                                                         =============
Shareholders' equity ...................................       1,029.3

</TABLE>

---------
(1)  The numerator of both basic and diluted earnings per share is calculated
     with consideration of the adjustment of ASE Test's basic and diluted
     earnings per share. See notes 19 and 27(i) to our consolidated financial
     statements.
(2)  Dividends per common share issued as a stock dividend.
(3)  Represents the weighted average number of shares after retroactive
     adjustments to give effect to stock dividends and employee stock bonuses.
     Beginning in 2002, common shares held by consolidated subsidiaries are
     classified for accounting purposes as "treasury stock", and are deducted
     from the number of common shares outstanding.
(4)  Includes current portions of long-term debt and long-term payable for
     investments.
(5)  Excludes current portion of long-term debt and long-term payable for
     investments.
(6)  Includes proceeds from the sale of common shares, including common shares
     represented by global depositary shares, by affiliates of ASE Inc. and
     proceeds from the sale of ordinary shares of ASE Test by ASE Inc.
(7)  Includes proceeds from primary offerings of common shares represented by
     ADSs by ASE Inc., and of ordinary shares by ASE Test.
(8)  Represents the weighted average number of shares after retroactive
     adjustments to give effect to stock dividends.

EXCHANGE RATES

     Fluctuations in the exchange rate between NT dollars and U.S. dollars will
affect the U.S. dollar equivalent of the NT dollar price of the common shares
on the Taiwan Stock Exchange and, as a result, will likely affect the market
price of the ADSs. Fluctuations will also affect the U.S. dollar conversion by
the depositary of cash dividends paid in NT dollars on, and the NT dollar
proceeds received by the depositary from any sale of, common shares represented
by ADSs, in each case, according to the terms of the deposit agreement.

     The following table sets forth, for the periods indicated, information
concerning the number of NT dollars for which one U.S. dollar could be
exchanged based on the noon buying rate for cable transfers in NT dollars as
certified for customs purposes by the Federal Reserve Bank of New York.


                                       4
<PAGE>

<TABLE>
                                            NT Dollars per U.S. Dollar Noon Buying Rate
                                          -----------------------------------------------
                                           Average      High          Low      Period-End
                                          --------    --------     --------    ----------
<S>                                         <C>         <C>          <C>         <C>
1998..................................      33.50       35.00        32.05       32.27
1999..................................      32.28       33.40        31.39       31.39
2000..................................      31.37       33.25        30.35       33.17
2001..................................      33.91       35.13        32.23       35.00
2002..................................      34.53       34.79        34.70       34.70
   December...........................      34.80       34.89        34.70       34.70
2003
   January............................      34.57       34.76        34.40       34.61
   February...........................      34.74       34.82        34.61       34.78
   March..............................      34.72       34.80        34.58       34.75
   April..............................      34.82       34.98        34.79       34.85
   May................................      34.70       34.85        34.60       34.71
   June (through June 20).............      34.65       34.70        34.52       34.59
</TABLE>

-----------
Source: Federal Reserve Statistical Release, Board of Governors of the Federal
Reserve System.

     On June 20, the noon buying rate was NT$34.59 to US$1.00.

     We publish our financial statements in NT dollars, the lawful currency of
the ROC. This annual report contains translations of NT dollar amounts into
U.S. dollars at specific rates solely for the convenience of the reader. Unless
otherwise noted, all translations from NT dollars to U.S. dollars and from U.S.
dollars to NT dollars were made at the noon buying rate in The City of New York
for cable transfers in NT dollars per U.S. dollar as certified for customs
purposes by the Federal Reserve Bank of New York as of December 31, 2002, which
was NT$34.70 to US$1.00 on that date. No representation is made that the NT
dollar or U.S. dollar amounts referred to in this annual report could have been
or could be converted into U.S. dollars or NT dollars, as the case may be, at
any particular rate or at all.

CAPITALIZATION AND INDEBTEDNESS

     Not applicable.

REASON FOR THE OFFER AND USE OF PROCEEDS

     Not applicable.

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. As 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 semiconductors led to excess capacity and increased
competition beginning in early 1998. As a result, price declines in 1998
accelerated more rapidly and, together with a significant decrease in demand,
adversely affected our operating results in 1998. Prices for packaging and
testing services improved due to an upturn in the industry in the second half
of 1999 that continued through the third quarter of 2000, but have fallen since
an industry downturn that commenced in the fourth quarter of 2000. This most
recent


                                       5
<PAGE>


worldwide downturn resulted in an even more significant deterioration in the
average selling prices, as well as demand, for our services in 2001, and
significantly and adversely affected our operating results in 2001. Although
there has been a modest recovery in the semiconductor industry during 2002, we
expect the market conditions to continue to exert 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 and we may incur losses.

     Market conditions in the semiconductor industry depend to a large degree
on conditions in the markets for the end-use applications of semiconductor
products, such as communications, personal computer and consumer electronics
products. 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 would likely have a material adverse effect on our financial
condition and results of operations. In 2001 and 2002, approximately 71.5% and
69.8% of our net revenues, respectively, were 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 adversely affect 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 that 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 third parties
like us. A reversal of, or a slowdown in, this outsourcing trend could result
in reduced demand for our services and adversely affect our growth prospects
and profitability.

If we are unable to compete favorably in the highly competitive semiconductor
packaging and testing markets, our revenues and earnings 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:

     o    ability to provide total solutions to customers;

     o    technological expertise;

     o    range of package types and testing platforms available;

     o    ability to work closely with customers at the product development
          stage;

     o    responsiveness and flexibility;

     o    capacity;

     o    production cycle time;

     o    production yield; and

     o    price.


                                       6

<PAGE>


     We face increasing competition from other packaging and testing companies,
as most of our customers obtain packaging or testing services from more than
one source. In addition, 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 and in 2001, in order to maintain capacity
utilization in their facilities during periods of reduced demand. Although
prices have stabilized, any renewed erosion in the prices for our packaging and
testing services could cause our revenues and earnings to decrease and have a
material adverse effect on our financial condition and results of operations.

The outbreak of Severe Acute Respiratory Syndrome, or SARS, in mainland China,
Hong Kong, Singapore, Taiwan and certain other regions may have an adverse
effect on the economies and financial markets of certain Asian countries and as
a result may adversely affect our results of operations.

     In March 2003, mainland China, Hong Kong, Singapore and certain other
regions in Asia encountered an outbreak of SARS, a highly contagious form of
atypical pneumonia. Since April 2003, the outbreak of SARS has spread to
certain other regions, including Taiwan. According to the World Health
Organization, or WHO, as of June 24, 2003, 8,458 cases of SARS and 807
deaths have been reported worldwide, including 687 cases and 84 deaths in
Taiwan. In response to the severity of the SARS outbreak in certain regions,
the WHO issued a travel advisory recommending that persons traveling to certain
regions, including much of mainland China and Taiwan, consider postponing all
but essential travel. The ROC government has also imposed a variety of
SARS-preventive measures, including rules that require residents and visitors
to undergo a 10-day quarantine under certain circumstances. As a result, the
SARS outbreak may restrict the level of economic activity in the affected
areas, which may adversely affect our business and prospects.

     While the long-term impact of the SARS outbreak is unclear at this time,
the prolonged existence of the SARS outbreak, or the perception that the SARS
outbreak has not been contained, may have an adverse effect on the economic
conditions of certain regions in Asia. Each of the governments of Hong Kong,
Singapore and the ROC has recently revised downward its gross domestic product
growth forecasts for 2003 due to SARS. As a result, the economic fallout of the
SARS outbreak may result in a decrease in the demand for our packaging and
testing services. In addition, our production operations and that of our
suppliers or customers may be seriously interrupted due to the SARS outbreak or
the measures taken by the respective government of the ROC, Hong Kong,
Singapore, the PRC or other regions against SARS.

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 selling 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
adversely affect 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 market price of our ADSs and common
shares. Among the more important factors affecting our quarterly and annual
operating results are the following:

     o    changes in general economic and business conditions, particularly
          given the cyclical nature of the semiconductor industry and the
          markets served by our customers;


                                       7

<PAGE>


     o    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;

     o    timing of capital expenditures in anticipation of future orders;

     o    changes in prices of our packaging and testing services;

     o    volume of orders relative to our packaging and testing capacity;

     o    our ability to obtain adequate packaging and testing equipment on a
          timely basis;

     o    changes in costs and availability of raw materials, equipment and
          labor; and

     o    earthquakes, drought and other natural disasters, as well as
          industrial accidents.

     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
gross margin at past levels if we are unable to achieve relatively high
capacity utilization rates.

     Our operations, in particular our testing operations, are characterized by
relatively high fixed costs. We expect to continue to incur substantial
depreciation and other expenses as a result of our previous acquisitions of
packaging and testing equipment and 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 periods of low demand, we
experience relatively low capacity utilization rates in our operations due to
relatively low growth in demand, which leads to reduced margins during that
period. During 2001, we experienced lower than anticipated utilization rates in
our operations due to a significant decline in worldwide demand for our
packaging and testing services, 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 gross
margin 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,
including the expansion of our interconnect materials operations. In
particular, we intend to provide total solutions covering all stages of the
semiconductor manufacturing process to 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.

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 existing cash and cash equivalents, short-term
investments, expected cash flow from operations and existing credit lines under
our short-term loan facilities will be sufficient to meet our capital


                                       8


<PAGE>


expenditures, working capital, cash obligations under our existing debt and
lease arrangements, and other requirements for at least the next twelve months.
However, future capacity expansions 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:

     o    our future financial condition, results of operations and cash flows;

     o    general market conditions for financing activities by semiconductor
          companies; and

     o    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.

Restrictive covenants and broad default provisions in the agreements governing
our existing debt may materially restrict our operations as well as adversely
affect our liquidity, financial condition and results of operations.

     We are a party to numerous loan and other agreements relating to the
incurrence of debt, many of which include restrictive covenants and broad
default provisions. In general, covenants in the agreements governing our
existing debt, and debt we may incur in the future, may materially restrict our
operations, including our ability to incur debt, pay dividends, make certain
investments and payments and encumber or dispose of assets. In the event of a
prolonged downturn in the demand for our services as a result of a downturn in
the worldwide semiconductor industry or otherwise, we cannot assure you that we
will be able to remain in compliance with our financial covenants which, as a
result, may lead to a default. Furthermore, a default under one agreement by us
or one of our subsidiaries may also trigger cross-defaults under other
agreements. In the event of default, we may not be able to cure the default or
obtain a waiver on a timely basis, and our operations would be significantly
disrupted or harmed and our liquidity would be adversely affected. An event of
default under any agreement governing our existing or future debt, if not cured
or waived, would have a material adverse effect on our liquidity, financial
condition and results of operations.

     As a result of the reduced levels of operating cash flow due primarily to
the recent downturn in the worldwide semiconductor industry, we had on occasion
during 2001 failed to comply with certain financial covenants in some of our
loan agreements. Such non-compliance may also have, through broadly worded
cross-default provisions, resulted in default under some of the agreements
governing our other existing debt. We have obtained waivers from the relevant
lenders relating specifically to such non-compliance. In addition, we have
repaid or refinanced all amounts owed under agreements containing cross-default
provisions that we have identified which may have been triggered by such
non-compliance. Such non-compliance has not had any significant effect on our
ability to repay or refinance amounts due in respect of our existing debt. For
these and other reasons, including our financial condition and our relationship
with our lenders, no lender has to date sought and we do not believe that any
of our lenders would seek to declare a default or enforce remedies in respect
of our existing debt, as a result of cross-default provisions or otherwise,
although we cannot provide any assurance in this regard.

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. 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. In particular, we may
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


                                       9

<PAGE>


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 and Chief Executive Officer,
Richard H.P. Chang, our Vice Chairman and President, and Chang Yao Hung-ying,
our then director, and others for alleged breach of fiduciary duties owed to
Hung Ching Development & Construction Co. Ltd., or Hung Ching, an affiliate of
ASE Inc., in their capacity as directors and officer of Hung Ching relating to
a sale of land. ASE Inc. is not a party to these proceedings and we do not
expect that these charges will result in any liability to us. In January 2001,
the District Court of Taipei rendered a judgment finding Jason C.S. Chang and
Chang Yao Hung-ying guilty of forgery of corporate and other documents and
breach of fiduciary duties and Richard H.P. Chang not guilty. In January 2002,
the High Court of Taiwan, the Republic of China, or ROC, rendered a judgment
relating to the appeal of the judgment by the District Court, and found Jason
C.S. Chang and Chang Yao Hung-ying guilty and Richard H.P. Chang not guilty. In
order to comply with the Singapore Companies Act, Jason C.S. Chang and Chang
Yao Hung-ying have both resigned as directors of our subsidiary, ASE Test.
Neither Jason C.S. Chang nor Chang Yao Hung-ying believes that he or she
committed any offense in connection with such transactions, and they appealed
the decision to the Supreme Court of Taiwan, ROC. On January 23, 2003, the
Supreme Court reversed the judgment of the High Court with respect to Jason
C.S. Chang and Chang Yao Hung-ying and remanded the case to the High Court for
retrial. If a final adverse judgment is rendered against Jason C.S. Chang, he
may be required to resign as Chairman and a director of ASE Inc. See "Item 8.
Financial Information--Legal Proceedings".

If we are not successful in developing and enhancing our in-house interconnect
materials capabilities, our margins and profitability may be adversely
affected.

     We expect that we will need to offer more advanced interconnect materials
designs and production processes in order to respond to competitive industry
conditions and customer requirements. In particular, our competitive position
will depend to a significant extent on our ability to design and produce
interconnect materials that are comparable to or better than those produced by
independent suppliers and others. Many of these independent suppliers have
dedicated greater resources than we have for the research and development and
design and production of interconnect materials. In addition, we may not be
able to acquire the technology and personnel that would enable us to further
develop our in-house expertise and enhance our design and production
capabilities. We expect to continue making investments in our subsidiary ASE
Material Inc., or ASE Material, which focuses on the design and production of
interconnect materials. In particular, we intend to further develop our
in-house interconnect materials capabilities with a view to sourcing a majority
of our substrate requirements by value from ASE Material by the end of 2003. If
we are unable to maintain and enhance our in-house interconnect materials
expertise to offer advanced interconnect materials that meet the requirements
of our customers, we may become less competitive and our margins and
profitability may suffer as a result.

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 such equipment from a limited
number of suppliers, including, in the case of wire bonders, Kulicke & Soffa
Industries Inc., and in the case of testers, Advantest Corporation, Agilent
Technologies, Inc., Credence Systems Corporation, LTX Corporation, NP Test Inc.
and Teradyne, Inc. 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. If we are unable
to obtain equipment or facilities in a timely manner, we may be unable to
fulfill our customers' orders, which could adversely affect our growth
prospects as well as financial condition and results of operations.


                                      10


<PAGE>


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, primarily in NT dollars and
U.S. dollars, as well as, to a lesser extent, Malaysian ringgit, Korean won,
Japanese yen and Philippine pesos. In addition, a substantial portion of our
capital expenditures, primarily for the purchase of packaging and testing
equipment, has been, and is expected to continue to be, denominated in U.S.
dollars with much of the remainder in Japanese yen. Fluctuations in exchange
rates, primarily among the U.S. dollar, the NT dollar and the Japanese yen,
will affect our costs and operating margins. In addition, these fluctuations
could result in exchange losses and increased costs in NT dollar and other
local currency terms. Despite hedging and mitigating techniques implemented by
us, fluctuations in exchange rates have affected, and may continue to affect,
our financial condition and results of operations.

The loss of a major customer or termination of our strategic alliance and other
commercial arrangements with semiconductor foundries and providers of other
complementary semiconductor manufacturing services 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 44%, 41% and 40% of our net revenues in 2000, 2001
and 2002, respectively. Other than Motorola, Inc. and VIA Technologies, Inc. in
2000 and 2001, and Motorola, Inc. in 2002, no other customer accounted for more
than 10% of our net revenues in 2000, 2001 and 2002. 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. The loss
of a major customer may adversely affect our revenues and profitability.

     Our strategic alliance with TSMC, the world's largest dedicated
semiconductor foundry, as well as our other commercial arrangements with
providers of other complementary semiconductor manufacturing services, enable
us to offer total semiconductor manufacturing solutions to our customers. This
strategic alliance and any of our other commercial arrangements may be
terminated at any time. A termination of this strategic alliance and other
commercial arrangements, and our failure to enter into substantially similar
alliances and commercial arrangements, may adversely affect our competitiveness
and our revenues and profitability.

     All of our key customers operate in the cyclical semiconductor business
and have varied in the past, and may vary in the future, order levels
significantly from period to period. Some 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.
Any price reduction would likely reduce our margins and profitability.

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 our subsidiaries, 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


                                      11

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 revenues 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 1999 and the
first half of 2000, the industry experienced a shortage in the supply of
advanced substrates used in ball grid array, or BGA, packaging. We established
ASE Material in 1997 to partially reduce this risk. However, we do not expect
ASE Material to supply all of our raw materials requirements. Consequently, we
will remain dependent on market supply and demand for our raw materials. 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 and interconnect materials production 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.

     Members of the Chang family own, directly or indirectly, a controlling
interest in our outstanding common shares. See "Item 7. Major Shareholders and
Related Party Transactions--Major Shareholders". Accordingly, these
shareholders will continue to have the ability to exercise a controlling
influence over our business, including matters relating to:

     o    our management and policies;

     o    the timing and distribution of dividends; and

     o    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 interests.

We are a 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 Republic of China. 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. As a result, public
shareholders of ROC companies may have more difficulty in protecting their


                                      12

<PAGE>


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.

Any impairment charges required under US GAAP may have a material adverse
effect on our financial condition and results of operations on a US GAAP
reconciled basis.

     Under currently effective US GAAP, we are required to evaluate our
equipment, goodwill and other long-lived assets for impairment whenever there
is an indication of impairment. If certain criteria are met, we are required to
record an impairment charge. We can give no assurance that impairment charges
will not be required in periods subsequent to December 31, 2002.

     As a result of new standards under US GAAP that became effective on
January 1, 2002, we are no longer permitted to amortize remaining goodwill.
Total goodwill amortization expense amounted to NT$815.6 million (US$23.5
million) under ROC GAAP for the year ended December 31, 2002. Starting from
January 2002, all goodwill must be periodically tested for impairment under US
GAAP. As a result of our impairment test as of December 31, 2002, we wrote off
the remaining goodwill associated with our purchase of shares of ASE Test of
NT$2,213.0 million (US$63.8 million) under US GAAP. As of December 31, 2002,
goodwill under US GAAP amounted to NT$3,227.1 million (US$93.0 million). We
currently are not able to estimate the extent and timing of any goodwill
impairment charge for future years. Any goodwill impairment charge required
under US GAAP may have a material adverse effect on our financial condition and
results of operations on a US GAAP reconciled basis.

     The determination of an impairment charge at any given time is based
significantly on our expected results of operations over a number of years
subsequent to that time. As a result, an impairment charge is more likely to
occur during a period when our operating results are otherwise already
depressed.

Risks Relating to Taiwan, Republic of China

Strained relations between the Republic of China and the People's Republic of
China could negatively affect our business and the market value of your
investment.

     Our principal executive offices and our principal packaging and testing
facilities are located in Taiwan and approximately 77% of our net revenues in
2002 were derived from our operations in Taiwan. The Republic of China has a
unique international political status. The People's Republic of China asserts
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 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. 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
securities of ROC 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.

     In July 2000, our shareholders approved a resolution which authorized our
board of directors to make investments in the People's Republic of China.
However, the Republic of China government currently restricts certain types of
investments by ROC companies in the People's Republic of China, including
investments in facilities for the packaging and testing of semiconductors. We
do not know when or if such laws and policies governing investment in the
People's Republic of China will be amended, and we cannot assure you that any
such amendments to the Republic of China investment laws and policies will
permit us to make an investment that we consider beneficial to us in the
People's Republic of China in the future. As a result, our growth prospects and
profitability may be adversely affected if we are restricted from making
certain investments in the People's Republic of China and are not able to fully
capitalize on the growth of the semiconductor industry in the People's Republic
of China.


                                      13

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As a substantial portion of our business and operations are located in Taiwan,
we are vulnerable to earthquakes, typhoons, drought and other natural
disasters, which could severely disrupt the normal operation of our business
and adversely affect our earnings.

     Taiwan is susceptible to earthquakes and has experienced severe
earthquakes which caused significant property damage and loss of life,
particularly in the central and eastern parts 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.

     Taiwan is also susceptible to typhoons, which may cause damage and
business interruption to companies with facilities located in Taiwan. In 2001,
Taiwan experienced severe damage from typhoons, including a typhoon on
September 16 that caused over 100 deaths, severe flooding and extensive damage
to property and businesses. We have not experienced any material damage or
business interruption from the increased typhoon activity in Taiwan.

     In May 2002, Taiwan experienced a severe drought. Although our
manufacturing process does not rely on an adequate supply of water and we were
not affected by the May 2002 drought directly, a drought may interrupt the
manufacturing process of the foundries located in Taiwan, in turn disrupting
some of our customers' production, and this could result in a decline in the
demand for our services. In addition, any temporary or sustained adverse impact
from any future droughts may adversely affect Taiwan's economic, social or
political conditions and may lead to fluctuations in the market price of our
ADSs.

     While we maintain several insurance policies relating to our business, we
do not currently carry any insurance coverage for interruptions in public
utility services or any other business interruption insurance except in
connection with fire. Should these interruptions occur, we will be exposed to
substantial risks and may be liable for the full amount of any losses.

     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 by an
earthquake, a typhoon, a drought or other natural disasters, 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, typhoon, drought, or other natural disasters 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 be sustained, the price of our ADSs
may fall.

     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 ADR 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. If a significant number of
withdrawals are effected, the liquidity of our ADSs will be substantially
reduced. 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.


                                      14

<PAGE>


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 instructions. In all other cases, holders will
be deemed to have authorized and directed the depositary to give a
discretionary proxy to our Chairman or his designee to vote the common shares
represented by their ADSs in any manner he or his designee may wish, which may
not be in the interests of the holders.

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 U.S. Securities Act of 1933, as
amended, or the Securities Act, 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. 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.

Restrictions on the ability to deposit our common shares into our ADR facility
may adversely affect the liquidity and price of our ADSs.

     The ability to deposit our common shares into our ADR facility is
restricted by ROC law. A significant number of withdrawals of our common shares
underlying our ADSs would reduce the liquidity of our ADSs by reducing the
number of ADRs outstanding. As a result, the prevailing market price of our
ADSs may differ from the prevailing market price of our common shares on the
Taiwan Stock Exchange. Under current ROC law, no person or entity, including
you and us, may deposit our common shares into our ADR facility without
specific approval of the ROC Securities and Futures Commission except where:

     (1)  we pay stock dividends on our common shares;

     (2)  we make a free distribution of our common shares;

     (3)  you exercise preemptive rights in the event of a capital increase for
          cash; or

     (4)  you purchase our common shares, directly or through the depositary,
          on the Taiwan Stock Exchange, and deliver our common shares to the
          custodian for deposit into our ADR facility. The depositary may issue
          ADSs against the deposit of our common shares only if the total
          number of ADSs outstanding following the deposit will not exceed the
          number of ADSs previously approved by the ROC Securities and Futures
          Commission, plus any additional ADSs issued pursuant to the events
          described in (1) through (3) above.

     In addition, in the case of a deposit of common shares requested as
described above, the depositary may refuse to accept our common shares for
deposit if such deposit is not permitted under any restriction notified by us
to the depositary from time to time. These restrictions may include blackout
periods during which deposits may not be made and as well as limitations on the
size and frequencies of deposits.


                                      15

<PAGE>


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

     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 or ADSs will not dispose of significant
numbers of common shares or ADSs. In addition, several of our subsidiaries and
affiliates hold common shares, depositary shares representing common shares and
options to purchase common shares or ADSs. We or they may decide to sell those
securities in the future. See "Item 7. Major Shareholders and Related Party
Transactions--Major Shareholders" for a description of our significant
shareholders and affiliates 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 prevailing from time to time. Sales of substantial amounts of
ADSs or common shares in the public market, or the perception that such sales
may occur, could depress the prevailing market prices of our ADSs or common
shares.

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:

     o    the proceeds of the sale of common shares represented by ADSs or
          received as stock dividends from the common shares and deposited into
          the depositary receipt facility; and

     o    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 ADR facility against
the creation of additional ADSs. The depositary may 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 for 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:

     o    the proceeds of the sale of any underlying common shares withdrawn
          from the depositary receipt facility or received as a stock dividend;
          and

     o    any cash dividends or distribution received.

     However, such holder may be required to obtain foreign exchange approval
from the Central Bank of China on a payment-by-payment basis for conversion
from NT dollars to foreign currencies of the proceeds from the sale of
subscription rights for new common shares. Although the Central Bank of China
is generally expected to grant this approval as a routine matter, we cannot
assure you that you will actually obtain this approval in a timely manner, or
at all.

     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.


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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. 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 June 20, 2003, the Taiwan Stock Exchange Index closed at
5,002.6. 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.

Holders of ADSs may incur dilution as a result of the practice among ROC
technology companies of issuing stock bonuses and stock options 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. In addition, under the revised ROC Company Law we may, upon
approval from our board of directors and the ROC Securities and Futures
Commission, establish an employee stock option plan. On August 13, 2002, we
adopted an employee stock option plan pursuant to which our full-time employees
and the full-time employees of our domestic and foreign subsidiaries are
eligible to receive stock option grants. As of December 31, 2002, 145,989,000
options have been issued. See "Item 6. Directors, Senior Management and
Employees--Compensation--ASE Inc. Employee Bonus Plan and Stock Option Plans".
The issuance of our shares pursuant to stock bonuses or stock options may have
a dilutive effect on your ADSs.

Item 4.  Information on the Company.

HISTORY AND DEVELOPMENT OF THE COMPANY

     Our legal name is Advanced Semiconductor Engineering, Inc. and we are also
known as "ASE". We were incorporated on March 23, 1984 under the laws of the
Republic of China as a company limited by shares. Our principal place of
business is at 26 Chin Third Road, Nantze Export Processing Zone, Nantze,
Kaohsiung, Taiwan, Republic of China and our phone number is 886-7-361-7131.
Our agent for service of process in the U.S. is CT Corporation System, 111
Eighth Avenue, New York, New York 10011 and our agent's phone number is
212-894-8940.

     We were established in 1984 as a packaging and testing company, with
facilities in the Nantze Export Processing Zone. Our business grew and we were
listed on the Taiwan Stock Exchange in 1989. In 1990, we acquired ASE Test
Taiwan, which provides our customers with testing services. In 1991, we
established ASE Test Malaysia, which provides our customers with testing and
packaging services. In 1996, we established ASE Philippines, which also
conducts testing and packaging services. In 1997, we established ASE Materials,
which manufactures etched leadframes and assists us in reducing our dependency
on outsourced leadframes. In 1997, we constructed a new facility in Kaohsiung
for packaging services and established a research and development laboratory.

ASE Chung Li and ASE Korea

     In July 1999, we purchased Motorola's Semiconductor Products Sector
operations in Chung Li, Taiwan and Paju, South Korea for the packaging and
testing of semiconductors with principally communications, consumer and
automotive applications. The businesses are now operated by ASE Chung Li and
ASE Korea. We acquired substantially all of the assets of ASE Chung Li for a
base price of US$150.0 million in cash, consisting of an initial payment of
US$80.0 million at closing and an additional US$70.0 in three annual
installments ending in July 2002, contingent upon certain targets of revenue
from packaging and testing services provided to Motorola being met. These
targets were met for the first two years. The last installment of $23.3 million
was due in July 2002. In 2002, we and Motorola re-negotiated the agreement for
the payment of the final installment to take place in three smaller


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<PAGE>


installments ending in July 2004 contingent upon certain targets of revenue
from packaging and testing services provided to Motorola being met.

     We acquired 100% of the outstanding shares of ASE Korea for a base price
of US$140.0 million in cash, consisting of an initial payment of US$36.0
million and an additional US$104.0 million payable over five years. In addition
to the combined base price of US$290.0 million, we also paid an aggregate of
approximately US$60.1 million in cash to purchase capital assets at both
facilities which were acquired after January 1, 1999 and specified inventories
and cash positions at both facilities. Under the acquisition agreements, ASE
Inc. acquired a 70.0% interest in each of the two businesses, and ASE Test
acquired the remaining 30.0% interest. This division of the investment
reflected in part our estimate of the relative packaging and testing values at
the facilities. Both facilities provide semiconductor packaging and testing
services for Motorola's Semiconductor Products Sector, and will continue to do
so for at least three to five years following the completion of the acquisition
under manufacturing services agreements with Motorola.

ISE Labs

     In May 1999, we acquired 70.0% of the outstanding shares of ISE Labs, a
semiconductor testing company with principal facilities located in Fremont and
Santa Clara, California. The total purchase price for our 70.0% equity interest
in ISE Labs was US$98.0 million.

     In April, July and November, 2000, we purchased additional shares of ISE
Labs at an aggregate purchase price of US$70.9 million. As a result of these
purchases, we owned 80.4% of the outstanding shares of ISE Labs as of December
31, 2000. In January 2002, we purchased the remaining portion of the shares of
ISE Labs for a purchase price of US$50.1 million.

Universal Scientific

     From February through July of 1999, we purchased 22.6% of the outstanding
shares of Universal Scientific for approximately NT$3,532.5 million (US$115.0
million), principally through open market purchases on the Taiwan Stock
Exchange. We subsequently increased our holding to 23.3% following the open
market purchase of additional shares in July and August of 2000. As of March
31, 2003, we held 23.5% of Universal Scientific's outstanding equity shares.
Six out of the nine directors on the Universal Scientific board of directors,
including the chairman, are our representatives.

BUSINESS OVERVIEW

     We are one of the world's largest independent providers of semiconductor
packaging services and, together with our subsidiary ASE Test, the world's
largest independent provider of semiconductor testing services. Our services
include semiconductor packaging, design and production of interconnect
materials, front-end engineering testing, wafer probing and final testing
services. We believe that we are better positioned than our competitors to meet
the requirements of semiconductor companies worldwide for outsourced packaging
and testing services across a wide range of end-use applications because of:

     o    our ability to provide a broad range of advanced semiconductor
          packaging and testing services on a large scale turnkey basis;

     o    our expertise in developing and providing advanced packaging and
          testing technologies and solutions;

     o    our scale of operations and financial position which enable us to
          make significant investments in capacity expansion and research and
          development as well as to make selective acquisitions;

     o    our geographic presence in key centers of outsourced semiconductor
          and electronics manufacturing; and

     o    our long-term relationships with providers of complementary
          semiconductor manufacturing services, including our strategic
          alliance with TSMC, the world's largest dedicated semiconductor
          foundry.


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<PAGE>


     We believe that the trend for semiconductor companies to outsource their
packaging and testing requirements is accelerating as semiconductor companies
increasingly rely on independent providers of foundry and advanced packaging
and testing services. In response to the increased pace of new product
development and shortened product life and production cycles, semiconductor
companies are increasingly seeking independent packaging and testing companies
that can provide turnkey services in order to reduce time-to-market. We believe
that our expertise and scale in advanced technology and our ability to
integrate our broad range of solutions into turnkey services allow us to
benefit from the accelerated outsourcing trend and better serve our existing
and potential customers.

     We believe that we have benefited, and will continue to benefit, from our
geographic location in Taiwan. Taiwan is currently the largest center for
outsourced semiconductor manufacturing in the world and, in addition, has a
high concentration of electronics manufacturing service providers, which are
the end users of our customers' products. Our close proximity to foundries and
other providers of complementary semiconductor manufacturing services is
attractive to our customers who wish to take advantage of the efficiencies of a
total semiconductor manufacturing solution by outsourcing several stages of
their manufacturing requirements. Our close proximity to end users of our
customers' products is attractive to our customers who wish to take advantage
of the logistical efficiencies of direct shipment services that we offer. We
believe that, as a result, we are well positioned to meet the advanced
semiconductor engineering requirements of our customers.

     Our global base of over 200 customers includes leading semiconductor
companies across a wide range of end-use applications:

o   Advanced Micro Devices, Inc.           o    NVIDIA Corporation
o   Altera Corporation                     o    ON Semiconductor Corp.
o   ATI Technologies Inc.                  o    Qualcomm Incorporated
o   Conexant Systems, Inc.                 o    RF Micro Devices, Inc.
o   IBM Corporation                        o    Silicon Integrated Systems Corp.
o   Koninklijke Philips Electronics N.V.   o    STMicroelectronics N.V.
o   LSI Logic Corporation                  o    VIA Technologies, Inc.
o   Motorola, Inc.

Industry Background

   General

     Semiconductors are the basic building blocks used to create an increasing
variety of electronic products and systems. Continuous improvements in
semiconductor manufacturing processes and design technologies have led to
smaller, more complex and more reliable semiconductors at a lower cost per
function. These improvements have resulted in significant performance and price
benefits to manufacturers of electronic systems. As a result, semiconductor
demand has grown substantially in our primary markets of communications,
personal computers and consumer electronics, and has experienced increased
growth in other markets such as automotive products, industrial automation and
control systems.

     The semiconductor industry is characterized by strong long-term growth,
with periodic and sometimes severe cyclical downturns. The Semiconductor
Industry Association estimates that worldwide sales of semiconductors increased
from approximately US$50.5 billion in 1990 to US$140.7 billion in 2002. The
semiconductor industry experienced strong growth between 1992 and 1995 and
between 1998 and 2000, with declines between 1996 and first half of 1997 as
well as in 1998. Starting from the fourth quarter of 2000, the semiconductor
industry experienced a severe downturn due to a slowdown in the global economy,
overcapacity in the semiconductor industry and worldwide inventory adjustment.
The semiconductor industry started to show signs of a modest recovery in 2002,
primarily as a result of inventory replenishment and the introduction of new
products. We believe that the pattern of long-term growth and cyclical
fluctuations will continue in the semiconductor industry.


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   Outsourcing Trends in Semiconductor Manufacturing

     Historically, semiconductor companies designed, manufactured, packaged and
tested semiconductors primarily in their own facilities. Over the past several
years, there has been a trend in the industry to outsource stages in the
manufacturing process. Virtually every significant stage of the manufacturing
process can be outsourced. Wafer foundry services and semiconductor packaging
services are currently the largest segments of the independent semiconductor
manufacturing services market. Most of the world's major integrated device
manufacturers use some independent manufacturing services to maintain a
strategic mix of internal and external manufacturing capacity.

     The availability of technologically advanced independent manufacturing
services has also enabled the growth of "fabless" semiconductor companies that
focus on semiconductor design and marketing and outsource their fabrication,
packaging and testing requirements to independent semiconductor manufacturing
companies. The growth in the number and scale of fabless semiconductor
companies that rely solely on independent companies to meet their manufacturing
requirements will continue to be a driver of growth in the market for
independent foundry, packaging and testing services. Similarly, the
availability of technologically advanced independent manufacturing services has
encouraged integrated device manufacturers, which had traditionally relied on
in-house semiconductor manufacturing capacity, to increasingly outsource their
manufacturing requirements to independent semiconductor manufacturing
companies.

     We believe the outsourcing of semiconductor manufacturing services will
increase in the future from current levels for many reasons, including the
following:

     Technological Expertise and Significant Capital Expenditure. Semiconductor
manufacturing processes have become highly complex, requiring substantial
investment in specialized equipment and facilities and sophisticated
engineering and manufacturing expertise. Technical expertise becomes
increasingly important as the industry transitions from one generation of
technology to another, as evidenced by the current migration of fabrication
technology from 8-inch to 12-inch wafers. In addition, product life cycles have
been shortening, magnifying the need to continuously upgrade or replace
manufacturing equipment to accommodate new products. As a result, new
investments in in-house packaging, testing and fabrication facilities are
becoming less desirable to integrated device manufacturers because of the high
investment costs as well as the inability to achieve sufficient economies of
scale and the utilization rates necessary to be competitive with the
independent service providers. Independent packaging, testing and foundry
companies, on the other hand, are able to realize the benefits of
specialization and achieve economies of scale by providing services to a large
base of customers across a wide range of products. This enables them to reduce
costs and shorten production cycles through high capacity utilization and
process expertise. In the process, they are also able to focus on discrete
stages of semiconductor manufacturing and deliver services of superior quality.

     Since the recent industry downturn in 2001, semiconductor companies have
significantly reduced their investment in in-house packaging and testing
technologies and capacity. As a result, some semiconductor companies may have a
limited amount of the necessary in-house expertise and capacity to accommodate
large orders following a recovery in demand, particularly in the area of
advanced technology. We expect semiconductor companies to increasingly
outsource their packaging and testing requirements to take advantage of the
advanced technology and scale of operations of independent packaging and
testing companies.

     Focus on Core Competencies. As the semiconductor industry becomes more
competitive, semiconductor companies are expected to further outsource their
semiconductor manufacturing requirements in order to focus their resources on
core competencies, such as semiconductor design and marketing.

     Time-to-Market Pressure. The increasingly short product life cycle has
accelerated time-to-market pressure for semiconductor companies, leading them
to rely increasingly on outsourced suppliers as a key source for effective
manufacturing solutions.

     Gartner Dataquest forecasts that the total outsourced semiconductor
packaging market will grow from US$6.8 billion in 2002 to US$14.2 billion in
2005. Gartner Dataquest also forecasts that the total outsourced semiconductor
testing market will grow from US$1.6 billion in 2002 to US$3.9 billion in 2005.


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   The Semiconductor Industry in Taiwan

     The semiconductor industry in Taiwan has been a leader in, and a major
beneficiary of, the trend in outsourcing. The growth of the semiconductor
industry in Taiwan has been the result of several factors. First, semiconductor
manufacturing companies in Taiwan typically focus on one or two stages of the
semiconductor manufacturing process. As a result, these companies tend to be
more efficient and are better able to achieve economies of scale and maintain
higher capacity utilization rates. Second, semiconductor manufacturing
companies in Taiwan that provide the major stages of the manufacturing process
are located close to each other and typically enjoy close working
relationships. This close network is attractive to customers who wish to
outsource several stages of the semiconductor manufacturing process. For
instance, a customer could reduce production cycle time and unit cost and
streamline logistics by outsourcing its foundry, packaging, testing and drop
shipment services to semiconductor manufacturing companies in Taiwan. Third,
Taiwan also has an educated labor pool and a large number of engineers suitable
for sophisticated manufacturing industries such as semiconductors.

     As a result of the growth of the global semiconductor market, the
semiconductor industry in Taiwan has in recent years made significant capital
expenditures to expand capacity and technological capabilities. The ROC
government has also provided tax incentives, long-term loans at favorable rates
and research and development support, both directly and indirectly through
support of research institutes and universities. As a result of investments
made in recent years, Taiwan has achieved substantial market share in the
outsourced semiconductor manufacturing industry. Furthermore, the growth of
Taiwan's electronics manufacturing industry, particularly in personal computer
design and manufacturing, has created substantial local demand for
semiconductors.

   The Semiconductor Industry in Other Asian Regions

     Many of the factors that contributed to the growth of the semiconductor
industry in Taiwan have also contributed to the recent development of the
semiconductor industry in Southeast Asia. Access to expanding semiconductor
foundry services in Singapore, convenient proximity to major downstream
electronics manufacturing operations in Malaysia, Singapore and Thailand,
government sponsored infrastructure support, tax incentives and pools of
skilled engineers and labor at a relatively low cost have all encouraged the
development of back-end semiconductor service operations in Southeast Asia. The
downstream electronics manufacturers in Southeast Asia have typically focused
on products used in the communications, industrial and consumer electronics and
personal computer peripheral sectors. The proximity to both semiconductor
foundries and end users has influenced local and international semiconductor
companies increasingly to obtain packaging, testing and drop shipment services
from companies in Southeast Asia.

     In addition, the world's leading electronics manufacturing service
providers, many of them from Taiwan, are increasingly establishing
manufacturing facilities in the People's Republic of China in order to take
advantage of lower labor costs, government incentives for investment and the
potential size of the domestic market for end users of electronics products.
Many of the factors that contributed to the growth of the semiconductor
industry in Taiwan are beginning to emerge in the People's Republic of China
and may play an increasingly important role in the growth of its semiconductor
industry over the long-term.

   Overview of Semiconductor Manufacturing Process

     The manufacturing of semiconductors is a complex process that requires
increasingly sophisticated engineering and manufacturing expertise. We are
involved in all stages of the semiconductor manufacturing process except
circuit design and wafer fabrication.

    Process                                    Description
    -------                                    -----------

Circuit Design                     The design of a semiconductor is developed
                                   by laying out circuit components and
                                   interconnections. A complex circuit may be
                                   designed with as many as 20 layers of
                                   patterns or more.

Front-End Engineering Test         Throughout and following the design process,
                                   prototype semiconductors undergo front-end
                                   engineering testing, which involves software
                                   development, electrical design validation,
                                   reliability and failure analysis.


                                      21

<PAGE>


Wafer Fabrication                  The process begins with the generation of a
                                   photomask through the definition of the
                                   circuit design pattern on a photographic
                                   negative, known as a mask, by an electron
                                   beam or laser beam writer. These circuit
                                   patterns are transferred to the wafers using
                                   various advanced processes.

Wafer Probe                        Each individual die is electrically
                                   tested, or probed, for defects. Dies that
                                   fail this test are marked to be discarded.

Packaging                          Packaging, also called assembly, is the
                                   processing of bare semiconductors into
                                   finished semiconductors and serves to
                                   protect the die and facilitate electrical
                                   connections and heat dissipation. The
                                   patterned silicon wafers received from our
                                   customers are diced by means of diamond saws
                                   into separate dies, also called chips. Each
                                   die is attached to a leadframe or a laminate
                                   (plastic or tape) substrate by epoxy resin.
                                   A leadframe is a miniature sheet of metal,
                                   generally made of copper and silver alloys,
                                   on which the pattern of input/output leads
                                   has been cut. On a laminate substrate,
                                   typically used in ball grid array packages,
                                   the leads take the shape of small bumps or
                                   balls. Leads on the leadframe or the
                                   substrate are connected by extremely fine
                                   gold wires or bumps to the input/output
                                   terminals on the chips, through the use of
                                   automated machines known as "wire bonders".
                                   Each chip is then encapsulated, generally in
                                   a plastic casing molded from a molding
                                   compound, with only the leads protruding
                                   from the finished casing, either from the
                                   edges of the package as in the case of the
                                   leadframe-based packages, or in the form of
                                   small bumps on a surface of the package as
                                   in the case of ball grid array or other
                                   substrate-based packages.

Final Test                         Final testing is conducted to ensure that
                                   the packaged semiconductor meets performance
                                   specifications. Final testing involves using
                                   sophisticated testing equipment and
                                   customized software to electrically test a
                                   number of attributes of packaged
                                   semiconductors, including functionality,
                                   speed, predicted endurance and power
                                   consumption. The final testing of
                                   semiconductors is categorized by the
                                   functions of the semiconductors tested into
                                   logic/mixed-signal final testing and memory
                                   final testing. Memory final testing
                                   typically requires simpler test software but
                                   longer testing time per device tested.

Strategy

     Our objective is to provide advanced semiconductor packaging and testing
services which set industry standards and to lead and facilitate the industry
trend towards outsourcing semiconductor manufacturing requirements. The
principal elements of our strategy are to:

   Maintain Our Focus on Providing a Complete Range of Semiconductor Packaging
   and Testing Services

     We believe that an important factor in our ability to attract leading
semiconductor companies as our customers has been our ability to provide
turnkey services on a large scale. Turnkey services consist of the integrated
packaging, testing and direct shipment of semiconductors to end users
designated by our customers. As a result of our technical expertise and large
production capacity in both packaging and testing, we are able to provide
turnkey services on a large scale. As product lives and production cycles
shorten and packaging and testing technologies advance more rapidly, our
customers increasingly value our ability, as a downstream service provider, to
work with them as an integral and strategic partner in the upstream development
of their products. We intend to enhance and expand our expertise in both the
upstream and downstream semiconductor manufacturing processes in order to
better serve our customers in providing our core services of packaging and
testing. The front-end engineering testing expertise of ISE Labs has greatly
enhanced our ability to participate in the earlier stages of circuit design and
the semiconductor manufacturing process. Our establishment of ASE Material in
1997 for the design and production of interconnect materials, such as
substrates and leadframes, has provided us with expertise in interconnect
technology, which has become increasingly critical for our customers both in
terms of cost and production cycle time.


                                      22

<PAGE>


   Continue to Focus on Advanced Technological, Processing and Materials
   Capabilities

     We intend to continue our focus on developing advanced process and product
technologies in order to meet the advanced packaging and testing requirements
of our customers. Our expertise in packaging technology has enabled us to
develop advanced solutions such as fine-pitch bonding, stacked die packaging
and bump chip carrier packaging. We are continuously investing in research and
development in response to and in anticipation of migrations in technology and
intend to continue to acquire access to new technologies through strategic
alliances and licensing arrangements.

     We intend to continue to focus on developing and enhancing our existing
interconnect materials capabilities through ASE Material. We expect that
interconnect materials will become an increasingly important value-added
component of the semiconductor packaging business as packaging technology
migrates from the traditional wirebonding process towards the flip-chip wafer
bumping process. As a result, we expect high density interconnect materials to
be a core element for the next generation of semiconductor packaging
technology. By focusing on the design and production of interconnect materials,
we plan to capture most of the value-added components of the packaging business
and lead the migration in packaging technology. In 2002, ASE Material supplied
approximately one third of our substrate requirements by value. We intend to
continue to invest in ASE Material in order to further develop and enhance our
existing capabilities in interconnect materials with a view to sourcing a
majority of our substrate requirements by value from ASE Material by the end of
2003.

     We intend to continue to strengthen our capabilities in testing complex,
high-performance semiconductors. In particular, we plan to focus on testing
logic/mixed-signal semiconductors that are characterized by very high clock
speeds, high pin count and high levels of integration.

     The increasing miniaturization of semiconductors and the growing
complexity of interconnect technology have also resulted in the blurring of the
traditional distinctions among assembly at different (that is, upstream and
downstream) levels of integration: chip, module, board and system. Our
controlling interest in Universal Scientific has provided us with access to
process and product technologies at the levels of module, board and system
assembly and test, which helps us to better anticipate industry trends and take
advantage of potential growth opportunities.

   Strategically Expand Production Capacity

     We intend to strategically expand our production capacity, both through
internal growth and through selective acquisitions, with a focus on providing
more advanced packaging and testing services, which we believe present greater
opportunities to achieve higher growth in our revenues and higher margins. We
believe that the demand for advanced semiconductor packaging and testing
services will grow at a faster pace than demand for traditional packaging and
testing services. Packaging and testing services for more advanced
semiconductors also generally have higher margins for two reasons. First, as
the packaging and testing of advanced semiconductors become more complex,
requiring greater expertise in process and technology, such services typically
command higher average selling prices. Second, we have been able to achieve
higher utilization rates for the equipment we use for more advanced packaging
and testing, compared to other equipment that we maintain. We believe that our
technical expertise, as well as our scale of operations and financial position,
which had enabled us to continue to make investments in more advanced packaging
and testing equipment even in times of market downturn, have also enabled us to
attract a greater proportion of the demand for more advanced packaging and
testing services.

     We evaluate acquisition opportunities on the basis of access to new
markets and technology, the enhancement of our production capacity, economies
of scale and management resources, and closer proximity to existing and
potential customers. In 1999, we acquired ISE Labs, an independent testing
company with operations in California, Hong Kong and Singapore. Through
combining the front-end engineering testing capabilities of ISE Labs with our
existing final testing capabilities, we are able to provide our customers with
complete semiconductor testing solutions. We acquired ASE Chung Li and ASE
Korea in 1999, formerly the semiconductor packaging and testing operations of
Motorola, Inc. located in Chung Li, Taiwan and Paju, South Korea, which allowed
us to expand our capacity and gain access to specialized packaging and testing
technologies with a focus on wireless communications and automotive
end-products.


                                      23

<PAGE>


   Continue to Leverage Our Presence in Key Centers of Semiconductor and
   Electronics Manufacturing

     We intend to continue leveraging our presence in key centers of
semiconductor and electronics manufacturing to further grow our business. We
have significant packaging and testing operations in Taiwan, currently the
largest center for outsourced semiconductor manufacturing in the world. This
presence enables our engineers to work closely with our customers as well as
foundries and other providers of complementary semiconductor manufacturing
services early in the semiconductor design process, enhances our responsiveness
to the requirements of our customers and shortens production cycles. In
addition, as a provider of turnkey services, we are able to offer in Taiwan
packaging and testing services, including interconnect materials solutions, all
within relatively close geographic proximity to our customers, other service
providers and the end users of our customers' products. In addition to our
expansion plans in Kaohsiung, Taiwan, we intend to expand our packaging,
testing and interconnect materials operations in Chung Li, Taiwan to better
serve our customers located in northern Taiwan and customers who request that
we maintain the capability of packaging and testing their products at more than
one location in Taiwan.

     In addition to our locations in Taiwan, we have operations in the
following locations:

     o    Korea--a center for the manufacturing of memory devices and
          semiconductors for communications applications with a concentration
          of integrated device manufacturers specializing in these products;

     o    Malaysia and Singapore--an emerging center for outsourced
          semiconductor manufacturing in Southeast Asia with a concentration of
          integrated device manufacturers; and

     o    Silicon Valley in California--the preeminent center for semiconductor
          design with a concentration of fabless customers.

   Strengthen and Develop Strategic Relationships with Providers of
   Complementary Semiconductor Manufacturing Services

     We intend to strengthen existing and develop new strategic relationships
with providers of other complementary semiconductor manufacturing services,
such as foundries, as well as equipment vendors, raw material suppliers and
technology research institutes, in order to offer our customers total
semiconductor manufacturing solutions covering all stages of the manufacturing
of their products from design to shipment.

     Since 1997, we have maintained a strategic alliance with TSMC, the world's
largest dedicated semiconductor foundry, which designates us as the
non-exclusive preferred provider of packaging and testing services for
semiconductors manufactured by TSMC. Through our strategic alliance with and
close geographic proximity to TSMC, we are able to offer our customers a total
semiconductor manufacturing solution that includes access to foundry services
in addition to our packaging, testing and direct shipment services.

     We are developing similar strategic relationships with other major
foundries and providers of other complementary semiconductor manufacturing
services in Taiwan and Southeast Asia with which we already have close business
relationships.

Principal Products and Services

     We offer a broad range of advanced semiconductor packaging and testing
services. Our package types employ either leadframes or substrates as
interconnect materials. The semiconductors we package are used in a wide range
of end-use applications, including communications, personal computers, consumer
electronics, industrial, automotive and other applications. Our testing
services include front-end engineering testing, which is performed during and
following the initial circuit design stage of the semiconductor manufacturing
process; wafer probe; final testing and other related semiconductor testing
services. We focus on packaging and testing logic semiconductors. We offer our
customers turnkey services which consist of packaging, testing and direct
shipment of semiconductors to end users designated by our customers. In 2001
and 2002, our packaging revenues accounted for 75.3% and 77.9% of our net
revenues, respectively, and our testing revenues accounted for 24.7% and 22.1%
of our net revenues, respectively.


                                      24

<PAGE>


   Packaging Services

     We offer a broad range of package types to meet the requirements of our
customers, with a focus on advanced packaging solutions. Within our portfolio
of package types, we focus on the packaging of semiconductors for which there
is expected to be a strong demand. These include advanced leadframe-based
package types such as quad flat package, thin quad flat package, bump chip
carrier and quad flat no-lead package, and package types based on substrates,
such as BGA, including flip-chip BGA. We are among the leaders in such advanced
packaging process and technologies and are well-positioned to lead the
technology migration in the semiconductor packaging industry.

     The semiconductor packaging industry has evolved to meet the advanced
packaging requirements of high-performance semiconductors. The development of
high-performance electronics products has spurred the innovation of
semiconductor packages that have higher interconnect density and better
electrical performance. As a part of this technology migration, semiconductor
packages have evolved from leadframe-based packages to substrate-based
packages. The key differences of these package types are:

     o    the size of the package;

     o    the density of electrical connections the package can support; and

     o    the thermal and electrical characteristics of the package.

     Leadframe-Based Packages. Leadframe-based packages are packaged by
connecting the die, using wire bonders, to the leadframe with gold wire. As
packaging technology improves, the number of leads per package increases.
Packages have evolved from the lower pin-count plastic dual in-line packages to
higher pin-count quad flat packages. In addition, improvements in
leadframe-based packages have reduced the footprint of the package on the
circuit board and improved the electrical performance of the package. The
following table sets forth our principal leadframe-based packages.


                                      25

<PAGE>


<TABLE>
                           Number of
  Package Types              Leads                  Description                     End-Use Applications
  -------------              -----                  -----------                     --------------------
<S>                           <C>                      <C>                                   <C>

Quad Flat Package           44-304      Designed for advanced processors           Multimedia applications,
  (QFP)/Thin Quad Flat                  and controllers, application specific      cellular phones, personal
  Package (TQFP)                        integrated circuits and digital            computers, automotive and
                                        signal processors.                         industrial products, hard disk
                                                                                   drives, communication boards
                                                                                   such as ethernet, integrated
                                                                                   services digital network,
                                                                                   and notebook computers.

Quad Flat No-Lead            16-88      QFN or MCC uses half-encapsulation         Cellular phones, wireless LAN,
  Package                               technology to expose the rear side         personal digital assistant devices
  (QFN)/Microchip                       of the die pad and the tiny fingers,       and digital cameras.
  Carrier(MCC)                          which are used to connect the chip
                                        and bonding wire with printed
                                        circuit boards.

Bump Chip Carrier           16-116      BCC packages use plating metal             Cellular phones, wireless LAN,
  (BCC)                                 pads to connect with printed circuit       personal digital assistant devices
                                        boards, creating enhanced thermal          and digital cameras.
                                        and electrical performance.

Small Outline Plastic         8-56      Designed for memory devices                Consumer audio/video and
  Package (OP)/Thin Small               including static random access             entertainment products, cordless
  Outline Plastic                       memory, or SRAM, dynamic random            telephones, pagers, fax
  Package (TSOP)                        access memory, or DRAM, fast static        machines, printers, copiers,
                                        RAM, also called FSRAM, and flash          personal computer peripherals,
                                        memory devices.                            automotive parts,
                                                                                   telecommunications products,
                                                                                   recordable optical disks and
                                                                                   hard disk drives.

Small Outline Plastic        20-44      Designed for memory and low                DRAM memory devices,
  J-Bend Package (SOJ)                  pin-count applications.                    microcontrollers, digital analog
                                                                                   conversions and audio/video
                                                                                   applications.

Plastic Leaded Chip          28-84      Designed for applications that do          Personal computers, scanners,
  Carrier (PLCC)                        not require a low profile package          electronic games and monitors.
                                        with a high density of interconnects.

Plastic Dual In-line          8-56      Designed for consumer electronic           Telephones, televisions,
  Package (PDIP)                        products.                                  audio/video applications and
                                                                                   computer peripherals.
</TABLE>


     Substrate-Based Packages. Substrate-based packages generally employ the
ball grid array design which utilizes a substrate rather than a leadframe.
Whereas traditional leadframe technology places the electrical connection
around the perimeter of the package, the BGA package type places the electrical
connection at the bottom of the package surface in the form of small bumps or
balls. These small bumps or balls are typically distributed evenly across the
bottom surface of the package, allowing greater distance between individual
leads and higher pin-counts.

     The BGA package type was developed in response to the requirements of
advanced semiconductors. The benefits of the BGA package type include:

     o    smaller package size;

     o    higher pin-count;


                                      26

<PAGE>


     o    greater reliability;

     o    superior electrical signal transmission; and

     o    better heat dissipation.

     The industry demand for BGA packages has grown significantly in recent
years. BGA packages are generally used in applications where size, density and
performance are important considerations, such as cellular handsets and high
pin-count graphic chipsets. Our expertise in BGA packages also includes
capabilities in stacked-die BGA, which assembles multiple dies into a single
package. As an extension to stacked-die BGA, we also assemble
systems-in-a-package products, which involve the integration of more than one
chip into the same package. We believe that we are among the leaders in these
packaging technologies.

     We believe that there will continue to be a growing demand for packaging
solutions with increased input/output density, a smaller size and better heat
dissipation characteristics. In anticipation of this demand, we have focused on
developing our capabilities in some advanced packaging solutions, such as
flip-chip BGA. Flip-chip BGA technology replaces wire bonding with wafer
bumping for interconnections within the package. Wafer bumping involves the
placing of tiny solder balls, instead of wires, on top of dies for connection
to substrates. As compared with more traditional packages which allow
input/output connection only on the boundaries of the dies, flip-chip packages
significantly enhance the input/output flow by allowing input/output connection
over the entire surface of the dies. We commenced volume production of
flip-chip packages in July 2000.

     The following table sets forth our principal substrate-based packages.

<TABLE>
                         Number of
  Package Types           Leads                  Description                      End-Use Applications
  -------------          ---------               -----------                      --------------------
<S>                         <C>                     <C>                                 <C>
Plastic BGA               5-1152      Designed for semiconductors which         Wireless products, cellular
                                      require the enhanced performance          phones, global positioning
                                      provided by plastic BGA, including       systems, notebook computers,
                                      personal computer chipset, graphic        disk drives and video cameras.
                                      controllers and microprocessors,
                                      application specific integrated
                                      circuits, digital signal processors
                                      and memory devices.

Film BGA                  96-280      Substrate-based package that has a        Cellular phones, pagers,
                                      higher performance and lower profile      wireless communications,
                                      than plastic BGA.                         digital signal processors and
                                                                                micro-controller applications
                                                                                and high performance disk
                                                                                drives.

Cavity Down BGA           256-854     Designed for memory devices such as       Cellular and other
                                      flash memory devices, SRAM, DRAM and      telecommunications products,
                                      FSRAM, microprocessors/controllers        wireless and consumer systems,
                                      and high value application specific       PDAs, disk drives, notebook
                                      integrated circuits requiring a low       computers and memory boards.
                                      profile, light and small package.

Stacked-Die BGA           48-341      Combination of multiple dies in a         Cellular phones, local area
                                      single package that enables package       networks, graphic processors,
                                      to have multiple functions within a       digital cameras and pagers.
                                      small surface area.
</TABLE>


                                      27

<PAGE>


<TABLE>
                         Number of
  Package Types           Leads                  Description                      End-Use Applications
  -------------          ---------               -----------                      --------------------
<S>                         <C>                     <C>                                 <C>
Flip-Chip BGA             16-1681     Using advanced interconnect               High-performance networking,
                                      technology, flip-chip BGA package         graphics and processor
                                      allows higher density of input/output     applications.
                                      connection over the entire surface of
                                      the dies. Designed for
                                      high-performance semiconductors that
                                      require high density of interconnects
                                      in a small package.

System-in-Package         256-972     Integrated combination of                 Digital televisions, fax
                                      microprocessor, logic controller and      modems, personal computer
                                      memory chips assembled in one package.    peripherals, compact disc
                                                                                players and copiers.

Land Grid Array             32-78     Leadless package which is essentially     High frequency integrated
                                      a BGA package without the solder          circuits such as wireless
                                      balls. Based on laminate substrate,       communications products,
                                      land grid array packages allow            computer servers and personal
                                      flexible routing and are capable of       computer peripherals.
                                      multichip module functions.

Tape Carrier Package       51-384     The light-weight tape carrier package     Liquid crystal displays, ink
                                      uses a labor-saving reel-to-reel          printers, cellular phones, PDA
                                      bonding technique to facilitate high      and notebook computers.
                                      input/output and frequency as well as
                                      flexible interconnections.
</TABLE>


     The following table sets forth, for the periods indicated, the percentage
of our packaging revenues accounted for by each package type.

<TABLE>
                                                                  Year Ended December 31,
                                                             ---------------------------------
                                                                2000        2001        2002
                                                             -----------  ---------  ---------
                                                             (percentage of packaging revenues)
<S>                                                               <C>        <C>          <C>
Package Types:
   BGA and other substrate-based package types.............      44.2%       52.0%       53.5%
   TQFP/LQFP...............................................      18.2        14.3        15.2
   QFP.....................................................      14.6        12.7        12.1
   SOJ/SOP.................................................       9.9         6.7         5.8
   PLCC....................................................       3.0         2.1         1.8
   PDIP....................................................       3.0         3.0         3.4
   Other...................................................       7.1         9.2         8.2
                                                                -----       -----       -----
     Total.................................................     100.0%      100.0%      100.0%
                                                                =====       =====       =====
</TABLE>


     Interconnect Materials. Interconnect materials connect the input/output on
the semiconductor dies to the printed circuit board. Interconnect materials
include leadframe, which is a miniature sheet of metal, generally made of
copper and silver alloys, on which the pattern of input/output leads has been
cut, and substrate, which is a multi-layer miniature printed circuit board.
Interconnect materials are an important element of the electrical
characteristics and overall performance of semiconductors. We produce both
leadframes and substrates for our packaging operations through ASE Material. In
2002, ASE Material supplied approximately one-quarter, by value, of the
leadframes and one-third, by value, of the substrates used in our operations.


                                      28

<PAGE>


     We expect substrates will become an increasingly important value-added
component of the semiconductor packaging business. The demand for higher
performance semiconductors in smaller packages will continue to spur the
development of advanced substrates that can support the advancement in circuit
design and fabrication. As a result, we believe that the market for substrates
will grow and the cost of substrates as a percentage of the total packaging
process will increase, especially for advanced packages such as flip-chip BGA
packages. In the past, substrates we designed for our customers were produced
by independent substrate manufacturers. In anticipation of the migration in
packaging technology, we established ASE Material in 1997 to develop our
capabilities in the design and production of interconnect materials for use in
our packaging operations. Through ASE Material, we believe we can capture the
growth opportunities in the interconnect materials business as well as reduce
the production cycle time for our customers by integrating substrate design and
production into our packaging services. See "Item 3. Key Information--Risk
Factors--Risk Relating to Our Business--If we are not successful in developing
and enhancing our in-house interconnect materials capabilities, our margins and
profitability may be adversely affected".

   Testing

     We provide a complete range of semiconductor testing services, including
front-end engineering testing, wafer probing, final testing of
logic/mixed-signal and memory semiconductors and other test-related services.

     The testing of semiconductors requires technical expertise and knowledge
of the specific applications and functions of the semiconductors tested as well
as the testing equipment utilized. We believe that our testing services employ
technology and expertise which are among the most advanced in the semiconductor
industry. In addition to maintaining different types of testing equipment,
which enables us to test a variety of semiconductor functions, we work closely
with our customers to design effective testing and conversion programs on
multiple equipment platforms for particular semiconductors.

     In recent years, complex, high-performance logic/mixed-signal
semiconductors have accounted for an increasing portion of our testing
revenues. As the testing of complex, high-performance semiconductors requires a
large number of functions to be tested using more advanced testing equipment,
these products generate higher revenues per unit of testing time, as measured
in central processing unit seconds.

     Front-End Engineering Testing. We provide front-end engineering testing
services, including customized software development, electrical design
validation, and reliability and failure analysis.

     o    Customized Software Development. Test engineers develop customized
          software to test the semiconductor using advanced testing equipment.
          A customized software, developed on specific testing platforms, is
          required to test the conformity of each particular semiconductor type
          to its unique functionality and specification.

     o    Electrical Design Validation. A prototype of the designed
          semiconductor is subjected to electrical tests using advanced test
          equipment and customized software. These tests assess whether the
          prototype semiconductor complies with a variety of different
          operating specifications, including functionality, frequency,
          voltage, current, timing and temperature range.

     o    Reliability Analysis. Reliability analysis is designed to assess the
          long-term reliability of the semiconductor and its suitability of use
          for intended applications. Reliability testing can include "burn-in"
          services, which electrically stress a device, usually at high
          temperature and voltage, for a period of time long enough to cause
          the failure of marginal devices.

     o    Failure Analysis. In the event that the prototype semiconductor does
          not function to specifications during either the electrical design
          validation or reliability testing processes, it is typically
          subjected to failure analysis to determine why it did not perform as
          anticipated. As part of this analysis, the prototype semiconductor
          may be subjected to a variety of analyses, including electron beam
          probing and electrical testing.


                                      29

<PAGE>


     Wafer Probing. Wafer probing is the step immediately before the packaging
of semiconductors and involves visual inspection and electrical testing of the
processed wafer for defects to ensure that it meets our customers'
specifications. Wafer probing services require expertise and testing equipment
similar to that used in final testing, and most of our testers can also be used
for wafer probing.

     Logic/Mixed-Signal Final Testing. We conduct final tests of a wide variety
of logic/mixed-signal semiconductors, with the number of leads ranging from the
single digits to over one thousand and operating frequencies of up to 800 MHz
for digital semiconductors and 6 GHz for radio frequency semiconductors, which
are at the high end of the range for the industry. The products we test include
semiconductors used for networking and wireless communications, graphics and
disk controllers for home entertainment and personal computer applications, as
well as a variety of application specific integrated circuits for various
specialized applications.

     Memory Final Testing. We provide final testing services for a variety of
memory products, such as SRAM, DRAM, single-bit erasable programmable read-only
memory semiconductors and flash memory semiconductors.

     Other Test-Related Services. We provide a broad range of additional
test-related services, including:

     o    Burn-in Testing. Burn-in testing is the process of electrically
          stressing a device, usually at high temperature and voltage, for a
          period of time to simulate the continuous use of the device to
          determine whether this use would cause the failure of marginal
          devices.

     o    Dry Pack. Process which involves heating semiconductors in order to
          remove moisture before packaging and shipping to customers.

     o    Tape and Reel. Process which involves transferring semiconductors
          from a tray or tube into a tape-like carrier for shipment to
          customers.

     Drop Shipment Services. We offer drop shipment services for the shipment
of semiconductors directly to end users designated by our customers. Drop
shipment services are provided mostly in conjunction with logic/mixed-signal
testing. We provide drop shipment services to a significant percentage of our
testing customers. A substantial portion of our customers at each of our
facilities have qualified these facilities for drop shipment services. Since
drop shipment eliminates the additional step of inspection by the customer
before shipment to the end user, quality of service is a key consideration. We
believe that our ability to successfully execute our full range of services,
including drop shipment services, is an important factor in maintaining
existing customers as well as attracting new customers.

     The following table sets forth, for the periods indicated, the percentage
of our testing revenues accounted for by each type of testing service.


                                               Year Ended December 31,
                                           --------------------------------
                                             2000        2000        2000
                                           --------    --------    --------
                                           (percentage of testing revenues)
Testing Services:
Front-end engineering test.................    4.5%        8.7%        7.4%
Wafer probe................................    9.9         9.0         8.9
Final test.................................   85.6        82.3        83.7
                                             -----       -----       -----
     Total.................................  100.0%      100.0%      100.0%
                                             =====       =====       =====


Sales and Marketing

   Sales and Marketing Offices

     We maintain sales and marketing offices in Taiwan, the United States,
Europe and Malaysia. Our Hsinchu and Kaohsiung offices in Taiwan are staffed
with employees from both ASE Inc. and ASE Test Taiwan. In addition, the sales
agent for our packaging and testing services maintains sales and marketing
offices in Austria, Belgium,


                                      30

<PAGE>


Germany, Japan, Korea, Malaysia and the United States. We conduct marketing
research through our customer service personnel and those of our sales agent
and through our relationships with our customers and suppliers to keep abreast
of market trends and developments. We also provide advice in the area of
production process technology to our major customers planning the introduction
of new products. In placing orders with us, our customers specify which of our
facilities these orders will go to. Our customers conduct separate
qualification and correlation processes for each of our facilities that they
use. See "--Sales and Marketing--Qualification and Correlation by Customers".

   Sales and Customer Service Agents

     Under commission agreements, each of ASE Inc., ASE Test Taiwan, ASE Korea,
ASE Chung Li and ASE Test Malaysia has appointed Gardex International Limited,
or Gardex, as the non-exclusive sales agent for its services and products
worldwide, excluding Asia. Gardex helps us identify customers, monitor delivery
acceptance and payment by customers and, within parameters set by us, negotiate
price, delivery and other terms with our customers. Purchase orders are placed
directly with us by our customers. We pay Gardex a commission of between 0.5%
and 1.0% of our sales outside of Asia, payable monthly, depending on the amount
of these sales. In 2001 and 2002, we paid US$5.9 million and US$5.6 million,
respectively, in commission to Gardex.

     Under service agreements, each of ASE Inc., ASE Test Taiwan, ASE Korea,
ASE Chung Li and ASE Test Malaysia has appointed ASE (U.S.) Inc. as its
non-exclusive agent to provide customer service and after-sales support to its
customers in Europe and North America. We pay ASE (U.S.) Inc. a monthly fee
based on its monthly associated costs and expenses plus a commission set by
reference to the lower of a percentage of sales or a fixed fee. In 2001 and
2002, we paid US$15.8 million and US$15.6 million, respectively, in fees and
service charges to ASE (U.S.) Inc.

     Both Gardex and ASE (U.S.) Inc. are wholly owned by Y.C. Hsu, who has had
a long personal relationship with Jason C.S. Chang, our Chairman and Chief
Executive Officer, that pre-dates the founding of our company. We have
maintained business relationships with Gardex, ASE (U.S.) Inc. and their
predecessors since 1985. Gardex and ASE (U.S.) Inc. currently perform services
only for us.

   Customers

     Our global base of over 200 customers includes leading semiconductor
companies across a wide range of end-use applications:

   o  Advanced Micro Devices, Inc.           o  NVIDIA Corporation
   o  Altera Corporation                     o  ON Semiconductor Corp.
   o  ATI Technologies Inc.                  o  Qualcomm Incorporated
   o  Conexant Systems, Inc.                 o  RF Micro Devices, Inc.
   o  IBM Corporation                        o  Silicon Integrated Systems Corp.
   o  Koninklijke Philips Electronics N.V.   o  STMicroelectronics N.V.
   o  LSI Logic Corporation                  o  VIA Technologies, Inc.
   o  Motorola, Inc.

     Our five largest customers together accounted for approximately 44%, 41%
and 40% of our net revenues in 2000, 2001 and 2002, respectively. Other than
Motorola, Inc. and VIA Technologies, Inc. in 2000 and 2001 and Motorola, Inc.
in 2002, no customer accounted for more than 10% of our net revenues in 2000,
2001 and 2002.

     We package and test for our customers a wide range of products with
end-use applications in the communications, personal computers, consumer
electronics, industrial and automotive sectors. The following table sets forth
a breakdown of the percentage of our net revenues, for the periods indicated,
by the principal end-use applications of the products which we packaged and
tested.


                                      31

<PAGE>


                                                       Year Ended December 31,
                                                       -----------------------
                                                         2001         2002
                                                       ---------    ----------
End-Use Applications:
  Communications....................................     36.0%        34.4%
  Personal computers................................     35.5         35.4
  Consumer electronics/industrial/automotive........     27.7         28.8
  Other.............................................      0.8          1.4
                                                        -----        -----
     Total..........................................    100.0%       100.0%
                                                        =====        =====

     Many of our customers are leaders in their respective end-use markets. For
example, we provide Motorola, an industry leader in automotive and wireless
communications semiconductor products, with most of its outsourced packaging
and testing requirements. The following table sets forth some of our largest
customers, in alphabetical order, categorized by the principal end-use
applications of the products which we package and test for them.


<TABLE>
                                                                                Consumer Electronics/
   Communications                           Personal Computers                  Industrial/Automotive
   --------------                           ------------------                  ---------------------
<S>                                                 <C>                               <C>
Advanced Micro Devices, Inc.                Advanced Micro Devices, Inc.        Altera Corporation
Conexant Systems, Inc.                      ATI Technologies, Inc.              LSI Logic Corporation
Koninklijke Philips Electronics N.V.        IBM Corporation                     Motorola, Inc.
Motorola, Inc.                              NVIDIA Corporation                  ON Semiconductor Corp.
Qualcomm Incorporated                       Silicon Integrated Systems Corp.    STMicroelectronics N.V.
RF Micro Devices, Inc.                      VIA Technologies, Inc.
STMicroelectronics N.V.                     Winbond Electronics Corporation
</TABLE>


     We categorize our packaging and testing revenues geographically based on
the country in which the customer is headquartered. The following table sets
forth, for the periods indicated, the percentage breakdown by geographic
regions of our packaging and testing revenues.

                                           Year Ended December 31,
                                        -------------------------------
                                         2000        2001         2002
                                        ------      ------       ------
North America......................      65.0%       65.0%        59.1%
Taiwan.............................      24.8        26.7         24.9
Europe.............................       3.8         3.9          6.1
Others.............................       6.4         4.4          9.9
                                        -----       -----        -----
     Total.........................     100.0%      100.0%       100.0%


     In 2002, approximately 83% of the testing revenues of ASE Test Taiwan and
79% of the testing revenues of ASE Test Malaysia were accounted for by the
testing of semiconductors packaged at our packaging facilities in Kaohsiung,
Taiwan and Malaysia, respectively. The balance represented testing revenues
from customers who delivered packaged semiconductors directly to ASE Test
Taiwan or ASE Test Malaysia for testing. In 2002, approximately 34% of our
packaging revenues in Kaohsiung, Taiwan and 62% of our packaging revenues in
Malaysia were accounted for by the packaging of semiconductors which were
subsequently tested at ASE Test Taiwan and ASE Test Malaysia, respectively. We
expect that more customers of our packaging facilities in Kaohsiung, Taiwan and
Malaysia will begin to contract for our packaging and testing services on a
turnkey basis.

   Qualification and Correlation by Customers

     Customers generally require that our facilities undergo a stringent
qualification process during which the customer evaluates our operations and
production processes, including engineering, delivery control and testing
capabilities. The qualification process typically takes up to eight weeks, but
can take longer depending on the requirements of the customer. In the case of
our testing operations, after we have been qualified by a customer and before
the customer delivers semiconductors to us for testing in volume, a process
known as correlation is undertaken. During the correlation process, the
customer provides us with sample semiconductors to be tested and


                                      32

<PAGE>


either provides us with the test program or requests that we develop a
conversion program. In some cases, the customer also provides us with a data
log of results of any testing of the semiconductors which the customer may have
conducted previously. The correlation process typically takes up to two weeks,
but can take longer depending on the requirements of the customer. We believe
our ability to provide turnkey services reduces the amount of time spent by our
customers in the qualification and correlation process. As a result, customers
utilizing our turnkey services are able to achieve shorter production cycles.

   Pricing

     We price our packaging services primarily on a cost-plus basis with
reference to prevailing market prices. We price our testing services primarily
on the basis of the amount of time, measured in central processing unit
seconds, taken by the automated testing equipment to execute the test programs
specific to the products being tested, as well as the cost of the equipment,
with reference to prevailing market prices. Prices for our packaging and
testing services are confirmed at the time firm orders are received from
customers, which is typically four to eight weeks before delivery.

Raw Materials and Suppliers

   Packaging

     The principal raw materials used in our packaging processes are
interconnect materials such as leadframes and substrates, gold wire and molding
compound. Interconnect materials, such as leadframes and substrates, gold wire
and molding compound represented approximately 57.5%, 21.2% and 9.6%,
respectively, of our total cost of packing materials in 2002.

     The silicon die, which is the functional unit of the semiconductor to be
packaged, is supplied in the form of silicon wafers. Each silicon wafer
contains a number of identical dies. We receive the wafers from the customers
or the foundries on a consignment basis. Consequently, we generally do not
incur inventory costs relating to the silicon wafers used in our packaging
process.

     We do not maintain large inventories of leadframes, substrates, gold wire
or molding compound, but generally maintain sufficient stock of each principal
raw material for approximately one month's production based on blanket orders
and rolling forecasts of near-term requirements received from customers. In
addition, several of our principal suppliers dedicate portions of their
inventories, typically in amounts equal to the average monthly amounts supplied
to us, as reserves to meet our production requirements. However, shortages in
the supply of materials experienced by the semiconductor industry have in the
past resulted in occasional price adjustments and delivery delays. For example,
in 1999 and the first half of 2000, the industry experienced a shortage in the
supply of advanced substrates used in BGA packages, which, at the time, were
only available from a limited number of suppliers located primarily in Japan.
In these instances, we generally negotiate an extension of the delivery date
from our customers. See "--Strategy--Continue to Focus on Advanced
Technological, Processing and Materials Capabilities".

   Testing

     Apart from packaged semiconductors, no other raw materials are needed for
the functional and burn-in testing of semiconductors. For the majority of our
testing equipment, we often base our purchases on prior discussions with our
customers about their forecast requirements. The balance consists of testing
equipment on consignment from customers, which are dedicated exclusively to the
testing of these customers' specific products.

Equipment

   Packaging

     The most important equipment used in the semiconductor packaging process
is the wire bonder. The number of wire bonders at a given facility is commonly
used as a measure of the packaging capacity of the facility. The wire bonders
connect the input/output terminals on the silicon die using extremely fine gold
wire to leads on leadframes or substrates. Typically, wire bonders may be used,
with minor modifications, for the packaging of different


                                      33

<PAGE>


products. We purchase our wire bonders principally from Kulicke & Soffa
Industries Inc. As of December 31, 2002, we operated an aggregate of 4,393 wire
bonders, of which 3,109 were fine-pitch wire bonders and 21 were consigned by
customers, respectively. In addition to wire bonders, we maintain a variety of
other types of packaging equipment, such as wafer grind, wafer mount, wafer
saw, die bonders, automated molding machines, laser markers, solder plate, pad
printers, dejunkers, trimmers, formers, substrate saw and scanners.

   Testing

     Testing equipment is the most capital intensive component of the testing
process. We generally seek to purchase testers from different suppliers with
similar functionality and the ability to test a variety of different
semiconductors. We purchase testing equipment from major international
manufacturers, including Advantest Corporation, Agilent Technologies, Inc.,
Credence Systems Corporation, LTX Corporation, NP Test Inc. and Teradyne, Inc.
Upon acquisition of new testing equipment, we install, configure, calibrate,
perform burn-in diagnostic tests on and establish parameters for the testing
equipment based on the anticipated requirements of existing and potential
customers and considerations relating to market trends. As of December 31,
2002, we operated an aggregate of 1,066 testers, 162 of which were consigned by
customers. In addition to testers, we maintain a variety of other types of
testing equipment, such as automated handlers and probers (special handlers for
wafer probing), scanners, re-formers and computer workstations for use in
software development. Each tester may be attached to a handler or prober.
Handlers attach to testers and transport individual packaged semiconductors to
the tester interface. Probers similarly attach to the tester and align each
individual die on a wafer with the interface to the tester.

     Test programs, which are the software that drive the testing of specific
semiconductors, are written for a specific testing platform. We often perform
test program conversions that enable us to test semiconductors on multiple test
platforms. This portability between testers enables us to allocate
semiconductors tested across our available test capabilities and thereby
improve capacity utilization rates. In cases where a customer requires the
testing of a semiconductor product that is not yet fully developed, the
customer may provide personal computer workstations to us to test specific
functions. In cases where a customer has specified testing equipment that was
not widely applicable to other products which we test, we have required the
customer to furnish the equipment on a consignment basis.

Intellectual Property

     As of December 31, 2002, we held 220 Taiwan patents and 88 U.S. patents
related to various semiconductor packaging technologies. In addition, we
registered "ASE" as a trademark and as a servicemark in Taiwan.

     We have also entered into various non-exclusive technology license
agreements with other companies involved in the semiconductor manufacturing
process, including Tessera Inc., Fujitsu Limited, Flip Chip Technologies,
Motorola, Inc. and LSI Logic Corporation. We paid royalties under these license
agreements in the amount of NT$199.8 million, NT$151.2 million and NT$176.7
million (US$5.1 million) in 2000, 2001 and 2002, respectively. The technology
we license from these companies includes solder bumping, redistribution,
ultraCSP assembly and other technologies used in the production of package
types, such as BCC, flip-chip BGA and film BGA. The license agreement with
Tessera Inc. will not expire until the expiration of the Tessera Inc. patents
licensed by the agreement. The license agreements with Motorola and Fujitsu
Limited expired on December 31, 2002 and April 13, 2003, respectively, and we
are in the process of negotiating the renewal of these license agreements with
Motorola and Fujitsu, respectively. The license agreements with Flip Chip
Technologies and LSI Logic Corporation will expire on March 1, 2009 and January
1, 2010, respectively.

Quality Control

     We believe that our advanced process technology and reputation for high
quality and reliable services have been important factors in attracting and
retaining leading international semiconductor companies as customers for our
packaging and testing services. We have maintained an average packaging yield
rate of 99.8% or greater in each of the last three years. We maintain a quality
control staff at each of our facilities. Our quality control staff typically
includes engineers, technicians and other employees who monitor packaging and
testing processes in order to ensure high quality. Our quality assurance
systems impose strict process controls, statistical in-line monitors, supplier


                                      34

<PAGE>


control, data review and management, quality controls and corrective action
systems. Our quality control employees operate quality control stations along
production lines, monitor clean room environment and follow up on quality
through outgoing product inspection and interaction with customer service
staff. We have established quality control systems which are designed to ensure
high quality service to customers, high product and testing reliability and
high production yields at our facilities. In addition, our packaging and
testing facilities have been qualified by all of our major customers after
satisfying stringent quality standards prescribed by these customers.

     Our packaging and testing operations are undertaken in clean rooms where
air purity, temperature and humidity are controlled. To ensure stability and
integrity of our operations, we maintain clean rooms at our facilities that
meet U.S. Federal 209E class 1,000, 10,000 and 100,000 standards. All of our
facilities have been certified as meeting the ISO 9002 quality standards by the
International Standards Organization, or ISO. In addition, our packaging
facilities in Kaohsiung and Chung Li have been certified as meeting the ISO
9001 quality standards and our facilities in Taiwan, Korea, Malaysia and the
Philippines have been certified as meeting the ISO 14001 quality standards. The
ISO certifications are required by many countries in connection with sales of
industrial products in these countries. Our facilities in Taiwan, Korea,
Malaysia and the Philippines have also been certified as meeting the Quality
System 9000, also known as QS-9000, quality standards. The QS-9000 quality
standards provide for continuous improvement with an emphasis on the prevention
of defects and reduction of variation and waste in the supply chain. Like the
ISO 9002 certification, the QS-9000 certification is required by some
semiconductor manufacturers as a threshold indicating a company's quality
control standards. Furthermore, our testing and packaging facilities in
Kaohsiung have received the SAC Level-1 certification for quality assurance
from the Semiconductor Assembly Council. The Semiconductor Assembly Council is
an organization of semiconductor manufacturers, subcontractors, end-users,
materials and service providers established to certify subcontract quality
systems and process control practices. In addition, we have received various
vendor awards from our customers for the quality of our products and services.

Competition

     We compete in the highly competitive independent semiconductor packaging
and testing markets. We face competition from a number of sources, including
other independent semiconductor packaging and testing companies, especially
those that also offer turnkey packaging and testing services. More importantly,
we compete for the business of integrated device manufacturers with in-house
packaging and testing capabilities and fabless semiconductor design companies
with their own in-house testing capabilities. Some of these integrated device
manufacturers have commenced, or may commence, in-house packaging and testing
operations in Asia. Furthermore, several independent packaging and testing
companies have established their packaging operations in Taiwan.

     Integrated device manufacturers that use our services continuously
evaluate our performance against their own in-house packaging and testing
capabilities. These integrated device manufacturers may have access to more
advanced technologies, and greater financial and other resources than we do. We
believe, however, that we can offer greater efficiency and lower costs while
maintaining equivalent or higher quality products and services for several
reasons. First, as we benefit from specialization and economies of scale by
providing services to a large base of customers across a wide range of
products, we are better able to reduce costs and shorten production cycles
through high capacity utilization and process expertise. Second, as a result of
our customer base and product offerings, our equipment generally has a longer
useful life. Third, as a result of the continuing reduction of investments in
in-house packaging and testing capacity and technology at integrated device
manufacturers, we are better positioned to meet advanced packaging and testing
requirements on a large scale.

Environmental Matters

     Our packaging and interconnect materials operations generate environmental
wastes, including gaseous chemical, liquid and solid industrial wastes. We have
installed various types of anti-pollution equipment for the treatment of liquid
and gaseous chemical waste, generated at all of our semiconductor packaging
facilities. We believe that we have adopted adequate anti-pollution measures
for the effective maintenance of environmental protection standards that are
consistent with the industry practice in the countries in which our facilities
are located.


                                      35

<PAGE>


In addition, we believe we are in compliance in all material respects with
present environmental laws and regulations applicable to our operations and
facilities.

Insurance

     We have insurance policies covering property damage and damage to our
production facilities, buildings and machinery due to fire. In addition, we
have insurance policies covering our liabilities in connection with certain
accidents. Significant damage to any of our production facilities, whether as a
result of fire or other causes, would have a material adverse effect on our
results of operations. We are not insured against the loss of key personnel.

ORGANIZATIONAL STRUCTURE

     The following is a brief description of our corporate structure and
effective ownership interest in each of our principal operating subsidiaries
and affiliates as of March 31, 2003.

     As of March 31, 2003, ASE Inc.(1) held:

     o    72.4% ownership interests of ASE (Chung Li) Inc.;

     o    70% ownership interests of ASE (Korea) Inc.;

     o    50.5% ownership interests of ASE Test Limited(2);

     o    100% onwership interests of ASE Holding Electronics (Phillippines)
          Inc.;

     o    23.5% ownership interests of Universal Scientific Indsutrial Co.,
          Ltd.(3);

     o    26.4% ownership interests of Hung Ching Development & Construction
          Co. Ltd.(4); and

     o    56.6% ownership interests of ASE Material Inc.(5)

     As of March 31, 2003, ASE Test Limited held:

     o    27.6% ownership interests of ASE (Chung Li) Inc.;

     o    30% ownership interests of ASE (Korea) Inc.;

     o    100% ownership interests of ASE Electronics (M) Sdn, Bhd.;

     o    100% ownership interests of ISE Labs, Inc.; and

     o    100% ownership interesets of ASE Test, Inc., which, as of March 31,
          2003, held 4.0% ownership interests of ASE Material Inc.(5)

-------------

(1)  The common shares of ASE Inc. are listed on the Taiwan Stock Exchange
     under the symbol "2311". The ADSs of ASE Inc. are listed on the New York
     Stock Exchange under the symbol "ASX".
(2)  The ordinary shares of ASE Test are quoted for trading on the Nasdaq
     National Market under the symbol "ASTSF". ASE Test's Taiwan depositary
     shares which represent its ordinary shares, are listed for trading on the
     Taiwan Stock Exchange under the symbol "9101".
(3)  The common shares of Universal Scientific Industrial Co., Ltd. are listed
     on Taiwan Stock Exchange under the symbol "2350".
(4)  The common shares of Hung Ching Development & Construction Co. Ltd. are
     listed on the Taiwan Stock Exchange under the symbol "2527".
(5)  The remaining shares of ASE Material Inc. are owned by the management and
     employees of ASE Material Inc., the management and employees of ASE Inc.
     and its affiliates, as well as a strategic investor.



                                      36

<PAGE>


Our Consolidated Subsidiaries

   ASE Test

     ASE Test is the largest independent testing company in the world,
providing a complete range of semiconductor testing services to leading
international semiconductor companies. ASE Test also provides semiconductor
packaging services. ASE Test has testing operations in Taiwan, the United
States, Hong Kong and Singapore, and also maintains testing and packaging
operations in Malaysia.

     ASE Test was incorporated in 1995 and its ordinary shares have been quoted
for trading on the Nasdaq National Market since June 1996 under the symbol
"ASTSF". ASE Test's Taiwan depositary shares representing its ordinary shares
have been listed for trading on the Taiwan Stock Exchange under the symbol
"9101" since January 1998. As of March 31, 2003, we held 50.5% of the
outstanding shares of ASE Test.

     ASE Test is a holding company incorporated in Singapore whose significant
assets are its ownership interests in the following operating companies as of
March 31, 2003:

     o    100% of ASE Test, Inc., also called ASE Test Taiwan;

     o    100% of ASE Test Malaysia;

     o    100% of ISE Labs;

     o    27.6% of ASE Chung Li (the remaining 72.4% of which is owned by ASE
          Inc.); and

     o    30% of ASE Korea (the remaining 70% of which is owned by ASE Inc.).

     In 2002, ASE Test recorded net revenues of US$302.0 million, an operating
loss of US$76.0 million and a net loss of US$81.3 million. In 2001, ASE Test
recorded net revenues of US$298.5 million, an operating loss of US$24.1 million
and a net loss of US$45.8 million.

   ASE Material

     ASE Material, which is a ROC company, was established in 1997 for the
design and production of interconnect materials, such as leadframes and
substrates, used in the packaging of semiconductors. See "--Strategy--Continue
to Focus on Advanced Technological, Processing and Materials Capabilities". ASE
Material currently supplies our packaging facilities in Kaohsiung, Taiwan with
a substantial portion of our leadframe and substrate requirements. See "--Raw
Materials and Suppliers--Packaging". As of March 31, 2003, we held 60.6% of the
outstanding shares of ASE Material, comprising 56.6% held by ASE Inc. and 4.0%
held by ASE Test Taiwan. The remaining shares of ASE Material are owned by the
management and employees of ASE Material, the management and employees of ASE
Inc. and its affiliates, as well as a strategic investor. The supervisor and
two of the five directors of ASE Material are representatives of ASE Inc. and
one director is a representative of ASE Test Taiwan. The remaining two
directors of ASE Material are Jason C.S. Chang, our Chairman and Chief
Executive Officer, and Richard H.P. Chang, our Vice Chairman and President,
serving in their individual capacities.

     ASE Material's facilities are located in the Nantze Export Processing Zone
near our packaging and testing facilities in Kaohsiung, and in Chung Li,
Taiwan. In 2002, ASE Material recorded net revenues of NT$3,136.4 million
(US$90.4 million), an operating loss of NT$583.6 million (US$16.8 million) and
a net loss of NT$854.3 million (US$24.6 million). In 2001, ASE Material
recorded net revenues of NT$2,458.4 million, operating income of NT$273.5
million and net income of NT$181.6 million. Substantially all of ASE Material's
sales are to us and our affiliates. Accordingly, substantially all of its sales
and net income are eliminated in the preparation of our consolidated financial
statements.


                                      37

<PAGE>


Our Unconsolidated Affiliates

     As of March 31, 2003, we held approximately 23.5% of the outstanding
shares of Universal Scientific and 26.4% of the outstanding shares of Hung
Ching.

   Universal Scientific

     Universal Scientific, which is a ROC company, manufactures electronics
products in varying degrees of system integration principally on a contract
basis for original equipment manufacturers, including:

     o    electronic components such as thick film mixed-signal devices, thick
          film resistors, high frequency devices and automotive and power
          electronic devices;

     o    board and sub-system assemblies such as customized surface mount
          technology board assemblies, mother boards for personal computers,
          wireless local area network cards and fax control boards; and

     o    system assemblies such as portable computers, desktop personal
          computers, network computers and servers.

     We are the largest shareholder in Universal Scientific and six out of the
nine directors on its board of directors, including the chairman, are
representatives of ASE Inc.

     Universal Scientific's principal manufacturing facilities are located in
Nantou, Taiwan. In 2002, Universal Scientific recorded net revenues of
NT$28,310.0 million (US$815.9 million), operating income of NT$638.5 million
(US$18.4 million) and net income of NT$276.0 million (US$8.0 million). In 2001,
Universal Scientific recorded net revenues of NT$28,866.6 million, operating
income of NT$1,157.7 million and a net loss of NT$163.1 million. The shares of
Universal Scientific are listed on the Taiwan Stock Exchange. As of March 31,
2003, Universal Scientific had a market capitalization of NT$6,644.0 million
(US$191.4 million).

   Hung Ching

     Hung Ching, which is a ROC company, is engaged in the development and
management of commercial, residential and industrial real estate properties in
Taiwan. Hung Ching's completed development projects include the ASE Design
Center commercial project and the Earl Village residential project, both
located in Hsichih, Taiwan. Hung Ching was founded in 1986 by Chang Yao
Hung-ying. Chang Yao Hung-ying is the mother of both Jason C.S. Chang, our
Chairman and Chief Executive Officer, and Richard H.P. Chang, our Vice Chairman
and President, and was a director of ASE Inc. from 1984 to June 2003. Jason
C.S. Chang, Richard H.P. Chang, Chang Yao Hung-ying and other members of the
Chang family are controlling shareholders of Hung Ching.

     In 2002, Hung Ching recorded net revenues of NT$235.1 million (US$6.8
million), an operating loss of NT$177.8 million (US$5.1 million) and a net loss
of NT$512.7 million (US$14.8 million). In 2001, Hung Ching recorded net
revenues of NT$1,784.1 million, an operating income of NT$12.2 million and a
net loss of NT$811.3 million. The shares of Hung Ching are listed on the Taiwan
Stock Exchange. As of March 31, 2003, Hung Ching had a market capitalization of
NT$1,046.8 million (US$30.2 million).

PROPERTIES

     We operate a number of packaging and testing facilities in Asia and the
United States. Our facilities provide varying types or levels of services with
respect to different end-product focus, customers, technologies and geographic
locations. Our facilities range from our large-scale turnkey facilities in
Taiwan and Malaysia to our specialized Korea facility dedicated to wireless
communications and automotive end-products. With our diverse facilities we are
able to tailor our packaging and testing solutions closely to our customers'
needs. The following table sets forth the location, commencement of operation,
primary use and approximate floor space as of December 31, 2002.


                                      38

<PAGE>


<TABLE>
                                              Commencement of                                               Approximate Floor Space
      Facility             Location              Operation                 Primary Use                          (in sq. ft.)
      --------             --------           ---------------              -----------                      -----------------------
<S>                           <C>                  <C>                          <C>                                   <C>
ASE Inc.'s facility      Kaohsiung, Taiwan     March 1984        Our primary packaging facility. Offers            2,160,000
in Kaohsiung, Taiwan                                             complete semiconductor manufacturing
                                                                 solutions in conjunction with ASE Test
                                                                 Taiwan and foundries located in Taiwan.
                                                                 Focuses primarily on advanced BGA and
                                                                 quad flat packages for integrated device
                                                                 manufacturers, fabless design companies
                                                                 and system companies.

ASE Test, Inc.            Kaohsiung, Taiwan     December 1987    Our primary testing facility. Offers complete       750,000
                          Chung Li, Taiwan                       semiconductor solutions in conjunction with
                                                                 ASE Inc.'s facility in Kaohsiung and
                                                                 foundries located in Taiwan. Focuses
                                                                 primarily on advanced logic/mixed-signal
                                                                 testing for integrated device manufacturers,
                                                                 fabless design companies and system
                                                                 companies.

ASE Material              Kaohsiung, Taiwan     December 1997    Design and production of interconnect               690,000
                          Chung Li, Taiwan                       materials such as leadframes and substrates
                                                                 used in packaging of semiconductors.

ASE Test Malaysia         Penang, Malaysia      February 1991    An integrated packaging and testing facility        650,000
                                                                 which focuses primarily on the requirements
                                                                 of integrated device manufacturers and system
                                                                 companies.

ASE Chung Li(1)           Chung Li, Taiwan      April 1985       An integrated packaging and testing facility        900,000
                                                                 which specializes in semiconductors for
                                                                 communications applications, particularly
                                                                 those incorporating Motorola's proprietary
                                                                 Map BGA technology.

ASE Korea(2)              Paju, Korea           March 1967       An integrated packaging and testing facility        470,000
                                                                 which specializes in semiconductors for radio
                                                                 frequency, sensor and automotive applications.

ISE Labs(3)               Fremont, California   November 1983    Front-end engineering and final testing             370,000
                          Hong Kong                              facilities located in northern California
                          Singapore                              in close proximity to several of the world's
                                                                 largest fabless design companies. Testing
                                                                 facilities located in close proximity to
                                                                 integrated device manufacturers and fabless
                                                                 companies in Hong Kong and Southeast Asia.
</TABLE>


                                      39

<PAGE>

<TABLE>
                                              Commencement of                                               Approximate Floor Space
      Facility             Location              Operation                 Primary Use                          (in sq. ft.)
      --------             --------           ---------------              -----------                      -----------------------
<S>                           <C>                  <C>                          <C>                                   <C>
ASE Holding Electronics   Cavite, Philippines   November 1995    Focuses primarily on the packaging of               130,000
  (Philippines) Inc.,                                            commodity semiconductor products for
  also called ASE                                                integrated device manufacturers in the
  Philippines                                                    Philippines.
</TABLE>

-------------

(1)  We acquired a 70.0% interest in ASE Chung Li and ASE Test acquired the
     remaining 30.0% interest in July 1999. As of March 31, 2003, we held a
     72.4% interest in ASE Chung Li and ASE Test held a 27.6% interest in ASE
     Chung Li.
(2)  We acquired a 70.0% interest in ASE Korea and ASE Test acquired the
     remaining 30.0% interest in July 1999.
(3)  We acquired a 70.0% interest in ISE Labs in May 1999, which was
     subsequently increased to 80.4% following ASE Test's purchase of
     additional shares of ISE Labs in 2000. In January 2002, we purchased the
     remaining outstanding shares of ISE Labs.


                                      40

<PAGE>


Item 5.  Operating and Financial Review and Prospects.

OPERATING RESULTS AND TREND INFORMATION

     The following discussion of our business, financial condition and results
of operations should be read in conjunction with our consolidated financial
statements, which are included elsewhere in this annual report. This discussion
contains forward-looking statements that reflect our current views with respect
to future events and financial performance. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of any number of factors, such as those set forth under "Item 3. Key
Information--Risk Factors" and elsewhere in this annual report. See
"Forward-Looking Statements".

Overview

     We offer a broad range of semiconductor packaging and testing services. In
addition to offering each service separately, we also offer turnkey services,
which consist of the integrated packaging, testing and direct shipment of
semiconductors to end users designated by our customers. Our net revenues
decreased from NT$50,893.4 million in 2000 to NT$38,367.8 million in 2001,
primarily as a result of a severe downturn in the semiconductor industry, but
increased to NT$45,586.8 million (US$1,313.7 million) in 2002, reflecting a
modest recovery in the semiconductor industry and increased outsourcing of the
packaging of advanced package types such as ball grid array, or BGA. The
decrease in our net revenues from 2000 to 2001 was across each of the principal
end-use applications of the semiconductors that we packaged and
tested--communications, personal computers and consumer electronics. In 2002,
we experienced a gradual improvement in our net revenues compared to 2001
across each of the end-use applications of the semiconductors that we packaged
and tested. This improvement was generally concentrated in the packaging of
more advanced package types and the testing of more complex, high-performance
semiconductors.

Pricing and Revenue Mix

     We price our services on a cost-plus basis, taking into account the actual
costs involved in providing these services, with reference to prevailing market
prices. The majority of our prices and revenues are denominated in U.S.
dollars. However, as more than half of our costs, including most of our labor
and overhead costs, are denominated in NT dollars, we consider the NT dollar to
be our functional currency. Furthermore, the majority of our financing costs
are denominated in NT dollars.

     The semiconductor industry is characterized by a general trend towards
declining prices for products and services of a given technology over time. In
addition, during periods of intense competition and adverse conditions in the
semiconductor industry, the pace of this decline may be more rapid than that
experienced in other years. The average selling prices of our packaging and
testing services have experienced sharp declines during such periods as a
result of intense price competition from other independent packaging and
testing companies that attempt to maintain high capacity utilization levels in
the face of reduced demand. During the industry downturn that commenced in the
fourth quarter of 2000, we experienced a significant deterioration in average
selling prices which resulted in our company incurring a net loss in 2001 and a
significant decrease in net income in 2002, as compared with the years prior to
2001.

     In 2000, 2001 and 2002, packaging revenues accounted for 74.7%, 75.3% and
77.9% while testing revenues accounted for 25.1%, 24.7% and 22.1%,
respectively, of our net revenues. Testing revenues as a percentage of our net
revenues have decreased in 2001 and 2002 as the average selling prices of our
testing services are more severely affected by the downturn in the
semiconductor industry than the average selling prices of our packaging
services. In periods of an industry downturn, the decline in the average
selling prices of our testing services is often exacerbated by the decrease in
demand from our integrated device manufacturer customers, who typically
maintain larger in-house testing capacity than in-house packaging capacity.
These price declines are also exacerbated by the intense price competition from
other independent testing service providers, who typically offer large price
discounts during periods of depressed demand, such as in 2001, in order to
maintain higher capacity utilization rates to defray the high fixed costs
associated with testing operations.

     The growth rate for outsourced semiconductor testing services has slowed
as a result of the industry downturn in 2000 and 2001. However, we believe that
the market for outsourced semiconductor testing services has more


                                      41

<PAGE>


potential for growth than the market for outsourced semiconductor packaging
services over the long term for two reasons. First, the portion of the
semiconductor testing market that is currently accounted for by independent
testing service providers is smaller than that for packaging. Second, the large
capital expenditures needed for increasingly sophisticated testing equipment,
as compared to less expensive packaging equipment, are also a driving factor
for further outsourcing of testing services by integrated device manufacturers.

     Declines in average selling prices have been partially offset over the
last three years by a change in our revenue mix. In particular, revenues
derived from packaging more advanced package types, such as BGA, higher density
packages with finer lead-to-lead spacing, or pitch, and testing of more
complex, high-performance semiconductors have increased as a percentage of
total revenues. We intend to continue focusing on packaging more advanced
package types, such as BGA and flip-chip BGA, developing and offering new
technologies in packaging and testing services and expanding our capacity to
achieve economies of scale, as well as improving production efficiencies for
older technology, in order to mitigate the effects of declining average selling
prices on our profitability.

High Fixed Costs

     Our operations, in particular our testing operations, are characterized by
relatively high fixed costs. We expect to continue to incur substantial
depreciation and other expenses as a result of our previous acquisitions of
packaging and testing equipment and 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 could 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.

     The current generation of advanced testers typically costs between US$2.0
million and US$5.0 million each, while wire bonders used in packaging typically
cost approximately US$100,000 each. In 2000, 2001 and 2002, our depreciation
expense as a percentage of net revenues was 15.7%, 27.0% and 25.0%,
respectively. The significant increase in depreciation expense as a percentage
of net revenues in 2001 and 2002 compared to 2000 was primarily a result of the
lower net revenues during 2001 and 2002 compared to 2000 and our capacity
expansion in 2000. We begin depreciating our equipment when it is placed into
service. There may sometimes be a time lag between when our equipment is placed
into service and when it achieves high levels of utilization. In periods of
depressed industry conditions such as 2001 and 2002, we may experience lower
than expected demand from customers and a sharp decline in the average selling
price of our testing services, resulting in an increase in depreciation expense
relative to net revenues. In particular, the capacity utilization rates for our
testing equipment are more severely affected during an industry downturn as a
result of the decrease in outsourcing demand from integrated device
manufacturers, which typically maintain larger in-house testing capacity than
in-house packaging capacity.

Raw Material Costs

     Substantially all of our raw material costs are accounted for by packaging
and the production of interconnect materials, as testing requires minimal raw
materials. In 2000, 2001 and 2002, raw material cost as a percentage of our net
revenues was 28.7%, 30.7% and 30.2%, respectively. We expect interconnect
materials to become an increasingly important component of the cost of our
packaging revenues and we plan to continue to develop and enhance our in-house
interconnect materials capabilities through ASE Material in order to maintain
and enhance our profitability, ensure an adequate supply of interconnect
materials at competitive prices and reduce production time.

Goodwill Amortization

     Our operating income and non-operating income in recent years have been
affected by goodwill amortization charges in connection with the restructuring
of our investment holdings and other share repurchases. Under ROC GAAP,
additional purchases of shares of consolidated subsidiaries (majority owned) or
of companies accounted for using the equity method (less than majority but at
least 20% owned) will generate goodwill in an amount equal to the difference
between the purchase price and the book value per share of those shares. The
goodwill generated is amortized over ten years. Goodwill amortization from the
purchases of shares of consolidated subsidiaries are recognized under general
and administrative expense. Goodwill amortization from the purchases of shares
of


                                      42

<PAGE>


companies accounted for using the equity method are recognized as a debit
under investment income. Transactions which created significant goodwill
charges were (1) the purchase of additional ordinary shares of ASE Test in the
open market in 2002, (2) the purchase of additional ordinary shares of ASE Test
in 2001 from two of our directors at the prevailing market price, (3) the
purchase of a total of 26,250,000 shares of ISE Labs in 1999, 2000 and 2002 and
(4) the open market purchase of shares of Universal Scientific between 1999 and
2000. See "Item 7. Major Shareholders and Related Party Transactions--Related
Party Transactions" and note 10 to our consolidated financial statements.

Critical Accounting Policies and Estimates

     Preparation of our consolidated financial statements requires us to make
estimates and judgments in applying our critical accounting policies which have
a significant impact on the results we report in our consolidated financial
statements. We continually evaluate these estimates, including those related to
allowances for doubtful accounts, inventories, allowances for deferred income
tax assets, useful lives of properties, realizability of long-term assets,
goodwill and the valuation of marketable securities and long-term investments.
We base our estimates on historical experience and other assumptions which we
believe to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions and conditions. We have
identified below the accounting policies that are the most critical to our
consolidated financial statements.

     Revenue recognition. Revenues from semiconductor packaging services that
we provide are recognized upon shipment. Revenues from testing services that we
provide are recognized upon completion of the services. We do not take
ownership of: (1) bare semiconductor wafers received from customers that we
package into finished semiconductors, and (2) packaged semiconductors received
from customers that we test. The title and risk of loss remains with the
customer for those bare semiconductors and/or packaged semiconductors.
Accordingly, the cost of customer-supplied semiconductors materials is not
included in our consolidated financial statements. Other criteria that we use
to determine when to recognize revenue are: (1) persuasive evidence that the
services provided exist, (2) the selling price is fixed or determinable and (3)
collectibility is reasonably assured. These policies are consistent with
provisions in the Staff Accounting Bulletin No. 101 issued by the United States
Securities and Exchange Commission, or SEC. We do not provide warranties to our
customers except in cases of defects in the packaging services provided and
deficiencies in testing services provided. An appropriate sales allowance is
recognized in the period during which the sale is recognized, and is estimated
based on historical experience.

     Allowance for Doubtful Accounts. We periodically record a provision for
doubtful accounts based on our evaluation of the collectibility of our accounts
receivable. The total amount of this provision is determined by us as follows.
We first identify the receivables of customers that are of a higher credit risk
based on their current overdue accounts with us, difficulties collecting from
these customers in the past or their overall financial condition. For each of
these customers, we estimate the extent to which the customer will be able to
meet its financial obligations to us, and we record an allowance that reduces
our accounts receivable for that customer to the amount that we reasonably
believe will be collected. For all other customers, we maintain an allowance
for doubtful accounts equal to a percentage of their aggregate accounts
receivable. Based on our experience, we currently maintain an allowance for the
account receivables of these other customers which average between 3% and 4%,
on a consolidated basis, of our accounts receivable. Additional allowances may
be required in the future if the financial condition of our customers or
general economic conditions deteriorate, and this additional allowance would
reduce our net income.

     Inventories. Inventories are recorded at cost when acquired and stated at
the lower of weighted average cost or market value. Market value for finished
goods and work in process is the net realized value. Market value for raw
materials, supplies and spare parts is the replacement cost. An allowance for
loss on decline in market value and obsolescence is provided based on the
difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. An additional
inventory provision may be required if actual market conditions are less
favorable than those projected.

     Allowances for Deferred Income Tax Assets. Tax benefits arising from
deductible temporary differences, unused tax credits and net operating loss
carryforwards are recognized as deferred tax assets. We record a valuation
allowance to reduce our deferred income tax assets to an amount that we believe
will more likely than not be realized. We have considered future taxable income
and ongoing prudent and feasible tax planning strategies in assessing the need
and amount for the valuation allowance. In the event we were to determine that
we would be able


                                      43

<PAGE>


to realize our deferred income tax assets in the future in excess of our net
recorded amount, an adjustment to our deferred income tax assets would increase
income in the period such determination was made. Alternatively, should we
determine that we would not be able to realize all or part of our net deferred
income tax assets in the future, an adjustment to our deferred income tax
assets would decrease income in the period such determination was made.

     Useful Lives of Properties. Our operations are capital intensive and we
have significant investments in expensive packaging and testing equipment.
Properties represented 55.9%, 57.0% and 60.2% of our total assets as of
December 31, 2000, 2001 and 2002, respectively. We depreciate our properties
based on our estimate of their economic useful lives to us, which is in turn
based on our judgment, historical experience and the potential obsolescence of
our existing equipment brought about by the introduction of more sophisticated
packaging and testing technologies and processes. If we subsequently determine
that the actual useful life of properties is shorter than what we had
estimated, we will depreciate the remaining undepreciated value of that asset
over its remaining economic useful life. This would result in increased
depreciation expense and decreased net income during those periods. Similarly,
if the actual lives of properties are longer than what we had estimated, we
would have a smaller depreciation expense and higher net income in subsequent
periods. As a result, if our estimations of the useful lives of our properties
are not accurate or are required to be changed in the future, our net income in
future periods would be affected.

     Realizability of Long-Term Assets. We are required to evaluate our
equipment, goodwill and other long-lived assets for impairment whenever there
is an indication of impairment. If certain criteria are met, we are required to
record an impairment charge. We have adopted U.S. Statement of Financial
Accounting Standards, or U.S. SFAS, No. 144, "Accounting for the Impairment for
Disposal of Long-Lived Assets" to account for the impairment of our long-lived
assets under both ROC GAAP and US GAAP. In accordance with U.S. SFAS No. 144,
long-lived assets held and used by us are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. For purposes of evaluating the recoverability of
long-lived assets, the recoverability test is performed by comparing
undiscounted net cash flows of the assets against the net book value of the
assets. If the recoverability test indicates that an impairment has occurred,
the impairment loss is the amount of the asset's net book value in excess of
the related fair value. For example, in 2002, we took a NT$1,225.6 million
(US$35.3 million) impairment charge against some of our testing equipment to
reflect the decline in economic value of these equipment.

     Goodwill. Under US GAAP, goodwill recognized prior to June 30, 2001 is
recognized as an asset and amortized over its estimated useful life. Goodwill
is reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. The U.S. Financial Accounting
Standards Board, or FASB, recently issued U.S. SFAS No. 142, "Goodwill and
Other Intangible Assets". U.S. SFAS No. 142 requires the use of a
nonamortization approach to account for purchased goodwill and certain
intangibles. Under U.S. SFAS No. 142, goodwill and intangibles are evaluated at
least annually to determine if an impairment writedown is required. Under US
GAAP, we realized an impairment charge at December 31, 2002 related to the
goodwill from the acquisition of ASE Test. See "--US GAAP Reconciliation". We
continue to carry goodwill resulting from the acquisition of ASE Korea and the
purchase of shares of ISE Labs and Universal Scientific, and will have to
assess such goodwill for impairment on at least an annual basis in the future.
If events and circumstances deteriorate in the future, the value of the
goodwill could be further impaired under US GAAP.

     Valuation of Marketable Securities and Long-term Investments. Under ROC
GAAP, marketable equity securities are carried at the lower of aggregate cost
or market value and are classified as trading or long-term investments
depending on management's intent to hold the security for long-term investment
purposes. Trading securities are primarily mutual funds with readily
determinable market values. We hold significant long-term investments in public
and non-public entities. We periodically evaluate these long-term investments
based on market prices, if available, the financial condition of the investee
company, economic conditions in the industry, and our intent and ability to
hold the investment for a long period of time. These assessments usually
require a significant amount of judgment as a significant decline in the market
price may not be the best indicator of impairment. Under US GAAP, we evaluate
long-term investments using the above mentioned criteria and to the extent any
decline in the value of a long-term investment is determined to be other than
temporary, an impairment charge is recorded in the current period. The methods
to measure the amount of impairment under ROC GAAP and US GAAP may be based on
different estimates of fair value depending on the circumstances. Under US
GAAP, market price is to be


                                      44

<PAGE>


used, if available, to determine the fair value. Under ROC GAAP, however, if
the market price is deemed to be a result of an inactive market, other measures
of fair value may be used. Several of the long-term investments held by us are
accounted for under the equity method. Any significant decline in the
operations of an equity-method investee could affect the value of the long-term
investment and an impairment charge may occur.

     In determining whether an other-than-temporary impairment occurred in our
long-term investments as of December 31, 2002, no amount was recorded under ROC
GAAP based on the difference between the carrying value and the net-asset value
of the investee with adjustments made to significant assets of the investee
using appraised values and other appropriate information. The amount recorded
under US GAAP was based on the market price of the stock of the investee at
December 31, 2002. The difference resulted in an additional impairment charge
for 2002 under US GAAP. See "--US GAAP Reconciliation".

Results of Operations

     The following table sets forth, for the periods indicated, financial data
from our consolidated statements of income, expressed as a percentage of net
revenues.

<TABLE>
                                                                         Year Ended December 31,
                                                                     ----------------------------
                                                                      2000       2001       2002
                                                                     ------     ------     ------
                                                                     (percentage of net revenues)
<S>                                                                   <C>       <C>          <C>
ROC GAAP:
Net revenues...................................................      100.0%    100.0%      100.0%
   Packaging...................................................       74.7      75.3        77.9
   Testing.....................................................       25.1      24.7        22.1
   Other.......................................................        0.2       0.0         0.0
Cost of revenues...............................................      (69.9)    (85.9)      (84.4)
Gross profit...................................................       30.1      14.1        15.6
Operating expenses.............................................      (10.7)    (15.3)      (17.1)
Operating income (loss)........................................       19.4      (1.2)       (1.5)
Non-operating income (expenses)................................       (2.9)     (6.6)       (4.4)
Income (loss) before income tax and minority interest..........       16.5      (7.8)       (5.9)
Income tax benefit (expense)...................................       (2.1)      0.5         2.5
Income (loss) before minority interest.........................       14.4      (7.3)       (3.4)
Extraordinary loss.............................................        --       (0.4)       (0.1)
Minority interest in net (income) loss of subsidiary...........       (2.9)      2.1         3.8
Net income (loss)..............................................       11.5%     (5.6)%       0.3%
</TABLE>


     The following table sets forth, for the periods indicated, the gross
margins for our packaging and testing services and our total gross margin.


<TABLE>
                                                                       Year Ended December 31,
                                                                    -----------------------------
                                                                     2000       2001        2002
                                                                    ------     ------      ------
<S>                                                                   <C>       <C>          <C>
ROC GAAP:
Gross margin
   Packaging...................................................      26.3%      16.0%      17.6%
   Testing.....................................................      41.5%       8.3%       8.4%
   Total.......................................................      30.1%      14.1%      15.6%
</TABLE>


                                      45

<PAGE>


     The following table sets forth, for the periods indicated, a breakdown of
our total cost of revenues and operating expenses, expressed as a percentage of
net revenues.


<TABLE>
                                                                     Year Ended December 31,
                                                                 ------------------------------
                                                                   2000       2001        2002
                                                                 -------    -------     -------
                                                                 (percentage of net revenues)
<S>                                                                  <C>       <C>        <C>
ROC GAAP:
Cost of revenues
   Raw materials...............................................    28.7%      30.7%      30.2%
   Labor.......................................................    12.9       14.6       14.8
   Depreciation................................................    15.7       27.0       25.0
   Other.......................................................    12.6       13.6       14.4
                                                                 ------     ------     ------
Total cost of revenues.........................................    69.9%      85.9%      84.4%
                                                                 ======     ======     ======
Operating expenses
   Selling.....................................................     2.0%       2.3%       2.0%
   General and administrative(1)...............................     5.1        7.3        8.8
   Goodwill amortization(2)....................................     1.1        1.8        1.8
   Research and development....................................     2.5        3.9        4.5
                                                                 ------     ------     ------
   Total operating expenses....................................    10.7%      15.3%      17.1%
                                                                 ======     ======     ======
</TABLE>
     -------------
(1)  Excludes goodwill amortization for purposes of this table only.
(2)  Included in general and administrative expense in our consolidated
     financial statements.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Net Revenues. Net revenues increased 18.8% to NT$45,586.8 million
(US$1,313.7 million) in 2002 from NT$38,367.8 million in 2001. Packaging
revenues increased 22.9% to NT$35,515.4 million (US$1,023.5 million) in 2002
from NT$28,898.2 million in 2001. Testing revenues increased 6.4% to
NT$10,060.6 million (US$289.9 million) in 2002 from NT$9,459.3 million in 2001.
The increase in packaging and testing revenues was primarily due to an increase
in packaging and testing volume, which was partly offset by a decrease in the
average selling prices for packaging and testing services. The increase in
volume resulted primarily from the modest recovery in the semiconductor
industry and the increase in outsourcing of the packaging and testing of
semiconductor devices. The decrease in the average selling prices reflected the
general trend in the semiconductor industry of declining prices for each
input/output lead on a semiconductor device. This decrease was partially offset
by a change in the revenue mix as our BGA packages and fine-pitch packages,
which typically command higher average selling prices, accounted for a greater
portion of the packaging volume, and as we tested more complicated
semiconductor devices, which generally command higher prices.

     Gross Profit. Gross profit increased 31.1% to NT$7,094.6 million (US$204.5
million) in 2002 from NT$5,410.8 million in 2001. Our gross margin increased to
15.6% in 2002 compared to 14.1% in 2001, primarily as a result of decreased
depreciation expense as a percentage of net revenues. Our gross margin for
packaging increased to 17.6% in 2002 from 16.0% in 2001. This increase was
primarily due to a decrease in depreciation expense as a percentage of
packaging revenues as a result of improved capacity utilization rates, as well
as a decrease in raw material costs as a result of an increase in our sourcing
of packaging materials from ASE Material. Our gross margin for testing
increased to 8.4% in 2002 from 8.3% in 2001. This slight increase was primarily
due to higher capacity utilization rates, which was partially offset by a
decrease in average selling prices. Depreciation expense in 2002 was
NT$11,398.3 million (US$328.5 million), compared to NT$10,375.0 million in
2001. This increase was due to increased capital expenditures in 2002. As a
percentage of net revenues, depreciation expense decreased to 25.0% in 2002
from 27.0% in 2001, reflecting higher capacity utilization rates in 2002.

     Operating Income (Loss). We had an operating loss of NT$685.2 million
(US$19.7 million) in 2002 compared to operating loss of NT$462.1 million in
2001. Operating margin decreased to negative 1.5% in 2002 compared to negative
1.2% in 2001. This decrease was primarily due to an asset impairment charge of
NT$1,225.6 million (US$35.3 million) booked under general and administrative
expenses. Operating expenses increased 32.5% to NT$7.779.8 million (US$224.2
million) in 2002 compared to NT$5,872.9 million in 2001. The increase in
operating expenses


                                      46

<PAGE>


was primarily due to higher general and administrative, goodwill amortization,
and research and development expenses. Selling expense increased 3.6% to
NT$909.4 million (US$26.2 million) in 2002 from NT$877.9 million in 2001.
Selling expense amounted to 2.0% of our net revenues in 2002 compared to 2.3%
in 2001. General and administrative expenses, excluding goodwill amortization,
increased 43.2% to NT$4,005.8 million (US$115.4 million) in 2002 from
NT$2,797.6 million in 2001. This increase was primarily due to the asset
impairment charge of NT$1,225.6 million (US$35.3 million) booked under general
and administrative expenses. General and administrative expense, excluding
goodwill amortization, amounted to 8.8% of our net revenues in 2002 compared to
7.3% in 2001. Goodwill amortization expense increased 17.7% to NT$815.6 million
(US$23.5 million) in 2002 from NT$692.9 million in 2001. This increase was
primarily due to additional goodwill amortization expense resulting from our
purchase of shares of ASE Test and ISE Labs in 2001 and 2002. Goodwill
amortization expense amounted to 1.8% of our net revenues in 2002 compared to
1.8% in 2001. Research and development expense increased 36.2% to NT$2,049.0
million (US$59.0 million) in 2002 from NT$1,504.5 million in 2001. This
increase was largely a result of an increase in the number of research and
development employees, an increase in factory supplies expense as well as an
increase in depreciation charges associated with testers and other equipment
dedicated to research and development uses. Research and development expense
amounted to 4.5% of our net revenues in 2002 compared to 3.9% in 2001.

     Net Non-Operating Income (Expense). We recorded a net non-operating loss
of NT$2,024.5 million (US$58.3 million) in 2002 compared to a net non-operating
loss of NT$2,523.4 million in 2001. This decrease was primarily a result of a
decrease in net long-term investment loss and a decrease in net interest
expense, which were partially offset by our incurring of a net foreign exchange
loss. Net investment loss decreased 67.1% to NT$410.3 million (US$11.8 million)
in 2002 from NT$1,246.8 million in 2001. The significantly larger net
investment loss in 2001 was primarily due to a one-time write down of goodwill
arising from our investment in Hung Ching as a result of the prolonged weakness
of Hung Ching's stock price, as well as the improvement in the financial
performance of Hung Ching and Universal Scientific in 2002 compared to 2001.
Net interest expense decreased 9.2% to NT$1,578.6 million (US$45.5 million) in
2002 from NT$1,739.3 million in 2001, primarily due to lower market interest
rates in 2002 as well as the refinancing of certain of our long-term debt. We
recorded a net foreign exchange loss of NT$397.9 million (US$11.5 million) in
2002 compared to net foreign exchange gain of NT$247.5 million in 2001. The net
foreign exchange loss in 2002 was primarily due to the depreciation of the NT
dollar, which had a negative impact on our U.S. dollar-denominated and Japanese
yen-denominated liabilities.

     Net Income (Loss). As a result of the foregoing, we had a loss before
minority interest of NT$1,569.4 million (US$45.2 million) in 2002 compared to a
loss before minority interest of NT$2,786.3 million in 2001. After excluding
minority interest in the net losses of our subsidiaries of NT$1,733.0 million
(US$49.9 million) and taking into account an extraordinary loss of NT$34.6
million (US$1.0 million) due to our repurchase of US$68 million in aggregate
principal amount of our US$200 million zero coupon convertible bonds due 2002,
we had net income of NT$129.0 million (US$3.7 million) in 2002. In 2001, we
recorded a net loss, after excluding minority interest in the net loss of our
subsidiaries of NT$788.7 million and taking into account an extraordinary loss
of NT$144.6 million due to our repurchase of US$131 million in aggregate
principal amount of our US$200 million zero coupon convertible bonds due 2002,
of NT$2,142.2 million. The net income per ADS was NT$0.21 in 2002 compared with
net loss per ADS of NT$3.29 in 2001. We had an income tax benefit of NT$1,140.3
million (US$32.9 million) in 2002 compared to an income tax benefit of NT$199.2
million in 2001, primarily as a result of the additional tax credits generated
by ASE Inc. in 2002 from qualifying equipment purchases. See "--Taxation".

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

     Net Revenues. Net revenues decreased 24.6% to NT$38,367.8 million in 2001
from NT$50,893.4 million in 2000. Packaging revenues decreased 24.0% to
NT$28,898.2 million in 2001 from NT$38,028.8 million in 2000. Testing revenues
decreased 25.9% to NT$9,459.2 million in 2001 from NT$12,768.4 million in 2000.
The decreases in packaging and testing revenues were primarily due to an
industry downturn commencing in the fourth quarter of 2000, resulting in a
decrease in the average selling prices and volumes for packaging and testing
services. This decrease was partially offset by a change in the revenue mix as
our BGA packages and fine-pitch packages, which typically command higher
average selling prices, accounted for a greater portion of the packaging
volume, and as we tested more complex high-performance semiconductors, which
generally command higher prices.


                                      47

<PAGE>


     Gross Profit. Gross profit decreased 64.7% to NT$5,410.8 million in 2001
from NT$15,326.1 million in 2000. Our gross margin decreased to 14.1% in 2001
from 30.1% in 2000, primarily as a result of increased depreciation expense and
increased raw materials costs, all as a percentage of net revenues. Our gross
margin for packaging decreased to 16.0% in 2001 from 26.3% in 2000. This
decrease was primarily due to increases in depreciation expense and raw
materials costs, all as a percentage of packaging revenues. Our gross margin
for testing decreased to 8.3% in 2001 from 41.5% in 2000. This decrease was
primarily due to increases in depreciation expense and plant and machine rental
costs, all as a percentage of testing revenues. Raw material costs in 2001 were
NT$11,776.2 million, or 30.7% of net revenues, compared to NT$14,620.4 million,
or 28.7% of net revenues, in 2000. The increase in raw material costs was
largely a result of products with higher raw material costs, such as BGA
packages, accounting for a larger proportion of our packaging services.
Depreciation for 2001 was NT$10,375.0 million, compared to NT$7,992.3 million
in 2000. This increase was primarily due to the full year effect of our
capacity expansion in 2000. As a percentage of net revenues, depreciation
increased to 27.0% in 2001 from 15.7% in 2000, principally as a result of the
significant decrease in our net revenues and higher depreciation in 2001.

     Operating Income (Loss). We incurred an operating loss of NT$462.1 million
in 2001 compared to an operating income of NT$9,877.1 million in 2000.
Operating margin decreased to negative 1.2% in 2001 compared to 19.4% in 2000.
Operating expenses increased 7.8% to NT$5,872.9 million in 2001 compared to
NT$5,449.0 million in 2000. This was primarily due to higher general and
administrative, goodwill amortization and research and development expenses,
partially offset by lower selling expense. Selling expense decreased 14.0% to
NT$877.9 million in 2001 from NT$1,020.5 million in 2000. This decrease
reflected decreased sales in 2001. Selling expense represented 2.3% of our net
revenues in 2001 compared to 2.0% in 2000. General and administrative expenses,
excluding goodwill amortization, increased 7.3% to NT$2,797.6 million in 2001
from NT$2,606.2 million in 2000. This increase was primarily due to increases
in cash bonuses and directors' compensation of our subsidiaries paid in 2001
with respect to the preceding fiscal year. General and administrative expense,
excluding goodwill amortization, represented 7.3% of our net revenues in 2001
compared to 5.1% in 2000. Goodwill amortization expense increased 23.8% to
NT$692.9 million in 2001 from NT$559.8 million in 2000. This increase was
primarily due to additional goodwill amortization expense resulting from our
purchase of additional shares of ASE Test in 2001. Goodwill amortization
expense represented 1.8% of our net revenues in 2001 compared to 1.1% in 2000.
Research and development expense increased 19.2% to NT$1,504.5 million in 2001
from NT$1,262.5 million in 2000. This increase was largely a result of an
increase in the number of research and development employees as well as an
increase in depreciation charges associated with testers and other equipment
dedicated to research and development uses. Research and development expense
accounted for 3.9% of our net revenues in 2001 compared to 2.5% in 2000.

     Net Non-Operating Income (Expense). We recorded a net non-operating loss
of NT$2,523.4 million in 2001 compared to a net non-operating loss of
NT$1,473.5 million in 2000. This was primarily a result of an increase in net
interest expense, an increase in net investment loss on long-term investments
and a decrease in net foreign exchange gain. Net interest expense increased
13.1% to NT$1,739.3 million in 2001 from NT$1,538.0 million in 2000. This
increase was primarily a result of increased debt financing incurred in 2001,
which was partially offset by higher interest income resulting from higher cash
balances resulting from our offering of ADSs in September 2000. We recorded a
net investment loss of NT$1,246.8 million in 2001 as compared to a net
investment loss of NT$167.3 million in 2000. The loss was principally a result
of a one-time write down of goodwill in the amount of NT$475.6 million arising
from our investment in Hung Ching due to the prolonged weakness of Hung Ching's
stock price, as well as the goodwill amortization associated with our purchase
of the shares of, and the net investment losses incurred by, Hung Ching and
Universal Scientific. We recorded a net foreign exchange gain of NT$247.5
million in 2001 compared to net foreign exchange gain of NT$302.7 million in
2000. These foreign exchange gains were primarily due to the Japanese yen's
depreciation, which reduced the NT dollar value of our Japanese yen denominated
liabilities.

     Net Income (Loss). As a result of the foregoing, we had a loss before
minority interest of NT$2,786.3 million in 2001 compared to income before
minority interest of NT$7,337.8 million in 2000. After excluding minority
interest in the net losses of our subsidiaries of NT$788.7 million and taking
into account an extraordinary loss of NT$144.6 million due to our repurchase of
US$131 million in aggregate principal amount of our US$200 million zero coupon
bonds due 2002, we had a net loss of NT$2,142.2 million in 2001. In 2000, we
recorded net income, after excluding minority interest in the net income of our
subsidiaries of NT$1,500.6 million, of NT$5,837.2


                                      48

<PAGE>


million. The net loss per ADS was NT$3.29 for 2001 compared with net income per
ADS of NT$9.01 for 2000. As a result of our net loss in 2001, we had an income
tax benefit of NT$199.2 million in 2001 compared to an income tax expense of
NT$1,065.8 million in 2000.

Quarterly Net Revenues, Gross Profit and Gross Margin

     The following table sets forth our unaudited consolidated net revenues,
gross profit and gross margin for the quarterly periods indicated. You should
read the following table in conjunction with our consolidated financial
statements and related notes included in this annual report. Our net revenues,
gross profit and gross margin for any quarter are not necessarily indicative of
the results for any future period. Our quarterly net revenues, gross profit and
gross margin may fluctuate significantly.


<TABLE>
                                                                Quarter Ended
                            -------------------------------------------------------------------------------------
                            Jun. 30,  Sept. 30,  Dec. 31,   Mar. 31,    Jun. 30,  Sept. 30,   Dec. 31,  March 31,
                             2001       2001       2001      2002        2002       2002        2002      2003
                            -------   ---------  --------   --------    --------  ---------   --------  ---------
                              NT$        NT$        NT$       NT$         NT$        NT$         NT$       NT$
                                                      (in millions, except percentages)
<S>                            <C>       <C>        <C>       <C>         <C>        <C>         <C>       <C>
Consolidated
   Net Revenues:
Packaging..............     6,273.5    6,406.8    8,075.5    7,814.6     8,437.5    9,205.8   10,057.5    9,021.5
Testing................     2,204.3    1,970.3    2,179.1    2,227.4     2,390.4    2,654.8    2,788.0    2,534.7
Other..................         4.6        3.7       --          1.7         0.6        0.3        8.2       28.2
                            -------    -------    -------    -------     -------    -------   --------    -------
Total..................     8,482.4    8,380.8   10,254.6   10,043.7    10,828.5   11,860.9   12,853.7   11,584.4
                            =======    =======   ========   ========    ========   ========   ========   ========
Consolidated Gross
   Profit:
Packaging..............       779.0      846.7    1,493.5    1,281.9     1,507.5    1,598.2    1,867.8    1,159.9
Testing................       103.5     (138.9)     (57.7)     (34.2)      132.4      287.1      455.9      355.3
Other..................        (0.1)       0.6        1.4        0.2        --         (0.1)      (2.1)      (4.1)
                            -------    -------    -------    -------     -------    -------   --------    -------
Total..................       882.4      708.4    1,437.2    1,247.9     1,639.9    1,885.2    2,321.6    1,511.1
                            =======    =======   ========   ========    ========   ========   ========   ========
Consolidated
   Gross Margin:
Packaging..............        12.4%      13.2%      18.5%      16.4%       17.9%      17.4%      18.6%      12.9%
Testing................         4.7%      (7.0)%     (2.6)%     (1.5)%       5.5%      10.8%      16.4%      14.0%
Total..................        10.4%       8.5%      14.0%      12.4%       15.1%      15.9%      18.1%      13.0%
</TABLE>


     Our results of operations have been adversely affected by the global
semiconductor industry downturn which commenced in the fourth quarter of 2000
and continued through the fourth quarter of 2001. Beginning the second quarter
of 2002, we experienced an improvement in our net revenues as a result of a
modest recovery in the semiconductor industry. However, in the first quarter of
2003, our net revenues were adversely affected by global political and economic
conditions. To a lesser extent, our results of operations have also been
affected by seasonality. Our first quarter net revenues have historically
decreased over the preceding fourth quarter, primarily due to the combined
effects of holidays in the United States, Taiwan and Malaysia. Moreover, the
increase or decrease in net revenues of a particular quarter as compared with
the immediately preceding quarter varies significantly. See "Item 3. Key
Information--Risk Factors--Risks Relating to Our Business--Our operating
results are subject to significant fluctuations, which could adversely affect
the value of your investment".

     Our testing operations historically have higher gross margins than our
packaging operations. However, during periods of lower-than-normal capacity
utilization, such as the last three quarters of 2001 and the full year of 2002,
our testing operations have experienced lower gross margins than our packaging
operations.

Exchange Rate Fluctuations

     Currently, the majority of our revenues from packaging and testing
services are denominated in U.S. dollars and NT dollars. Our cost of revenues
and operating expenses associated with packaging and testing services, on the
other hand, are incurred in several currencies, primarily in NT dollars and
U.S. dollars, as well as, to a lesser extent, Malaysian ringgit, Korean won,
Japanese yen and Philippine pesos. In addition, a substantial portion of our
capital


                                      49

<PAGE>


expenditures, primarily for the purchase of packaging and testing equipment,
has been, and is expected to continue to be, denominated in U.S. dollars with
much of the remainder in Japanese yen. Fluctuations in exchange rates,
primarily among the U.S. dollar, the NT dollar and the Japanese yen, will
affect our costs and operating margins. In addition, these fluctuations could
result in exchange losses and increased costs in NT dollar and other local
currency terms. Despite hedging and mitigating techniques implemented by us,
fluctuations in exchange rates have affected, and may continue to affect, our
financial condition and results of operations. We recorded a net foreign
exchange gain of NT$302.7 million in 2000 and NT$247.5 million in 2001 and we
incurred a net foreign exchange loss of NT$397.9 million (US$11.5 million) in
2002. For a quantitative and qualitative disclosure of our exposure to foreign
currency exchange rate risk, see "Item 11. Quantitative and Qualitative
Disclosures about Market Risk--Market Risk--Foreign Currency Exchange Rate
Risk".

Taxation

     The regular corporate income tax rate in the ROC applicable to us is 25%.
We have obtained preferential tax treatment under the tax laws of the ROC and
Malaysia. Under the ROC Statute of Upgrading Industries, which gives certain
preferential tax treatment to companies that qualify as operating in an
"important technology industry", we have a tax exemption on income derived from
the packaging of BGA products which expires at the end of 2005. In addition,
ASE Electronics (M) Sdn, Bhd., or ASE Test Malaysia, qualified as a "pioneer"
company in Malaysia and enjoyed a tax exemption which expired on June 30, 1999.
ASE Test Malaysia subsequently obtained the status as "high-tech pioneer" and
was granted a five-year tax exemption which expires on June 30, 2004. These tax
exemptions resulted in tax savings for us of approximately NT$700.7 million,
NT$26.4 million and NT$52.1 million (US$1.5 million) in 2000, 2001 and 2002,
respectively.

     We also have tax credits under the ROC Statute of Upgrading Industries.
Under the previous tax credit rules, we obtained a tax credit of 20% for the
purchase of equipment manufactured in Taiwan and 10% for the purchase of
equipment manufactured outside Taiwan. In April 2002, the ROC Executive Yuan
amended the tax credit rules and adopted a 13% rate of tax credit to be applied
to the purchase of equipment regardless of where it was manufactured.

     Under ROC tax laws, we may apply for additional tax holidays upon receipt
of cash infusion from our shareholders, including through rights offerings, if
the proceeds of which are used to purchase eligible machinery and equipment. We
may also apply for this tax holiday after the capitalization of retained
earnings through the issuance of stock dividends. See note 18 to our
consolidated financial statements.

     In addition, since we have facilities located in special export zones such
as the Nantze Export Processing Zone in Taiwan and the Bayan Lepas Free
Industrial Zone in Malaysia, we enjoy exemptions from various import duties and
commodity taxes on imported machinery, equipment, raw materials and components.
Goods produced by companies located in these zones and exported or sold to
others within the zones are exempt from otherwise applicable commodity or
business taxes.

     Our effective income tax rate was 12.7%, 0% and 0% in 2000, 2001 and 2002,
respectively. The effective tax rate was significantly lower in 2001 and 2002
because we incurred a net loss before income tax, minority interests
acquisition and extraordinary loss in those periods, which resulted in income
tax benefits of NT$247.3 million and NT$1,151.9 million (US$33.2 million) in
2001 and 2002, respectively.

     The net deferred tax assets in 2001 consisted primarily of tax credit that
we utilized in 2002 and expect to utilize thereafter. These tax credits were
generated primarily as a result of our purchase of packaging equipment for our
facilities in Kaohsiung, Taiwan. In 2002, we generated sufficient taxable
income to utilize these tax credits, and thus realized the current portion of
the net deferred tax assets recorded at December 31, 2001. We generated
additional tax credits in 2002 and believe that the future estimated taxable
income will be sufficient to realize the current and long-term portion of our
net deferred tax assets recorded as of December 31, 2002.

     In 1997, the ROC Income Tax Law was amended whereby, effective from
January 1, 1998, all retained earnings generated in a year which are not
distributed to shareholders as dividends in the following year will be assessed
a 10% retained earnings tax. As a result, if we do not distribute all of our
annual retained earnings generated after January 1, 1998 as either cash or
stock dividends in the following year, these earnings will be subject to the
10% retained earnings tax.


                                      50

<PAGE>


US GAAP Reconciliation

     Our financial statements are prepared in accordance with ROC GAAP, which
differ in significant respects from US GAAP. The following table sets forth a
comparison of our net income and shareholders' equity in accordance with ROC
GAAP and US GAAP as of and for the periods indicated.


<TABLE>
                                                                        As of and for the Year Ended
                                                                                December 31,
                                                             -------------------------------------------------
                                                               2000          2001         2002          2002
                                                             ---------    ----------    ----------    --------
                                                                NT$          NT$           NT$          US$
                                                                               (in millions)
<S>                                                              <C>         <C>            <C>           <C>
Net income (loss) in accordance with:
ROC GAAP..............................................         5,837.2     (2,142.2)        129.0          3.7
US GAAP...............................................         3,930.0     (4,046.6)     (3,074.3)       (88.6)
Shareholders' equity in accordance with:
ROC GAAP..............................................        43,669.2     41,946.3      39,430.7      1,136.3
US GAAP...............................................        40,729.1     37,960.3      35,716.8      1,029.3
</TABLE>


     Note 26 to our consolidated financial statements provides a description of
the principal differences between ROC GAAP and US GAAP as they relate to us,
and a reconciliation to US GAAP of select items, including net income and
shareholders' equity. Differences between ROC GAAP and US GAAP, which primarily
affect our net income as reported under ROC GAAP, relate to impairment of
goodwill and long-term investments and compensation expense pertaining to
bonuses to employees, directors and supervisors.

     Effective January 1, 2002, we adopted U.S. SFAS No. 142, "Goodwill and
Other Intangible Assets", which requires that goodwill no longer be amortized,
and instead, be tested for impairment on a periodic basis. In conjunction with
the implementation of U.S. SFAS No. 142, we completed a goodwill impairment
review as of January 1, 2002 using a fair value based approach in accordance
with the provision of the standard and found no impairment. Based on
acquisitions completed as of June 30, 2001, application of the goodwill
non-amortization provisions resulted in a decrease in amortization of
approximately NT$815.6 million (US$23.5 million) for 2002 which continues to be
recorded for ROC GAAP purposes. We completed our annual goodwill impairment
test at December 31, 2002 and determined impairment of NT$2,213.0 million
(US$63.8 million) of the remaining goodwill associated with our purchase of
shares of ASE Test.

     ROC GAAP and US GAAP require an assessment of impairment of long-term
investments whenever events or circumstances indicate a decline in value may be
other-than-temporary. The criteria for determination are similar under ROC GAAP
and US GAAP. However, the methods to measure the amount of impairment may be
based on different estimates of fair values depending on the circumstances.
When impairment is determined to have occurred, US GAAP requires the market
price to be used, if available, to determine the fair value of the long-term
investment and measure the amount of impairment at the reporting date. Under
ROC GAAP, if the market price is deemed to be a result of an inactive market,
another measure of fair value may be used. As such, when determining whether an
other-than-temporary impairment occurred in our long-term investment in Hung
Ching at December 31, 2002, the fair value, under ROC GAAP, was based on the
difference between the carrying value and the net-asset value of Hung Ching
with adjustments made to significant assets of Hung Ching using appraised
values and other appropriate information. Using this method under ROC GAAP, we
determined that no impairment occurred in our long-term investment in Hung
Ching in 2002. Under US GAAP, we determined an other-than-temporary impairment
occurred in our long-term investment in Hung Ching as of December 31, 2002 in
the amount of NT$883.6 million (US$25.5 million).

     In 2001, we purchased 2,480,000 shares of ASE Test from two of our
directors following their exercise of employee stock options in ASE Test
shares. We entered into the transaction in order to maintain our investment in
ASE Test at a level above 50% of the outstanding shares of ASE Test. We
purchased these shares directly from these two directors based on a 10-day
average of the market price of the shares. Although we entered into the
transaction in order to maintain our majority ownership of ASE Test and not for
compensation purposes, under US GAAP, all shares issued upon the exercise of
employee incentive stock options which are repurchased by the ASE Test or ASE
Test's affiliates within six months of exercise results in compensation
expense, which in our case


                                      51

<PAGE>


equals the excess of the purchase price over the exercise price. The
transaction resulted in a US$26.7 million increase in ASE Test's compensation
expense and a corresponding increase in ASE Test's capital surplus, which in
turn led to a NT$908.7 million increase in ASE Inc.'s compensation expense. See
"Item 7. Major Shareholders and Related Party Transactions--Related Party
Transactions".

     In 1999, three of our consolidated subsidiaries sold an aggregate of 32.5
million ASE Inc. common shares in open market sales. Under US GAAP, when a
subsidiary holds its parent's common shares as investments, the common shares
are treated as treasury stock and are presented in the consolidated balance
sheet as a deduction to shareholders' equity. The capital gain or loss from the
sale of treasury stock is added to or deducted from the balance of treasury
stock. Under ROC GAAP, this treatment is not required and, as a result, the
investment in ASE Inc. common shares by its subsidiaries is presented as
long-term investment in the consolidated balance sheet and the capital gain or
loss from the sale of treasury stock is recognized as income or loss. As a
result of these transactions, we recognized under ROC GAAP capital gains on
sale of investments of NT$1,388.5 million in 1999. Under US GAAP, these
investments in ASE Inc.'s common shares should be classified as treasury stock
and the capital gain is not recognized as income but is deducted from treasury
stock under capital surplus. Effective January 1, 2002, we adopted the ROC
Statement of Financial Accounting Standards No. 30, "Accounting for Treasury
Stock", which is similar to the accounting and financial statement presentation
under US GAAP except the minority ownership portion is deducted from the gross
amount of treasury stock for ROC GAAP reporting purposes.

     We paid employee bonuses in 2000 and 2001 in the form of common shares
with respect to the results of the preceding fiscal years. We did not pay any
employee bonuses in 2002 because we incurred a net loss in 2001. We typically
pay all or a portion of employee bonuses in the form of common shares. The
number of common shares distributed as part of employee bonuses is obtained by
dividing the total nominal NT dollar amount of the bonus to be paid in the form
of common shares by the par value of the common shares, or NT$10 per share,
rather than their market value, which has generally been substantially higher
than par value. Under ROC GAAP, the distribution of employee bonus shares is
treated as an allocation from retained earnings, and we are not required to,
and do not, charge the value of the employee bonus shares to employee
compensation expense. Under US GAAP, however, we are required to charge the
market value of the employee bonus shares to employee compensation expense in
the period to which they relate, and correspondingly reduce our net income and
income per common share. See "Item 6. Directors, Senior Management and
Employees--Compensation--ASE Inc. Employee Bonus Plan and Stock Option Plans".

     The amount and the form of the payment of this compensation are subject to
approval at our annual general shareholders' meeting. Under US GAAP, the
compensation expense is initially accrued at the nominal NT dollar amount of
the aggregate bonus in the period to which it relates. For US GAAP purposes,
the difference between the amount initially accrued and the market value of the
common shares issued as payment of all or any part of the bonus is recorded as
employee compensation expense in the period in which shareholders' approval is
obtained, which normally occurs during the second quarter of each year. The
amount of the adjustment for market price for the purpose of US GAAP
reconciliation for the special stock bonus paid in 2000 was allocated over a
period of three years commencing in the second quarter of the year following
the year in which the bonus was paid, reflecting the additional length of
service required from employees who received the special stock bonus.

Recent US GAAP Accounting Pronouncements

     In June 2001, the FASB issued U.S. SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement requires, among other provisions,
retirement obligations to be recognized when they are incurred and displayed as
liabilities, with a corresponding amount capitalized as part of the related
long-lived asset. The capitalized element is required to be expensed using a
systematic and rational method over its useful life. We adopted U.S. SFAS No.
143 on January 1, 2003 and we do not expect U.S. SFAS No. 143 will have a
material impact on our US GAAP financial results.

     In April 2002, the FASB issued U.S. SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". Among other things, this statement rescinds FASB Statement No. 4,
"Reporting Gains and Losses from Extinguishment of Debt", which required all
gains and losses from the early extinguishment of debt to be aggregated and, if
material, classified as extraordinary. This statement now requires those gains
and losses to be classified as unusual and infrequently occurring events and


                                      52

<PAGE>


transactions. The statement was effective upon issuance in April 2002 for
prospective transactions. The adoption of this statement would require the
Company to reclassify the extraordinary loss recognized for ROC GAAP to unusual
and unfrequent events for US GAAP. We believe there is no impact to other
financial information under US GAAP.

     In June 2002, the FASB issued U.S. SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". U.S. SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity should be
measured at fair value and recorded when it meets the definition of a liability
in FASB Concepts Statement No. 6, "Elements of Financial Statements". U.S. SFAS
No. 146 superceded EITF No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit and Activity (Including Certain
Costs Incurred in Restructuring)", which required recognition of a liability
for costs associated with an exit or disposal activity when the company
committed to an exit/disposal plan. U.S. SFAS No. 146 is effective for exit or
disposal activities initiated after December 31, 2002. Restatement of prior
periods is not required. U.S. SFAS No. 146 applies to future restructuring
activities and the application of U.S. SFAS No. 146 has no impact on our US
GAAP financial results.

     In December 2002, the FASB issued U.S. SFAS No. 148, "Accounting for
Stock-Based Compensation--Transition and Disclosure", and amended U.S. SFAS No.
123, "Accounting for Stock Based Compensation". This statement provides
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation. It
also amends the disclosure provisions of that statement to require prominent
disclosure about the effects on reported net income of an entity's accounting
policy decisions with respect to stock-based employee compensation. This
statement is effective January 1, 2003. We have elected not to account for
stock-based employee compensation using the fair value based method of
accounting set forth in U.S. SFAS No. 123 and U.S. SFAS No. 128, but to
continue to provide the disclosure requirements under U.S. SFAS No. 123.
Accordingly, this statement will not affect our consolidated financial
statements until we decide to adopt the fair value based method of accounting
set forth in U.S. SFAS No. 123 and U.S. SFAS No. 128.

     In November 2002, the FASB issued FASB Interpretation, or FIN, No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". The interpretation elaborates
on the existing disclosure requirements for most guarantees, including loan
guarantees such as standby letters of credit. It also clarifies that at the
time a company issues a guarantee, the company must recognize an initial
liability for the fair value, or market value, of the obligations it assumes
under the guarantee and must disclose that information on its interim and
annual financial statements. The provisions related to recognizing a liability
at inception of the guarantee for the fair value of the guarantor's obligations
does not apply to product warranties or to guarantees accounted for as
derivatives. The initial recognition and initial measurement provisions apply
on a prospective basis to guarantees issued or modified after December 31,
2002. We are in the process of assessing the impact and currently believe the
adoption of recognition and initial measurement requirements of FIN No. 45 will
not have a material effect on our financial condition and results of
operations.

     In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities--An Interpretation of Accounting Research Bulletin No. 51".
FIN No. 46 requires a primary beneficiary to consolidate a variable interest
entity, or VIE, if it has a VIE that will absorb a majority of the entity's
expected losses if they occur, receive a majority of the entity's expected
residual returns if they occur, or both. FIN No. 46 applies immediately to VIEs
created after January 31, 2003, and to VIEs in which the entity obtains an
interest after that date. For VIEs acquired before February 1, 2003, the
effective date for compliance is July 1, 2003. We are currently in the process
of determining the impact of this statement on our results of operations,
financial position and cash flows.

     In November 2002, the FASB Emerging Issues Task Force, or EITF, reached a
consensus on EITF 00-21, "Revenue Arrangements with Multiple Deliverables",
related to the timing of revenue recognition for arrangements in which goods or
services or both are delivered separately in a bundled sales arrangement. The
EITF requires that when the deliverables included in this type of arrangement
meet certain criteria, they should be individually accounted for as separate
units of accounting. This may result in a difference in the timing of revenue
recognition but will not result in a change in the total amount of revenue
recognized in a bundled sales arrangement. The allocation of revenue to the
separate deliverables is based on the relative fair value of each item. If the
fair value is not available for the delivered items, a residual method must
then be used. This method requires the full fair value amount to be allocated
to the undelivered items. This would result in a discount, if any, being
allocated to the delivered items. This consensus is effective for bundled sales
arrangements entered into in fiscal periods beginning


                                      53

<PAGE>


after June 15, 2003. We do not believe that the consensus will have a
significant impact on our results of operations, financial position and cash
flows.

     In April 2003, the FASB issued SFAS No. 149, "Amendment to Statement 133
on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is applied prospectively and is effective for contracts
entered into or modified after June 30, 2003. We have not determined the
effect, if any, that SFAS No. 149 will have on our Consolidated Financial
Statements.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity". The
Statement establishes standards for how an issuer classifies and measures
certain financial instruments. This Statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The Statement requires that certain financial instruments that, under
previous guidance, could be accounted for as equity be classified as
liabilities, or assets in some circumstances. This Statement does not apply to
features embedded in a financial instrument that is not a derivative in its
entirety. The Statement also requires disclosures about alternative ways of
settling the instruments and the capital structure of entities whose shares are
mandatorily redeemable. We do not expect the adoption of SFAS No. 150 to have
an impact on our financial statements.

LIQUIDITY AND CAPITAL RESOURCES

     We have historically been able to satisfy our working capital needs from
cash flow from operations. We have historically funded our capacity expansion
from internally generated cash and, to the extent necessary, the issuance of
equity securities and long-term borrowings. If adequate funds are not available
on satisfactory terms, we may be forced to curtail our expansion plans.
Moreover, our ability to meet our working capital needs from cash flow from
operations will be affected by the demand for our packaging and testing
services, which in turn may be affected by several factors. Many of these
factors are outside of our control, such as economic downturns and declines in
the prices of our services caused by a downturn in the semiconductor industry.
See "Item 3. Key Information--Risk Factors--Risks Relating to Our Business--Our
operating results are subject to significant fluctuations, which would
adversely affect the market value of your investment". The average selling
prices of our packaging and testing services are likely to be subject to
further downward pressure in the future. To the extent we do not generate
sufficient cash flow from our operations to meet our cash requirements, we will
have to rely on external financing. Other than as described in "--Off-Balance
Sheet Arrangements", we have not historically relied, and we do not plan to
rely in the foreseeable future, on off-balance sheet financing arrangements to
finance our working capital or capacity expansion.

     Net cash provided by operating activities amounted to NT$11,313.8 million
(US$326.0 million) for 2002, partly as a result of adjusting for non-cash
depreciation and amortization, including amortization of consolidated debits,
of NT$13,101.9 million (US$377.6 million). Our net cash provided by operating
activities amounted to NT$11,578.4 million for 2001, partly as a result of
adjusting for non-cash depreciation and amortization, including amortization of
consolidated debits, of NT$11,820.2 million. Our net cash provided by operating
activities amounted to NT$17,459.9 million for 2000, partly as a result of
adjusting for non-cash depreciation and amortization, including amortization of
consolidated debits, of NT$9,153.6 million. The decline in net cash generated
by operating activities in 2002 and 2001 compared to 2000 was primarily due to
the significant decreases in our net income in 2002 and 2001 compared to a net
profit of NT$5,837.2 million in 2000. Depreciation and amortization increased
in 2002 compared to 2001, primarily due to an increase in capital expenditures
in 2002. Depreciation and amortization increased in 2001 compared to 2000,
primarily as a result of the full-year effect of our capacity expansion in
2000.

     Net cash used in investing activities decreased to NT$13,167.2 million
(US$379.5 million) for 2002 from NT$15,051.2 million in 2001. This decrease
reflected a decrease in short-term investments, which was partially offset by
the purchase of the shares of ISE Labs and an increase in acquisition of fixed
assets. Net cash used in investing activities decreased to NT$15,051.2 million
in 2001 from NT$33,392.0 million in 2000. This decrease was primarily due to a
significant decrease in the acquisition of machinery and equipment for our
packaging, testing and interconnect materials operations to NT$8,024.9 million
in 2001 from NT$27,154.2 million in 2000.


                                      54

<PAGE>


     Net cash provided by financing activities for 2002 amounted to NT$530.5
million (US$15.3 million). This amount reflected proceeds from short-term and
long-term debt of NT$1,797.5 million (US$51.8 million), which was partially
offset by the payment of NT$1,674.1 million (US$48.2 million) for the
repurchase of the remaining outstanding portion of our US$200 million zero
coupon convertible bonds due 2002. Net cash provided by financing activities in
2001 amounted to NT$603.5 million. This amount primarily reflected proceeds
from long-term debt of NT$9,746.6 million, which was partially offset by the
payment of NT$1,568.1 million to a sinking fund in connection with our US$200
million zero coupon convertible bonds due 2002 and by the payment of NT$6,066.0
million for the repurchase of a portion of our US$200 million zero coupon
convertible bonds due 2002. Net cash provided by financing activities in 2000
amounted to NT$17,607.3 million, primarily reflecting proceeds of NT$4,151.3
million from our offering of ADSs in September 2000 and the increase of
NT$9,854.5 million in minority interest resulting from the equity offering by
ASE Test in 2000.

     As of December 31, 2002, our primary source of liquidity was NT$10,381.9
million (US$299.2 million) of cash and cash equivalents and NT$2,038.0 million
(US$58.7 million) of short-term investments. Our short-term investments
primarily consisted of investments in fixed income mutual funds. As of December
31, 2002, we had total availability under existing short-term lines of credit
of NT$12,764.6 million (US$367.9 million), of which we had borrowed NT$6,288.6
million (US$181.2 million). The interest rate for borrowings under these
facilities ranged from 0.88% to 7.00% per year as of December 31, 2002, as
compared to 0.85% to 7.30% per year as of December 31, 2001. All of our
short-term loans are revolving facilities with a term of one year, each of
which may be extended on an annual basis with lender consent. We believe that
our existing credit lines under our short-term loan facilities, together with
cash generated from our operations, are sufficient to finance our working
capital needs for the next 12 months. As of December 31, 2002, we had working
capital of NT$2,641.8 million (US$76.1 million).

     Our long-term liabilities consist primarily of bank loans. As of December
31, 2002, we had outstanding long-term bank loans, less current portion, of
NT$23,009.6 million (US$663.1 million). These long-term bank loans carried
variable interest rates which ranged between 0.88% and 7.92% per year as of
December 31, 2002, as compared to 0.86% to 7.92% per year as of December 31,
2001. We have pledged a portion of our assets, with a carrying value of
NT$15,823.8 million (US$456.0 million) as of December 31, 2002, to secure our
obligations under our short-term and long-term facilities.

     In June 2003, we completed an offering of ADSs by our wholly-owned
subsidiaries, ASE Investment Inc. and ASE Capital Inc. The net proceeds from
the offering were approximately US$82.7 million. We plan to use the net
proceeds to repay NT$1.12 billion in aggregate principal amount of borrowings
of ASE Investment, NT$140 million in aggregate principal amount of borrowings
of ASE Capital as well as NT$6 billion in aggregate principal amount of
borrowings of us. In addition, pursuant to a merger agreement dated July 17,
2002, ASE Investment and ASE Capital plan to merge into ASE Inc. in July 2003.
Upon the effectiveness of such merger, ASE Inc. will assume all of the assets
and liabilities of both ASE Investment and ASE Capital.

     In December 2002, we entered into a NT$7.0 billion three-year syndicated
credit facility, for which Citibank N.A., Taipei Branch acted as the lead
arranger. We used NT$5.2 billion (US$149.9 million) of the amount available
under the facility to refinance a NT$5.2 billion syndicated credit facility,
for which Citibank, N.A., Taipei Branch acted as the lead arranger, entered
into on June 22, 2001. The remaining NT$1.8 billion (US$51.9 million) was used
to repay a portion of our existing revolving credit lines.

     In June 2003, ASE Test Finance Limited, a wholly-owned finance subsidiary
of ASE Test, entered into a five-year syndicated credit facility for which
Citibank N.A., Taipei Branch acted as the lead arranger. The total commitments
under the facility amounted to US$150 million. ASE Test plans to use the loan
to refinance a portion of its US$160 million 1% guaranteed convertible notes
due 2004. ASE Inc., ASE Test and ASE Test's wholly-owned subsidiary, ASE Test,
Inc., provided guarantee for ASE Test Finance Limited's payment obligations
under the facility.

     In November 1997, we issued US$200 million in aggregate principal amount
of zero coupon convertible bonds due 2002. These bonds had an implied interest
rate of 6.37%, and were convertible into our common shares. These bonds, which
matured in November 2002, were convertible at the option of the holders from
December 1997 through October 2002. As of November 2002, we had repurchased in
the open market all of the outstanding bonds.


                                      55

<PAGE>


     Our long-term loans and facilities contain various financial and other
covenants that could trigger a requirement for early payment. Among other
things, these covenants require the maintenance of certain financial ratios,
such as liquidity ratio, indebtedness ratio, interest coverage ratio and other
technical requirements. In general, covenants in the agreements governing our
existing debt, and debt we may incur in the future, may materially restrict our
operations, including our ability to incur debt, pay dividends, make certain
investments and payments and encumber or dispose of assets. A default under one
debt instrument may also trigger cross-defaults under our other debt
instruments. An event of default under any debt instrument, if not cured or
waived, could have a material adverse effect on our liquidity, as well as our
financial condition and operations.

     The reduced levels of operating cash flow as a result of the downturn in
the semiconductor industry resulted in our failure on June 30, 2001 to comply
with the interest coverage ratio under our NT$5.2 billion three-year syndicated
credit facility. We successfully obtained a waiver for the breach and an
amendment to the interest coverage ratio from Citibank, N.A., as manager on
behalf of the syndicate, in November 2001. We cannot assure you that we will be
able to remain in compliance with our financial covenants under our loan
agreements. In the event of default, we may not be able to cure the default or
obtain a waiver, and our operations could be significantly disrupted and
harmed. See "Item 3. Key Information--Risk Factors--Risks Relating to Our
Business--Restrictive covenants and broad default provisions in the agreements
governing our existing debt may materially restrict our operations as well as
adversely affect our liquidity, financial condition and results of operations".

     The following table sets forth the maturity of our contractual obligations
as of December 31, 2002.


<TABLE>
                                                                    Payments Due by Period
                                                   ----------------------------------------------------------
                                                               Under 1      1 to 3       4 to 5       After 5
           Contractual Obligations                 Total        Year         Years        Years        Years
-------------------------------------------       --------     --------  -------------   -------     --------
                                                    NT$          NT$          NT$          NT$          NT$
                                                                         (in millions)
<S>                                               <C>           <C>         <C>           <C>            <C>
Long-term debt.............................       33,924.4      6,008.7     26,821.4      1,067.6        26.7
Capital lease obligations..................          467.4        193.7        273.7         --          --
Operating leases...........................        1,707.9        317.4        554.7        461.9       373.9
Payable for investment.....................        3,327.1        962.8      2,364.3         --          --
                                                  --------      -------     --------      -------        ----
  Total....................................       39,426.8      7,482.6     30,014.1      1,529.5       400.6
                                                  ========      =======     ========      =======       =====
</TABLE>


     The payable for investment category set forth above relates to our
earn-out arrangement with Motorola in connection with our acquisition of ASE
Chung Li and ASE Korea in 1999. Under the arrangement, a portion of the
purchase price would be paid in installments ending in July 2004 contingent
upon certain targets of revenues from packaging and testing services provided
to Motorola being met. See note 25 to our consolidated financial statements
included in this annual report. In addition to the contractual obligations set
forth above, as of December 31, 2002, we had made commitments to purchase
approximately NT$3,462.6 million (US$99.8 million) of machinery and equipment,
which may be canceled subject to the payment of certain penalties. We also have
continuing obligations to make cash royalty payments under our technology
license agreements for the procurement of the manufacturing technology for
certain products. Under these agreements, we are obligated to pay royalties
equal to a specified percentage of quantities. The royalties we paid amounted
to NT$199.8 million, NT$151.2 million and NT$176.7 million (US$5.1 million) in
2000, 2001 and 2002, respectively.

     Our contingent obligations consist of guarantees provided by us to our
subsidiaries. As of December 31, 2002, we endorsed and guaranteed the
promissory notes of our subsidiaries in the amount of NT$6,341.4 million
(US$182.7 million). Other than such guarantees, we have no other contingent
obligations. See note 21 to our consolidated financial statements.

     We have made, and expect to continue to make, substantial capital
expenditures in connection with the expansion of our production capacity. The
table below sets forth our principal capital expenditures incurred for the
periods indicated.


                                      56

<PAGE>


<TABLE>
                                                                          Year Ended December 31,
                                                               ---------------------------------------------
                                                                 2000        2001         2002        2002
                                                               --------    --------    ---------    --------
                                                                 NT$          NT$         NT$         US$
                                                                               (in millions)
<S>                                                            <C>          <C>         <C>           <C>
Machinery and equipment.................................       27,154.2     8,024.9     13,786.8      397.3
Building and improvements...............................        4,309.3     3,540.8      1,963.0       56.6
</TABLE>


     We have budgeted capital expenditures of approximately NT$13,880.0 million
(US$400.0 million) to NT$17,350.0 million (US$500.0 million) for 2003,
primarily to purchase machinery and equipment in connection with the expansion
of our packaging, testing, and interconnect materials operations. We may adjust
the amount of our capital expenditures upward or downward based on cash flow
from operations, the progress of our expansion plans and market conditions. Due
to the rapid changes in technology in the semiconductor industry, we frequently
need to invest in new machinery and equipment, which may require us to raise
additional capital. We cannot assure you that we will be able to raise
additional capital should it become necessary on terms acceptable to us or at
all. See "Item 3. Key Information--Risk Factors--Risks Relating to Our
Business--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".

     We believe that our existing cash and cash equivalents, short-term
investments, expected cash flow from operations and existing credit lines under
our short-term loan facilities will be sufficient to meet our capital
expenditures, working capital, cash obligations under our existing debt and
lease arrangements, and other requirements for at least the next twelve months.
We have contractual obligations of NT$37,496.7 million (US$1,080.6 million) due
in the next three years. We intend to meet our payment obligations through the
expected cash flow from operations, long-term borrowings and the issuance of
additional equity or equity-linked securities. We will continue to evaluate our
capital structure and may decide from time to time to increase or decrease our
financial leverage through equity offerings or borrowings. The issuance of
additional equity or equity-linked securities may result in additional dilution
to our shareholders.

     From time to time, we evaluate possible investments, acquisitions or
divestments and may, if a suitable opportunity arises, make an investment,
acquisition or divestment. We currently have no commitments to make any
material investment, acquisition or divestment. In July 2000, our shareholders
approved a resolution which authorizes our board of directors to make
investments in the People's Republic of China. However, the ROC government
currently restricts certain types of investments by ROC companies in the
People's Republic of China. We intend to consider establishing semiconductor
packaging, testing and interconnect materials operations in the People's
Republic of China if ROC investment law and policy is amended to permit such
investments, and if suitable opportunities are available at that time.

Off-Balance Sheet Arrangements

     We have, from time to time, entered into interest rate swap transactions
to hedge our interest rate exposure. As of December 31, 2002, there were no
outstanding interest rate swap transactions. In addition, we have entered into
foreign currency option contracts to hedge our existing assets and liabilities
denominated in foreign currencies and identifiable foreign currency purchase
commitments. As of December 31, 2002, we had US$20.0 million outstanding in
foreign currency option contracts and US$10.0 million outstanding in forward
exchange contracts. See "Item 11. Quantitative and Qualitative Disclosure About
Market Risk".

Inflation

     We do not believe that inflation in Taiwan has had a material impact on
our results of operations.

RESEARCH AND DEVELOPMENT

     For 2000, 2001 and 2002, our research and development expenditures totaled
approximately NT$1,262.5 million, NT$1,504.5 million and NT$2,049.0 million
(US$59.0 million), respectively. These expenditures represented approximately
2.5%, 3.9% and 4.5% of net revenues in 2000, 2001 and 2002, respectively. We
have


                                      57

<PAGE>


historically expensed all research and development costs as incurred and none
is currently capitalized. As of December 31, 2002, we employed 1,561 employees
in research and development.

   Packaging

     We centralize our research and development efforts in packaging technology
in our Kaohsiung, Taiwan facilities. After initial phases of development, we
conduct pilot runs in one of our facilities before the new technologies or
processes are implemented commercially at other sites. Facilities with special
product expertise, such as ASE Korea, also conduct research and development of
these specialized products and technologies at their sites. One of the areas of
emphasis for our research and development efforts is improving the efficiency
and technology of our packaging processes. We expect these efforts to continue.
We are now also putting significant research and development efforts into the
development and adoption of new technology. We work closely with the
manufacturers of our packaging equipment, including Kulicke & Soffa Industries
Inc., in designing and modifying the equipment used in our production process.
We also work closely with our customers to develop new product and process
technology.

     A significant portion of our research and development efforts is also
focused on the development of advanced substrate production technology for BGA
packaging through ASE Material. Substrate is the principal raw material for BGA
packages. Development and production of advanced substrates involve complex
technology and, as a result, high quality substrates are currently available
only from a limited number of suppliers, located primarily in Japan. We believe
that the successful development of substrate production capability by ASE
Material will, among other things, enable us to capture an increasingly
important value-added component of the packaging process, help ensure a stable
and cost-effective supply of substrates for our BGA packaging operations and
shorten production time. In 2002, ASE Material supplied approximately one-third
of our substrate requirements by value.

   Testing

     Our research and development efforts in the area of testing have focused
primarily on improving the efficiency and technology of our testing processes.
The efforts include developing software for parallel testing of logic
semiconductors, rapid automatic generation and cross-platform conversion of
test programs to test logic/mixed-signal semiconductors, automatic code
generation for converting and writing testing programs, testing new products
using existing machines and providing customers remote access to monitor test
results. We are also continuing the development of interface designs to provide
for high-frequency testing by minimizing electrical noise. We work closely with
our customers in designing and modifying testing software and with equipment
vendors to increase the efficiency and reliability of testing equipment. Our
research and development operations also include a mechanical engineering
group, which currently designs handler kits for semiconductor testing and wafer
probing, as well as software to optimize capacity utilization.

Item 6.  Directors, Senior Management and Employees.

DIRECTORS AND SENIOR MANAGEMENT AND BOARD PRACTICE

     Directors

     Our board of directors is elected by our shareholders in a general meeting
at which a quorum, consisting of a majority of all issued and outstanding
common shares, is present. The Chairman is elected by the board from among the
directors. Our seven-member board of directors is responsible for the
management of our business.

     The term of office for our directors is three years from the date of
election. The current board of directors began serving on June 19, 2003. The
terms of the current directors will expire on June 18, 2006. Directors may
serve any number of consecutive terms and may be removed from office at any
time for a valid reason by a resolution adopted at a general meeting of
shareholders. Normally, all board members are elected at the same time, except
where the posts of one-third or more of the directors are vacant, at which time
a special meeting of shareholders shall be convened to elect directors to fill
the vacancies.

     The following table sets forth the name of each of our directors, his or
her position in ASE Inc., the year they were elected as director and other
significant positions of our affiliates held by them.

                                       58
<PAGE>


<TABLE>
                                                                      Director
                  Name                             Position            Since    Age     Other Significant Positions Held
--------------------------------------     ------------------------   --------  ---     --------------------------------
<S>                                              <C>                   <C>     <C>            <C>
Jason C.S. Chang(1)...................     Director, Chairman and     1984      59    Chairman of ASE Test Taiwan
                                           Chief Executive Officer
Richard H.P. Chang(1).................     Director, Vice Chairman    1984      56    Chairman of ASE Test; Chairman of
                                           and President                              Universal Scientific
Joseph Tung(2)........................     Director and Chief         1997      44    Supervisor of Universal Scientific;
                                           Financial Officer                          Director of ASE Test
Chin Ko-Chien(2)......................     Director and Executive     1997      56    Director of ASE Test
                                           Vice President
David Pan(2)..........................     Director                   1997      58    Director and President of ASE Test
Jeffrey Chen(2).......................     Director and Vice          2003      39    Director of ASE Test
                                           President
Tien Wu(2)............................     Director                   2003      46    Chief Executive Officer of ISE Labs
</TABLE>
-------------

(1)  Jason C.S. Chang and Richard H.P. Chang are brothers.
(2)  Representative of ASE Enterprises Limited, a company organized under the
     laws of Hong Kong, which held 19.3% of our outstanding common shares as of
     May 31, 2003. All of the outstanding shares of ASE Enterprises Limited are
     held by a company organized under the laws of the British Virgin Islands
     in trust for the benefit of Chang Yao Hung-ying, who was our director from
     1984 to June 2003 and is the mother of Jason C.S. Chang, our Chairman and
     Chief Executive Officer, and Richard H.P. Chang, our Vice Chairman and
     President. Jason C.S. Chang is the sole shareholder and director of that
     company.


Supervisors

     We currently have five supervisors, each serving a three-year term.
Supervisors are typically elected at the time that directors are elected. The
current supervisors began serving on June 1, 2001, and their terms will expire
on May 31, 2004. The supervisors' duties and powers include investigation of
our business condition, inspection of our corporate records, verification and
review of financial statements presented by our board of directors at
shareholders' meetings, convening of shareholders' meetings, representing us in
negotiations with our directors and notification, when appropriate, to the
board of directors to cease acting in contravention of any applicable law or
regulation or in contravention of our Articles of Incorporation. Each
supervisor is elected by our shareholders and cannot concurrently serve as a
director, managerial officer or other staff member. The ROC Company Law
requires at least one supervisor be appointed at all times, or two supervisors
for a company with publicly issued equity shares, and that a supervisor's term
of office be no more than three years.

     The following table sets forth the name of each of our supervisors, the
year they were elected as supervisor and other significant positions of our
affiliates held by them.


<TABLE>
                                                          Supervisor
                   Name                       Position      Since     Age   Other Significant Positions Held
---------------------------------------      ----------   ----------  ---   --------------------------------
<S>                                          <C>             <C>       <C>  <C>
Feng Mei-Jean(1).......................      Supervisor      1984      48   Supervisor of ASE Chung Li
Yen-Yi Tseng(2)........................      Supervisor      2000      61   Chairman of Hung Ching
Alan Cheng(2)..........................      Supervisor      1997      57   Director of ASE Test
John Ho(2).............................      Supervisor      1998      47   Director of Universal Scientific
Raymond Lo(2)..........................      Supervisor      2000      48   President of ASE Test Taiwan
</TABLE>

-------------

(1)  Feng Mei-Jean is the wife of Richard H.P. Chang.
(2)  Representative of ASE Enterprises Limited.

     In accordance with ROC law, each of our directors and supervisors is
elected either in the capacity as an individual or as an individual
representative of a corporation or government. Persons designated to represent
corporate or government shareholders as directors are typically nominated by
such shareholders at the annual


                                      59

<PAGE>

general meeting. Of the current directors and supervisors, nine represent ASE
Enterprises Limited. The remaining directors and supervisors serve in their
capacity as individual shareholders.

Executive Officers

     The following table sets forth information relating to our executive
officers.

<TABLE>
<CAPTION>
                                                                                          Years with the
                     Name                                       Position                      Company        Age
------------------------------------------      ----------------------------------------  --------------     ---
<S>                                             <C>                                             <C>          <C>
Jason C.S. Chang..........................      Chairman and Chief Executive Officer            19           58
Richard H.P. Chang........................      Vice Chairman and President                     19           56
Chin Ko-Chien.............................      Executive Vice President and General            19           56
                                                Manager, Kaohsiung packaging facility
David Pan.................................      President, ASE Test                              9           58
Raymond Lo................................      President, ASE Test Taiwan                      17           48
Kanapathi A/L Kuppusamy...................      President, ASE Test Malaysia                     4           51
Shih-Song Lee.............................      President, ASE Chung Li                          4           62
James Stilson.............................      President, ASE Korea                             4           56
Gregory Lin...............................      President, ASE Material                          8           59
Joseph Tung...............................      Chief Financial Officer                          8           44
Tien Wu...................................      Chief Executive Officer, ISE Labs                3           46
</TABLE>

Biographies of Directors, Supervisors and Executive Officers

     Jason C.S. Chang has served as Chairman of ASE Inc. since its founding in
March 1984 and as its Chief Executive Officer since May 2003. He holds a degree
in electrical engineering from National Taiwan University and a masters degree
from the Illinois Institute of Technology. He is the brother of Richard H.P.
Chang, our Vice Chairman and President.

     Richard H.P. Chang has served as Vice Chairman of ASE Inc. since November
1999 after having served as President of ASE Inc. since its founding in March
1984, and was Chief Executive Officer of ASE Inc. from July 2000 to April 2003.
In February 2003, he was again appointed President of ASE Inc. upon the
retirement of Mr. Leonard Y. Liu. Mr. Chang is also the Chairman and Chief
Executive Officer of ASE Test. He holds a degree in industrial engineering from
Chung Yuan Christian University of Taiwan. He is the brother of Jason C.S.
Chang, our Chairman and Chief Executive Officer.

     Joseph Tung has served as a director of ASE Inc. since April 1997 and
Chief Financial Officer since December 1994. He is also a director of ASE Test.
Before joining ASE Inc., Mr. Tung was a Vice President at Citibank, N.A. He
received a degree in economics from the National Chengchi University of Taiwan
and a masters degree in business administration from the University of Southern
California.

     Chin Ko-Chien has served as a director of ASE Inc. since March 1984 and
Executive Vice President and General Manager of our packaging facility in
Kaohsiung since March 1990. Mr. Chin is also a director of ASE Test. Before
joining ASE Inc., he held managerial positions at Fu Hua Construction Co. Ltd.
and De Ji Trading Company. He holds a degree in bearings technology from Taiwan
Ocean University.

     David Pan has served as a director of ASE Inc. since April 1997 and
President and a director of ASE Test since November 1995. Before joining ASE
Test, Mr. Pan was the Vice President responsible for research and development
at Ultratech Stepper Inc. He holds a degree in physics from the University of
Illinois and masters and doctorate degrees in physics from the University of
California at Berkeley.

     Jeffrey Chen has served as a director of ASE Inc. since June 2003 and a
director of ASE Test since 1998. He was the Chief Financial Officer of ASE Test
from July 1998 to August 2002. Mr. Chen has also served as our Vice President
since May 2002 and Assistant Vice President of the President's Office of ASE
Inc. since 1994. Prior to joining ASE Inc., he worked in the corporate banking
department of Citibank, N.A., in Taipei and as the Vice President of corporate
finance at Bankers Trust in Taipei. He holds a degree in finance and economics
from Simon Fraser University in Canada and a masters degree in business
administration from the University of British Columbia in Canada.


                                       60


<PAGE>


     Tien Wu has served as a director of ASE Inc. since June 2003 and the Chief
Executive Officer of ISE Labs since March 2003. He also serves as the Vice
President of Worldwide Marketing and Strategy of ASE Group. Prior to joining
ASE Inc. in March 2000, Mr. Wu held various managerial positions with IBM. He
holds a B.S.C.E. degree from the National Taiwan University and a M.S. degree
in mechanical engineering and a Ph.D. degree in applied mechanics from
University of Pennsylvania.

     Feng Mei-Jean has served as a supervisor of ASE Inc. since March 1984. She
holds a degree in economics from National Taiwan University. She is the wife of
Richard H.P. Chang, our Vice Chairman and President.

     Yen-Yi Tseng has served as a supervisor of ASE Inc. since July 2000 and
Chairman of Hung Ching since July 2002. Mr. Tseng served as President of
Ret-Ser Engineering Agency from 1991 to 1998. He holds a degree in civil
engineering from National Taiwan University and a masters degree in system
engineering from Asian Institute of Technology in Thailand. He was also a
participant in the Program for Management Development at Harvard Business
School.

     Alan Cheng has served as a supervisor of ASE Inc. since April 1997. Mr.
Cheng served as the Chairman of Hung Ching from April 1997 to July 2002. He
holds a degree in industrial engineering from Chung-Yuan University.

     John Ho has served as a supervisor of ASE Inc. since April 1998. He is
also a director of Universal Scientific. He served as Chief Financial Officer
of ASE Inc. from 1988 until 1995. He holds a degree in business administration
from National Taiwan University and a masters degree in business administration
from the University of Iowa.

     Raymond Lo has served as a supervisor of ASE Inc. since July 2000 and
President of ASE Test Taiwan since December 1999, after serving as Vice
President of Operations of ASE Inc. since July 1993. Before joining ASE Inc.,
Mr. Lo was the Director of Quality Assurance at Zeny Electronics Co. He holds a
degree in electronic physics from the National Chiao Tung University of Taiwan.

     Kanapathi A/L Kuppusamy has served as President of ASE Test Malaysia since
July 1999. Before joining ASE Test Malaysia, Mr. Kanapathi was President of
Motorola Asia Final Manufacturing. He holds a masters degree in business
administration from the University of East Asia in Kuala Lumpur, Malaysia.

     Shih-Song Lee has served as President of ASE Chung Li since July 1999.
Before joining ASE Chung Li, Mr. Lee served as President of Motorola, Inc.'s
Semiconductor Products Sector Businesses in Chung Li, Taiwan before we acquired
the company. He holds a degree in electrical engineering from the Tatung
Institute of Technology in Taiwan.

     James Stilson has served as President of ASE Korea since July 1999. Before
joining ASE Korea, Mr. Stilson served as President of Motorola, Inc.'s
Semiconductor Products Sector Businesses in Paju, Korea before we acquired the
company. He holds a degree in chemistry and a masters degree in business
administration from the University of California.

     Gregory Lin has served as President of ASE Material since its inception in
December 1997. Before joining ASE Material, Mr. Lin held research positions
with Xerox Palo Alto Research Center. He holds a degree in chemistry from
National Taiwan Chung Hsing University, and masters and doctorate degrees in
chemistry from the University of Illinois.

COMPENSATION

     In 2002, we paid to our directors, supervisors and executive officers
approximately NT$134.7 million (US$3.9 million) in cash remuneration. An
aggregate of 14,000,000 options were granted to our directors, supervisors and
executive officers in 2002 under our employee stock option plan at an exercise
price of NT$20.8 per share. We did not grant any common shares of ASE Inc. in
2002 to our directors, supervisors and executive officers. In 2002, we also set
aside an aggregate of NT$2.7 million (US$0.08 million) to provide pension,
retirement and similar benefits


                                       61


<PAGE>


for our executive officers pursuant to existing plans provided by or
contributed to by our company or its subsidiaries.

   ASE Inc. Employee Bonus and Stock Option Plans

     We award bonuses to employees of ASE Inc. and its affiliates who are
located in Taiwan based on overall income and individual performance targets.
These employees are eligible to receive bonuses in the form of common shares of
ASE Inc. valued at par. Actual amounts of bonuses to individual employees are
determined based upon the employee's meeting specified individual performance
objectives. We granted an aggregate of 47,833,062 common shares and 34,960,000
common shares in 2000 and 2001, respectively, as stock bonuses to employees of
ASE Inc. and its affiliates with a fair market value at the date of grant of
NT$3,429.2 million and NT$830.6 million, respectively. We did not grant any
stock bonuses to employees of ASE Inc. or its affiliates in 2002.

     On August 13, 2002, we adopted an employee stock option plan. We filed a
report with the ROC Securities and Futures Commission for the issuance of
employee stock options, which report became effective on August 28, 2002.
Pursuant to such plan, full-time employees of ASE Inc. as well as the full-time
employees of our domestic and foreign subsidiaries are eligible to receive
stock option grants. Under this plan, for a period of one year from August 28,
2002, we may issue up to 160,000,000 options on one or more occasions. Each
option entitles the holder to purchase one common share of ASE Inc. at a price
equal to the closing market price on the date of the option issuance. Each
option is exercisable upon vesting for five years. Forty percent of the options
originally granted vest upon the second anniversary of the grant date, and an
additional 10% of the options originally granted vest every six months
thereafter. Each option expires at the end of the 10th year following its issue
date. The options are generally not transferable. As of December 31, 2002, a
total of 145,989,000 options have been issued at an exercise price of NT$20.8
per share.

   ASE Test Share Option Plans

     ASE Test currently maintains five option plans which include plans adopted
in each year from 1996 to 2000. Under ASE Test's share option plans, its
directors, employees, advisors and consultants and those of its affiliates may,
at the discretion of a committee of its directors administering the plan, be
granted options to purchase its shares at an exercise price of no less than
their market value on the date of grant. The committee has complete discretion
to determine which eligible individuals are to receive option grants, the
number of shares subject to each grant, the vesting schedule to be in effect
for each option grant and the maximum term for which each granted option is to
remain outstanding, up to a maximum term of five years, or in the case of the
1999 and 2000 option plans, ten years. ASE Test's board of directors may amend
or modify the plans at any time. As of December 31, 2002, an aggregate of
28,800,000 of ASE Test's shares had been reserved for issuance and 13,331,363
options to purchase its shares remained outstanding under its various option
plans. An aggregate of 7,030,000 options had been granted to the directors and
executive officers of ASE Test. Options granted under the various plans are
exercisable at an exercise price ranging from US$3.50 to US$25.00 per share.
Options granted under the 1996, 1997 and 1998 option plans will expire five
years from the date of grant, and in the case of the 1999 and 2000 plans, ten
years from the date of grant.

Interests of Management in Related Party Transactions

     Several of our directors, supervisors and executive officers also serve as
directors, supervisors or executive officers of companies with which we do
business. These companies include our affiliates. See "Item 7. Major
Shareholders and Related Party Transactions". We conduct these transactions on
an arm's-length commercial basis.

EMPLOYEES

     The following table sets forth certain information concerning our
employees for the dates indicated:


                                       62


<PAGE>


<TABLE>
                                                                                  As of December 31,
                                                                           ------------------------------
                                                                            2000        2001        2002
                                                                           ------      ------      ------
<S>                                                                        <C>         <C>         <C>
Total..............................................................        18,121      15,681      20,401
Function
  Direct labor.....................................................        12,011       9,690      13,059
  Indirect labor (manufacturing)...................................         3,577       3,366       4,264
  Indirect labor (administration)..................................         1,370       1,350       1,517
  Research and development.........................................         1,163       1,275       1,561
Location
  Taiwan...........................................................        12,430      10,811      15,061
  Malaysia.........................................................         3,407       2,854       3,140
  Korea............................................................           965         885       1,305
  United States....................................................           523         438         361
  Philippines......................................................           568         571         461
  Singapore........................................................           104          68          65
  Hong Kong........................................................           124          54           8
</TABLE>

     Eligible employees may participate in the ASE Inc. Employee Share Bonus
Plan and the ASE Test Share Option Plans. See "--Compensation--ASE Inc. Employee
Bonus Plan and Stock Option Plans" and "--Compensation--ASE Test Share Option
Plans".

     With the exception of ASE Korea's employees, our employees are not covered
by any collective bargaining arrangements. We believe that our relationship
with our employees is good.

SHARE OWNERSHIP

     The following table sets forth certain information with respect to our
officers and directors as of May 31, 2003.

<TABLE>
                                                            Percentage
                                                           of Total of
                                                            our Common
                                           Number of ASE      Shares                       Exercise Price
                                            Inc. Common     Issued and       Number of       of Options        Expiration Date
    Executive Officer or Director           Shares Held    Outstanding    Options Held(1)      (NT$)             of Options
------------------------------------       -------------   ------------   ---------------  --------------      ---------------
<S>                                         <C>                <C>           <C>                <C>              <C>
Jason C.S. Chang..................          20,254,843          0.62%        4,800,000          20.8             Dec. 24, 2012
Richard H.P. Chang................          37,181,794         1.14          3,200,000          20.8             Dec. 24, 2012
Leonard Y. Liu(2).................             161,923         0.00                 --            --                   --
Joseph Tung.......................             780,394         0.02            600,000          20.8             Dec. 24, 2012
Chang Yao Hung-ying(2)............           8,000,606         0.25                 --            --                   --
Chin Ko-Chien.....................             534,530         0.02          1,000,000          20.8             Dec. 24, 2012
David Pan.........................             319,953         0.01            600,000          20.8             Dec. 24, 2012
Feng Mei-Jean.....................          57,621,663         1.77                 --            --                   --
Yen-Yi Tseng......................               1,100         0.00            400,000          20.8             Dec. 24, 2012
Alan Cheng........................             287,697         0.01                 --            --                   --
John Ho...........................             284,710         0.01            500,000          20.8             Dec. 24, 2012
Raymond Lo........................             500,175         0.02            600,000          20.8             Dec. 24, 2012
Kanapathi A/L Kuppusamy...........                  --          --             600,000          20.8             Dec. 24, 2012
Shih-Song Lee.....................             231,400         0.01            600,000          20.8             Dec. 24, 2012
James Stilson.....................                  --          --             600,000          20.8             Dec. 24, 2012
Gregory Lin.......................             200,803         0.01            500,000          20.8             Dec. 24, 2012
Tien Wu...........................              64,780         0.00          1,000,000          20.8             Dec. 24, 2012
<FN>
-------------
(1) Each option covers one common share of ASE Inc.
(2) Term expired on June 18, 2003.
</FN>
</TABLE>

                                       63
<PAGE>


Item 7.  Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

     The following table sets forth information known to us with respect to the
beneficial ownership of our common shares, as of May 31, 2003, by (1) each
shareholder known by us to own beneficially more than 5% of our common shares
and (2) all directors, supervisors and executive officers as a group.

<TABLE>
                                                                                       Common Shares
                                                                                    Beneficially Owned
                                                                              -----------------------------
                        Name of Shareholder or Group                             Number          Percentage
------------------------------------------------------------------------      -----------        ----------
<S>                                                                           <C>                  <C>
ASE Enterprises Limited(1)..............................................      628,395,834          19.3%
Directors, supervisors and executive officers
   as a group(2)........................................................      746,306,099          22.9%
<FN>
-------------
(1)  ASE Enterprises Limited is a company organized under the laws of Hong
     Kong. All of the outstanding shares of ASE Enterprises Limited are held by
     a company organized under the laws of the British Virgin Islands in trust
     for the benefit of Chang Yao Hung-ying, who was our director from 1984 to
     June 2003, and our Chairman Jason C.S. Chang, who is the sole shareholder
     and director of that company.
(2)  Includes shareholding of ASE Enterprises Limited.
</FN>
</TABLE>

     The following table sets forth information relating to our common shares
held by our consolidated subsidiaries and non-consolidated affiliates as of
June 24, 2003.

<TABLE>
                                                                                       Common Shares
                                                                                    Beneficially Owned
                                                                              -----------------------------
                        Name of Shareholder or Group                             Number          Percentage
------------------------------------------------------------------------      -----------        ----------
<S>                                                                            <C>                 <C>
ASE Test Taiwan(1)...................................................             652,713           0.0%
Hung Ching(2)........................................................          39,535,822           1.2%
<FN>
-------------
(1)  ASE Test Taiwan is a subsidiary of ASE Test, our subsidiary.
(2)  As of May 31, 2003, we held 26.4% of the outstanding shares of Hung Ching.
     Our then director Chang Yao Hung-ying, our Chairman and Chief Executive
     Officer Jason C.S. Chang, our Vice Chairman and President Richard H.P.
     Chang and other members of the Chang family are controlling shareholders
     of Hung Ching. See "Item 4. Information on the Company--Organizational
     Structure--Our Unconsolidated Affiliates".
</FN>
</TABLE>

     None of our major shareholders has different voting rights from those of
our other shareholders. There have been no significant changes in the
percentage ownership of any of our major shareholders in 2000, 2001 and 2002.

     As of May 31, 2003, a total of 3,254,800,000 common shares were
outstanding. With certain limited exceptions, holders of common shares that are
not ROC persons are required to hold their common shares through a brokerage
account in the ROC. As of June 19, 2003, 115,519,475 common shares were
registered in the name of a nominee of Citibank, N.A., the depositary under our
ADS deposit agreement. Citibank, N.A., has advised us that, as of June 19,
2003, 23,103,379 ADSs, representing 115,516,895 common shares, were held of
record by Cede & Co. and 516 ADSs, representing 2,580 common shares, were held
by 5 other U.S. persons. We have no further information as to common shares
held, or beneficially owned, by U.S. persons.

RELATED PARTY TRANSACTIONS

     In recent years, ASE Inc. has made awards of ASE Inc.'s common shares to
the employees of affiliates of ASE Inc. as part of their compensation, based in
part on the consolidated net income of ASE Inc. and the affiliates' contribution
to the consolidated income. ASE Inc. granted an aggregate of 13,510,250 common
shares in 2000 and 9,872,725 common shares in 2001 as stock awards to employees
of affiliates of ASE Inc. with a fair market value at the time of grant of
NT$968.5 million and NT$234.6 million, respectively. ASE Inc. expects this
practice to continue in future periods.


                                       64


<PAGE>


     ASE Material sold interconnect materials in the aggregate amount of
NT$1,765.6 million, NT$2,346.9 million and NT$2,885.6 million (US$83.2 million)
to ASE Inc. in 2000, 2001 and 2002, respectively. In 2002, we purchased
approximately 39% of our substrate requirements by value for our packaging
facilities from ASE Material. We purchase, and plan to continue to purchase,
materials from ASE Material at prevailing market prices.

     ASE Test Taiwan has historically charged ASE Inc. fees for the testing of
semiconductors packaged for a small number of customers that prefer to be
billed through ASE Inc. for testing services performed by ASE Test Taiwan.
These fees amounted to NT$142.7 million, NT$178.3 million and NT$232.5 million
(US$6.7 million) in 2000, 2001 and 2002, respectively. ASE Inc. sold to ASE
Test Taiwan at book value a building at an aggregate price of NT$18.4 million
in 2000.

     ASE Test Malaysia and ASE Philippines have historically purchased a
portion of the raw materials used in their packaging operations, principally
leadframes, from ASE Inc. when they face a shortage in the supply of these
types of raw materials. These types of raw materials are typically resold by
ASE Inc. to ASE Test Malaysia and ASE Philippines at book value. Purchases of
raw materials by ASE Test Malaysia amounted to NT$3.6 million, NT$17.2 million
and NT$11.7 million (US$0.3 million) in 2000, 2001 and 2002, respectively.
Purchases of raw materials by ASE Philippines amounted to NT$2.1 million,
NT$4.7 million and NT$2.3 million (US$0.1 million) in 2000, 2001 and 2002,
respectively. In addition, ASE Inc. purchased raw materials, principally
leadframes, from ASE Test Malaysia in an amount of NT$11.9 million, NT$12.8
million and NT$0.1 million in 2000, 2001 and 2002, respectively.

     In 2002, ASE Test Malaysia purchased raw materials, primarily lead frames
and substrates, from ASE Material in the aggregate amount of NT$181.6 million
(US$5.2 million). These types of raw materials are typically sold by ASE
Material to ASE Test Malaysia at the prevailing market price.

     ASE Inc. has historically guaranteed the short-term borrowing of many of
its subsidiaries. As of December 31, 2002, ASE Inc. has endorsed and guaranteed
an aggregate amount of NT$6,341.4 million (US$182.7 million) of the outstanding
promissory notes of its subsidiaries.

     In 2000, 2001 and 2002, ASE Inc. sold to ASE Philippines at book value
machinery and equipment for the packaging of plastic dual in-line packages at
an aggregate price of NT$22.8 million, NT$30.5 million and NT$0.1 million,
respectively.

     In April 2003, ASE Inc. and its affiliate, Hung Ching, entered into an
agreement for the development of a building in the Nantze Export Processing
Zone on land currently leased by ASE Inc. Under the agreement, Hung Ching will
bear all costs relating to the development. Upon completion of the development,
which is currently expected to be in the second half of 2004, ASE Inc. will own
the first two floors of the building with floor space of approximately 22,000
square feet, and Hung Ching will own remaining floors of the building with
floor space of approximately 86,000 square feet. ASE Inc. plans to use its
floor space to house part of its operations in Kaohsiung. ASE Inc. and its
affiliates will have priority in purchasing the remaining floor space from Hung
Ching. The total value of the project, including land and the completed
building, is estimated at NT$1.4 billion.

     In January 2000, ASE Chung Li and Hung Ching, our affiliate, entered into
an agreement for the development of buildings on land currently owned by ASE
Chung Li. Under the agreement, Hung Ching will bear all costs relating to the
development. Upon completion of the development, floor space in the buildings
will be sold by Hung Ching at prices to be negotiated between Hung Ching and
the buyers. ASE Chung Li and its affiliates will have priority in the purchase
of the floor space. In the event that floor space is sold to persons other than
ASE Chung Li, ASE Chung Li will receive 25% of the selling price. The first
phase of the development project is the construction of a building with
aggregate floor space of approximately 800,000 square feet, which was completed
in September 2000. The total value of the first phase of the project, including
land and the completed building, is estimated at NT$2.0 billion. The new
building houses ASE Chung Li's testing operations as well as part of the
operations of other subsidiaries of ASE Inc.

     ASE Chung Li entered into two leases with ASE Material and one lease with
ASE Test Taiwan to lease floor space in a building located at 550-5, Section 1,
Chung-hwa Road, Fu-hwa Li, Chung Li, Taiwan. An area of


                                       65


<PAGE>


approximately 48,000 square feet per floor was leased, with two floors leased to
ASE Material and one floor leased to ASE Test Taiwan. The leased area will be
used for production facilities.

     In October 1997, J&R Holding entered into agreements with Swiss Bank
Corporation to purchase call options on a portion of our US$200 million zero
coupon convertible bonds due 2002. The call options were offered by Swiss Bank
Corporation as a part of the repackaging of our convertible bonds by SBC
Warburg, an affiliate of Swiss Bank Corporation, into two separate instruments
consisting of: (1) US$200 million callable floating rate notes secured by the
convertible bonds and (2) call options on the convertible bonds. SBC Warburg
decided to repackage the convertible bonds because the adverse market
conditions resulting from the Asian financial crisis during the second half of
1997 made it difficult to market the convertible bonds. SBC Warburg was able to
obtain commitments for the entire issue of the floating rate notes but, as a
result of the adverse market conditions described above, was able to obtain
commitments for only a portion of the call options. As a result, Swiss Bank
Corporation approached a number of large institutional investors, including J&R
Holding, with a proposal to sell a portion of the call options.

     J&R Holding decided to purchase the call options because its management
considered the call options to be a good investment. Under the first agreement
with Swiss Bank Corporation, J&R Holding was required to make four cash
payments to Swiss Bank Corporation in November 1998, 1999, 2000 and 2001. In
return, J&R Holding had the right to call the convertible bonds back at any
time during the period from November 1998 through November 2002. Under the
second agreement, Swiss Bank Corporation paid US$200,000 to J&R Holding. In
return, Swiss Bank Corporation had the right to sell a portion of the call
options to J&R Holding at any time between November 4, 1997 and November 1,
1998. These options were terminated by agreement on December 11, 2001. As of
November 2002, we had repurchased in the open market all of the remaining
bonds.

     ASE Holding Limited, one of our subsidiaries through which we hold ASE
Test shares, entered into a share purchase agreement dated as of May 19, 2001
with two of our directors under which ASE Holding Limited agreed to purchase
2,480,000 shares of ASE Test from these directors upon the exercise of certain
options granted to them under ASE Test's 1996 option plan for an aggregate
purchase price of US$35,389,600. The closing date of this acquisition of shares
was May 22, 2001. We engaged in this acquisition principally to maintain our
investment in ASE Test at a level above 50% of the outstanding shares of ASE
Test. For more information relating to the transaction, see "Item 7. Major
Shareholders--Related Party Transactions" of our annual report on Form 20-F for
the fiscal year ended December 31, 2001.

Item 8.  Financial Information.

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     Consolidated financial statements are set forth under "Item 18.  Financial
Statements".

LEGAL PROCEEDINGS

     We are not involved in material legal proceedings the outcome of which we
believe would have a material adverse effect on us.

     Criminal charges were brought in December 1998 by the district attorney
for Taipei against Jason C.S. Chang, Richard H.P. Chang, Chang Yao Hung-ying
and four others for alleged breach of fiduciary duties owed to Hung Ching, an
affiliate of ASE Inc., in their capacity as directors and officer of Hung Ching
in connection with a land sale transaction in 1992 valued at approximately
NT$1.7 billion. ASE Inc. is not a party to these proceedings and we do not
expect that these charges will result in any liability to us. It was alleged
that the transaction in which Jason C.S. Chang sold the land to Hung Ching
unfairly benefited Jason C.S. Chang to the detriment of Hung Ching. Hung Ching
at that time was a privately-owned company whose principal shareholders were
members of the Chang family. Ancillary charges were brought against Jason C.S.
Chang, Chang Yao Hung-ying and another person for alleged forgery of Hung Ching
board resolutions relating to that transaction. In January 2001, the District
Court of Taipei rendered a judgment finding Jason C.S. Chang and Chang Yao
Hung-ying guilty of forgery of corporate and other documents and breach of
fiduciary duties and Richard H.P. Chang not guilty. In January 2002, the High
Court of Taiwan, ROC rendered a judgment relating to the appeal of the judgment
by the District Court, and found Jason C.S. Chang and Chang Yao Hung-ying
guilty and Richard H.P. Chang not guilty, and reduced the sentences


                                       66


<PAGE>


rendered by the District Court relating to Jason C.S. Chang and Chang Yao
Hung-ying from six years to four years and three years, respectively. In order
to comply with the particular requirements of the Singapore Companies Act, Jason
C.S. Chang and Chang Yao Hung-ying have both resigned as directors of ASE Test.

     Neither Jason C.S. Chang nor Chang Yao Hung-ying believes that he or she
committed any offense in connection with such transactions, and they appealed
the decision to the Supreme Court of Taiwan, ROC. On January 23, 2003, the
Supreme Court reversed the judgment of the High Court with respect to Jason
C.S. Chang and Chang Yao Hung-ying and remanded the case to the High Court for
retrial. If a final adverse judgment is rendered against Jason C.S. Chang, he
may be required under ROC law to resign as Chairman and a director of ASE Inc.
See "Item 3. Key Information--Risk Factors--Risks Relating to Our Business--We
depend on select personnel and could be affected by the loss of their
services".

DIVIDENDS AND DIVIDEND POLICY

     To date we have not paid cash dividends on our common shares, and we
expect that we will continue to pay a substantial portion, if not all, of our
dividends in the form of shares. We have paid annual stock dividends on our
common shares since 1989 except in 2002, in which we did not pay any dividend
due to the losses we incurred in the 2001 fiscal year.

     The following table sets forth the aggregate number of outstanding common
shares entitled to dividends, as well as the stock dividends paid during each
of the years indicated. The stock dividends per common share represent
dividends paid in the fiscal year for common shares outstanding on the record
date applicable to the payment of these dividends.

<TABLE>
                                                                                                  Percentage of
                                                Total Common Shares      Outstanding Common     Outstanding Common
                       Stock Dividends Per        Issued as Stock         Shares on Record      Shares Represented
                         Common Share(1)             Dividends                Date(2)           by Stock Dividends
                       -------------------      -------------------      ------------------     ------------------
                          NT$         US$
                       --------    --------
<C>                     <C>           <C>             <C>                    <C>                      <C>
1995...........         3.60          0.14            93,600,000             260,000,000              36.0%
1996...........         8.00          0.29           319,840,000             399,800,000(3)           80.0
1997...........         3.80          0.14           277,020,000             729,000,000              38.0
1998...........         7.20          0.21           732,240,000           1,017,000,000              72.0
1999...........         1.07          0.03           190,460,000           1,780,000,000              10.7
2000...........         3.15          0.10           623,811,852           1,980,355,086              31.5
2001...........         1.70          0.05           467,840,000           2,752,000,000              17.0
2002...........            -            -                      -           3,254,800,000               -
<FN>
-------------
(1)  Holders of common shares receive as a stock dividend the number of common
     shares equal to the NT dollar value per common share of the dividend
     declared multiplied by the number of common shares owned and divided by
     the par value of NT$10 per share. Fractional shares are not issued but are
     paid in cash.

(2)  Aggregate number of common shares outstanding on the record date
     applicable to the dividend payment. Includes common shares issued in the
     previous year under our employee bonus plan.

(3)  Includes 43,000,000 common shares issued in connection with an offering of
     global depositary shares in July 1995.
</FN>
</TABLE>


     In the general shareholders' meeting held on June 19, 2003, our
shareholders approved the issuance of 325,480,000 common shares as stock
dividends with respect to the results of 2002. Such issuance is subject to the
approval of the ROC Securities and Futures Commission. If approved by the ROC
Securities and Futures Commission, the stock dividends to be paid would
represent 10.0% of our outstanding common shares as of the record date and
would be the equivalent of NT$1.00 (US$0.03) per common share.

     We have historically paid stock dividends on our common shares with
respect to the results of the preceding year after approval by our shareholders
at the annual general meeting of shareholders. The form, frequency and amount
of future cash or stock dividends on our common shares and ADSs will depend
upon our earnings, cash flow, financial condition and other factors. See
"Description of Common Shares -- Dividends and Distributions".


                                       67


<PAGE>


     In general, we are not permitted to distribute dividends or make other
distributions to shareholders for any year where we did not record net income
or retained earnings (excluding reserves). The ROC Company Law also requires
that 10% of annual net income (less prior years' losses, if any) be set aside
as a legal reserve until the accumulated legal reserve equals our paid-in
capital. In addition, our Articles of Incorporation require that before a
dividend is paid out of our annual net income:

     o   up to 2% of our annual net income (less prior years' losses and legal
         and special reserves, if any) should be paid to our directors and
         supervisors as compensation; and

     o   between 5% and 7% of the annual net income (less prior years' losses
         and legal and special reserves, if any) should be paid to our
         employees as bonuses; the 5% portion is to be distributed to all
         employees in accordance with our employee bonus plan, while any
         portion exceeding 5% is to be distributed in accordance with rules
         established by our board of directors to individual employees who have
         been recognized as having made special contributions to our company.

     In order to meet the needs of our present and future capital expenditures,
our dividend distribution will be primarily in the form of common shares. Cash
dividends may also be distributed in certain circumstances. However, the
percentage of cash dividends generally will not exceed 20% in any dividend
distribution, provided further that cash dividends will not be paid if the
dividend per share is less than NT$0.1.

     Holders of ADSs will be entitled to receive dividends, subject to the
terms of the deposit agreement, to the same extent as the holders of the
commons shares. Cash dividends will be paid to the depositary in NT dollars
and, except as other provided in the deposit agreement, will be converted by
the depositary into U.S. dollars and paid to holders of ADSs according to the
terms of the deposit agreement. Stock dividends will be distributed to the
depositary and, except as other provided in the deposit agreement, will be
distributed by the depositary, in the form of additional ADSs, to holders of
ADSs according to the terms of the deposit agreement.

     Holders of outstanding common shares on a dividend record date will be
entitled to the full dividend declared without regard to any prior or
subsequent transfer of common shares. Accordingly, purchasers of ADSs holding
outstanding ADSs on the relevant dividend record date will, subject to the
terms of the deposit agreement, be entitled to the full amount of any dividend
declared at our next general meeting of the shareholders.

     For information relating to ROC withholding taxes payable on dividends,
see "Taxation -- ROC Taxation -- Dividends".

SIGNIFICANT CHANGES

     We have not experienced any significant changes since the date of the
annual financial statements.

Item 9.  Listing Details.

MARKET PRICE INFORMATION AND MARKETS

     Our common shares were first issued in March 1984 and have been listed on
the Taiwan Stock Exchange since July 1989. The Taiwan Stock Exchange is an
auction market where the securities traded are priced according to supply and
demand through announced bid and ask prices. As of May 31, 2003, there were an
aggregate of 3,254,800,000 of our common shares outstanding. The following
table sets forth, for the periods indicated, the high and low closing prices
and the average daily volume of trading activity on the Taiwan Stock Exchange
for the common shares and the high and low of the daily closing values of the
Taiwan Stock Exchange Index. The closing price for our common shares on the
Taiwan Stock Exchange on June 20, 2003 was NT$21.60 per share.


                                       68


<PAGE>


<TABLE>
                                                                                           Average
                                                                                            Daily
                                         Closing Price per         Adjusted Closing        Trading            Taiwan Stock
                                               Share              Price per Share(1)       Volume            Exchange Index
                                         -----------------        ------------------    -------------     --------------------
                                                                                        (in thousands
                                           High       Low          High        Low        of shares)        High         Low
                                          ------     -----       ------       -----     -------------     --------     -------
<S>                                       <C>        <C>          <C>         <C>          <C>             <C>         <C>
  1998.............................       191.00     47.00        65.76       27.60        54,727          9,277.1     6,251.4
  1999.............................       117.00     51.00        72.80       29.94        43,438          8,608.9     5,474.8
  2000.............................       123.00     22.60        79.95       19.32        22,279         10,202.2     4,614.6
  2001.............................        38.80     14.00        34.20       14.00        22,799          6,104.2     3,446.3
    First Quarter..................        38.80     22.50        33.16       19.23        34,321          6,104.2     4,743.9
    Second Quarter.................        29.60     21.00        25.30       17.95        16,275          5,797.9     4,768.5
    Third Quarter..................        22.60     14.00        20.20       14.00        14,249          4,886.9     3,493.8
    Fourth Quarter.................        34.20     14.40        34.20       14.40        27,237          5,551.2     3,446.3
  2002.............................        38.50     15.90        38.50       15.90        22,543          6,462.3     3,850.0
    First Quarter..................        35.80     26.00        35.80       26.00        32,486          6,242.6     5,488.3
    Second Quarter.................        38.50     20.80        38.50       20.80        17,708          6,462.3     5,071.8
    Third Quarter..................        24.50     17.10        24.50       17.10        15,666          5,416.5     4,185.9
    Fourth Quarter.................        24.30     15.90        24.30       15.90        25,694          4,823.7     3,850.0
     December......................        24.30     20.30        24.30       20.30        20,665          4,823.7     4,452.4
  2003 (through June 20)...........        22.50     16.90        22.50       16.90        20,133          5,078.8     4,139.5
    First Quarter..................        22.50     16.90        22.50       16.90        13,573          5,078.8     4,139.5
     January.......................        22.50     19.80        22.50       19.80        18,052          5,078.8     4,524.4
     February......................        20.00     17.50        20.00       17.50        14,036          5,015.2     4,432.5
     March.........................        20.20     16.90        20.20       16.90        12,875          4,599.3     4,260.4
  Second Quarter (through June 20).        22.50     17.80        22.50       17.80        25,195          5,048.9     4,139.5
     April.........................        21.00     18.00        21.00       18.00        13,628          4,658.3     4,139.5
     May...........................        19.50     17.80        19.50       17.80        12,627          4,555.9     4,187.8
     June (through June 20)........        22.50     19.10        22.50       19.10        62,225          5,048.9     4,678.1
<FN>
-------------
(1)  As adjusted retroactively by the Taiwan Stock Exchange to give effect to
     stock dividends paid in the periods indicated.
</FN>
</TABLE>

     The performance of the Taiwan Stock Exchange has in recent years been
characterized by extreme price volatility. There are currently limits on the
range of daily price movements on the Taiwan Stock Exchange.

     Our ADSs have been listed on the New York Stock Exchange under the symbol
"ASX" since September 26, 2000. The outstanding ADSs are identified by the
CUSIP number 00756M404. As of June 19, 2003, a total of 23,103,895 ADSs were
outstanding. The table below shows, for the periods indicated, the high and low
closing prices and the average daily volume of trading activity on the New York
Stock Exchange for our ADSs and the highest and lowest of the daily closing
values of the New York Stock Exchange Index. The closing price for our ADSs on
the New York Stock Exchange on June 20, 2003 was US$3.12 per ADS.


                                       69


<PAGE>


<TABLE>
                                                                                           Average
                                                                                            Daily
                                                                   Adjusted Closing        Trading            New York Stock
                                     Closing price per ADS         Price per ADS(1)         Volume            Exchange Index
                                     ---------------------        ------------------    -------------     --------------------
                                                                                        (in thousands
                                       High       Low              High        Low         of ADSs)         High         Low
                                      ------     -----           ------       -----     -------------     --------     -------
                                        US$       US$            US$         US$
<S>                                   <C>        <C>              <C>         <C>            <C>           <C>         <C>
2000............................      6.75       3.06            5.77        2.62             28           7,164.55    6,094.91
  Fourth Quarter................      6.75       3.06            5.77        2.62             28           7,061.88    6,599.28
2001............................      6.05       1.75            5.17        1.75             97           7,048.13    5,331.38
  First Quarter.................      6.05       3.06            5.17        2.62             90           7,048.13    5,998.43
  Second Quarter................      4.55       2.99            3.89        2.56            128           7,016.30    6,049.02
  Third Quarter.................      3.25       1.75            3.00        1.75             47           6,632.58    5,331.38
  Fourth Quarter................      5.07       2.15            5.07        2.15            114           6,284.81    5,731.49
2002............................      5.54       2.21            5.54        2.21            101           6,445.01    4,452.49
  First Quarter.................      5.35       3.75            5.35        3.75            122           6,445.01    5,894.75
  Second Quarter................      5.54       3.05            5.54        3.05            118           6,327.11    5,543.28
  Third Quarter.................      3.70       2.39            3.70        2.39            100           5,598.68    4,549.66
  Fourth Quarter................      3.50       2.21            3.50        2.21             66           5,247.64    4,452.49
   December.....................      3.50       2.89            3.50        2.89             79           5,236.85    4,958.02
2003 (through June 20)..........      3.23       2.45            3.23        2.45            124           5,722.85    4,486.70
  First Quarter................       3.23       2.45            3.23        2.45             37           5,255.39    4,486.70
   January......................      3.23       2.80            3.23        2.80             50           5,255.39    4,486.70
   February.....................      2.84       2.50            2.84        2.50             14           4,884.79    4,649.71
   March........................      2.93       2.45            2.93        2.45             44           4,970.94    4,486.70
  Second Quarter (through
    June 20)...................       3.22       2.50            3.22        2.50            217           5,722.85    4,793.50
   April........................      3.08       2.58            3.08        2.58             32           5,135.12    4,793.50
   May..........................      2.82       2.50            2.82        2.50             41           5,435.37    5,126.80
   June (through June 20).......      3.22       2.68            3.22        2.68            725           5,722.85    5,470.02
<FN>
-------------
(1) As adjusted retroactively to give effect to stock dividends paid in the periods indicated.
</FN>
</TABLE>

Item 10.  Additional Information.

ARTICLES OF INCORPORATION

General

     We are a company limited by shares organized under the laws of the ROC.
Our organizational document is our Articles of Incorporation. We have no
by-laws.

     Our Articles of Incorporation provide, in Article 2, that we are to engage
in the following types of business:

     1.  The manufacture, assembly, processing, testing and export of various
         types of integrated circuitry;

     2.  The research, development, design and manufacture, assembly,
         processing, testing and export of various computers, electronics,
         communications, information products and their peripheral products;
         and

     3.  General import and export trading business (to the exclusion of
         certain approved businesses that require trading permits).

     We were incorporated on March 23, 1984 as a company limited by shares
under the ROC Company Law. Our authorized capital was NT$45,500,000,000,
divided into 4,550,000,000 common shares, 3,254,800,000 were issued in
registered form and outstanding as of March 31, 2003. We do not have any equity
in the form of preference shares or otherwise outstanding as of the date of
this annual report.

     With the approval of our board of directors and the ROC Securities and
Futures Commission, we may issue stock options to our employees, provided that
the shares to be issued under any option plan shall not exceed 10% of


                                       70


<PAGE>


our outstanding common shares and the total number of shares to be issued under
all option plans shall not exceed 15% of our outstanding common shares. The
exercise price of an option shall not be less than the closing price of our
common shares on the Taiwan Stock Exchange on the issue date of the option. As
of December 31, 2002, we have issued 145,989,000 options to our full-time
employees as well as full-time employees of our domestic and foreign
subsidiaries pursuant to an employee stock option plan established on August 13,
2002. See "Item 6. Directors, Senior Management and Employees--Compensation--ASE
Inc. Employee Bonus Plan and Stock Option Plans". We have 300,000,000 common
shares reserved for issuance under our employee stock options.

Directors

     Our Articles of Incorporation provide that we are to have from five to
seven directors with tenures of three years who are elected from among the
shareholders. There is no minimum amount of shares necessary to stand for
election to a directorship. Many of our directors are corporate shareholders,
who appoint representatives. Re-elections are allowed. The directors have
certain powers and duties, including devising operations strategy, proposing to
distribute dividends or make up losses, proposing to increase or decrease
capital, reviewing material internal rules and contracts, hiring and
discharging the general manager or managers, establishing and dissolving branch
offices, reviewing budgets and audited financial statements and other duties
and powers granted by or in accordance with the ROC Company Law or shareholders
resolutions.

     The board of directors is constituted by the directors, who elect a
chairman and a vice-chairman from among the directors to preside over the
meeting of the Board. Meetings of the board may be held in the ROC or any place
abroad. A director may appoint another director to attend a meeting and vote by
proxy, but a director may accept only one proxy.

     The Articles of Incorporation contain no provisions relating to a
director's power to vote on a proposal in which that director is interested,
the directors' power to vote compensation to themselves, borrowing powers,
retirement or age-limit requirements.

Dividends and Distributions

     In general, we are not permitted to distribute dividends or make other
distributions to shareholders in any year in which we did not record net income
or retained earnings (excluding reserves). The ROC Company Law also requires
that 10% of annual net income (less prior years' losses, if any) be set aside
as a legal reserve until the accumulated legal reserve equals our paid-in
capital. In addition, our Articles of Incorporation require that before a
dividend is paid out of our annual net income:

     o   up to 2% of our annual net income (less prior years' losses and legal
         and special reserves, if any) should be paid to our directors and
         supervisors as compensation; and

     o   between 5% and 7% of the annual net income (less prior years' losses
         and legal and special reserves, if any) should be paid to our
         employees as bonuses. The 5% portion is to be distributed to all
         employees in accordance with our employee bonus plan, while any
         portion exceeding 5% is to be distributed in accordance with rules
         established by our board of directors to individual employees who have
         been recognized as having made special contributions to our company.

     At the annual general shareholders' meeting, our board of directors
submits to the shareholders for their approval any proposal for the
distribution of a dividend or the making of any other distribution to
shareholders from our net income for the preceding fiscal year. All common
shares outstanding and fully paid as of the relevant record date are entitled
to share equally in any dividend or other distribution so approved. Dividends
may be distributed in cash, in the form of common shares or a combination of
the two, as determined by the shareholders at the meeting.

     We are also permitted to make distributions to our shareholders of
additional common shares by capitalizing reserves. However, the capitalized
portion payable out of our legal reserve is limited to 50% of the total
accumulated legal reserve and the capitalization can only be effected when the
accumulated legal reserve exceeds 50% of our paid-in capital.


                                       71


<PAGE>


     For information as to ROC taxes on dividends and distributions, see
"--Taxation--ROC Taxation--Dividends".

Changes in Share Capital

     Under ROC Company Law, any change in the authorized share capital of a
company limited by shares requires an amendment to its Articles of
Incorporation. In the case of a public company such as ASE Inc., the approval
of the ROC Securities and Futures Commission and the ROC Ministry of Economic
Affairs is also required. Authorized but unissued common shares may be issued,
subject to applicable ROC law, upon terms as our board of directors may
determine.

Preemptive Rights

     Under the ROC Company Law, when a ROC company issues new shares for cash,
existing shareholders who are listed on the shareholders' register as of the
record date have preemptive rights to subscribe for the new issue in proportion
to their existing shareholdings, while a company's employees, whether or not
they are shareholders of the company, have rights to subscribe for 10% to 15%
of the new issue. Any new shares that remain unsubscribed at the expiration of
the subscription period may be offered by us to the public or privately placed.

     In addition, in accordance with the ROC Securities and Exchange Law, a
public company that intends to offer new shares for cash must offer to the
public at least 10% of the shares to be sold. This percentage can be increased
by a resolution passed at a shareholders' meeting, which would diminish the
number of new shares subject to the preemptive rights of existing shareholders.

     The preemptive rights provisions do not apply to offerings by shareholders
of outstanding shares. According to the amended ROC Securities and Exchange
Law, which was passed by the Legislative Yuan on January 15, 2002 and became
effective on February 8, 2002, the preemptive rights provisions will not apply
to offerings of new shares through a private placement approved at a
shareholders meeting.

Meetings of Shareholders

     We are required to hold an ordinary meeting of our shareholders within six
months following the end of each fiscal year. These meetings are generally held
in Kaohsiung, Taiwan. Extraordinary shareholders' meetings may be convened by
resolution of the board of directors or by the board of directors upon the
written request of any shareholder or shareholders who have held 3% or more of
the outstanding common shares for more than one year. Extraordinary
shareholders' meetings may also be convened by a supervisor. Notice in writing
of general meetings of shareholders, stating the place, time and purpose, must
be dispatched to each shareholder at least 30 days, in the case of ordinary
meetings, and 15 days, in the case of extraordinary meetings, before the date
set for each meeting. A majority of the holders of all issued and outstanding
common shares present at a shareholders' meeting constitutes a quorum for
meetings of shareholders.

Voting Rights

     Under the ROC Company Law, a shareholder has one vote for each common
share held. As previously required by law, our Articles of Incorporation
provide that a holder of common shares has one vote for each common share,
except that a holder of more than 3% of the total outstanding common shares is
not permitted to vote 0.1% of the number of common shares held by the holder in
excess of 3%. Such voting discount requirement has been eliminated under the
newly amended ROC Company Law, and we amended the Articles of Incorporation to
comply with the law in the shareholders' meeting held on June 21, 2002. Under
the ROC Company Law, the election of our directors and supervisors at a
shareholders' meeting is through cumulative voting.

     In general, a resolution can be adopted by the holders of at least a
majority of the common shares represented at a shareholders' meeting at which
the holders of a majority of all issued and outstanding common shares are
present. Under ROC Company Law, the approval by at least a majority of the
common shares represented at a shareholders meeting in which a quorum of at
least two-thirds of all issued and outstanding common shares are represented is
required for major corporate actions, including:


                                       72


<PAGE>


     o   amendment to the Articles of Incorporation, including increase of
         authorized share capital and any changes of the rights of different
         classes of shares;

     o   transfer of the whole or substantial part of its business or assets;

     o   taking over of the whole of the business or assets of any other
         company, which would have a significant impact on our company's
         operations;

     o   distribution of any stock dividend; or

     o   removal of directors or supervisors.

     A shareholder may be represented at an ordinary or extraordinary meeting
by proxy if a valid proxy form is delivered to us five days before the
commencement of the ordinary or extraordinary shareholders' meeting.

     Holders of ADSs, however, generally do not have the right to exercise
voting rights with respect to the underlying common shares.

Register of Shareholders and Record Dates

     Our share registrar, President Securities Corp., maintains our register of
shareholders at its offices in Taipei, Taiwan, and enters transfers of common
shares in our register upon presentation of, among other documents,
certificates representing the common shares transferred. Under the ROC Company
Law and our Articles of Incorporation, we may, by giving advance public notice,
set a record date and close the register of shareholders for a specified period
in order for us to determine the shareholders or pledgees that are entitled to
rights pertaining to the common shares. The specified period required is as
follows:

     o   ordinary shareholders' meeting--60 days;

     o   extraordinary shareholders' meeting--30 days; and

     o   relevant record date--five days.

Annual Financial Statements

     At least 10 days before the annual ordinary shareholders' meeting, our
annual financial statements must be available at our principal executive office
in Kaohsiung, Taiwan for inspection by the shareholders.

Transfer of Common Shares

     The transfer of common shares in registered form is effected by
endorsement and delivery of the related share certificates but, in order to
assert shareholders' rights against us, the transferee must have his name and
address registered on our register of shareholders. Shareholders are required
to file their respective specimen seals, also known as chops, with us. Chops
are official stamps widely used in Taiwan by individuals and other entities to
authenticate the execution of official and commercial documents.

Acquisition of Common Shares by ASE Inc.

     Under the ROC Securities and Exchange Law, we may purchase our own common
shares for treasury stock in limited circumstances, including:

     o   to transfer common shares to our employees;

     o   to deliver shares upon the conversion or exercise of bonds with
         warrants, preferred shares with warrants, convertible bonds,
         convertible preferred shares or warrants issued by us; and

     o   to maintain our credit and our shareholders' equity, provided that the
         shares so purchased shall be cancelled.


                                       73


<PAGE>


     We may purchase our common shares on the Taiwan Stock Exchange or by means
of a public tender offer. These transactions require the approval of a majority
of our board of directors at a meeting in which at least two-thirds of the
directors are in attendance. The total amount of common shares purchased for
treasury stock may not exceed 10% of the total outstanding shares. In addition,
the total cost of the purchased shares shall not exceed the aggregate amount of
our retained earnings, any premium from share issuances and the realized
portion of our capital reserve.

     Pursuant to the amended ROC Company Law, effective from November 14, 2001,
our subsidiaries are not permitted to acquire our common shares. This
restriction does not affect any acquisition of our common shares made by our
subsidiaries prior to November 14, 2001.

Liquidation Rights

     In the event of our liquidation, the assets remaining after payment of all
debts, liquidation expenses and taxes will be distributed pro rata to the
shareholders in accordance with the relevant provisions of the ROC Company Law
and our Articles of Incorporation.

Substantial Shareholders and Transfer Restrictions

     The ROC Securities and Exchange Law currently requires (1) each director,
supervisor, manager or substantial shareholder (that is, a shareholder who
together with his or her spouse, minor children or nominees, holds more than
10% of the shares of a public company) to report any change in that person's
shareholding to the issuer of the shares and the ROC Securities and Futures
Commission and (2) each director, supervisor, manager or substantial
shareholder, after acquiring its status of director, supervisor, manager or
substantial shareholder for a period of six months, to report his or her intent
to transfer any shares on the Taiwan Stock Exchange to the ROC Securities and
Futures Commission at least three days before the intended transfer, unless the
number of shares to be transferred is less than 10,000 shares.

     In addition, the number of shares that can be sold or transferred on the
Taiwan Stock Exchange by any person subject to the restrictions described above
on any given day may not exceed:

     o   0.2% of the outstanding shares of the company in the case of a company
         with no more than 30 million outstanding shares; or

     o   0.2% of 30 million shares plus 0.1% of the outstanding shares
         exceeding 30 million shares in the case of a company with more than 30
         million outstanding shares; or

     o   in any case, 5% of the average trading volume (number of shares) on
         the Taiwan Stock Exchange for the ten consecutive trading days
         preceding the reporting day on which the director, supervisor, manager
         or substantial shareholder reports the intended share transfer to the
         ROC Securities and Futures Commission.

     These restrictions do not apply to sales or transfers of our ADSs.

MATERIAL CONTRACTS

     Manufacturing Services Agreement dated as of July 3, 1999 among Motorola,
Inc., ASE Inc. and ASE (Chung Li) Inc.

     This contract was entered into to provide a strategic supplier
relationship in which we use our ASE Chung Li subsidiary to provide testing and
packaging services to Motorola on a priority basis. This contract has a
duration of five years. The contract governs capacity reservation by Motorola
at the Chung Li facility as well as our facilities in Kaohsiung or the
facilities of ASE Test Taiwan and specifications of the work to be performed.
Remuneration to us is confidential and the contract, as filed as an exhibit to
our Form F-1 Registration Statement in 2000, was granted confidential treatment
by the Commission.

     Manufacturing Services Agreement dated as of July 3, 1999 among Motorola,
Inc., ASE Inc. and ASE (Korea) Inc.


                                       74


<PAGE>


     This contract was entered into to provide a strategic supplier
relationship in which we use our ASE Korea subsidiary to provide testing and
packaging services to Motorola on a priority basis. This contract has a
duration of five years. The contract governs capacity reservation by Motorola
at the Korea facility and specifications of the work to be performed.
Remuneration to us is confidential and the contract, as filed as an exhibit to
our Form F-1 Registration Statement in 2000, was granted confidential treatment
by the Commission.

     BGA Immunity Agreement dated as of January 25, 1994 between ASE Inc. and
Motorola, Inc.

     Pursuant to this contract, Motorola released, acquitted and forever
discharged us and our subsidiaries from any and all claims or liability for
infringement or alleged infringement of any Motorola patents, as defined in the
contract. Motorola granted us and our subsidiaries immunity from suit for
Motorola patents involving BGA packages. We and our subsidiaries released,
acquitted and forever discharged Motorola and its subsidiaries for any time
prior to the date of the contract, from any and all claims or liability for
infringement of any of our patents. We granted Motorola and its subsidiaries
immunity from suit for our patents involving BGA packages. Remuneration to
Motorola is confidential and the contract, as filed as an exhibit to our Form
F-1 Registration Statement in 2000, was granted confidential treatment by the
Commission. The agreement terminated on December 31, 2002.

     Service Agreement dated as of August 1, 2002 between ASE Electronics (M)
Sdn. Bhd. and ASE (U.S.) Inc.

     This contract established ASE (U.S.) as our subsidiary, ASE Test Malaysia's
non-exclusive sales service and sales support agent in Europe and North America
for its products and services. For such services, our subsidiary pays ASE (U.S.)
12% of their monthly incurred services associated costs and expenses plus 5% or
US$189,000, whichever is lower. ASE (U.S.) agreed to reimburse our subsidiary
for expenses for any employee traveling to the U.S. or Europe if such travel was
necessary to ASE (U.S.)'s services. This agreement will expire on July 31, 2003.

     Service Agreement dated as of August 1, 2002 between ASE Test Inc. and ASE
(U.S.) Inc.

     This contract established ASE (U.S.) as our subsidiary, ASE Test Inc.'s
non-exclusive sales service and sales support agent in Europe and North America
for its products and services. For such services, our subsidiary pays ASE (U.S.)
17% of their monthly incurred services associated costs and expenses plus 5% or
US$267,750, whichever is lower. ASE (U.S.) agreed to reimburse our subsidiary
for expenses for any employee traveling to the U.S. or Europe if such travel was
necessary to ASE (U.S.)'s services. This agreement will expire on July 31, 2003.

     Service Agreement dated as of August 1, 2002 between ASE (Korea) Inc. and
ASE (U.S.) Inc.

     This contract established ASE (U.S.) as our subsidiary, ASE Korea's
non-exclusive sales service and sales support agent in Europe and North America
for its products and services. For such services, our subsidiary pays ASE (U.S.)
5.5% of their monthly incurred services associated costs and expenses plus 5% or
US$86,625, whichever is lower. ASE (U.S.) agreed to reimburse our subsidiary for
expenses for any employee traveling to the U.S. or Europe if such travel was
necessary to ASE (U.S.)'s services. This agreement will expire on July 31, 2003.

     Service Agreement dated as of August 1, 2002 between ASE (Chung-Li) Inc.
and ASE (U.S.) Inc.

     This contract established ASE (U.S.) as our subsidiary, ASE Chung Li's
non-exclusive sales service and sales support agent in Europe and North America
for its products and services. For such services, our subsidiary pays ASE (U.S.)
13% of their monthly incurred services associated costs and expenses plus 5%, or
US$204,750, whichever is lower. ASE (U.S.) agreed to reimburse our subsidiary
for expenses for any employee traveling to the U.S. or Europe if such travel was
necessary to ASE (U.S.)'s services. This agreement will expire on July 31, 2003.

     Service Agreement dated as of August 1, 2002 between ASE Inc. and ASE
(U.S.) Inc.

     This contract established ASE (U.S.) as our non-exclusive sales service and
sales support agent in Europe and North America for our products and services.
For such services, we pay ASE (U.S.) 52.5% of their monthly incurred services
associated costs and expenses plus 5% or US$826,875, whichever is lower. ASE
(U.S.) agreed to reimburse us for expenses for any employee traveling to the
U.S. or Europe if such travel was necessary to ASE (U.S.)'s services. This
agreement will expire on July 31, 2003.


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<PAGE>


     Commission Agreement dated as of August 1, 2002 between ASE Electronics (M)
Sdn, Bhd. and Gardex International Limited

     This contract established Gardex as our subsidiary, ASE Test Malaysia's
non-exclusive worldwide sales agent for all its products and services. For such
services, our subsidiary pays Gardex monthly, in respect of net export sales
outside Malaysia, 0.56% of the sales amount for monthly sales. This agreement
will expire on July 31, 2003.

     Commission Agreement dated as of August 1, 2002 between ASE Test Inc. and
Gardex International Limited

     This contract established Gardex as our subsidiary, ASE Test Inc.'s
non-exclusive worldwide sales agent for all its products and services. For such
services, our subsidiary pays Gardex monthly, in respect of net export sales
outside Taiwan, 0.56% of the sales amount for monthly sales. This agreement
will expire on July 31, 2003.

     Commission Agreement dated as of August 1, 2002 between ASE (Korea) Inc.
and Gardex International Limited

     This contract established Gardex as our subsidiary, ASE Korea's
non-exclusive worldwide sales agent for all its products and services. For such
services, our subsidiary pays Gardex monthly, in respect of net export sales
outside Korea, 0.48% of the sales amount for monthly sales. This agreement will
expire on July 31, 2003.

     Commission Agreement dated as of August 1, 2002 between ASE (Chung Li) Inc.
and Gardex International Limited

     This contract established Gardex as our subsidiary, ASE Chung Li's
non-exclusive worldwide sales agent for all its products and services. For such
services, our subsidiary pays Gardex monthly, in respect of net export sales
outside Taiwan, 0.56% of the sales amount for monthly sales. This agreement
will expire on July 31, 2003.

     Commission Agreement dated as of August 1, 2002 between ASE Inc. and Gardex
International Limited

     This contract established Gardex as our non-exclusive worldwide sales
agent for all its products and services. For such services, we pay Gardex
monthly, in respect of net export sales outside Taiwan, 0.8% of the sales
amount for monthly sales. This agreement will expire on July 31, 2003.

EXCHANGE CONTROLS

ROC Exchange Controls

     The Foreign Exchange Control Statute and regulations provide that all
foreign exchange transactions must be executed by banks designated to handle
the business, by the ROC Ministry of Finance or by the Central Bank of China.
Current regulations favor trade-related foreign exchange transactions.
Consequently, foreign currency earned from exports of merchandise and services
may now be retained and used freely by exporters, and all foreign currency
needed for the importation of merchandise and services may be purchased freely
from the designated foreign exchange banks.

     Trade aside, ROC companies and resident individuals may, without foreign
exchange approval, remit into and outside the ROC foreign currency of up to
US$50 million (or its equivalent) and US$5 million (or its equivalent)
respectively in each calendar year. The above limits apply to remittances
involving a conversion of NT dollars to a foreign currency and vice versa. A
requirement is also imposed on all enterprises to register medium-and long-term
foreign debt with the Central Bank of China.

     In addition, foreign persons may, subject to specified requirements, but
without foreign exchange approval of the Central Bank of China, remit outside
and into the ROC foreign currencies of up to US$100,000 (or its equivalent) for
each remittance. The above limit applies to remittances involving a conversion
of NT dollars to a foreign currency and vice versa. The above limit does not,
however, apply to the conversion of NT dollars into other currencies, including
U.S. dollars, from the proceeds of sale of any underlying shares withdrawn from
a depositary receipt facility.


                                       76


<PAGE>


TAXATION

ROC Taxation

     The following discussion describes the principal ROC tax consequences of
the ownership and disposition of ADSs representing common shares or common
shares to a non-resident individual or entity. It applies to you only if you
are:

     o   an individual who is not a ROC citizen, who owns ADSs and who is not
         physically present in the ROC for 183 days or more during any calendar
         year; or

     o   a corporation or a non-corporate body that is organized under the laws
         of a jurisdiction other than the ROC for profit-making purposes and
         has no fixed place of business or other permanent establishment in the
         ROC.

     You should also consult your tax advisors concerning the ROC tax
consequences of owning ADSs.

   Dividends

     Dividends declared by us out of our retained earnings and distributed to
you are subject to ROC withholding tax, currently at the rate of 20%, on the
amount of the distribution in the case of cash dividends or on the par value of
the common shares in the case of stock dividends. However, a 10% ROC retained
earnings tax paid by us on our undistributed after-tax earnings, if any, would
provide a credit up to 10% of the gross amount of any dividends declared out of
such earnings that would reduce the 20% ROC tax imposed on these distributions.

     Under current ROC law, it is not clear whether the dividends paid by us
out of our capital reserves are subject to ROC withholding tax.

   Capital Gains

     Under ROC law, capital gains on share securities transactions are exempt
from income tax.

   Subscription Rights

     Distributions of statutory subscription rights for common shares in
compliance with ROC law are not subject to any ROC tax. Proceeds derived from
sales of statutory subscription rights evidenced by securities are exempted
from income tax but are subject to securities transaction tax at the rate of
0.3% of the gross amount received. Proceeds derived from sales of statutory
subscription rights which are not evidenced by securities are subject to
capital gains tax at the rate of:

     o   35% of the realized gains received if you are a natural person; or

     o   25% of the realized gains received if you are an entity that is not a
         natural person.

     Subject to compliance with ROC law, we, at our sole discretion, can
determine whether statutory subscription rights shall be evidenced by issuance
of securities.

   Securities Transaction Tax

     A securities transaction tax, at the rate of 0.3% of the gross amount
received, will be withheld upon a sale of common shares in the ROC. Transfers
of ADSs are not subject to ROC securities transaction tax. Withdrawal of common
shares from the deposit facility is not subject to ROC securities transaction
tax.

   Estate and Gift Tax

     ROC estate tax is payable on any property within the ROC of a deceased who
is an individual, and ROC gift tax is payable on any property within the ROC
donated by any such person. Estate tax is currently payable at rates ranging
from 2% of the first NT$600,000 to 50% of amounts over NT$100,000,000. Gift tax
is payable at rates


                                       77


<PAGE>


ranging from 4% of the first NT$600,000 to 50% of amounts over NT$45,000,000.
Under ROC estate and gift tax laws, common shares issued by ROC companies are
deemed located in the ROC regardless of the location of the holder. It is
unclear whether a holder of ADSs will be considered to hold common shares for
this purpose since there is no authority directly indicating whether an ADR
holder will be treated as owning the shares represented by the ADR. However,
despite this lack of direct authority, we are of the view that a holder of ADSs
will not be subject to the ROC estate and gift tax because (1) the ADSs are not
considered property within the ROC and (2) the transfer of ADSs is not deemed to
be a transfer of the underlying common shares.

   Tax Treaty

     The ROC does not have an income tax treaty with the United States. On the
other hand, the ROC has income tax treaties with Indonesia, Singapore, South
Africa, Australia, Vietnam, New Zealand, Malaysia, Macedonia, Swaziland,
Gambia, the United Kingdom and the Netherlands, which may result in a reduction
in the rate of ROC withholding tax on dividends paid with respect to common
shares of ROC companies. It is unclear whether if you hold ADSs, you will be
considered to hold common shares for the purposes of these treaties.
Accordingly, if you may otherwise be entitled to the benefits of the relevant
income tax treaty, you should consult your tax advisors concerning your
eligibility for the benefits with respect to the ADSs.

United States Federal Income Taxation

     The following discussion describes the material U.S. federal income tax
consequences of the acquisition, ownership and disposition of ADSs or common
shares to the U.S. holders of the ADSs or common shares. For these purposes, you
are a U.S. holder if you are a beneficial owner of ADSs or common shares that,
for U.S. federal income tax purposes, is:

     o   a citizen or resident of the United States;

     o   a corporation or other entity taxable as a corporation organized under
         the laws of the United States or of any political subdivision of the
         United States; or

     o   an estate or trust the income of which is includable in gross income
         for U.S. federal income tax purposes regardless of its source.

     This discussion assumes that ASE Inc. will not be considered a passive
foreign investment company. Please see our discussion of passive foreign
investment company rules below.

     Please note that this discussion does not address all of the tax
consequences that may be relevant in light of your particular circumstances. In
particular, it does not address all of the tax consequences that may be
relevant to purchasers subject to special rules, including:

     o   persons subject to the alternative minimum tax;

     o   insurance companies;

     o   tax-exempt entities;

     o   dealers or traders in securities;

     o   financial institutions;

     o   persons who hold or will hold ADSs or common shares as part of an
         integrated investment, including a straddle, hedging or conversion
         transaction, comprised of common shares and one or more other
         positions for tax purposes;

     o   persons whose functional currency is not the U.S. dollar; or

     o   persons who own 10% or more of our voting stock.


                                       78


<PAGE>


     This discussion is based on the Internal Revenue Code of 1986, Treasury
Regulations, administrative announcements and judicial decisions currently in
effect. These laws and regulations may change, possibly with retroactive
effect. This discussion is also based in part on representations by the
depositary and assumes that each obligation under the deposit agreement and any
related agreement will be performed in accordance with its terms.

     For U.S. federal income tax purposes, a U.S. holder of ADSs should be
treated as the holder of the common shares represented by the ADSs. However,
the U.S. Treasury has expressed concerns that parties to whom depositary shares
are pre-released may be taking actions that are inconsistent with the claiming
of foreign tax credits by the holders of ADSs. Accordingly, the analysis of the
creditability of ROC taxes described below could be affected by future actions
that may be taken by the U.S. Treasury.

     Please consult your tax advisors with regard to the application of the U.S.
federal income tax laws to ADSs as well as any tax consequences arising under
the laws of any state, local or non-U.S. taxing jurisdictions.

   Dividends

     Any dividends you receive on ADSs or common shares, including the amount
of any ROC taxes withheld thereon, reduced by any credit against the
withholding tax on account of the 10% retained earnings tax imposed on ASE
Inc., other than pro rata distributions of common shares to all shareholders
including holders of ADSs, will constitute foreign source dividend income to
the extent paid out of earnings and profits as calculated for U.S. federal
income tax purposes. The amount you will be required to include in income for
any dividend paid in NT dollars will be equal to the U.S. dollar value of the
NT dollars paid, calculated by reference to the exchange rate in effect on the
date the depositary receives the dividend. If you realize gain or loss on a
sale or other disposition of NT dollars, it will be U.S. source ordinary income
or loss. You will not be entitled to a dividends-received deduction for
dividends you receive. Under recently enacted legislation, dividends received
by noncorporate U.S. Holders on ADRs may be subject to U.S. federal income tax
at lower rates than other types of ordinary income if certain conditions are
met. U.S. Holders should consult their own tax advisors regarding the
implications of this new legislation in their particular circumstances.

     Subject to applicable limitations and restrictions, the ROC taxes withheld
from dividend distributions, reduced by any credit against the withholding tax
on account of the 10% retained earnings tax, will be eligible for credit
against your U.S. federal income tax liabilities. The limitation on foreign
taxes eligible for credit is calculated separately with respect to specific
classes of income including, among others, "passive income", "financial
services income" and "general limitation income". For this purpose, dividends
paid with respect to the common shares will constitute "passive income" or, in
the case of U.S. financial services providers, may be "financial services
income".

     Pro rata distributions of common shares by a company to its shareholders,
including holders of ADSs, will not be subject to U.S. federal income tax.
Accordingly, these distributions will not give rise to U.S. federal income
against which the ROC tax imposed on these distributions may be credited. Any
ROC tax of this nature will only be creditable against a U.S. holder's U.S.
federal income tax liability with respect to income in the "general limitation
income" class and not "passive income" or "financial services income", subject
to applicable limitations and restrictions.

   Capital Gains

     You will recognize capital gain or loss for U.S. federal income tax
purposes on the sale or exchange of ADSs in the same manner as you would on the
sale or exchange of any other common shares held as capital assets. The gain or
loss will be U.S. source income or loss. You should consult your own tax
advisor about the treatment of capital gains, which may be taxed at lower rates
than ordinary income for non-corporate taxpayers, and capital losses, the
deductibility of which may be limited.

     Deposits and withdrawals of common shares by a U.S. holder in exchange for
ADSs will not result in realization of gain or loss for U.S. federal income tax
purposes.


                                       79


<PAGE>


   Passive Foreign Investment Company Rules

     Based on management estimates, we do not expect to be a passive foreign
investment company. In general, a foreign corporation is a passive foreign
investment company for any taxable year in which (1) 75% or more of its gross
income consists of passive income (such as dividends, interest, rents and
royalties) or (2) 50% or more of the average quarterly value of its assets
consists of assets that produce, or are held for the production of, passive
income. The determination of whether we may be a passive foreign investment
company will be based on the composition of its income and assets, as well as
those of its subsidiaries and certain affiliates, from time to time. Since the
composition of our income and assets will vary over time, there can be no
assurance that it will not be considered a passive foreign investment company
for any fiscal year. If we were a passive foreign investment company at any
time that you own ADSs or common shares:

     o   You may be subject to additional taxes and interest charges on any
         gain realized on the disposition of the ADSs or common shares, as
         applicable, and on "excess distributions". The additional taxes are
         assessed at the highest tax rate applicable for corporate or
         individual taxpayers for the relevant tax periods; and

     o   You will be subject to additional U.S. tax filing requirements for
         each year that you hold ADSs or common shares.

     Please consult your tax advisors about the possibility that we may be a
passive foreign investment company and the rules that would apply to you if it
were.

   Estate and Gift Tax

     As discussed in "--ROC Taxation", you might be required to pay ROC estate
and gift tax. You should consult your tax advisor regarding the effect of these
taxes.

DOCUMENTS ON DISPLAY

     We file annual reports on Form 20-F and periodic reports on Form 6-K with
the SEC. You may read and copy this information at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can also request
copies of the documents, upon payment of a duplicating fee, by writing to the
Public Reference Section of the SEC. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the Public Reference Room. Our SEC
filings are also available to the public from the SEC's website at
http://www.sec.gov.

Item 11.  Quantitative and Qualitative Disclosures about Market Risk.

MARKET RISK

     Our exposure to financial market risks relates primarily to changes in
interest rates and foreign currency exchange rates. To mitigate these risks, we
utilize derivative financial instruments, the application of which is primarily
to manage these exposures, and not for speculative purposes.

     Interest Rate Risk. Our exposure to interest rate risks relates primarily
to our long-term floating rate debt, which is normally incurred to support our
corporate activities and capital expenditures. We currently do not enter into
derivative transactions with regard to interest rates, but would consider
engaging in currency interest rate swaps to lock in favorable currency and
interest rate levels from time to time, if available, on terms considered
attractive by us. No interest rate derivative contracts were outstanding as of
December 31, 2002.

     The following table provides information about our significant obligations
that are sensitive to interest rate fluctuations.


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<PAGE>


<TABLE>
                                                               As of December 31, 2002
                                  -------------------------------------------------------------------------------------------
                                                                Expected Maturity Date
                                  -------------------------------------------------------------------------------------------
                                     2003            2004           2005         2006        2007       Total      Fair Value
                                  ----------     ----------      ---------     -------      ------     --------    ----------
                                                          (in millions, except percentages)
<S>                               <C>            <C>             <C>           <C>          <C>        <C>         <C>
Short-term debt:
  Variable rate (NT$)........      3,152.4           --             --          --          --          3,152.4     3,152.4
   Average interest rate.....          2.70%         --             --          --          --
  Variable rate (US$)........         52.5           --             --          --          --             52.5        52.5
   Average interest rate.....          2.60%         --             --          --          --
  Variable rate (JP(Y))......      1,608.7           --             --          --          --          1,608.7     1,608.7
   Average interest rate.....          1.44%         --             --          --          --
  Variable rate (KRW)........     21,726.8           --             --          --          --         21,726.8    21,726.8
   Average interest rate.....          5.96%         --             --          --          --
  Variable rate (EUR)........          0.5           --             --          --          --              0.5         0.5
   Average interest rate.....          5.31%         --             --          --          --
  Variable rate (RMB)........         47.0           --             --          --          --             47.0        47.0
   Average interest rate.....          5.96%         --             --          --          --
Long-term debt:
  Variable rate (NT$)........      5,315.1       11,691.5        6,283.7       811.5        --         24,101.8    24,101.8
   Average interest rate.....          5.19%          4.07%          4.50%       4.01%      --
  Fixed rate (NT$)...........         18.6            2.1            0.4        --          --             21.1        21.1
   Average interest rate.....          8.53%          3.23%          3.23%      --          --
  Variable rate (US$)........          1.6           49.7            6.6         4.5         3.6           66.0        66.0
   Average interest rate.....          4.22%          3.45%          5.17%       5.59%       5.93%
  Fixed rate (US$)...........         23.4          153.7            3.0         0.1        --            180.2       180.2
   Average interest rate.....          5.98%          7.32%          9.50%       7.75%      --
  Variable rate (JP(Y))......         --          5,460.4           --          --          --          5,460.4     5,460.4
   Average interest rate.....         --              1.00%         --          --          --
  Variable rate (EUR)........         --              3.0           --          --          --              3.0         3.0
   Average interest rate.....         --              4.53%         --          --          --
</TABLE>

     Foreign Currency Exchange Rate Risk. Our foreign currency exposures give
rise to market risk associated with exchange rate movements against the NT
dollar, our functional currency. Currently, the majority of our revenues from
packaging and testing services are denominated in U.S. dollars, with a portion
denominated in NT dollars. Our costs of revenues and operating expenses
associated with packaging and testing services are incurred in several
currencies, primarily in NT dollars and U.S. dollars, as well as, to a lesser
extent, Malaysian ringgit, Korean won, Japanese yen and Philippine pesos.
Fluctuations in exchange rates, primarily among the U.S. dollar, the NT dollar
and the Japanese yen, will affect our costs and operating margins and could
result in exchange losses and increased costs in NT dollar and other local
currency terms. In 2000, 2001 and 2002, the average exchange rate of the NT
dollar to the U.S. dollar was 31.37, 33.91 and 34.53, respectively. In
addition, a substantial portion of our capital expenditures, primarily for the
purchase of packaging and testing equipment, has been, and is expected to
continue to be, denominated primarily in U.S. dollars with the remainder in
Japanese yen.

     Foreign currency denominated liabilities as of December 31, 2002 include
U.S. dollar debt and Japanese yen debt. As of December 31, 2002, approximately
66.8% of our cash and accounts receivable were denominated in U.S. dollars,
with a substantial portion of the remainder denominated in NT dollars. As of
December 31, 2002, approximately 75.4% of our accounts payable and payable for
fixed assets were denominated in currencies other than the NT dollar. To
protect against reductions in value and the volatility of future cash flows
caused by changes in foreign currency exchange rates, we may utilize currency
forward contracts from time to time to reduce the impact of foreign currency
fluctuations on our results of operations. Our policy is to account for these
contracts on a mark-to-market rate basis, and the premiums are amortized on a
straight-line basis over the life of the contract.

     The table below presents our outstanding foreign currency option contracts
and forward exchange contracts as of December 31, 2002.


                                       81


<PAGE>


<TABLE>
                   Foreign Currency Option Contracts                             Amount           Maturity
---------------------------------------------------------------------        -------------     -------------
                                                                                  US$
                                                                             (in millions)
<S>                                                                                <C>         <C>
Contracts to buy US$ call/NT$ put....................................               5.0        January 2003
Contracts to buy US$ call/NT$ put....................................               5.0        February 2003
Contracts to sell US$ call/NT$ put...................................              10.0        January 2003
</TABLE>

<TABLE>
                      Forward Exchange Contracts                                 Amount           Maturity
---------------------------------------------------------------------        -------------     -------------
                                                                                  US$
                                                                             (in millions)
<S>                                                                                <C>         <C>
Contracts to buy NT$/sell US$.....................................                  5.0        January 2003
Contracts to buy NT$/sell US$.....................................                  5.0        February 2003
</TABLE>

Item 12.  Description of Securities Other Than Equity Securities.

     Not applicable.


                                    PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies.

     Not applicable.

Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

     In July 1995, we established with Citibank, N.A., as GDS depositary, two
depositary receipts facilities, one for the purpose of facilitating the
issuance of GDSs sold under Rule 144A and the other for the purpose of
facilitating the issuance of GDSs sold pursuant to Regulation S. Each GDS
represented five of our common shares. In December 1999, some of our affiliates
offered and sold additional GDSs. The GDSs sold under Rule 144A were designated
as eligible for trading in the PORTAL System of the National Association of
Securities Dealers, Inc. in the United States. The GDSs sold pursuant to
Regulation S were listed on the Stock Exchange of Singapore and the Luxembourg
Stock Exchange and quoted on SEAQ International.

     Concurrently with our offering of ADSs on September 25, 2000, we arranged
with our GDS depositary and our ADS depositary for the automatic conversion of
each of our outstanding GDSs sold pursuant to Regulation S into one ADS. The
ADSs issued upon conversion of our GDSs sold pursuant to Regulation S were
identified by a new CUSIP number. We have listed these ADSs for trading on the
NYSE under the symbol "ASX". We delisted these GDSs from the Stock Exchange of
Singapore and the Luxembourg Stock Exchange and suspended quotation on SEAQ
International.

     Concurrently with our offering of ADSs of September 25, 2000, we offered
to exchange one ADS for each of our outstanding GDSs sold under Rule 144A. The
ADSs issued upon exchange of the GDSs sold under Rule 144A are identified by
the same CUSIP number as that which identifies the ADSs issued upon conversion
of the GDSs sold pursuant to Regulation S as described above, and all of those
ADSs are fully fungible for trading on the NYSE. Upon the completion of the
exchange offer, we instructed the GDS depositary to terminate the global
depositary receipt facility.

Item 15.  Controls and Procedures.

     Within 90 days prior to the date of this annual report, we, under the
supervision and with the participation of our management, including the Chief
Executive Officer and the Chief Financial Officer, performed an evaluation of
the effectiveness of our disclosure controls and procedures. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective for gathering,
analyzing and disclosing the information we are required to disclose in this
annual report we file under the Securities


                                       82


<PAGE>


Exchange Act of 1934, within the time periods specified in the SEC's rules and
forms. Our management necessarily applied its judgment in assessing the costs
and benefits of such controls and procedures, which by their nature can provide
only reasonable assurance regarding management's control objectives.

     There have been no significant changes in our internal controls or other
factors that could significantly affect internal controls subsequent to the
date of their evaluation.


                                    PART III

Item 17.  Financial Statements.

     The Company has elected to provide financial statements for fiscal year
2002 and the related information pursuant to Item 18.

Item 18.  Financial Statements.

     Reference is made to pages F-1 to F-54 of this annual report.

     The consolidated financial statements of the Company and the report
thereon by its independent auditors listed below are attached hereto as
follows:

     (a) Report of Independent Auditors of the Company dated February 11, 2003
         (page F-2).

     (b) Consolidated Balance Sheets of the Company and subsidiaries as of
         December 31, 2001 and 2002 (page F-3).

     (c) Consolidated Statements of Income of the Company and subsidiaries for
         the years ended December 31, 2000, 2001 and 2002 (page F-5).

     (d) Consolidated Statements of Changes in Stockholders' Equity of the
         Company and subsidiaries for the years ended December 31, 2000, 2001
         and 2002 (page F-8).

     (e) Consolidated Statements of Cash Flows of the Company and subsidiaries
         for the years ended December 31, 2000, 2001 and 2002 (page F-11).

     (f) Notes to Consolidated Financial Statements of the Company and
         subsidiaries (pages F-13).

Item 19.  Exhibits.

1.      (a)   Articles of Association of the Registrant (in Chinese with
              English translation) (incorporating all amendments as of June 21,
              2002) (incorporated by reference to Exhibit 3.1 to the Company's
              registration statement on Form F-3 (File No. 333-89428) (the
              "Form F-3") filed on March 31, 2003).

2.      (a)   Amended and Restated Deposit Agreement dated as of September
              29, 2000 among ASE Inc., Citibank N.A., as depositary, and
              Holders and Beneficial Holders of American Depositary Shares
              evidenced by American Depositary Shares evidenced by American
              Depositary Receipts issued thereunder, including the form of
              American Depositary Receipt (incorporated by reference to Exhibit
              4.1 to the Form F-3 filed on March 31, 2003).

        (b)   Form of Underwriting Agreement (incorporated by reference to
              Exhibit 1.1 to the Form F-3 filed on April 24, 2003).

4.      (a)   Asset Purchase Agreement dated as of July 3, 1999 among ASE
              (Chung Li) Inc., ASE Inc., Motorola Electronics Taiwan, Ltd. and
              Motorola, Inc. (incorporated by reference to Exhibit 10.2 to ASE
              Test Limited's registration statement on Form F-3 (File No.
              333-10892) which was declared effective by the SEC on December
              22, 1999 (the "ASE Test 1999 Registration Statement").


                                       83


<PAGE>


        (b)   Agreement dated as of June 5, 2002 among ASE (Chung Li) Inc., ASE
              Inc., Motorola Electronics Taiwan, Ltd. and Motorola, Inc.
              amending certain earn-out arrangement provided for in Section
              2.09(b)(ii)(D) of the Asset Purchase Agreement dated as of July
              3, 1999 among the same parties.

        (c)   Stock Purchase Agreement dated as of July 3, 1999 among ASE
              Investment (Labuan) Inc., ASE Inc., Motorola Asia Ltd. and
              Motorola, Inc. relating to the purchase and sale of 100% of the
              Common Stock of Motorola Korea Ltd. (incorporated by reference to
              Exhibit 10.3 to the ASE Test 1999 Registration Statement).

        (d)+  Manufacturing Services Agreement dated as of July 3, 1999 among
              Motorola, Inc., ASE Inc. and ASE (Chung Li) Inc. (incorporated by
              reference to Exhibit 10.4 to the Company's registration statement
              on Form F-1 (File No. 333-44622) (the "Form F-1")).

        (e)+  Manufacturing Services Agreement dated as of July 3, 1999 among
              Motorola, Inc., ASE Inc. and ASE (Korea) Inc. (incorporated by
              reference to Exhibit 10.5 to the Form F-1).

        (f)+  BGA Immunity Agreement dated as of January 25, 1994 between ASE
              Inc. and Motorola, Inc. (incorporated by reference to Exhibit
              10.6 to the Form F-1).

        (g)   Land Lease effective October 1, 1999 until September 30, 2009
              between ASE Inc. and the Nantze Export Processing Zone
              (incorporated by reference to Exhibit 10.14 to the Form F-1).

        (h)   Land Lease effective September 1, 1999 until August 30, 2009
              between ASE Inc. and the Nantze Export Processing Zone
              (incorporated by reference to Exhibit 10.15 to the Form F-1).

        (i)   Land Lease effective April 1, 1998 until March 31, 2008 between
              ASE Inc. and the Nantze Export Processing Zone (incorporated by
              reference to Exhibit 10.16 to the Form F-1).

        (j)   Land Lease effective October 1, 1997 until September 30, 2007
              between ASE Inc. and the Nantze Export Processing Zone
              (incorporated by reference to Exhibit 10.17 to the Form F-1).

        (k)   Land Lease effective October 1, 1997 until September 30, 2007
              between ASE Inc. and the Nantze Export Processing Zone
              (incorporated by reference to Exhibit 10.18 to the Form F-1).

        (l)   Land Lease effective August 1, 1997 until July 31, 2007 between
              ASE Inc. and the Nantze Export Processing Zone (incorporated by
              reference to Exhibit 10.19 to the Form F-1).

        (m)   Land Lease effective January 1, 1996 until December 31, 2005
              between ASE Inc. and the Nantze Export Processing Zone
              (incorporated by reference to Exhibit 10.20 to the Form F-1).

        (n)   Land Lease effective January 1, 1995 until October 31, 2005
              between ASE Inc. and the Nantze Export Processing Zone
              (incorporated by reference to Exhibit 10.21 to the Form F-1).

        (o)   Land Lease effective October 1, 1999 until September 30, 2009
              between ASE Inc. and the Nantze Export Processing Zone
              (incorporated by reference to Exhibit 10.14 to the Form F-1).

        (p)   Land Lease effective July 1, 1995 until June 30, 2005 between ASE
              Inc. and the Nantze Export Processing Zone (incorporated by
              reference to Exhibit 10.22 to the Form F-1).

        (q)   Land Lease effective July 1, 1995 until June 30, 2005 between ASE
              Inc. and the Nantze Export Processing Zone (incorporated by
              reference to Exhibit 10.23 to the Form F-1).

        (r)   Land Lease effective August 1, 1994 until July 31, 2004 between
              ASE Inc. and the Nantze Export Processing Zone (incorporated by
              reference to Exhibit 10.24 to the Form F-1).

        (s)   Land Lease effective April 6, 1994 until April 5, 2004 between
              ASE Inc. and the Nantze Export Processing Zone (incorporated by
              reference to Exhibit 10.25 to the Form F-1).


                                       84


<PAGE>


        (u)   License Agreement dated as of January 16, 2001 between 1st
              Silicon (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd.
              (incorporated by reference to Exhibit 4(u) to the Annual Report
              on Form 20-F for the year 2000, filed on June 28, 2001 (the "2000
              20-F")).

        (v)   Service Agreement dated as of August 1, 2002 between ASE
              Electronics (M) Sdn. Bhd. and ASE (U.S.) Inc. (incorporated by
              reference to Exhibit 10.21 to the Form F-3 filed on March 31,
              2003).

        (w)   Service Agreement dated as of August 1, 2002 between ASE Test
              Inc. and ASE (U.S.) Inc. (incorporated by reference to Exhibit
              10.22 to the Form F-3 filed on March 31, 2003).

        (x)   Service Agreement dated as of August 1, 2002 between ASE (Korea)
              Inc. and ASE (U.S.) Inc. (incorporated by reference to Exhibit
              10.23 to the Form F-3 filed on March 31, 2003).

        (y)   Service Agreement dated as of August 1, 2002 between ASE
              (Chung-Li) Inc. and ASE (U.S.) Inc. (incorporated by reference to
              Exhibit 10.24 to the Form F-3 filed on March 31, 2003).

        (z)   Service Agreement dated as of August 1, 2002 between Advanced
              Semiconductor Engineering, Inc. and ASE (U.S.) Inc. (incorporated
              by reference to Exhibit 10.25 to the Form F-3 filed on March 31,
              2003).

        (aa)  Commission Agreement dated as of August 1, 2002 between ASE
              Electronics (M) Sdn. Bhd. and Gardex International Limited.
              (incorporated by reference to Exhibit 10.26 to the Form F-3 filed
              on March 31, 2003).

        (bb)  Commission Agreement dated as of August 1, 2002 between ASE Test
              Inc. and Gardex International Limited. (incorporated by reference
              to Exhibit 10.27 to the Form F-3 filed on March 31, 2003).

        (cc)  Commission Agreement dated as of August 1, 2002 between ASE
              (Korea) Inc. and Gardex International Limited. (incorporated by
              reference to Exhibit 10.28 to the Form F-3 filed on March 31,
              2003).

        (dd)  Commission Agreement dated as of August 1, 2002 between ASE
              (Chung Li) Inc. and Gardex International Limited. (incorporated
              by reference to Exhibit 10.29 to the Form F-3 filed on March 31,
              2003).

        (ee)  Commission Agreement dated as of August 1, 2002 between Advanced
              Semiconductor Engineering, Inc. and Gardex International Limited.
              (incorporated by reference to Exhibit 10.30 to the Form F-3 filed
              on March 31, 2003).

        (ff)  Land Lease effective July 1, 2000 until June 30, 2010 between ASE
              Inc. and the Nantze Export Processing Zone. (incorporated by
              reference to Exhibit 4(ff) to the 2000 20-F).

        (gg)  Land Lease effective July 1, 2000 until June 30, 2010 between ASE
              Inc. and the Nantze Export Processing Zone. (incorporated by
              reference to Exhibit 4(ff) to the 2000 20-F).

        (hh)  Land Lease effective October 1, 2000 until September 30, 2010
              between ASE Inc. and the Nantze Export Processing Zon0e.
              (incorporated by reference to Exhibit 4(hh) to the 2000 20-F).

        (ii)  Land Lease effective March 16, 2001 until March 15, 2011 between
              ASE Inc. and the Nantze Export Processing Zone. (incorporated by
              reference to Exhibit 4(ii) to the 2000 20-F).

        (jj)  Land Lease effective March 1, 2001 until February 28, 2011
              between ASE Inc. and the Nantze Export Processing Zone.
              (incorporated by reference to Exhibit 4(jj) to the 2000 20-F).

        (kk)  First Amendment to Lease Agreement dated June 7, 2000 between ISE
              Labs, Inc. and RND Funding Company, Inc. (incorporated by
              reference to Exhibit 4(kk) to the 2000 20-F).


                                       85


<PAGE>


        (ll)  Sub-lease Agreement dated October 3, 2000 between ISE Labs
              Singapore Pte Ltd and Wan Tien Realty (Pte) Ltd. (incorporated by
              reference to Exhibit 4(ll) to the 2000 20-F).

        (mm)  Sub-lease Agreement dated June 3, 1999 between ISE Labs Singapore
              Pte Ltd and Wan Tien Realty (Pte) Ltd. (incorporated by reference
              to Exhibit 4(mm) to the 2000 20-F).

        (nn)  Sublease Agreement dated June 2000 between ISE Labs, Inc. and
              Cirrus Logic, Inc. (incorporated by reference to Exhibit 4(nn) to
              the 2000 20-F).

        (oo)  Sublease Agreement dated June 2000 between ISE Labs, Inc. and
              Cirrus Logic, Inc. (incorporated by reference to Exhibit 4(oo) to
              the 2000 20-F).

        (pp)  Tenancy Agreement dated April 1, 1999 between ISE Labs (HK)
              Limited and Hing Seng Plastic Factory Limited. (incorporated by
              reference to Exhibit 4(pp) to the 2000 20-F).

        (qq)  Lease dated September 28, 2000 between ISE Labs Hong Kong Limited
              and Shinano Kenshi (HK) Co., Ltd. (incorporated by reference to
              Exhibit 4(qq) to the 2000 20-F).

        (rr)  Lease dated October 20, 2000 between ISE Labs Hong Kong and Bless
              Silver Development Limited. (incorporated by reference to Exhibit
              4(rr) to the 2000 20-F).

        (ss)  Lease Agreement between ASE Test Malaysia and Penang Development
              Corporation (incorporated by reference to Exhibit 2(c) to ASE
              Test Limited's annual report on Form 20-F for the year ended
              December 31, 1997). (incorporated by reference to Exhibit 4(ss)
              to the 2000 20-F).

        (tt)  Sale and Purchase Agreement between Afasia Knitting Factory
              (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd. dated
              February 24, 1997. (incorporated by reference to Exhibit 4(tt) to
              the 2000 20-F).

        (uu)  Office Building Lease Agreement between ISE Labs, Inc. and
              JER/BRE Austin Tech L.P. dated October 4, 2001. (incorporated by
              reference to Exhibit 10.46 to the Form F-3 filed on May 30,
              2002).

        (vv)  Plant Lease Agreement between ASE (Chung Li) Inc. and ASE
              Material Inc. dated October 31, 2001.

        (ww)  Plant Lease Agreement between ASE (Chung Li) Inc. and ASE
              Material Inc. dated October 31, 2001.

        (xx)  Plant Lease Agreement between ASE (Chung Li) Inc. and ASE Test
              Inc. dated October 5, 2001.

        (iii) ASE Inc. Employee Bonus Plan in (Chinese with English language
              translation) (incorporated by reference to Exhibit 4(iii) to the
              Annual Report on Form 20-F for the year 2001, filed on June 28,
              2002).

        (iv)  2002 ASE Employee Stock Option Plan (in Chinese with English
              language translation) (incorporated by reference to Exhibit 10.50
              to the Form F-3 filed on March 31, 2003.

8.      List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the
        Form F-3 filed on May 30, 2002).

12.     (a)   Co-Building and Sale Agreement dated as of January 27, 2000
              between ASE (Chung Li) Inc. and Hung Ching Development &
              Construction Co. Ltd. (in Chinese with English language summary
              translation) (incorporated by reference to Exhibit 99.1 to the
              Form F-3 filed on May 27, 2003).

        (b)   Co-Building Agreement dated as of April 17, 2003 between ASE Inc.
              and Hung Ching Development & Construction Co. Ltd. (in Chinese
              with English language summary translation) (incorporated by
              reference to Exhibit 99.2 to the Form F-3 filed on May 27, 2003).

        (c)   Certification of the Chief Executive Officer and the Chief
              Financial Officer of Advanced Semiconductor Engineering, Inc. for
              the purpose of complying with Section 1350 of Chapter 63 of Title
              18 of the United States Code.


                                       86


<PAGE>


--------------------
+ Does not contain portions for which confidential treatment has been granted.

     The Company agrees to furnish to the Securities and Exchange Commission
upon request a copy of any instrument which defines the rights of holders of
long-term debt of the Company and its consolidated subsidiaries.


                                       87


<PAGE>


                         INDEX TO FINANCIAL STATEMENTS


                                                                           Page
                                                                          ------
Consolidated Financial Statements of Advanced Semiconductor
   Engineering, Inc. and Subsidiaries
     Independent Auditors' Report.......................................    F-2
     Consolidated Balance Sheets........................................    F-3
     Consolidated Statements of Income..................................    F-5
     Consolidated Statements of Changes in Shareholders' Equity.........    F-8
     Consolidated Statements of Cash Flows..............................   F-11
     Notes to Consolidated Financial Statement..........................   F-13



                                      F-1


<PAGE>


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Advanced Semiconductor Engineering, Inc.

     We have audited the accompanying consolidated balance sheets of Advanced
Semiconductor Engineering, Inc., a corporation incorporated under the laws of
the Republic of China, and its consolidated subsidiaries (the "Company") as of
December 31, 2001 and 2002, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the years in the
three year period ended December 31, 2002, all prepared in accordance with
accounting principles generally accepted in the Republic of China and expressed
in New Taiwan dollars. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with Regulations for Audit of
Financial Statements by Certified Public Accountants and auditing standards
generally accepted in the Republic of China and the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company as of December 31, 2001 and 2002, and the consolidated results
of their operations and their cash flows for each of the years in the three
year period ended December 31, 2002, in conformity with accounting principles
generally accepted in the Republic of China.

     As disclosed in Note 3 to the consolidated financial statements, on
January 1, 2002, the Company adopted Republic of China Statement of Financial
Accounting Standards No. 30, "Accounting for Treasury Stock".

     Accounting principles generally accepted in the Republic of China vary in
certain significant respects from accounting principles generally accepted in
the United States of America. The application of the latter would have affected
the determination of net income for each of the three years in the period ended
December 31, 2002, and the determination of shareholders' equity and financial
position at December 31, 2001 and 2002, to the extent summarized in Note 26.

     As discussed in Note 26 to the consolidated financial statements, the
Company changed its method of accounting for goodwill and other intangible
assets to conform to US Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" effective January 1, 2002.

T.N. Soong & Co.
(Associate Member Firm of Deloitte Touche Tohmatsu Effective April 22, 2002)
(Formerly a Member Firm of Andersen Worldwide, SC)
Taipei, Taiwan
Republic of China

February 11, 2003


                                      F-2


<PAGE>


<TABLE>
                          ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                                         CONSOLIDATED BALANCE SHEETS
                                      (In Thousands, Except Share Data)

                                                                                     December 31,
                                                                   ---------------------------------------------
                                                                      2001                       2002
                                                                   ----------        ---------------------------
                                                                       NT$               NT$              US$
<S>                                                                <C>               <C>                 <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 2)......................           11,770,729        10,381,924          299,191
Short-term investments (Notes 2 and 4)..................            4,601,172         2,038,020           58,733
Notes receivable........................................              105,185           112,667            3,247
Accounts receivable--net (Note 5)........................           7,020,964         8,885,879          256,077
Inventories (Notes 2 and 6).............................            2,768,436         3,131,652           90,249
Deferred income tax assets--net (Notes 2 and 18).........             873,008         1,084,441           31,252
Pledged time deposit (Note 20)..........................              140,949           428,743           12,355
Prepayments and other...................................              801,161           968,433           27,909
Sinking fund (Note 13)..................................            1,568,057                --               --
                                                                  -----------       -----------        ---------
Total current assets....................................           29,649,661        27,031,759          779,013
                                                                  -----------       -----------        ---------
LONG-TERM INVESTMENTS (Notes 2, 3, 7, 10 and 20)........            9,530,398         6,566,734          189,243
PROPERTIES (Notes 2, 8, 14 and 20)
Cost
   Land and land improvements...........................            3,877,876         3,870,967          111,555
   Buildings and improvements...........................           14,640,855        16,656,394          480,011
   Machinery and equipment..............................           66,986,146        72,203,572        2,080,795
   Transportation equipment.............................              107,927           104,225            3,004
   Furniture and fixtures...............................            1,387,583         1,579,785           45,527
   Leased assets and leasehold improvements.............              584,163           855,487           24,654
   Long-term land leasehold rights......................               62,600            62,206            1,793
                                                                  -----------       -----------        ---------
   Total cost...........................................           87,647,150        95,332,636        2,747,339
Accumulated depreciation................................          (31,751,538)      (39,709,319)      (1,144,361)
                                                                  -----------       -----------        ---------
                                                                   55,895,612        55,623,317        1,602,978
Construction in progress................................            1,728,587         1,683,387           48,512
Machinery in transit and prepayments....................            2,930,886         5,782,166          166,633
                                                                  -----------       -----------        ---------
Net properties..........................................           60,555,085        63,088,870        1,818,123
                                                                  -----------       -----------        ---------
OTHER ASSETS (Notes 2, 9 and 20)........................            1,342,269         2,640,187           76,086
                                                                  -----------       -----------        ---------
CONSOLIDATED DEBITS (Notes 2 and 10)....................            5,248,919         5,541,808          159,706
                                                                  -----------       -----------        ---------
TOTAL ASSETS............................................          106,326,332       104,869,358        3,022,171
                                                                  ===========       ===========        =========
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-3


<PAGE>



<TABLE>
                          ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                                  CONSOLIDATED BALANCE SHEETS - (Continued)
                                      (In Thousands, Except Share Data)

                                                                                     December 31,
                                                                   ---------------------------------------------
                                                                      2001                       2002
                                                                   ----------        ---------------------------
                                                                       NT$               NT$              US$
<S>                                                                <C>               <C>               <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes 10 and 20).......................      3,456,149          3,903,994         112,507
Commercial paper and bank acceptances payable (Note 12).......      3,444,314          2,384,577          68,720
Accounts and notes payable....................................      2,968,779          4,047,171         116,633
Payable for fixed assets......................................      1,928,469          4,494,828         129,534
Income tax payable............................................        244,618            172,453           4,970
Current portion of long-term bonds payable (Note 13)..........      3,090,345                 --              --
Current portion of long-term debts (Notes 14 and 20)..........      3,175,883          6,202,423         178,744
Current portion of long-term payable for investments (Note 25)        816,433            962,758          27,745
Accrued expenses..............................................      1,631,642          1,839,423          53,009
Other.........................................................        512,295            382,349          11,019
                                                                  -----------        -----------       ---------
Total current liabilities.....................................     21,268,927         24,389,976         702,881
LONG-TERM BONDS PAYABLE (Note 13).............................      4,778,291          5,179,793         149,273
LONG-TERM DEBTS (Notes 14 and 20).............................     23,101,135         23,009,563         663,100
LONG-TERM PAYABLE FOR INVESTMENTS (Note 25)...................      2,794,861          2,364,360          68,137
ACCRUED PENSION COST (Notes 2 and 15).........................        294,438            416,671          12,008
                                                                  -----------        -----------       ---------
Total liabilities.............................................     52,237,652         55,360,363       1,595,399
                                                                  -----------        -----------       ---------
COMMITMENTS AND CONTINGENCIES (Note 21)
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES................     12,142,359         10,078,329         290,441
                                                                  -----------        -----------       ---------
SHAREHOLDERS' EQUITY (Notes 2, 3 and 16)
Capital stock--NT$10 par values...............................     32,548,000         32,548,000         937,983
                                                                  -----------        -----------       ---------
   Authorized--4,150,000,000 shares in 2001 and 4,550,000,000
     shares in 2002
   Issued--3,254,800,000 shares in 2001 and 2002
Capital surplus
   Capital in excess of par value.............................      3,171,933          3,171,933          91,410
   Net gain on disposal of properties.........................         23,109                 --              --
   Adjustment of equity in subsidiary due to change in
     percentage of ownership..................................      3,656,472          3,753,594         108,173
                                                                  -----------        -----------       ---------
   Total capital surplus......................................      6,851,514          6,925,527         199,583
                                                                  -----------        -----------       ---------
Retained earnings.............................................      1,015,654          1,173,564          33,821
                                                                  -----------        -----------       ---------
Unrealized loss on long-term investments in shares of stock...       (442,246)          (423,620)        (12,208)
                                                                  -----------        -----------       ---------
Cumulative translation adjustments ...........................      1,973,399          1,847,021          53,228
                                                                  -----------        -----------       ---------
Treasury stock................................................             --         (2,639,826)        (76,076)
                                                                  -----------        -----------       ---------
Total shareholders' equity....................................     41,946,321         39,430,666       1,136,331
                                                                  -----------        -----------       ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....................    106,326,332        104,869,358       3,022,171
                                                                  ===========        ===========       =========
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-4


<PAGE>


<TABLE>
                          ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                                      CONSOLIDATED STATEMENTS OF INCOME)
                                  (In Thousands, Except Share and ADS Data)

                                                                               Year Ended December 31,
                                                            -------------------------------------------------------------
                                                               2000             2001                      2002
                                                            ----------       ----------       ---------------------------
                                                              NT$              NT$              NT$              US$
<S>                                                         <C>              <C>              <C>               <C>
NET REVENUES (Note 24)
Packaging..........................................         38,028,799       28,898,185       35,515,397        1,023,498
Testing............................................         12,768,361        9,459,275       10,060,635          289,932
Other..............................................             96,217           10,366           10,806              311
                                                            ----------       ----------       ----------        ---------
Subtotal...........................................         50,893,377       38,367,826       45,586,838        1,313,741
                                                            ----------       ----------       ----------        ---------
COST OF REVENUES
Packaging..........................................         28,011,934       24,272,336       29,260,015          843,228
Testing............................................          7,473,964        8,676,475        9,219,424          265,689
Other..............................................             81,380            8,203           12,831              370
                                                            ----------       ----------       ----------        ---------
Subtotal...........................................         35,567,278       32,957,014       38,492,270        1,109,287
                                                            ----------       ----------       ----------        ---------
GROSS PROFIT.......................................         15,326,099        5,410,812        7,094,568          204,454
                                                            ----------       ----------       ----------        ---------
OPERATING EXPENSES
Selling............................................          1,020,451          877,858          909,439           26,208
General and administrative (Notes 8 and 10)........          3,166,006        3,490,507        4,821,385          138,945
Research and development...........................          1,262,516        1,504,536        2,048,973           59,048
                                                            ----------       ----------       ----------        ---------
Total operating expenses...........................          5,448,973        5,872,901        7,779,797          224,201
                                                            ----------       ----------       ----------        ---------
INCOME (LOSS) FROM OPERATIONS......................          9,877,126         (462,089)        (685,229)         (19,747)
                                                            ----------       ----------       ----------        ---------
NON-OPERATING INCOME
Interest (Notes 2, 8, and 22)......................            554,180          503,603          392,593           11,314
Gain on sales of investments.......................             91,666           50,666               --               --
Investment income under equity method (Notes 2
   and 7)..........................................             69,915               --               --               --
Foreign exchange gain--net (Notes 2 and 22)........            302,745          247,498               --               --
Other..............................................            198,518          466,787          582,840           16,796
                                                            ----------       ----------       ----------        ---------
Total non-operating income.........................          1,217,024        1,268,554          975,433           28,110
                                                            ----------       ----------       ----------        ---------
NON-OPERATING EXPENSES
Interest (Notes 2, 8 and 22).......................          2,092,238        2,242,879        1,971,227           56,808
Investment loss under equity method (Notes 2 and 7)            237,152        1,246,836          410,348           11,826
Foreign exchange loss--net (Notes 2 and 22)........                 --               --          397,874           11,466
Other..............................................            361,200          302,249          220,460            6,353
                                                            ----------       ----------       ----------        ---------
Total non-operating expenses.......................          2,690,590        3,791,964        2,999,909           86,453
                                                            ----------       ----------       ----------        ---------
INCOME (LOSS) BEFORE INCOME TAX AND MINORITY
   INTEREST AND EXTRAORDINARY LOSS.................          8,403,560       (2,985,499)      (2,709,705)         (78,090)
INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 18)......         (1,065,768)         199,160        1,140,324           32,863
                                                            ----------       ----------       ----------        ---------
INCOME (LOSS) BEFORE MINORITY INTEREST AND
   EXTRAORDINARY LOSS..............................          7,337,792       (2,786,339)      (1,569,381)         (45,227)
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-5


<PAGE>


<TABLE>
                          ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                               CONSOLIDATED STATEMENTS OF INCOME - (Continued)
                                  (In Thousands, Except Share and ADS Data)

                                                                               Year Ended December 31,
                                                         ------------------------------------------------------------------
                                                             2000             2001                      2002
                                                         ----------       ----------       --------------------------------
                                                              NT$              NT$              NT$              US$
<S>                                                         <C>              <C>              <C>               <C>
EXTRAORDINARY LOSS (net of tax benefit of
   $48,188 in 2001 and $11,538 (US$333) in
   2002) (Note 13)..............................                   --          (144,565)          (34,613)             (997)
MINORITY INTEREST IN NET (INCOME) LOSS OF
   SUBSIDIARIES.................................           (1,500,643)          788,685         1,733,029            49,943
                                                            ---------        ----------           -------             -----
NET INCOME (LOSS)...............................            5,837,149        (2,142,219)          129,035             3,719
                                                            =========        ==========           =======             =====
EARNINGS (LOSS) PER SHARE (Notes 2
   and 19)
Based on weighted average number of outstanding
   shares of 3,090,678,225 in 2002,
   3,254,800,000 in 2001 and 2,677,602,508
   in 2000
   Basic
      Before income tax
      Income (Loss) before extraordinary loss...                2.59            (0.71)            (0.26)              (0.01)
      Extraordinary loss........................                  --            (0.06)            (0.01)              (0.00)
                                                            ---------        ----------           -------             -----
      Net income (loss).........................                2.59            (0.73)            (0.27)              (0.01)
                                                            =========        ==========           =======             =====
      After income tax
      Income (Loss) before extraordinary loss...                2.18            (0.61)             0.05                0.00
      Extraordinary loss........................                  --            (0.05)            (0.01)              (0.00)
                                                            ---------        ----------           -------             -----
      Net income (loss).........................                2.18            (0.66)             0.04                0.00
                                                            =========        ==========           =======             =====
   Diluted
      Before income tax
      Income (Loss) before extraordinary loss...                2.54            (0.71)            (0.26)              (0.01)
      Extraordinary loss........................                  --            (0.06)            (0.01)              (0.00)
                                                            ---------        ----------           -------             -----
      Net income (loss).........................                2.54            (0.77)            (0.27)              (0.01)
                                                            =========        ==========           =======             =====
      After income tax
      Income (Loss) before extraordinary loss...                2.13            (0.61)             0.05                0.00
      Extraordinary loss........................                  --            (0.05)            (0.01)              (0.00)
                                                            ---------        ----------           -------             -----
      Net income (loss).........................                2.13            (0.66)             0.04                0.00
                                                            =========        ==========           =======             =====
Based on weighted average number of outstanding
   shares after giving retroactive
   adjustment to 2001 stock dividends Basic
      Before income tax.........................                2.21
      After income tax..........................                1.84
   Diluted
      Before income tax.........................                2.17
      After income tax..........................                1.80
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-6


<PAGE>


<TABLE>
                          ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                               CONSOLIDATED STATEMENTS OF INCOME - (Continued)
                                  (In Thousands, Except Share and ADS Data)

                                                                               Year Ended December 31,
                                                            -------------------------------------------------------------
                                                               2000             2001                      2002
                                                            ----------       ----------       ---------------------------
                                                              NT$              NT$              NT$              US$
<S>                                                         <C>              <C>              <C>               <C>
EARNINGS (LOSS) PER EQUIVALENT ADS (Notes 2
   and 19)
Based on weighted average number of outstanding
   shares of 618,135,645 in 2002,
   650,960,000 in 2001 and 535,520,502 in 2000
   Basic
      Before income tax
      Income (loss) before extraordinary loss.........      12.95            (3.54)           (1.29)           (0.04)
      Extraordinary loss..............................      --               (0.30)           (0.07)           (0.00)
                                                            -----            -----            -----            -----
      Net income (loss)...............................      12.95            (3.84)           (1.36)           (0.04)
                                                            =====            =====            =====            =====
      After income tax
      Income (loss) before extraordinary loss.........      10.90            (3.07)            0.26             0.01
      Extraordinary loss..............................      --               (0.22)           (0.05)           (0.00)
                                                            -----            -----            -----            -----
      Net income (loss)...............................      10.90            (3.29)            0.21             0.01
                                                            =====            =====             ====             ====
   Diluted
      Before income tax
      Income (loss) before extraordinary loss.........      12.70            (3.54)           (1.29)           (0.04)
      Extraordinary loss..............................      --               (0.30)           (0.07)           (0.00)
                                                            -----            -----            -----            -----
      Net income (loss)...............................      12.64            (3.67)           (1.65)           (0.04)
                                                            =====            =====            =====            =====
      After income tax
      Income (loss) before extraordinary loss.........      10.65            (3.07)            0.26             0.01
      Extraordinary loss..............................      --               (0.22)           (0.05)           (0.00)
                                                            -----            -----            -----            -----
      Net income (loss)...............................      10.65            (3.29)            0.21             0.01
                                                            =====            =====             ====             ====
Based on weighted average number of outstanding
   shares after giving retroactive adjustment
   to 2001 stock dividends
   Basic
      Before income tax...............................      11.05
      After income tax................................       9.22
   Diluted
      Before income tax...............................      10.85
      After income tax................................       9.01
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-7
<PAGE>

<TABLE>
                               ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                               CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                     (In Thousands)

                                                                       Capital Stock
                                                        ---------------------------------------------
                                                                          Issued and Outstanding
                                                                        -----------------------------
                                                         Authorized
                                                           Shares           Shares          Amount      Capital Surplus
                                                        -------------   -------------   -------------   ---------------
                                                                                               NT$               NT$
<S>                                                     <C>             <C>                <C>                 <C>
BALANCE, January 1, 2000 ............................   2,400,000,000   1,980,000,000      19,800,000          683,674
Convertible bonds converted into common shares ......              --         355,086           3,551           32,102
Increase in authorized capital, July 11, 2000 .......     800,000,000              --              --               --
Appropriations of 1999 earnings (Note 16)
    Legal reserve ...................................              --              --              --               --
    Compensation to directors and supervisors .......              --              --              --               --
    Bonus to employees--cash ........................              --              --              --               --
    Bonus to employees--stock .......................              --      47,833,062         478,331               --
    Stock dividends--31.5% ..........................              --     623,811,852       6,238,118               --
Capital increase in cash through the issuance of
    American Depositary Shares--September 29 ........              --     100,000,000       1,000,000        3,137,910
Transfer of subsidiary's net gain on disposal of
    properties ......................................              --              --              --            9,470
Adjustment of equity in subsidiary due to change
    in percentage of ownership ......................              --              --              --        3,405,909
Unrealized loss on long-term investment in shares
    of stock ........................................              --              --              --               --
Consolidated net income in 2000 .....................              --              --              --               --
Transfer of net gain on disposal of properties ......              --              --              --            1,760
Cumulative translation adjustments (Note 2) .........              --              --              --               --
                                                        -------------   -------------   -------------    -------------
BALANCE, DECEMBER 31, 2000 ..........................   3,200,000,000   2,752,000,000      27,520,000        7,270,825
Increase in authorized capital, April 6, 2001 .......     950,000,000              --              --               --
Appropriations of 2000 earnings (Note 16)
    Legal reserve ...................................              --              --              --               --
    Compensation to directors and supervisors .......              --              --              --               --
    Bonus to employees--cash ........................              --              --              --               --
    Bonus to employees--stock .......................              --      34,960,000         349,600               --
    Stock dividends--17% ............................              --     467,840,000       4,678,400               --


<CAPTION>
                                                                      Retained Earnings
                                                       -----------------------------------------------
                                                                       Unappropriated                    Unrealized Loss
                                                                          Earnings                        on Long-term
                                                                        (Accumulated                      Investment in
                                                       Legal Reserve       Losses)           Total        Shares of Stock
                                                       ---------------  -------------    -------------    -------------
                                                              NT$              NT$              NT$              NT$
<S>                                                         <C>              <C>              <C>               <C>
BALANCE, January 1, 2000 ............................       1,549,784        7,693,562        9,243,346               --
Convertible bonds converted into common shares ......              --               --               --               --
Increase in authorized capital, July 11, 2000 .......              --               --               --               --
Appropriations of 1999 earnings (Note 16)
    Legal reserve ...................................         779,393         (779,393)              --               --
    Compensation to directors and supervisors .......              --         (139,200)        (139,200)              --
    Bonus to employees--cash ........................              --          (12,669)         (12,669)              --
    Bonus to employees--stock .......................              --         (478,331)        (478,331)              --
    Stock dividends--31.5% ..........................              --       (6,238,118)      (6,238,118)              --
Capital increase in cash through the issuance of
    American Depositary Shares--September 29 ........              --               --               --               --
Transfer of subsidiary's net gain on disposal of
    properties ......................................              --           (9,470)          (9,470)              --
Adjustment of equity in subsidiary due to change
    in percentage of ownership ......................              --               --               --               --
Unrealized loss on long-term investment in shares
    of stock ........................................              --               --               --         (546,829)
Consolidated net income in 2000 .....................              --        5,837,149        5,837,149               --
Transfer of net gain on disposal of properties ......              --           (1,760)          (1,760)              --
Cumulative translation adjustments (Note 2) .........              --               --               --               --
                                                        -------------    -------------    -------------    -------------
BALANCE, DECEMBER 31, 2000 ..........................       2,329,177        5,871,770        8,200,947         (546,829)
Increase in authorized capital, April 6, 2001 .......              --               --               --               --
Appropriations of 2000 earnings (Note 16)
    Legal reserve ...................................         583,539         (583,539)              --               --
    Compensation to directors and supervisors .......              --         (103,200)        (103,200)              --
    Bonus to employees--cash ........................              --          (10,400)         (10,400)              --
    Bonus to employees--stock .......................              --         (349,600)        (349,600)              --
    Stock dividends--17% ............................              --       (4,678,400)      (4,678,400)              --


<CAPTION>
                                                        Cumulative
                                                       Translation                            Total
                                                        Adjustments                      Shareholders'
                                                          (Note 2)      Treasury Stock       Equity
                                                       --------------   -------------    -------------
                                                              NT$               NT$            NT$
<S>                                                        <C>                     <C>      <C>
BALANCE, January 1, 2000 ............................        330,016               --       30,057,036
Convertible bonds converted into common shares ......             --               --           35,653
Increase in authorized capital, July 11, 2000 .......             --               --               --
Appropriations of 1999 earnings (Note 16)
    Legal reserve ...................................             --               --               --
    Compensation to directors and supervisors .......             --               --         (139,200)
    Bonus to employees--cash ........................             --               --          (12,669)
    Bonus to employees--stock .......................             --               --               --
    Stock dividends--31.5% ..........................             --               --               --
Capital increase in cash through the issuance of
    American Depositary Shares--September 29 ........             --               --        4,137,910
Transfer of subsidiary's net gain on disposal of
    properties ......................................             --               --               --
Adjustment of equity in subsidiary due to change
    in percentage of ownership ......................             --               --        3,405,909
Unrealized loss on long-term investment in shares
    of stock ........................................             --               --         (546,829)
Consolidated net income in 2000 .....................             --               --        5,837,149
Transfer of net gain on disposal of properties ......             --               --               --
Cumulative translation adjustments (Note 2) .........        894,255               --          894,255
                                                       -------------    -------------    -------------
BALANCE, DECEMBER 31, 2000 ..........................      1,224,271               --       43,669,214
Increase in authorized capital, April 6, 2001 .......             --               --               --
Appropriations of 2000 earnings (Note 16)
    Legal reserve ...................................             --               --               --
    Compensation to directors and supervisors .......             --               --         (103,200)
    Bonus to employees--cash ........................             --               --          (10,400)
    Bonus to employees--stock .......................             --               --               --
    Stock dividends--17% ............................             --               --               --
</TABLE>


The accompanying notes are an integral part of the financial statements.

                                      F-8


<PAGE>

<TABLE>
                               ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - (Continued)
                                                     (In Thousands)

                                                                       Capital Stock
                                                        ---------------------------------------------
                                                                          Issued and Outstanding
                                                                        -----------------------------
                                                         Authorized
                                                           Shares           Shares          Amount      Capital Surplus
                                                        -------------   -------------   -------------   ---------------
                                                                                               NT$               NT$
<S>                                                     <C>             <C>                <C>                 <C>
Adjustment of equity in subsidiary due to change in
percentage of ownership .............................              --              --              --         (419,311)
Reversal of unrealized loss on long-term investment
in shares of stock ..................................              --              --              --               --
Consolidated net loss in 2001 .......................              --              --              --               --
Cumulative translation adjustments (Note 2) .........              --              --              --               --
                                                        -------------   -------------   -------------    -------------
BALANCE, DECEMBER 31, 2001 ..........................   4,150,000,000   3,254,800,000      32,548,000        6,851,514
Increase in authorized capital, June 21, 2002 .......     400,000,000              --              --               --
Transfer of ASE Inc. shares held by subsidiaries as
treasury stock ......................................              --              --              --               --
Reversal of prior years' gain on disposal of
properties ..........................................              --              --              --          (23,109)
Legal reserve offset against deficit ................              --              --              --               --
Reversal of unrealized loss on long-term investment
in share of stock ...................................              --              --              --               --
Adjustment of equity in subsidiary due to change in
percentage of ownership .............................              --              --              --          104,474
Adjustment of equity in subsidiary due to reversal of
prior years' gain on disposal of properties .........              --              --              --           (7,352)
Consolidated net income in 2002 .....................              --              --              --               --
Cumulative translation adjustments (Note 2) .........              --              --              --               --
                                                        -------------   -------------   -------------    -------------
BALANCE, DECEMBER 31, 2002 ..........................   4,550,000,000   3,254,800,000      32,548,000        6,925,527
                                                        =============   =============   =============    =============


<CAPTION>
                                                                      Retained Earnings
                                                       -----------------------------------------------
                                                                       Unappropriated                    Unrealized Loss
                                                                          Earnings                        on Long-term
                                                                        (Accumulated                      Investment in
                                                       Legal Reserve       Losses)           Total        Shares of Stock
                                                       ---------------  -------------    -------------    -------------
                                                              NT$              NT$              NT$              NT$
<S>                                                         <C>                <C>            <C>               <C>
Adjustment of equity in subsidiary due to change in
percentage of ownership .............................              --           98,526           98,526               --
Reversal of unrealized loss on long-term investment
in shares of stock ..................................              --               --               --          104,583
Consolidated net loss in 2001 .......................              --       (2,142,219)      (2,142,219)              --
Cumulative translation adjustments (Note 2) .........              --               --               --               --
                                                        -------------    -------------    -------------    -------------
BALANCE, DECEMBER 31, 2001 ..........................       2,912,716       (1,897,062)       1,015,654         (442,246)
Increase in authorized capital, June 21, 2002 .......              --               --               --               --
Transfer of ASE Inc. shares held by subsidiaries as
treasury stock ......................................              --               --               --               --
Reversal of prior years' gain on disposal of
properties ..........................................           2,310           20,799           23,109               --
Legal reserve offset against deficit ................      (1,876,264)       1,876,264               --               --
Reversal of unrealized loss on long-term investment
in share of stock ...................................              --               --               --           18,626
Adjustment of equity in subsidiary due to change in
percentage of ownership .............................              --           (1,586)          (1,586)              --
Adjustment of equity in subsidiary due to reversal of
prior years' gain on disposal of properties .........              --            7,352            7,352               --
Consolidated net income in 2002 .....................              --          129,035          129,035               --
Cumulative translation adjustments (Note 2) .........              --               --               --               --
                                                        -------------    -------------    -------------    -------------
BALANCE, DECEMBER 31, 2002 ..........................       1,038,762          134,802        1,173,564         (423,620)
                                                        =============    =============    =============    =============


<CAPTION>
                                                        Cumulative
                                                       Translation                            Total
                                                        Adjustments                      Shareholders'
                                                          (Note 2)      Treasury Stock       Equity
                                                       --------------   -------------    -------------
                                                              NT$               NT$            NT$
<S>                                                        <C>              <C>             <C>
Adjustment of equity in subsidiary due to change in
percentage of ownership .............................              --               --         (320,785)
Reversal of unrealized loss on long-term investment
in shares of stock ..................................              --               --          104,583
Consolidated net loss in 2001 .......................              --               --       (2,142,219)
Cumulative translation adjustments (Note 2) .........         749,128               --          749,128
                                                        -------------    -------------    -------------
BALANCE, DECEMBER 31, 2001 ..........................       1,973,399               --       41,946,321
Increase in authorized capital, June 21, 2002 .......              --               --               --
Transfer of ASE Inc. shares held by subsidiaries as
treasury stock ......................................              --       (2,639,826)      (2,639,826)
Reversal of prior years' gain on disposal of
properties ..........................................              --               --               --
Legal reserve offset against deficit ................              --               --               --
Reversal of unrealized loss on long-term investment
in share of stock ...................................              --               --           18,626
Adjustment of equity in subsidiary due to change in
percentage of ownership .............................              --               --          102,888
Adjustment of equity in subsidiary due to reversal of
prior years' gain on disposal of properties .........              --               --               --
Consolidated net income in 2002 .....................              --               --          129,035
Cumulative translation adjustments (Note 2) .........        (126,378)              --         (126,378)
                                                        -------------    -------------    -------------
BALANCE, DECEMBER 31, 2002 ..........................       1,847,021       (2,639,826)      39,430,666
                                                        =============    =============    =============

The accompanying notes are an integral part of the financial statements.
</TABLE>


                                      F-9
<PAGE>

<TABLE>
                               ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                               CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                     (In Thousands)

                                                                       Capital Stock
                                                        ---------------------------------------------
                                                                          Issued and Outstanding
                                                                        -----------------------------
                                                         Authorized
                                                           Shares           Shares          Amount      Capital Surplus
                                                        -------------   -------------   -------------   ---------------
                                                                                               NT$               NT$
<S>                                                     <C>             <C>                <C>                 <C>
BALANCE, JANUARY 1, 2002 ............................   4,150,000,000   3,254,800,000         937,983          197,450
Increase in authorized capital, June 21, 2002 .......     400,000,000              --              --               --
Transfer of ASE Inc. shares held by subsidiaries
    as treasury stock ...............................              --              --              --               --
Reversal of prior years' gain on disposal of
    properties ......................................              --              --              --             (666)
Legal reserve offset against deficit ................              --              --              --               --
Reversal of unrealized loss on long-term
    investment in share of stock ....................              --              --              --               --
Adjustment of equity in subsidiary due to change
    in percentage of ownership ......................              --              --              --            3,011
Adjustment of equity in subsidiary due to
    reversal of prior years' gain on disposal of
    properties ......................................              --              --              --             (212)
Consolidated net income in 2002 .....................              --              --              --               --
Cumulative translation adjustments (Note 2) .........              --              --              --               --
                                                        -------------   -------------   -------------    -------------
Balance, December 31, 2002 ..........................   4,550,000,000   3,254,800,000         937,983          199,583
                                                        =============   =============   =============    =============


<CAPTION>
                                                                      Retained Earnings
                                                       -----------------------------------------------
                                                                       Unappropriated                    Unrealized Loss
                                                                          Earnings                        on Long-term
                                                                        (Accumulated                      Investment in
                                                       Legal Reserve       Losses)           Total        Shares of Stock
                                                       ---------------  -------------    -------------    -------------
                                                              NT$              NT$              NT$              NT$
<S>                                                         <C>              <C>              <C>               <C>

BALANCE, JANUARY 1, 2002 ............................          83,940          (54,670)          29,270          (12,745)
Increase in authorized capital, June 21, 2002 .......              --               --               --               --
Transfer of ASE Inc. shares held by subsidiaries
    as treasury stock ...............................              --               --               --               --
Reversal of prior years' gain on disposal of
    properties ......................................              67              599              666               --
Legal reserve offset against deficit ................         (54,071)          54,071               --               --
Reversal of unrealized loss on long-term
    investment in share of stock ....................              --               --               --              537
Adjustment of equity in subsidiary due to change
    in percentage of ownership ......................              --              (46)             (46)              --
Adjustment of equity in subsidiary due to
    reversal of prior years' gain on disposal of
    properties ......................................              --              212              212               --
Consolidated net income in 2002 .....................              --            3,719            3,719               --
Cumulative translation adjustments (Note 2) .........              --               --               --               --
                                                        -------------    -------------    -------------    -------------
Balance, December 31, 2002 ..........................          29,936            3,885           33,821          (12,208)
                                                        =============    =============    =============    =============


<CAPTION>
                                                        Cumulative
                                                       Translation                            Total
                                                        Adjustments                      Shareholders'
                                                          (Note 2)      Treasury Stock       Equity
                                                       --------------   -------------    -------------
                                                              NT$               NT$            NT$
<S>                                                        <C>                     <C>      <C>
BALANCE, JANUARY 1, 2002 ............................          56,870               --        1,208,828
Increase in authorized capital, June 21, 2002 .......              --               --               --
Transfer of ASE Inc. shares held by subsidiaries
    as treasury stock ...............................              --          (76,076)         (76,076)
Reversal of prior years' gain on disposal of
    properties ......................................              --               --               --
Legal reserve offset against deficit ................              --               --               --
Reversal of unrealized loss on long-term
    investment in share of stock ....................              --               --              537
Adjustment of equity in subsidiary due to change
    in percentage of ownership ......................              --               --            2,965
Adjustment of equity in subsidiary due to
    reversal of prior years' gain on disposal of
    properties ......................................              --               --               --
Consolidated net income in 2002 .....................              --               --            3,719
Cumulative translation adjustments (Note 2) .........          (3,642)              --           (3,642)
                                                        -------------    -------------    -------------
Balance, December 31, 2002 ..........................          53,228          (76,076)       1,136,331
                                                        =============    =============    =============
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-10
<PAGE>

           ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
                                                                             Year Ended December 31,
                                                           --------------------------------------------------------
                                                               2000           2001                  2002
                                                           -----------    -----------    --------------------------
                                                               NT$             NT$            NT$             US$
<S>                                                         <C>            <C>            <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ......................................     5,837,149     (2,142,219)       129,035          3,719
Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
   Minority interest in net income (loss) of
     subsidiaries ......................................     1,500,643       (788,685)    (1,733,029)       (49,943)
   Depreciation ........................................     8,127,561     10,633,197     11,841,331        341,249
   Amortization ........................................       466,238        494,088        444,995         12,824
   Exchange (gain) loss on:
     Long-term foreign bonds payable ...................       628,058        640,171        (69,321)        (1,998)
     Long-term foreign investment payable ..............       170,351        223,599        (34,926)        (1,007)
   Accrued interest on convertible bonds ...............       812,931        872,575        576,437         16,612
   Provision for doubtful accounts and sales
     allowance .........................................       155,458         80,629         85,823          2,473
   Gain on sale of investments .........................       (91,666)       (50,666)      (101,314)        (2,920)
   Loss on early redemption of foreign convertible
     bonds .............................................            --        144,565         46,151          1,330
   Investment loss under equity method .................       167,237      1,246,836        410,348         11,826
   Cash dividends received from long-term stock
     investments .......................................            --         33,196             --             --
   Reversal of accrued interest from long-term
     investment payable ................................            --             --       (145,238)        (4,186)
   Impairment loss on fixed assets .....................            --             --      1,225,555         35,317
   Gain (loss) on disposal of properties ...............        19,298         26,884         15,668            452
   Provision for loss on long-term bonds investments ...       284,301         29,822             --             --
   Loss from idle assets ...............................            --        111,109         78,120          2,251
   Amortization of consolidated debits .................       559,807        692,919        815,573         23,504
   Deferred income taxes ...............................      (226,898)      (401,745)    (1,130,358)       (32,575)
   Other ...............................................       (16,441)        (3,251)            --             --
   Changes in operating assets and liabilities
     Notes receivable ..................................       (18,599)       114,456         (7,482)          (216)
     Accounts receivable ...............................    (1,933,977)     1,939,341     (1,950,738)       (56,217)
     Inventories .......................................      (796,636)       477,891       (363,216)       (10,467)
     Prepayments and other .............................      (486,108)       199,912       (231,154)        (6,661)
     Notes and accounts payable ........................       707,556       (891,130)     1,078,392         31,078
     Income tax payable ................................       642,539       (856,346)       (72,165)        (2,080)
     Accrued expenses and other ........................     1,574,097       (821,272)       217,222          6,260
     Accrued pension cost ..............................        59,236         46,013        122,233          3,523
Effect of exchange rate changes ........................      (682,197)      (473,515)        65,858          1,898
                                                           -----------    -----------    -----------    -----------
Net cash provided by (used in) operating activities ....    17,459,938     11,578,374     11,313,800        326,046
                                                           -----------    -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets ............................   (30,063,640)   (11,565,689)   (12,657,920)      (364,781)
(Increase) decrease in short-term investments ..........    (1,471,248)    (2,913,644)     2,664,466         76,786
Decrease (increase) in pledged time deposits ...........       158,351        128,837       (287,794)        (8,294)
Payments for long-term stock investments ...............    (2,026,047)      (216,444)       (49,716)        (1,433)
Increase in other assets ...............................      (787,246)      (214,772)      (831,279)       (23,956)
Proceeds from sales of:
   Properties ..........................................       697,126        685,776         77,142          2,223
   Bonds ...............................................            --        195,320             --             --
   Others ..............................................       100,666         51,639             --             --
Purchase of ASE Material Inc. shares ...................            --             --        (10,000)          (288)
Purchase of ASE Test Limited shares ....................            --     (1,202,185)      (317,004)        (9,136)
Purchase of ISE Labs, Inc. shares ......................            --             --     (1,755,133)       (50,580)
                                                           -----------    -----------    -----------    -----------
Net cash provided by (used in) investing activities ....   (33,392,038)   (15,051,162)   (13,167,238)      (379,459)
                                                           -----------    -----------    -----------    -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                     F-11
<PAGE>


           ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
                                 (In Thousands)

<TABLE>
                                                                                           Year Ended December 31,
                                                                          --------------------------------------------------------
                                                                              2000           2001                  2002
                                                                          -----------    -----------    --------------------------
                                                                               NT$            NT$            NT$            US$
<S>                                                                        <C>            <C>            <C>               <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayments of):
   Capital increase through the issuance of American
     Depositary Shares ................................................     4,151,300             --             --             --
   Long-term debts ....................................................     1,013,796      9,746,636      1,161,489         33,472
   Investment payable .................................................    (1,453,603)      (803,833)      (249,250)        (7,183)
   Commercial papers and bank acceptances payable .....................     2,578,212       (837,491)    (1,739,263)       (50,123)
Proceeds from short-term borrowings ...................................     1,614,950        944,148      2,375,322         68,453
Decrease in payable for fixed assets ..................................            --     (2,250,855)            --             --
Contribution to a sinking fund for convertible bonds ..................            --     (1,568,057)            --             --
Early redemption of foreign convertible bonds .........................            --     (6,066,042)    (1,674,053)       (48,244)
Increase in minority interest .........................................     9,854,500      1,552,601        656,246         18,912
Compensation to directors and supervisors and bonus
   to employees .......................................................      (151,869)      (113,600)            --             --
                                                                          -----------    -----------    -----------    -----------
Net cash provided by (used in) financing activities ...................    17,607,286        603,507        530,491         15,288
                                                                          -----------    -----------    -----------    -----------
EFFECT OF EXCHANGE RATE CHANGES .......................................       682,197        473,515        (65,858)        (1,898)
                                                                          -----------    -----------    -----------    -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................     2,357,383     (2,395,766)    (1,388,805)       (40,023)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ..........................    11,809,112     14,166,495     11,770,729        339,214
CASH AND CASH EQUIVALENTS, END OF YEAR ................................    14,166,495     11,770,729     10,381,924        299,191
                                                                          ===========    ===========    ===========    ===========
SUPPLEMENTAL INFORMATION
Interest paid .........................................................     1,217,052      1,557,887      1,248,726         35,986
Income tax paid .......................................................       497,882      1,024,286         88,884          2,569
Cash paid for acquisition of fixed assets
   Acquisition of fixed assets ........................................    31,463,451     11,565,689     15,749,807        453,884
   Increase in payable ................................................    (1,399,811)            --     (2,566,359)       (73,958)
   Increase in obligation under capital losses ........................            --             --       (525,528)       (15,145)
                                                                          -----------    -----------    -----------    -----------
                                                                           30,063,640     11,565,689     12,657,920        364,781
Cash received from capital increase through the
   issuance of American Depositary Shares
   Net proceeds .......................................................     4,137,910
   Increase in payable ................................................        13,390
                                                                          -----------
   Net cash inflow ....................................................     4,151,300
                                                                          ===========
Cash paid for redemption of foreign convertible bonds
   Redemption price for foreign convertible bonds .....................                    6,066,042      3,242,110         93,433
   Cash paid from sinking fund ........................................                           --     (1,568,057)       (45,189)
                                                                                         -----------    -----------    -----------
                                                                                           6,066,042      1,674,053         48,244
                                                                                         ===========    ===========    ===========
Non-cash flow investing and financing activities
   Reclassification of the Company's shares which
     are held by consolidated subsidiaries from
     long-term investment to treasury stock ...........................                                   2,639,826         76,076
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                     F-12
<PAGE>


           ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2000, 2001 and 2002
                (Amounts in Thousands, Unless Otherwise Stated)

1.  History and Organization

   Overview

     Advanced Semiconductor Engineering, Inc. (the "Company"), a corporation
incorporated under the laws of the Republic of China (the "ROC"), is an
independent provider of semiconductor packaging and testing services. The
Company's common shares are traded on the Taiwan Stock Exchange under the
symbol "2311". Since September 2000, the Company's common shares in the form of
American depositary shares ("ADS") have been traded on the New York Stock
Exchange under the symbol "ASX". The Company and its consolidated subsidiaries
and affiliates are together referred to as the "ASE Group".

     Set forth is a brief overview of the Company's organization structure and
its equity stakes in its consolidated subsidiaries.

     The Company has six wholly-owned subsidiaries:

     o    ASE Holding Limited (incorporated in Bermuda in April 1990), which
          holds shares in ASE Group companies;

     o    ASE Marketing Services Ltd. (incorporated in Hong Kong in February
          1991), which engages in trading;

     o    ASE Investment Inc. ("ASE Investment") (incorporated in the ROC in
          March 1996), which holds shares in ASE Group companies;

     o    J&R Holding Limited (incorporated in Bermuda in May 1996), which
          holds shares in ASE Group companies;

     o    ASE Capital Inc. ("ASE Capital") (incorporated in the ROC in November
          1997), which holds shares in ASE Group companies; and

     o    ASE Southwest, Inc. (incorporated in the United States in August
          1999), which engages in trading.

     As of December 31, 2002, the Company also held:

     o    98.8% equity stake in ASE Technologies, Inc. (incorporated in the ROC
          in June 1991), which is engaged in the research and development,
          manufacture and sales of computers and related accessories;

     o    90.0% equity stake in ASE Network Inc. (incorporated in the ROC in
          January 2000), which is engaged in investing in Taiwan Fixed Network
          Co., Ltd.;

     o    70.0% equity stake in ASE (Chung Li) Inc. ("ASE Chung Li")
          (incorporated in the ROC in April 1999), which is engaged in the
          packaging and testing of semiconductors. In addition, ASE Test
          Limited has a 30.0% equity stake in ASE Chung Li; and

     o    56.6% equity stake in ASE Material Inc. ("ASE Material")
          (incorporated in the ROC in December 1997), which is engaged in the
          design and production of leadframes and substrates used in the
          packaging of semiconductors. In addition, ASE Test, Inc. has a 4.0%
          equity stake in ASE Material.

     ASE Holding Limited has the following wholly-owned or majority-owned
subsidiaries:

     o    ASEP Realty Corporation (incorporated in the Philippines in December
          1995), which holds real estate of ASE Holding Electronics
          (Philippines);

     o    ASE Holding Electronics (Philippines)(incorporated in the Philippines
          in December 1995), which manufactures electronic products, components
          and semiconductors; and


                                     F-13
<PAGE>

     o    70.0% equity stake in ASE Investment (Labuan) Inc. (incorporated in
          Malaysia in June 1999), which holds shares of ASE Korea Inc. In
          addition, ASE Test Limited has a 30.0% equity stake in ASE Investment
          (Labuan) Inc.

     A portion of the share capital of the Philippine subsidiaries is held by
certain Filipino individuals due to local requirements.

     J&R Holding Limited has two subsidiaries:

     o    100.0% equity stake of J&R Industrial Inc. (incorporated in the ROC
          in April 1999), which is mainly engaged in the leasing of substrate,
          packaging and testing equipment; and

     o    39.3% equity stake of ASE Test Limited ("ASE Test") (incorporated in
          Singapore in May 1996), which holds shares in ASE Group companies.

     In addition, as of December 31, 2002, ASE Holding Limited held an 11.2%
equity stake in ASE Test. The shares of ASE Test have been listed on the NASDAQ
National Market in the United States since June 1996.

     ASE Test has four majority-owned subsidiaries:

     o    ASE Test, Inc. (incorporated in ROC in December 1987), which is
          engaged in the testing of semiconductors;

     o    ASE Holding (Singapore) Pte. Ltd. (incorporated in Singapore in
          December 1994), which holds shares in ASE Group companies;

     o    ASE Test Holdings, Limited ("ASE Test Holdings") (incorporated in
          Cayman Islands in April 1999), which mainly holds shares in ASE Group
          companies; and

     o    ASE Test Finance Limited (incorporated in Mauritius in June 1999),
          which is engaged in financing activities.

     ASE Test, Inc. has a wholly-owned subsidiary, ASE Test (USA) Inc.
(incorporated in the United States in October 1995), which provides after-sales
services relating to tested semiconductors.

     ASE Holding (Singapore) Pte. Ltd. has a wholly-owned subsidiary, ASE
Electronics (M) Sdn, Bhd. ("ASE Test Malaysia") (incorporated in Malaysia in
February 1991), which is engaged in the packaging and testing of
semiconductors.

     ASE Test Holdings has a wholly-owned subsidiary, ISE Labs, Inc. ("ISE
Labs") (incorporated in California, U.S.A. in November 1983), which is engaged
in the front-end engineering testing and final testing of semiconductors.

     ASE Chung Li has a wholly-owned subsidiary, Omniquest Industrial Limited
("Omniquest") (incorporated in the British Virgin Islands in June 2001), which
holds shares in ASE (Shanghai) Inc.

     Omniquest has a wholly-owned subsidiary, ASE (Shanghai) Inc. (incorporated
in the People's Republic of China in 2002), which is currently in the
pre-operating phase.

     ASE Investment (Labuan) Inc. has a wholly-owned subsidiary, ASE Korea Inc.
("ASE Korea") (incorporated in the Republic of Korea in 1999), which is engaged
in the packaging and testing of semiconductors.

2.  Significant Accounting Policies

     The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles in the ROC ("ROC GAAP").
Significant accounting policies are summarized as follows:

   Presentation of Consolidated Financial Statements

     The Company prepares its consolidated financial statements using ROC GAAP
with reconciliation to generally accepted accounting principles of the United
States ("US GAAP") (see Note 26). The accompanying consolidated balance sheets
are presented for the two years ended as at December 31, 2001 and 2002, and the
accompanying consolidated statements of income, changes in shareholders' equity
and cash flows are presented for the three years ended December 31, 2000, 2001
and 2002.


                                     F-14
<PAGE>

     Unless otherwise stated, amounts presented are in thousands of NT dollars
(NT$).

   Consolidation

     The consolidated financial statements include the accounts of the Company
and all of the aforementioned companies.

     All intercompany accounts and transactions have been eliminated and
minority shareholders' interests in the equity and earnings of the subsidiaries
are presented separately in the consolidated financial statements. The
differences between the costs of investments and the proportionate equity in
each subsidiary when the stocks were acquired are recorded as consolidated
credits or debits and are amortized on the straight-line method over ten years.

   Use of Estimates

     The preparation of consolidated financial statements in conformity with
ROC GAAP and US GAAP requires management to make estimates and judgments that
affect the recorded amounts of assets, liabilities, revenues and expenses of
the Company. The Company continually evaluates these estimates, including those
related to allowances for doubtful accounts, inventories, useful lives of
properties, consolidated debits, income tax valuation allowances, pension plans
and the fair value of financial instruments. The Company bases its estimates on
historical experience and other assumptions, which it believes to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions and conditions.

   Cash and Cash Equivalents

     The Company considers all highly liquid investments within an original
maturity from date of purchase of three months or less to be cash equivalents.

   Short-term Investments

     Short-term investments are carried at cost less allowance for decline in
market value.

   Allowance for Doubtful Accounts

     Allowance for doubtful accounts is provided based on evaluation of the
collectibility of receivables.

     The total amount of the provision is determined based on the
identification of customers that the Company determines to have a higher credit
risk based on overdue accounts, past collection difficulties or their overall
financial condition. An estimation is made based on the extent to which the
customer will be able to meet its financial obligations to the Company and a
provision is recorded to reduce the accounts receivable balance to the amount
the Company reasonably believes will be collected. For all other customers, an
allowance is equal to a percentage of the aggregate accounts receivable based
on history of collection. An allowance for these other customers averages
between 3% and 4%, on a consolidated basis, of the Company's accounts
receivable.

   Inventories

     Inventories are stated at the lower of weighted average cost or market
value. Unbilled processing charges incurred are included in finished goods and
work in process and are stated at actual cost. Market value represents net
realizable value for finished goods and work in process, and replacement costs
for raw materials, supplies and spare parts.

     Materials received from customers for processing, mainly semiconductor
wafers, are excluded from inventories as title and risk of loss remains with
the customers.

   Long-term Investments in Shares of Stock

     Long-term investments of which the Company owns at least 20% of the
outstanding voting shares and where the Company exercises significant influence
over the investee company's operations are accounted for by the equity method.
Under the equity method, the investments are initially carried at cost and
subsequently adjusted for the Company's proportionate share in the net earnings
or losses of the investee companies. Such proportionate share in the earnings
or losses are recognized as investment income or losses while any cash
dividends declared are reflected as a reduction in the carrying value of the
investments. The goodwill


                                     F-15
<PAGE>

representing the excess of the investment cost over the Company's proportionate
equity in the fair value of the net assets of the investees at the time of
investments or at the time the equity method of accounting is first applied to
a particular investment, is amortized on the straight-line method over ten
years. Changes in the Company's ownership percentage of investees under the
equity method are accounted for as adjustments to long-term investments and
capital surplus.

     Other long-term investments (including the Company's common shares prior
to January 1, 2002) in shares of stock are carried at cost or lower of cost or
market value. Allowances for decline in market value and unrealized loss on
long-term investments in shares of stock (a deduction account in shareholders'
equity) are made when the market value of an investment is lower than its
carrying value. If decline in value of the stock investment is determined to be
other than temporary, such decline in value is charged against current income.
Cash dividends are recognized as income on the declaration date.

     Unrealized profits or losses arising from transactions with equity
investees or between equity investees are offset against investment income or
loss from long-term investments, based on the percentage of ownership.

     Effective January 1, 2002, the Company adopted ROC SFAS No. 30,
"Accounting for Treasury Stock". This adoption of ROC SFAS No. 30 resulted in
the Company's shares that are held by consolidated subsidiaries being reflected
as treasury stock under shareholders' equity. The capital gain (loss) from
sales of treasury stock is added to or deducted from capital surplus. The
above-mentioned unrealized loss on long-term investments in shares of stock as
recorded from the decline in market value of the Company's shares held by its
consolidated subsidiaries will be recognized as realized loss in the period
when such shares are disposed of after January 1, 2002.

   Properties

     Properties, except for leased equipment, are stated at cost. Equipment
held under capital leases are recorded as an asset and an obligation at an
amount equal to the lower of: (i) the present value at the beginning of the
lease term of the minimum lease payments during the lease term (including the
payment called for under any bargain purchase option); or (ii) fair value of
the leased equipment at the inception of the lease. Machinery in transit,
construction in progress and prepayments under construction are stated at cost.
These include the cost of machinery, construction, down payments and other
direct costs plus interest charges attributable to the borrowings used to
finance the acquisitions of these assets. Major renewals and improvements are
capitalized, while maintenance and repairs are expensed currently.

     Depreciation is computed using the straight-line method over estimated
service lives which range as follows: long-term land leasehold rights, 60 years
(lease period); buildings and improvements, 3 to 55 years; machinery and
equipment, 3 to 8 years; furniture and fixtures, 2 to 15 years; transportation
equipment, 3 to 8 years; and leased assets and leasehold improvements, 3 to 5
years. In the event that an asset depreciated to its residual value is deemed
to have a continual useful life, the residual value is depreciated over the
remaining life, not to exceed 2 years.

     Impairment losses on properties are recorded as an operating expense and
included in general and administrative expenses.

     When properties are retired or disposed of, their costs and accumulated
depreciation are removed from the accounts and any gain or loss is credited or
charged to income. Prior to January 1, 2001, the gain, after deducting
applicable income tax, was reclassified to capital surplus at the end of the
year.

   Deferred Charges

     Deferred charges are amortized using the straight-line method as follows:
tools, 2 years; license fees, 2 years; telecommunications, electrical and
computer network systems, 5 years; and others, 2 to 5 years.

   Consolidated Debits

     The consolidated debits as shown in the balance sheet represent goodwill
arising from acquisitions or investments in the consolidated subsidiaries and
are amortized on the straight-line method over 10 years.


                                     F-16
<PAGE>

   Pension Cost

     Pension cost is recorded based on actuarial calculations. Provisions for
pension costs are accrued based on actuarially determined amounts which include
service costs, interest, amortization of unrecognized net obligation and
expected return on pension assets.

   Convertible Bonds

     Conversion of convertible bonds into common shares is accounted for by the
book value method. Under this method, unamortized bond issuance cost, accrued
interest no longer payable and the carrying value of the bond are written off.
In addition, common shares are recorded at the par value of the shares issued
and the excess is recorded as capital surplus.

   Revenue Recognition

     Revenues from semiconductor packaging services that the Company provides
are recognized upon shipment. Revenues from semiconductor testing services that
the Company provides are recognized upon completion of the services. The
Company does not take ownership of: (i) bare semiconductor wafers received from
customers that the Company packages into finished semiconductors, and (ii)
packaged semiconductors received from customers that the Company tests as to
whether they meet certain performance specifications. The title and risk of
loss remains with the customer for those bare semiconductors and/or packaged
semiconductors. Accordingly, the cost of customer-supplied semiconductors
materials is not included in the accompanying consolidated financial
statements. Other criteria that the Company uses to determine when to recognize
revenue are: (i) existence of persuasive evidence of the services provided,
(ii) the selling price is fixed or determinable and (iii) collectibility is
reasonably assured. The Company does not provide warranties to its customers
except only in cases of defects in the packaging services provided and
deficiencies in testing services provided. An appropriate sales allowance,
based on historical experience, is recognized in the period the sale is
recognized.

   Income Tax

     Tax effects of deductible temporary differences, unused tax credits and
operating loss carryforwards are recognized as deferred income tax assets,
while those taxable temporary differences are recognized as deferred income tax
liabilities. A valuation allowance is provided for deferred income tax assets
based on the estimated realizability.

     Adjustments of prior years' income tax are added to or deducted from the
current year's tax provision.

     Income taxes on undistributed earnings (10%) generated in 1998 and onwards
for consolidated entities in the ROC are recorded as expense in the following
year when the shareholders have resolved that the earnings shall be retained.

   Foreign Currency Transactions and Translation of Foreign-currency Financial
Statements

     The Company and its subsidiaries maintain their accounts in the currency
of their respective countries of incorporation (local currencies) and
functional currencies.

     Foreign currency transactions, other than foreign currency forward
exchange contracts, are recorded in the local currencies at the rates of
exchange in effect when the transactions occur. Gains or losses resulting from
the application of different foreign exchange rates when foreign- currency
assets and liabilities are settled, are credited or charged to income in the
year of settlement. Year-end balances of foreign currency assets and
liabilities are restated based on prevailing exchange rates and the resulting
differences are credited or charged to income.

     The financial statements of the foreign subsidiaries are translated into
NT dollars at the following rates: Assets and liabilities, current rate; and
income and expenses, average exchange rate during the year. The net resulting
translation adjustment is reported as a separate component of shareholders'
equity.

   Derivative Financial Instruments

     Premiums or discounts on foreign currency forward exchange contracts which
hedge foreign currency assets or liabilities arising from the difference
between the forward rate and the spot rate at the date of each contract are
deferred and amortized over the contract period. At year end, the balances of
the forward exchange receivables or payables are restated based on prevailing
exchange rates and the resulting gain or loss is credited or charged to income.
Any exchange gain or loss when the contract is settled is also credited or


                                     F-17
<PAGE>

charged to income. The difference between receivable and payable balances
arising from forward exchange contracts is accounted for as either current
asset or current liability.

     Written option contracts to purchase foreign currencies and cross currency
swap contracts entered into for hedging purposes are not recorded as assets or
liabilities on the contract dates. Gains or losses upon settlement are credited
or charged to income. Amounts received or paid are amortized over each contract
period. At year end, the outstanding written option contracts and cross
currency swap contracts are marked to market with charges to current income.

     Interest rate swap contracts to limit the impact of the variable interest
rate of certain long-term debt are not recorded as assets or liabilities on the
contract date. The differential between fixed and variable rates to be paid or
received on swaps is accrued as interest rates change in accordance with the
contracts and is included in current interest income or expense.

   Earnings Per Share ("EPS") and Earnings Per Equivalent ADS

     Basic earnings per share is calculated by dividing net income by the
weighted average number of shares outstanding during the period, adjusted
retroactively for stock dividends and stock bonuses issued subsequently.
Diluted earnings per share is calculated using the weighted average number of
shares and dilutive equivalent shares outstanding during the period. Dilutive
equivalent shares consist primarily of stock options and convertible bonds and
are excluded from the calculation if they are anti-dilutive. Earnings per
equivalent American depositary shares ("ADS") are calculated by multiplying
earnings per share by five (one ADS represents five common shares).

     Effective January 1, 2002, the Company adopted ROC SFAS No. 30, and thus,
the denominator used in calculating the EPS is adjusted to reflect the fact
that the shares of the Company held by the consolidated subsidiaries are not
considered to be outstanding for such purposes.

   US Dollar Amount

     The Company prepares its consolidated financial statements in NT dollars.
Translations into US dollars for 2002 financial statements are included solely
for the convenience of the reader, and are based on the US Federal Reserve Bank
of New York noon buying rate of NT$34.70 to US$1.00 in effect as at December
31, 2002. The convenience translations should not be construed as
representations that the NT dollar amounts have been, could have been, or could
in the future be, converted into US dollars at this or any other rate of
exchange.

3.  Change in Accounting Policies and the Effects

     Effective January 1, 2002, the Company adopted ROC SFAS No. 30. As a
result of the adoption of ROC SFAS No. 30, shares of the Company held by
consolidated subsidiaries were reclassified from long-term investments to
treasury stock under shareholders' equity. The adoption of ROC SFAS No. 30
resulted in the decrease in the balance of long-term investments by
NT$2,649,484 and increase in the balance of treasury stock by NT$2,639,826 and
decrease in the balance of minority interest in consolidated subsidiaries by
NT$9,658 in the consolidated balance sheet as of December 31, 2002. However,
there was no effect on consolidated net income for the year ended December 31,
2002.

4.  Short-term Investments

                                                     December 31,
                                        -------------------------------------
                                            2001               2002
                                        ----------   ------------------------
                                            NT$          NT$           US$
Mutual funds ........................    4,583,958    2,025,957        58,385
Stocks ..............................        5,337        5,305           153
Convertible bonds ...................       11,877       10,000           288
                                        ----------   ----------    ----------
                                         4,601,172    2,041,262        58,826
Allowance for loss ..................           --       (3,242)          (93)
                                        ----------   ----------    ----------
                                         4,601,172    2,038,020        58,733
                                        ==========   ==========    ==========


                                     F-18
<PAGE>


5.  Accounts Receivable--Net

<TABLE>
                                                                                    December 31,
                                                                    -----------------------------------------------
                                                                     2001                         2002
                                                                    ---------          ----------------------------
                                                                      NT$                NT$                US$
<S>                                                                 <C>                <C>                  <C>
Accounts receivable.......................................          7,361,066          9,229,641            265,984
Allowance for doubtful accounts (Note 2)..................           (286,476)          (300,713)            (8,666)
Allowance for sales allowances............................            (53,626)           (43,049)            (1,241)
                                                                    ---------          ---------            -------
                                                                    7,020,964          8,885,879            256,077
                                                                    =========          =========            =======
</TABLE>


     The change in allowance for doubtful accounts and sales allowances are as
follows:

<TABLE>
                                                                                     Doubtful            Sales
                                                                                     Accounts         Allowances
                                                                                     --------         ----------
                                                                                       NT$                NT$
<S>                   <C>                                                             <C>                <C>
Balance, beginning of 2000..................................................          187,162            47,092
Additions...................................................................          148,834             6,624
Deductions..................................................................          (21,753)          (15,040)
                                                                                      -------            ------
Balance, end of 2000........................................................          314,243            38,676
Additions...................................................................           15,619            65,010
Deductions..................................................................          (43,386)          (50,060)
                                                                                      -------            ------
Balance, end of 2001........................................................          286,476            53,626
Additions...................................................................           67,567            18,256
Deductions..................................................................          (53,330)          (28,833)
                                                                                      -------            ------
Balance, end of 2002........................................................          300,713            43,049
                                                                                      =======            ======

                                                                                     Doubtful            Sales
                                                                                     Accounts          Allowances
                                                                                     --------         ----------
                                                                                       US$                US$
Balance, beginning of 2002..................................................            8,256             1,546
Additions...................................................................            1,947               526
Deductions..................................................................           (1,537)             (831)
                                                                                      -------            ------
Balance, end of 2002........................................................            8,666             1,241
                                                                                      =======            ======
</TABLE>

6.  Inventories

<TABLE>
                                                                                     December 31,
                                                                  -----------------------------------------------
                                                                    2001                         2002
                                                                  ---------          ----------------------------
                                                                    NT$                NT$                US$
<S>                                                               <C>                <C>                   <C>
Raw materials...........................................          1,613,458          1,999,267             57,615
General supplies and spare parts........................            665,598            508,736             14,661
Work in process.........................................            348,933            436,872             12,590
Finished goods..........................................            297,355            333,427              9,609
Supplies in transit.....................................             63,640             66,107              1,905
                                                                  ---------          ---------             ------
                                                                  2,988,984          3,344,409             96,380
Allowance for obsolescence..............................           (220,548)          (212,757)            (6,131)
                                                                  ---------          ---------             ------
                                                                  2,768,436          3,131,652             90,249
                                                                  =========          =========             ======
</TABLE>


                                      F-19


<PAGE>


     The movement of allowance for obsolescence is as follows:

                                           NT$
                                          -------
Balance, beginning of 2000......          176,205
Additions.......................          115,928
Deductions......................         (137,072)
                                          -------
Balance, end of 2000............          155,061
Additions.......................          131,197
Deductions......................          (65,710)
                                          -------
Balance, end of 2001............          220,548
Additions.......................           34,379
Deductions......................          (42,170)
                                          -------
Balance, end of 2002............          212,757
                                          =======

                                            US$
                                          -------
Balance, beginning of 2002......           6,356
Additions.......................             990
Deductions......................          (1,215)
                                          -------
Balance, end of 2002............           6,131
                                          =======

7.  Long-term Investments--Common Stocks

<TABLE>
                                                                                     December 31,
                                                           -----------------------------------------------------------
                                                                    2001                           2002
                                                           ----------------------    ---------------------------------
                                                                          % of                                 % of
                                                                         Direct                               Direct
                                                              NT$       Ownership      NT$         US$       Ownership
<S>                                                        <C>              <C>      <C>           <C>           <C>
Equity method
Common stock
  Hung Ching Development & Construction Co. ("HCDC")..      1,213,563       25.4     1,140,427      32,865       26.4
  Hung Ching Kwan Co. ("HCKC")........................        405,406       27.3       404,513      11,657       27.3
  Universal Scientific Industrial Co., Ltd. ("USI")...      3,633,927       23.5     3,422,186      98,622       23.5
  Universal Access Technology Inc. ("UAT")............         60,001       25.0            --          --       25.0
Preferred stock
  Integrated Programmable Communication, Inc. ("IPC").        101,447       23.1        85,870       2,475       30.0
Cost method
  ASE shares held by subsidiaries.....................      3,017,964        5.1            --          --       --
  InveStar Burgeon Venture Capital, Inc...............        161,749       13.0       160,732       4,632       13.0
  Taiwan Fixed Network Co., Ltd.......................      1,500,000        1.6     1,500,000      43,228        1.6
  Global Strategic Investment, Inc....................         69,980        2.5        69,540       2,004        2.5
  UC Fund II..........................................         34,990       --          34,770       1,002       --
  Digital Communications Internal Inc. ("DCI")........             --       --          40,000       1,153       12.0
  Crimson@Velocity Fund, L.P..........................             --       --           8,845         255       --
                                                           ----------                ---------     -------
                                                           10,199,027                6,866,883     197,893
Adjustment for decline in market value in ASE stock...       (368,480)                      --          --
                                                           ----------                ---------     -------
Unrealized gain on sale of land.......................       (300,149)                (300,149)     (8,650)
                                                           ----------                ---------     -------
                                                            9,530,398                6,566,734     189,243
                                                            =========                =========     =======
</TABLE>

     The Company acquired its 27.3% equity interest in Hung Ching Kwan Co.
("HCKC") in 1992 by transferring to HCKC a parcel of land as an investment in
HCKC at an agreed value of NT$390,470. The resulting gain of NT$300,149, which
represents the excess of such value over the cost of the land plus land value
increment tax, has been deferred until the disposal of this investment. As of
December 31, 2002, the Company has a 44.1% effective interest in HCKC, which
consists of 27.3% interest directly owned by the Company, and 16.8% in 2002
interest indirectly owned through Hung Ching Development & Construction Co.
("HCDC") (based on HCDC's 63.5% interest in HCKC).


                                      F-20


<PAGE>


     The Company invested in Universal Access Technology Inc. ("UAT") in
December 2000 and directly acquired its 25.0% equity interest. In addition,
HCDC and Universal Scientific Industrial Co., Ltd. ("USI") have 10.0% and 25.0%
equity interests in UAT, respectively. Accordingly, as of December 31, 2002,
the Company has a 33.3% effective interest in UAT.

     In December 2000, ASE invested in convertible preferred stock issued by
Integrated Programmable Communication, Inc. ("IPC"). As of December 31, 2002,
the Company and its subsidiary, J&R Holding has made total investments of
US$5.2 million, and own a 30.0% stake in IPC. In addition, USI has 16.0% equity
interest in IPC.

     As of December 31, 2002, the accumulated loss for HCDC is NT$393,662
(US$11,345), the undistributed earnings for HCKC are NT$51,191 (US$1,475), and
the undistributed earnings is NT$275,955 (US$7,953) for USI. HCKC did not
declare dividends in 2001 and 2002. USI declared stock and cash dividends in
2001 for NT$1.3 and NT$0.25 per share, respectively. HCDC declared stock and
cash dividends in 2000 for NT$0.8 and NT$0.2 per share, respectively. However,
this distribution of earnings was not approved by the ROC Securities and
Futures Commission, and such appropriation was subsequently reversed in the
2002 shareholders' meeting.

     The Company recorded net investment losses of NT$167,237 in 2000,
NT$1,246,836 in 2001 and NT$410,348 (US$11,826) in 2002 from its investments in
the aforementioned equity-method investees.

8.  Properties

     Accumulated depreciation consists of:

<TABLE>
                                                                         December 31,
                                                        -------------------------------------------------
                                                          2001                         2002
                                                        ----------          -----------------------------
                                                          NT$                 NT$                US$
<S>                                                     <C>                 <C>                 <C>
Buildings and improvements....................           2,021,886           2,844,317             81,969
Machinery and equipment.......................          28,735,918          35,399,098          1,020,147
Transportation equipment......................              69,757              71,622              2,064
Furniture and fixtures........................             616,101             842,146             24,269
Leased assets and leasehold improvements......             300,187             543,397             15,660
Long-term land leasehold rights...............               7,689               8,739                252
                                                        ----------          ----------          ---------
                                                        31,751,538          39,709,319          1,144,361
                                                        ==========          ==========          =========
</TABLE>

     Certain machinery and equipment related to the testing business of ASE
Test and ISE Labs were impaired during 2002. As a result, an impairment loss of
NT$1,225,555 (US$35,317) was recognized and included in general and
administrative expenses in 2002.

     Interest capitalized and included as cost of properties amounted to
NT$163,916, NT$100,453 and NT$145,985 (US$4,207) for the years ended December
31, 2000, 2001 and 2002, respectively.

     The Company and ASE Test, Inc. entered into purchase agreements with Hung
Ching in 2001 to purchase a building located in Nantze Export Processing Zone
for expansion purposes. The contract prices were based on appraisal and totaled
NT$1,027,034 (US$29,598) and NT$459,363 (US$13,238), respectively.

     Machinery in transit pertains to the purchase of packaging and testing
equipment that has been purchased but is not ready for use. Prepayments are
deposits made to purchase machinery with non-cancellable purchase orders.

     Machinery in transit and prepayments consist of the following:

                                                     December 31,
                                        -----------------------------------
                                           2001               2002
                                        ---------     ---------------------
                                           NT$           NT$          US$
Bonders...............................     22,855       649,783      18,726
Testers...............................  1,099,240       845,585      24,368
Others................................  1,808,791     4,286,798     123,539
Total.................................  2,930,886     5,782,166     166,633


                                      F-21


<PAGE>


9.  Other Assets

<TABLE>
                                                                                           December 31,
                                                                               -----------------------------------
                                                                                  2001               2002
                                                                               ---------     ---------------------
                                                                                  NT$           NT$           US$
<S>                                                                            <C>           <C>            <C>
Deferred charges
   Tooling.............................................................           48,479       122,048       3,517
   Unamortized license fee.............................................           86,997        93,722       2,701
   Telecommunications, electrical and computer network systems.........          302,604       415,579      11,976
   Other...............................................................          284,621       423,990      12,219
                                                                               ---------     ---------      ------
                                                                                 722,701     1,055,339      30,413
Deferred income tax assets.............................................          226,190     1,145,115      33,000
Guarantee deposits.....................................................          185,162       170,064       4,901
Non-operating properties...............................................          155,703       153,744       4,431
Other..................................................................           52,513       115,925       3,341
                                                                               ---------     ---------      ------
                                                                               1,342,269     2,640,187      76,086
                                                                               =========     =========      ======
</TABLE>

10.  Consolidated Debits

     Consolidated debits represent goodwill arising from the purchases of:

<TABLE>
                                                                                           December 31,
                                                                               -----------------------------------
                                                                                  2001               2002
                                                                               ---------     ---------------------
                                                                                  NT$           NT$           US$
<S>                                                                            <C>           <C>           <C>
ASE Test shares..............................................                  2,992,676     2,701,189      77,844
ISE Labs shares..............................................                  1,870,915     2,514,629      72,468
ASE Korea shares.............................................                    377,382       325,990       9,394
Other........................................................                      7,946            --          --
                                                                               ---------     ---------      ------
                                                                               5,248,919     5,541,808     159,706
                                                                               =========     =========      ======
</TABLE>

     Goodwill from the purchase of ASE Test shares included the purchase of
2,480,000 shares by ASE Holding at the prevailing market price from the
Company's directors in May 2001.

     Amortization of goodwill is reflected in general and administrative
expenses in the consolidated statement of income and was NT$559,807, NT$692,919
and NT$815,573 (US$23,504) for the years ended December 31, 2000, 2001 and
2002, respectively.

     Equity level goodwill from investments in HCDC and USI is amortized over
ten years through April 2006 for HCDC and July 2010 for USI.

     In 2001, the Company amortized the remaining balance of goodwill for HCDC
as a result of the significant decline in the market value of HCDC shares. As
of December 31, 2001 and 2002, unamortized goodwill for USI was NT$1,651,742
and NT$1,431,142 (US$41,243), respectively.

11.  Short-term Borrowings

<TABLE>
                                                                 December 31,
                                  -------------------------------------------------------------------------
                                            2001                                     2002
                                  ------------------------    ---------------------------------------------
                                  Interest                         Interest
                                   Rate(%)           NT$             Rate(%)         NT$               US$
<S>                               <C>            <C>               <C>            <C>               <C>
Letters of credit.........        0.85--6.75       803,156         0.88--5.45     1,748,209          50,381
Revolving.................        2.65--7.30     2,652,993         2.00--7.00     2,155,785          62,126
                                                 ---------                        ---------         -------
                                                 3,456,149                        3,903,994         112,507
                                                 =========                        =========         =======
</TABLE>


                                      F-22


<PAGE>


     As of December 31, 2002, unused credit lines for short-term borrowings,
including commercial paper and bank acceptances, totaled approximately
NT$6,476,000 (US$186,628).

12.  Commercial Paper and Bank Acceptances Payable

     Commercial paper and bank acceptances payable bore interest rates ranging
from 1.80% to 6.30% in 2001 and 1.55% to 3.65% in 2002.

13.  Long-term Bonds Payable

<TABLE>
                                                                                       December 31,
                                                                        --------------------------------------
                                                                          2001                   2002
                                                                        ---------      -----------------------
                                                                           NT$           NT$             US$
<S>                                                                     <C>            <C>             <C>
Foreign convertible bonds--issued by ASE.....                           2,379,320             --            --
Foreign convertible notes--issued by ASE Test Finance Limited           3,845,051      3,820,875       110,111
Accrued interest............................                            1,644,265      1,358,918        39,162
                                                                        ---------      ---------       -------
                                                                        7,868,636      5,179,793       149,273
Less: Current portion.......................                            3,090,345             --            --
                                                                        ---------      ---------       -------
                                                                        4,778,291      5,179,793       149,273
                                                                        =========      =========       =======
</TABLE>

     Information on the long-term bonds payable is as follows:

   Foreign convertible bonds--issued by the Company

     In November 1997, the Company issued US$200.0 million of zero coupon
convertible bonds due November 2002, consisting of 200 units with face values
of US$1.0 million (NT$30.8 million) each. The bonds had an implied interest
rate of 6.37%.

     From December 1997 through October 2002, the bondholders had the right to
convert the bonds into common shares at the specified conversion price. The
conversion rate was based on the current market price at the time of sale.
Except for US$1.0 million aggregate principal amount of convertible bonds that
were converted into 355,086 common shares during 2001, the remaining US$199.0
million aggregate principal amount of the outstanding bonds were repurchased
from the open market and cancelled in 2001 and 2002. During 2001, the Company
repurchased US$131.0 million in aggregate principal amount of the outstanding
bonds from the open market with payments of NT$6,066,042, which resulted in an
extraordinary loss of NT$192,753 (net of income tax benefit of NT$48,188).
During 2002, the Company repurchased US$68.0 million in aggregate principal
amount of the outstanding bonds from the open market with payments of
NT$3,242,110, which resulted in an extraordinary loss of NT$34,613 (net of
income tax benefit of NT$11,538). Prior to the repurchase of all the
outstanding bonds, the Company was required to contribute to a sinking fund for
the outstanding bonds at the date of twelve months prior to maturity date. At
December 31, 2001 and 2002, the balance of the sinking fund was NT$1,568,057
and NT$0, respectively.

   Foreign convertible notes--issued by ASE Test Finance Limited

     In June 1999, ASE Test, in connection with the acquisitions of ISE Labs
and Motorola SPS Businesses, issued US$160.0 million (NT$5,552.0 million) of 1%
guaranteed convertible notes (the "Convertible Notes") due July 1, 2004 through
its subsidiary, ASE Test Finance Limited (the "Issuer"). The Company subscribed
US$50.0 million (NT$1,735.0 million) of the Convertible Notes and, accordingly,
the net balance of US$110,111 (NT$3,820.9 million) is recorded in the
accompanying balance sheet.

     The holders may convert the Convertible Notes into ASE Test's ordinary
shares at the specified conversion price (currently US$24.75 per share, subject
to adjustment) at any time between December 29, 1999 and July 1, 2004.

     The Convertible Notes may be redeemed under the following circumstances:

     a) Redemption for taxation reasons:


                                      F-23


<PAGE>


     If the applicable tax law or treaty is unfavorably revised, the Issuer or
ASE Test may redeem the Convertible Notes in whole at a specified early
redemption price, at any time upon giving written notice not less than 30 days
and not more than 60 days to the bondholders.

     b) Redemption at the option of the Issuer:

     On or at any time after July 1, 2002, the Issuer may redeem all or a part
of the Convertible Notes at a specified early redemption price.

14.  Long-term Debt

     Long-term debts consist of the following:

<TABLE>
                                                                                       December 31,
                                                                    ----------------------------------------------
                                                                       2001                       2002
                                                                    ----------         ---------------------------
                                                                      NT$                NT$                US$
<S>                                                                 <C>                <C>                 <C>
Mortgage bank loans for purchase of building and machinery           5,423,384          7,281,200          209,833
Revolving bank loans and acceptances payable..............          11,280,825         11,019,162          317,555
Bank loans secured by assets..............................           1,367,634          1,724,760           49,705
Letters of credit loans for purchase of materials and
   machinery..............................................           2,098,650          2,719,490           78,371
Loans for specified use...................................           6,000,000          6,000,000          172,911
Obligation under capital leases (Note 21).................             106,525            467,374           13,469
                                                                    ----------         ----------          -------
                                                                    26,277,018         29,211,986          841,844
Current portion...........................................           3,175,883          6,202,423          178,744
                                                                    ----------         ----------          -------
                                                                    23,101,135         23,009,563          663,100
                                                                    ==========         ==========          =======
</TABLE>

   Mortgage Bank Loans for Purchase of Building and Machinery

     Mortgage bank loans obtained by the Company, ASE Test, Inc., ASE Chung Li,
and ASE Material are repayable in monthly, quarterly or semi-annually
installments. The loans bear interest at rates ranging from 0.88% to 6.95% in
2001 and 3.00% to 7.92% in 2002.

     ASE Chung Li has a syndicated loan agreement with a total facility of
NT$4,000,000, which will be repayable through May 2006. As of December 31,
2002, NT$1,600,000 (US$46,110) of the total facility had been drawn. The
remaining NT$2,400,000 (US$69,164) available under the facility had not been
drawn and, under the terms of the agreement, expired in November 2002. The
agreement requires that, among other things, ASE Chung Li maintains certain
financial ratios. As of December 31, 2002, ASE Chung Li was in compliance with
the required covenants.


                                      F-24


<PAGE>





   Revolving Bank Loans and Acceptance Payables

<TABLE>
                                                                                       December 31,
                                                                      -------------------------------------------
                                                                          2001                    2002
                                                                      ----------      ---------------------------
                                                                        NT$              NT$             US$
<S>                                                                   <C>             <C>                 <C>
Five-year syndicated bank loans--interest at 2.91%-6.07% in 2001
   and 2.14%-5.90% in 2002
   ASE.........................................................        7,600,000       5,200,000          149,856
   ASE Test Inc................................................        1,200,000         300,000            8,645
Revolving credit lines due May 2003 to December 2005--interest at
   2.05%-6.45% in 2001 and 1.85%-4.88% in 2002
   ASE.........................................................        2,173,000       4,920,030          141,788
   Others......................................................          355,000         606,341           17,474
                                                                      ----------      ----------          -------
                                                                      11,328,000      11,026,371          317,763
Unamortized discounts..........................................          (47,175)         (7,209)            (208)
                                                                      ----------      ----------          -------
                                                                      11,280,825      11,019,162          317,555
                                                                      ==========      ==========          =======
</TABLE>

     The five-year syndicated bank loan of NT$5.2 billion of the Company is
repayable semi-annually from June 2003 through June 2004. Revolving credit
lines of NT$2.8 billion of the Company expire in 2003. In December 2002, the
Company obtained two new long-term credit lines: a syndicated bank loan of
NT$7.0 billion and a bank loan of NT$1.0 billion. The funds were drawn in
January 2003 and were used to repay the syndicated bank loan of NT$5.2 billion
and revolving credit lines of NT$2.8 billion.

     The January 2003 syndicated bank loan of NT$7.0 billion is repayable in
three semi-annual installments from December 2004 to December 2005. The
agreement requires, among other things, the following:

     1) Without the prior written consent from the majority of the banks, ASE
may not:

         (a) pledge its assets or assume liabilities or change the scope of its
             operations or dispose material assets; or

         (b) merge or combine with any other entity or make investments or
             acquire major assets of any other entity.

     2)  The Company's tangible net worth (as defined in a loan agreement)
         should not be less than NT$38.0 billion (US$1,319.0 million).

     3) Maintenance by the Company of certain financial ratios.

     The bank loan of NT$1.0 billion is repayable in March 2004.

     The remaining syndicated bank loans were covered by several bank
acceptance agreements made by the Company and ASE Test, Inc. which stipulate,
among other things, the following:

     1)  Without prior written consent from the majority of the banks, the
         Company cannot pledge its assets or assume liabilities or change its
         operating items or merge with any other entity or dispose of more than
         20% of total assets, or provide financing to other entity, or make
         such investment that will unfavorably affect its financial conditions.

     2)  The Company's tangible net worth (as defined in the loan agreements)
         should not be less than NT$38.0 billion (US$1,319.0 million).

     3)  The Company is required to maintain certain financial ratios.

     4)  The Company is required to pay an annual commitment fee of 0.15% of
         the difference between the authorized and utilized credit line.


                                      F-25


<PAGE>


     ASE Test provided a guaranty on the bank acceptance agreement entered into
by ASE Test, Inc. Under the guaranty, ASE Test is required to maintain certain
financial ratios and, without written consent of the majority banks, shall not:

     1) Merge or consolidate with any other entity or take any action to
dissolve, liquidate or reorganize.

     2) Purchase or redeem its shares or reduce its share capital.

     3) Reduce its ownership in ASE Test, Inc. to less than 51%.

     4) Transfer, sell, lease or dispose of a substantial portion of its
assets.

   Bank Loans Secured by Assets

     These include various bank loans obtained by ISE Labs which are secured by
ISE Labs' total assets (see Note 20). The loans are repayable in May 2009, and
bear interest from 5.50% to 7.92% in 2001 and 4.75% to 7.75% in 2002,
respectively. These agreements contain certain covenant and default provisions
that require ISE Labs to maintain certain financial ratios, dividend and
capital expenditure restrictions and maintenance of working capital
requirements. ISE Labs was in violation of covenants under a US$10.0 million
bank loan agreement to maintain certain monthly and quarterly financial ratios
for the months from October 2002 through February 2003 and for the fourth
quarter of 2002, respectively. These breaches constituted events of default
and, as a result, the bank declared all of ISE Labs' obligations under the
agreement immediately due and payable. Accordingly, the long-term debt portion
of US$10.0 million was included in the current portion of long-term debt at
December 31, 2002. ISE Labs subsequently obtained a waiver of the
aforementioned breaches from the bank, repaid all of the amounts owed under the
loan and terminated the loan agreement.

     These also include various bank loans obtained by ASE Korea which are
secured by ASE Korea's buildings and improvements (see Note 20). The loans are
repayable in July 2007 and bear interest from 4.40% to 6.10% in 2001 and 3.70%
to 4.30% in 2002, respectively.

   Letters of Credit

     These represent various bank loans obtained by the Company or ASE Material
with original terms of one year or less, due from January 2003 through
September 2003 with interest rates ranging from 0.86% to 6.81% in 2001 and
0.88% to 5.45% in 2002. The Company and ASE Material have received permission
from the relevant banks to refinance some of these loans on the same terms.

   Loans for Specified Use

     This represents the loan which specified for use in the redemption of the
Company's convertible bonds in 2001. The loan is repayable in semi-annual
installments starting June 2003 to December 2004 and bears interest of 5.95% in
2001 and 5.79% in 2002. The agreement requires, among other things, the
following:

     1) Without the prior written consent from the majority of the banks, the
Company may not:

        (a)   pledge its assets or assume liabilities or change significantly
              its operating items or dispose material assets, or provide
              financing to other entity, or make lending to any other parties.

        (b)   merge or combine with any other entity or make investments or
              acquire major assets of other entity.

     2)  The Company's tangible net worth (as defined in the loan agreement)
         should not be less than NT$38.0 billion (US$1,319.0 million).

     3) Maintenance by the Company of certain financial ratios.

     The abovementioned bank loan contracts have variable interest rates and
are subject to adjustments by banks or changes in prime rate. In addition,
several of the loan agreements have default provisions, whereby a default under
one debt agreement may also trigger cross-defaults under other debt agreements.

     As of December 31, 2002, unused long-term bank facilities approximated
NT$3,311,000 (US$95,418).


                                      F-26


<PAGE>


     As of December 31, 2002, the maturities of long-term debt (including
long-term bonds payable) are as follows:

                                                              Amount
                                                  -----------------------------
                                                      NT$                 US$
                                                  ----------            -------
Within the following year...............           6,202,423            178,744
During the second year..................          20,476,710            590,107
During the third year...................           6,618,418            190,732
During the fourth year..................             967,365             27,878
During the fifth year and thereafter....             126,863              3,656
                                                  ----------            -------
                                                  34,391,779            991,117
                                                  ==========            =======

     Long-term debts (including long-term bonds payable) by currencies is
detailed as follows:

<TABLE>
                                                                               December 31,
                                                     ---------------------------------------------------------------
                                                             2000                  2001                  2002
                                                     ------------------    -------------------   -------------------
<S>                                                  <C>                   <C>                   <C>
New Taiwan Dollars..............................     NT$     12,128,557    NT$      22,810,513   NT$      24,122,910
US Dollars......................................     US$        469,339    US$         289,175   US$         246,194
Deutsche Mark...................................     DM             940    DM                -   DM                -
Japanese Yen....................................     (Y)      5,069,552    (Y)       4,562,877   (Y)       5,460,363
Singapore Dollars...............................     SGD              7    SGD               -   SGD               -
British Pound...................................     GBP             91    GBP               -   GBP               -
European Currency Unit..........................     EUR              4    EUR               -   EUR           2,986
</TABLE>

15.  Pension Plans

     The Company and its consolidated subsidiaries in the ROC have pension
plans for their regular employees. Retirement benefits are based on the length
of service and average salaries or wages of the last six months before
retirement. ISE Labs has a defined contribution savings plan ("401k plan") for
eligible employees. This plan permits employees to make contributions up to the
maximum limits allowable under Internal Revenue Code Section 401k. ASE Korea
also has a pension plan where eligible employees and directors with more than
one year of service are entitled to receive a lump-sum payment upon termination
of their service with ASE Korea, based on their length of service and rate of
pay at the time of termination. The consolidated entities in the ROC make
monthly contributions, at 2.0% of salaries and wages, to pension funds which
are in the name of, and are administered by, the employee pension plan
committee of the respective entities. The changes in the retirement funds
during the periods indicated are summarized as follows:

<TABLE>
                                                                                 Year Ended December 31,
                                                                          -----------------------------------------
                                                                            2001                     2002
                                                                          -------          ------------------------
                                                                          NT$              NT$              US$
<S>                                                                       <C>              <C>               <C>
Balance, beginning of year.....................................           339,500          440,746           12,702
Contributions..................................................            86,615           83,996            2,420
Payments.......................................................            (3,654)            (145)              (4)
Interest income................................................            15,285           10,815              312
                                                                          -------          -------           ------
Balance, end of year...........................................           440,746          535,412           15,430
                                                                          =======          =======           ======
</TABLE>


                                      F-27


<PAGE>


     Pension costs for these entities during the periods indicated consist of:

<TABLE>
                                                                                 Year Ended December 31,
                                                                          -----------------------------------------
                                                                            2001                     2002
                                                                          -------          ------------------------
                                                                          NT$              NT$              US$
<S>                                                                       <C>              <C>               <C>
Service costs..................................................           114,393          191,707            5,525
Interest.......................................................            28,503           36,102            1,040
Projected return on pension assets.............................           (21,611)         (23,003)            (663)
Amortization of prior period service cost, gain or loss on
   plan assets, etc............................................             6,933            4,176              120
                                                                          -------          -------            -----
                                                                          128,218          208,982            6,022
                                                                          =======          =======            =====
</TABLE>

     Other pension information based on actuarial calculations of the plan
during the periods indicated are as follows:

<TABLE>
                                                                            Year Ended December 31,
                                                                -------------------------------------------------
                                                                  2001                           2002
                                                                --------             ----------------------------
                                                                  NT$                 NT$                  US$
<S>                                                               <C>                  <C>                    <C>
a. Benefit obligations
   Vested benefit obligation............................          18,677               21,347                 615
   Non-vested benefit obligation........................         415,454              738,300              21,277
                                                                --------             --------             -------
   Accumulated benefit obligation.......................         434,131              759,647              21,892
   Additional benefits based on future salaries.........         278,587              486,056              14,007
                                                                --------             --------             -------
   Projected benefit obligation.........................         712,718            1,245,703              35,899
   Fair value of assets.................................        (412,192)            (507,098)            (14,614)
                                                                --------             --------             -------
   Funded status........................................         300,526              738,605              21,285
   Unrecognized net transition obligation...............        (101,984)            (104,105)             (3,000)
   Unrecognized net actuarial gain......................          93,428             (210,955)             (6,079)
   Portion in prepayments...............................           5,561                   --                  --
   Portion in other current liabilities.................          (3,093)              (6,874)               (198)
                                                                --------             --------             -------
   Accrued pension cost.................................         294,438              416,671              12,008
                                                                ========             ========             =======
b. Vested obligation.................................             22,177               23,858                 688
                                                                ========             ========             =======
c. Actuarial assumption
   Discount rate........................................           5.0%              3.5%
   Increase in future salary level                            3.0%-4.0%              3.0%
   Expected rate of return on plan assets...............           5.0%              3.5%
</TABLE>

16.  Shareholders' Equity

     In July 1995, the Company issued 8,600,000 GDSs, representing 43,000,000
common shares. In September 2000, the Company issued 20,000,000 ADSs,
representing 100,000,000 common shares. In connection with the ADS offering in
2000, the Company offered to exchange all outstanding GDSs for ADSs listed on
the New York Stock Exchange. A total of 7,536,000 GDSs, representing an
aggregate of 37,677,000 common shares, were exchanged for ADSs pursuant to the
exchange offer.

     During 2002, a portion of the outstanding ADSs were cancelled in exchange
for approximately 198,599 thousand common shares of the Company, which
represented 6.1% of the Company's total outstanding common shares. As of
December 31, 2002, the outstanding ADSs (including treasury stock) represented
1.7% of the Company's total outstanding common shares.

     Under the ROC Company Law, capital surplus from the paid-in capital in
excess of par value can be used to offset against deficit. In addition, such
capital surplus may be transferred to capital and is subject to a specified
limit under relevant regulations.

     Capital surplus from prior years' gains on disposal of properties has been
transferred to retained earnings after the 2002 general shareholders' meeting.


                                      F-28


<PAGE>


     Capital surplus from long-term investments in shares of stock which are
accounted for by the equity method may not be used for any purpose.

     The Company's Articles of Incorporation provide that the annual net income
shall be appropriated as follows:

     a.  offset against deficit, if any;

     b.  10.0% of the remainder as legal reserve, until the accumulated amount
         equals paid-in capital;

     c.  an amount equal to the income from long-term investments in shares of
         stock accounted for by the equity method, excluding cash dividends, as
         special reserve;

     d.  not more than 2.0% of the remainder, as compensation to directors and
         supervisors;

     e.  between 5.0% to 7.0% of the remainder, as bonus to employees, of which
         5.0% will be distributed in accordance with the employee bonus plan
         and the excess to be distributed to specific employees as decided by
         the board of directors; and

     f.  the remainder, as dividends to shareholders.

     The aforementioned appropriations shall be approved by the shareholders in
the following year and given effect in the consolidated financial statements of
such year.

     Under the ROC Company Law, the aforementioned legal reserve may be used to
offset a deficit. Also, when the reserve has reached 50.0% of capital, up to
50.0% thereof may be transferred to capital.

     In order to meet the needs of our present and future capital expenditures,
the Company's dividend distribution shall be primarily in the form of common
shares. Cash dividends may also be distributed in certain circumstances.
However, the percentage of cash dividends generally shall not exceed 20.0% in
any dividend distribution, provided further that cash dividends shall not be
paid if the dividend per share is less than NT$0.1.

     With respect to the percentage of cash dividends to be paid referred to in
the previous paragraph, the Company may decide the most suitable dividend
distribution in accordance with its current operational status, and taking into
consideration the budget plan for the following year. The board of directors
shall draw up a profit distribution plan, which shall be submitted to the
shareholders' meeting for approval before implementation.

     Under the Integrated Income Tax System which became effective on January
1, 1998, non-corporate resident shareholders are allowed a tax credit for the
income tax paid or payable by the Company on earnings generated in 1998 and
onwards. An Imputation Credit Account ("ICA") is maintained by the Company for
such income tax and the tax credit allocated to each shareholder. The maximum
credit available for allocation to each shareholder cannot exceed the balance
shown in the ICA on the date of distribution of dividends.

     As of December 31, 2002 the creditable taxes aggregated NT$29,409
(US$848). The actual percentage for the distribution of 2000 net income was
10.3%.

     As of December 31, 2002, the unappropriated earnings prior to 1998 (the
year that Integrated Income Tax System became effective) amounted to NT$22,242
(US$641).

17.  Employee Stock Option Plans

     In order to attract, retain and incentivize employees, the Company adopted
an employee stock option plan, which became effective on August 28, 2002. Under
this plan, for a period of one year from August 28, 2002, the Company may issue
up to 160,000,000 options on one or more occasions. Each option entitles the
holder to purchase one common share of the Company at a price equal to the
closing market price on the date of the option grant. Forty percent of the
options originally granted vest upon the second anniversary of the grant date,
and an additional 10% of the options originally granted vest every six months
thereafter. Each option expires at the end of the 10th year following its issue
date. As of December 31, 2002, a total of 145,989,000 units stock options have
been granted to employees at an exercise price of NT$20.8 per share, which was
equal to the closing price of the Company's


                                      F-29


<PAGE>


common shares listed on the Taiwan Stock Exchange on the date of grant. The
remaining 14,011,000 options will be granted to employees by August 28, 2003.
The Company has reserved 300,000,000 common shares for issuance under the Plan.

     ASE Test has five stock option plans, the 1996 Executive Management Option
Plan (the "1996 Plan"), and the 1997, 1998, 1999 and 2000 Option Plans. Stock
options granted under these plans are exercisable for ASE Test ordinary shares
based on a vesting schedule over five years until the options expire.

18.  Income Tax

     a. Income tax expense (benefit) is determined as follows:

<TABLE>
                                                                              Year Ended December 31,
                                                        ----------------------------------------------------------------
                                                           2000               2001                        2002
                                                        ----------          --------          --------------------------
                                                          NT$               NT$               NT$                US$
<S>                                                     <C>                 <C>               <C>                 <C>
Current
   Tax (benefit) based on pre-tax accounting
     income (loss) at statutory rate.............        3,211,156          (579,651)         (950,597)          (27,395)
   Add (less) tax effects of:
     Permanent differences
       Tax-exempt income
         --Tax holiday...........................         (700,749)          (26,413)          (52,126)           (1,502)
         --Gain from sales of securities.........          (51,415)          (31,711)          (16,798)             (484)
     Temporary differences
       Investment loss (income)..................         (523,941)          814,148           793,812            22,876
       Unfunded pension cost.....................           12,214             7,842            24,239               699
       Bond interest payable.....................          114,798          (189,164)         (163,289)           (4,706)
       Other.....................................          249,888           156,866           629,545            18,143
                                                        ----------          --------          --------            ------
                                                         2,311,951           151,917           264,786             7,631
Income taxes on undistributed earnings.........            147,379           335,065            54,598             1,573
Credits for investments and research and
   development.................................         (1,231,247)         (253,227)         (331,255)           (9,546)
Net change in deferred income tax for the
   period......................................           (152,138)         (449,933)       (1,130,358)          (32,575)
Adjustment of prior year's income tax                      (10,177)           17,018             1,905                55
                                                        ----------          --------          --------            ------
Income tax (benefit) expense...................          1,065,768          (199,160)       (1,140,324)          (32,862)
                                                        ==========          ========          ========            ======
</TABLE>

     b.  The above-mentioned taxes on pre-tax accounting income (loss) at the
         statutory rates for domestic and foreign entities are shown below:

<TABLE>
                                                                            Year Ended December 31,
                                                        -------------------------------------------------------------
                                                           2000             2001                       2002
                                                        ---------         --------         --------------------------
                                                          NT$              NT$              NT$               US$
<S>                                                     <C>               <C>              <C>                <C>
Domestic entities in ROC
(25.0% statutory rate).........................         2,542,888         (501,553)        (173,787)           (5,008)
Foreign entities
   ASE Korea Inc. (30.8% statutory rate)..........          2,153               --               --                --
   ISE Labs, Inc. (federal tax rate 35.0% and
     state tax rate 6.0%).........................        439,169          (92,487)        (725,744)          (20,915)
   ASE Test Malaysia (30.0% statutory rate).......        226,946           14,389          (51,066)           (1,472)
                                                        ---------         --------         --------           -------
                                                        3,211,156         (579,651)        (950,597)          (27,395)
                                                        =========         ========         ========           =======
</TABLE>


                                      F-30


<PAGE>


     c.  Deferred income tax assets and liabilities as of December 31, 2001 and
         2002 are summarized as follows:

<TABLE>
                                                                                       December 31,
                                                                    -----------------------------------------------
                                                                       2001                         2002
                                                                    ---------          ----------------------------
                                                                      NT$                NT$                US$
<S>                                                                 <C>                <C>                   <C>
Current deferred income tax assets
   Unused tax credits........................................         378,075            966,689             27,858
   Provision for inventory obsolescence......................          41,502             38,212              1,101
   Accrued interest on convertible bonds.....................         163,289                 --                 --
   Provision for doubtful accounts and sales allowance.......          68,432             23,305                672
   Unrealized foreign exchange loss..........................         108,721             49,351              1,422
   Loss carryforward.........................................         214,013                 --                 --
   Other.....................................................          97,776             39,884              1,149
                                                                    ---------          ---------             ------
                                                                    1,071,808          1,117,441             32,202
   Valuation allowance.......................................        (161,800)           (23,000)              (663)
                                                                    ---------          ---------             ------
                                                                      910,008          1,094,441             31,539
Current deferred income tax liabilities--unrealized
   foreign exchange gain..................................            (37,000)           (10,000)              (287)
                                                                    ---------          ---------             ------
                                                                      873,008          1,084,441             31,252
                                                                    =========          =========             ======
Non-current deferred income tax assets
   Unused tax credits........................................       1,648,956          2,324,529             66,990
   Accrued pension costs.....................................          64,308            498,087             14,354
   Loss carryforward.........................................              --            455,589             13,129
   Others....................................................          97,472            112,092              3,230
                                                                    ---------          ---------             ------
                                                                    1,810,736          3,390,297             97,703
   Valuation allowance.......................................        (639,188)        (1,765,860)           (50,889)
                                                                    ---------          ---------             ------
                                                                    1,171,548          1,624,437             46,814
                                                                    ---------          ---------             ------
Non-current deferred income tax liabilities
   Investment income.........................................        (636,815)          (206,500)            (5,951)
   Unrealized foreign exchange gain..........................          (7,185)                --                 --
   Goodwill amortization.....................................         (56,124)           (35,658)            (1,028)
   Others....................................................        (245,234)          (237,164)            (6,835)
                                                                    ---------          ---------             ------
                                                                     (945,358)          (479,322)           (13,814)
                                                                    ---------          ---------             ------
                                                                      226,190          1,145,115             33,000
                                                                    =========          =========             ======
</TABLE>

     In assessing the realizability of deferred income tax assets, the Company
considers its future taxable earnings and expected timing for the reversal of
temporary differences. In addition, in the event future taxable earnings do not
materialize, the Company will consider executing certain tax planning
strategies available to realize the deferred income tax assets. The valuation
allowance is provided to reduce the gross deferred income tax assets to an
amount which the Company believes will more likely than not be realized.
Deferred income tax assets and liabilities are classified in the consolidated
balance sheets based on the classification of the related assets or liabilities
or the expected timing of the reversal of temporary differences.

     The U.S. Federal and California State net operating loss carryforward of
ISE Labs as of December 31, 2002 approximated US$15.0 million and US$7.8
million with expiration in 2021 and 2006, respectively.

     A portion of the Company's and ASE Test, Inc.'s income from the
manufacturing, processing and testing of semiconductors is exempt from income
tax for five years ending December 2005. ASE Test Malaysia has been granted
approval of "hi-tech pioneer" status for an additional five years and is
expected to commence the tax holiday retroactively from July 1, 1999 through
June 30, 2004. The per share effect of tax holiday is NT$0.3 in 2000, NT$0.01
in 2001 and NT$0.02 in 2002.


                                      F-31


<PAGE>


     d.  As of December 31, 2002, unused tax credits of ROC subsidiaries which
         can be utilized to offset their future income tax are set forth below:

<TABLE>
                                                                        December 31, 2002
                                             ----------------------------------------------------------------------
                                                                 ASE          ASE              ASE
             Year of Expiry                     ASE           Chung Li      Material        Test, Inc.      Total
--------------------------------------       ---------        --------      --------        ----------    ---------
                                                NT$            NT$            NT$             NT$            NT$
<S>                                          <C>              <C>            <C>             <C>          <C>
2003..................................         115,750          4,176         27,252         191,821        338,999
2004..................................         297,057        123,727         14,981         306,975        742,740
2005..................................         624,821             --         25,332         109,809        759,962
2006..................................         516,372         71,897        635,210         226,038      1,449,517
                                             ---------        -------        -------         -------      ---------
                                             1,554,000        199,800        702,775         834,643      3,291,218
                                             =========        =======        =======         =======      =========
</TABLE>

     In the ROC, tax credits may be utilized to reduce up to 50% of income tax
payable each year. In the expiring year, any remainder of unused tax credits
can be used entirely.

     Income tax returns of the Company and its subsidiaries in the ROC have
been examined by the ROC tax authorities through 1999.

19.  Earnings Per Share and ADS

     Since the Company incurred a loss from continuing operations for the year
ended December 31, 2001, and the Company's common share equivalents
attributable to the employees' stock options had no dilutive effect in 2002,
the basic net income (loss) per share and per ADS are presented.

     Diluted earnings per share for the year ended December 31, 2000 is
calculated as follows:

     The denominator is the weighted average number of outstanding shares of
common stock of 2,677,602,508 shares in 2000. The numerator with consideration
of the adjustment of ASE Test's diluted EPS in 2000 is calculated as follows:

<TABLE>
                                                                                                            NT$
<S>                                                                                                      <C>
Net income......................................................................................          5,837,149
Less: net income contributed from ASE Test......................................................         (1,816,985)
Add: ASE Test's diluted EPS multiplied by the number of shares of ASE Test owned by the Company.          1,685,617
                                                                                                         ----------
As adjusted.....................................................................................          5,705,781
                                                                                                         ==========
</TABLE>

     Diluted earnings per ADS for the year ended December 31, 2000 is
calculated as follows:

     The denominator is the above-mentioned weighted average outstanding shares
divided by five (one ADS represents five common shares). The numerator is the
same as mentioned in the above EPS calculation.

     The number of shares to be issued upon conversion of the convertible bonds
is as follows:

<TABLE>
                                                                       2000               2001               2002
<S>                                                                 <C>                <C>                        <C>
                                                                    ----------         ----------         ----------
Convertible bonds--issued by the Company...................         95,400,000         38,537,822             --
                                                                    ==========         ==========         ==========
</TABLE>


                                      F-32


<PAGE>


20.  Assets Pledged or Mortgaged

     Except for those mentioned in Note 14, the assets pledged or mortgaged as
first priority collateral are summarized as follows:

<TABLE>
                                                                                      December 31,
                                                                   ------------------------------------------------
                                                                      2001                         2002
                                                                   ----------         -----------------------------
                                                                      NT$                NT$                US$
<S>                                                                <C>                <C>                   <C>
Buildings and improvements................................          2,077,487          2,762,585             79,613
Machinery and equipment...................................          9,021,120          8,629,757            248,696
Long-term investments (including treasury stock)..........          1,790,961                 --                 --
Time deposits.............................................            140,949            428,743             12,356
Guarantee deposits--time deposits..........................            77,821            118,445              3,413
Short-term investment.....................................                 --            260,120              7,496
Commercial paper..........................................                 --            552,416             15,920
                                                                   ----------         ----------            -------
                                                                   13,108,338         12,752,066            367,494
                                                                   ==========         ==========            =======
</TABLE>

     In addition, the total assets of ISE Labs amounting to NT$3,236,253
(US$93,264) as of December 31, 2002, have been pledged as collaterals for its
long-term and short-term debts.

21.  Commitments and Contingencies as of December 31, 2002

     a. The Company, ASE Test, Inc. and ASE Material lease the land on which
their buildings are situated under various operating lease agreements with the
government which expire on various dates from September 2009 to 2012. The
agreements grant these entities option to renew the leases and reserve the
right for the lessor to adjust the lease charges upon an increase in the
assessed value of the land and to terminate the leases under certain
conditions. In addition, the Company, ASE Material and ISE Labs also lease
equipment under non- cancellable capital lease agreements. The net book value
as of December 31, 2001 and 2002 of the equipment acquired under the capital
obligations amounted to NT$276,287 and NT$506,637 (US$14,600), respectively.
The future minimum lease payments under the above-mentioned operating leases
are as follows:

<TABLE>
                                   Operating Leases                                            December 31, 2002
------------------------------------------------------------------------------------        ------------------------
                                                                                              NT$            US$
<S>                                                                                         <C>               <C>
2003................................................................................          317,426          9,148
2004................................................................................          278,496          8,026
2005................................................................................          276,170          7,959
2006................................................................................          255,656          7,367
Thereafter..........................................................................          580,162         16,719
                                                                                            ---------         ------
Total minimum lease payments........................................................        1,707,910         49,219
                                                                                            =========         ======
</TABLE>

     The future minimum lease payments under above-mentioned capital leases as
of December 31, 2002 are as follows:

<TABLE>
                                                                                               December 31, 2002
                                                                                            ------------------------
                                                                                              NT$            US$
<S>                                                                                         <C>               <C>
Within the following year...........................................................          229,710          6,620
Within the second year..............................................................          187,748          5,410
Within the third year...............................................................          110,031          3,171
                                                                                              -------          -----
Total minimum lease payments........................................................          527,489         15,201
Less: Imputed interest..............................................................           60,115          1,732
                                                                                              -------          -----
Present value of future lease obligations...........................................          467,374         13,469
Capital lease obligation, current...................................................          193,714          5,583
                                                                                              -------          -----
Capital lease obligation, long-term.................................................          273,660          7,886
                                                                                              =======         ======
</TABLE>

     b. The Company, ASE Test, Inc., ASE Test Malaysia and ASE Chung Li
(starting 1999) engage outside sales agencies. Commissions and service fees
were paid based on monthly incurred service-related costs and expenses plus
5%-10% in 2001 and


                                      F-33


<PAGE>


2002 (starting August 2001, there is limited amounts prescribed for costs and
expenses incurred) or based on 0.48%-1% in 2001 and 2002 of net export sales.
Commissions and service fees paid in 2000, 2001 and 2002 were approximately
NT$762,159, NT$729,300 and NT$734,322 (US$21,162), respectively.

     c. As of December 31, 2002, commitments to purchase machinery and
equipment were approximately NT$3,462,610 (US$99,787).

     d. As of December 31, 2002, commitments for construction of buildings were
approximately NT$1,192,342 (US$34,361).

     e. As of December 31, 2002, unused letters of credit were approximately
NT$1,298,648 (US$37,317).

     f. The Company entered into technology license agreements with foreign
companies which will expire on various dates through 2016 for the licensing of
technology used in the packaging of certain products. Pursuant to such
agreements, the Company shall pay royalties at a specified percentage of sales
quantities. Such royalties in 2000, 2001 and 2002 were approximately
NT$199,836, NT$151,249 and NT$176,711 (US$5,093), respectively.

     g. As of December 31, 2002, the Company has endorsed and guaranteed the
promissory notes of its subsidiaries as follows:

<TABLE>
                                                                                                  Amount
                                                                                         --------------------------
                                                                                            NT$               US$
<S>                                                                                      <C>                <C>
ASE (Labuan)....................................................................         2,777,289           80,037
ASE (Philippines)...............................................................           399,855           11,523
ASE Chung Li....................................................................           758,450           21,857
ASE Material....................................................................         1,638,790           47,227
ASE Capital.....................................................................           160,000            4,611
ASE Investment..................................................................           597,000           17,205
ASE Technologies................................................................            10,000              288
                                                                                         ---------          -------
                                                                                         6,341,384          182,748
                                                                                         =========          =======
</TABLE>

22.  Derivative Financial Instruments

     Information on derivative transactions are as follows:

   a.  Foreign Currency Option Contracts

     Because the Company, ASE Test, ASE Material and ASE Chung Li expect to
receive US dollars from export sales and to pay Japanese yen or NT dollars for
long-term debts or short-term borrowings, these companies have occasionally
entered into foreign currency option contracts to manage exposures to exchange
rate fluctuations.

     As of December 31, 2002, the outstanding contracts were as follows:

<TABLE>
                                                                    Strike Price
           Contract                         Amount                     US$/NT$                      Maturity Date
--------------------------------   -----------------------      ----------------------        ------------------------
      <S>                              <C>                          <C>                          <C>
      Buy US$ Call/NT$ Put             US$5.0 million               US$1:NT$30.787               January 29, 2003
      Buy US$ Call/NT$ Put             US$5.0 million               US$1:NT$30.781               February 26, 2003
      Sell US$ Call/NT$ Put            US$10.0 million              US$1:NT$35.180               January 9, 2003
</TABLE>

     The loss arising from such outstanding contracts based on mark-to-market
valuation as at December 31, 2002 was approximately NT$39,141 (US$1,128).


                                      F-34


<PAGE>


   b.  Forward Exchange Contracts

     The Company entered into forward contracts to manage exposures of foreign
exchange rate fluctuations associated with its long-term debt. As of December
31, 2002, the outstanding contracts were as follows:

<TABLE>
                                                                    Strike Price
           Contract                         Amount                     US$/NT$                      Maturity Date
--------------------------------   -----------------------      ----------------------        ------------------------
      <S>                              <C>                          <C>                          <C>
       Buy NT$/Sell US$                US$5.0 million               US$1:NT$34.174               January 29, 2003
       Buy NT$/Sell US$                US$5.0 million               US$1:NT$34.167               February 26, 2003
</TABLE>

   c.  Interest Rate Swap

     In June 2002, the Company entered into two interest rate swap contracts
with a foreign bank to manage exposures to interest rate fluctuations. These
contracts would have expired in December 2004. In September 30, 2002, ASE
settled these contracts and recorded net interest income of NT$107,910
(US$3,110).

   d.  Transaction Risk

     1)  Credit Risk

     The Company is exposed to credit risk in the event of non-performance of
the counter parties to forward contracts on maturity. In order to manage this
risk, the Company transacts only with financial institutions with good credit
ratings. As a result, no material losses resulting from counter party defaults
are anticipated.

     2)  Market Risk

     Market risk is the exposure created by potential exposures to changes of
foreign exchange rate related to its foreign-currency-denominated assets and/or
liabilities and changes on interest rates related to its obligations.

     3)  Liquidity Risk and Cash Flow Risk

     The Company entered into European option contracts and forward exchange
contracts to hedge its exposure to the effect of exchange rate fluctuations on
net assets or net liabilities. As the Company has sufficient operating capital
to meet cash requirements upon the maturity of these contracts, the Company
believes there are no significant liquidity or cash flow risks.


                                      F-35


<PAGE>


23.  Non-derivative and Derivative Financial Instruments

<TABLE>
                                                                       December 31,
                                         --------------------------------------------------------------------------
                                                   2001                                 2002
                                         -----------------------   ------------------------------------------------
                                          Carrying                  Carrying       Fair        Carrying       Fair
                                          Values     Fair Values     Values       Values        Values       Values
                                         ----------  -----------   ----------   ----------     --------     -------
                                            NT$          NT$          NT$         NT$          US$          US$
<S>                                      <C>          <C>          <C>          <C>            <C>          <C>
Non-derivative Financial
   Instruments
Assets
   Cash and cash equivalents..........   11,770,729   11,770,729   10,381,924   10,381,924     299,191      299,191
   Short-term investments.............    4,601,172    4,642,062    2,038,020    2,040,066      58,733       58,792
   Notes receivable...................      105,185      105,185      112,667      112,667       3,247        3,247
   Accounts receivable--net............   7,020,964    7,020,964    8,885,879    8,885,879     256,077      256,077
   Long-term investments..............    9,530,398   11,026,363    6,566,734    4,297,778     189,243      123,855
   Pledged time deposit...............      140,949      140,949      428,743      428,743      12,356       12,356
   Guarantee deposit..................       77,821       77,821      118,445      118,445       3,413        3,413
   Sinking fund.......................    1,568,057    1,568,057           --           --          --           --
Liabilities
   Short-term borrowings..............    3,456,149    3,456,149    3,903,994    3,903,994     112,507      112,507
   Commercial paper and bank
     acceptances payable..............    3,444,314    3,444,314    2,384,577    2,384,577      68,720       68,720
   Accounts payable...................    2,968,779    2,968,779    4,045,849    4,045,849     116,595      116,595
   Long-term bonds payable (included
     current portion).................    7,868,636    7,424,031    5,179,793    4,646,184     149,274      133,896
   Long-term debts (included current
     portion).........................   26,277,018   26,277,018   29,211,986   29,211,986     841,844      841,844
   Long-term payable for investments
     (included current portion).......    3,611,294    3,611,294    3,327,118    3,327,118      95,882       95,882
Derivative Financial Instruments
Forward exchange contracts.........              --           --       (5,781)      (5,681)       (167)        (164)
Foreign currency option contracts..        (136,751)    (136,751)     (39,141)     (39,141)     (1,128)      (1,128)
Cross currency swap contracts......          69,978       69,978           --           --          --           --
</TABLE>

     The carrying values of cash and cash equivalents, notes receivable,
accounts receivable, short-term borrowings, commercial paper and bank
acceptance payables and notes and accounts payable approximate fair values
because of the short maturity of these instruments. The fair values of
short-term and long-term investments are determined based on market values or
net equity values. The fair value for pledged time deposit, guarantee deposits
and sinking fund is the book value. The fair values of long-term bonds and
payables for investments are determined based on the market value or the
estimated present value of future cash flows using the interest rates of
similar long-term debt instruments which the Company is able to obtain as the
discount rate. Fair value of long-term debts is carrying value because floating
interest rates are applied. The fair values of derivative financial instruments
are based on the information of mark-to-market valuation.

24.  Segment and Geographical Information

   a.  Geographical Information

     1)  Net Revenue:

<TABLE>
                                                          Year Ended December 31,
                       ----------------------------------------------------------------------------------------------
                                  2000                        2001                               2002
                       ------------------------    ------------------------    --------------------------------------
                                     % of Total                  % of Total                                % of Total
                          NT$         Revenues        NT$         Revenues        NT$           US$         Revenues
<S>                    <C>               <C>       <C>               <C>       <C>            <C>              <C>
North America....      33,089,214         65       24,930,813         65       26,922,752       775,872         59
Taiwan...........      12,639,373         25       10,222,723         27       11,342,210       326,865         25
Europe...........       1,905,646          4        1,508,919          4        2,766,981        79,740          6
Others...........       3,259,144          6        1,705,371          4        4,554,895       131,264         10
                       ----------        ---       ----------        ---       ----------     ---------        ---
                       50,893,377        100       38,367,826        100       45,586,838     1,313,741        100
                       ==========        ===       ==========        ===       ==========     =========        ===
</TABLE>


                                      F-36


<PAGE>


     2)  Long-lived Assets:

<TABLE>
                                                                             December 31,
                                                  ------------------------------------------------------------------
                                                             2001                               2002
                                                  ------------------------    --------------------------------------
                                                                % of Total                                % of Total
                                                                Long-lived                                Long-lived
                                                     NT$          Assets         NT$           US$          Assets
<S>                                               <C>               <C>       <C>            <C>              <C>
Taiwan......................................      43,724,466         72       47,958,294     1,382,083         76
Rest of Asia................................      13,482,411         22       13,288,531       382,955         21
North America...............................       3,348,228          6        1,842,045        53,085          3
                                                  ----------        ---       ----------     ---------        ---
                                                  60,555,105        100       63,088,870     1,818,123        100
                                                  ==========        ===       ==========     =========        ===
</TABLE>

   b.  Major customers

     Customers accounting for 10% or more of total revenues are shown below:

<TABLE>
                                                                Year Ended December 31,
                             ----------------------------------------------------------------------------------------------
                                        2000                        2001                               2002
                             ------------------------    ------------------------    --------------------------------------
                                           % of Total                  % of Total                                % of Total
                                NT$         Revenues        NT$         Revenues        NT$           US$         Revenues
<S>                           <C>              <C>       <C>               <C>       <C>            <C>              <C>
Motorola, Inc............     11,256,760       22        7,164,415         19        7,703,767      222,011          17
VIA Technologies Inc.....      5,185,434       10        4,413,854         12        3,837,476      110,590           8
</TABLE>


                                      F-37


<PAGE>


   c.  Segment Information

     The Company has three reportable segments under ROC GAAP: packaging,
testing and investing. The Company packages bare semiconductors into finished
semiconductors with enhanced electrical and thermal characteristics; provides
testing services, including front-end engineering testing, wafer probing and
final testing services; and engages in investing activities. The accounting
policies of the segments are the same as those described in Note 2. Segment
information for the years ended December 31, 2000, 2001 and 2002 is as follows:

<TABLE>
                                        Packaging        Testing        Investing        All Other         Total
                                       ----------       ----------      ----------      ----------      -----------
                                           NT$             NT$             NT$              NT$             NT$
<S>                                    <C>              <C>             <C>             <C>             <C>
2000
   Revenue from external customer.     38,028,799       12,911,073              --       2,001,604       52,941,476
   Inter-segment revenues.........             --         (142,712)             --      (1,905,387)      (2,048,099)
   Interest revenue...............        265,737           45,112         182,915          60,416          554,180
   Interest expense...............      1,200,236          375,257         461,791          54,954        2,092,238
   Net interest revenue (expense).       (934,499)        (330,145)       (278,876)          5,462       (1,538,058)
   Depreciation and amortization..      4,423,814        3,815,237          59,704         295,044        8,593,799
   Segment profit (loss)..........      6,191,070        3,541,102      (1,125,536)       (203,076)       8,403,560
   Segment asset..................     53,385,822       31,155,426      16,810,253       6,989,663      108,341,164
   Expenditures for segment assets     12,412,225       14,720,913              --       4,330,313       31,463,451
2001
   Revenue from external customer.     28,928,185        9,637,615              --       2,684,736       41,250,536
   Inter-segment revenues.........        (30,000)        (178,340)             --      (2,674,370)      (2,882,710)
   Interest revenue...............        283,733           36,138         172,866          10,866          503,603
   Interest expense...............      1,260,786          310,571         565,071         106,451        2,242,879
   Net interest expense...........       (977,053)        (274,433)       (392,205)        (95,585)      (1,739,276)
   Depreciation and amortization..      5,186,067        5,466,435          24,489         450,294       11,127,285
   Segment profit (loss)..........     (2,786,577)      (1,195,344)        800,266         196,156       (2,985,499)
   Segment asset..................     51,397,373       32,968,822      11,508,993      10,451,144      106,326,332
   Expenditures for segment assets      5,879,357        4,415,168              --       1,271,164       11,565,689
2002
   Revenue from external customer.     35,814,644       10,060,635              --       3,299,756       49,175,035
   Inter-segment revenues.........        (14,291)        (276,628)             --      (3,297,278)      (3,588,197)
   Interest revenue...............        277,096           12,619          90,127          12,751          392,593
   Interest expense...............      1,109,241          183,967         639,896          38,124        1,971,227
   Net interest expense...........       (832,145)        (171,348)       (549,769)        (25,373)      (1,578,634)
   Depreciation and amortization..      5,743,420        5,679,224             738         674,399       12,097,781
   Segment profit (loss)..........      1,304,013       (2,797,405)       (654,314)       (561,999)      (2,709,705)
   Segment asset..................     53,667,786       31,338,672       8,099,495      11,763,405      104,869,358
   Expenditures for segment assets      9,054,519        4,393,023              --       2,297,079       15,744,621
2002
   Revenue from external customer.      1,032,122          289,932              --           95,094       1,417,148
   Inter-segment revenues.........           (412)          (7,972)             --          (95,022)       (103,406)
   Interest revenue...............          7,985              364           2,597              368          11,314
   Interest expense...............         31,967            5,302          18,441            1,098          56,808
   Net interest expense...........        (23,981)          (4,938)        (15,844)            (731)        (45,494)
   Depreciation and amortization..        165,517          163,666              21           19,435         348,639
   Segment profit (loss)..........         38,573          (81,610)        (18,856)         (16,196)        (78,089)
   Segment asset..................      1,546,622          903,132         233,415          339,003       3,022,172
   Expenditures for segment assets        260,937          126,600              --           66,198         453,735
</TABLE>

25.  Acquisitions

     In May 1999, ASE Test acquired 70% equity of ISE Labs, which is engaged in
the testing and packaging of semiconductors. The purchase price, including
transaction costs, approximated US$100.1 million (NT$3,473.5 million), and was
paid in May 1999. In 2000, ASE Test purchased additional shares of ISE Labs in
connection with a capital increase of ISE Labs for US$70.0 million (NT$2,429.0
million), purchased ISE Labs' shares from minority shareholders for US$0.9
million (NT$31.2 million), and consequently owned an 80.0% equity interest in
ISE Labs. In January 2002, ASE Test purchased the remaining 20.0% equity
interest in ISE Labs from minority shareholders for US$50.2 million (NT$1,741.9
million). At December 31, 2002, the total investment amount in ISE Labs was
US$221.2 million (NT$7,675.6 million).


                                      F-38


<PAGE>


     In July 1999, the Company and ASE Test purchased equity interests of 70.0%
and 30.0%, respectively, in the Motorola SPS Businesses held through ASE Chung
Li and ASE Korea, respectively. Both ASE Chung Li and ASE Korea are engaged in
the packaging and testing of semiconductors. The total purchase price was
approximately US$350.1 million (NT$12,148.5 million). ASE Test financed its
portion of the purchase price with a US$160.0 million convertible notes
offering completed in June 1999 by ASE Test Finance Limited (see Note 13),
which was guaranteed by ASE Test. In addition, a portion of the purchase price
would be paid by the Company in three annual installments ending in July 2002,
contingent upon certain targets of revenue from packaging and testing services
provided to Motorola being met. The Company was able to reasonably estimate the
contingent amount and recorded US$70.0 million (NT$2,429.0 million) as a
payable at the time of purchase. The contingent portion of US$23.3 million
(NT$808.5 million) was due in July 2002. In 2002, the Company and Motorola
re-negotiated the agreement for the payment of final installment to take place
in three smaller installments ending in July 2004 contingent upon certain
targets of revenue from packaging and testing services provided to Motorola
being met.

     As of December 31, 2002, US$254.3 million (NT$8,824.2 million) has been
paid to Motorola and the remaining amount of US$95.8 million (NT$3,324.3
million) is to be paid as follows:

                                                             Amount
                                                    --------------------------
                                                       NT$                US$
Within this year............................          962,758           27,745
Within the following year and after.........        2,364,360           68,137
                                                    ---------           ------
                                                    3,327,118           95,882
                                                    =========           ======

     The Company has provided a guarantee to Motorola for the above payments.

     The acquisitions of the Motorola SPS Businesses and ISE Labs were
accounted for by the purchase method. Assets acquired and liabilities assumed
have been recorded at their estimated fair values as of the acquisition date.
The purchase prices exceeded the fair value of the net tangible assets by
approximately US$81.9 million for Motorola SPS Businesses and US$76.5 million
for ISE Labs. The purchase price in excess of fair value of net tangible assets
was allocated to various tangible and intangible assets, which will be
amortized on a straight-line basis over 3 to 38 years.

     The purchase prices, net book value and calculation of excess amount for
those acquisitions described above are as follows:

                                          Purchase    Net Book
                Acquirees                   Price       Value         Excess
--------------------------------------    --------    --------        ------
                                             US$         US$            US$
                                                    (in millions)
ISE Labs..............................        100.1        23.6        76.5
Motorola SPS Businesses...............        350.1       268.2        81.9

     The excess purchase price was allocated as follows:

                                                                Motorola SPS
                  Item                              ISE Labs     Businesses
---------------------------------------------       --------    ------------
                                                       US$           US$
                                                         (in millions)
Write-up of land.............................            2.5          87.7
Write-up (write-down) buildings..............            2.7         (11.5)
Write-up (write-down) machinery..............            9.0          (8.4)
Deferred tax liability.......................           (5.7)         --
Goodwill.....................................           68.0          14.1
                                                        ----          ----
                                                        76.5          81.9
                                                        ====          ====


                                      F-39


<PAGE>


     In the first quarter of 2000, ASE Test adjusted its allocation of purchase
price by reducing the allocation to land by US$0.2 million, buildings by US$2.3
million, machinery by US$2.3 million, deferred tax liabilities by US$1.9
million and increasing the allocation to goodwill by US$3.8 million because
impairment loss incurred arising from the disposition of the packaging
operation of ISE Labs, which was a pre-acquisition contingency at the date of
acquisition.

     The purchase prices for Motorola SPS Businesses and ISE Labs acquisitions,
are respectively allocated as follows:

                                                             Motorola SPS
                                               ISE Labs       Businesses
                                               --------       ----------
                                                  US$            US$
                                             (in millions)
Cash.....................................         4.3           45.2
Accounts receivable......................        14.3           30.3
Other current assets.....................         0.7            6.9
Fixed assets--net........................         82.5          302.8
Other assets.............................         3.5            2.6
Goodwill.................................        68.0           14.1
Total liabilities........................       (59.4)         (51.8)
Minority interest........................       (13.8)          --
                                                -----          -----
                                                100.1          350.1
                                                =====          =====

26. Summary of Significant Differences Between Accounting Principles Followed
by the Company and Accounting Principles Generally Accepted in the United
States

     The Company's consolidated financial statements have been prepared in
accordance with ROC GAAP, which differ in the following respects from US GAAP:

   a.  Pension Benefits

     The Company adopted US Statement of Financial Accounting Standards ("US
SFAS") No. 87, "Accounting for Pensions", on January 1, 1987. A portion of the
unrecognized net transition obligation at the adoption date is to be allocated
directly to equity. ROC SFAS No. 18, which is substantially similar in many
aspects to US SFAS No. 87, was effective in 1996 for listed companies in Taiwan.
Therefore, pension expense due to different adoption dates is adjusted.

   b.  Short-term Investments

     Under ROC GAAP, marketable equity securities are carried at the lower of
aggregate cost or market, and debt securities are carried at cost, with only
unrealized losses recognized. Under US SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", debt and equity securities that
have readily determinable fair values are to be classified as either trading,
available-for-sale or held-to-maturity securities. Debt securities that the
Company has the positive intent and ability to hold to maturity are classified
as held-to-maturity securities and reported at amortized cost. Debt and equity
securities that are bought and traded for short-term profit are classified as
trading securities and reported at fair value, with unrealized gains and losses
included in earnings. Debt and equity securities not classified as either
held-to-maturity or trading are classified as available-for-sale securities and
reported at fair value, with unrealized gains and losses excluded from earnings
and reported as a separate component of shareholders' equity.

     All of the Company's short-term investments are classified as trading
securities under US GAAP, with gains and losses recognized currently in income.
The unrealized gain included in earnings under US GAAP was NT$5,952 thousand in
2001 and unrealized loss of NT$38,844 (US$1,119) in 2002. All of the Company's
short-term investments in mutual funds, stock and convertible debt are held
principally for the purpose of selling them in the near term.

   c.  Bonuses to Employees, Directors and Supervisors

     According to ROC regulations and the Articles of Incorporation of the
Company, a portion of distributable earnings should be set aside as bonuses to
employees, directors and supervisors. Bonuses to directors and supervisors are
always paid in cash. However, bonuses to employees may be granted in cash or
stock or both. All of these appropriations, including stock bonuses which are
valued


                                      F-40


<PAGE>


at par value of NT$10, are charged against retained earnings under ROC GAAP
after such appropriations are formally approved by the board of directors and
resolved by the shareholders in the following year. Under US GAAP, such bonuses
are charged against income currently in the year earned. Stock issued as part of
these bonuses is recorded at fair market value. Since the amount and form of
such bonuses are not finally determinable until the board of directors meeting
in the subsequent year, the total amount of the aforementioned bonuses ("regular
bonuses") is initially accrued based on the management's estimate regarding the
amount to be paid based on the Company's Articles of Incorporation. Any
difference between the initially accrued amount and the fair market value of the
bonuses settled by the issuance of shares is recognized in the year of approval
by the board of directors. The management estimates that the regular annual
bonuses from above appropriations, including cash and stock, will approximate
three to four months' salaries and wages.

     Aside from the aforementioned regular bonus plan, the Company granted a
special stock bonus to employees amounting to NT$1,536,396 in 1997 and
NT$2,506,617 in 2000. Employees who received the special stock bonus are
required to continue working for the Company for an additional three years.
Accordingly, the amount of special stock bonuses is being allocated over three
years as additional compensation expense in the consolidated statement of
income under US GAAP.

   d.  Treasury Stock

     The common shares of the Company that are held by consolidated
subsidiaries are, under US GAAP, reflected as treasury stock in the
consolidated balance sheet. Also, under US GAAP, the minority interest
reflected in the statements of income is adjusted to reflect the equity of the
minority shareholders on the subsidiary's equity in the net income of the
Company. The mutual or reciprocal holdings had no material effect on the
minority interest reported in the consolidated statements of income. In
addition, under US GAAP, the denominator used in calculating EPS is reduced by
the number of the Company's common shares held by the subsidiary as of the date
the subsidiary acquired the shares. The adjustment to the denominator is
135,867,641 shares in 2000 and 164,441,865 shares in 2001, respectively. The
capital gain (loss) from sales of treasury stock is deducted from or added to
the consolidated balance of capital surplus.

     Beginning January 1, 2002, the Company adopted ROC SFAS No. 30,
"Accounting for Treasury Stock", which requires shares of parent stock held by
subsidiaries to be recorded as treasury stock. The effect is similar to US GAAP
except the reduction of the minority share of treasury stock is required under
ROC GAAP. Prior to 2002, common shares of the Company held by subsidiaries were
presented as a long-term investment in the consolidated balance sheets with the
gain or loss on the sale of the treasury stock reflected in the consolidated
statements of income.

   e.  Depreciation of Buildings

     Under ROC GAAP, the estimated life of a building can be as long as 40
years based on ROC practices. For US GAAP purposes, the useful lives of
buildings is estimated to be 25 years.

   f.  Excess of Book Value on Transfer of Buildings Between Consolidated
Subsidiaries

     ASE Test, Inc., a consolidated subsidiary, purchased buildings and
facilities from another consolidated subsidiary, ASE Technologies, in 1997. The
purchase price from ASE Technologies was based on market value. Such additional
payment for the excess of book value of NT$17,667 thousand was capitalized by
ASE Test, Inc. as allowed under ROC GAAP. Under US GAAP, transfers of assets
between related parties should not be recorded by the transferee at stepped-up
values.

   g.  Gain on Sales of Subsidiary's Stock

     The carrying value of stock investments in ASE Test by J&R Holding under
ROC GAAP is different from that under US GAAP mainly due to the differences in
accounting for bonuses to employees, directors and supervisors.

   h.  Effects of US GAAP Adjustments on Equity-Method Investments

     The carrying values of equity-method investments and the investment income
(loss) accounted for by the equity method in HCDC, HCKC and USI are reflected
in the consolidated financial statements under ROC GAAP. The financial
statements of these equity investees prepared under ROC GAAP are different from
the financial statements of such equity investees prepared under US GAAP mainly
due to the differences in accounting for bonuses to employees, directors and
supervisors and depreciation of buildings.


                                      F-41


<PAGE>


Therefore, the investment income (loss) has been adjusted to reflect the
differences between ROC GAAP and US GAAP in the investees' financial statements.

   i.  Impairment of Long-lived Assets

     Under US GAAP, in accordance with US SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", long-lived assets held and used
by the Corporation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of long-lived
assets, the recoverability test is performed by comparing undiscounted net cash
flows of the assets against the net book value of the assets. If the
recoverability test indicates that an impairment has occurred, the impairment
loss is the amount of the asset's net book value in excess of the related fair
value. As there are no requirements related to the evaluation of recoverability
of impairment of long-lived assets under ROC GAAP, the Company has selected the
same accounting for impairment of long-lived assets as US SFAS No. 144 for both
ROC GAAP and US GAAP reporting.

   j.  Stock Dividends

     Under ROC GAAP, stock dividends are recorded at par with a charge to
retained earnings. Under US GAAP, if the ratio of distribution is less than 25
percent of the same class of shares outstanding, the fair value of the shares
issued should be charged to retained earnings. The difference for 2001 stock
dividends would be treated as an additional reduction to retained earnings and
increase to capital surplus amounting to NT$3,181 million (US$92 million).

   k.  Stock Option Compensation

     For US GAAP reporting, the Company has elected to follow Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", which measures compensation expense based on the difference, if
any, between the market price of the underlying common shares and the exercise
price of the stock option on the date of the grant. The Corporation is required
under US SFAS No. 123, "Accounting for Stock-based Compensation", to disclose
the pro forma information regarding option grants to its employees computed as
if the fair value method had been applied.

     In May 2001, ASE Test's directors exercised their stock options for
2,480,000 shares at US$3.50 per share under the 1996 option plan. The Company
decided, based on resolution of its Board of Directors, to purchase these
shares from the directors at the prevailing market price of US$14.27 per share
on the same day the options were exercised. Under ROC GAAP, such a share
purchase is accounted for as additional investments of ASE Test's shares by the
Company. However, under US GAAP, the purchase of shares from employees within
six months after exercise of a vested option creates a compensation expense
equal to the difference between the market price of the share on the date of
exercise and the market price on the date the options were granted.
Consequently, compensation expense of NT$908,661 (US$26,186) was recorded by
ASE Test.

   l.  Derivative Financial Instruments

     There are no specific accounting standards under ROC GAAP which address
measurement for derivative instruments, except for foreign-currency forward
contracts. Under ROC GAAP, foreign-currency forward contracts are accounted for
in a manner similar to that required under US SFAS No. 52. Under US GAAP,
accounting for derivative instruments is covered under US SFAS No. 133, as
amended by US SFAS No. 138, which requires that all entities recognize
derivative instruments as assets and liabilities in the statement of financial
position at fair value. If certain conditions are met, entities may elect to
designate a derivative instrument as a hedge. Under US GAAP, the Company does
not apply hedge accounting, and derivatives have historically been, and
continue to be, recorded on the consolidated balance sheet at fair value, with
the changes in fair values recorded through current period earnings.

   m.  Goodwill

     Under ROC GAAP, the Company amortizes goodwill arising from acquisitions
over five to twenty years. Under US GAAP, the Corporation adopted the
provisions of US SFAS No. 142 on January 1, 2002. US SFAS No. 142 requires the
Company to review for possible impairment of goodwill existing at the date of
adoption and perform subsequent impairment tests on at least an annual basis.
In addition, existing goodwill and intangible assets must be reassessed and
classified consistently in accordance with the criteria set forth in US SFAS
No. 141 and US SFAS No. 142. As a result, the Company will no longer amortize
goodwill. Definite lived intangible assets will continue to be amortized over
their estimated useful lives. The Company completed its transitional impairment


                                      F-42


<PAGE>


test on January 1, 2002 and found no impairment. The Company performed its
annual impairment test during the fourth quarter and determined the goodwill
related to the acquisition of ASE Test was impaired and recorded a charge of
NT$2,213,045 (US$63,777). Total amortization expenses of goodwill under ROC
GAAP in 2000, 2001 and 2002 are NT$559,807, NT$692,919 and NT$815,573
(US$23,504), respectively.

   n.  Undistributed Earnings Tax

     Undistributed earnings generated after 1997 are subject to a 10% tax in
compliance with the Income Tax Law of the ROC. Under ROC GAAP, the 10% tax on
undistributed earnings is recorded as an expense at the time shareholders
resolve that the Company's earnings shall be retained. Under US GAAP, the
Company measured its income tax expense, including the tax effects of temporary
differences, using the rate that includes the tax on undistributed earnings.

   o.  Impairment of Long-term Investments

     ROC GAAP and US GAAP require an assessment of impairment of long-term
investments whenever events or circumstances indicate a decline in value may be
other than temporary. The criteria for determination are similar under ROC GAAP
and US GAAP; however, the methods to measure the amount of impairment may be
based on different estimates of fair values depending on the circumstances.
When impairment is determined to have occurred, US GAAP requires the market
price to be used, if available, to determine the fair value of the long-term
investment and measure the amount of impairment at the reporting date. Under
ROC GAAP, if the market price is deemed to be a result of an inactive market,
another measure of fair value may be used. As such, the Company determined an
other-than-temporary impairment occurred in one of its long-term investments in
an equity-method investee at December 31, 2002. The amount recorded for ROC
GAAP was based on the difference between the carrying value and the net-asset
value of the investee with adjustments made to significant assets of the
investee as determined using appraised values and other appropriate
information. The amount recorded for US GAAP was based on the market price of
the stock of the investee at December 31, 2002. The difference resulted in an
additional impairment charge for 2002 under US GAAP of NT$883.6 million
(US$25.5 million).

     The following reconciles net income (loss) and shareholders' equity under
ROC GAAP as reported in the consolidated financial statements to the
approximate net income (loss) and shareholders' equity amounts as determined
under US GAAP, giving effect to adjustments for the differences listed above.

<TABLE>
                                                                       Year Ended December 31,
                                                 ------------------------------------------------------------------
                                                      2000              2001                       2002
                                                 -------------     -------------     ------------------------------
                                                      NT$               NT$               NT$              US$
                                                          (In Thousands,
                                                  Except Per Share and ADS Data)
<S>                                              <C>               <C>               <C>              <C>
Net income (loss)
Net income (loss) based on ROC GAAP.........         5,837,149        (2,142,219)          129,035            3,719
Adjustments:
   a.Pension benefits.......................             5,635             2,755             2,619               75
   b.Short-term investments.................            22,354             5,952           (38,844)          (1,119)
   c.Bonuses to employees, directors and
     supervisors:
     Accrued regular bonuses................          (929,348)               --                --               --
     Special stock bonuses..................          (929,901)         (963,572)         (835,539)         (24,079)
   e.Depreciation of building...............           (32,127)          (48,803)          (99,981)          (2,881)
   f.Excess of book value of building
     transferred between consolidated
     subsidiaries...........................               432               432               432               12
   g.Restate carrying value and related
     capital gain from sale of long-term
     investment.............................                --            39,002                --               --
   h.Effects for US GAAP adjustments on
     equity-method investees................           (51,825)          (33,785)          198,839            5,730
   k.Stock option compensation..............                --          (908,661)               --               --
   m.Goodwill:
     Amortization                                           --                --           815,573           23,504
     Impairment loss........................                --                --        (2,213,045)         (63,777)
   o.Impairment loss on equity-method
     investee...............................                --                --          (883,620)         (25,465)
Effect of US GAAP adjustments on income tax              6,553             6,978            10,783              311


                                      F-43


<PAGE>

<CAPTION>
                                                                       Year Ended December 31,
                                                 ------------------------------------------------------------------
                                                      2000              2001                       2002
                                                 -------------     -------------     ------------------------------
                                                      NT$               NT$               NT$              US$
                                                          (In Thousands,
                                                  Except Per Share and ADS Data)
<S>                                              <C>               <C>               <C>              <C>
Effect of US GAAP adjustments on minority
   interest.................................             1,074            (4,682)         (160,517)          (4,626)
                                                 -------------     -------------     -------------    -------------
Net decrease in net income..................        (1,907,153)       (1,904,384)       (3,203,300)         (92,315)
                                                 -------------     -------------     -------------    -------------
Net income (loss) based on US GAAP..........         3,929,996        (4,046,603)       (3,074,265)         (88,596)
                                                 =============     =============     =============    =============
Earnings (loss) per share
   Basic....................................              1.34             (1.32)            (0.99)           (0.03)
   Diluted                                                1.29             (1.32)            (0.99)           (0.03)
Earnings (loss) per ADS
   Basic....................................              6.69             (6.59)            (4.97)           (0.14)
   Diluted..................................              6.47             (6.59)            (4.97)           (0.14)
Number of weighted average shares
   outstanding..............................     2,938,004,535     3,071,234,458     3,090,678,225    3,090,678,225
Number of ADS...............................       587,600,907       614,246,892       618,135,645      618,135,645
</TABLE>

<TABLE>
                                                                       Year Ended December 31,
                                                 ------------------------------------------------------------------
                                                      2000              2001                       2002
                                                 -------------     -------------     ------------------------------
                                                      NT$               NT$               NT$              US$
<S>                                                  <C>              <C>               <C>               <C>
Shareholders' equity
Shareholders' equity based on ROC GAAP.......        43,669,214       41,946,321        39,430,666        1,136,331
                                                     ----------       ----------        ----------        ---------
Adjustments:
   a.Pension benefits........................           (42,159)         (39,404)          (36,785)          (1,060)
   b.Restatement of short-term investments...            34,938           40,890             2,046               59
   c.Bonuses to employees, directors and
     supervisors.............................          (113,600)              --                --               --
   d.Treasury stocks
     Reversal of unrealized loss.............           487,752          367,662           367,662           10,595
     Classification or adjustment of
       treasury stock........................        (2,919,411)      (3,017,964)         (378,138)         (10,897)
   e.Effect of US GAAP adjustments on useful
     life....................................          (127,423)        (176,226)         (276,207)          (7,960)
   f.Excess of book value of building
     transferred between consolidated
     subsidiaries............................           (16,191)         (15,759)          (15,327)            (442)
   g.Restate carrying value of subsidiaries'
     long-term investment....................           (47,621)          (8,619)           (8,619)            (248)
   h.Effects of US GAAP adjustments on
     equity-method investments...............          (238,873)        (272,658)          (73,819)          (2,127)
   k.Stock option compensation...............                --         (908,661)         (908,661)         (26,186)
   m.Goodwill:
     Amortization............................                --               --           815,573           23,503
     Impairment loss.........................                --               --        (2,213,045)         (63,777)
   o.Impairment loss on equity-method
     investee................................                --               --          (883,620)         (25,465)
Effect of US GAAP adjustments on income tax..            21,723           28,701            39,484            1,138
Effect of US GAAP adjustments on minority
   interest..................................            20,741           16,059          (144,458)          (4,163)
                                                     ----------       ----------        ----------        ---------
Net decrease in shareholders' equity.........        (2,940,124)      (3,985,979)       (3,713,914)        (107,030)
                                                     ----------       ----------        ----------        ---------
Shareholders' equity based on US GAAP........        40,729,090       37,960,342        35,716,752        1,029,301
                                                     ==========       ==========        ==========        =========
Changes in shareholders' equity based on US
   GAAP
Balance, beginning of year...................        26,569,687       40,729,090        37,960,342        1,093,958
Convertible bonds converted into common
   shares....................................            35,653               --                --               --
Capital increase in cash through the
   Issuance of American Depositary shares....         4,137,910               --                --               --
Net income (loss) for the year...............         3,929,996       (4,046,603)       (3,074,265)         (88,596)
Adjustment for common shares issued as
   bonuses to employees, directors and
   supervisors...............................         1,811,607          963,572           835,539           24,079
Translation adjustment for subsidiaries......           894,255          749,128          (126,378)          (3,642)
Adjustment from changes in ownership
   percentage of investees...................         3,405,909         (320,785)          102,888            2,965
Unrealized loss on long-term investment in
   shares of stock...........................           (59,077)         (15,508)           18,626              537
Effect of change in exchange rate............             3,150               --                --               --
Purchase of treasury stock...................                --          (98,552)               --               --
                                                     ----------       ----------        ----------        ---------


                                      F-44



<PAGE>


<CAPTION>
                                                                       Year Ended December 31,
                                                 ------------------------------------------------------------------
                                                      2000              2001                       2002
                                                 -------------     -------------     ------------------------------
                                                      NT$               NT$               NT$              US$
<S>                                                  <C>              <C>               <C>               <C>
Balance, end of year.........................        40,729,090       37,960,342        35,716,752        1,029,301
                                                     ==========       ==========        ==========        =========
</TABLE>

     A reconciliation of the significant balance sheet accounts under ROC GAAP
to the amounts as determined under US GAAP is as follows:

<TABLE>
                                                                               December 31,
                                                           -------------------------------------------------------
                                                              2001                             2002
                                                           ----------            ---------------------------------
                                                               NT$                    NT$                   US$
<S>                                                        <C>                   <C>                       <C>
Short-term investments
As reported.....................................            4,601,172             2,038,020                 58,733
US GAAP adjustments
   Restatement of investments to fair value.....               40,890                 2,046                     59
                                                           ----------            ----------                -------
As adjusted.....................................            4,642,062             2,040,066                 58,792
                                                           ==========            ==========                =======
Long-term investments
As reported.....................................            9,530,398             6,566,734                189,243
US GAAP adjustments
   Treasury stock...............................           (2,649,484)                   --                     --
   Equity-method investments....................             (272,658)              (73,819)                (2,127)
   Impairment loss..............................                   --              (883,620)               (25,464)
                                                           ----------            ----------                -------
As adjusted.....................................            6,608,256             5,609,295                161,652
                                                           ==========            ==========                =======
Buildings and improvement
As reported.....................................           14,640,855            16,656,394                480,011
US GAAP adjustments
   Effect of US GAAP adjustments on useful life.             (176,226)             (276,207)                (7,960)
   Excess of book value of building transferred
     between consolidated subsidiaries..........              (15,759)              (15,327)                  (442)
                                                           ----------            ----------                -------
As adjusted.....................................           14,448,870            16,364,860                471,609
                                                           ==========            ==========                =======
Other assets
As reported.....................................            1,342,269             2,640,187                 76,086
US GAAP adjustments
   Effect of US GAAP adjustments on income tax..               28,701                39,484                  1,138
                                                           ----------            ----------                -------
As adjusted                                                 1,370,970             2,679,671                 77,224
                                                           ==========            ==========                =======
Consolidated debits
As reported.....................................            5,248,919             5,541,808                159,706
US GAAP adjustments
Restated carrying value of subsidiaries'
   long-term investment.........................             (917,280)             (917,280)               (26,434)
   Goodwill amortization........................                   --               815,573                 23,503
   Goodwill impairment loss.....................                   --            (2,213,045)               (63,777)
                                                           ----------            ----------                -------
As adjusted.....................................            4,331,639             3,227,056                 92,998
                                                           ==========            ==========                =======
Accrued pension cost
As reported.....................................              294,438               416,671                 12,008
US GAAP adjustments
   Pension benefits.............................               39,404                36,785                  1,060
                                                           ----------            ----------                -------
As adjusted.....................................              333,842               453,456                 13,068
                                                           ==========            ==========                =======
</TABLE>


                                      F-45


<PAGE>


     As a result of the adjustments presented above, the amounts of total
assets based on US GAAP were NT$102,364,516 and NT$101,347,163 (US$2,920,667)
as of December 31, 2001 and 2002, respectively. Total liabilities based on US
GAAP were NT$52,277,056 and NT$55,397,148 (US$1,596,459) as of December 31,
2001 and 2002, respectively.

27.  Additional Disclosures Required by US GAAP

     a. Recent accounting pronouncements

     In June 2001, the FASB issued US SFAS No. 143, "Accounting for Asset
Retirement Obligations". The statement requires, among other provisions,
retirement obligations to be recognized when they are incurred and displayed as
liabilities, with a corresponding amount capitalized as part of the related
long-lived asset. The capitalized element is required to be expensed using a
systematic and rational method over its useful life. US SFAS No. 143 will be
adopted by the Corporation on January 1, 2003 and is not expected to have a
material impact on the Company's US GAAP financial information.

     In April 2002, the FASB issued US SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". Among other things, this statement rescinds FASB Statement No. 4,
"Reporting Gains and Losses from Extinguishment of Debt", which required all
gains and losses from the early extinguishment of debt to be aggregated and, if
material, classified as extraordinary. This statement now requires those gains
and losses to be classified as unusual and infrequently occurring events and
transactions. The statement was effective upon issuance in April 2002 for
prospective transactions. The adoption of this statement would require the
Company to reclassify the extraordinary loss recognized for ROC GAAP to unusual
and unfrequent events for US GAAP. The Company's management believes there is
no impact to other financial information under US GAAP.

     In June 2002, the FASB issued US SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". US SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity should be
measured at fair value and recorded when it meets the definition of a liability
in FASB Concepts Statement No. 6, "Elements of Financial Statements". US SFAS
No. 146 superceded EITF No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit and Activity (Including Certain
Costs Incurred in Restructuring)", which required recognition of a liability
for costs associated with an exit or disposal activity when the company
committed to an exit/disposal plan. US SFAS No. 146 is effective for exit or
disposal activities initiated after December 31, 2002. Restatement of prior
periods is not required. US SFAS No. 146 applies to future restructuring
activities and the application of US SFAS No. 146 has no impact on the
Company's US GAAP financial information.

     In December 2002, the FASB issued US SFAS No. 148, "Accounting for
Stock-Based Compensation--Transition and Disclosure", and amended US SFAS No.
123 "Accounting for Stock Based Compensation". This statement provides
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation. It
also amends the disclosure provisions of that statement to require prominent
disclosure about the effects on reported net income of an entity's accounting
policy decisions with respect to stock-based employee compensation. This
statement is effective January 1, 2003. The Company has elected not to account
for stock-based employee compensation using the fair value based method of
accounting set forth in US SFAS No. 123 and US SFAS No. 128, but to continue to
provide the disclosure requirements under US SFAS No. 123. Accordingly, this
statement will not affect the consolidated financial statement of the Company
until the Company decides to adopt the fair value based method of accounting
set forth in US SFAS No. 123 and US SFAS No. 128.

     In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". The interpretation elaborates
on the existing disclosure requirements for most guarantees, including loan
guarantees such as standby letters of credit. It also clarifies that at the
time a company issues a guarantee, the company must recognize an initial
liability for the fair value, or market value, of the obligations it assumes
under the guarantee and must disclose that information on its interim and
annual financial statements. The provisions related to recognizing a liability
at inception of the guarantee for the fair value of the guarantor's obligations
does not apply to product warranties or to guarantees accounted for as
derivatives. The initial recognition and initial measurement provisions apply
on a prospective basis to guarantees issued or modified after December 31,
2002. The Company is in the process of assessing the impact and currently
believes the adoption of recognition and initial measurement requirements of
FIN No. 45 will not have a material impact on its financial position, cash
flows or results of operations.

     In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities--an interpretation of Accounting Research Bulletin No. 51.
FIN No. 46 requires a primary beneficiary to consolidate a variable interest
entity ("VIE") if it has a VIE


                                      F-46


<PAGE>


that will absorb a majority of the entity's expected losses if they occur,
receive a majority of the entity's expected residual returns if they occur, or
both. FIN No. 46 applies immediately to VIEs created after January 31, 2003, and
to VIEs in which the entity obtains an interest after that date. For VIEs
acquired before February 1, 2003, the effective date for compliance is July 1,
2003. The Company is currently in the process of determining the impact of this
statement on its results of operations, financial position and cash flows.

     In November 2002, the FASB Emerging Issues Task Force ("EITF") reached a
consensus on EITF 00-21, "Revenue Arrangements with Multiple Deliverables",
related to the timing of revenue recognition for arrangements in which goods or
services or both are delivered separately in a bundled sales arrangement. The
EITF requires that when the deliverables included in this type of arrangement
meet certain criteria, they should be individually accounted for as separate
units of accounting. This may result in a difference in the timing of revenue
recognition but will not result in a change in the total amount of revenue
recognized in a bundled sales arrangement. The allocation of revenue to the
separate deliverables is based on the relative fair value of each item. If the
fair value is not available for the delivered items, a residual method must
then be used. This method requires the full fair value amount to be allocated
to the undelivered items. This would result in a discount, if any, being
allocated to the delivered items. This consensus is effective for arrangements
entered into in fiscal periods beginning after June 15, 2003. The Company does
not believe that the consensus will have a significant impact on its results of
operations, financial position and cash flows.

     b.  Pension

     Set forth below is pension information disclosed in accordance with US
SFAS No. 132:

<TABLE>
                                                                          Year Ended December 31,
                                                         --------------------------------------------------------
                                                           2000            2001                    2002
                                                         -------         -------        -------------------------
                                                           NT$              NT$             NT$              US$
<S>                                                      <C>             <C>            <C>                <C>
Components of net periodic benefit cost
   Service cost.................................         120,528         116,657          191,707           5,525
   Interest cost................................          30,241          28,968           36,102           1,040
   Expected return on plan assets...............         (14,575)        (21,630)         (23,003)           (663)
   Amortization of prior service cost...........               8           1,468            1,557              45
                                                         -------         -------        ---------          ------
Net periodic benefit cost......................          136,202         125,463          206,363           5,947
Changes in benefit obligation
Benefit obligation at beginning of year........          465,674         650,032          722,024          20,808
   Service cost.................................         120,528         116,657          191,707           5,525
   Interest cost................................          30,241          28,968           36,102           1,040
   Actuarial (gain) loss........................          34,025         (69,978)         288,441           8,312
   Benefits paid................................            (436)         (3,655)            (145)             (4)
                                                         -------         -------        ---------          ------
Benefit obligation at end of year..............          650,032         722,024        1,238,129          35,681
Change in plan assets
Fair value of plan assets at beginning of year.          208,289         311,737          412,036          11,874
   Actual return on plan assets.................          12,408          13,324           10,157             293
   Employer contribution........................          91,476          90,468           85,050           2,451
   Benefits paid................................            (436)         (3,493)            (145)             (4)
                                                         -------         -------        ---------          ------
                                                         311,737         412,036          507,098          14,614
                                                         -------         -------        ---------          ------
Funded Status...................................         338,295         309,988          731,031          21,067
Unrecognized actuarial gain (loss).............          (45,795)         26,947         (270,641)         (7,799)
                                                         -------         -------        ---------          ------
Net amount recognized (recognized as accrued
   pension cost)...............................          292,500         336,935          460,390          13,268
                                                         =======         =======        =========          ======
</TABLE>

     Actuarial assumptions:

                                                             2000 to 2002
                                                             ------------
Discount rate......................................          3.5% to 6.0%
Rate of compensation increase......................          3.0% to 4.0%
Expected return on plan assets.....................          3.5% to 6.0%

     The Company has no other post-retirement or post-employment benefit plans.


                                      F-47


<PAGE>

     c. Short-term investments

     At December 31, 2001 and 2002, certain investments carried at cost under
ROC GAAP were restated under US SFAS No. 115:

<TABLE>
                                                                  December 31,
                    ---------------------------------------------------------------------------------------------------------
                                  2001                                                  2002
                    ---------------------------------   ---------------------------------------------------------------------
                                           Unrealized                          Unrealized                          Unrealized
                    Carrying                 Holding    Carrying                 Holding    Carrying                 Holding
                      Value    Fair Value     Gains       Value    Fair Value     Gains       Value    Fair Value     Gains
                    --------   ----------  ----------   --------   ----------  ----------   --------   ----------  ----------
                       NT$         NT$         NT$         NT$         NT$         NT$         US$         US$         US$
<S>                 <C>         <C>           <C>       <C>         <C>            <C>        <C>         <C>            <C>
Short-term
  investments....   4,601,172   4,642,062     40,890    2,038,020   2,040,066      2,046      58,733      58,792         59
</TABLE>

     d. Income tax expense (benefit)

<TABLE>
                                                                             Year Ended December 31,
                                                         ----------------------------------------------------------
                                                            2000            2001                     2002
                                                         ---------        --------       --------------------------
                                                           NT$              NT$             NT$               US$
<S>                                                      <C>              <C>            <C>                <C>
Income tax currently payable (tax benefit).......        1,080,704        (101,310)         (66,469)         (1,915)
Net change in deferred income tax assets
   (liabilities) for the period..................         (158,691)       (456,911)      (1,261,021)        (36,341)
Income tax on undistributed earnings.............          147,379         335,065          174,478           5,028
Adjustment of prior years' income taxes..........          (10,177)         17,018            1,905              55
                                                         ---------        --------       ----------         -------
                                                         1,059,215        (206,138)      (1,151,107)        (33,173)
                                                         =========        ========       ==========         =======
</TABLE>

     Reconciliation between the income tax calculated on pretax financial
statement income based on the statutory tax rate and the income tax expense
(benefit) which conforms to US GAAP is as follows:

<TABLE>
                                                                             Year Ended December 31,
                                                         ----------------------------------------------------------
                                                            2000            2001                     2002
                                                         ---------        --------       --------------------------
                                                           NT$              NT$             NT$               US$
<S>                                                     <C>               <C>           <C>                 <C>
Tax (benefit) based on pre-tax accounting
   income (loss) at statutory rate................      2,732,461         (830,326)     (1,064,135)         (30,667)
Add (less) tax effects of:
   Permanent differences
     Tax-exempt income
      --Tax holiday...............................       (700,749)         (26,413)        (52,126)          (1,502)
      --Gain from sale of securities..............        (51,415)         (31,711)        (16,798)            (484)
       Bonus to employee and directors............        464,812          240,893          52,221            1,505
       Other......................................          7,368               --          65,259            1,881
Tax credits
   Utilized.......................................     (1,231,247)        (253,227)       (331,255)          (9,546)
   Deferred.......................................       (299,217)         342,563         139,224            4,012
Income taxes (10.0%) on undistributed earnings....        147,379          335,065          54,598            1,573
Adjustment of prior year's income tax.............        (10,177)          17,018           1,905               55
                                                       ----------         --------      ----------          -------
Income tax expense (benefit)......................      1,059,215         (206,138)     (1,151,107)         (33,173)
                                                       ==========         ========      ==========          =======
</TABLE>

     The abovementioned taxes on pretax accounting income (loss) at the
statutory rates for domestic and foreign entities are shown below:

<TABLE>
                                                                             Year Ended December 31,
                                                         ----------------------------------------------------------
                                                            2000            2001                     2002
                                                         ---------        --------       --------------------------
                                                           NT$              NT$             NT$               US$
<S>                                                      <C>              <C>            <C>                <C>
Domestic entities in ROC (25.0% statutory rate)..        2,064,193        (752,228)        (282,713)         (8,147)
Foreign entities
   ASE Korea (30.8% statutory rate)..............            2,153              --               --              --
   ISE Labs (33.0% statutory rate)...............          439,169         (92,487)        (725,744)        (20,915)


                                      F-48


<PAGE>


<CAPTION>
                                                                             Year Ended December 31,
                                                         ----------------------------------------------------------
                                                            2000            2001                     2002
                                                         ---------        --------       --------------------------
                                                           NT$              NT$             NT$               US$
<S>                                                      <C>              <C>            <C>                <C>
   ASE Test Malaysia (30.0% statutory rate)......          226,946          14,389          (55,678)         (1,605)
                                                         ---------        --------         --------          ------
                                                         2,732,461        (830,326)      (1,064,135)        (30,667)
                                                         =========        ========         ========          ======
</TABLE>


     Deferred income tax assets and liabilities as of December 31, 2001 and
2002 are summarized as follows:

<TABLE>
                                                                               December 31,
                                                         ----------------------------------------------------------
                                                             2001                             2002
<S>                                                         <C>                 <C>                       <C>
                                                             NT$                    NT$                   US$
Current deferred income tax assets
   Unused tax credits...........................              378,075               966,689                 27,858
   Provision for inventory obsolescence.........               41,502                38,212                  1,101
   Accrued interest on convertible bonds........              163,289                    --                     --
   Provision for doubtful accounts and sales
     allowance..................................               68,432                23,305                    672
   Unrealized foreign exchange loss.............              108,721                49,351                  1,422
   Loss carryforward............................              214,013                    --                     --
   Other........................................               97,776                39,884                  1,149
                                                            ---------            ----------                -------
                                                            1,071,808             1,117,441                 32,202
   Valuation allowance..........................             (161,800)              (23,000)                  (663)
                                                            ---------            ----------                -------
                                                              910,008             1,094,441                 31,539
Current deferred income tax liabilities--
   unrealized foreign exchange gain.............              (37,000)              (10,000)                  (287)
                                                            ---------            ----------                -------
                                                              873,008             1,084,441                 31,252
                                                            ---------            ----------                -------
Non-current deferred income tax assets
   Unused tax credits...........................            1,648,956             2,324,529                 66,990
   Accrued pension costs........................               64,308               498,087                 14,354
   Loss carryforward............................                   --               455,589                 13,129
   Others.......................................              126,173               151,576                  4,368
                                                            ---------            ----------                -------
                                                            1,839,437             3,429,781                 98,841
   Valuation allowance..........................             (639,188)           (1,765,860)               (50,889)
                                                            ---------            ----------                -------
                                                            1,200,249             1,663,921                 47,952
                                                            ---------            ----------                -------
Non-current deferred income tax liabilities
   Investment income............................             (636,815)             (206,500)                (5,951)
   Unrealized foreign exchange gain.............               (7,185)                   --                     --
   Goodwill amortization........................              (56,124)              (35,658)                (1,028)
   Others.......................................             (245,234)             (237,164)                (6,835)
                                                            ---------            ----------                -------
                                                             (945,358)             (479,322)               (13,814)
                                                            ---------            ----------                -------
                                                              254,891             1,184,599                 34,138
                                                            =========            ==========                =======
</TABLE>

     e. Employee stock option plans


                                      F-49


<PAGE>


ASE Option Plan

     Information regarding the Company's employee stock option plan is as
follows:

<TABLE>
                                                                                       Outstanding Option Rights
                                                                                  -----------------------------------
                                                                 Option Rights                       Weighted Average
                                                                   Available      Number of Option       Exercise
                                                                --------------    ----------------   ----------------
                                                                (In Thousands)     (In Thousands)          (NT$)
<S>                                                                  <C>                 <C>                  <C>
Option rights authorized..................................            160,000                 --              --
   Options granted........................................           (145,989)           145,989              20.80
   Options exercised......................................                 --                 --              --
   Options cancelled......................................                 --                 --              --
                                                                     --------            -------              -----
Balance, December 31, 2002................................             14,011            145,989              20.80
                                                                     ========            =======              =====
</TABLE>

ASE Test Option Plan

     ASE Test has five stock option plans, the 1996 Executive Management Option
Plan (the "1996 Plan"), the 1997 Option Plan, the 1998 Option Plan, the 1999
Option Plan and the 2000 Option Plan. Up to 10,000,000 shares, 3,200,000
shares, 1,600,000 shares, 2,000,000 shares and 12,000,000 shares have been
reserved for issuance under the 1996, 1997, 1998, 1999 and 2000 Option Plans,
respectively.

     The 1996, 1997, 1998, 1999 and 2000 Option Plans granted the following
stock options to purchase the ASE Test shares which are exercisable based on a
vesting schedule over a period of five years until the expiration of options,
to directors, officers and key employees. If any granted shares are forfeited,
the shares may be granted again, to the extent of any such forfeiture.

     Each aforementioned option exercise price was equal to the stock's market
price on the date of grant. Options granted under the 1996, 1997 and 1998
Option Plans expire 5 years after grant. Options granted under the 1999 and
2000 Option Plan expire 10 years after grant.

     Information regarding the option plans of ASE Test is presented below:

<TABLE>
                                                                              Weighted Average      Weighted Average
                                                                             Exercise Price Per     Grant Date Fair
                                                         Number of Shares           Share                Values
                                                                                     US$                  US$
<S>                                                           <C>                     <C>                 <C>
ASE Test
Beginning balance--January 1, 2000..................           12,624,374              9.07
Option granted.....................................              412,000             25.00                13.44
Option exercised...................................           (1,263,041)             6.31                =====
Option forfeited...................................             (287,184)            14.14
                                                              ----------              ----
Ending balance--December 31, 2000...................           11,486,149              9.82
Option granted.....................................           10,158,650              8.94                 4.24
Option exercised...................................           (5,221,508)             3.81                =====
Option forfeited...................................             (114,706)            17.11
                                                              ----------              ----
Ending balance--December 31, 2001...................           16,308,585             11.15
Option granted.....................................              414,500              0.36                10.46
Option exercised...................................           (2,420,591)             8.62                =====
Option forfeited...................................             (882,051)             9.88
Option expired.....................................              (89,080)            13.84
                                                              ----------              ----
Ending balance--December 31, 2002...................          13,331,363             11.55
                                                              ==========             =====
Options exercisable at:
   December 31, 2000...............................            6,902,529              6.13
   December 31, 2001...............................            6,233,453             11.89
   December 31, 2002...............................            5,199,349             13.50
</TABLE>


                                      F-50


<PAGE>

     Significant option groups outstanding at December 31, 2002 and the related
weighted average exercise price and remaining contractual life information are
as follows:

<TABLE>
                   ASE Test                             Outstanding                 Exercisable
---------------------------------------------    ------------------------       ---------------------
                                                                                                           Weighted
                                                                 Weighted                    Weighted      Average
                                                                 Average                     Average      Remaining
                                                   Shares         Price         Shares        Price      Life (Years)
                                                 ---------       --------       ------       --------    ------------
                                                                   US$                         US$
<S>                                              <C>                <C>        <C>            <C>            <C>
Options with exercise price of:
   US$20.00-US$30.00.........................    2,833,440          20.70      1,904,200      20.52          5.3
   US$11.00-US$16.50.........................    1,275,349          11.20        822,099      11.12          1.2
   US$6.10-US$9.15...........................    9,222,574           8.79      2,473,050       8.88          8.1
                                                ----------                     ---------
Options outstanding at December 31, 2002....    13,331,363                     5,199,349
                                                ==========                     =========
</TABLE>

     US SFAS No. 123, "Stock-Based Compensation", effective in 1996,
establishes accounting and disclosure requirements using a fair value-based
method of accounting for stock-based employee compensation plans. Under US SFAS
No. 123, the Company and ASE Test have elected to use the intrinsic value-based
method and provide pro forma disclosures of net income and earnings per share
as if the fair value accounting provisions of this statement had been adopted.

     The Company and ASE Test have computed for pro forma disclosure purposes
the fair value of each option grant, as defined by US SFAS No. 123, using the
Black-Scholes option pricing model with the following assumptions:

                ASE                                2002
----------------------------------------           ----
Risk-free interest rate.................            3.88%
Expected dividend yield.................            0%
Expected lives..........................            5 years
Volatility..............................           58.76%

<TABLE>
                           ASE Test                                   2000              2001                  2002
-----------------------------------------------------------      --------------     -----------           -----------
<S>                                                              <C>                <C>                   <C>
Risk free interest rate....................................       6.61-6.75%         3.62-4.66%            2.58-4.48%
Expected dividend yield....................................       0%                 0%                    0%
Expected lives.............................................       3.4-5.0 years      3.4 years             5.0 years
Volatility.................................................      55.53%             62.14%                62.14%
</TABLE>

     For purposes of pro forma disclosure, the estimated fair value of the
options are amortized to expense over the option rights vesting periods. Had
the Company and ASE Test recorded compensation costs based on the estimated
grant date fair value, as defined by US SFAS No. 123, the Company's net income
(loss) under US GAAP would have been reduced to the pro forma amounts below.

<TABLE>
                                                                          Year Ended December 31,
                                                      -----------------------------------------------------------
                                                         2000           2001                     2002
                                                      ---------      ----------      ----------------------------
                                                          NT$            NT$             NT$            US$
                                                               (In Thousands, Except Per Share and ADS Data)
<S>                                                   <C>            <C>             <C>             <C>
Net income (loss) based on US GAAP .............      3,929,996      (4,046,603)     (3,074,265)     (88,596)
Stock-based compensation expense (net of related
   tax effects) ................................       (247,800)       (305,085)       (331,872)      (9,564)
                                                      ---------      ----------      ----------      -------
Pro forma net income (loss) ....................      3,682,196      (4,351,688)     (3,406,137)     (98,160)
                                                      =========      ==========      ==========      =======
Reported EPS--Basic ............................           1.34           (1.32)          (0.99)       (0.03)
  --Diluted ....................................           1.29           (1.32)          (0.99)       (0.03)
Pro forma EPS--Basic ...........................           1.25           (1.42)          (1.10)       (0.03)
  --Diluted ....................................           1.21           (1.42)          (1.10)       (0.03)
Reported EPS per ADS--Basic ....................           6.69           (6.59)          (4.97)       (0.14)
  --Diluted ....................................           6.47           (6.59)          (4.97)       (0.14)
Pro forma EPS per ADS--Basic ...................           6.27           (7.08)          (5.51)       (0.16)
  --Diluted ....................................           6.05           (7.08)          (5.51)       (0.16)
</TABLE>


                                      F-51


<PAGE>


     The pro forma amounts reflect compensation expense related to 1996, 1997,
1998, 1999 and 2000 option plans of ASE Test granted and vested only. In future
years, the annual compensation expense may increase relative to the fair value
of the options granted and vested in those future years.

     f. According to US SFAS No. 130, the statement of comprehensive income
(loss) for the years ended December 31, 2001 and 2002 are present below:

<TABLE>
                                                                          Year Ended December 31,
                                                      -----------------------------------------------------------
                                                         2000           2001                     2002
                                                      ---------      ----------      ----------------------------
                                                          NT$            NT$             NT$               US$
<S>                                                   <C>            <C>              <C>                <C>
Net income (loss) based on US GAAP...............     3,929,996      (4,046,603)      (3,074,265)        (88,596)
Translation adjustment on subsidiaries--net of
   income tax expense of NT$223,564 and
   NT$187,282 in 2000 and 2001 and income tax
   benefit of NT$31,595 in 2002, respectively....       670,691         561,846          (94,783)         (2,731)
                                                      ---------      ----------       ----------         -------
Comprehensive income (loss)......................     4,600,687      (3,484,757)      (3,169,048)        (91,327)
                                                      =========      ==========       ==========         =======
</TABLE>

     g. US GAAP cash flow information

     The following represents the major caption of cash flow under US GAAP
pursuant to US SFAS No. 95:

<TABLE>
                                                                          Year Ended December 31,
                                                    -------------------------------------------------------------
                                                        2000              2001                     2002
                                                    -----------       -----------      ---------------------------
                                                         NT$               NT$              NT$              US$
<S>                                                 <C>               <C>              <C>                <C>
Cash flows
   Net cash provided by operating activities.....    17,308,069        10,595,115       11,313,800         326,046
   Net cash used in investing activities.........   (33,392,038)      (14,082,951)     (13,167,238)       (379,459)
   Net cash provided by financing activities.....    17,759,155           618,555          530,491          15,288
                                                    -----------       -----------      -----------        --------
   Net increase (decrease) in cash...............     1,675,186        (2,869,281)      (1,322,947)        (38,125)
   Cash, beginning of year.......................    11,809,112        14,166,495       11,770,729         339,214
   Effect of exchange rate changes in cash.......       682,197           473,515          (65,858)         (1,898)
                                                    -----------       -----------      -----------        --------
                                                     14,166,495        11,770,729       10,381,924         299,191
                                                    ===========       ===========      ===========        ========
</TABLE>

     The significant reclassifications for US GAAP cash flow statements pertain
to the following:

        1)    the effect of exchange rate changes on cash is shown in the
              reconciliation of the beginning balance and ending balance of
              cash (as opposed to operating activities under ROC GAAP)

        2)    compensation to directors and supervisors and bonuses to
              employees is shown in the operating activity under US GAAP (as
              opposed to financing activities under ROC GAAP)

        3)    purchases of treasury stock is shown in the financing activities
              under US GAAP (as opposed to investing activities under ROC
              GAAP).

     h.  Goodwill

     As of January 1, 2002, the Company adopted US SFAS No. 142, "Goodwill and
Other Intangible Assets", which requires that goodwill no longer be amortized,
and instead, be tested for impairment on a periodic basis. In conjunction with
the implementation of US SFAS No. 142, the Company completed a goodwill
impairment review as of January 1, 2002 using a fair-value based approach in
accordance with the provision of the standard and found no impairment. Based on
acquisitions completed as of June 30, 2001, application of the goodwill
non-amortization provisions resulted in a decrease in amortization of
approximately NT$815.6 million (US$23.5 million) for 2002. The Company
completed its annual goodwill impairment test at December 31, 2002 and
determined impairment of NT$2,213.0 million (US$63.8 million) of the remaining
goodwill associated with its acquisition of ASE Test. As of December 31, 2002,
the Company had goodwill of NT$3,227.1 million (US$93.0 million), which was
primarily in the reporting units of the testing operations.


                                      F-52


<PAGE>


     The following pro forma information reconciles the net income (loss) and
earnings (loss) per share reported for 2000 and 2001 to adjusted net income
(loss) and earnings (loss) per share, which reflect the adoption of US SFAS No.
142 and compares the adjusted information to the current year results:

<TABLE>
                                                                            Year Ended December 31,
                                                        -----------------------------------------------------------
                                                           2000           2001             2002              2002
                                                        ---------      ----------       ----------         --------
                                                           NT$             NT$              NT$               US$
                                                               (In Thousands, Except Per Share and ADS Data)
<S>                                                     <C>            <C>              <C>                <C>
Net income (loss) based on US GAAP...............       3,929,996      (4,046,603)      (3,074,265)        (88,596)
Goodwill amortization............................         559,807         653,917               --              --
                                                        ---------      ----------       ----------         -------
Net income (loss), as adjusted...................       4,489,803      (3,392,686)      (3,074,265)        (88,596)
                                                        =========      ==========       ==========         =======
Earnings (loss) per share
   Basic earnings (loss) per share, as reported...           1.34           (1.32)           (0.99)          (0.03)
   Goodwill amortization..........................           0.19             0.21              --              --
                                                        ---------      ----------       ----------         -------
   Basic earnings (loss) per share, as adjusted...           1.53           (1.11)           (0.99)          (0.03)
                                                        =========      ==========       ==========         =======
   Diluted earnings (loss) per share, as reported.           1.29           (1.32)           (0.99)          (0.03)
   Goodwill amortization..........................           0.19             0.21              --              --
                                                        ---------      ----------       ----------         -------
   Diluted earnings (loss) per share, as adjusted.           1.48           (1.11)           (0.99)          (0.03)
                                                        =========      ==========       ==========         =======
Earnings (loss) per ADS
   Basic earnings (loss) per share, as reported...           6.69           (6.59)           (4.97)          (0.14)
   Goodwill amortization..........................           0.95             1.06              --              --
                                                        ---------      ----------       ----------         -------
   Basic earnings (loss) per share, as adjusted...           7.64           (5.53)           (4.97)          (0.14)
                                                        =========      ==========       ==========         =======
   Diluted earnings (loss) per share, as reported.           6.47           (6.59)           (4.97)          (0.14)
   Goodwill amortization..........................           0.95             1.06              --              --
                                                        ---------      ----------       ----------         -------
   Diluted earnings (loss) per share, as adjusted.           7.42           (5.53)           (4.97)          (0.14)
                                                        =========      ==========       ==========         =======
</TABLE>

     Changes in the carrying amount of goodwill for the years ended December
31, 2002 and 2001, by reportable segment, are as follows:

<TABLE>
                                                        Packaging        Testing                   Total
                                                        ---------      ----------       ---------------------------
                                                           NT$             NT$              NT$              US$
<S>                                                      <C>           <C>              <C>                <C>
Balance as of January 1, 2001....................         597,725       4,336,077        4,933,802         142,184
   Goodwill amortized during the period...........        (84,214)       (562,257)        (646,471)        (18,630)
                                                         --------      ----------       ----------         -------
   Translation adjustment.........................         (3,898)         40,260           36,362           1,048
Balance as of December 31, 2001..................         509,613       3,814,080        4,323,693         124,602
   Goodwill acquired during the period............         24,169       1,140,009        1,164,178          33,550
   Goodwill impairment............................       (354,280)     (1,858,765)      (2,213,045)        (63,777)
   Translation adjustment.........................         (7,461)        (40,309)         (47,770)         (1,377)
                                                         --------      ----------       ----------         -------
Balance as of December 31, 2002..................         172,041       3,055,015        3,227,056          92,998
                                                         ========      ==========       ==========         =======
</TABLE>

     i. Earnings per share

     The following table represents the computation of basic earnings per share
for each of the years ended at December 31:

<TABLE>
                                                             2000            2001                     2002
                                                        -------------   -------------    -----------------------------
                                                           NT$              NT$             NT$              US$
<S>                                                     <C>             <C>              <C>             <C>
Net Income (loss)................................           3,929,996      (4,046,603)      (3,074,265)        (88,596)
Weighted average shares outstanding:
   Basic..........................................      2,938,004,535   3,071,234,458    3,090,678,225   3,090,678,225
   Effective of dilutive securities...............                 --              --               --              --
                                                        -------------   -------------    -------------   -------------
   Diluted........................................      2,938,004,535   3,071,234,458    3,090,678,225   3,090,678,225
                                                        =============   =============    =============   =============
</TABLE>


                                      F-53


<PAGE>


     Diluted earnings per share for the year ended December 31, 2000 are
calculated as follows:

     The denominator is the weighted average number of outstanding shares of
common stock of 2,938,004,535 shares in 2000. The numerator with consideration
of the adjustment of ASE Test's diluted EPS in 2000 is calculated as follows:

                                                                       Amount
                                                                     ----------
                                                                         NT$
Net income                                                            3,929,996
Less: net income contributed from ASE Test.....................      (1,715,291)
Add : ASE Test's diluted EPS multiplied by the
   number of shares of ASE Test owned by the Company...........       1,588,821
                                                                     ----------
As adjusted....................................................       3,803,526
                                                                     ==========

     Due to the Company's net loss for 2001 and 2002 under US GAAP, all of the
outstanding stock options of 145,989,000 shares in 2002 and shares potentially
issued from convertible bonds of 38,537,822 shares in 2001 were anti-dilutive.
Had the Company earned a profit for 2001 and 2002, the share equivalents of the
convertible bonds of 38,537,822 shares and the stock option of 145,989,000
shares, respectively, would have been added to the basic weighted average
shares outstanding to calculate the diluted weighted averages shares
outstanding.

     The average number of shares outstanding for EPS calculation has been
adjusted retroactively for issuance of stock dividends. The retroactive
adjustment caused the basic EPS before income tax and after income tax for the
year ended December 31, 2000 to decrease from NT$1.99 to NT$1.56 and NT$1.70 to
NT$1.34 and the diluted EPS before income tax and after income tax for the year
ended December 31, 2000 to decrease from NT$1.94 to NT$1.51 and NT$1.66 to
NT$1.29, respectively.


                                      F-54


<PAGE>


                                   SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report.

                            ADVANCED SEMICONDUCTOR ENGINEERING, INC.



                            By:   /s/ Joseph Tung
                                 -------------------------------------------
                                 Joseph Tung
                                 Chief Financial Officer

Date: June 30, 2003



<PAGE>



                                  Certification

     I, Jason C.S. Chang, Chief Executive Officer of Advanced Semiconductor
Engineering, Inc. ("ASE Inc."), certify that:

     1.  I have reviewed this annual report on Form 20-F of ASE Inc.;

     2.  Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this annual report;

     3.  Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

     4.  The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
         and we have:

         a)   designed such disclosure controls and procedures to ensure that
              material information relating to the registrant, including its
              consolidated subsidiaries, is made known to us by others within
              those entities, particularly during the period in which this
              annual report is being prepared;

         b)   evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
              filing date of this annual report (the "Evaluation Date"); and

         c)   presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
              our evaluation as of the Evaluation Date;

     5.  The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)   all significant deficiencies in the design or operation of
              internal controls which could adversely affect the registrant's
              ability to record, process, summarize and report financial data
              and have identified for the registrant's auditors any material
              weaknesses in internal controls; and

         b)   any fraud, whether or not material, that involves management or
              other employees who have a significant role in the registrant's
              internal controls; and

     6.  The registrant's other certifying officer and I have indicated in this
         annual report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent
         evaluation, including any corrective actions with regard to
         significant deficiencies and material weaknesses.

     Date: June 30, 2003



                                   /s/ Jason C.S. Chang
                                  --------------------------------------------
                                  Jason C.S. Chang
                                  Chief Executive Officer



<PAGE>



                                  Certification

     I, Joseph Tung, Chief Financial Officer of Advanced Semiconductor
Engineering, Inc. ("ASE Inc."), certify that:

     1.  I have reviewed this annual report on Form 20-F of ASE Inc.;

     2.  Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this annual report;

     3.  Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

     4.  The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
         and we have:

         a)   designed such disclosure controls and procedures to ensure that
              material information relating to the registrant, including its
              consolidated subsidiaries, is made known to us by others within
              those entities, particularly during the period in which this
              annual report is being prepared;

         b)   evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
              filing date of this annual report (the "Evaluation Date"); and

         c)   presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
              our evaluation as of the Evaluation Date;

     5.  The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)   all significant deficiencies in the design or operation of
              internal controls which could adversely affect the registrant's
              ability to record, process, summarize and report financial data
              and have identified for the registrant's auditors any material
              weaknesses in internal controls; and

         b)   any fraud, whether or not material, that involves management or
              other employees who have a significant role in the registrant's
              internal controls; and

     6.  The registrant's other certifying officer and I have indicated in this
         annual report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent
         evaluation, including any corrective actions with regard to
         significant deficiencies and material weaknesses.

     Date: June 30, 2003



                                    /s/ Joseph Tung
                                   --------------------------------------------
                                   Joseph Tung
                                   Chief Financial Officer


<PAGE>

<TABLE>
                                 EXHIBITS INDEX

   Exhibit
    Number                             Description                                      Page
   -------                             -----------                                      ----

<C>      <S>   <S>                                                                      <S>
1.       (a)   Articles of Association of the Registrant (in Chinese with
               English translation) (incorporating all amendments as of June
               21, 2002) (incorporated by reference to Exhibit 3.1 to the
               Company's registration statement on Form F-3 (File No.
               333-89428) (the "Form F-3") filed on March 31, 2003).

2.       (a)   Amended and Restated Deposit Agreement dated as of September
               29, 2000 among ASE Inc., Citibank N.A., as depositary, and
               Holders and Beneficial Holders of American Depositary Shares
               evidenced by American Depositary Shares evidenced by American
               Depositary Receipts issued thereunder, including the form of
               American Depositary Receipt (incorporated by reference to
               Exhibit 4.1 to the Form F-3 filed on March 31, 2003).

         (b)   Form of Underwriting Agreement (incorporated by reference to
               Exhibit 1.1 to the Form F-3 filed on April 24, 2003).

4.       (a)   Asset Purchase Agreement dated as of July 3, 1999 among ASE
               (Chung Li) Inc., ASE Inc., Motorola Electronics Taiwan, Ltd. and
               Motorola, Inc. (incorporated by reference to Exhibit 10.2 to ASE
               Test Limited's registration statement on Form F-3 (File No.
               333-10892) which was declared effective by the SEC on December
               22, 1999 (the "ASE Test 1999 Registration Statement").

         (b)   Agreement dated as of June 5, 2002 among ASE (Chung Li) Inc.,            E-1
               ASE Inc., Motorola E-1 Electronics Taiwan, Ltd. and Motorola,
               Inc. amending certain earn-out arrangement provided for in
               Section 2.09(b)(ii)(D) of the Asset Purchase Agreement dated as
               of July 3, 1999 among the same parties.

         (c)   Stock Purchase Agreement dated as of July 3, 1999 among ASE
               Investment (Labuan) Inc., ASE Inc., Motorola Asia Ltd. and
               Motorola, Inc. relating to the purchase and sale of 100% of the
               Common Stock of Motorola Korea Ltd. (incorporated by reference
               to Exhibit 10.3 to the ASE Test 1999 Registration Statement).

         (d)+  Manufacturing Services Agreement dated as of July 3, 1999 among
               Motorola, Inc., ASE Inc. and ASE (Chung Li) Inc. (incorporated
               by reference to Exhibit 10.4 to the Company's registration
               statement on Form F-1 (File No. 333-44622) (the "Form F-1")).

         (e)+  Manufacturing Services Agreement dated as of July 3, 1999 among
               Motorola, Inc., ASE Inc. and ASE (Korea) Inc. (incorporated by
               reference to Exhibit 10.5 to the Form F-1).

         (f)+  BGA Immunity Agreement dated as of January 25, 1994 between ASE
               Inc. and Motorola, Inc. (incorporated by reference to Exhibit
               10.6 to the Form F-1).

         (g)   Land Lease effective October 1, 1999 until September 30, 2009
               between ASE Inc. and the Nantze Export Processing Zone
               (incorporated by reference to Exhibit 10.14 to the Form F-1).

         (h)   Land Lease effective September 1, 1999 until August 30, 2009
               between ASE Inc. and the Nantze Export Processing Zone
               (incorporated by reference to Exhibit 10.15 to the Form F-1).

         (i)   Land Lease effective April 1, 1998 until March 31, 2008 between
               ASE Inc. and the Nantze Export Processing Zone (incorporated by
               reference to Exhibit 10.16 to the Form F-1).



<PAGE>

<CAPTION>
   Exhibit
    Number                             Description                                      Page
   -------                             -----------                                      ----

<S>      <C>   <C>                                                                      <C>
         (j)   Land Lease effective October 1, 1997 until September 30, 2007
               between ASE Inc. and the Nantze Export Processing Zone
               (incorporated by reference to Exhibit 10.17 to the Form F-1).

         (k)   Land Lease effective October 1, 1997 until September 30, 2007
               between ASE Inc. and the Nantze Export Processing Zone
               (incorporated by reference to Exhibit 10.18 to the Form F-1).

         (l)   Land Lease effective August 1, 1997 until July 31, 2007 between
               ASE Inc. and the Nantze Export Processing Zone (incorporated by
               reference to Exhibit 10.19 to the Form F-1).

         (m)   Land Lease effective January 1, 1996 until December 31, 2005
               between ASE Inc. and the Nantze Export Processing Zone
               (incorporated by reference to Exhibit 10.20 to the Form F-1).

         (n)   Land Lease effective January 1, 1995 until October 31, 2005
               between ASE Inc. and the Nantze Export Processing Zone
               (incorporated by reference to Exhibit 10.21 to the Form F-1).

         (o)   Land Lease effective October 1, 1999 until September 30, 2009
               between ASE Inc. and the Nantze Export Processing Zone
               (incorporated by reference to Exhibit 10.14 to the Form F-1).

         (p)   Land Lease effective July 1, 1995 until June 30, 2005 between
               ASE Inc. and the Nantze Export Processing Zone (incorporated by
               reference to Exhibit 10.22 to the Form F-1).

         (q)   Land Lease effective July 1, 1995 until June 30, 2005 between
               ASE Inc. and the Nantze Export Processing Zone (incorporated by
               reference to Exhibit 10.23 to the Form F-1).

         (r)   Land Lease effective August 1, 1994 until July 31, 2004 between
               ASE Inc. and the Nantze Export Processing Zone (incorporated by
               reference to Exhibit 10.24 to the Form F-1).

         (s)   Land Lease effective April 6, 1994 until April 5, 2004 between
               ASE Inc. and the Nantze Export Processing Zone (incorporated by
               reference to Exhibit 10.25 to the Form F-1).

         (u)   License Agreement dated as of January 16, 2001 between 1st
               Silicon (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd.
               (incorporated by reference to Exhibit 4(u) to the Annual Report
               on Form 20-F for the year 2000, filed on June 28, 2001 (the
               "2000 20-F")).

         (v)   Service Agreement dated as of August 1, 2002 between ASE
               Electronics (M) Sdn. Bhd. and ASE (U.S.) Inc. (incorporated by
               reference to Exhibit 10.21 to the Form F-3 filed on March 31,
               2003).

         (w)   Service Agreement dated as of August 1, 2002 between ASE Test
               Inc. and ASE (U.S.) Inc. (incorporated by reference to Exhibit
               10.22 to the Form F-3 filed on March 31, 2003).

         (x)   Service Agreement dated as of August 1, 2002 between ASE
               (Korea) Inc. and ASE (U.S.) Inc. (incorporated by reference to
               Exhibit 10.23 to the Form F-3 filed on March 31, 2003).

         (y)   Service Agreement dated as of August 1, 2002 between ASE
               (Chung-Li) Inc. and ASE (U.S.) Inc. (incorporated by reference
               to Exhibit 10.24 to the Form F-3 filed



<PAGE>

<CAPTION>
   Exhibit
    Number                             Description                                      Page
   -------                             -----------                                      ----

<S>      <C>   <C>                                                                      <C>
               on March 31, 2003).

         (z)   Service Agreement dated as of August 1, 2002 between Advanced
               Semiconductor Engineering, Inc. and ASE (U.S.) Inc.
               (incorporated by reference to Exhibit 10.25 to the Form F-3
               filed on March 31, 2003).

         (aa)  Commission Agreement dated as of August 1, 2002 between ASE
               Electronics (M) Sdn. Bhd. and Gardex International Limited.
               (incorporated by reference to Exhibit 10.26 to the Form F-3
               filed on March 31, 2003).

         (bb)  Commission Agreement dated as of August 1, 2002 between ASE
               Test Inc. and Gardex International Limited. (incorporated by
               reference to Exhibit 10.27 to the Form F-3 filed on March 31,
               2003).

         (cc)  Commission Agreement dated as of August 1, 2002 between ASE
               (Korea) Inc. and Gardex International Limited. (incorporated by
               reference to Exhibit 10.28 to the Form F-3 filed on March 31,
               2003).

         (dd)  Commission Agreement dated as of August 1, 2002 between ASE
               (Chung Li) Inc. and Gardex International Limited. (incorporated
               by reference to Exhibit 10.29 to the Form F-3 filed on March
               31, 2003).

         (ee)  Commission Agreement dated as of August 1, 2002 between
               Advanced Semiconductor Engineering, Inc. and Gardex
               International Limited. (incorporated by reference to Exhibit
               10.30 to the Form F-3 filed on March 31, 2003).

         (ff)  Land Lease effective July 1, 2000 until June 30, 2010 between
               ASE Inc. and the Nantze Export Processing Zone. (incorporated
               by reference to Exhibit 4(ff) to the 2000 20-F).

         (gg)  Land Lease effective July 1, 2000 until June 30, 2010 between
               ASE Inc. and the Nantze Export Processing Zone. (incorporated
               by reference to Exhibit 4(ff) to the 2000 20-F).

         (hh)  Land Lease effective October 1, 2000 until September 30, 2010
               between ASE Inc. and the Nantze Export Processing Zon0e.
               (incorporated by reference to Exhibit 4(hh) to the 2000 20-F).

         (ii)  Land Lease effective March 16, 2001 until March 15, 2011
               between ASE Inc. and the Nantze Export Processing Zone.
               (incorporated by reference to Exhibit 4(ii) to the 2000 20-F).

         (jj)  Land Lease effective March 1, 2001 until February 28, 2011
               between ASE Inc. and the Nantze Export Processing Zone.
               (incorporated by reference to Exhibit 4(jj) to the 2000 20-F).

         (kk)  First Amendment to Lease Agreement dated June 7, 2000 between
               ISE Labs, Inc. and RND Funding Company, Inc. (incorporated by
               reference to Exhibit 4(kk) to the 2000 20-F).

         (ll)  Sub-lease Agreement dated October 3, 2000 between ISE Labs
               Singapore Pte Ltd and Wan Tien Realty (Pte) Ltd. (incorporated
               by reference to Exhibit 4(ll) to the 2000 20-F).

         (mm)  Sub-lease Agreement dated June 3, 1999 between ISE Labs
               Singapore Pte Ltd and Wan Tien Realty (Pte) Ltd. (incorporated
               by reference to Exhibit 4(mm) to the 2000 20-F).

         (nn)  Sublease Agreement dated June 2000 between ISE Labs, Inc. and
               Cirrus Logic, Inc. (incorporated by reference to Exhibit 4(nn)
               to the 2000 20-F).



<PAGE>

<CAPTION>
   Exhibit
    Number                             Description                                      Page
   -------                             -----------                                      ----

<S>      <C>   <C>                                                                      <C>
         (oo)  Sublease Agreement dated June 2000 between ISE Labs, Inc. and
               Cirrus Logic, Inc. (incorporated by reference to Exhibit 4(oo)
               to the 2000 20-F).

         (pp)  Tenancy Agreement dated April 1, 1999 between ISE Labs (HK)
               Limited and Hing Seng Plastic Factory Limited. (incorporated by
               reference to Exhibit 4(pp) to the 2000 20-F).

         (qq)  Lease dated September 28, 2000 between ISE Labs Hong Kong
               Limited and Shinano Kenshi (HK) Co., Ltd. (incorporated by
               reference to Exhibit 4(qq) to the 2000 20-F).

         (rr)  Lease dated October 20, 2000 between ISE Labs Hong Kong and
               Bless Silver Development Limited. (incorporated by reference to
               Exhibit 4(rr) to the 2000 20-F).

         (ss)  Lease Agreement between ASE Test Malaysia and Penang
               Development Corporation (incorporated by reference to Exhibit
               2(c) to ASE Test Limited's annual report on Form 20-F for the
               year ended December 31, 1997). (incorporated by reference to
               Exhibit 4(ss) to the 2000 20-F).

         (tt)  Sale and Purchase Agreement between Afasia Knitting Factory
               (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd. dated
               February 24, 1997. (incorporated by reference to Exhibit 4(tt)
               to the 2000 20-F).

         (uu)  Office Building Lease Agreement between ISE Labs, Inc. and
               JER/BRE Austin Tech L.P. dated October 4, 2001. (incorporated
               by reference to Exhibit 10.46 to the Form F-3 filed on May 30,
               2002).

         (vv)  Plant Lease Agreement between ASE (Chung Li) Inc. and ASE
               Material Inc. dated October 31, 2001.

         (ww)  Plant Lease Agreement between ASE (Chung Li) Inc. and ASE
               Material Inc. dated October 31, 2001.

         (xx)  Plant Lease Agreement between ASE (Chung Li) Inc. and ASE Test
               Inc. dated October 5, 2001.

         (iii) ASE Inc. Employee Bonus Plan in (Chinese with English language
               translation) (incorporated by reference to Exhibit 4(iii) to
               the Annual Report on Form 20-F for the year 2001, filed on June
               28, 2002).

         (iv)  2002 ASE Employee Stock Option Plan (in Chinese with English
               language translation) (incorporated by reference to Exhibit
               10.50 to the Form F-3 filed on March 31, 2003).

8.             List of Subsidiaries (incorporated by reference to Exhibit 21.1
               to the Form F-3 filed on May 30, 2002).

12.      (a)   Co-Building and Sale Agreement dated as of January 27, 2000
               between ASE (Chung Li) Inc. and Hung Ching Development &
               Construction Co. Ltd. (in Chinese with English language summary
               translation) (incorporated by reference to Exhibit 99.1 to the
               Form F-3 filed on May 27, 2003).

         (b)   Co-Building Agreement dated as of April 17, 2003 between ASE
               Inc. and Hung Ching Development & Construction Co. Ltd. (in
               Chinese with English language summary translation)(incorporated
               by reference to Exhibit 99.2 to the Form F-3 filed on May 27,
                2003).



<PAGE>

<CAPTION>
   Exhibit
    Number                             Description                                      Page
   -------                             -----------                                      ----

<S>      <C>   <C>                                                                      <C>
         (c)   Certification of the Chief Executive Officer and the Chief                E-6
               Financial Officer of E-6 Advanced Semiconductor Engineering,
               Inc. for the purpose of complying with Section 1350 of Chapter
               63 of Title 18 of the United States Code.
</TABLE>
-----------------------
+ Does not contain portions for which confidential treatment has been granted.