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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 20-F

[ ]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (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, 2001

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

             (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
                                (8867) 361-7131
                    (Address of Principal Executive Offices)

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

                 American Depositary Shares, each representing
                       5 Common Shares of NT$10 par value

     Securities registered or to be registered pursuant to Section 12(g) of the
Act: None

          (As of the close of the period covered by the annual report)

     Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: None

     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

     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
      CAPITALIZATION AND INDEBTEDNESS..........................................5
      REASON FOR THE OFFER AND USE OF PROCEEDS.................................5
      RISK FACTORS.............................................................5
     Item 4.  Information on the Company......................................16
      HISTORY AND DEVELOPMENT OF THE COMPANY..................................16
      BUSINESS OVERVIEW.......................................................18
      ORGANIZATIONAL STRUCTURE................................................39
      PROPERTIES..............................................................39
     Item 5.  Operating and Financial Review and Prospects....................42
      OPERATING RESULTS AND TREND INFORMATION.................................42
      LIQUIDITY AND CAPITAL RESOURCES.........................................52
      RESEARCH AND DEVELOPMENT................................................55
     Item 6.  Directors, Senior Management and Employees......................56
      DIRECTORS AND SENIOR MANAGEMENT AND BOARD PRACTICE......................56
      EMPLOYEES...............................................................60
      SHARE OWNERSHIP.........................................................60
     Item 7.  Major Shareholders..............................................61
      MAJOR SHAREHOLDERS......................................................61
      RELATED PARTY TRANSACTIONS..............................................62
     Item 8.  Financial Information...........................................63
      CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.................63
      LEGAL PROCEEDINGS.......................................................63
      SIGNIFICANT CHANGES.....................................................64
     Item 9.  Listing Details.................................................64
      MARKET PRICE INFORMATION AND MARKETS....................................64
     Item 10.  Additional Information.........................................66
      ARTICLES OF INCORPORATION...............................................66
      MATERIAL CONTRACTS......................................................70
      EXCHANGE CONTROLS.......................................................73
      TAXATION................................................................73
      DOCUMENTS ON DISPLAY....................................................76
     Item 11.  Quantitative and Qualitative Disclosures About Market Risk.....77
     Item 12.  Description of Securities Other Than Equity Securities.........78

PART II.......................................................................78
     Item 13.  Defaults, Dividend Arrearages and Delinquencies................78
     Item 14.  Material Modifications to the Rights of Security Holders
               and Use of Proceeds............................................78
      MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS................78

PART III......................................................................79
     Item 17.  Financial Statements...........................................79


                                       i
<PAGE>


     Item 18.  Financial Statements...........................................79
     Item 19.  Exhibits.......................................................80
























                                      ii

<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, 2001,
which was NT$35.00=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 statement, 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 statements of income for the years
ended December 31, 1999, 2000 and 2001 and our balance sheets as of December
31, 2000 and 2001 have been audited by T.N. Soong & Co., independent
accountants. 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, 1997 and 1998 and
selected consolidated balance sheet data as of December 31, 1997, 1998 and 1999
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 material respects from generally accepted
accounting principles in the United States, or US GAAP. Notes 27 and 28 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, 1999, 2000 and 2001 and reconciliations of shareholders'
equity to US GAAP as of December 31, 2000 and 2001.

<TABLE>
                                                                   Year Ended and as of December 31,
                                         ------------------------------------------------------------------------------------
                                               1997          1998          1999           2000          2001           2001
                                         ------------- ------------- -------------  -------------  ------------  ------------
                                                NT$           NT$           NT$            NT$           NT$           US$
                                                  (in millions, except share, ADS and earnings per share and per ADS data)
<S>                                           <C>           <C>           <C>            <C>           <C>            <C>
Income Statement Data:
ROC GAAP:
Net revenues.........................         19,088.2      20,762.4      32,609.6       50,893.4      38,367.8       1,096.2
Cost of revenues.....................        (13,758.5)    (15,468.1)    (23,959.6)     (35,567.3)    (32,957.0)       (941.6)
                                         ------------- ------------- -------------  -------------  ------------  ------------
Gross profit.........................          5,329.7       5,294.3       8,650.0       15,326.1       5,410.8         154.6
Operating expenses:
   Selling...........................           (733.5)       (744.7)       (924.3)      (1,020.5)       (877.9)        (25.1)
   General and administrative,
     excluding goodwill
     amortization(1).................           (648.7)       (909.4)     (1,655.0)      (2,606.2)     (2,797.6)        (79.9)
   Goodwill amortization(2)..........            (53.2)       (345.7)       (507.8)        (559.8)       (692.9)        (19.8)
   Research and development..........           (372.9)       (453.6)       (714.3)      (1,262.5)     (1,504.5)        (43.0)
                                         ------------- ------------- -------------  -------------  ------------  ------------
   Operating income (loss)...........          3,521.4       2,840.9       4,848.6        9,877.1        (462.1)        (13.2)
Net non-operating income (expense):
   Investment income (loss) on
     long-term investment-- net(1)(3)            114.2          54.6         329.9          195.7        (868.8)        (24.8)
   Goodwill amortization(4)..........           (155.1)       (155.1)       (279.3)        (363.0)       (378.0)        (10.8)
   Gain (loss) on sale of
     investments-- net...............          4,870.9         606.9       5,544.2           91.7          50.7           1.4
   Foreign exchange gain (loss)-- net           (133.8)       (935.5)       (538.4)         302.7         247.5           7.1
   Interest income (expense)-- net(5)            (85.9)       (380.4)     (1,046.6)      (1,538.0)     (1,739.3)        (49.7)
   Others-- net(6)...................             11.0         (50.1)        204.0         (162.6)        164.5           4.7
                                         ------------- ------------- -------------  -------------  ------------  ------------
Income (loss) before tax.............          8,142.7       1,981.3       9,062.4        8,403.6      (2,985.5)        (85.3)


                                                               2
<PAGE>

<CAPTION>
                                                                   Year Ended and as of December 31,
                                         ------------------------------------------------------------------------------------
                                               1997          1998          1999           2000          2001           2001
                                         ------------- ------------- -------------  -------------  ------------  ------------
                                                NT$           NT$           NT$            NT$           NT$           US$
                                                  (in millions, except share, ADS and earnings per share and per ADS data)
<S>                                           <C>           <C>           <C>            <C>           <C>            <C>
Income tax benefit (expense).........           (374.9)        150.8        (459.5)      (1,065.8)        199.2           5.7
                                         ------------- ------------- -------------  -------------  ------------  ------------
Income (loss) before minority interest...      7,767.8       2,132.1       8,602.9        7,337.8      (2,786.3)        (79.6)
Income before acquisition............             --            --           (65.1)          --            --            --
Extraordinary loss...................             --            --            --             --          (144.6)         (4.1)
Minority interest in net loss
   (income) of subsidiary............           (364.3)       (528.1)       (743.1)      (1,500.6)        788.7          22.5
                                         ------------- ------------- -------------  -------------  ------------  ------------
Net income (loss)....................          7,403.5       1,604.0       7,794.7        5,837.2      (2,142.2)        (61.2)
                                         ============= ============= =============  ============= ============= =============
Earnings per common share:
   Simple............................              N/A           N/A           N/A            N/A         (0.66)        (0.02)
                                         ============= ============= =============  ============= ============= =============
   Primary(7)........................             2.33          0.49          2.46           1.82           N/A           N/A
                                         ============= ============= =============  ============= ============= =============
   Fully diluted(7)..................             2.33          0.49          2.45           1.80           N/A           N/A
                                         ============= ============= =============  ============= ============= =============
Dividends per common share(8)........             3.80          7.20          1.07           3.15          1.70          0.05
                                         ============= ============= =============  ============= ============= =============
Earnings per pro forma equivalent ADS:
   Simple............................              N/A           N/A           N/A            N/A         (3.29)        (0.09)
                                         ============= ============= =============  ============= ============= =============
   Primary(7)........................            11.65          2.43         12.28           9.12           N/A           N/A
                                         ============= ============= =============  ============= ============= =============
   Fully diluted(7)..................            11.65          2.43         12.27           9.01           N/A           N/A
                                         ============= ============= =============  ============= ============= =============
Number of common shares(9)...........    3,135,196,466 3,135,196,466 3,135,196,466  3,166,809,827 3,254,800,000 3,254,800,000
Number of pro forma equivalent ADSs..      627,039,293   627,039,293   627,039,293    633,361,965   650,960,000   650,960,000
US GAAP:
Net income...........................                          298.9       4,641.3        3,930.0      (4,046.6)       (115.6)
Earnings per common share:
   Basic.............................                           0.11          1.61           1.34         (1.32)        (0.04)
                                                       ============= =============  ============= ============= =============
   Diluted...........................                           0.09          1.58           1.29         (1.32)        (0.04)
                                                       ============= =============  ============= ============= =============
Earnings per pro forma equivalent ADS:
   Basic.............................                           0.53          8.07           6.69         (6.59)        (0.19)
                                                       ============= =============  ============= ============= =============
   Diluted...........................                           0.46          7.91           6.47         (6.59)        (0.19)
                                                       ============= =============  ============= ============= =============
Number of common shares(9)...........                  2,806,247,321 2,874,924,409 2,938,004,535  3,071,234,458 3,071,234,458
Number of pro forma equivalent ADSs..                    561,249,464   574,984,882   587,600,907    614,246,892   614,246,892
Balance Sheet Data:
ROC GAAP:
Current assets:
   Cash and cash equivalents.........         10,869.8       8,173.9      11,809.1       14,166.5      11,770.7         336.3
   Short-term investments............          4,008.0         647.2         216.3        1,682.7       4,601.2         131.5
   Notes and accounts receivable.....          4,094.3       3,636.7       7,463.4        9,260.6       7,126.1         203.6
   Inventories.......................          2,059.0       1,744.8       2,449.7        3,246.3       2,768.4          79.1
   Other.............................            705.5         771.9       1,411.8        2,431.6       3,383.2          96.7
                                         ------------- ------------- -------------  ------------- ------------- -------------
   Total.............................         21,736.6      14,974.5      23,350.3       30,787.7      29,649.6         847.2
                                         ============= ============= =============  ============= ============= =============
Long-term investments................          5,501.7       7,317.0       9,674.4       10,712.2       9,530.4         272.3
Properties...........................         16,363.1      20,356.8      38,107.5       60,566.2      60,555.1       1,730.1
Other assets.........................          1,557.7       4,363.2       6,198.6        6,275.1       6,591.2         188.3
                                         ------------- ------------- -------------  ------------- ------------- -------------
Total assets.........................         45,159.1      47,011.5      77,330.8      108,341.2     106,326.3       3,037.9
                                         ============= ============= =============  ============= ============= =============
Short-term bank borrowings/loans.....          5,946.0       6,810.2       9,868.2       13,768.0      13,983.1         399.5
Long-term bank borrowings/loans......         11,872.9      12,235.0      24,551.5       25,976.9      30,674.3         876.4
Other liabilities and minority
   interest..........................          6,306.5       6,091.5      12,854.1       24,927.1      19,722.6         563.5
                                         ------------- ------------- -------------  ------------- ------------- -------------
Total liabilities and minority
   interest..........................         24,125.4      25,136.7      47,273.8       64,672.0      64,380.0       1,839.4
                                         ============= ============= =============  ============= ============= =============
Shareholders' equity.................         21,033.7      21,874.8      30,057.0       43,669.2      41,946.3       1,198.5
US GAAP:
Shareholders' equity.................                       17,675.2      26,569.7       40,729.1      37,960.3       1,084.6

Segment Data:
ROC GAAP:
Net revenues:
   Packaging.........................         15,334.3      16,867.4      24,523.0       38,028.8      28,898.2         825.7
   Testing...........................          2,383.4       3,131.3       7,793.2       12,768.4       9,459.2         270.2
   Other.............................          1,370.5         763.7         293.4           96.2          10.4           0.3
Gross profit:
   Packaging.........................          3,990.5       3,693.8       5,753.0       10,016.9       4,625.8         132.2
   Testing...........................          1,148.7       1,484.6       3,105.2        5,294.4         782.8          22.4
   Other.............................            190.5         115.9        (208.2)          14.8           2.2           0.1


                                                               3
<PAGE>

<CAPTION>
                                                                   Year Ended and as of December 31,
                                         ------------------------------------------------------------------------------------
                                               1997          1998          1999           2000          2001           2001
                                         ------------- ------------- -------------  -------------  ------------  ------------
                                                NT$           NT$           NT$            NT$           NT$           US$
                                                  (in millions, except share, ADS and earnings per share and per ADS data)
<S>                                           <C>           <C>           <C>            <C>           <C>            <C>
Other Data:
ROC GAAP:
Net cash outflow from acquisition of
   fixed assets......................         (8,030.1)     (6,945.0)     (9,869.2)     (30,063.6)    (11,565.7)       (330.4)
Depreciation and amortization........          2,301.6       3,237.2       5,554.4        8,593.8      11,127.3         317.9
Net cash inflow (outflow) from
   operations........................          2,185.3       5,194.2       7,017.2       17,618.3      11,707.2         334.5
Net cash inflow (outflow) from sale
   of investments....................          5,495.0         290.5       7,889.3           --            --            --
Net cash inflow (outflow) from
   investing activities(10)..........         (5,067.7)     (8,558.3)    (11,782.7)     (33,550.4)    (15,180.0)       (433.7)
Net cash inflow (outflow) from
   financing activities(11)..........         11,290.3         589.3       8,569.0       17,607.3         603.5          17.2

------------------
(1)  Excludes goodwill amortization for purposes of this table only.

(2)  Included in general and administrative expenses in our consolidated
     financial statements.

(3)  Derived by netting "investment income under equity method" in
     non-operating income and "investment loss under equity method" in
     non-operating expenses in our consolidated financial statements.

(4)  Included in "investment loss under equity method" in non-operating
     expenses in our consolidated financial statements.

(5)  Derived by netting "interest" in non-operating income and "interest" in
     non-operating expenses in our consolidated financial statements.

(6)  Derived by netting "others" in non-operating income and "others" in
     non-operating expenses in our consolidated financial statements.

(7)  The numerator of both primary and fully diluted earnings per share is
     calculated with consideration of the adjustment of ASE Test's primary and
     fully diluted earnings per share. See note 20 to our consolidated
     financial statements.

(8)  Dividends per common share issued as a stock dividend.

(9)  Represents the weighted average number of shares after retroactive
     adjustments to give effect to stock dividends and employee stock bonuses.

(10) Includes proceeds from the sale of common shares, including global
     depositary shares, by affiliates of ASE Inc. and proceeds from the sale of
     ordinary shares of ASE Test by ASE Inc.

(11) Includes proceeds from primary offerings of common shares, including ADSs,
     and ordinary shares by ASE Inc. and ASE Test, respectively.
</TABLE>

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 fiscal years indicated,
information concerning the amount 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.

<TABLE>

                                          NT Dollars per U.S. Dollar Noon Buying Rate
                                     ----------------------------------------------------
                                      Average        High            Low       Period-End
                                     --------      --------       --------     ----------
<S>                                    <C>           <C>            <C>           <C>
1997..............................   NT$29.06      NT$33.25       NT$27.34      NT$32.80
1998..............................      33.54         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
   November.......................      34.50         34.55          34.44         34.47
   December.......................      34.68         35.13          34.46         35.00
2002 (through June 27)............      34.74         35.11          33.50         33.50
First Quarter.....................      35.04         35.11          34.94         35.00


                                                      4
<PAGE>

<CAPTION>

                                          NT Dollars per U.S. Dollar Noon Buying Rate
                                     ----------------------------------------------------
                                      Average        High            Low       Period-End
                                     --------      --------       --------     ----------
<S>                                    <C>           <C>            <C>           <C>
      January.....................      35.03         35.08          34.94         34.99
      February....................      35.07         35.11          34.99         35.11
      March.......................      35.02         35.10          34.95         35.00
   Second Quarter (through June 27)     34.45         35.01          33.50         33.50
      April.......................      34.92         35.01          34.72         34.72
      May.........................      34.45         34.72          34.05         34.05
      June (through June 27)......      33.91         34.07          33.50         33.50

------------------
Source: Federal Reserve Board database.
</TABLE>


     On June 27, 2002, the noon buying rate was NT$33.50 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, 2001, which
was NT$35.00 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

   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 commencing in the fourth quarter of 2000 that continued
through 2001. This most recent 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. We expect this industry downturn 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


                                       5
<PAGE>


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, approximately 71.5% of
our net revenues 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 our 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.

     We face increasing competition from other packaging and testing companies.
In particular, most of our customers obtain packaging or testing services from
more than one source. Furthermore, some of our competitors may have access to
more advanced technologies and greater financial and other resources than we
do. Many of our competitors have shown a willingness to quickly and sharply
reduce prices, as they did in 1998 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.


                                       6
<PAGE>


   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;

     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
   profitability 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


                                       7
<PAGE>


maintain or surpass our past profitability levels if we cannot consistently
achieve or maintain relatively high capacity utilization rates.

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

     We have significantly expanded our packaging and testing operations in
recent years, and expect to continue to expand our operations in the future,
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
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 may
also trigger cross-defaults under our 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 could be significantly disrupted or harmed. An event
of default under any agreement governing our existing or future debt, if not
cured or waived, could 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


                                       8
<PAGE>


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 import of foreign workers were to become significantly more restrictive
or if we are otherwise unable to attract or retain these workers at reasonable
cost.

     Criminal charges were brought in December 1998 by the district attorney
for Taipei against Jason C.S. Chang, our Chairman, Richard H.P. Chang, our Vice
Chairman and Chief Executive Officer, and Chang Yao Hung-ying, our director,
and others 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
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 are
appealing the decision to the Supreme Court of Taiwan, ROC. If the convictions
are not overturned on appeal, they will be required under ROC law to resign as
directors and Jason C.S. Chang will be required to resign as Chairman of ASE
Inc. See "Item 4. Information on the Company--Business Overview--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 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


                                       9
<PAGE>


of 2002. 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 this 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, Schlumberger
Limited 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.

   Fluctuations in exchange rates could result in foreign exchange losses.

     Currently, the majority of our revenues from packaging and testing
services are denominated in U.S. dollars and NT dollars. Our costs of revenues
and operating expenses associated with packaging and testing services, on the
other hand, are incurred in several currencies, including NT dollars, U.S.
dollars, Malaysian ringgit, Korean won, Philippine pesos, Singapore dollars and
Hong Kong dollars. In addition, a substantial portion of our capital
expenditures, primarily for the 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 40%, 44% and 41% of our net revenues in 1999, 2000
and 2001, respectively. Other than Motorola, Inc. in 1999, and Motorola, Inc.
and VIA Technologies, Inc. in 2000 and 2001, no other customer accounted for
more than 10% of our net revenues in 1999, 2000 and 2001. 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.


                                      10
<PAGE>


     All of our key customers operate in the cyclical semiconductor business
and have in the past, and may in the future, vary order levels significantly
from period to period. 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 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 be able to provide sufficient raw materials to meet all of our
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.


                                      11
<PAGE>


   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 -
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
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 net income 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, 2001. Please see
note 27 to our consolidated financial statements for a discussion of the
criteria which, if met, may require impairment charges.

     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 expenses amounted to NT$1,070.9 million (US$70.6
million) under ROC GAAP for the year ended December 31, 2001. Starting from
January 2002, all goodwill must be periodically tested for impairment. As of
December 31, 2001, the goodwill under US GAAP amounted to NT$6,882.7 million
(US$196.6 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 net
income for periods subsequent to December 31, 2001 on a US GAAP reconciled
basis. Please see note 28h to our consolidated financial statements for a
discussion of the new standards under US GAAP.

     The determination of an impairment charge at any given time is based
significantly on our expected results of operation 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
2001 from packaging and testing services are derived from our operations


                                      12
<PAGE>


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 authorizes our
board of directors to make investments in the People's Republic of China.
However, the Republic of China government currently restricts certain
investments by ROC companies in the People's Republic of China. 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 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.

   As a substantial portion of our business and operations are located in
   Taiwan, we are vulnerable to earthquakes, 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. In addition, many areas in Taiwan are experiencing a severe
drought. As of May 3, 2002, the Taiwan authorities announced water rationing
measures in the northern parts of Taiwan. If the drought continues and the
authorities are unable to source water from alternative sources in sufficient
quantities, we may be required to temporarily shut down or substantially reduce
the operations of our facilities in the affected areas, which would seriously
affect our operations.

     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 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, 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.


                                      13
<PAGE>


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.

   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;


                                      14
<PAGE>


     (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.

   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--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

     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.


                                      15
<PAGE>


     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.

   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 28, 2002, the Taiwan Stock Exchange Index closed at
5,153.71. 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.

   Purchasers 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. The issuance of these
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 also provides our customers with testing
and packaging services. In 1996, we established ASE Philippines, which 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


                                      16
<PAGE>


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 million payable over three
years if sales volume targets were met. These targets were met for the first
two years. The third year to determine such target will be complete on June 30,
2002. 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 December
31, 2001, we held 23.0% 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.







                                      17
<PAGE>


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

     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; 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.

     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    Altera Corporation

     o    ATI Technologies Inc.

     o    Cambridge Silicon Radio

     o    Cirrus Logic, Inc.

     o    Conexant Systems, Inc.

     o    Koninklijke Philips Electronics N.V.


                                      18
<PAGE>


     o    LSI Logic Corporation

     o    Motorola, Inc.

     o    NVIDIA Corporation

     o    ON Semiconductor Corp.

     o    Qualcomm Incorporated

     o    Silicon Integrated Systems Corp.

     o    ST Microelectronics N.V.

     o    VIA Technologies, 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 process 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 and 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$204.4 billion in 2000. 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 stabilization in the fourth
quarter of 2001, primarily as a result of the completion of inventory
adjustment and introduction of new products. We believe that the pattern of
long-term growth and cyclical fluctuations will continue in the semiconductor
industry.

   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. Similarly, the availability of technologically advanced independent
manufacturing services has encouraged "systems companies", which had
traditionally outsourced the manufacturing of semiconductor components used in
the assembly of their systems products to integrated device manufacturers, to
increasingly outsource to independent semiconductor manufacturing companies.


                                      19
<PAGE>


     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 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.

     During the recent industry downturn in 2001, semiconductor companies
significantly reduced their investment in in-house packaging and testing
technologies and capacity. As a result, some semiconductor companies may have
limited 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.

     Growth of Fabless Semiconductor Companies. The substantial growth in the
number and scale of fabless semiconductor companies that rely solely on
independent companies to meet their manufacturing requirements will continue to
drive growth in the market for independent foundry, packaging and testing
services.

     Gartner Dataquest forecasts that the total outsourced semiconductor
packaging market will grow from US$6.4 billion in 2001 to US$17.0 billion in
2005. Gartner Dataquest also forecasts that the total outsourced semiconductor
testing market will grow from US$0.9 billion in 2001 to US$3.0 billion in 2005.

   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.


                                      20
<PAGE>


     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 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. The
manufacturing process may be divided into the following stages from circuit
design to shipment:

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

Wafer Fabrication          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 wafer 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)


                                      21
<PAGE>


                           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.

   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


                                      22
<PAGE>


wirebonding process towards the flip chip process. As a result, we expect
bumping and high density interconnect materials to be the core technology 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 component of the packaging business and lead the migration in
packaging technology. In 2001, ASE Material supplied approximately 34% of our
substrate requirements by value. We intend to continue to make investments 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 2002.

     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 systems. Our
controlling interest in Universal Scientific has provided us with access to
process and product technologies at the levels of module, board and systems
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 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 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.

   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


                                      23
<PAGE>


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

     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;
          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,
our packaging and testing revenues accounted for 75.3% and 24.7% of our net
revenues, respectively.

   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 strong demand. These include advanced leadframe-based package
types such as quad flat package and thin quad flat package, and package types
based on substrates, such as ball grid array. We believe that 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


                                      24
<PAGE>


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 difference 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.

<TABLE>

         Package Types            Number of Leads          Description                   End Use Applications
----------------------------      ---------------  -----------------------------     ---------------------------
<S>                                     <C>        <C>                               <C>
Quad Flat Package (QFP)/Thin            44-304     Designed for advanced             Multimedia applications,
   Quad Flat Package (TQFP)                           processors and                    cellular phones, personal
                                                      controllers, application          computers, automotive and
                                                      specific integrated               industrial products, hard
                                                      circuits and digital              disk drives, communication
                                                      signal processors.                boards such as ethernet,
                                                                                        integrated services
                                                                                        digital network, and
                                                                                        notebook computers.

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

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

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

Plastic Dual In-line Package              8-56     Package used in consumer          Telephones, televisions,
   (PDIP)                                             electronic 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.


                                      25
<PAGE>


     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;

     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 growing demand for packaging
solutions with increased input/output density, smaller size and better heat
dissipation characteristics. In anticipation of this demand, we have focused on
developing our capabilities in 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>

         Package Types            Number of Leads          Description                   End Use Applications
----------------------------      ---------------  -----------------------------     ---------------------------
<S>                                     <C>        <C>                               <C>
Plastic BGA                           119-1096     Designed for semiconductors       Wireless products, cellular
                                                      which require the                 phones, global positioning
                                                      enhanced performance              systems, notebook
                                                      provided by plastic BGA,          computers, disk drives and
                                                      including personal                video cameras.
                                                      computer chipsets,
                                                      graphic controllers and
                                                      microprocessors,
                                                      application specific
                                                      integrated circuits,
                                                      digital signal processors
                                                      and memory devices.

Thin Film BGA                           36-288     Designed for semiconductors       Cellular and other
                                                      such as memory, analog,           telecommunications and
                                                      and application specific          wireless systems, global
                                                      integrated circuits               positioning systems,
                                                      requiring a smaller               notebook computers and
                                                      package.                          personal digital
                                                                                        assistants, also called
                                                                                        PDAs.

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


                                      26
<PAGE>


<CAPTION>

         Package Types            Number of Leads          Description                   End Use Applications
----------------------------      ---------------  -----------------------------     ---------------------------
<S>                                     <C>        <C>                               <C>
Viper BGA                              256-792     Designed for memory devices       Cellular and other
                                                      such as flash memory              telecommunications
                                                      devices, SRAM, DRAM and           products, wireless and
                                                      FSRAM,                            consumer systems, PDAs,
                                                      microprocessors/controllers       disk drives, notebook
                                                      and high value                    computers and memory
                                                      application specific              boards.
                                                      integrated circuits
                                                      requiring a low profile,
                                                      light and small package.

Stacked-Die BGA                         66-256     Combination of multiple dies      Cellular phones, local area
                                                      in a single package               networks, graphic
                                                      enables package to have           processors, digital
                                                      multiple functions within         cameras and pagers.
                                                      a small surface area.

Flip Chip BGA                          16-1681     Using advanced interconnect       High-performance networking
                                                      technology, flip chip BGA         and graphics and processor
                                                      package allows higher             applications.
                                                      density of input/output
                                                      connection over the
                                                      entire surface of the
                                                      dies. Designed for
                                                      high-performance
                                                      semiconductors that
                                                      require high density of
                                                      interconnects in a small
                                                      package.

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

Land Grid Array                           6-78     Leadless package which is         High frequency integrated
                                                      essentially a BGA package         circuits such as wireless
                                                      without the solder balls.         communications products,
                                                      Based on laminate                 computer servers and
                                                      substrate, land grid              personal computer
                                                      array packages allow              peripherals.
                                                      flexible routing and are
                                                      capable of multichip
                                                      module functions.

Bump Chip Carrier                         8-96     Bump chip carrier packages        Radio frequency devices for
                                                      use plating metal pads to         wireless communications
                                                      connect with printed              products.
                                                      circuit boards, creating
                                                      enhanced thermal and
                                                      electrical performance.

Tape Carrier Package                   129-384     The light-weight tape             Liquid crystal displays, ink
                                                      carrier package uses a            printers, cellular phones,
                                                      labor-saving reel-to-reel         PDA and notebook computers.
                                                      bonding technique to
                                                      facilitate high
                                                      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.


                                      27
<PAGE>


                                              Year Ended December 31,
                                   ------------------------------------------
                                    1999               2000              2001
                                   -----              -----             -----
                                       (percentage of packaging revenues)
Package Types:
   BGA.......................       35.3%              44.2%             52.0%
   TQFP......................       18.4               18.2              14.3
   QFP.......................       22.0               14.6              12.7
   SOJ/SOP...................        9.8                9.9               6.7
   PLCC......................        4.4                3.0               2.1
   PDIP......................        4.9                3.0               3.0
   Other.....................        5.2                7.1               9.2
                                   -----              -----             -----
      Total..................      100.0%             100.0%            100.0%
                                   =====              =====             =====

     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
2001, ASE Material supplied approximately 23%, by value, of the leadframes and
34%, by value, of the substrates used in our operations.

     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 -- 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.


                                      28
<PAGE>


     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.

     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 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 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.


                                      29
<PAGE>


     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,
                                   ------------------------------------------
                                    1999               2000              2001
                                   -----              -----             -----
                                              (percentage of testing revenues)
Testing Services:
   Front-end engineering test.....   2.2%               4.5%              8.7%
   Wafer probe....................   7.8                9.9               9.0
   Final test.....................  90.0               85.6              82.3
                                   -----              -----             -----
      Total....................... 100.0%             100.0%            100.0%
                                   =====              =====             =====

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 1996 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 June 14, 2002, we held 50.52% of the
outstanding shares of ASE Test. We are evaluating alternatives to increase our
ownership of ASE Test to greater than 50%, including open market purchases of
ASE Test shares.

     ASE Test is a holding company incorporated in Singapore whose significant
assets are its ownership interests in the following operating companies as of
April 30, 2002:

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

     o    100% of ASE Test Malaysia;

     o    100% of ISE Labs;

     o    30% of ASE Chung Li (the remaining 70% of which is owned by ASE
          Inc.); and

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

     In 2001, ASE Test recorded net revenues of US$298.5 million, operating
loss of US$24.1 million and 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 December
31, 2001, we held 60.2% of the outstanding shares of ASE Material, comprising
56.2% 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



                                      30

<PAGE>


remaining two directors of ASE Material are Jason C.S. Chang, our
Chairman, and Richard H.P. Chang, our Vice Chairman and Chief Executive
Officer, 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 2001, ASE Material recorded net revenues of NT$2,458.4 million
(US$70.2 million), operating income of NT$273.5 million (US$7.8 million) and
net income of NT$181.6 million (US$5.2 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.

   ASE Technologies

     ASE Technologies, Inc., a ROC company, was involved in the design and
assembly of notebook computers, set-top boxes and liquid crystal display
monitors, and the assembly of board and sub-systems. As of December 31, 2001,
we held 98.8% of the outstanding shares of ASE Technologies. ASE Technologies
ceased operations in 2001, and had an operating loss of NT$4.4 million (US$0.1
million) and a net income of NT$44.1 million (US$1.3 million) in 2001. We
intend to wind down the business of ASE Technologies upon approval from ASE
Technologies' shareholders on June 28, 2002. We do not expect to incur any
significant charges to our net income in connection with the winding down of
ASE Technologies.

Our Unconsolidated Affiliates

     As of December 31, 2001, we held approximately 23.0% of the outstanding
shares of Universal Scientific and 25.4% 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 2001, Universal Scientific recorded net revenues of
NT$28,866.6 million (US$824.8 million), operating income of NT$1,157.7 million
(US$33.1 million) and net loss of NT$163.1 million (US$4.7 million). The shares
of Universal Scientific are listed on the Taiwan Stock Exchange. As of December
31, 2001, Universal Scientific had a market capitalization of NT$17,694.5
million (US$505.6 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 Richard H.P. Chang, our Vice Chairman and Chief Executive
Officer, and is a director of ASE Inc. As of December 31, 2001, we held 25.4%
of the outstanding shares of Hung Ching. Jason C.S. Chang,


                                      31
<PAGE>


Richard H.P. Chang, Chang Yao Hung-ying and other members of the Chang family
are controlling shareholders of Hung Ching.

     In 2001, Hung Ching recorded net revenues of NT$1,784.1 million (US$51.0
million), operating income of NT$12.2 million (US$0.3 million) and net loss of
NT$811.3 million (US$23.2 million). The shares of Hung Ching are listed on the
Taiwan Stock Exchange. As of December 31, 2001, Hung Ching had a market
capitalization of NT$1,479.8 million (US$42.3 million).

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, France, 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, we paid US$5.9 million 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, we
paid US$15.8 million 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, 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    Altera Corporation

     o    ATI Technologies Inc.

     o    Cambridge Silicon Radio


                                      32
<PAGE>


     o    Cirrus Logic, Inc.

     o    Conexant Systems, Inc.

     o    Koninklijke Philips Electronics N.V.

     o    LSI Logic Corporation

     o    Motorola, Inc.

     o    NVIDIA Corporation

     o    ON Semiconductor Corp.

     o    Qualcomm Incorporated

     o    Silicon Integrated Systems Corp.

     o    ST Microelectronics N.V.

     o    VIA Technologies, Inc.

     Our five largest customers together accounted for approximately 40%, 44%
and 41% of our net revenues in 1999, 2000 and 2001, respectively. Other than
Motorola, Inc. in 1999, and Motorola, Inc. and VIA Technologies, Inc. in 2000
and 2001, no customer accounted for more than 10% of our net revenues in 1999,
2000 or 2001.

     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 in 2001 by the principal end
use applications of the products which we packaged and tested.

                                                                  Year Ended
                                                              December 31, 2001
                                                              ------------------
                                                              (percentage of net
                                                                  revenues)
End Use Applications:
   Communications........................................             36.0%
   Personal computers....................................             35.5
   Consumer electronics/industrial/automotive............             27.7
   Other.................................................              0.8
                                                                     -----
      Total..............................................            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.                ESS Technology, Inc.
Koninklijke Philips Electronics N.V.      Cirrus Logic, Inc.                    LSI Logic Corporation
Motorola, Inc.                            IBM Corporation                       Motorola, Inc.
Qualcomm Incorporated                     NVIDIA Corporation                    ST Microelectronics N.V.
ST Microelectronics N.V.                  Silicon Integrated Systems Corp.
                                          VIA Technologies, Inc.
                                          Winbond Electronics Corporation
</TABLE>


                                      33
<PAGE>


     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,
                                      -----------------------------------------
                                       1999              2000              2001
                                      -----             -----             -----
North America................          57.2%             65.0%             65.0%
Taiwan.......................          28.9              24.8              26.7
Other Asia...................          11.3               6.4               4.4
Europe.......................           2.6               3.8               3.9
                                      -----             -----             -----
   Total.....................         100.0%            100.0%            100.0%
                                      =====             =====             =====

     In 2001, approximately 82% of the testing revenues of ASE Test Taiwan and
82% 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 2001, approximately 34% of our
packaging revenues in Kaohsiung, Taiwan and 67% 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 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. Prices are confirmed at the time firm
orders are received from customers, which is typically four to eight weeks
before delivery.

     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.

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 59.2%, 19.0% and 9.1%,
respectively, of our total cost of packaging materials in 2001.


                                      34
<PAGE>


     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 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 and 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 products. We purchase
our wire bonders principally from Kulicke & Soffa Industries Inc. As of
December 31, 2001, we operated an aggregate of 3,780 wire bonders, of which
2,157 were fine pitch wire bonders and 29 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, Schlumberger Limited 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, 2001, we operated an aggregate of 1,082 testers, 172 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
semiconductor 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


                                      35
<PAGE>


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 April 30, 2002, we held 158 Taiwan patents and 64 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. 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 bump chip
carrier, flip chip packages and micro 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 Fujitsu Limited, Flip Chip
Technologies, Motorola, Inc. and LSI Logic Corporation will expire on April 13,
2003, March 1, 2009, December 31, 2002, 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
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 facilities in
Taiwan (excluding Chung Li), Malaysia and the Philippines have been certified
as meeting the ISO 14001 quality standards by the ISO. 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 ISO 9002
and ISO 14001 certifications are required by many countries in connection with
sales of industrial products in these countries. 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.
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


                                      36
<PAGE>


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 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 the advanced packaging and testing requirements on a large
scale.

Environmental Matters

     Our packaging and interconnect materials operations generate environmental
wastes, including as 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. In addition, we believe we are in compliance in all
material respects with present environmental laws and regulations applicable to
our operations and facilities.




                                      37
<PAGE>



Insurance

     We have insurance policies covering property damage and damage to our
production facilities, buildings and machinery, as well as business
interruption losses, due to fire and flood. We are in the process of obtaining
insurance policies for our Taiwan operations covering property damage and
damage to our production facilities, buildings and machinery, as well as
business interruption losses, due to typhoons. 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.






















                                      38
<PAGE>


ORGANIZATIONAL STRUCTURE

     The following chart illustrates our corporate structure and effective
ownership interest in each of our principal operating subsidiaries and
affiliates as of June 14, 2002.

<TABLE>
                              ADVANCED SEMICONDUCTOR ENGINEERING, INC.(1)
------------------------------------------------------------------------------------------------------------------
<S>          <C>                                                <C>         <C>          <C>             <C>
                                               |50.5%
70%          70%                               |               |56.2%      |100%        |23.0%          |25.4%
|                                       -------------------    |           |            |               |
|    ---------------------------------- ASE Test Limited(2)    |           |            |               |
|    |       |            |             -------------------    |           |            |               |
|    |30%    |30%         |100%         |100%         |100%    |           |            |               |
|    |       |            |             |             |        |           |            |               |
---------    ------------  -----------  ---------    --------- |       -------------   -----------   -------------
ASE                        ASE          ISE Labs,    ASE Test, |       ASE Holding     Universal     Hung Ching
(Chung Li)   ASE           Electronics  Inc.         Inc.      |       Electronics     Scientific    Development &
Inc.         (Korea) Inc.  (M) Sdn.                            |       (PhilippineS)   Industrial    Construction
                           Bhd.                                |       Inc.            Co., Ltd.(1)  Co. Ltd.
---------    ------------  -----------  ---------    --------- |       -------------   -----------   -------------
                                                      |        |
                                                      | 4.0%   |
                                                      ---------|
                                                       ASE
                                                       Material
                                                       Inc. (3)
                                                      ---------
</TABLE>

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

(1)  The common shares of ASE Inc. and Universal Scientific are listed on the
     Taiwan Stock Exchange.

(2)  The ordinary shares of ASE Test are quoted for trading on the Nasdaq
     National Market under the symbol "ASTSF".

(3)  The remaining shares of ASE Materials are owned by management and
     employees of ASE Inc. and its affiliates.

(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.

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, 2001.



                                      39
<PAGE>

<TABLE>
                                                                                                               Approximate
                                               Commencement of                                                 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,                                                      complete semiconductor manufacturing
Taiwan                                                             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 communications systems companies.

ASE Test, Inc.          Kaohsiung, Taiwan      December 1987     Our primary testing facility. Offers                770,000
                                                                   complete 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 communications
                                                                   systems companies.

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

ASE Test Malaysia       Penang, Malaysia       February 1991     An integrated packaging and testing facility        600,000
                                                                   which focuses primarily on the
                                                                   requirements of integrated device
                                                                   manufacturers and communications systems
                                                                   companies.

ASE Chung Li(1)         Chung Li, Taiwan       April 1985        An integrated packaging and testing facility        800,000
                                                                   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
                        Santa Clara,                               facilities located in northern California
                        California Hong                            in close proximity to several of the world's
                        Kong Singapore                             largest fabless design companies. Testing
                                                                   facilities located in close proximity to
                                                                   integrated device manufacturers and
                                                                   fabless companies in Hong Kong and
                                                                   Southeast Asia.

ASE Holding             Cavite, Philippines    November 1995     Focuses primarily on the packaging of               130,000
Electronics                                                        commodity semiconductor  products for
(Philippines) Inc.,                                                integrated device manufacturers in the
also called ASE                                                    Philippines.
Philippines
</TABLE>


                                                              40
<PAGE>
----------

(1)  We acquired a 70.0% interest in ASE Chung Li and ASE Test acquired the
     remaining 30.0% interest in July 1999.

(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.


























                                      41
<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
increased from NT$32,609.6 million in 1999 to NT$50,893.4 million in 2000
primarily as a result of an upturn in the semiconductor industry that continued
through the third quarter of 2000, but decreased to NT$38,367.8 million
(US$1,096.2 million) in 2001 due to a severe downturn in the semiconductor
industry. The decrease in our net revenues during 2001 was across each of the
principal end use applications for the products which we packaged and tested --
communications, personal computers and consumer electronics. In the fourth
quarter of 2001, we experienced a gradual improvement in our net revenues
compared to the preceding quarter. 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.

     In 1999, 2000 and 2001, our packaging revenues accounted for 75.2%, 74.7%
and 75.3% while testing revenues accounted for 23.9%, 25.1% and 24.7%,
respectively, of our net revenues. The portion of the semiconductor testing
market currently accounted for by independent testing service providers is
smaller than that for packaging, which we believe will result in outsourced
testing growing at a faster rate than outsourced packaging. In addition, the
large capital expenditures needed for increasingly sophisticated testing
equipment, as compared to less expensive packaging equipment, is leading to
further outsourcing of testing services by integrated device manufacturers.

     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 commencing in the
fourth quarter of 2000, we experienced a significant deterioration in prices
which resulted in our company incurring a net loss in 2001.

     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 ball grid array, or
BGA, and 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 developing and offering new
technologies in packaging and testing services and expand our capacity to
achieve economies of scale, as well as improving production efficiencies for
older technology, in order to mitigate the effects of declining prices on our
profitability.


                                      42
<PAGE>


High Fixed Costs

     Our operations are capital intensive and our primary capital requirements
are for the purchase of packaging and testing equipment. As a result, fixed
costs, primarily depreciation expense, are a major component of our cost of
revenues. In particular, depreciation is the principal component of our cost of
testing revenues as testing requires minimal raw materials. Increases or
decreases in capacity utilization rates can have a significant effect on gross
profit margins, as the unit cost of packaging and testing services generally
decreases as fixed costs, such as equipment depreciation expense, are allocated
over a larger number of units. Our ability to maintain or improve our margins
will continue to depend to a large extent on our ability to effectively manage
capacity utilization levels.

     The current generation of advanced testers typically cost 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 1999, 2000 and 2001, our depreciation
expense as a percentage of net revenues was 16.3%, 15.7% and 27.0%,
respectively. The significant increase in depreciation expense as a percentage
of net revenues in 2001 primarily reflected the significant decrease in net
revenues during that year and full year effect of 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, we may experience lower than expected demand
from customers and a sharp decline in average selling price, resulting in an
increase in depreciation expense relative to net revenues.

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 1999, 2000 and 2001, raw material cost as a percentage of our net
revenues was 30.0%, 28.7% and 30.7%, 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.

Consolidation of ISE Labs, ASE Chung Li and ASE Korea

     In 1999, we acquired Motorola, Inc.'s semiconductor packaging and testing
operations in Chung Li, Taiwan and Paju, South Korea. The businesses are now
operated by ASE (Chung Li) Inc., or ASE Chung Li, and ASE (Korea) Inc., or ASE
Korea. In addition, in 1999 ASE Test acquired 70% of the outstanding shares of
ISE Labs, Inc., or ISE Labs, an independent semiconductor testing company.
Under the method of consolidation used by us to consolidate the statements of
income of ISE Labs, ASE Chung Li and ASE Korea for the year ended December 31,
1999: (1) ISE Labs' full-year 1999 net revenues, cost of revenues and operating
expenses are included in our consolidated financial statements, and the
pre-acquisition income of ISE Labs for the year ended December 31, 1999 (from
January 1 to May 4, 1999) is then subtracted from our net income for 1999; and
(2) the net revenues, cost of revenues, operating expenses and net income of
ASE Chung Li and ASE Korea are included in our consolidated financial
statements since the date of acquisition. See notes 2 and 28f to our
consolidated financial statements.

Goodwill Amortization

     Our operating and non-operating income in recent years have been affected
by goodwill amortization charges in connection with acquisitions, 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 generated
on the purchases of shares of consolidated subsidiaries are recognized under
general and administrative expense. Goodwill generated on the purchases of
shares of companies accounted for using the equity method are recognized as a
debit under investment income. In addition to the acquisitions of ASE Korea and
ISE Labs, other transactions which created significant goodwill charges were
(1) the open-market purchases of 22.6% of Universal Scientific Industrial Co.,
Ltd., or Universal Scientific, shares in 1999, (2) the purchase of additional
ordinary shares of ASE Test in 2001 from two of our directors at the prevailing
market price


                                      43
<PAGE>

and (3) the open market purchase of shares of Hung Ching between
1995 and 1996. No goodwill was recognized in connection with the acquisition of
ASE Chung Li, which was structured as an asset purchase, due to the
appreciation of the fixed assets purchased. See "Item 7. Major Shareholders --
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 that affect the amounts of our assets, liabilities,
revenues and expenses. We continually evaluate 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. 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 semiconductor 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.

     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 prior experience, we currently maintain an allowance
for the account receivables of these other customers of between 3% and 4% of
net revenues. 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.

     Useful Lives of Properties. Our operations are capital intensive and we
have significant investments in expensive packaging and testing equipment.
Properties represented 56% and 57% of our total assets as of December 31, 2000
and 2001, 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 a property 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.

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.


                                      44
<PAGE>

<TABLE>

                                                        Year Ended December 31,
                                                  -----------------------------------
                                                   1999           2000           2001
                                                  -----          -----          -----
                                                     (percentage of net revenues)
<S>                                               <C>            <C>            <C>
ROC GAAP:
Net revenues................................      100.0%         100.0%         100.0%
   Packaging................................       75.2           74.7           75.3
   Testing..................................       23.9           25.1           24.7
   Other....................................        0.9            0.2            0.0
Cost of revenues............................      (73.5)         (69.9)         (85.9)
Gross profit................................       26.5           30.1           14.1
Operating expenses..........................      (11.6)         (10.7)         (15.3)
Operating income (loss).....................       14.9           19.4           (1.2)
Non-operating income (expenses).............       12.9           (2.9)          (6.6)
Income (loss) before income tax and
   minority interest.........................      27.8           16.5           (7.8)
Income tax benefit (expense).................      (1.4)          (2.1)           0.5
Income (loss) before minority interest.......      26.4           14.4           (7.3)
Income before acquisition....................      (0.2)          --             --
Extraordinary loss...........................      --             --             (0.4)
Minority interest in net loss (income) of
   subsidiary................................      (2.3)          (2.9)           2.1
Net income (loss)............................      23.9%          11.5%          (5.6)%

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

<CAPTION>
                                                        Year Ended December 31,
                                                  -----------------------------------
                                                   1999           2000           2001
                                                  -----          -----          -----
<S>                                               <C>            <C>            <C>
ROC GAAP:
Gross margin
   Packaging................................       23.5%          26.3%          16.0%
   Testing..................................       39.8%          41.5%           8.3%
   Total....................................       26.5%          30.1%          14.1%

     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.

<CAPTION>
                                                        Year Ended December 31,
                                                  -----------------------------------
                                                   1999           2000           2001
                                                  -----          -----          -----
                                                     (percentage of net revenues)
<S>                                               <C>            <C>            <C>
ROC GAAP:
Cost of revenues............................
   Raw materials............................       30.0%          28.7%          30.7%
   Labor....................................       13.0           12.9           14.6
   Depreciation.............................       16.3           15.7           27.0
   Other....................................       14.4           12.6           13.6
                                                   ----           ----           ----
Total cost of revenues......................       73.5%          69.9%          85.9%
                                                   ====           ====           ====
Operating expenses
   Selling                                          2.8%           2.0%           2.3%
   General and administrative(1)............        5.0            5.1            7.3
   Goodwill amortization(2).................        1.6            1.1            1.8
   Research and development.................        2.2            2.5            3.9
                                                   ----           ----           ----
   Total operating expenses.................       11.6%          10.7%          15.3%
                                                   ====           ====           ====
</TABLE>

---------------------------
(1)  Excludes goodwill amortization for purposes of this table only.

(2)  Included in general and administrative expense in our consolidated
     financial statements.


                                      45
<PAGE>


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
(US$1,096.2 million) in 2001 from NT$50,893.4 million in 2000. Packaging
revenues decreased 24.0% to NT$28,898.2 million (US$825.7 million) in 2001 from
NT$38,028.8 million in 2000. Testing revenues decreased 25.9% to NT$9,459.3
million (US$270.3 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. The
decrease in the average selling prices reflects the general trend in the
semiconductor industry of declining prices for each input/output lead on a
semiconductor device, which was exacerbated by the sharp decline in demand
resulting from the industry downturn. 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.

     Gross Profit. Gross profit decreased 64.7% to NT$5,410.8 million (US$154.6
million) in 2001 from NT$15,326.1 million in 2000. Our gross margin, which is
equal to gross profit divided by net revenues, 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 (US$336.5 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 (US$296.4 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
(US$13.2 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 (US$167.8
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 (US$25.1 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 (US$79.9 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
(US$19.8 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 (US$43.0
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 (US$72.1 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


                                      46
<PAGE>


foreign exchange gain. Net interest expense increased 13.1% to NT$1,739.3
million (US$49.7 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$1,196.1 million (US$34.2 million) in 2001 as compared
to a net investment loss of NT$75.6 million in 2000. The loss was principally a
result of a one-time write down of NT$475.6 (US$13.6 million) million 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 (US$7.1 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 recorded a net loss of
NT$2,142.2 million (US$61.2 million) in 2001 compared to net income of
NT$5,837.2 million in 2000. The net loss per ADS was NT$3.29 (US$0.09) 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$247.3 million (US$7.1 million)
in 2001 compared to an income tax expense of NT$1,065.8 million in 2000.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

     Net Revenues. Net revenues increased 56.1% to NT$50,893.4 million in 2000
from NT$32,609.6 million in 1999. Packaging revenues increased 55.1% to
NT$38,028.8 million in 2000 from NT$24,523.0 million in 1999. Testing revenues
increased 63.8% to NT$12,768.4 million in 2000 from NT$7,793.2 million in 1999.
Increases in packaging and testing revenues resulted primarily from an increase
in net revenues at our existing facilities, due to an upturn in the
semiconductor industry which commenced in the second half of 1999 and continued
through the third quarter of 2000. After eliminating the results of ISE Labs,
ASE Chung Li and ASE Korea for comparative purposes, our net revenues for 2000
increased by 44.4% compared to 1999, reflecting a 43.5% increase in packaging
revenues and a 57.2% increase in testing revenues.

     Gross Profit. Gross profit increased 77.2% to NT$15,326.1 million in 2000
from NT$8,650.0 million in 1999. Our gross margin improved to 30.1% in 2000
compared to 26.5% in 1999, primarily as a result of a higher revenue
contribution from testing operations and decreases in raw material costs and
depreciation as a percentage of net revenues. Our testing operations
historically have higher gross margins than our packaging operations, except
during periods of lower-than-normal capacity utilization. Our gross margin for
packaging increased to 26.3% in 2000 from 23.5% in 1999. This increase was
primarily due to decreases in direct and indirect labor costs, raw material
costs and depreciation as percentages of packaging revenues. Our gross margin
for testing increased to 41.5% in 2000 from 39.8% in 1999. This increase was
principally a result of a decrease in repair and maintenance costs, which was
partially offset by increases in depreciation as well as direct and indirect
labor costs, all as percentages of testing revenues. Raw material costs in 2000
were NT$14,620.4 million, or 28.7% of net revenues, compared to NT$9,782.9
million, or 30.0% of net revenues, in 1999. This percentage decrease reflected
a change in the revenue mix, as testing services, which incur very limited raw
material costs, accounted for a greater portion of our net revenues, as well as
a decrease in raw material prices. Depreciation increased to NT$7,992.3 million
in 2000 from NT$5,325.8 million in 1999, due primarily to the full year effect
of capacity expansion in 2000. As a percentage of net revenues, depreciation
decreased to 15.7% in 2000 from 16.3% in 1999, primarily reflecting a higher
capacity utilization rate in 2000 as a result of increased economies of scale
realized through increased production.

     Operating Income. Operating income increased 103.7% to NT$9,877.1 million
in 2000 from NT$4,848.6 million in 1999. Operating margin increased to 19.4% in
2000 from 14.9% in 1999. Operating expenses increased 43.3% to NT$5,449.0
million in 2000 compared to NT$3,801.4 million in 1999. This was primarily due
to higher general and administrative and research and development expenses in
2000. Selling expense increased 10.4% to NT$1,020.5 million in 2000 from
NT$924.3 million in 1999. This increase reflected our increased sales in 2000.
Selling expense accounted for 2.0% of our net revenues in 2000 compared to 2.8%
in 1999. General and administrative expense, excluding goodwill amortization,
increased 57.5% to NT$2,606.2 million in 2000 from NT$1,655.0 million in 1999.
General and administrative expense, excluding goodwill amortization,
represented 5.1% of our net revenues in 2000 compared to 5.0% in 1999. This was
primarily due to an increase in the number of


                                      47
<PAGE>


employees responsible for general and administrative functions as a result of
the acquisitions of ISE Labs, ASE Chung Li and ASE Korea. Goodwill amortization
expense increased 10.2% to NT$559.8 million in 2000 from NT$507.8 million in
1999. This increase was primarily due to the full year effect of the higher
goodwill amortization expense resulting from our acquisitions of ISE Labs and
ASE Korea in 1999. Goodwill amortization expense represented 1.1% of our net
revenues in 2000 compared to 1.6% in 1999. Research and development expense
increased 76.7% to NT$1,262.5 million in 2000 from NT$714.3 million in 1999.
This increase was largely a result of the full year effect of the increase in
the number of research and development employees as well as additional
depreciation charges associated with testers and other equipment dedicated to
research and development uses attributable to our acquisitions of ISE Labs, ASE
Chung Li and ASE Korea in 1999. Research and development expense accounted for
2.5% of our net revenues in 2000 compared to 2.2% in 1999.

     Net Non-Operating Income (Loss). We recorded a net non-operating loss of
NT$1,473.5 million in 2000 compared with net non-operating income of NT$4,213.8
million in 1999. This difference was primarily a result of a significant
one-time gain on the sale of long-term investments in 1999. Net interest
expense increased 47.0% to NT$1,538.0 million in 2000 from NT$1,046.6 million
in 1999, primarily as a result of the full year effect of the interest expense
from the convertible bonds issued by ASE Test in June 1999 and long-term debt
incurred in 1999 to finance our acquisitions of our interests in Universal
Scientific, ISE Labs, ASE Chung Li and ASE Korea. We recorded a net investment
loss of NT$75.6 million in 2000 compared to net investment income of NT$5,594.8
million in 1999. The difference primarily resulted from a one-time capital gain
of NT$5,544.2 million in 1999 resulting from the sale of ASE Test ordinary
shares by our subsidiary J&R Holding Limited through a public offering of
Taiwan depositary receipts and the sale of ASE Inc. common shares by our
subsidiaries and affiliates in a private placement of global depositary shares.
Most of the ASE Inc. common shares underlying the global depositary shares were
acquired by our subsidiaries between March 1996 and April 1998 as part of a
share repurchase program instituted in support of ROC government policies. We
recorded a net foreign exchange gain of NT$302.7 million in 2000, compared to a
net loss of NT$538.4 million in 1999, reflecting the unrealized foreign
exchange gains on assets that are denominated in foreign currencies due to the
year-end depreciation of the NT dollar.

     Net Income. As a result of the foregoing, net income declined 25.1% to
NT$5,837.2 million in 2000 from NT$7,794.7 million in 1999. Excluding the
one-time capital gain of NT$5,544.2 million in 1999, net income was NT$2,250.5
million in 1999. The net income per ADS was NT$9.01 for 2000 compared to
NT$12.27 for 1999. After eliminating the results of ISE Labs, ASE Chung Li and
ASE Korea for comparative purposes, our net income declined 48.3% to NT$3,673.6
million in 2000 compared to NT$7,110.8 million in 1999. Our effective tax rate
was 12.7% in 2000 compared to 5.1% in 1999. Our effective income tax rate was
significantly lower in 1999 primarily as a result of substantial capital gain
in 1999 that was not subject to ROC corporate tax.

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
                    --------------------------------------------------------------------------------------------------------
                      Mar. 31,    Jun. 30,     Sept. 30,     Dec. 31,      Mar. 31,     Jun. 30,    Sept. 30,     Dec. 31,
                        2000         2000         2000         2000          2001         2001        2001          2001
                    -----------  -----------  -----------   ----------   -----------   ----------   ----------   -----------
                                                                (in millions)
<S>                 <C>          <C>          <C>           <C>          <C>           <C>          <C>          <C>
Consolidated Net
Revenues:
Packaging..........  NT$8,378.4   NT$9,347.1  NT$10,458.9   NT$9,844.4    NT$8,142.4   NT$6,273.5   NT$6,406.8    NT$8,075.5
Testing............     2,776.2      3,013.3      3,440.1      3,538.8       3,105.5      2,204.3      1,970.4       2,179.1
Other..............         7.0         75.2          5.2          8.8           2.1          4.6          3.6          --
                    -----------  -----------  -----------   ----------   -----------   ----------   ----------   -----------
Total.............. NT$11,161.6  NT$12,435.6  NT$13,904.2  NT$13,392.0   NT$11,250.0   NT$8,482.4   NT$8,380.8   NT$10,254.6
                    ===========  ===========  ===========   ==========   ===========   ==========   ==========   ===========
Consolidated Gross
Profit:
Packaging..........  NT$2,320.1   NT$2,568.2   NT$2,688.7   NT$2,439.9    NT$1,506.6     NT$779.0     NT$846.7    NT$1,493.5
                    ===========  ===========  ===========   ==========   ===========   ==========   ==========   ===========
</TABLE>


                                       48
<PAGE>

<TABLE>
                                                                  Quarter Ended
                    --------------------------------------------------------------------------------------------------------
                      Mar. 31,    Jun. 30,     Sept. 30,     Dec. 31,      Mar. 31,     Jun. 30,    Sept. 30,     Dec. 31,
                        2000         2000         2000         2000          2001         2001        2001          2001
                    -----------  -----------  -----------   ----------   -----------   ----------   ----------   -----------
                                                                (in millions)
<S>                 <C>          <C>          <C>           <C>          <C>           <C>          <C>          <C>
Consolidated Net
Testing............     1,208.7      1,285.8      1,433.9      1,366.0         875.9        103.5       (138.9)        (57.7)
Other..............       (39.0)       (23.3)       (45.1)       122.2           0.3         (0.1)         0.6           1.4
                    -----------  -----------  -----------   ----------   -----------   ----------   ----------   -----------
Total..............  NT$3,489.8   NT$3,830.7   NT$4,077.5   NT$3,928.1    NT$2,382.8     NT$882.4     NT$708.4    NT$1,437.2
                    ===========  ===========  ===========   ==========   ===========   ==========   ==========   ===========
Consolidated Gross
Margin:
Packaging..........        27.7%        27.5%        25.7%        24.8%         18.5%        12.4%        13.2%         18.5%
Testing............        43.5%        42.7%        41.7%        38.6%         28.2%         4.7%        (7.0)%        (2.6)%
Total..............        31.3%        30.8%        29.3%        29.3%         21.2%        10.4%         8.5%         14.0%
                    ===========  ===========  ===========   ==========   ===========   ==========   ==========   ===========
</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 2001. In the fourth quarter of 2001, we experienced an
improvement in our net revenues compared to the preceding quarter. 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 -- 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, our testing operations
have experienced lower gross margins than our packaging operations.

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, 2001, 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, 2001, we had NT$5,470.5 million (US$156.3
million) outstanding in foreign currency option 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.

Taxation

     The regular corporate income tax rate in the ROC applicable to us is 25%.
We enjoy 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 enjoy 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$779.4 million,
NT$700.7 million and NT$26.4 million (US$0.8 million) in 1999, 2000 and 2001,
respectively.

     We also enjoy tax credits under the ROC Statute of Upgrading Industries.
Under the previous tax credit rules, we enjoyed 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


                                      49
<PAGE>


and equipment. We may also apply for this tax holiday after the capitalization
of retained earnings through the issuance of stock dividends. See note 17 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 5.1%, 12.7% and 0% in 1999, 2000 and
2001, respectively. The effective tax rate was significantly lower in 2001
because we incurred a net loss, which resulted in income tax benefits of
NT$247.3 million (US$7.1 million).

US GAAP Reconciliation

     Our financial statements are prepared in accordance with ROC GAAP, which
differ in material 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,
                                              -----------------------------------------------------
                                                  1999         2000          2001          2001
                                              -----------   -----------   -----------   -----------
                                                                     (in millions)
<S>                                              <C>           <C>          <C>             <C>
Net income (loss) in accordance with:
ROC GAAP..................................     NT$7,794.7    NT$5,837.2   NT$(2,142.2)    US$(61.2)
US GAAP...................................     NT$4,641.3    NT$3,930.0   NT$(4,046.6)   US$(115.6)
Shareholders' equity in accordance with:
ROC GAAP..................................    NT$30,057.0   NT$43,669.2   NT$41,946.3   US$1,198.5
US GAAP...................................    NT$26,569.7   NT$40,729.1   NT$37,960.3   US$1,084.6
</TABLE>

     Note 27 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 have a
material effect on our net income as reported under ROC GAAP relate to gain
from the sale of treasury stock and compensation expense pertaining to bonuses
to employees, directors and supervisors.

     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, 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 (US$26.0 million) increase in
ASE Inc.'s compensation expense. See "Item 7. Major Shareholders -- 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 is 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


                                      50
<PAGE>


capital gain is not recognized as income but is deducted from treasury stock
under capital surplus. The accounting and financial statement presentation
under ROC GAAP for shares of a parent company held by its subsidiary and any
related capital gain or loss was, effective January 1, 2002, changed to conform
to the accounting and financial presentation under US GAAP.

     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 do not expect to
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 income. Under US GAAP, however, we would be required to charge the
market value of the employee bonus shares to employee compensation expense in
the period to which they relate, correspondingly reduce our net income and
income per common share calculated in accordance with US GAAP. See "Item 6.
Directors, Senior Management and Employees-- Directors and Senior Management
and Board Practice -- ASE Inc. Employee Bonus Plan".

     The amount and the form of the payment of this compensation is subject to
approval at our 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. See note 27 to our
consolidated financial statements. Net income and income per common share
amounts calculated in accordance with ROC GAAP and US GAAP differ accordingly.
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 which we require from employees who received the special stock bonus.

Recent US GAAP Accounting Pronouncements

     We are required by SEC Staff Accounting Bulletin No. 74 to disclose the
impact that recently issued accounting standards will have on our financial
statements when adopted in a future period, as well as make certain disclosure
about recently issued accounting standards.

     In June 2001, the U.S. Financial Accounting Standards Board issued SFAS
No. 141, "Accounting for Business Combinations", and SFAS No. 142, "Goodwill
and Other Intangible Assets". We were required to adopt these standards on
January 1, 2002, which may affect accounting for business combinations
consummated after June 30, 2001 and that for existing goodwill and other
intangible assets upon adoption. The standards require, among other things,
companies to review for possible impairment of goodwill existing at the date of
adoption and perform subsequent impairment tests on an annual basis. In
addition, existing goodwill and intangible assets must be reassessed and
classified consistently in accordance with the criteria set forth in SFAS No.
141 and SFAS No. 142. Under the new standards, we will no longer amortize
goodwill but intangible assets will continue to be amortized over their
estimated useful lives, which, if supportable, may be a period that exceeds the
current maximum period of 40 years. As of December 31, 2000 and 2001, we had
unamortized goodwill of approximately NT$7,652.7 million and NT$6,900.7 million
(US$197.2 million), respectively. Total goodwill amortization expenses of
goodwill under ROC GAAP incurred for the years ended December 31, 1999, 2000,
and 2001 were NT$507.8 million, NT$559.8 million and NT$692.9 million (US$19.8
million), respectively. We have not yet completed our assessment of the impact
that these new standards may have on the accompanying financial statements and
cannot estimate whether the related impact would be material or not.

     In June 2001, the U.S. Financial Accounting Standards Board issued SFAS
No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 requires,
among other things, 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


                                      51
<PAGE>


life. SFAS No. 143 will be adopted by us on January 1, 2003 and is not expected
to have a material impact on our consolidated financial information relating to
US GAAP.

     In August 2001, the U.S. Financial Accounting Standards Board issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of", and the accounting and reporting provisions of APB Opinion
No. 30, "Reporting the Results of Operations -- Reporting the Effects of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions". SFAS No. 144 is effective for years beginning after
December 15, 2001. The impact of adopting this accounting standard is not
expected to have a material effect on our financial position and results of
operations.

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 -- 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.

     Our net cash provided by operating activities amounted to NT$11,707.2
million (US$334.5 million) for 2001, partly as a result of adjusting for
non-cash depreciation and amortization of NT$11,820.2 million (US$337.7
million). Our net cash provided by operating activities amounted to NT$17,618.3
million for 2000, partly as a result of adjusting for non-cash depreciation and
amortization of NT$9,153.6 million. The decline in net cash generated by
operating activities was primarily a result of our net loss of NT$2,142.2
million (US$61.2 million) in 2001, compared to a net profit of NT$5,837.2
million in 2000. Depreciation and amortization increased in 2001 compared to
2000 primarily due to the full year effect of our capacity expansion in 2000.
In 1999, our net cash provided by operating activities amounted to NT$7,017.2
million, partly as a result of adjusting for non-cash depreciation and
amortization expenses of NT$6,062.2 million. The increase in net cash generated
by operating activities in 2000 compared to 1999 was primarily due to an
increase in net income to NT$5,837.2 million in 2000 from NT$2,250.5 million
(excluding the one-time capital gain of NT$5,544.2 million) in 1999. The
increase in depreciation and amortization in 2000 compared to 1999 was
primarily due to increased capital investment for the expansion of our
production capacity.

     Net cash used in investing activities decreased to NT$15,180.0 million
(US$433.7 million) from NT$33,550.4 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 (US$229.3 million) in 2001 from NT$27,154.2 million in 2000.
Net cash used in investing activities was NT$11,782.7 million in 1999. The most
significant components of this were the acquisition of ASE Chung Li, ASE Korea,
ISE Labs and Universal Scientific and the acquisition of NT$7,787.9 million of
machinery and equipment in connection with our packaging and testing
operations, partially offset by proceeds of NT$7,889.3 million from the sale of
shares in ASE Inc. and ASE Test by our subsidiaries.

     Net cash provided by financing activities in 2001 amounted to NT$603.5
million (US$17.2 million). This amount primarily reflects proceeds from
long-term debt of NT$9,746.6 million (US$278.5 million), partially offset by
the payment of NT$6,066.0 million (US$173.3 million) for the early redemption
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


                                      52
<PAGE>


2000 and the increase of NT$9,854.5 million in minority interest resulting from
the equity offering by ASE Test in 2000. Net cash provided by financing
activities in 1999 was NT$8,569.0 million, primarily reflecting the proceeds
from long-term debt of NT$4,201.5 million and proceeds of NT$3,460.1 million
received from the issuance of convertible notes by ASE Test.

     As of December 31, 2001, our primary source of liquidity was NT$11,770.7
million (US$336.3 million) of cash and cash equivalents and NT$4,601.2 million
(US$131.5 million) of short-term investments. Our short-term investments
primarily consisted of investments in fixed income mutual funds. As of December
31, 2001, we had total availability under existing short-term lines of credit
of NT$18,513.5 million (US$529.0 million), of which we had borrowed NT$6,900.5
million (US$197.2 million). The interest rate for borrowings under these
facilities ranged from 0.85% to 7.3% per year as of December 31, 2001, as
compared to 0.975% to 11.5% per year as of December 31, 2000. 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, 2001, we had working
capital of NT$8,380.7 million (US$239.4 million).

     Our long-term liabilities consist primarily of bank loans. As of December
31, 2001, we had outstanding long-term bank loans, less current portion, of
NT$23,075.2 million (US$659.3 million). These long-term bank loans carried
variable interest rates which ranged between 0.88% and 7.92% per year as of
December 31, 2001, as compared to 1.1% to 10.5% per year as of December 31,
2000. We have pledged a substantial portion of our assets, with a carrying
value of NT$12,889.6 million (US$368.3 million) as of December 31, 2001, to
secure our obligations under our short-term and long-term facilities.

     In November 1997, we issued US$200 million in aggregate principal amount
of zero coupon convertible bonds. These bonds have an implied interest rate of
6.372%, and are convertible into our shares. These bonds, which are scheduled
to mature in November 2002, are convertible at the option of the holders from
December 1997 through October 2002. As of March 31, 2002, these convertible
bonds are convertible into our common shares at a conversion price of NT$50.5
per common share. As of December 31, 2001, 355,086 shares were issued as a
result of the conversion of these bonds. The bonds are redeemable, in whole or
in part, by us under certain circumstances beginning in November 2000. Between
September and December 2001, we redeemed US$131 million in aggregate principal
amount of these bonds. As of December 31, 2001, US$68 million in aggregate
principal amount of the bonds remained outstanding. In addition, we were
required to make payments to a sinking fund for the benefit of the outstanding
amount of the bonds twelve months prior to the maturity date of the bonds. As
of December 31, 2001, the balance of the sinking fund was NT$1,568.1 million
(US$44.8 million).

     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
loan. 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. If the downturn in the semiconductor industry and
for our services continues, we cannot assure you that we will be able to remain
in compliance with our financial covenants under this agreement or other
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 -- 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".


                                      53
<PAGE>


     The following table sets forth the maturity of our long-term debt, capital
lease obligations and operating leases as of December 31, 2001.

<TABLE>

                                                       Payments Due by Period
                                                           (in millions)
                                 ----------------------------------------------------------------------
    Contractual Obligations         Total     Under 1 Year  1 to 3 Years   4 to 5 Years   After 5 Years
-------------------------------  -----------  ------------  ------------   ------------   -------------
<S>                              <C>          <C>           <C>            <C>            <C>
 Long-term debt................  NT$34,039.2    NT$6,185.7   NT$26,220.9    NT$1,562.8        NT$69.8
 Capital lease obligations.....     NT$106.5       NT$80.5       NT$26.0    NT$    --         NT$ --
 Operating leases..............   NT$1,990.1      NT$314.0      NT$554.3      NT$534.1       NT$587.7
</TABLE>

     In addition to the contractual obligations set forth above, as of December
31, 2001, we had made commitments to purchase approximately NT$3,060.0 million
(US$87.4 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$112.0 million, NT$199.8
million and NT$151.2 million (US$4.3 million) in 1999, 2000 and 2001,
respectively.

     Our contingent obligations consist of guarantees provided by us to our
subsidiaries. As of December 31, 2001, we have endorsed and guaranteed the
promissory notes of our subsidiaries in the amount of NT$8,082.7 (US$230.9
million). Other than such guarantees, we have no other contingent obligations.
See note 22 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.

                                             Year Ended December 31,
                                  ------------------------------------------
                                    1999       2000              2001
                                  -------    --------     ------------------
                                    NT$         NT$          NT$       US$
                                                  (in millions)
 Machinery and equipment.......   7,787.9    27,154.2     8,024.9     229.3
 Building and improvements.....   3,309.5     4,309.3     3,540.8     101.1

     We have budgeted capital expenditures of approximately NT$9,800.0 million
(US$280.0 million) for 2002, 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 -- 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$33,381.4 million (US$953.8 million) due
in the next three years. We intend to meet our payment obligations through the
expected cash flow from operations, long-term debt 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 debt 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


                                      54
<PAGE>


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. When this type of investment is
permitted by the ROC investment law and policy, and if suitable opportunities
are available at that time, we intend to consider establishing semiconductor
packaging, testing and interconnect materials operations in the People's
Republic of China.

RESEARCH AND DEVELOPMENT

     For 1999, 2000 and 2001, our research and development expenditures totaled
approximately NT$714.3 million, NT$1,262.5 million and NT$1,504.5 million
(US$43.0 million), respectively. These expenditures represented approximately
2.2%, 2.5% and 3.9% of net revenues in 1999, 2000 and 2001, respectively. We
have historically expensed all research and development costs as incurred and
none is currently capitalized. As of December 31, 2001, we employed 1,275
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 2001, ASE Material supplied approximately 34% 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.







                                      55
<PAGE>


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 July 11, 2000. The
terms of the directors will expire on July 10, 2003. 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.

<TABLE>
                                                       Director              Other Significant Positions
          Name                      Position            Since       Age                 Held
---------------------------    ----------------------- --------     ---     ------------------------------
<S>                            <C>                      <C>         <C>     <C>
Jason C.S. Chang(1)........    Director and Chairman     1984        58     Chairman of ASE Test Taiwan
Richard H.P. Chang(1)......    Vice Chairman and Chief   1984        55     Chairman of ASE Test;
                               Executive Officer                            Chairman of Universal
                                                                            Scientific
Leonard Y. Liu(2)..........    Director and President    2000        60     Director and Chief Executive
                                                                            Officer of ASE Test; Chief
                                                                            Executive Officer of Universal
                                                                            Scientific
Joseph Tung(2).............    Director and Chief        1997        43     Supervisor of Universal
                               Financial Officer                            Scientific; Director of ASE
                                                                            Test
Chang Yao Hung-ying(1)(2)..    Director                  1984        79     Director of ASE Test Taiwan
Chin Ko-Chien(2)...........    Director and Executive    1997        56     Director of ASE Test
                               Vice President
David Pan(2)...............    Director                  1997        57     Director and President of ASE
                                                                            Test
</TABLE>
---------------------------
(1)  Chang Yao Hung-ying is the mother of both Jason C.S. Chang and
     Richard H.P. Chang.

(2)  Representative of ASE Enterprises Limited, a company organized under the
     laws of Hong Kong, which held 19.5% of our outstanding common shares as of
     December 31, 2001. 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, the mother
     of Jason C.S. Chang, our Chairman, and Richard H.P. Chang, our Vice
     Chairman and Chief Executive Officer. 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


                                      56
<PAGE>


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, his or
her position in ASE Inc., the year they were elected as supervisor and other
significant positions of our affiliates held by them.

<TABLE>
                                         Supervisor      Age
            Name           Position         Since                     Other Significant Positions Held
--------------------     ----------      ----------      ---    --------------------------------------------
<S>                      <C>             <C>            <C>     <C>
Feng Mei-Jean (1)...     Supervisor         1984          47    Supervisor of ASE Chung Li
Yen-Yi Tseng (2)....     Supervisor         2000          60    Vice Chairman of Hung Ching
Alan Cheng (2)......     Supervisor         1997          56    Director of ASE Test; Chairman of Hung Ching
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 shareholder 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 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>

                                                                            Years with
            Name                               Position                     the Company     Age
----------------------------    -----------------------------------------   -----------     ---
<S>                             <C>                                             <C>         <C>
Jason C.S. Chang............    Chairman                                        18.0        58
Richard H.P. Chang..........    Vice Chairman and Chief Executive Officer       18.0        55
Leonard Y. Liu..............    President, ASE Inc.                              2.5        60
Chin Ko-Chien...............    Executive Vice President and General            18.0        56
                                Manager, Kaohsiung packaging facility
David Pan...................    President, ASE Test                              8.5        57
Raymond Lo..................    President, ASE Test Taiwan                      16.0        48
Kanapathi A/L Kuppusamy.....    President, ASE Test Malaysia                     3.0        50
Shih-Song Lee...............    President, ASE Chung Li                          3.0        61
James Stilson...............    President, ASE Korea                             3.0        55
Fu-Shing Chang..............    President, ASE Philippines                      18.0        51
Gregory Lin.................    President, ASE Material                          7.0        58
Joseph Tung.................    Chief Financial Officer                          7.5        43
</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. He holds a degree in electrical engineering from National Taiwan
University and a masters degree from the Illinois Institute of Technology. He
is the son of Chang Yao Hung-ying, a director of ASE Inc., and the brother of
Richard H.P. Chang, our Vice Chairman and Chief Executive Officer.

     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 appointed Chief Executive Officer of ASE Inc. in July 2000. Mr.
Chang is also the Chairman of ASE Test. He holds a degree in industrial
engineering from Chung


                                      57
<PAGE>


Yuan Christian University of Taiwan. He is the son of Chang Yao Hung-ying, a
director of ASE Inc., and the brother of Jason C.S. Chang, our Chairman.

     Leonard Y. Liu has served as a director since July 2000 and President of
ASE Inc. since November 1999. Mr. Liu is also the Chief Executive Officer and a
director of ASE Test and the Chief Executive Officer of Universal Scientific.
Before joining ASE Inc., he was Chairman and Chief Executive Officer of Walker
Interactive System, Inc. Mr. Liu has held other top management positions at
leading technology companies, including Chief Operating Officer of Cadence
Design Systems, President of the Acer Group worldwide and General Manager of
IBM Corporation's application enabling software business unit. He holds a
degree in electrical engineering from National Taiwan University and a
doctorate degree in electrical engineering and computer science from Princeton
University.

     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.

     Chang Yao Hung-ying has served as a director of ASE Inc. since 1996.
Before April 1997, she was the Chairman of Hung Ching. She holds a degree from
Shanghai University. She is the mother of Jason C.S. Chang and Richard H.P.
Chang, our Chairman and our Vice Chairman and Chief Executive Officer,
respectively.

     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.

     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 Chief Executive Officer.

     Yen-Yi Tseng has served as a supervisor of ASE Inc. since July 2000 and
Vice Chairman of Hung Ching since 1999. 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 is also the Chairman of Hung Ching. 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.


                                      58
<PAGE>


     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.

     Fu-Shing Chang has served as President of ASE Philippines since January
2000. Before joining ASE Philippines, Mr. Chang served as Vice President for
Quality Assurance and Customer Service. He holds a degree in mechanical
engineering from the National Cheng-kung University in Taiwan.

     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 2001, we paid to our directors, supervisors and executive officers
approximately NT$172.8 million (US$4.9 million) in cash remuneration. In
addition, an aggregate of 1,242,340 common shares of ASE Inc. were granted in
2001 to our directors, supervisors and executive officers. In 2001, we also set
aside an aggregate of NT$1.4 million (US$0.04 million) to provide pension,
retirement and similar benefits for our executive officers pursuant to existing
plans provided by or contributed to by our company or its subsidiaries.

   ASE Inc. Employee Bonus Plan

     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 meeting specified individual performance
objectives. We granted an aggregate of 9,540,000 common shares, 47,833,062
common shares and 34,960,000 common shares in 1999, 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$754.7 million, NT$3,429.0
million and NT$830.6 million (US$23.7 million), respectively. We expect this
practice to continue in future periods.

   ASE Test Share Option Plans

     ASE Test currently maintains six option plans which include an option plan
adopted prior to the initial public offering, also known as the pre-IPO plan,
and 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, 2001,
an aggregate of 30,300,000 of ASE Test's shares had been reserved for issuance
and 16,308,585 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$2.06 to US$25.00 per
share. Options granted under the pre-IPO, 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.


                                      59
<PAGE>


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 -- Major Shareholders" and "-- Related Party Transactions". We
conduct these transactions on an arms' length commercial basis.

EMPLOYEES

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

                                                    As of December 31,
                                           ------------------------------------
                                            1999           2000           2001
                                           ------         ------         ------
Total.................................     14,184         18,121         15,681
   Function
Direct labor..........................      9,495         12,011          9,690
Indirect labor (manufacturing)........      2,995          3,577          3,366
Indirect labor (administration).......      1,067          1,370          1,350
Research and development..............        627          1,163          1,275
   Location
Taiwan................................      9,360         12,430         10,811
Korea.................................        972            965            885
Malaysia..............................      2,625          3,407          2,854
United States.........................        472            523            438
Philippines...........................        582            568            571
Singapore.............................         36            104             68
Hong Kong.............................        137            124             54

     Eligible employees may participate in the ASE Inc. Employee Share Bonus
Plan and the ASE Test Share Option Plans. See "-- Directors and Senior
Management and Board Practice -- Compensation" and "-- Share Ownership".

     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 April 30, 2002.

                                                                  Percentage of
                                                                  Total of our
                                                                  Common Shares
                                           Number of ASE Inc.      Issued and
       Executive Officer or Director       Common Shares Held      Outstanding
       -----------------------------       ------------------      -----------
Jason C.S. Chang.........................     20,254,843                0.62%
Richard H.P. Chang.......................     37,379,794                1.15
Leonard Y. Liu...........................        161,923                0.00
Joseph Tung..............................        780,394                0.02
Chang Yao Hung-Ying......................      8,384,606                0.26
Chin Ko-Chien............................        534,530                0.02
David Pan................................        328,953                0.01
Feng Mei-Jean............................     57,819,663                1.78
Yen-Yi Tseng.............................          1,100                0.00
Alan Cheng...............................        287,697                0.01
John Ho..................................        284,710                0.01
Raymond Lo...............................        500,175                0.02
Kanapathi A/L Kuppusamy..................             --                  --
Shih-Song Lee............................        231,400                0.01


                                      60
<PAGE>



                                                                  Percentage of
                                                                  Total of our
                                                                  Common Shares
                                           Number of ASE Inc.      Issued and
       Executive Officer or Director       Common Shares Held      Outstanding
       -----------------------------       ------------------      -----------
James Stilson............................             --                  --
Fu-Shing Chang...........................          1,737                0.00
Gregory Lin..............................        200,803                0.01

Item 7.  Major Shareholders.

MAJOR SHAREHOLDERS

     The following table sets forth information known to us with respect to the
beneficial ownership of our common shares, as of April 30, 2002, 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.

     Name of shareholder or group              Common Shares Beneficially Owned
                                                 Number              Percentage
                                               -----------           ----------
ASE Enterprises Limited(1)................     634,595,834              19.5%
Directors, supervisors and executive
  officers as a group(2)..................     761,878,893              23.4

--------------------------
(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, the mother of Jason C.S. Chang, our
     Chairman, and Richard H.P. Chang, our Vice Chairman and Chief Executive
     Officer. Jason C.S. Chang is the sole shareholder and director of that
     company.

(2)  Includes shareholding of ASE Enterprises Limited.

     The following table sets forth information relating to our common shares
held by our consolidated subsidiaries and non-consolidated affiliates as of
April 30, 2002.

       Name of shareholder                   Common Shares Beneficially Owned
       -------------------                   --------------------------------
                                                Number             Percentage
                                             ------------          ----------
ASE Capital(1)..........................       21,420,317             0.7%
ASE Investment(1)(2)....................      142,368,827             4.4%
ASE Test Taiwan(3)......................          652,713             0.0%
Hung Ching(4)...........................       39,535,822             1.2%

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

(1)  ASE Capital and ASE Investment are our wholly-owned subsidiaries.

(2)  Of the 142,368,827 common shares owned by ASE Investment, 16,232,450 are
     currently represented by an aggregate of 3,246,490 ADSs.

(3)  ASE Test Taiwan is a subsidiary of ASE Test, our subsidiary.

(4)  As of April 30, 2002, we held 25.4% of the outstanding shares of Hung
     Ching. Our director Chang Yao Hung-ying, our Chairman Jason C.S. Chang,
     our Vice Chairman and Chief Executive Officer Richard H.P. Chang and other
     members of the Chang family are controlling shareholders of Hung Ching.
     See "Item 4. Information on the Company-- Business-- Unconsolidated
     Affiliates".

     None of our major shareholders have different voting rights from those of
our other shareholders. There has been no significant changes in the percentage
ownership of any of our major shareholders in 1999, 2000 and 2001.

     As of December 31, 2001, 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 December 31, 2001, 234,897,292 common shares were
registered in the name of a nominee of Citibank, N.A., the depositary under our
ADS deposit agreement. We believe that, of such shares, approximately 160
million were held in the United States in the form of ADSs by approximately
1,000 holders.


                                      61
<PAGE>


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
1,305,000 common shares in 1999, 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$103.2 million, NT$968.5
million and NT$234.6 million (US$6.7 million), respectively. ASE Inc. expects
this practice to continue in future periods.

     ASE Material sold interconnect materials in the aggregate amount of
NT$779.9 million, NT$1,765.6 million and NT$2,346.9 million (US$67.1 million)
to ASE Inc. in 1999, 2000 and 2001, respectively. In 2001, we purchased
approximately 34% 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$81.5 million, NT$142.7 million and NT$178.3 million
(US$5.1 million) in 1999, 2000 and 2001, 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$14.6 million, NT$3.6 million
and NT$17.2 million (US$0.5 million) in 1999, 2000 and 2001, respectively.
Purchases of raw materials by ASE Philippines amounted to NT$1.8 million,
NT$2.1 million and NT$4.7 million (US$0.1 million) in 1999, 2000 and 2001,
respectively. In addition, ASE Inc. purchased raw materials, principally
leadframes, from ASE Test Malaysia in an amount of NT$4.3 million, NT$11.9
million and NT$12.8 million (US$0.4 million) in 1999, 2000 and 2001,
respectively.

     In 2001, ASE Test Malaysia purchased raw materials, primarily lead frames
and substrates, from ASE Material in the aggregate amount of NT$79.3 million
(US$2.3 million). These types of raw materials are typically sold by ASE
Material to ASE Test Malaysia at book value.

     ASE Inc. has historically guaranteed the short-term borrowing of many of
its subsidiaries. As of December 31, 2001, ASE Inc. has endorsed and guaranteed
an aggregate amount of NT$8,082.7 million (US$230.9 million) of the outstanding
promissory notes of its subsidiaries.

     In 1999, 2000 and 2001, 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$12.9 million, NT$22.8 million and NT$30.5 million
(US$0.9 million), respectively.

     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 is expected to house ASE Chung Li's testing operations as well as part
of the operations of other affiliates of ASE Inc.


                                      62
<PAGE>


     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 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 is required to make four cash payments
to Swiss Bank Corporation in November 1998, 1999, 2000 and 2001. In return, J&R
Holding has 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.

     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, 2000.

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


                                      63
<PAGE>


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 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 are
appealing the decision to the Supreme Court of Taiwan, ROC. Counsel to Jason
C.S. Chang and Chang Yao Hung-ying have advised that, as these proceedings may
not be finally determined until the case has been considered by the Supreme
Court, one or two years may elapse until the case is fully resolved. If the
convictions are not overturned on appeal, Jason C.S. Chang and Chang Yao
Hung-ying will be required under ROC law to resign as directors and Jason C.S.
Chang will be required to resign as Chairman of ASE Inc.

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 April 30, 2002, 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.

<TABLE>

                                                                                    Average
                                                                  Adjusted           Daily
                                          Closing Price         Closing Price       Trading         Taiwan Stock
                                            per Share           per Share(1)         Volume        Exchange Index
                                       ------------------     -----------------    ---------     ------------------
                                                                                    (in
                                                                                    thousands
                                        High        Low         High        Low     of shares)     High        Low
                                       ------      ------     ------     ------     ---------    --------   --------
<C>                                    <C>          <C>         <C>       <C>         <C>        <C>         <C>
1997.............................      158.00       52.00      53.94      12.86       109,038    10,116.8    6,820.3
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
   First Quarter.................      123.00       91.00      79.95      59.15        40,946    10,202.2    8,448.8
   Second Quarter................      119.50       89.50      77.67      58.17        18,974    10,186.2    8,120.9
   Third Quarter.................       95.00       43.10      61.75      36.84        12,496     8,585.5    6,432.4
   Fourth Quarter................       43.00       22.60      36.84      19.32        18,282     6,432.4    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
   October.......................       18.20       14.40      18.20      14.40        12,788     4,065.1    3,446.3
   November......................       24.90       17.60      24.90      17.60        24,901     4,608.3    3,929.7
   December......................       34.20       23.70      34.20      23.70        43,145     5,551.2    4,441.1
2002 (through June 28)...........       38.50       20.80      38.50      20.80        24,596     6,462.3    5,071.8
   First Quarter.................       35.80       26.00      35.80      26.00        32,486     6,242.6    5,488.3
   January.......................       33.70       27.80      33.70      27.80        27,923     6,007.3    5,488.3
   February......................       28.90       26.00      28.90      26.00        17,280     5,968.6    5,499.8
   March.........................       35.80       27.00      35.80      27.00        45,956     6,242.6    5,680.8
   Second Quarter................       38.50       20.80      38.50      20.80        17,708     6,462.3    5,071.8
   April.........................       38.50       33.00      38.50      33.00        23,511     6,462.3    6,059.2
</TABLE>



                                                            64
<PAGE>


<TABLE>

                                                                                    Average
                                                                  Adjusted           Daily
                                          Closing Price         Closing Price       Trading         Taiwan Stock
                                            per Share           per Share(1)         Volume        Exchange Index
                                       ------------------     -----------------    ---------     ------------------
                                                                                    (in
                                                                                    thousands
                                        High        Low         High        Low     of shares)     High        Low
                                       ------      ------     ------     ------     ---------    --------   --------
<C>                                    <C>          <C>         <C>       <C>         <C>        <C>         <C>
 May...........................         34.10       27.70      34.10      27.70         14,529     6,065.7    5,443.2
   June.......................          28.30       20.80      28.30      20.80         15,126     5,675.6    5,071.8
</TABLE>

---------------------------
(1)..As adjusted retroactively by the Taiwan Stock Exchange to give effect to
     stock dividends paid in the periods indicated.

     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. Each ADS represents five common shares. As of April 30,
2002, a total of 43,022,558 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 27,
2002 was US$3.19 per ADS.

<TABLE>
                                                                                    Average
                                                                                    Daily
                                          Closing Price        Adjusted Closing     Trading        New York Stock
                                             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         667.87      624.12
 Fourth Quarter..................        6.75       3.06        5.77        2.62       28         667.87      624.12
 2001............................        6.05       1.75        5.17        1.75       97         666.57      504.21
 First Quarter...................        6.05       3.06        5.17        2.62       90         666.57      566.35
 Second Quarter..................        4.55       2.99        3.89        2.56      128         663.56      572.08
 Third Quarter...................        3.25       1.75        3.00        1.75       47         627.27      504.21
 Fourth Quarter..................        5.07       2.15        5.07        2.15      114         594.38      542.05
 October.........................        2.66       2.15        2.66        2.15      122         566.58      542.05
 November........................        3.59       2.64        3.59        2.64       88         588.23      555.96
 December........................        5.07       3.35        5.07        3.35      129         594.38      569.27
 2002 (through June 27)..........        5.54       3.05        5.54        3.05      121         609.53      524.25
 First Quarter...................        5.35       3.75        5.35        3.75      122         609.53      557.49
 January.........................        4.97       3.92        4.97        3.92       99         596.57      564.93
 February........................        4.15       3.75        4.15        3.75       49         579.20      557.49
 March...........................        5.35       4.15        5.35        4.15      216         609.53      588.63
 Second Quarter (through June 27)        5.54       3.05        5.54        3.05      120         598.31      524.25
 April...........................        5.54       4.66        5.54        4.66      165         598.38      568.43
 May.............................        5.00       4.13        5.00        4.13      116         585.78      565.35
 June (through June 27)..........        4.13       3.05        4.13        3.05       69         570.78      524.25
</TABLE>

---------------------------
(1) As adjusted retroactively to give effect to stock dividends paid in the
periods indicated.


                                                          65
<PAGE>


Item 10.  Additional Information.

ARTICLES OF INCORPORATION

     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).

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.

General

     We were incorporated on March 23, 1984 as a company limited by shares
under the ROC Company Law. Our authorized capital was NT$41,500,000,000,
divided into 4,150,000,000 common shares, 3,254,800,000 were issued in
registered form and outstanding as of March 31, 2002. We do not have any equity
in the form of preference shares or otherwise outstanding as of the date of
this annual report.

     We have 300,000,000 common shares reserved for issuance under our employee
stock options and 300,000,000 common shares reserved in connection with
conversions of convertible bonds. As of March 31, 2002, these convertible bonds
were convertible into our common shares at a conversion price of NT$50.5 per
common share. The conversion price is subject to adjustment in the following
circumstances:

     (1) the making of a free distribution or bonus issue of common shares;

     (2) subdivisions, consolidations or reclassifications of common shares;

     (3) the declaration of a dividend in common shares;

     (4) the grant, issue or offer to the holders of common shares or rights or
         warrants to subscribe for or purchase common shares at less than the
         current market price or to subscribe for or purchase any securities
         convertible into or exchangeable for common shares at less than the
         then current market price;


                                      66
<PAGE>


     (5) the distribution to the holders of common shares of evidences of
         indebtedness of ASE Inc. or of shares of capital stock of ASE Inc.
         (other than common shares) or of assets (other than regular periodic
         dividends in cash) or of rights or warrants to subscribe for or
         purchase shares or securities (other than those mentioned in (4)
         above);

     (6) the issue of securities (other than the bonds, the entitlement
         certificates to be issued on conversion of bonds and those securities
         mentioned in (4) above) convertible into or exchangeable for common
         shares at less than the then current market price or of rights or
         warrants (other than those securities mentioned in (4) above) to
         subscribe for or purchase common shares at less than the then current
         market price or to subscribe for or purchase securities convertible
         into or exchangeable for common shares at less than the then current
         market price;

     (7) the issue of common shares (other than common shares or the
         entitlement certificates issued on conversion of the bonds or in any
         of the circumstances described above, but including to employees under
         any employee bonus arrangements) at less than the current market
         price; and

     (8) any other event or circumstances which would have in our determination
         or in the determination of the trustee an analogous effect to any of
         the events in (1) to (7) above including, but not limited to, issues
         of receipts or certificates entitling holders to receive securities.

Certificates of Payment

     Under current ROC law, whenever we issue common shares, we will deliver
one or more certificates of payment evidencing the aggregate number of common
shares purchased to the purchaser (or the holder, in the case of a distribution
of common shares to existing holders, or the subscriber, in the case of a
holder subscribing for additional common shares under a rights offering). Each
certificate of payment will represent the irrevocable right to receive the
relevant number of common shares after all required ROC share issuance
procedures have been complied with. We are required under ROC law to file an
amendment to our corporate registration within 15 days after we receive the
proceeds of an offering.

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 any gains on the disposal of
          fixed assets, 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 any gains on the
          disposal of fixed assets, 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. In the event cash
dividends are lower than NT$0.1 per share, the Company will distribute stock
dividends rather than cash dividends.

     Whenever we make a distribution of common shares upon the common shares
underlying the ADSs, we will notify the depositary of the ADSs and deposit the
applicable number of shares with the custodian for the depositary. Upon receipt
of notice of the deposit, the depositary will, subject to ROC law, either
distribute to holders new ADSs representing the common shares deposited or
modify the ratio of ADSs representing our common shares, in which case each ADS
will represent rights and interests in the additional common shares so
deposited.

     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. Furthermore, the
annual capitalized portion payable out of our capital reserve shall not exceed
10% of our paid-in capital.

     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


                                      67
<PAGE>


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. Our Articles of Incorporation provide that 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:

     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;


                                      68
<PAGE>


     o    distribution of any stock dividend; or

     o    removal of directors or supervisors.

     Alternatively, in the case of a public company, such as us, the above
major corporate actions may be approved by at least two-thirds of the common
shares represented at a shareholders meeting in which a quorum of at least a
majority of all issued and outstanding common shares are represented.

     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 will not have the right to exercise voting rights with
respect to the underlying common shares, except as described in "Description of
American Depositary Receipts -- Voting Rights".

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;

     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.

     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.


                                      69
<PAGE>


     These restrictions on acquiring our common shares do not apply to our
subsidiaries or affiliates. According to the ROC Company Law amended on
November 12, 2001, our subsidiaries or affiliates in which our shareholding
exceeds 50% of each of their issued shares or capital may not purchase or take
pledge of our shares. Shares obtained by such subsidiaries or affiliates prior
to November 12, 2001 may be kept or sold by such subsidiaries or affiliates.
See "Item 7. Major Shareholders-- Major Shareholders".

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 publicly listed 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 holding those common shares for more than a 180-day period 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    2% of the outstanding shares of the company in the case of a company
          with no more than 30 million outstanding shares; or

     o    2% of 30 million shares plus 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.




                                      70
<PAGE>


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.

     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 terminates on December 31, 2002.

     Service Agreement dated as of August 1, 2001 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.) 14% of their monthly incurred services associated costs and
expenses plus 10% or US$161,700, 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, 2002.

     Service Agreement dated as of August 1, 2001 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$196,350,


                                      71
<PAGE>


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, 2002.

     Service Agreement dated as of August 1, 2001 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$63.525, 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, 2002.

     Service Agreement dated as of August 1, 2001 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.) 11% of their monthly incurred services associated costs and expenses
plus 5%, or US$127,050, 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, 2002.

     Service Agreement dated as of August 1, 2001 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$606,375, 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, 2002.

     Commission Agreement dated as of August 1, 2001 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, 2002.

     Commission Agreement dated as of August 1, 2001 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, 2002.

     Commission Agreement dated as of August 1, 2001 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, 2002.

     Commission Agreement dated as of August 1, 2001 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, 2002.

     Commission Agreement dated as of August 1, 2001 between ASE Inc. and
Gardex International Limited


                                      72
<PAGE>


     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, 2002.

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 Ministry of Finance or by the Central Bank of China.
Current regulations favor trade-related foreign exchange transactions and
Foreign Investment Approval investments. 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 outside the ROC foreign currency of up to
US$50,000,000 (or its equivalent) and US$5,000,000 (or its equivalent)
respectively in each calendar year. In addition, ROC companies and resident
individuals may, without foreign exchange approval, remit into the ROC foreign
currency of up to US$50,000,000 (or its equivalent) and US$5,000,000 (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.

TAXATION

ROC Taxation

     The following discussion is the opinion of Lee and Li. The discussion
describes the principal ROC tax consequences of the ownership and disposition
of ADSs representing 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.

     Dividends paid by us out of our capital reserves are not subject to ROC
withholding tax.


                                      73
<PAGE>


   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 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 of 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
and the Netherlands, which may limit 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 is the opinion of Davis Polk & Wardwell. The
discussion describes the material U.S. federal income tax consequences of the
acquisition, ownership and disposition of ADSs to those U.S. holders described
below. For these purposes, you are a U.S. holder if you are a beneficial owner
of common shares that, for U.S. federal income tax purposes, is:

     o    a citizen or resident of the United States;


                                      74
<PAGE>


     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 only applies to ADSs that you purchase through this
offering and only if you hold the ADSs as capital assets.

     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 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.

     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, 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.


                                      75
<PAGE>


     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, amongst 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.

   Passive Foreign Investment Company Rules

     Based on management estimates and the available financial data, ASE Inc.
does 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 ASE
Inc. 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 ASE Inc.'s
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
ASE Inc. is a passive foreign investment company at any time that you own ADSs:

     o    You may be subject to additional taxes and interest charges on any
          gain realized on the disposition of the ADSs, 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.

     Please consult your tax advisors about the possibility that ASE Inc. 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


                                      76
<PAGE>


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
for hedging, 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, primarily 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, 2001.

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

<TABLE>

                                                            As of December 31, 2001
                              -------------------------------------------------------------------------------------
                                                            Expected Maturity Date
                              -------------------------------------------------------------------------------------
                                                                                  2007 and
                                2002      2003      2004      2005       2006    Thereafter    Total     Fair Value
                              -------   --------   -------   -------   -------   ----------   --------   ----------
<S>                           <C>       <C>        <C>       <C>       <C>
 Short-term debt:
    Variable rate (NT$).....    800.0         --        --        --        --         --        800.0        800.0
      Average interest
        rate................    4.33%         --        --        --        --         --
    Variable rate (US$).....     55.8         --        --        --        --         --         55.8         55.8
      Average interest
        rate................    3.87%         --        --        --        --         --
    Variable rate (JP(Y))...    545.6         --        --        --        --         --        545.6        545.6
      Average interest
        rate................    1.10%         --        --        --        --         --
    Variable rate (KRW)..... 12,830.4         --        --        --        --         --     12,830.4     12,830.4
      Average interest
        rate................    5.73%         --        --        --        --         --
    Variable rate (MYR).....     20.5         --        --        --        --         --         20.5         20.5
      Average interest
        rate................    3.36%         --        --        --        --         --
    Variable rate (DM)......      2.0         --        --        --        --         --          2.0          2.0
      Average interest
        rate................    4.45%         --        --        --        --         --
 Long-term debt:
    Variable rate (NT$).....  2,847.0   12,830.8   5,989.1     909.1     234.5         --     22,810.5     22,810.5
      Average interest
        rate................    4.37%      5.19%     6.34%     6.53%     6.04%         --
    Fixed rate (US$)........     89.4        0.2     136.6        --        --         --        226.2        226.2
      Average interest
        rate................    6.40%      8.79%     7.28%        --        --         --
    Variable rate (US$).....      8.4       31.6       9.0       7.9       4.1        2.0         63.0         63.0
      Average interest
        rate................    6.32%      5.11%     7.80%     8.22%     8.49%     10.77%
    Variable rate (JP(Y))...       --    4,562.9        --        --        --         --      4,562.9      4,562.9
      Average interest
        rate................       --      1.10%        --        --        --         --
</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, including U.S. dollars, NT dollars, Malaysian ringgit, Korean won,
Philippine pesos, Singapore dollars and Hong Kong dollars. 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
1999, 2000 and 2001, the average exchange rate of the NT dollar to the U.S.
dollar was 32.28, 31.37 and 33.91, respectively. In addition, a substantial
portion of our capital


                                      77
<PAGE>


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, 2001 include
U.S. dollar debt and Japanese yen debt. As of December 31, 2001, approximately
72.2% 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, 2001, approximately 70.2% 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
as of December 31, 2001.

  Foreign Currency Option Contracts               Amount            Maturity
  ---------------------------------              --------         ------------
                                                        (in millions)
 Contracts to sell US$ call/NT$ put.......       US$114.5         Jan-Jul 2002
 Contracts to buy US$ put/NT$ call........         US$2.0         Jan 2002
 Contracts to buy US$ put/JP(Y)call.......         US$6.0         Jan-Mar 2002
 Contracts to sell US$ call/JP(Y)put......         US$9.0         Jan-Mar 2002
 Contracts to sell US$ call/JP(Y)put......        US$15.0         Jan-Mar 2002
 Contracts to buy JP(Y)call/US$ put.......         US$9.8         Jan-Mar 2002

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.


                                      78
<PAGE>


Upon the completion of the exchange offer, we instructed the GDS depositary to
terminate the global depositary receipt facility.


                                    PART III

Item 17.  Financial Statements.

     The Company has elected to provide financial statements for fiscal year
2001 and the related information pursuant to Item 18.

Item 18.  Financial Statements.

     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 May 17, 2002
          (page F-1).

     (b)  Consolidated Balance Sheets of the Company and subsidiaries as of
          December 31, 2000 and 2001 (page F-2).

     (c)  Consolidated Statements of Income of the Company and subsidiaries for
          the years ended December 31, 1999, 2000 and 2001 (page F-4).

     (d)  Consolidated Statements of Changes in Stockholders' Equity of the
          Company and subsidiaries for the years ended December 31, 1999, 2000
          and 2001 (page F-6).

     (e)  Consolidated Statements of Cash Flows of the Company and subsidiaries
          for the years ended December 31, 1999, 2000 and 2001 (page F-9).

     (f)  Notes to Consolidated Financial Statements of the Company and
          subsidiaries (pages F-11).


                                      79
<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 "Corporation") as
of December 31, 2000 and 2001 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, 2001, 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
Corporation'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 Corporation as of December 31, 2000 and 2001, and the consolidated
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the Republic of China.

     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, 2001 and the determination of stockholders' equity and financial
position at December 31, 2001 and 2000, to the extent summarized in Note 27.


T N Soong & Co
An Associate Member Firm of Deloitte Touche Tohmatsu effective April 22, 2002
Formerly A Member Firm of Andersen Worldwide, SC
Taipei, Taiwan
Republic of China

May 17, 2002



                                      F-1


<PAGE>


           ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

<TABLE>
                                                                                    December 31,
                                                                   ------------------------------------------------
                                                                      2000                       2001
                                                                   -----------       ------------------------------
                                                                     (NT$)              (NT$)             (US$)
<S>                                                                 <C>                <C>                  <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 2)......................            14,166,495         11,770,729           336,307
Short-term investments (Notes 2 and 3)..................             1,682,679          4,601,172           131,462
Notes receivable........................................               219,641            105,185             3,005
Accounts receivable -- net (Notes 4)....................             9,040,934          7,020,964           200,599
Inventories (Notes 2 and 5).............................             3,246,327          2,768,436            79,098
Deferred income tax assets -- net (Notes 2 and 17)......             1,160,727            873,008            24,943
Prepayments and other (Note 21).........................             1,270,859            942,110            26,917
Sinking fund (Note 13)..................................                    --          1,568,057            44,802
                                                                   -----------        -----------         ---------
Total Current Assets....................................            30,787,662         29,649,661           847,133
                                                                   ===========        ===========         =========
LONG-TERM INVESTMENTS
Shares of stock (Notes 2, 6, 10 and 21).................            10,485,459          9,530,398           272,297
Bonds (Notes 2 and 7)...................................               226,740                 --                --
                                                                   -----------        -----------         ---------
Total Long-Term Investments.............................            10,712,199          9,530,398           272,297
                                                                   ===========        ===========         =========
PROPERTIES (Notes 2, 8, 13 and 21)
Cost
   Land and land improvements...........................             3,798,835          3,940,476           112,585
   Buildings and improvements...........................             9,390,206         14,640,855           418,310
   Machinery and equipment..............................            59,631,388         66,986,146         1,913,890
   Transportation equipment.............................               101,409            107,927             3,084
   Furniture and fixtures...............................             1,458,138          1,387,583            39,645
   Leased assets and leasehold improvements.............               486,275            584,163            16,690
   Long-term land leasehold rights......................                 1,389                 --                --
                                                                   -----------        -----------         ---------
   Total cost...........................................            74,867,640         87,647,150         2,504,204
Accumulated depreciation................................          (22,690,292)       (31,751,538)         (907,187)
                                                                   -----------        -----------         ---------
                                                                    52,177,348         55,895,612         1,597,017
Construction in progress................................             3,438,426          1,728,587            49,388
Machinery in transit and prepayments....................             4,950,426          2,930,886            83,740
                                                                   -----------        -----------         ---------
Net Properties..........................................            60,566,200         60,555,085         1,730,145
                                                                   -----------        -----------         ---------
OTHER ASSETS (Notes 2, 9 and 21)........................             1,275,557          1,342,269            38,351
                                                                   -----------        -----------         ---------
CONSOLIDATED DEBITS (Notes 2 and 10)....................             4,999,546          5,248,919           149,969
                                                                   -----------        -----------         ---------
TOTAL ASSETS............................................           108,341,164        106,326,332         3,037,895
                                                                   ===========        ===========         =========
</TABLE>

                                                         F-2
<PAGE>

<TABLE>
                                                                                    December 31,
                                                                   ------------------------------------------------
                                                                      2000                       2001
                                                                   -----------       ------------------------------
                                                                     (NT$)              (NT$)             (US$)
<S>                                                                  <C>                <C>                  <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes 11 and 21).................             5,402,597          3,456,149            98,747
Commercial paper and bank acceptances payable (Note 12).             4,281,805          3,444,314            98,409
Accounts payable........................................             3,859,909          2,968,779            84,822
Payable for fixed assets (Note 8).......................             4,179,324          1,928,469            55,099
Income tax payable......................................             1,100,964            244,618             6,989
Current portion of long-term bonds payable (Note 13)....                    --          3,090,345            88,295
Current portion of long-term debts (Notes 14 and 21)....             3,309,935          3,175,883            90,740
Current portion of long--term payable for investments
   (Note 26)............................................               773,616            816,433            23,327
Accrued expenses (Note 19)..............................             1,613,207          1,631,642            46,619
Other...................................................             1,352,002            512,295            14,636
                                                                   -----------        -----------         ---------
Total Current Liabilities...............................            25,873,359         21,268,927           607,683
LONG-TERM BONDS PAYABLE (Note 13).......................            12,229,179          4,778,291           136,523
LONG-TERM DEBTS (Notes 14 and 21).......................            10,329,851         23,101,135           660,032
LONG-TERM PAYABLE FOR INVESTMENTS (Note 26).............             3,417,912          2,794,861            79,853
ACCRUED PENSION COST (Notes 2 and 18)...................               248,425            294,438             8,413
DEFERRED INCOME TAX LIABILITIES -- NET (Notes 2 and 17).               511,462                 --                --
                                                                   -----------        -----------         ---------
Total Liabilities.......................................            52,610,188         52,237,652         1,492,504
                                                                   -----------        -----------         ---------
COMMITMENTS AND CONTINGENCIES (Note 22) MINORITY
   INTEREST IN CONSOLIDATED SUBSIDIARIES................            12,061,762         12,142,359           346,925
                                                                   -----------        -----------         ---------
SHAREHOLDERS' EQUITY (Note 15)
Capital stock -- NT$10 par value........................            27,520,000         32,548,000           929,943
                                                                   -----------        -----------         ---------
   Authorized -- 3,200,000 thousand shares in 2000 and
     4,150,000 thousand shares in 2001
   Issued -- 2,750,000 thousand shares in 2000 and
     3,254,800 thousand shares in 2001
Capital surplus
   Capital in excess of par value..........................          3,171,933          3,171,933            90,627
   Net gain on disposal of properties......................             23,109             23,109               660
   Adjustment of equity in subsidiary due to change in
     percentage of ownership...............................          4,075,783          3,656,472           104,471
                                                                   -----------        -----------         ---------
   Total capital surplus...................................          7,270,825          6,851,514           195,758
                                                                   -----------        -----------         ---------
Retained earnings.......................................             8,200,947          1,015,654            29,018
                                                                   -----------        -----------         ---------
Unrealized loss on long-term investments in shares of
   stock................................................             (546,829)          (442,246)          (12,636)
                                                                   -----------        -----------         ---------
Cumulative translation adjustments......................             1,224,271          1,973,399            56,383
                                                                   -----------        -----------         ---------
Total Shareholders' Equity..............................            43,669,214         41,946,321         1,198,466
                                                                   -----------        -----------         ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..............           108,341,164        106,326,332         3,037,895
                                                                   ===========        ===========         =========
</TABLE>

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

                                                         F-3
<PAGE>


           ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
      (In Thousands, Except Earnings (Loss) Per Share and Equivalent ADS)

<TABLE>
                                                                                    Years Ended December 31,
                                                                      -----------------------------------------------------
                                                                        1999           2000                  2001
                                                                      ----------     ----------    ------------------------
                                                                        (NT$)          (NT$)         (NT$)         (US$)
<S>                                                                   <C>            <C>           <C>              <C>
NET REVENUES (Note 25)
Packaging...................................................          24,522,968     38,028,799    28,898,185       825,663
Testing.....................................................           7,793,198     12,768,361     9,459,275       270,265
Other.......................................................             293,395         96,217        10,366           296
                                                                      ----------     ----------    ----------     ---------
Subtotal....................................................          32,609,561     50,893,377    38,367,826     1,096,224
                                                                      ----------     ----------    ----------     ---------
COST OF REVENUES
Packaging...................................................          18,769,995     28,011,934    24,272,336       693,495
Testing.....................................................           4,687,939      7,473,964     8,676,475       247,899
Other.......................................................             501,632         81,380         8,203           235
                                                                      ----------     ----------    ----------     ---------
Subtotal....................................................          23,959,566     35,567,278    32,957,014       941,629
                                                                      ----------     ----------    ----------     ---------
GROSS PROFIT                                                           8,649,995     15,326,099     5,410,812       154,595
                                                                      ----------     ----------    ----------     ---------
OPERATING EXPENSES
Selling.....................................................             924,347      1,020,451       877,858        25,081
General and administrative (Note 10)........................           2,162,765      3,166,006     3,490,507        99,729
Research and development....................................             714,324      1,262,516     1,504,536        42,987
                                                                      ----------     ----------    ----------     ---------
Total Operating Expenses....................................           3,801,436      5,448,973     5,872,901       167,797
                                                                      ----------     ----------    ----------     ---------
INCOME (LOSS) FROM OPERATIONS...............................           4,848,559      9,877,126      (462,089)      (13,202)
                                                                      ----------     ----------    ----------     ---------
NON-OPERATING INCOME
Interest (Notes 2 and 23)...................................             423,158        554,180       503,603        14,389
Gain on sales of investments (Notes 2 and  16)..............           5,544,155         91,666        50,666         1,448
Investment income under equity method (Notes  2 and 6)......              81,466         69,915            --            --
Foreign exchange gain -- net (Notes 2 and 23)...............                  --        302,745       247,498         7,071
Other.......................................................             314,549        198,518       466,787        13,336
                                                                      ----------     ----------    ----------     ---------
Total Non-Operating Income..................................           6,363,328      1,217,024     1,268,554        36,244
                                                                      ----------     ----------    ----------     ---------
NON-OPERATING EXPENSES
Interest (Notes 2 and 8)....................................           1,469,795      2,092,238     2,242,879        64,082
Investment loss under equity method (Notes 2 and 6).........              30,871        237,152     1,246,836        35,624
Foreign exchange loss -- net (Notes 2 and 23)...............             538,368             --            --            --
Other.......................................................             110,412        361,200       302,249         8,636
                                                                      ----------     ----------    ----------     ---------
Total Non-Operating Expenses................................           2,149,446      2,690,590     3,791,964       108,342
                                                                      ----------     ----------    ----------     ---------
INCOME (LOSS) BEFORE INCOME TAX AND MINORITY INTEREST AND
   ACQUISITION AND EXTRAORDINARY LOSS (continued)...........           9,062,441      8,403,560    (2,985,499)      (85,300)
INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 17)...............            (459,543)    (1,065,768)      199,160         5,690
                                                                      ----------     ----------    ----------     ---------
INCOME (LOSS) BEFORE MINORITY INTEREST AND  ACQUISITION AND
   EXTRAORDINARY LOSS.......................................           8,602,898      7,337,792    (2,786,339)      (79,610)
(Continued)INCOME BEFORE ACQUISITION (Note 2)...............             (65,167)            --            --            --
EXTRAORDINARY LOSS (net of tax benefit $48,188 (US$1,377))
   (Note 13)................................................                  --             --      (144,565)       (4,130)
MINORITY INTEREST IN NET (INCOME) LOSS OF  SUBSIDIARIES.....            (743,065)    (1,500,643)      788,685        22,534
                                                                      ----------     ----------    ----------     ---------
NET INCOME (LOSS)...........................................           7,794,666      5,837,149    (2,142,219)      (61,206)
                                                                      ==========     ==========    ==========     =========
</TABLE>
                                                             F-4
<PAGE>

<TABLE>
                                                                                    Years Ended December 31,
                                                                      -----------------------------------------------------
                                                                        1999            2000                 2001
                                                                      ----------     ----------    ------------------------
                                                                        (NT$)          (NT$)         (NT$)         (US$)
<S>                                                                   <C>            <C>           <C>              <C>
EARNINGS (LOSS) PER SHARE (Notes 2 and 20) Based on weighted
   average number of outstanding shares of 3,254,800,000 in
   2001 and 2,677,602,508 in 2000 and 1,980,000,000 in 1999
   Simple
      Income loss before extraordinary loss.................                3.93           2.18         (0.61)        (0.02)
      Extraordinary loss....................................                  --             --         (0.05)           --
                                                                      ----------     ----------    ----------     ---------
      Net loss..............................................                3.93           2.18         (0.66)        (0.02)
                                                                      ==========     ==========    ==========     =========
   Primary..................................................                3.89           2.13         (0.66)        (0.02)
                                                                      ==========     ==========    ==========     =========
   Fully diluted............................................                3.89           2.13         (0.66)        (0.02)
                                                                      ==========     ==========    ==========     =========
Based on weighted average number of outstanding shares
   after giving retroactive adjustment to 2000 and 2001
   stock dividends

   Primary..................................................                2.46           1.82         (0.66)        (0.02)
                                                                      ==========     ==========    ==========     =========
   Fully diluted............................................                2.45           1.80         (0.66)        (0.02)
                                                                      ==========     ==========    ==========     =========
EARNINGS (LOSS) PER EQUIVALENT ADS (Note 2 and 20)
Based on weighted average number of outstanding shares of 650,960,000
   in 2001 and 535,520,502 in 2000 and 396,000,000 in 1999
   Simple
      Income Loss before extraordinary loss.................               19.68          10.90         (3.07)        (0.09)
      Extraordinary loss....................................                  --             --         (0.22)           --
                                                                      ----------     ----------    ----------     ---------
      Net loss..............................................               19.68          10.90         (3.29)        (0.09)
                                                                      ==========     ==========    ==========     =========
   Primary..................................................               19.45          10.65         (3.29)        (0.09)
                                                                      ==========     ==========    ==========     =========
   Fully diluted............................................               19.43          10.65         (3.29)        (0.09)
                                                                      ==========     ==========    ==========     =========
Based on weighted average number of outstanding shares after
   giving retroactive adjustment to 2000 and 2001 stock dividends
   Primary..................................................               12.28           9.12         (3.29)        (0.09)
                                                                      ==========     ==========    ==========     =========
   Fully diluted............................................               12.27           9.01         (3.29)        (0.09)
                                                                      ==========     ==========    ==========     =========
</TABLE>
--------------

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

                                                                 F-5
<PAGE>


           ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                       (In Thousands, Except Share Data)


<TABLE>
                                 Capital Stock (NT$10 Par Value)                                     Retained Earnings
                            -------------------------------------------                  ------------------------------------------
                                           Issued and Outstanding                                      Unappropriated
                                           ----------------------------                                    Earnings
                            Authorized                                       Capital         Legal      (Accumulated
                            Shares         Shares        Amount              Surplus        Reserve        Losses)        Total
                            -------------  -------------  -------------   ------------   ------------   ------------   ------------
<S>                         <C>            <C>            <C>             <C>            <C>            <C>            <C>
BALANCE, JANUARY 1, 1999 .  2,200,000,000  1,780,000,000  NT$17,800,000   NT$1,189,173   NT$1,389,529   NT$1,695,998   NT$3,085,527
Increase in authorized
   capital, June 9, 1999 .    200,000,000             --             --             --             --             --             --
Appropriations of 1998
   earnings (Note 15)
   Legal reserve .........             --             --             --             --        160,255       (160,255)            --
Compensation to directors
   and supervisors .......             --             --             --             --             --        (28,800)       (28,800)
Stock dividends -- 7.8% ..             --    138,840,000      1,388,400             --             --     (1,388,400)    (1,388,400)
Bonus to employees --
   stock .................             --      9,540,000         95,400             --             --        (95,400)       (95,400)
Bonus to employees --
   cash ..................             --             --             --             --             --         (5,500)        (5,500)
Stock dividends from
   capital surplus -- 2.9%             --     51,620,000        516,200       (516,200)            --             --             --
Transfer of subsidiary's
   net gain on disposal
   of properties .........             --             --             --          4,931             --         (4,931)        (4,931)
Transfer of net gain on
   disposal of properties              --             --             --            736             --           (736)          (736)
Adjustment of equity in
   subsidiary due to
   change in percentage
   of ownership ..........             --             --             --          5,034             --       (113,080)      (113,080)
Net income in 1999 .......             --             --             --             --             --      7,794,666      7,794,666
Reversal of unrealized
   loss on long-term
   investment in shares
   of stock ..............             --             --             --             --             --             --             --
Cumulative translation
   adjustments (Note 2) ..             --             --             --             --             --             --             --
                            -------------  -------------  -------------   ------------   ------------   ------------   ------------
BALANCE, DECEMBER 31, 1999  2,400,000,000  1,980,000,000     19,800,000        683,674      1,549,784      7,693,562      9,243,346
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 15)
   Legal reserve .........             --             --             --             --        779,393       (779,393)            --
Compensation to
   directors and
   supervisors ...........             --             --             --             --             --       (139,200)      (139,200)
Bonus to employees --
   cash ..................             --             --          NT$--          NT$--          NT$--     NT$(12,669)    NT$(12,669)
Bonus to employees --
   stock .................             --     47,833,062        478,331             --             --       (478,331)      (478,331)
Stock dividends --
   31.5% .................             --    623,811,852      6,238,118             --             --     (6,238,118)    (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             --         (9,470)        (9,470)

<CAPTION>
                                      Unrealized
                                       Loss on
                                      Long-term        Cumulative
                                      Investment       Translation       Total
                                       In Shares       Adjustments    Shareholders'
                                       of Stock         (Note 2)         Equity
                                      ------------     -----------    -------------
<S>                                    <C>              <C>           <C>
BALANCE, JANUARY 1, 1999 .........     NT$(703,865)     NT$503,973    NT$21,874,808
Increase in authorized
   capital, June 9, 1999 .........              --              --               --
Appropriations of 1998
   earnings (Note 15)
   Legal reserve .................              --              --               --
Compensation to directors
   and supervisors ...............              --              --          (28,800)
Stock dividends -- 7.8% ..........              --              --               --
Bonus to employees--
   stock .........................              --              --               --
Bonus to employees--
   cash ..........................              --              --           (5,500)
Stock dividends from
   capital surplus -- 2.9%  ......              --              --               --
Transfer of subsidiary's
   net gain on disposal
   of properties .................              --              --               --
Transfer of net gain on
   disposal of properties ........              --              --               --
Adjustment of equity in
   subsidiary due to
   change in percentage
   of ownership ..................              --              --         (108,046)
Net income in 1999 ...............              --              --        7,794,666
Reversal of unrealized
   loss on long-term
   investment in shares
   of stock ......................         703,865              --          703,865
Cumulative translation
   adjustments (Note 2) ..........              --        (173,957)        (173,957)
                                      ------------     -----------    -------------
BALANCE, DECEMBER 31, 1999 .......              --         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 15)
   Legal reserve .................              --              --               --
Compensation to
   directors and
   supervisors ...................              --              --         (139,200)
Bonus to employees--
   cash ..........................           NT$--           NT$--       NT$(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 ....................              --              --               --
</TABLE>

                                                                      F-6
<PAGE>

<TABLE>
                                 Capital Stock (NT$10 Par Value)                                     Retained Earnings
                            -------------------------------------------                  ------------------------------------------
                                           Issued and Outstanding                                      Unappropriated
                                           ----------------------------                                    Earnings
                            Authorized                                       Capital         Legal      (Accumulated
                            Shares         Shares        Amount              Surplus        Reserve        Losses)        Total
                            -------------  -------------  -------------   ------------   ------------   ------------   ------------
<S>                         <C>            <C>            <C>             <C>            <C>            <C>            <C>
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 .......             --             --             --             --             --             --             --
Net income in 2000 .......             --             --             --             --             --      5,837,149      5,837,149
Transfer of net gain
   on disposal of
   properties ............             --             --             --          1,760             --         (1,760)        (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      2,329,177      5,871,770      8,200,947
Increase in authorized
   capital, April 6,
   2001 ..................    950,000,000             --             --             --             --             --             --
Appropriations of 2000
   earnings (Note 15)
   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 .................             --     34,960,000        349,600             --             --       (349,600)      (349,600)
Stock dividends -- 17%  ..             --    467,840,000      4,678,400             --             --     (4,678,400)    (4,678,400)
Adjustment of equity
   in subsidiary due
   to change in
   percentage of
   ownership .............             --             --          NT$--   NT$(419,311)          NT$--      NT$98,526      NT$98,526
Reversal of unrealized
   loss on long-term
   investment in
   shares of stock .......             --             --             --             --             --             --             --
Net loss in 2001 .........             --             --             --             --             --     (2,142,219)    (2,142,219)
Cumulative translation
   adjustments (Note 2) ..             --             --             --             --             --             --             --
                            -------------  -------------  -------------   ------------   ------------  -------------   ------------
BALANCE, DECEMBER 31,
   2001 ..................  4,150,000,000  3,254,800,000  NT$32,548,000   NT$6,851,514   NT$2,912,716  NT$(1,897,062)  NT$1,015,654
                            =============  =============  =============   ============   ============  =============   ============
BALANCE, JANUARY 1,
   2001 ..................  3,200,000,000  2,752,000,000     US$786,285     US$207,738      US$66,547     US$167,766     US$234,313
Increase in authorized
   capital, April 6,
   2001 ..................    950,000,000             --             --             --             --             --             --
Appropriations of 2000
   earnings (Note 15)
   Legal reserve .........             --             --             --             --         16,673        (16,673)            --
Compensation to
   directors and
   supervisors ...........             --             --             --             --             --         (2,949)        (2,949)
Bonus to employees --
   cash ..................             --             --             --             --             --           (297)          (297)
Bonus to employees --
   stock .................             --     34,960,000          9,989             --             --         (9,989)        (9,989)
Stock dividends -- 17% ...             --    467,840,000        133,669             --             --       (133,669)      (133,669)
Adjustment of equity
   in subsidiary due
   to change in
   percentage of
   ownership .............             --             --             --        (11,980)            --          2,815          2,815

<CAPTION>
                                      Unrealized
                                       Loss on
                                      Long-term        Cumulative
                                      Investment       Translation       Total
                                       In Shares       Adjustments    Shareholders'
                                       of Stock         (Note 2)         Equity
                                      ------------     -----------    -------------
<S>                                    <C>              <C>           <C>
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)             --         (546,829)
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 ..........................        (546,829)      1,224,271       43,669,214
Increase in authorized
   capital, April 6,
   2001 ..........................              --              --               --
Appropriations of 2000
   earnings (Note 15)
   Legal reserve .................              --              --               --
Compensation to
   directors and
   supervisors ...................              --              --         (103,200)
Bonus to employees --
   cash ..........................              --              --          (10,400)
Bonus to employees --
   stock .........................              --              --               --
Stock dividends -- 17% ...........              --              --               --
Adjustment of equity
   in subsidiary due
   to change in
   percentage of
   ownership .....................           NT$--           NT$--      NT$(320,785)
Reversal of unrealized
   loss on long-term
   investment in
   shares of stock ...............         104,583              --          104,583
Net loss in 2001 .................              --              --       (2,142,219)
Cumulative translation
   adjustments (Note 2) ..........              --         749,128          749,128
                                      ------------    ------------    -------------
BALANCE, DECEMBER 31,
   2001 ..........................     NT$(442,246)   NT$1,973,399    NT$41,946,321
                                      ============    ============    =============
BALANCE, JANUARY 1,
   2001 ..........................      US$(15,624)      US$34,980     US$1,247,692
Increase in authorized
   capital, April 6,
   2001 ..........................              --              --               --
Appropriations of 2000
   earnings (Note 15)
   Legal reserve .................              --              --               --
Compensation to
   directors and
   supervisors ...................              --              --           (2,949)
Bonus to employees --
   cash ..........................              --              --             (297)
Bonus to employees --
   stock .........................              --              --               --
Stock dividends -- 17% ...........              --              --               --
Adjustment of equity
   in subsidiary due
   to change in
   percentage of
   ownership .....................              --              --           (9,165)
</TABLE>
                                                                      F-7
<PAGE>


<TABLE>
                                 Capital Stock (NT$10 Par Value)                                     Retained Earnings
                            -------------------------------------------                  ------------------------------------------
                                           Issued and Outstanding                                      Unappropriated
                                           ----------------------------                                    Earnings
                            Authorized                                       Capital         Legal      (Accumulated
                            Shares         Shares        Amount              Surplus        Reserve        Losses)        Total
                            -------------  -------------  -------------   ------------   ------------   ------------   ------------
<S>                         <C>            <C>            <C>             <C>            <C>            <C>            <C>
Reversal of unrealized
   loss on long-term
   investment in
   shares of stock .......             --             --             --             --             --             --             --
Net loss in 2001 .........             --             --             --             --             --        (61,206)       (61,206)
Cumulative translation
   adjustments (Note 2) ..             --             --             --             --             --             --             --
                            -------------  -------------  -------------   ------------   ------------  -------------   ------------
BALANCE, DECEMBER 31,
   2001 ..................  4,150,000,000  3,254,800,000     US$929,943     US$195,758      US$83,220    US$(54,202)      US$29,018
                            =============  =============  =============   ============   ============  =============   ============

<CAPTION>
                                      Unrealized
                                       Loss on
                                      Long-term        Cumulative
                                      Investment       Translation       Total
                                       In Shares       Adjustments    Shareholders'
                                       of Stock         (Note 2)         Equity
                                      ------------     -----------    -------------
<S>                                    <C>              <C>           <C>
Reversal of unrealized
   loss on long-term
   investment in
   shares of stock ...............           2,988              --            2,988
Net loss in 2001 .................              --              --          (61,206)
Cumulative translation
   adjustments (Note 2) ..........              --          21,403           21,403
                                      ------------    ------------    -------------
BALANCE, DECEMBER 31,
   2001 ..........................      US$(12,636)      US$56,383     US$1,198,466
                                      ============    ============    =============
</TABLE>

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

                                                                      F-8
<PAGE>


           ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
                                                                                          Year Ended December 31,
                                                                       ------------------------------------------------------------
                                                                            1999            2000                   2001
                                                                       ------------    ------------    ----------------------------
                                                                           (NT$)           (NT$)           (NT$)          (US$)
                                                                       ------------    ------------    ------------    ------------
<S>                                                                       <C>             <C>            <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ..................................................      7,794,666       5,837,149      (2,142,219)        (61,206)
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
   Minority interest in net income (loss) of
     subsidiaries ..................................................        743,065       1,500,643        (788,685)        (22,534)
   Depreciation ....................................................      5,128,282       8,127,561      10,633,197         303,806
   Amortization ....................................................        426,085         466,238         494,088          14,117
   Exchange (gain) loss on long-term foreign:
Bonds payable ......................................................       (191,895)        628,058         640,171          18,291
      Debts ........................................................         (3,927)             --              --              --
Investment payable .................................................             --         170,351         223,599           6,389
   Accrued interest on convertible bonds ...........................        615,805         812,931         872,575          24,931
   Provision for doubtful accounts and sales allowance .............        109,263         155,458          80,629           2,304
   Gain on sale of investments .....................................     (5,544,155)        (91,666)        (50,666)         (1,448)
   Loss on early redemption of foreign convertible bonds ...........             --              --         144,565           4,130
   Investment (income) loss under equity method ....................        (50,595)        167,237       1,246,836          35,624
   Cash dividends received from long-term stock
     investments ...................................................             --              --          33,196             948
Gain (Loss) on disposal of properties ..............................        (20,903)         19,298          26,884             768
   Provision for loss on long-term bonds investments ...............             --         284,301          29,822             852
   Loss from idle assets ...........................................             --              --         111,109           3,175
   Amortization of consolidated debits .............................        507,816         559,807         692,919          19,798
   Deferred income taxes ...........................................       (343,180)       (226,898)       (401,745)        (11,478)
   Other ...........................................................            345         (16,441)         (3,251)            (93)
   Changes in operating assets and liabilities, net
     of effects from purchases of Motorola SPS
     Businesses and  ISE Labs, Inc. ................................
      Notes receivable .............................................        189,530         (18,599)        114,456           3,270
      Accounts receivable ..........................................     (2,722,498)     (1,933,977)      1,939,341          55,410
      Inventories ..................................................       (444,885)       (796,636)        477,891          13,654
      Prepayments and other ........................................       (284,376)       (327,757)        328,749           9,393
      Notes payable ................................................       (214,858)             --              --              --
      Accounts payable .............................................        869,713         707,556        (891,130)        (25,461)
      Income tax payable ...........................................        238,982         642,539        (856,346)        (24,467)
      Accrued expenses and other ...................................        598,025       1,574,097        (821,272)        (23,465)
      Accrued pension cost .........................................       (551,421)         59,236          46,013           1,314
Effect of exchange rate changes ....................................        168,350        (682,197)       (473,515)        (13,530)
                                                                       ------------    ------------    ------------    ------------
Net Cash Provided by Operating Activities ..........................      7,017,234      17,618,289      11,707,211         334,492
                                                                       ------------    ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Motorola SPS Businesses .............................     (4,259,541)             --              --              --
Acquisition of ISE Labs, Inc. ......................................     (3,014,427)             --              --              --
Acquisition of fixed assets ........................................     (9,869,161)    (30,063,640)    (11,565,689)       (330,448)
(Increase) decrease in short-term investments ......................        569,099      (1,471,248)     (2,913,644)        (83,247)
</TABLE>

                                                                      F-9
<PAGE>

<TABLE>
                                                                                          Year Ended December 31,
                                                                       ------------------------------------------------------------
                                                                            1999            2000                   2001
                                                                       ------------    ------------    ----------------------------
                                                                           (NT$)           (NT$)           (NT$)          (US$)
                                                                       ------------    ------------    ------------    ------------
<S>                                                                       <C>             <C>            <C>                <C>
Payments for long-term stock investments ...........................     (3,538,728)     (2,026,047)       (216,444)         (6,184)
Increase in other assets ...........................................       (202,668)       (787,246)       (214,772)         (6,136)
Proceeds from sales of:
   Properties ......................................................        361,149         697,126         685,776          19,594
   Shares of stock:
      ASE Inc. .....................................................      3,170,957              --              --              --
      ASE Test Ltd. ................................................      4,718,324              --              --              --
   Bonds ...........................................................        282,306              --         195,320           5,580
   Others ..........................................................             --         100,666          51,639           1,475
Purchase of ASE Test Ltd. Shares ...................................             --              --      (1,202,185)        (34,348)
                                                                       ------------    ------------    ------------    ------------
Net Cash Used in Investing Activities ..............................    (11,782,690)    (33,550,389)    (15,179,999)       (433,714)
                                                                       ------------    ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayments of):
   Capital increase through the issuance of American
     Depositary Shares .............................................             --       4,151,300              --              --
   Issuance of foreign convertible bonds ...........................      3,460,050              --              --              --
   Long-term debts .................................................      4,201,517       1,013,796       9,746,636         278,475
   Investment payable ..............................................             --      (1,453,603)       (803,833)        (22,967)
   Commercial papers and bank acceptances payable ..................       (517,031)      2,578,212        (837,491)        (23,928)
Proceeds from short-term borrowings ................................      1,218,200       1,614,950         944,148          26,976
Decrease in payable for fixed assets ...............................             --              --      (2,250,855)        (64,310)
Contribution to a sinking fund for convertible bonds ...............             --              --      (1,568,057)        (44,802)
Early redemption of foreign convertible bonds ......................             --              --      (6,066,042)       (173,315)
Increase in minority interest ......................................        235,081       9,854,500       1,552,601          44,360
Compensation to directors and supervisors and bonus to
   employees .......................................................        (28,800)       (151,869)       (113,600)         (3,246)
                                                                       ------------    ------------    ------------    ------------
Net Cash Provided by Financing Activities ..........................      8,569,017      17,607,286         603,507          17,243
                                                                       ------------    ------------    ------------    ------------
EFFECT OF EXCHANGE RATE CHANGES ....................................       (168,350)        682,197         473,515          13,529
                                                                       ------------    ------------    ------------    ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...............      3,635,211       2,357,383      (2,395,766)        (68,450)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .......................      8,173,901      11,809,112      14,166,495         404,757
                                                                       ------------    ------------    ------------    ------------
CASH AND CASH EQUIVALENTS, END OF YEAR .............................     11,809,112      14,166,495      11,770,729         336,307
                                                                       ============    ============    ============    ============
SUPPLEMENTAL INFORMATION
Interest paid (excluding capitalized interest) .....................        787,106       1,217,052       1,557,887          44,511
Income tax paid ....................................................        397,065         497,882       1,024,286          29,265
Cash paid for acquisition of fixed assets Acquisition
   of fixed assets .................................................     11,097,395      31,463,451      11,565,689         330,448
   Increase in payable .............................................     (1,228,234)     (1,399,811)             --              --
                                                                       ------------    ------------    ------------    ------------
                                                                          9,869,161      30,063,640      11,565,689         330,448
                                                                       ============    ============    ============    ============
Total assets acquired from acquisition of Motorola SPS
   Businesses ......................................................     12,783,224              --              --              --
Less: Liabilities assumed ..........................................      1,627,383              --              --              --
                                                                       ------------    ------------    ------------    ------------
Payable amounts ....................................................     11,155,841              --              --              --
Less: Payable balance at end of year ...............................      5,474,780              --              --              --
                                                                       ------------    ------------    ------------    ------------
Cash paid ..........................................................      5,681,061              --              --              --
Less: Cash received at the date of acquisition .....................      1,421,520              --              --              --
                                                                       ------------    ------------    ------------    ------------
Net cash outflow ...................................................      4,259,541              --              --              --
                                                                       ============    ============    ============    ============
Total assets acquired from acquisition of ISE Labs, Inc. ...........      4,671,849              --              --              --
</TABLE>
                                                                      F-10
<PAGE>

<TABLE>
                                                                                          Year Ended December 31,
                                                                       ------------------------------------------------------------
                                                                            1999            2000                   2001
                                                                       ------------    ------------    ----------------------------
                                                                           (NT$)           (NT$)           (NT$)          (US$)
                                                                       ------------    ------------    ------------    ------------
<S>                                                                       <C>             <C>            <C>                <C>
Less: Liabilities assumed ..........................................      1,371,453              --              --              --
                                                                       ------------    ------------    ------------    ------------
Cash paid ..........................................................      3,300,396              --              --              --
Less: Cash received at the date of acquisition .....................        285,969              --              --              --
                                                                       ------------    ------------    ------------    ------------
Net cash outflow ...................................................      3,014,427              --              --              --
                                                                       ============    ============    ============    ============
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              --              --
                                                                       ============    ============    ============    ============
</TABLE>

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

                                                                      F-11
<PAGE>


           ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 2001
           (Amounts In Thousands of Dollars, Unless Otherwise Stated)

1.  General

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

     ASE has six wholly-owned subsidiaries: a) ASE Holding Limited
(incorporated in Bermuda in 1990) holds shares in ASE Group companies; b) ASE
Marketing Services Ltd. (incorporated in Hong Kong in 1991) engages in trading;
c) ASE Investment Inc. (incorporated in the ROC in March 1996) holds shares in
ASE Group companies; d) J&R Holding Limited (incorporated in Bermuda in May
1996) holds shares in ASE Group companies; e) ASE Capital Inc. (incorporated in
ROC in November 1997) holds shares in ASE Group companies; and f) ASE
Southwest, Inc. (incorporated in the USA in August 1999) engages in trading. As
of December 31, 2001, ASE also had a 99% equity stake in ASE Technologies,
Inc., a company incorporated in the ROC engaged in the research and
development, manufacture and sales of computers and related accessories; a 90%
equity stake in ASE Network Inc., a company incorporated in the ROC engaged in
investing; and a 56% equity stake in ASE Material Inc. ("ASE Material"), a
company incorporated in the ROC engaging in the design and production of
leadframes and substrates used in the packaging of semiconductors. In addition,
ASE Test, Inc. has a 4% equity stake in ASE Material.

     In 1999, ASE (Chung Li) Inc. ("ASE Chung Li") and ASE Investment (Labuan)
Inc., a holding company, were incorporated to acquire 100% interests in the
Motorola Semiconductor Product Sector Businesses ("Motorola SPS Businesses") in
Chung Li, Taiwan and Paju, Korea. The acquisitions of the Motorola SPS Business
were completed on July 4, 1999. ASE and ASE Test Limited ("ASE Test") own 70%
and 30% equity stakes in the two subsidiaries, respectively. ASE Investment
(Labuan) Inc. owns 100% of the equity of ASE Korea Inc. ("ASE Korea"). The
acquisitions were accounted for under purchase accounting and the purchase
price was US$350.1 million (see Note 26).

     In June 2001, ASE Chung Li invested US$6.8 million in Omniquest Industrial
Limited, a wholly-owned subsidiary incorporated in the British Virgin Islands
("Omniquest"). Omniquest has a wholly-owned subsidiary in the People's of
Republic of China ("PRC"), namely ASE (Hangzhou) Inc., with capital of US$6.8
million as of December 31, 2001. ASE (Hangzhou) Inc. is currently in the
preoperating stage, and will be engaged in the manufacture and sale of
transistors, LED (Light-Emitting Diode) modules and LED displays.

     ASE Holding Limited has the following wholly-owned subsidiaries: a) ASEP
Realty Corporation (incorporated in the Philippines in December 1995) develops
and invests in real estate; b) ASE Holding Electronics (Philippines)
(incorporated in the Philippines in December 1995) manufactures electronic
products, components and semiconductors; and c) ASE Holding (Singapore) Pte.
Ltd. (incorporated in Singapore in December 1994) holds shares in ASE Group
companies. A portion of the share capital of the Philippine subsidiaries are
held by certain Filipino individuals due to legal limitations. ASE Holding
(Singapore) Pte. Ltd. holds a 100% equity stake in ASE Electronics (M) Sdn,
Bhd. ("ASE Test Malaysia") (incorporated in Malaysia in 1991), which provides
packaging and testing services for integrated circuits. In April 1997, ASE
Holding Limited transferred its shareholding in ASE Test Malaysia to ASE Test.

     J&R Holding Limited has two subsidiaries: a) ASE Test (40.25%-owned,
incorporated in Singapore in May 1996) holds shares in ASE Group companies; and
b) J&R Industrial Inc. (100% owned, incorporated in the ROC in April 1999),
which is mainly engaged in the leasing of substrate, packaging and testing
equipment. In addition, ASE Holding Limited has a 10.71% 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.


                                     F-12
<PAGE>

     ASE Test has four majority-owned subsidiaries: a) ASE Test, Inc., which is
engaged in testing of semiconductors; b) ASE Test Malaysia, which is engaged in
packaging and testing of semiconductors; c) ASE Test Holding, which mainly
holds shares in ASE Group companies; and d) 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., which
is engaged in the after-sale service of tested semiconductors.

     In May 1999, ASE Test acquired 70% of the outstanding shares of ISE Labs,
Inc. ("ISE Labs"), which is engaged in front-end engineering testing, final
testing and packaging of semiconductors. The purchase cost, including
transaction costs, was US$100.1 million (NT$3,320.3 million). In 2001, ASE Test
purchased additional shares of ISE Labs in connection with the capital increase
of ISE Labs, and thereafter increased its ownership interest in ISE Labs. As of
December 31, 2001, ASE Test has made total investments of US$171 million and
acquired 80% of the outstanding shares of ISE Labs. In January 2002, the
minority shareholders of ISE Labs sold the remaining 20% of the outstanding
shares of ISE Labs to ASE Test for US$50 million. Consequently, ISE Labs has
become a wholly-owned subsidiary of ASE Test.

     ASE Technologies, Inc. originally had two subsidiaries: a) ASE
Technologies (U.S.A.), Inc. (100% ownership), which was mainly engaged in
research and development, manufacture and sales of computers and related
accessories; and b) Transmonde Technologies, Inc. (83% ownership), which was
mainly engaged in sales of computers and related accessories. In 2001, ASE
Technologies, Inc. sold all of the shares in the two subsidiaries to a third
party, and resulted in a gain of NT$50,666.

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

     ASE prepared its consolidated financial statements using ROC GAAP with
reconciliation to US GAAP (Note 27). The accompanying consolidated balance
sheets are presented for the two years ended as at December 31, 2000 and 2001,
and the accompanying consolidated statements of income, changes in
shareholders' equity and cash flows are presented for the three years ended
December 31, 1999, 2000 and 2001.

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

   Consolidation

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

     Under the consolidation method used by ASE to consolidate the statement of
income of ISE Labs for the year ended December 31, 1999, ISE Labs' full year
1999 net revenues, cost of revenues and operating expenses are included in the
Corporation's consolidated statements of income. The pre-acquisition income of
ISE Labs for the period (from January 1, 1999 to May 4, 1999) is then
subtracted from the Corporation's net income for 1999.

     The statements of income for both ASE Chung Li and ASE Korea (representing
the acquirees from acquisitions of Motorola SPS Businesses) are consolidated
since the date of acquisitions due to the change of business type after
acquisition in ASE Chung Li and ASE Korea for the accounting of silicon wafers
from previous purchase and sale transaction to customers' consignments (see
accounting policy for inventories).

     In 1999, ASE and ASE Test Inc. owned 38% and 10% equity stake in ASE
Material. However, the accounts of ASE Material for 1999 were consolidated
because ASE effectively controls ASE Material. First, two of the five board
members of ASE Material are appointed by ASE and one board member is appointed
by ASE Test, Inc. Second, Mr. Jason Chang, the Chairman of ASE, also serves as
the Chairman of ASE Material. Third, ASE appoints ASE Material's sole
supervisor, whose duty under the ROC Company Law is to monitor ASE Material's
business

                                     F-13
<PAGE>

and financial condition. Finally, Mr. Jason Chang has committed to vote his
shares of ASE Material as of December 31, 1999, which represented an 11.4%
ownership interest in ASE Material, in concert with ASE.

     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 (debits) and are amortized on the straight-line method over ten years.

   Use of Estimates

     The preparation of consolidated financial statements both in conformity
with ROC GAAP and generally accepted accounting principles in the United States
("US GAAP") requires management to make estimates and judgments that affect the
recorded amounts of assets, liabilities, revenues and expenses of the
Corporation. The Corporation continually evaluate 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 Corporation bases its
estimates on historical experience and other assumptions, which it believe to
be reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions and conditions.

   Cash and Cash Equivalents

     ASE 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

     These are carried at cost less allowance for decline in market value.

   Allowances for Doubtful Accounts

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

   Inventories

     Inventories are stated at the lower of weighted average cost or market
value. Unbilled processing charges incurred (included in finished goods and
work in process) 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 Corporation owns at least 20% of the
outstanding voting shares and where the Corporation 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 Corporation'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 representing the excess of the investment
costs over the Corporation'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 Corporation's
ownership percentage of investees under the equity method are accounted for as
adjustments to long-term investments and capital surplus. The writedown of
carrying value of long-term investments has been taken on the basis of the
discounted cash flows expected to be realized in the future.

                                     F-14
<PAGE>

     Other long-term investments (including ASE common shares) in shares of
stock are carried at cost. An allowance for the decline in value is made for
any permanent impairment in the carrying value of the investments and such
decline in value is charged against current income. Cash dividends are
recognized as income on the declaration date. The sales of ASE shares in 1999
were reflected as gains from the sale of long-term investments in the statement
of income.

     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.

   Long-term Investments in Bonds

     Bond securities being held to maturity are stated at amortized cost.
Allowances for loss in bond securities are provided based on the evaluation of
recoverability of the carrying value of these securities.

   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.

     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; issuance costs of convertible bonds, 5 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 representing
goodwill arising from acquisitions or investments in the consolidated
subsidiaries, are amortized on the straight line method over 10 years.

   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, interests, amortisation of unrecognised
net obligation and expected return on pension assets, in accordance with ROC
SFAS No. 18, "Accounting for Pensions".

   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

                                     F-15
<PAGE>

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 Corporation
provides are recognized upon shipment. Revenues from semiconductor testing
services that the Corporation provides are recognized upon completion of the
services. The Corporation does not take ownership of: (i) bare semiconductor
wafers received from customers that the Corporation packages into finished
semiconductors, and (ii) packaged semiconductors received from customers that
the Corporation 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 Corporation 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 Corporation 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 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. 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

     ASE 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
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.

                                     F-16
<PAGE>

     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.

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

     Common shares of ASE's convertible bonds are not considered in the
calculation of primary and fully diluted EPS because they have an anti-dilutive
effect. Common share equivalents attributable to the employees' stock options
of ASE Test are included in the EPS calculation (see Note 20).

     Earnings per equivalent ADS are calculated by multiplying earnings per
share by five (each of the ADS represents five common shares).

   US Dollar Amount

     ASE prepares its consolidated financial statements in NT dollars.
Translations into US dollars for 2001 financial statements are included solely
for the convenience of the readers, and are based on the US Federal Reserve
Bank of New York noon buying rate of NT$35.00 to US$1.00 in effect as at
December 31, 2001. 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 rates.

3.  Short-term Investments

<TABLE>
                                                                                   December 31
                                                                 ------------------------------------------------
                                                                    2000                         2001
                                                                 ---------           ----------------------------
                                                                     NT$                 NT$                US$
<S>                                                              <C>                 <C>                  <C>
Mutual funds...........................................          1,603,362           4,593,958            131,256
Stocks.................................................             63,978               5,337                152
Convertible bonds and government bonds.................             20,188               1,877                 54
                                                                 ---------           ---------          ---------
                                                                 1,687,528           4,601,172            131,462
Allowance for loss (Note 2)............................             (4,849)                 --                 --
                                                                 ---------           ---------          ---------
                                                                 1,682,679           4,601,172            131,462
                                                                 =========           =========          =========
</TABLE>

4.  Accounts Receivable -- Net

<TABLE>
                                                                                   December 31
                                                                 ------------------------------------------------
                                                                    2000                         2001
                                                                 ---------           ----------------------------
                                                                     NT$                 NT$                US$
<S>                                                              <C>                 <C>                  <C>
Accounts receivable....................................          9,393,853           7,361,066            210,316
Allowance for doubtful accounts........................           (314,243)           (286,476)            (8,185)
Allowance for sales allowances.........................            (38,676)            (53,626)            (1,532)
                                                                 ---------           ---------          ---------
                                                                 9,040,934           7,020,964            200,599
                                                                 =========           =========          =========
</TABLE>

The movement of allowance for doubtful accounts and sales allowances are as
follows:

<TABLE>
                                                                      Doubtful                  Sales
                                                                      Accounts               Allowances
                                                                 -------------------    -------------------
                                                                         NT$                     NT$
<S>                                                                    <C>                      <C>
Balance, beginning of 1999.............................                 84,708                  53,000
Additions..............................................                109,263                      --
Deductions.............................................                 (6,809)                 (5,908)
                                                                 -------------------    -------------------
Balance, end of 1999...................................                187,162                  47,092
Additions..............................................                148,834                   6,624
</TABLE>

                                                     F-17
<PAGE>

<TABLE>
                                                                      Doubtful                  Sales
                                                                      Accounts               Allowances
                                                                 -------------------    -------------------
                                                                         NT$                     NT$
<S>                                                                    <C>                      <C>
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
                                                                 ===================    ===================
</TABLE>
                                                     F-18
<TABLE>
                                                                         US$                     US$
                                                                 -------------------    -------------------
<S>                                                                    <C>                     <C>
Balance, beginning of 2001.............................                 8,979                   1,105
Additions..............................................                   446                   1,858
Deductions.............................................                (1,240)                 (1,431)
                                                                 -------------------    -------------------
Balance, end of 2001...................................                 8,185                   1,532
                                                                 ===================    ===================
</TABLE>

5.  Inventories

<TABLE>
                                                                                   December 31
                                                                 ------------------------------------------------
                                                                    2000                         2001
                                                                 ---------           ----------------------------
                                                                     NT$                 NT$                US$
<S>                                                              <C>                 <C>                   <C>
Raw materials..........................................          2,099,058           1,613,458             46,099
General supplies and spare parts.......................            630,979             665,598             19,016
Work in process........................................            337,320             348,933              9,970
Finished goods.........................................            246,812             297,355              8,496
Supplies in transit....................................             87,219              63,640              1,818
                                                                 ---------           ---------          ---------
                                                                 3,401,388           2,988,984             85,399
Allowance for obsolescence.............................           (155,061)           (220,548)            (6,301)
                                                                 ---------           ---------          ---------
                                                                 3,246,327           2,768,436             79,098
                                                                 =========           =========          =========
</TABLE>

     The movement of allowance for obsolescence is as follows:

<TABLE>
                                                                                                          NT$
                                                                                                      -----------
<S>                                                                                                     <C>
Balance, beginning of 1999........................................................................      199,018
Additions.........................................................................................       50,566
Deductions........................................................................................      (73,379)
                                                                                                      -----------
Balance, end of 1999..............................................................................      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
                                                                                                      ===========

<CAPTION>
                                                                                                          US$
                                                                                                      -----------
<S>                                                                                                     <C>
Balance, beginning of 2001........................................................................       4,430
Additions.........................................................................................       3,748
Deductions........................................................................................      (1,877)
                                                                                                      -----------
Balance, end of 2001..............................................................................       6,301
                                                                                                      ===========
</TABLE>

                                                        F-19
<PAGE>

6.  Long-term Investments -- Common Stocks

<TABLE>
                                                                              December 31
                                                   -----------------------------------------------------------------
                                                             2000                               2001
                                                   -----------------------     -------------------------------------
                                                                   % 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") (Note 10)........................       2,154,627      25.4         1,213,563       34,673        25.4
Hung Ching Kwan Co. ("HCKC").................         405,549      27.3           405,406       11,583        27.3
Universal Scientific Industrial Co., Ltd.
   ("USI") (Note 10).........................       3,931,810      23.3         3,633,927      103,827        23.0
Universal Access Technology Inc. ("UAT").....          92,775      25.0            60,001        1,714        25.0
Preferred stock
   Intergrated Programmable Communication,
   Inc. ("IPC")..............................         118,681      23.1           101,447        2,898        23.1
Cost method
   ASE stock held by subsidiaries............       2,919,411       4.9         3,017,964       86,228         5.1
InveStar Burgeon Venture Capital, Inc........         153,035      13.0           161,749        4,622        13.0
Taiwan Fixed Network Co., Ltd................       1,500,000       1.6         1,500,000       42,857         1.6
Global Strategic Investment, Inc.............              --      --              69,980        1,999         1.0
UC Fund II...................................              --      --              34,990        1,000        --
                                                   11,275,888                  10,199,027      291,401
                                                   ----------                  ----------   ----------
Adjustment for decline in
   market value in ASE stock.................        (490,280)                   (368,480)     (10,528)
Unrealized gain on sale of land..............        (300,149)                   (300,149)      (8,576)
                                                   ----------                  ----------   ----------
                                                   10,485,459                   9,530,398      272,297
                                                   ==========                  ==========   ==========
</TABLE>

     ASE 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, 2001, ASE has a 43.4% effective interest in HCKC, which consists of 27.3%
interest directly owned by ASE, and 16.1% interest indirectly owned through
Hung Ching Development & Construction Co. ("HCDC") (based on HCDC's 63.5%
interest in HCKC).

     ASE invested in Universal Access Technology Inc. ("UAT") in December 2000
and directly acquired its 25% equity interest. In addition, HCDC and Universal
Scientific Industrial Co., Ltd. ("USI") have 10% and 25% equity interests in
UAT, respectively. Accordingly, as of December 31, 2001, ASE has a 33.3%
effective interest in UAT. UAT is engaged in the design of related computer
products and software service.

     In December 2000, ASE invested in convertible preferred stocks issued by
Integrated Programmable Communication, Inc. ("IPC"). As of December 31, 2001,
ASE has made total investments of US$4.0 million, and owns a 23.1% stake in
IPC. In addition, USI and UAT have 16% and 7% equity interests in IPC,
respectively.

     As of December 31, 2001, the accumulated deficit for HCDC was NT$337,400
(US$14,828), the undistributed earnings for HCKC and USI were NT$54,460
(US$1,556) and NT$919,479 (US$26,271), respectively. HCKC did not declare
dividends in 2000 and 2001. USI declared stock and cash dividends in 2001 for
NT$1.3 and NT$0.25 per share, respectively, and stock dividends for NT$4.00 per
share in 2000. HCDC declared stock and cash dividends in 2000 for NT$0.8 and
NT$0.2 per share, respectively, but these dividends have not yet been
distributed as of December 31, 2001.

     ASE recorded net investment income of NT$50,595 in 1999, net investment
losses of NT$167,237 in 2000 and NT$1,246,836 (US$35,624) in 2001 from its
investments in the aforementioned equity investees.

                                     F-20
<PAGE>

7.  Long-term Bond Investments

     These represent long-term bond investments in APP Global Finance Ltd.
("APP") and the Federal National Mortgage Association. The investment cost was
US$9.5 million and US$5.9 million, respectively. The bond investment in Federal
Mortgage Association matured on May 2, 2001. The bond investment in APP had an
original maturity on October 4, 2001, but was defaulted because APP incurred
financial difficulties. ASE wrote off the gross bond investment in APP in 2001
due to a judgment of unrecoverability.

8.  Properties

     Accumulated depreciation consists of:

<TABLE>
                                                                                   December 31
                                                                -------------------------------------------------
                                                                   2000                          2001
                                                                ----------          -----------------------------
                                                                    NT$                 NT$                 US$
<S>                                                             <C>                 <C>                   <C>
Buildings and improvements.............................          1,335,682           2,021,886             57,768
Machinery and equipment................................         20,586,431          28,735,918            821,026
Transportation equipment...............................             56,731             116,845              3,338
Furniture and fixtures.................................            469,584             569,013             16,258
Leased assets and leasehold improvements...............            235,634             300,187              8,577
Long-term land leasehold rights........................              6,230               7,689                220
                                                                ----------          ----------         ----------
                                                                22,690,292          31,751,538            907,187
                                                                ==========          ==========         ==========
</TABLE>

     Interest capitalized and included as cost of properties amounted to
NT$123,347, NT$163,916 and NT$100,453 (US$2,870) for the years ended December
31, 1999, 2000 and 2001, respectively.

     ASE Chung Li and ASE Material entered into purchase agreements with HCDC
in 2000 to purchase a building located in Chung Li for expansion purposes. The
contract prices, which were based on appraisal, totaled NT$1,044,341 and
NT$358,442, respectively. ASE and ASE Test, Inc. entered into purchase
agreements with HCDC in 2001 to purchase a building located in Nantze Export
Processing Zone for expansion purpose. The contract prices, which were based on
appraisal, totaled NT$1,027,034 (US$29,344) and NT$459,363 (US$13,125),
respectively. The buildings and improvements acquired under the purchase
agreements described above have been included in the 2000 and 2001 consolidated
balance sheets.

     Machinery in transit and prepayments pertain to the purchase of packaging
and testing equipment, which are associated with machinery purchased with title
transferred but are not yet in ready-for-use condition, and down payments for
machinery purchased with non-cancellable purchase orders.

     Major components for machinery in transit and prepayments are as follows:

<TABLE>
                                                                                   December 31
                                                                 ------------------------------------------------
                                                                    2000                         2001
                                                                 ---------           ----------------------------
                                                                    NT$                 NT$                US$
<S>                                                              <C>                 <C>                   <C>
Bonders................................................            405,595              22,855                653
Testers................................................          1,063,911           1,099,240             31,407
Others.................................................          3,480,920           1,808,791             51,680
                                                                 ---------           ---------          ---------
Total..................................................          4,950,426           2,930,886             83,740
                                                                 =========           =========          =========
</TABLE>

9.  Other Assets

<TABLE>
                                                                                   December 31
                                                                 ------------------------------------------------
                                                                    2000                         2001
                                                                 ---------           ----------------------------
                                                                    NT$                 NT$                US$
<S>                                                              <C>                 <C>                   <C>
Deferred charges (Note 2)
   Tooling.............................................            124,468              48,479              1,385
   Issuance costs of convertible bonds.................            139,244              68,761              1,965
</TABLE>

                                                         F-21
<PAGE>

<TABLE>
                                                                                   December 31
                                                                 ------------------------------------------------
                                                                    2000                         2001
                                                                 ---------           ----------------------------
                                                                    NT$                 NT$                US$
<S>                                                              <C>                 <C>                   <C>
   Telecommunications, electrical and computer network
     systems...........................................            290,208             302,604              8,646
   Other...............................................            346,130             302,857              8,653
                                                                 ---------           ---------          ---------
                                                                   900,050             722,701             20,649
Deferred income tax assets (Note 17)...................                 --             226,190              6,463
Guarantee deposits.....................................            204,112             185,162              5,290
Non-operating properties...............................            147,686             155,703              4,449
Other..................................................             23,709              52,513              1,500
                                                                 ---------           ---------          ---------
                                                                 1,275,557           1,342,269             38,351
                                                                 =========           =========          =========
</TABLE>

10.  Consolidated Debits

     These represent goodwill arising from the purchases of:

<TABLE>
                                                                                    December 31
                                                                  ------------------------------------------------
                                                                     2000                         2001
                                                                  ---------           ----------------------------
                                                                     NT$                 NT$                US$
<S>                                                              <C>                 <C>                   <C>
ASE Test shares........................................           2,554,869           2,992,676             85,505
ISE Labs shares (Note 26)..............................           2,008,793           1,870,915             53,455
Motorola SPS Businesses (Note 26)......................             417,760             377,382             10,782
Other..................................................              18,124               7,946                227
                                                                  ---------           ---------          ---------
                                                                  4,999,546           5,248,919            149,969
                                                                  =========           =========          =========
</TABLE>

     The above goodwill arising from the purchases of ASE Test shares included
ASE Holding's purchase of 2,480,000 shares of ASE Test at the prevailing market
price from ASE's directors in May 2001.

     Amortization of the above-mentioned goodwill for consolidated subsidiaries
(as reflected in general and administrative expenses in the consolidated
statement of income) were NT$507,816, NT$559,807 and NT$692,919 (US$19,798) for
the years ended December 31, 1999, 2000 and 2001, respectively.

     In addition, the carrying values of investments in HCDC and USI as
discussed in Note 6 included unamortized goodwill, which is being amortized
over ten years through April 2006 for HCDC and July 2010 for USI, resulting
from the purchases of HCDC shares in 1995 and 1996, and USI shares in 1999 and
2000, as follows:

<TABLE>
                                                                                    December 31
                                                                  -----------------------------------------------
                                                                     2000                        2001
                                                                  ---------          ----------------------------
                                                                     NT$                NT$                US$
<S>                                                               <C>                <C>                   <C>
USI.....................................................          1,872,342          1,651,742             47,193
HCDC....................................................            780,798                 --                 --
                                                                  ---------          ---------          ---------
                                                                  2,653,140          1,651,742             47,193
                                                                  =========          =========          =========
</TABLE>

     In 2001, ASE amortized the remaining balance of goodwill for HCDC as a
result of the significant decline in the market value of HCDC shares.

11.  Short-term Borrowings

<TABLE>
                                                                            December 31
                                                   ---------------------------------------------------------------
                                                             2000                              2001
                                                   ------------------------   ------------------------------------
                                                    Interest                   Interest
                                                    Rate (%)         NT$        Rate (%)        NT$          US$
                                                   ---------      ---------   ---------     ---------    ---------
<S>                                                <C>            <C>         <C>           <C>             <C>
Letters of credit...........................       0.975-7.5      1,733,626   0.85-6.75       803,156       22,947
Revolving...................................          1.6-10      2,741,038    2.65-7.3     1,416,551       40,473
Promissory notes............................         8.1-8.7        927,933         3-6     1,236,442       35,327
                                                                  ---------                 ---------    ---------
                                                                  5,402,597                 3,456,149       98,747
                                                                  =========                 =========    =========
</TABLE>
                                                         F-22
<PAGE>

     As of December 31, 2001, unused credit lines for short-term borrowings and
commercial paper and bank acceptances payable totaled approximately
NT$11,613,000 (US$331,800).

12.  Commercial Paper and Bank Acceptances Payable

     Commercial paper and bank acceptances payable bore interest rates ranging
from 5.2% to 11.5% in 2000 and 1.8% to 6.3% in 2001, respectively.

13.  Long-term Bonds Payable

<TABLE>
                                                                             December 31
                                                              ------------------------------------------
                                                                 2000                   2001
                                                              ----------      --------------------------
                                                                  NT$             NT$             US$
<S>                                                           <C>              <C>               <C>
Foreign convertible bonds -- issued by ASE
   (US$199 million outstanding in 2000 and US$68
   million outstanding in 2001) ...........................    6,597,845       2,379,320          67,981
Foreign convertible bonds -- issued by ASE Test
   Finance Limited (US$109,890 thousand
   outstanding in 2000 and  2001) .........................    3,637,908       3,845,051         109,859
Accrued interest ..........................................    1,993,426       1,644,265          46,978
                                                              12,229,179       7,868,636         224,818
Less: Current portion .....................................           --       3,090,345          88,295
                                                              ----------      ----------      ----------
                                                              12,229,179       4,778,291         136,523
                                                              ==========      ==========      ==========
</TABLE>

     Information on the long-term bonds payable is follows:

   A.  US$200 Million -- Issued by ASE

     In November 1997, ASE issued bonds, consisting of 200 units with face
values of US$1 million (NT$30.8 million) each, with zero coupon, due November
2002. The bonds bear an implied interest rate of 6.372%.

     Starting from December 1997 through October 2002, the bondholders may
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. As
of December 31, 2001, 355,086 common shares were issued as a result of the
conversion of such bonds, resulting in a capital surplus of NT$32,102 (US$917).
In 2001, ASE redeemed and cancelled 131 units (US$131,000 thousand) from the
open market with payments of NT$6,066,042 (US$173,315), which had resulted in
extraordinary losses of NT$192,753 (US$5,507). As of December 31, 2001, the
outstanding convertible bonds aggregated US$68 million (NT$2,380 million). In
addition, ASE was required to contribute to a sinking fund with the outstanding
bonds at the date of twelve months prior to its maturity date. As of December
31, 2001, the balance of the sinking fund was NT$1,568,057 (US$44,802).

     On or at any time after October 14, 2000, ASE may redeem the bonds at the
redemption price if:

     a)   (i) the closing price of the common shares for a period of 30
          consecutive trading days is higher than 140% of the conversion price
          (NT$50.5 per share as at December 31, 2001) in effect on each such
          trading day and (ii) the closing price of the common shares
          translated into US dollars at the prevailing rate for a period of 30
          consecutive trading days is higher than 140% of the conversion price
          then in effect translated into US dollars at the exchange rate of
          NT$28.62 (Y) US$1.00; or

                                     F-23
<PAGE>

     b)   at least 95% of the bonds have already been converted, redeemed, or
          purchased and cancelled.

     In addition, ASE may, if the applicable tax law is unfavorably changed,
redeem at any time all, but not some, of the bonds.

     On September 5, 1997, ASE entered into a firm commitment subscription
agreement with SBC Warburg Securities Pte. Ltd. ("SBC Warburg") for the sale by
ASE to SBC Warburg of US$200 million Zero Coupon Convertible Bonds due 2002
(the "Convertible Bonds"). The closing of the sale of the Convertible Bonds was
initially scheduled to occur on October 6, 1997. Due to the adverse market
conditions prevailing during this period of time as a result of the Asian
financial crisis, however, SBC Warburg requested that the closing date for the
sale of the Convertible Bonds be extended.

     During the extension period (the "Extension Period"), SBC Warburg decided
to market the Convertible Bonds to potential investors as two separate
instruments by repackaging them into: (1) a debt portion consisting of US$200
million callable floating rate notes which are secured by the Convertible Bonds
(the "FRNs") and (2) an equity portion consisting of options to purchase the
Convertible Bonds (the "Call Options"). SBC Warburg was able to obtain
commitments for the entire issue of the FRNs 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 ("SBC"), an
affiliate of SBC Warburg, approached a number of large institutional investors,
including J&R Holding Limited ("J&R Holding"), a consolidated subsidiary of
ASE, with a proposal to sell a portion of the Call Options. Subsequently, J&R
Holding entered into two agreements with SBC to purchase options on a portion
of the Convertible Bonds.

     Under the first agreement with SBC, J&R Holding is required to make four
cash payments to SBC on November 4, 1998, 1999, 2000 and 2001 as long as the
Call Options remain unexercised and outstanding. In return, J&R Holding has the
right to call the Convertible Bonds at any time during the period from November
1998 through November 2002. The exercise price of the Call Options is equal to
the accreted carrying value of the Convertible Bonds as shown on the
Corporation's consolidated balance sheet at the date exercised. Pursuant to the
second agreement, SBC paid US$200,000 to J&R Holding. In return, SBC has 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. In any event, J&R Holding was required
under the automatic exercise provision of this agreement to purchase the Call
Options upon the expiration of the agreement on November 1, 1998. These options
were terminated by an agreement on December 11, 2001.

     The closing of the sale of the Convertible Bonds eventually took place on
November 4, 1997. Upon the closing of the sale of the Convertible Bonds, SBC
Warburg immediately resold the Convertible Bonds to a subsidiary of SBC
Warburg. Such subsidiary in turn repackaged the Convertible Bonds into the FRNs
and the Call Options for resale to the investors that had indicated an interest
in purchasing the FRNs and/or the Call Options during the Extension Period. The
closing of the sale of the FRNs and the Call Options took place on November 5,
1997.

     SBC Warburg and its subsidiary have entered into a swap transaction, which
stipulates that SBC Warburg will pay the interest on the FRN (aggregating to
US$80 million (NT$2,654 million)) on the subsidiary's behalf. The subsidiary
will repay the interest to SBC Warburg at the maturity date of the Convertible
Bonds. ASE has contracted with certain banks to issue letters of credit for
US$53,783 (NT$1,882,405) to SBC Warburg to guarantee the interest payment
obligation of the subsidiary. Under the contract with these banks, ASE may not,
among other things, change its scope of operations and is required to maintain
certain financial ratios.

   B.  US$110 Million of 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 million (NT$5,600 million) of 1%
guaranteed convertible notes (the "Convertible Notes") due July 1, 2004 through
its subsidiary, ASE Test Finance Limited (the "Issuer"). ASE subscribed to
US$50 million (NT$1,750 million) of the Convertible Notes and the current net
balance of US$109,890 thousand (NT$3,846 million) is shown in the accompanying
balance sheet.

                                     F-24
<PAGE>

     The holders of the Convertible Notes are entitled to convert the
Convertible Notes into ASE Test's ordinary shares at the specified conversion
price ($24.75 per share currently, subject to adjustment) at any time after
December 29, 1999 and before or on July 1, 2004.

     The Convertible Notes may be redeemed under the following circumstances:

     a) Redemption for taxation reasons:

     If the applicable tax law or treaty is unfavorably revised, the Issuer or
ASE Test may redeem the Convertible Notes in whole at 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 the early redemption price.

14.  Long-term Debts

     Long-term debts consist of the following:

<TABLE>
                                                                                   December 31
                                                                -------------------------------------------------
                                                                   2000                         2001
                                                                ----------          -----------------------------
                                                                    NT$                 NT$                US$
<S>                                                             <C>                 <C>                   <C>
Mortgage bank loans for purchase of building and
   machinery...........................................          4,989,564           5,423,384            154,954
Acceptances payable to syndicate banks.................          6,678,815           7,507,825            214,509
Bank loans secured by assets...........................          1,540,747           1,367,634             39,075
Revolving bank loans...................................            250,708           3,773,000            107,800
Letters of credit loans for purchase of materials and
   machinery...........................................                 --           2,098,650             59,961
Loans for specified use................................                 --           6,000,000            171,429
Obligation under capital leases (Note 22)..............            179,952             106,525              3,044
                                                                ----------          ----------         ----------
                                                                13,639,786          26,277,018            750,772
Current portion........................................          3,309,935           3,175,883             90,740
                                                                ----------          ----------         ----------
                                                                10,329,851          23,101,135            660,032
                                                                ==========          ==========         ==========
</TABLE>

   A.  Mortgage Bank Loans for Purchase of Building and Machinery

     These represent various bank loans obtained by ASE, ASE Test, Inc., ASE
Chung Li, and ASE Material. These mortgage bank loans are repayable in monthly,
quarterly or semi-annually installments and bear interest at rates ranging from
1.1% to 8.12% in 2000 and 0.88% to 6.95% in 2001.

     ASE Chung Li has a syndicated loan agreement with a total facility of
NT$4,000,000, which will be repayable through May 2006. The agreement requires
that, among other things, ASE Chung Li should maintain certain financial
ratios. As of December 31, 2001, the unused facility of the syndicate loan
aggregated NT$2,700,000 (US$77,143).

   B.  Acceptances Payable to Syndicate Banks

<TABLE>
                                                                                     December 31
                                                                      --------------------------------------------
                                                                         2000                      2001
                                                                      ---------         --------------------------
                                                                          NT$              NT$               US$
<S>                                                                   <C>               <C>                <C>
Five-year revolving credit lines of NT$9,710,000
   US$277,429) through May 2003 to June 2004, interest at
   5.223%-6.378% in 2000 and 2.905%-5.745% in 2001.........           6,775,000         6,500,000          185,714
Revolving credit lines through March 2003 to September
   2004, interest at 2.05%-3.65% in 2001...................                  --         1,055,000           30,143
                                                                      ---------         ---------        ---------
                                                                      6,775,000         7,555,000          215,857
Unamortized discounts......................................             (96,185)          (47,175)          (1,348)
                                                                      ---------         ---------        ---------
                                                                      6,678,815         7,507,825          214,509
                                                                      =========         =========        =========
</TABLE>

                                                         F-25
<PAGE>

     The above acceptances payable to syndicate banks were covered by several
bank acceptance agreements made by ASE and ASE Test, Inc. which stipulate,
among other things, the following:

     1)   Without prior written consent from the majority of the banks, ASE can
          not 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)   ASE's tangible net worth (as defined in the loan agreements) should
          not be less than NT$38 billion (US$1,086 million).

     3)   ASE is required to maintain certain financial ratios.

     4)   ASE is required to pay an annual commitment fee of 0.15%-0.20% of the
          difference between the authorized and utilized credit line.

     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.

   C.  Bank Loans Secured by Assets

     These represent various bank loans obtained by ISE Labs and ASE Korea
which are secured by its total assets, and buildings and improvements,
respectively (Note 21). The loans will be repayable May 2009 and July 2007,
respectively, and the loans bear interest ranging from 5.5% to 7.92% and 4.4%
to 6.1%, respectively. These agreements contain certain covenant and default
provisions that require ISE to maintain certain financial ratios, dividend and
capital expenditure restrictions and maintenance of working capital
requirements. ISE did not meet the minimum quick ratio requirement for one of
these agreements for the year ended December 31, 2001 and obtained a waiver
from the financial institution within the cure period.

   D.  Revolving Bank Loans

     These represent various revolving bank loans of Japanese Yen in 2000 and
NT Dollars in 2001. The loans will be repayable through May 2003 to June 2004,
with interest rates from 3.85% to 6.45%.

   E.  Letters of Credit for Purchase of Materials and Machinery

     This represents various bank loans, due from May 2003 through September
2003 with interest rates ranging from 0.88% to 4.8%.

                                     F-26
<PAGE>

   F.  Loans for Specified Use

     This represents the loan which specified for use in the redemption of
ASE's convertible bonds in 2001 (see Note 13). The loan is repayable in
semi-annual installments starting June 2003 to December 2004 and bears interest
of 5.95%. The agreement requires that among other things, the following:

     1)   Without the prior written consent from the majority of the banks, ASE
          can 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)   ASE's tangible net worth (as defined in a loan agreement) should not
          be less than NT$38 billion (US$1,086 million).

     3)   Maintenance by ASE of certain financial ratios.

     According to the abovementioned bank loan contracts, the interest rates
are variable subject to adjustments by banks or changes in prime rate.

     As of December 31, 2001, unused long-term bank facilities approximated
NT$4,958,000 (US$141,657).

     As of December 31, 2000 and 2001, the future maturities of long-term debts
(including long-term bonds payable) are as follows:

<TABLE>
                                                                                    December 31
                                                                 -------------------------------------------------
                                                                    2000                         2001
                                                                 ----------          -----------------------------
                                                                     NT$                 NT$                US$
<S>                                                              <C>                 <C>                   <C>
Within the following year..............................           3,309,935           6,266,228            179,035
During the second year.................................          12,484,848          15,163,030            433,229
During the third year..................................           3,257,243          11,083,861            316,682
During the fourth year.................................           4,939,819           1,186,263             33,893
During the fifth year and thereafter...................           1,877,120             446,272             12,751
                                                                 ----------          ----------         ----------
                                                                 25,868,965          34,145,654            975,590
                                                                 ==========          ==========         ==========
</TABLE>

     Long-term debts (including long-term bonds payable) by currencies are
detailed as follows:

<TABLE>
                                                                         2000                        2001
                                                                   ---------------             ---------------
<S>                                                                <C>                         <C>
New Taiwan Dollars.....................................            NT$  12,128,557             NT$  22,810,513
US Dollars.............................................            US$     469,339             US$     289,175
Deutsche Mark..........................................            DM          940             DM           --
Japanese Yen...........................................            (Y)   5,069,552             (Y)   4,562,877
Singapore Dollars......................................            SGD           7             SGD          --
British Pound..........................................            GBP          91             GBP          --
European Currency Unit.................................            EUR           4             EUR          --
</TABLE>

15.  Shareholders' Equity

     In July 1995, ASE issued 8,600,000 GDSs, representing 43,000,000 common
shares. In September 2000, ASE issued 20,000,000 ADSs, representing 100,000,000
common shares. In connection with the ADS offering in 2000, ASE launched an
exchange offer to exchange all outstanding GDSs for its New York Stock
Exchange-listed ADS. 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.

                                     F-27
<PAGE>

     The ADS holders generally have the same rights and obligations as the
shareholders, subject to the provision of relevant ROC laws. The exercise of
such rights and obligations shall comply with the related regulations and the
deposit agreement, which stipulate, among other things, that the ADS holders
can, through Citicorp Financial Services Limited, as nominee holder: (a)
exercise their voting rights; (b) sell their ADSs; and, (c) receive dividends
declared and subscribe to the issuance of new shares.

     As of December 31, 2001, the outstanding ADSs represented 6.95% of ASE'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 may be
transferred to retained earnings upon approval by the shareholders at the
annual general shareholders' meeting in 2002.

     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.

     ASE's Articles of Incorporation provide that the annual net income shall
be appropriated as follows:

          a.   gain on disposal of properties, less applicable income tax, as
               capital surplus;

          b.   offset against deficit, if any;

          c.   10% of the remainder as legal reserve, until the accumulated
               amount equals paid-in capital;

          d.   an amount (Note 6) equal to the income from long-term
               investments in shares of stock accounted for by equity method,
               excluding cash dividends, as special reserve;

          e.   not more than 2% of the remainder, as compensation to directors
               and supervisors;

          f.   between 5% to 7% of the remainder, as bonus to employees, of
               which 5% 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

          g.   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% of capital, up to 50%
thereof may be transferred to capital.

     ASE is currently going through a growth phase. In order to meet the needs
of operational expansion, both current and future, and to satisfy shareholders'
need for cash inflow, the Corporation's dividend policy priority shall be stock
dividends; cash dividends may also be paid. In principle, the percentage of
cash dividends paid shall not exceed 20%. Cash dividends shall not be paid if
the dividend per share is less than NT$0.1; and the stock dividends shall be
declared instead.

     With respect to the percentage of cash dividends to be paid referred to in
the previous paragraph, ASE 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 ASE on earnings generated in 1998 and onwards. An
Imputation Credit Account ("ICA") is maintained by ASE for such income tax and
the tax credit

                                     F-28
<PAGE>

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, 2001 the creditable taxes aggregated NT$22,555
(US$644). The actual percentage for the distribution of 2000 net income was
10.33%.

     As of December 31, 2001, the unappropriated earnings prior to 1998 (the
year that Integrated Income Tax System became effective) amounted to NT$17,644
(US$504).

16.  Gain on Sales of Investments

     This consists of the gross gain on sales of:

<TABLE>
                                                                              Years Ended December 31
                                                               -----------------------------------------------------
                                                                  1999           2000                 2001
                                                               ---------      ---------     ------------------------
                                                                   NT$            NT$           NT$            US$
<S>                                                            <C>               <C>           <C>             <C>
Sale of ASE Test's shares..............................        4,007,674             --            --             --
Sale of ASE's shares held by subsidiaries (Note 27)....        1,388,523             --            --             --
Other..................................................          147,958         91,666        50,666          1,448
                                                               ---------      ---------     ---------      ---------
                                                               5,544,155         91,666        50,666          1,448
                                                               =========      =========     =========      =========
</TABLE>

     The gain on sale of ASE Test's ordinary shares in 1999 was the result of
the secondary offering of 2,500 thousand shares for issuances of TDRs.

     The gain on sale of ASE's common shares in 1999 was the result of the
32,450 thousand shares sold through the re-issuance of GDSs.

17.  Income Tax

     a.   Income tax expense (benefit) is determined as follows:

<TABLE>
                                                                                          Years Ended December 31
                                                                      -------------------------------------------------------------
                                                                         1999             2000                     2001
                                                                      ----------       ----------       ---------------------------
                                                                          NT$              NT$              NT$              US$
<S>                                                                    <C>              <C>               <C>                <C>
Current
   Tax (benefit) based on pre-tax accounting income
     (loss) at statutory rate ..................................       3,218,520        3,211,156         (579,651)         (16,561)
   Add (less) tax effects of:
     Permanent differences
        Tax-exempt income
        -- Tax holiday .........................................        (779,437)        (700,749)         (26,413)            (755)
        -- Gain from sales of securities .......................        (384,079)         (51,415)         (31,711)            (906)
        Investment income
        -- Sale of ASE Test shares .............................      (1,001,919)              --               --               --
(Forward)
   Temporary differences
     Investment loss (income) ..................................        (398,886)        (523,941)         814,148           23,261
     Unfunded pension cost .....................................           8,494           12,214            7,842              224
     Unrealized foreign exchange loss (gain) ...................         (38,701)          91,102            3,012               86
     Bond interest payable .....................................         112,318          114,798         (189,164)          (5,405)
     Other .....................................................         248,765          158,786          153,854            4,397
                                                                      ----------       ----------       ----------       ----------
                                                                         985,075        2,311,951          151,917            4,341
Income taxes on undistributed earnings .........................          44,539          147,379          335,065            9,573
Credits for investments and research and development ...........        (401,525)      (1,231,247)        (253,227)          (7,235)
Net change in deferred income tax assets (liabilities)
   for the period ..............................................        (155,437)        (152,138)        (449,933)         (12,855)
Adjustment of prior year's income tax ..........................         (13,109)         (10,177)          17,018              486
                                                                      ----------       ----------       ----------       ----------
Income tax (benefit) expense ...................................         459,543        1,065,768         (199,160)          (5,690)
                                                                      ==========       ==========       ==========       ==========
</TABLE>

                                                                 F-29
<PAGE>

     b.   The above-mentioned taxes on pre-tax accounting income (loss) at the
          statutory rates for domestic and foreign entities are shown below:

<TABLE>
                                                                             Years Ended December 31
                                                           ---------------------------------------------------------
                                                              1999           2000                    2001
                                                           ----------     ----------      --------------------------
                                                               NT$            NT$             NT$             US$
<S>                                                         <C>            <C>              <C>              <C>
Domestic entities in ROC (25% statutory rate) .........     2,717,796      2,542,888        (501,553)        (15,707)
Foreign entities
   ASE Korea Inc. (30.8% statutory rate) ..............        55,770          2,153              --              --
   ISE Labs, Inc. (federal tax rate 35% and
     state tax rate 6%) ...............................       163,240        439,169         (92,487)         (2,642)
   ASE Test Malaysia (30% statutory rate) .............       281,714        226,946          14,389             411
                                                           ----------     ----------      ----------      ----------
                                                            3,218,520      3,211,156        (579,651)        (16,561)
                                                           ==========     ==========      ==========      ==========
</TABLE>

     c.   Deferred income tax assets and liabilities as of December 31, 2000
          and 2001 are summarized as follows:

<TABLE>
                                                                                   December 31
                                                                    ------------------------------------------
                                                                       2000                    2001
                                                                    ----------      --------------------------
                                                                        NT$             NT$             US$
<S>                                                                 <C>               <C>              <C>
Current assets
   Unused tax credits ........................................       1,028,885         378,075          10,802
   Provision for inventory obsolescence ......................          29,060          41,502           1,186
   Accrued interest on convertible bonds .....................              --         163,289           4,665
   Provision for doubtful accounts and sales allowance .......          73,766          68,432           1,955
   Unrealized foreign exchange loss ..........................           7,626         108,721           3,106
   Loss carryforward .........................................              --         214,013           6,115
   Other .....................................................         129,139          97,776           2,794
                                                                    ----------      ----------      ----------
                                                                     1,268,476       1,071,808          30,623
   Valuation allowance .......................................         (85,057)       (161,800)         (4,623)
                                                                    ----------      ----------      ----------
                                                                     1,183,419         910,008          26,000
Deferred income tax liability -- unrealized foreign
   exchange gain .............................................         (22,692)        (37,000)         (1,057)
                                                                    ----------      ----------      ----------
                                                                     1,160,727         873,008          24,943
                                                                    ==========      ==========      ==========
Non-current assets (liabilities)
   Unused tax credits ........................................         754,914       1,648,956          47,113
   Accrued pension costs .....................................          57,403          64,308           1,837
   Accrued interest on convertible bonds .....................         362,663              --              --
   Loss carryforward .........................................          24,645              --              --
   Others ....................................................          83,382          97,472           2,785
                                                                    ----------      ----------      ----------
                                                                     1,283,007       1,810,736          51,735
   Valuation allowance .......................................        (343,825)       (639,188)        (18,262)
                                                                    ----------      ----------      ----------
                                                                       939,182       1,171,548          33,473
                                                                    ----------      ----------      ----------
Deferred income tax liability
   Investment income .........................................      (1,159,500)       (636,815)        (18,195)
   Unrealized foreign exchange gain ..........................          (7,500)         (7,185)           (205)
   Goodwill amortization .....................................         (75,744)        (56,124)         (1,604)
   Others ....................................................        (207,900)       (245,234)         (7,006)
                                                                    ----------      ----------      ----------
                                                                    (1,450,644)       (945,358)        (27,010)
                                                                    ----------      ----------      ----------
                                                                      (511,462)        226,190           6,463
                                                                    ==========      ==========      ==========
</TABLE>

                                                       F-30
<PAGE>

     In assessing the realizability of deferred tax assets, ASE considered its
future taxable earnings and expected timing for the reversal of temporary
differences. The valuation allowance is provided to reduce the gross deferred
tax assets to an amount which ASE believes will more likely be realized.
Deferred 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, 2001 approximated US$5,087 thousand and US$454
thousand with expiration in 2021 and 2006, respectively.

     A portion of ASE'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 2000 and 2005, respectively. 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. The
per share effect of tax holiday is NT$0.4 in 1999, NT$0.3 in 2000 and NT$0.01
in 2001.

     d.   As of December 31, 2001, unused tax credits of ROC subsidiaries which
          can be utilized to offset their future income tax are set forth
          below:

<TABLE>
                                                  December 31, 2001
                           --------------------------------------------------------------
                                           ASE           ASE          ASE
Year of Expiry                ASE        Chung Li     Material    Test, Inc.      Total
------------------------   ----------   ----------   ----------   ----------   ----------
<S>                        <C>          <C>          <C>          <C>          <C>
2002 ...................   $   72,373   $       --   $   47,901   $  151,752   $  272,026
2003 ...................      225,750       13,246       27,252      241,966      508,214
2004 ...................      301,720      104,754       14,982      299,974      721,430
2005 ...................      278,040           --      175,865       71,456      525,361
                           ----------   ----------   ----------   ----------   ----------
                           $  877,883   $  118,000   $  266,000   $  765,148   $2,027,031
                           ==========   ==========   ==========   ==========   ==========
</TABLE>

     In the ROC, the 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 ASE and all its subsidiaries in Taiwan has been
examined by the ROC tax authorities through 1999.

18.  Pension Plans

     The consolidated entities (including ASE) 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.
Those entities make monthly contributions, at 2% 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 are summarized as follows:

<TABLE>
                                                                       Years Ended December 31
                                                            --------------------------------------------
                                                              1999        2000              2001
                                                            --------    --------    --------------------
                                                               NT$         NT$         NT$         US$
<S>                                                          <C>         <C>         <C>           <C>
Balance, beginning of year ..............................    186,412     232,205     339,500       9,700
Contributions ...........................................     34,410      92,211      89,615       2,560
Payments ................................................       (574)       (435)     (3,654)       (104)
Interest income .........................................     11,957      15,519      15,285         437
                                                            --------    --------    --------    --------
Balance, end of year ....................................    232,205     339,500     440,746      12,593
                                                            ========    ========    ========    ========
</TABLE>

                                                    F-31
<PAGE>


     Pension costs for these entities consist of:

<TABLE>
                                                                       Years Ended December 31
                                                            --------------------------------------------
                                                              1999        2000              2001
                                                            --------    --------    --------------------
                                                               NT$         NT$         NT$         US$
<S>                                                          <C>         <C>         <C>           <C>
Service costs ...........................................     56,870     120,528     114,393       3,268
Interest ................................................     23,243      30,234      28,503         814
Projected return on pension assets ......................    (12,543)    (14,575)    (21,611)       (617)
Amortization of prior period service cost, gain or loss
   on plan assets, etc ..................................      2,689       4,231       6,933         198
                                                            --------    --------    --------    --------
                                                              70,259     140,418     128,218       3,663
                                                            ========    ========    ========    ========
</TABLE>

     Other pension information based on actuarial calculations of the plan are
as follows:

<TABLE>
                                                                       Years Ended December 31
                                                            --------------------------------------------
                                                              1999        2000              2001
                                                            --------    --------    --------------------
                                                               NT$         NT$         NT$         US$
<S>                                                          <C>         <C>         <C>          <C>
a.  Benefit obligations
    Accumulated benefit obligation ......................    209,543     347,107     434,131      12,404
    Additional benefits based on future salaries ........    228,743     302,925     278,587       7,960
                                                            --------    --------    --------    --------
    Projected benefit obligation ........................    438,286     650,032     712,718      20,364
    Fair value of assets ................................   (211,576)   (311,758)   (412,192)    (11,778)
                                                            --------    --------    --------    --------
    Funded status .......................................    226,710     338,274     300,526       8,586
    Unrecognized net transition obligation ..............   (114,468)   (114,550)   (101,984)     (2,914)
    Unrecognized net actuarial gain (loss) ..............     85,903      30,580      93,428       2,669
    Portion in prepayments ..............................         --          --       5,561         159
    Portion in other current liabilities ................     (8,956)     (5,879)     (3,093)        (87)
                                                            --------    --------    --------    --------
    Accrued pension cost ................................    189,189     248,425     294,438       8,413
                                                            --------    --------    --------    --------
b.  Vested obligation ...................................      2,162       7,124      22,177         634
                                                            ========    ========    ========    ========
c.  Actuarial assumption
    Discount rate........................................    6.5%-7%         6%         5%
    Increase in future salary level......................    4%-5.5%       4%-5%       3%-4%
    Expected rate of return on plan assets...............    6.5%-7%         6%         5%
</TABLE>

19.  Stock Option Plans

     ASE Test has six stock option plans, the 1996 Option Plan (the "Pre-IPO
Plan"), 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. Because the exercise price is equal to the
market price of the shares on the date of grant, no compensation cost was
recognized.

20.  Earnings Per Share and ADS

     Since ASE incurred loss from continuing operations for the year ended
December 31, 2001, the simple net loss per share and per ADS are presented.

     Primary and fully diluted earnings per share for the years ended December
31, 1999 and 2000 are calculated as follows:

                                     F-32
<PAGE>

     The denominator is the weighted average number of outstanding shares of
common stock of 1,980,000,000 and 2,677,602,000 shares in 1999 and 2000,
respectively. The numerator is the net income with the primary and fully
diluted EPS adjustment for the employee stock options of ASE Test.

     The numerator with consideration of the adjustment of ASE Test's primary
EPS in 1999 and 2000 is calculated as follows:

<TABLE>
                                                                                  1999           2000
                                                                              -----------    -----------
<S>                                                                            <C>            <C>
Net income ................................................................    $7,794,666     $5,837,149
Less: net income contributed from ASE Test ................................    (1,184,670)    (1,816,985)
Add: ASE Test's primary EPS multiplied by the number of shares of ASE
   Test owned by ASE ......................................................     1,092,952      1,753,903
                                                                              -----------    -----------
As adjusted ...............................................................    $7,702,948     $5,774,067
                                                                              ===========    ===========
</TABLE>

     The numerator with consideration of the adjustment of ASE Test's fully
diluted EPS in 1999 and 2000 is calculated as follows:

<TABLE>
                                                                                  1999           2000
                                                                              -----------    -----------
<S>                                                                            <C>            <C>
Net income ................................................................    $7,794,666     $5,837,149
Less: net income contributed from ASE Test ................................    (1,184,670)    (1,816,985)
Add: ASE Test's fully diluted EPS multiplied by the number of shares of ASE
   Test owned by ASE ......................................................     1,085,749      1,685,617
                                                                              -----------    -----------
As adjusted ...............................................................    $7,695,745     $5,705,781
                                                                              ===========    ===========
</TABLE>

     Primary and fully diluted earnings per ADS for the years ended December
31, 1999 and 2000 are 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 potentially issued from convertible bonds is as
follows:

<TABLE>
                                                     1999                2000               2001
                                                 ----------          ----------         ----------
<S>                                              <C>                 <C>                <C>
 Convertible bonds -- issued by ASE              70,666,667          95,400,000         38,537,822
                                                 ==========          ==========         ==========
</TABLE>

21.  Assets Pledged or Mortgaged

     Except for those mentioned in Note 13, the assets pledged or mortgaged as
first priority collateral for short-term and long-term debts, and recruitment
of foreign laborers are summarized as follows:

<TABLE>
                                                                  December 31
                                                     ------------------------------------
                                                        2000               2001
                                                     ----------   -----------------------
                                                         NT$          NT$          US$
                                                     ----------   ----------   ----------
<S>                                                   <C>         <C>             <C>
Buildings and improvements .......................      710,327    2,077,487       59,357
Machinery and equipment ..........................    7,487,835    9,021,120      257,746
Long-term investments ............................    1,266,164    1,790,961       51,170
Time deposits ....................................      297,079      140,949        4,027
Guarantee deposits -- time deposits ..............       73,599       77,821        2,224
                                                     ----------   ----------   ----------
                                                      9,835,004   13,108,338      374,524
                                                     ==========   ==========   ==========
</TABLE>

     In addition, the total assets of ISE Labs amounting to NT$5,458,090
(US$155,945) as of December 31, 2001, have been pledged as collaterals for its
long-term and short-term debts.
\
                                     F-33
<PAGE>

22.  Commitments and Contingencies as of December 31, 2001

     a. ASE, ASE Test, Inc., and ASE Material lease the land on which their
buildings are situated under various operating lease agreements with the
government expiring on various dates through 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, ASE and ASE Material and ISE Labs also lease equipment
under non-cancellable capital lease agreements. The net book value as of
December 31, 2000 and 2001 of the equipment acquired under the capital
obligations amounted to NT$200,429 and NT$276,287 (US$7,894), respectively. The
future minimum lease payments under the above-mentioned operating leases are as
follows:

<TABLE>
                              Operating Leases                                             NT$              US$
-------------------------------------------------------------------------------        ---------        ---------
<S>                                                                                    <C>                 <C>
2002...........................................................................          314,006            8,972
2003...........................................................................          280,148            8,004
2004...........................................................................          274,174            7,834
2005...........................................................................          271,953            7,770
Thereafter.....................................................................          849,772           24,279
                                                                                       ---------        ---------
Total minimum lease payments...................................................        1,990,053           56,859
                                                                                       =========        =========
</TABLE>

     The future minimum lease payments under above-mentioned capital leases as
of December 31, 2001 are as follows:

<TABLE>
                                                                                           NT$              US$
                                                                                       ---------        ---------
<S>                                                                                      <C>               <C>
Within the following year......................................................           86,316            2,466
Within the second year.........................................................           25,752              736
Within the third year..........................................................              897               26
                                                                                       ---------        ---------
Total minimum lease payments...................................................          112,965            3,228
Less: Imputed interest.........................................................            6,440              184
                                                                                       ---------        ---------
Present value of future lease obligations......................................          106,525            3,044
Capital lease obligation, current..............................................           80,550            2,302
                                                                                       ---------        ---------
Capital lease obligation, long-term............................................           25,975              742
                                                                                       =========        =========
</TABLE>

     b. ASE, 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 services-related cost and expenses plus 10% in 1999 and 2000,
and 5%-10% in 2001 (starting August 2001, there is limited amounts prescribed
for cost and expenses incurred) or based on 1%-3% in 1999 and 2000, 0.48%-1% in
2001 of net export sales. Commissions and service fees paid in 1999, 2000 and
2001 approximated NT$570,729, NT$762,159 and NT$729,300 (US$20,837),
respectively.

     c. As of December 31, 2001, commitments to purchase machinery and
equipment approximated NT$3,059,996 (US$87,428).

     d. As of December 31, 2001, commitments for construction of buildings
approximated NT$379,668 (US$10,848).

     e. As of December 31, 2001, unused letters of credit of approximated
NT$782,667 (US$22,362).

     f. ASE entered into technology agreements with foreign companies which
will expire in various dates through 2016 for the procurement of manufacturing
technology of certain products. Based on the agreements, ASE shall pay
royalties at a specified percentage of sales quantities. Such royalties in
1999, 2000 and 2001 were approximately NT$112,025, NT$199,836 and NT$151,249
(US$4,321), respectively.

                                     F-34
<PAGE>

     g. As of December 31, 2001, ASE has endorsed and guaranteed the promissory
notes of its subsidiaries as follows:

<TABLE>
                                                                                           NT$             US$
                                                                                       ---------       ---------
<S>                                                                                    <C>               <C>
ASE (Labuan).................................................................          2,794,861          79,853
ASE (Philippines)............................................................          1,924,450          54,984
ASE Chung Li.................................................................          1,166,322          33,324
ASE Material.................................................................          1,017,295          29,066
ASE Holding..................................................................            839,760          23,993
ASE Investment...............................................................            300,000           8,571
ASE Technologies.............................................................             40,000           1,143
                                                                                       ---------       ---------
                                                                                       8,082,688         230,934
                                                                                       =========       =========
</TABLE>

23.  Derivative Financial Instruments

     Information on derivative transactions are as follows:

   a.  Interest Rate Swap

     ASE entered into two interest rate swap contracts with a foreign bank,
which expired in January and December 1999. Under these contracts, ASE paid
interest based on a notional principal amount of US$20 million (NT$663 million)
and floating interest at a rate of 4.85%-5.19% of LIBOR minus 0.21%-0.25%,
whichever was higher. The foreign bank paid interest to ASE based on the same
nominal principal and floating interest rate of 3 months' USD LIBOR. The
interest settlement was made on net basis. The net interest income from such
contracts amounted to NT$842 in 1999. As of December 31, 2000 and 2001, there
were no outstanding contracts.

   b.  Forward Exchange Contracts

     ASE Test Malaysia entered into forward contracts to hedge foreign exchange
fluctuations associated with foreign currency liabilities which has expired in
February 2001, and the net gain from such contracts amounted to NT$31,803
(US$909) in 2001. As of December 31, 2001, there were no open contracts.

   c.  European Options

     Because ASE and ASE Test, Inc. and ASE Material expect to receive US
dollars from export sales and to pay Japanese yen or NT dollars for long-term
debts or short-term borrowings, ASE and ASE Test, Inc. and ASE Material have
entered into foreign currency option contracts to hedge risks of exchange rate
fluctuations.

     As of December 31, 2001, the outstanding contracts are as follows:

   ASE

<TABLE>
                                                           Strike Price
       Contract                       Amount                  US$/NT$                  Maturity Date
--------------------------  -----------------------  -----------------------  ------------------------------
<S>                               <C>                      <C>                       <C>
Buy US$ Put/JPY Call              US$2 million             US$1:JPY120               January 29, 2002
Buy US$ Put/JPY Call              US$2 million             US$1:JPY120               February 26, 2002
Buy US$ Put/JPY Call              US$2 million             US$1:JPY120               March 26, 2002
Sell US$ Call/JPY Put             US$3 million             US$1:JPY120               January 29, 2002
Sell US$ Call/JPY Put             US$3 million             US$1:JPY120               February 26, 2002
Sell US$ Call/JPY Put             US$3 million             US$1:JPY120               March 26, 2002
Sell US$ Call/NT$ Put             US$36.5 million          US$1:NT$34                March 26, 2002
Sell US$ Call/NT$ Put             US$66 million            US$1:NT$36                July 15, 2002
</TABLE>

     The loss arising from such contracts based on mark-to-market valuation as
at December 31, 2001 approximated NT$86,732 (US$2,478).

                                     F-35
<PAGE>

   ASE Test, Inc.

<TABLE>
                                                           Strike Price
       Contract                       Amount                  US$/NT$                  Maturity Date
--------------------------  -----------------------  -----------------------  ------------------------------
<S>                               <C>                      <C>                       <C>
Sell US$ Call/NT$ Put             US$4 million             US$1:NT$34.61             January 10, 2002
Sell US$ Call/NT$ Put             US$4 million             US$1:NT$34.61             February 15, 2002
Sell US$ Call/NT$ Put             US$4 million             US$1:NT$34.61             March 11, 2002
Buy US$ Put/NT$ Call              US$2 million             US$1:NT$34.50             January 29, 2002
</TABLE>

     The loss arising from such contracts based on mark-to-market valuation as
at December 31, 2001 approximated NT$6,322 (US$181).

   ASE Material

<TABLE>
                                                           Strike Price
       Contract                       Amount                  US$/NT$                  Maturity Date
--------------------------  -----------------------  -----------------------  ------------------------------
<S>                                <C>                     <C>                       <C>
Sell US$ Call/JPY Put             US$5 million             US$1:JPY120               January 29, 2002
Sell US$ Call/JPY Put             US$5 million             US$1:JPY120               February 26, 2002
Sell US$ Call/JPY Put             US$5 million             US$1:JPY120               March 26, 2002
Buy JPY Call/US$ Put              US$3.25 million          US$1:JPY112.5             January 29, 2002
Buy JPY Call/US$ Put              US$3.25 million          US$1:JPY112.5             February 26, 2002
Buy JPY Call/US$ Put              US$3.25 million          US$1:JPY112.5             March 26, 2002
</TABLE>

     The loss arising from such contracts based on mark-to-market valuation as
at December 31, 2001 approximated NT$43,697 (US$1,248).

   d.  Cross Currency Swap Contract

     Because ASE will repay US dollars for convertible bonds upon maturity, ASE
entered into cross currency swap contract to hedge risks of exchange rate
fluctuation which will expire in November 4, 2002. In December 2001, ASE early
settled the contract, and resulted in a gain of NT$69,978 (US$1,999).

   e.  Transaction Risk

     1)  Credit Risk

     ASE, ASE Test, Inc. and ASE Material are 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, ASE, ASE Test, Inc. and ASE Material
transact 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)  Liquidation Risk and Cash Flow Risk

     ASE, ASE Test, Inc. and ASE Material entered into European option
contracts to hedge its exposure to the effect of exchange rate fluctuations on
net assets or net liabilities. At the maturity of the contracts, ASE, ASE Test,
Inc. and ASE Material have sufficient operating capital to meet cash
requirements, there are no funds raising risk. Therefore, ASE, ASE Test, Inc.
and ASE Material believe there are no significant liquidation risk and cash
flow risk.

                                     F-36
<PAGE>

24.  Non-derivative and Derivative Financial Instruments

<TABLE>
                                                                       December 31
                                    ----------------------------------------------------------------------------------
                                              2000                                        2001
                                    ------------------------     -----------------------------------------------------
                                     Carrying                     Carrying                     Carrying
                                      Values     Fair Values       Values     Fair Values       Values     Fair Values
                                    ----------    ----------     ----------    ----------     ----------    ----------
                                        NT$           NT$            NT$           NT$            US$           US$
<S>                                 <C>           <C>            <C>           <C>               <C>           <C>
Non-derivative Financial
   Instruments
Assets
   Cash and cash equivalents        14,166,495    14,166,495     11,770,729    11,770,729        336,307       336,307
   Short-term investments            1,682,679     1,717,617      4,601,172     4,642,062        131,462       132,630
   Notes receivable                    219,641       219,641        105,185       105,185          3,005         3,005
   Accounts receivable -- net        9,040,934     9,040,934      7,020,964     7,020,964        200,599       200,599
   Long-term investments            10,712,199    10,303,014      9,530,398    11,026,363        272,297       315,039
   Guarantee deposit                   297,079       297,079        140,949       140,949          4,027         4,027
   Sinking fund                             --            --      1,568,057     1,568,057         44,802        44,802
Liabilities
   Short-term borrowings             5,402,597     5,402,597      3,456,149     3,456,149         98,747        98,747
   C/P and B/A payable               4,281,805     4,281,805      3,444,314     3,444,314         98,409        98,409
   Accounts payable                  3,859,909     3,859,909      2,968,779     2,968,779         84,822        84,822
   Long-term bonds payable
     (included current portion)     12,229,179    12,229,179      7,868,636     7,868,636        224,818       224,818
   Long-term debts (included
     current portion)               13,639,786    13,639,786     26,277,018    26,277,018        750,772       750,772
   Long-term payable for
     investments (included
     current portion)                4,191,528     4,191,528      3,611,294     3,611,294        103,180       103,180
Derivative Financial Instruments
Forward exchange contracts               2,046        (1,708)            --            --             --            --
European options                            --       (21,832)            --      (136,751)            --        (3,907)
Cross currency swap contract                --        21,446             --            --             --            --
</TABLE>

     The carrying values of cash and cash equivalent, notes receivable,
accounts receivable, short-term borrowings, C/P and B/A payable, 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
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
estimated present value of future cash flows using the interest rates of
similar long-term debt instruments which ASE 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.

25.  Segment and Geographical Information

   a.  Geographical Sales Information

     1)  Net Revenue:

<TABLE>
                                                                   Year Emded December 31
                                      ----------------------------------------------------------------------------------------
                                               1999                      2000                             2001
                                      -----------------------   -----------------------   ------------------------------------
                                                      % of                      % of                                   % of
                                                      Total                     Total                                  Total
                                          NT$         Sales         NT$         Sales         NT$          US$         Sales
                                      ----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                                   <C>                 <C>   <C>                 <C>   <C>           <C>                <C>
America                               18,645,953           57   33,089,214           65   24,930,813      712,309           65
Domestic                               9,427,343           29   12,639,373           25   10,222,723      292,078           27
Europe                                   852,110            3    1,905,646            4    1,508,919       43,112            4
Asia and other areas                   3,684,155           11    3,259,144            6    1,705,371       48,725            4
                                      ----------   ----------   ----------   ----------   ----------   ----------   ----------
                                      32,609,561          100   50,893,377          100   38,367,826    1,096,224          100
                                      ==========   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>

                                     F-37
<PAGE>


     2)  Long-lived Assets:

<TABLE>
                                                    Year Ended December 31
                                 --------------------------------------------------------------
                                           2000                            2001
                                 -----------------------   ------------------------------------
                                              % of Total                             % of Total
                                              Long-Lived                             Long-Lived
                                     NT$        Assets         NT$          US$         Assets
                                 ----------   ----------   ----------   ----------   ----------
<S>                              <C>                 <C>   <C>           <C>                <C>
Domestic                         43,309,343           72   43,724,466    1,249,270           72
Asia                             14,271,843           23   13,482,411      385,212           22
America                           2,985,014            5    3,348,228       95,663            6
                                 ----------   ----------   ----------   ----------   ----------
                                 60,566,200          100   60,555,085    1,730,145          100
                                 ==========   ==========   ==========   ==========   ==========
</TABLE>

   b.  Major customers

     Customers accounting by 10% or more of total revenues are shown below:

<TABLE>
                                                                      Year Ended December 31
                                      ----------------------------------------------------------------------------------------
                                                1999                      2000                            2001
                                      -----------------------   -----------------------   ------------------------------------
                                                      % of                      % of                                   % of
                                                      Total                     Total                                  Total
                                          NT$         Sales         NT$         Sales         NT$          US$         Sales
                                      ----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                                    <C>                 <C>  <C>                  <C>   <C>            <C>               <C>
Motorola, Inc                          5,155,573           16   11,256,760           22    7,164,415      204,698           19
                                      ==========   ==========   ==========   ==========   ==========   ==========   ==========
VIA Technologies Inc                   2,576,155            8    5,185,434           10    4,413,854      126,110           12
                                      ==========   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>

   c.  Reported Segment Information

     ASE has three reportable segments: Packaging, Testing and Investing, each
of which requires different development and production. The packaging division
packages bare semiconductors into finished semiconductors with enhanced
electrical and thermal characteristics. The testing division provides testing
services, including front-end engineering testing, wafer probing and final
testing services. The investing division is engaged 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, 1999, 2000 and 2001 is
as follows:

<TABLE>
                                                 Packaging          Testing          Investing         All Other           Total
                                               ------------      ------------      ------------      ------------      ------------
<S>                                            <C>               <C>                 <C>             <C>               <C>
1999
Revenue from external customer ...........    NT$24,522,968      NT$7,874,728             NT$--      NT$1,207,287     NT$33,604,983
Inter-segment revenues ...................               --           (81,530)               --          (913,892)         (995,422)
Interest revenue .........................           25,219           227,616            84,567            85,756           423,158
Interest expense .........................          714,780           264,939           137,515           352,561         1,469,795
Net interest revenue (expense) ...........         (689,561)          (37,323)          (52,948)         (266,805)       (1,046,637)
Depreciation and amortization ............        2,994,302         2,418,278               140           141,647         5,554,367
Segment profit (loss) ....................        3,131,508         2,224,801         4,642,002          (935,870)        9,062,441
Segment asset ............................       35,318,472        16,203,198        11,840,510        13,968,595        77,330,775
Expenditures for segment assets ..........        5,617,480         4,808,413                --           671,502        11,097,395
2000
Revenue from external customer ...........    NT$38,028,799     NT$12,911,073             NT$--      NT$2,001,604     NT$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 ...........    NT$28,928,185      NT$9,637,615             NT$--      NT$2,684,736     NT$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 revenue (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
2001
Revenue from external customer ...........       US$826,520        US$275,360             US$--         US$76,707      US$1,178,587
Inter-segment revenues ...................             (857)           (5,095)               --           (76,411)          (82,363)
Interest revenue .........................            8,107             1,033             4,939               310            14,389
Interest expense .........................           36,022             8,873            16,145             3,042            64,082
Net interest revenue (expense) ...........          (27,916)           (7,841)          (11,206)           (2,730)          (49,693)
Depreciation and amortization ............          148,174           156,184               700            12,865           317,923
Segment profit (loss) ....................          (79,616)          (34,152)           22,865             5,604           (85,300)
Segment asset ............................        1,468,496           941,966           328,829           298,604         3,037,895
Expenditures for segment assets ..........          167,982           126,147                --            36,319           330,448
</TABLE>

                                                                 F-36
<PAGE>

26.  Acquisitions

     In May 1999, ASE Test acquired 70% equity of ISE Labs, which is engaged in
the testing and packaging of semiconductors. The purchase costs, including
transaction costs, approximated US$100.1 million (NT$3,503.5 million), which
was paid in May 1999. In 2001, ASE Test purchased additional shares of ISE Labs
in connection with the capital increase of ISE Labs, and consequently, as of
December 31, 2001, owned 80% equity of ISE Labs. Total investment cost of the
ISE Labs shares was US$171 million (NT$5,985 million) as of December 31, 2001.
In January 2002, ASE Test purchased the remaining 20% equity interest in ISE
Labs for US$50 million (NT$1,750 million), and thereafter owned 100% of ISE
Labs.

     In July 1999, ASE and ASE Test purchased 70% and 30%, respectively, of the
equity interest of the Motorola SPS Businesses. The purchase cost approximated
US$350.1 million (NT$12,253.5 million). As of December 31, 2001, US$246.8
million (NT$8,638 million) has been paid and the balance of US$103.3 million
(NT$3,615.5 million), plus interest (commencing as of the acquisition date --
July 1999) is payable, US$23.3 million (NT$815.5) of which is subject to target
sales volumes being met for the Motorola SPS Businesses in Chung Li, Taiwan,
based on specified payment dates. ASE believes the contingent payments of
US$23.3 million (NT$815.5) are determinable beyond a reasonable doubt. As of
December 31, 2001, ASE has provided guaranteed letters of credit of US$113,209
(NT$3,962,315) to Motorola. Both acquirees are currently engaged in the
packaging and testing of semiconductors. A portion of the purchase price was
financed through a Convertible Notes offering completed on June 29, 2000 by ASE
Test Finance Limited and fully and unconditionally guaranteed by ASE Test (see
Note 13).

     Future payments for investments in Motorola as of December 31, 2001 are as
follows:

                                                             NT$          US$
                                                         ---------    ---------
Within the following year ...........................      816,433       23,327
Within the second year and after ....................    2,794,861       79,853
                                                         ---------    ---------
                                                         3,611,294      103,180
                                                         =========    =========

     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 cost 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 (amounts in millions US
dollars):

                                     F-37
<PAGE>

<TABLE>
                       Acquirees                              Purchase Cost       Net Book Value         Excess
--------------------------------------------------------      -------------       --------------     -------------
<S>                                                              <C>                 <C>                 <C>
ISE Labs................................................         US$100.1             US$23.6            US$76.5
Motorola SPS Businesses.................................         US$350.1            US$268.2            US$81.9
</TABLE>

     The excess purchase price was allocated as follows (amount in millions of
US dollars):

<TABLE>
                                                                                   Motorola SPS
                         Item                                     ISE Labs          Businesses
--------------------------------------------------------     ----------------    ---------------
<S>                                                                <C>                <C>
Write-up of land........................................             2.5                87.7
Write-up (write-down) in buildings......................             2.7              (11.5)
Write-up (write-down) in machinery......................             9.0               (8.4)
Deferred tax liability..................................           (5.7)                  --
Goodwill................................................            68.0                14.1
                                                                --------            --------
                                                                    76.5                81.9
                                                                ========            ========
</TABLE>

     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 preacquisition contingency at the date of
acquisition.

     The purchase prices for Motorola SPS Businesses and ISE Labs acquisitions,
are respectively allocated as follows (amount in millions of US dollars):

<TABLE>
                                                                                   Motorola SPS
                                                                  ISE Labs          Businesses
                                                             ----------------    ---------------
<S>                                                             <C>                 <C>
Cash....................................................          US$4.3             US$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)                 --
                                                                --------            --------
                                                                US$100.1            US$350.1
                                                                ========            ========
</TABLE>

27. Summary of Significant Differences Between Accounting Principles Followed
by the Corporation and Generally Accepted Accounting Principles in the United
States

     The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the Republic of
China ("ROC GAAP"), which differ in the following respects from generally
accepted accounting principles in the United States ("US GAAP"):

   a.  Pension Benefits

     US Financial Accounting Standards ("FAS") 87, "Accounting for Pensions",
was effective no later than the beginning of the first period for which a US
GAAP reconciliation is required. A portion of the unrecognized net transition
obligation at the adoption date is to be allocated directly to equity. The
adoption date of ASE for US FAS 87 is the beginning of 1987. ROC SFAS 18, which
is substantially similar to US FAS 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 value, and debt securities at cost. Under US FAS 115,
"Accounting for Certain Investments in Debt and Equity Securities",

                                     F-38
<PAGE>


except for debt securities classified as "held-to-maturity securities",
investments in debt and equity securities, other than those recorded on the
equity method, should be stated at fair value.

     All of the Corporation's short-term investments are classified as trading
securities under US GAAP, with gains and losses recognized currently in income.
The unrealized holding gain included in earnings under US GAAP were NT$22,354
in 2000 and NT$5,952 (US$170) in 2001. All of the Corporation'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 ASE,
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 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 to 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 ASE'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 employee bonuses, including cash and stock, will approximate three to
four months' salaries and wages.

     Aside from the aforementioned regular bonus plan, ASE decided to grant a
special stock bonus to employees amounting to NT$1,536,396 in 1997 and
NT$2,506,617 in 2000 due to excellent profits for ASE in 1997 and 2000.
Employees who received the special stock bonus are required to continue working
for ASE for an additional three years. Accordingly, the amount of special stock
bonuses is being allocated over three years as special compensation expenses in
the statement of income under US GAAP.

   d.  Treasury Stock

     The shares of stock of ASE that are held by consolidated majority owned
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 ASE. 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 the EPS is adjusted to reflect that the
shares of ASE held by the subsidiary are not outstanding beginning on the date
that the subsidiary acquired the shares of ASE. The adjustment on the
denominator under US GAAP for purposes of EPS computation is 103,321,373 shares
in 1999, 135,867,641 shares in 2000 and 164,441,865 shares in 2001,
respectively. The capital gain (loss) from sales of treasury stock is added to
or deducted from the consolidated balance of capital surplus.

     Under ROC GAAP, such treatment is not required and, as a result, the
investment in ASE common shares is presented as a long-term investment in the
consolidated balance sheets and capital gain (loss) from sale of treasury stock
is recognized and included 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, an assessment for useful
lives of buildings is estimated to be 25 years.

   f.  Excess of Book Value on Transfer of Buildings Between Related Parties

     ASE Test, Inc., a consolidated subsidiary, purchased buildings and
facilitates from another consolidated subsidiary, ASE Technologies, in 1997.
The actual costs purchased from ASE Technologies were based on market value.
Such additional payment for the excess of book value of NT$17,667 was
capitalized by ASE Test, Inc. as

                                     F-39
<PAGE>

allowed under ROC GAAP. Under US GAAP, transfers of assets from 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 Long-term Investment

     The carrying values of equity-basis 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. Therefore, the investment income
(loss) has been adjusted to reflect the differences between ROC and US GAAP in
the investees' financial statements.

   i.  Impairment of Long-lived Assets

     Under US GAAP, impairment losses are recorded in current period earnings,
create a new cost basis for related assets going forward and cannot be reversed
subsequently. Under US GAAP, in accordance with US FAS 121, 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. Under ROC GAAP, there is no requirement to provide for impairment of
fixed assets. Based on an assessment by ASE and its subsidiaries of the
potential impact of US FAS 121, there is no impairment loss as of December 31,
2001 for ASE except for the value decline relating to the long-term bond
investment in APP (see Note 7).

   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 1999 and 2001
stock dividends would be treated as an additional reduction to retained
earnings and increase to capital surplus amounting to NT$9,580 million and
NT$3,181 million, respectively.

   k.  Stock Option Compensation

     In May 2001, ASE Test's directors exercised their stock options for
2,480,000 shares at US$3.5 per share under the 1996 option plan. ASE was
concerned about potential dilution caused by the sales of these shares into the
marketplace and 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 ASE. However, under US GAAP, in accordance to APB Opinion 25 and FIN
44, the purchase of shares from employees within six months after exercise of a
vested option, compensation expense shall be measured for the difference
between the market price of the share on the date of purchase and the market
price on the date the options were issued. Consequently, a difference amounting
to NT$908,661 (US$25,961) arising from the purchase by ASE of these shares was
recorded by ASE Test as compensation expense.

   l.  Derivative Financial Instruments

     There are no specific rules under ROC GAAP related to accounting for
derivative financial instruments other than foreign currency forward exchange
contracts (the "forward contracts"). The accounting of forward contracts and
other derivatives is disclosed in Note 2. The accounting and reporting
standards for derivative financial instruments under US GAAP are established in
FAS 133 and FAS 138; which were adopted by the Corporation

                                     F-40
<PAGE>

effective January 1, 2001. The adoption of US FAS 133 and US FAS 138 had no
material impacts to the consolidated financial statements for all periods
presented. Under US GAAP, the Corporation did not apply hedge accounting and
derivatives have historically been, and continue to be, recorded on the balance
sheets at fair value, with the changes in fair values recorded through current
period earnings.

   m.  Earnings Per Share (EPS)

     In calculating the weighted average number of shares outstanding for EPS
purposes under ROC GAAP, employee bonus shares are treated as outstanding for
all periods. Under US GAAP, employee bonus shares are treated as outstanding
only from the date when they are issued.

     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>
                                                                                       Years Ended December 31
                                                                 -----------------------------------------------------------------
                                                                      1999             2000                     2001
                                                                 --------------   --------------   -------------------------------
                                                                       NT$              NT$              NT$               US$
<S>                                                               <C>              <C>              <C>              <C>
Net income (loss)
Net income (loss) based on ROC GAAP .........................         7,794,666        5,837,149       (2,142,219)         (61,206)
Adjustments:
   a. Pension benefits (cost) ...............................           (15,799)           5,635            2,755               79
   b. Short -- term investments .............................            12,584           22,354            5,952              170
   c. Bonuses to employees, directors and
      supervisors:
      Accrued regular bonuses ...............................        (1,089,135)        (929,348)              --               --
      Special stock bonuses .................................          (577,500)        (929,901)        (963,572)         (27,531)
   d. Gain from sale of treasury stock ......................        (1,388,523)              --               --               --
   e. Depreciation of building ..............................           (30,731)         (32,127)         (48,803)          (1,394)
   f. Excess of book value of building transferred
      between related parties ...............................               432              432              432               12
   g. Restate carrying value and related capital
      gain from sale of long-term investment ................            (5,180)              --           39,002            1,114
   h. Effects for US GAAP adjustments on equity
      long-term investments .................................          (154,218)         (51,825)         (33,785)            (965)
   k. Stock option compensation .............................                --               --         (908,661)         (25,961)
      Effect of US GAAP adjustment on income tax ............             5,691            6,553            6,978              199
      Effect of US GAAP adjustments on minority interest ....            89,014            1,074           (4,682)            (134)
                                                                 --------------   --------------   --------------   --------------
Net decrease in net income ..................................        (3,153,365)      (1,907,153)      (1,904,384)         (54,411)
                                                                 ==============   ==============   ==============   ==============
Net income (loss) based on US GAAP ..........................         4,641,301        3,929,996       (4,046,603)        (115,617)
                                                                 ==============   ==============   ==============   ==============
Earnings (loss) per share
     Basic ..................................................              1.61             1.34            (1.32)           (0.04)
                                                                 ==============   ==============   ==============   ==============
     Diluted ................................................              1.58             1.29            (1.32)           (0.04)
                                                                 ==============   ==============   ==============   ==============
Earnings (loss) per ADS
     Basic ..................................................              8.07             6.69            (6.59)           (0.19)
                                                                 ==============   ==============   ==============   ==============
     Diluted ................................................              7.91             6.47            (6.59)           (0.19)
                                                                 ==============   ==============   ==============   ==============
Number of weighted average shares
     outstanding ............................................     2,874,924,409    2,938,004,535    3,071,234,458    3,071,234,458
                                                                 ==============   ==============   ==============   ==============
Number of ADS ...............................................       574,984,882      587,600,907      614,246,892      614,246,892
                                                                 ==============   ==============   ==============   ==============
</TABLE>

<TABLE>
                                                                                      Years Ended December 31
                                                                  -----------------------------------------------------------------
                                                                      1999              2000                       2001
                                                                  -----------       -----------       -----------------------------
                                                                       NT$               NT$               NT$               US$
<S>                                                                <C>               <C>               <C>                <C>
Shareholders' equity
Shareholders' equity based on ROC GAAP .....................       30,057,036        43,669,214        41,946,321         1,198,466
                                                                  -----------       -----------       -----------       -----------
Adjustments:
    a. Pension benefits ....................................          (47,794)          (42,159)          (39,404)           (1,126)
    b. Restatement of short-term investments ...............           12,584            34,938            40,890             1,168
    c. Bonuses to employees, directors and
         supervisors .......................................         (217,827)         (113,600)               --                --
    d. Treasury stocks
       d1. reversal of unrealized loss .....................               --           487,752           367,662            10,505
       d2. classification of treasury stock ................       (2,922,561)       (2,919,411)       (3,017,964)          (86,228)
    e. Effect of US GAAP adjustments on useful life ........          (95,296)         (127,423)         (176,226)           (5,035)
    f. Excess of book value of building
       transferred between related parties .................          (16,623)          (16,191)          (15,759)             (450)
    g. Restate carrying value of subsidiaries'
       long-term investment ................................          (47,621)          (47,621)           (8,619)             (247)
    h. Effects of the above adjustments on equity
       investment ..........................................         (187,048)         (238,873)         (272,658)           (7,790)
    k. Stock option compensation ...........................               --                --          (908,661)          (25,961)
Effect of US GAAP adjustments on income tax ................           15,170            21,723            28,701               820
Effect on US GAAP adjustments on minority interest .........           19,667            20,741            16,059               459
                                                                  -----------       -----------       -----------       -----------
Net decrease in shareholders' equity .......................       (3,487,349)       (2,940,124)       (3,985,979)         (113,885)
                                                                  -----------       -----------       -----------       -----------
Shareholders' equity based on US GAAP ......................       26,569,687        40,729,090        37,960,342         1,084,581
                                                                  ===========       ===========       ===========       ===========
Changes in shareholders' equity based on US GAAP
Balance, beginning of year .................................       17,675,199        26,569,687        40,729,090         1,163,688
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 .............................        4,641,301         3,929,996        (4,046,603)         (115,617)
Adjustment for common shares issued as bonuses to
   employees, directors and supervisors ....................        1,448,808         1,811,607           963,572            27,531
Translation adjustment for subsidiaries ....................         (173,957)          894,255           749,128            21,403
Adjustment from changes in ownership percentage of
   investees ...............................................         (108,046)        3,405,909          (320,785)           (9,165)
Unrealized loss on long-term investment in shares
   of stock ................................................               --           (59,077)          (15,508)             (443)
Effect of change in exchange rate ..........................               --             3,150                --                --
Purchase of treasury stock .................................               --                --           (98,552)           (2,816)
Sale of treasury stock .....................................        1,782,434                --                --                --
Capital gain from sale of treasury stock ...................        1,303,948                --                --                --
                                                                  -----------       -----------       -----------       -----------
Balance, end of year .......................................       26,569,687        40,729,090        37,960,342         1,084,581
                                                                  ===========       ===========       ===========       ===========
</TABLE>

     A reconciliation of the significant balance sheet accounts under ROC GAAP
to the amounts as determined under US GAAP is as follows:

<TABLE>
                                                                            Years Ended December 31
                                                                  -------------------------------------------
                                                                        2000                  2001
                                                                  -----------     ---------------------------
                                                                       NT$             NT$             US$
<S>                                                                <C>             <C>               <C>
Short-term investments
As reported ..................................................      1,682,679       4,601,172         131,462
US GAAP adjustments
  Restatement of investments to fair value ...................         34,938          40,890           1,168
                                                                  -----------     -----------     -----------
As adjusted ..................................................      1,717,617       4,642,062         132,630
                                                                  ===========     ===========     ===========
Long-term investments
As reported ..................................................     10,712,199       9,530,398         272,297
US GAAP adjustments
  Treasury stock .............................................     (2,429,131)     (2,649,484)        (75,700)
  Equity investments .........................................       (238,837)       (272,658)         (7,790)
                                                                  -----------     -----------     -----------
As adjusted ..................................................      8,044,231       6,608,256         188,807
                                                                  ===========     ===========     ===========
Buildings and improvement
As reported ..................................................      9,390,206      14,640,855         418,310
US GAAP adjustments
  Effect of US GAAP adjustments on useful life ...............       (127,423)       (176,226)         (5,035)
  Excess of book value of building transferred Between
     related parties .........................................        (16,191)        (15,759)           (450)
                                                                  -----------     -----------     -----------
As adjusted ..................................................      9,246,592      14,448,870         412,825
                                                                  ===========     ===========     ===========
</TABLE>

                                                    F-41
<PAGE>

<TABLE>
                                                                            Years Ended December 31
                                                                  -------------------------------------------
                                                                        2000                  2001
                                                                  -----------     ---------------------------
                                                                       NT$             NT$             US$
<S>                                                                <C>             <C>               <C>
Other assets
As reported ..................................................      1,275,557       1,342,269          38,351
US GAAP
  Effect of US GAAP adjustments on income tax ................             --          28,701             820
                                                                  -----------     -----------     -----------
As adjusted ..................................................      1,275,557       1,370,970          39,171
                                                                  ===========     ===========     ===========
Deferred income tax liabilities -- net
As reported ..................................................        511,462              --              --
US GAAP
  Effect of US GAAP adjustments on income tax ................        (21,723)             --              --
                                                                  -----------     -----------     -----------
As adjusted ..................................................        489,739              --              --
                                                                  ===========     ===========     ===========
Consolidated debits
As reported ..................................................      4,999,546       5,248,919         149,969
US GAAP adjustments
  Restated carrying value of subsidiaries' long-term
     investment ..............................................        (47,621)         (8,619)           (247)
                                                                  -----------     -----------     -----------
As adjusted ..................................................      4,951,925       5,240,300         149,722
                                                                  ===========     ===========     ===========
Current liabilities
   As reported ...............................................     25,873,359      21,268,927         607,683
US GAAP adjustments-- bonuses to employees, directors
  and supervisors ............................................        113,600              --              --
                                                                  -----------     -----------     -----------
As adjusted ..................................................     25,986,959      21,268,927         607,683
                                                                  ===========     ===========     ===========
Accrued pension cost
As reported ..................................................        248,425         294,438           8,413
US GAAP adjustments -- pension benefits ......................         42,159          39,404           1,126
                                                                  -----------     -----------     -----------
As adjusted ..................................................        290,584         333,842           9,539
                                                                  ===========     ===========     ===========
</TABLE>

     As a result of the adjustments presented above, the approximate amounts of
total assets based on US GAAP are NT$105,516,899 and NT$103,273,177
(US$2,950,661) as of December 31, 2000 and 2001, respectively.

28.  Additional Disclosures Required by US GAAP

   a. Pension

     Set forth below is pension information disclosed in accordance with US FAS
132:

<TABLE>
                                                                                 Years Ended December 31
                                                                    -----------------------------------------------
                                                                      1999         2000                2001
                                                                    --------     --------     ---------------------
                                                                       NT$          NT$          NT$          US$
<S>                                                                  <C>          <C>          <C>           <C>
Components of net periodic benefit cost
Service cost ...................................................      81,240      120,528      116,657        3,333
Interest cost ..................................................      23,796       30,241       28,968          828
Expected return on plan assets .................................     (12,242)     (14,575)     (21,630)        (618)
Amortization of prior service cost .............................         642            8        1,468           42
                                                                    --------     --------     --------     --------
Net periodic benefit cost ......................................      93,436      136,202      125,463        3,585
                                                                    ========     ========     ========     ========
Changes in benefit obligation ..................................     359,510      465,674      650,032       18,572
Benefit obligation at beginning of year
Service cost ...................................................      79,410      120,528      116,657        3,333
Interest cost ..................................................      23,369       30,241       28,968          827
Actuarial (gain) loss ..........................................       3,586       34,025      (69,978)      (1,999)
Benefits paid ..................................................        (201)        (436)      (3,655)        (104)
                                                                    --------     --------     --------     --------
Benefit obligation at end of year ..............................     465,674      650,032      722,024       20,629
                                                                    --------     --------     --------     --------
Change in plan assets ..........................................     165,155      208,289      311,737        8,907
Fair value of plan assets at beginning of year
Actual return on plan assets ...................................      10,790       12,408       13,324          380
Employer contribution ..........................................      32,545       91,476       90,468        2,585
Benefits paid ..................................................        (201)        (436)      (3,493)        (100)
                                                                    --------     --------     --------     --------
                                                                     208,289      311,737      412,036       11,772
                                                                    --------     --------     --------     --------
Funded Status ..................................................     257,385      338,295      309,988        8,857
Unrecognized actuarial gain (loss) .............................     (16,549)     (45,795)      26,947          770
                                                                    --------     --------     --------     --------
Net amount recognized (recognized as accrued pension
  cost) ........................................................     240,836      292,500      336,935        9,627
                                                                    ========     ========     ========     ========
</TABLE>

                                                          F-42
<PAGE>

     Actuarial assumptions:

                                                          1999 to 2001
                                                        ----------------
Discount rate..........................................     5% to 7%
Rate of compensation increase..........................    3% to 5.5%
Expected return on plan assets.........................     5% to 7%

     ASE has no other post-retirement or post-employment benefit plans.

   b. Short-term investments

     At December 31, 2000 and 2001, certain investments carried at cost under
ROC GAAP were restated under US FAS 115:

<TABLE>
                                                             December 31
                          ----------------------------------------------------------------------------------------------------------
                                                  2000                                                    2001
                          ---------------------------------------------------   ----------------------------------------------------
                                                  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
   (Note 3) ...........   1,682,679   1,717,617      34,938   4,601,172   4,642,062      40,890     131,462     132,630       1,168
</TABLE>

   c. Income taxes expense (benefit)

<TABLE>
                                                                            Years Ended December 31
                                                           -------------------------------------------------------
                                                              1999           2000                  2001
                                                           ----------     ----------     -------------------------
                                                               NT$            NT$            NT$             US$
<S>                                                          <C>            <C>            <C>             <C>
Income tax currently payable (tax benefit) ...........        583,550      1,080,704       (101,310)        (2,894)
Net change in deferred income tax assets
  (liabilities) for the period .......................       (161,128)      (158,691)      (442,955)       (12,656)
Income tax on undistributed earnings .................         44,539        147,379        335,065          9,573
Adjustment of prior years' income taxes ..............        (13,109)       (10,177)        17,018            486
                                                           ----------     ----------     ----------     ----------
                                                              453,852      1,059,215       (192,182)        (5,491)
                                                           ==========     ==========     ==========     ==========
</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:

<PAGE>

                                     F-43
<TABLE>
                                                                            Years Ended December 31
                                                           -------------------------------------------------------
                                                              1999           2000                  2001
                                                           ----------     ----------     -------------------------
                                                               NT$            NT$            NT$             US$
<S>                                                        <C>             <C>           <C>               <C>
Tax (benefit) based on pre-tax accounting
  income (loss) at statutory rate ....................      2,406,503      2,732,461     (1,056,321)       (30,181)
Add (less) tax effects of:
  Permanent differences
     Tax-exempt income
      -- Tax holiday .................................     (1,163,516)      (700,749)       (26,413)          (754)
      -- Gain from sale of securities ................       (653,493)       (51,415)       (31,711)          (906)
     Bonus to employee and directors .................        416,659        464,812        468,058         13,373
     Other ...........................................         35,408          7,368          6,958            199
Tax credits
     Utilized ........................................       (401,525)    (1,231,247)      (253,227)        (7,235)
     Deferred ........................................       (217,614)      (299,217)       348,390          9,954
Income taxes (10%) on undistributed
  earnings ...........................................         44,539        147,379        335,065          9,573
Adjustment of prior year's income tax ................        (13,109)       (10,177)        17,018            486
                                                           ----------     ----------      ---------      ---------
Income tax expense (benefit) .........................        453,852      1,059,215       (192,183)        (5,491)
                                                           ==========     ==========      =========      =========
</TABLE>

     The abovementioned taxes on pretax accounting income (loss) at the
statutory rates for domestic and foreign entities are shown below:

<TABLE>
                                                                         Years Ended December 31
                                                                ----------------------------------------
                                                                   2000                  2001
                                                                ----------     -------------------------
                                                                    NT$            NT$             US$
<S>                                                              <C>            <C>              <C>
Domestic entities in ROC (25% statutory rate) ..............     2,064,193       (978,223)       (27,949)
Foreign entities
  ASE Korea (30.8% statutory rate) .........................         2,153             --             --
  ISE Labs (33% statutory rate) ............................       439,169        (92,487)        (2,643)
  ASE Test Malaysia (30% statutory rate) ...................       226,946         14,389            411
                                                                ----------     ----------     ----------
                                                                 2,732,461     (1,056,321)       (30,181)
                                                                ==========     ==========     ==========
</TABLE>

   d. Stock option plans

     ASE Test has six stock option plans, the 1996 Option Plan (the "Pre-IPO
Plan"), 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. The Pre-IPO Plan has expired as of December 31, 2001. 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. The 1996, 1997 and 1998 Option Plans will expire
after 5 years and the 1999 and 2000 Option Plan will expire after 10 years.

     A summary of the transaction of shares under the six plans is presented
below:

<TABLE>
                                                                             Weighted        Weighted
                                                                             Average         Average
                                                             Number of       Exercise        Grant Date
                                                              Shares      Price Per Share   Fair Values
                                                           -----------    ---------------   -----------
<S>                                                         <C>                  <C>           <C>
Beginning balance -- January 1, 1999 ..................     11,585,128           $5.97
Option granted ........................................      2,742,500           20.00         $10.65
Option exercised ......................................     (1,627,226)           5.47         ======
Option forfeited ......................................        (76,028)           7.29
                                                           -----------     -----------
Ending balance -- December 31, 1999 ...................     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
                                                           -----------     -----------
</TABLE>

                                                  F-44
<PAGE>

<TABLE>
                                                                             Weighted        Weighted
                                                                             Average         Average
                                                             Number of       Exercise        Grant Date
                                                              Shares      Price Per Share   Fair Values
                                                           -----------    ---------------   -----------
<S>                                                         <C>                  <C>           <C>
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
                                                           ===========     ===========
Options exercisable at:
   December 31, 1999 ..................................      4,387,858           $4.91
   December 31, 2000 ..................................      6,902,529            6.13
   December 31, 2001 ..................................      6,233,453           11.89
</TABLE>

     Significant option groups outstanding at December 31, 2001 and the related
weighted average exercise price and remaining contractual life information are
as follows (in US dollars):

<TABLE>
                                                      Outstanding                   Exercisable
                                               ----------------------------   -----------------------
                                                                                            Weighted         Weighted
                                                                Weighted                     Average       Average Life
                                                 Shares       Average Price     Shares        Price           (Years)
                                               ----------     -------------   ---------    ----------      ------------
<S>                                            <C>                <C>         <C>             <C>               <C>
Options with exercise price of:
   $25.................................           397,000         $25.00        158,800       25.00             7.5
   $13.4375-$20.15625..................         2,640,706          19.69      1,449,886       19.54             5.6
   $8.875-$13.3125.....................        12,728,479           9.18      4,082,367        9.52             7.4
   $5-$7.5.............................           542,400           5.46        542,400        5.46             0.2
                                               ----------                     ---------
Options outstanding at December
  31, 2001.............................        16,308,585                     6,233,453
                                               ==========                     =========
</TABLE>

     US FAS 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 FAS 123, ASE
Test has elected to continue using 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.

     ASE Test has computed for pro forma disclosure purposes the fair value of
each option grant, as defined by US FAS 123, using the Black-Scholes option
pricing model with the following assumptions:

<TABLE>
                                                                      1999              2000               2001
                                                                  -----------       -----------        ----------
<S>                                                               <C>               <C>                <C>
Risk free interest rate..............................              5.76-6.01%        6.61-6.75%        3.62-4.66%
Expected dividend yield..............................                      0%                0%                0%
Expected lives.......................................             3.4-5 years       3.4-5 years         3.4 years
Volatility...........................................                  55.53%            55.53%            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
ASE Test recorded compensation costs based on the estimated grant date fair
value, as defined by US FAS 123, ASE's net income (loss) under US GAAP would
have been reduced to the pro forma amounts below.

<TABLE>
                                                                              Years Ended December 31
                                                           -------------------------------------------------------------
                                                               1999            2000                    2001
                                                           ------------    ------------    -----------------------------
                                                                NT$             NT$             NT$              US$
<S>                                                           <C>             <C>            <C>                <C>
Net income (loss) based on US GAAP ....................       4,641,301       3,929,996      (4,046,603)        (115,617)
Pro forma net income (loss) ...........................       4,479,803       3,682,196      (4,351,688)        (124,334)
Basic EPS           As reported........................            1.61            1.34           (1.32)           (0.04)
                                                           ============    ============    ============     ============
                    Pro forma..........................            1.56            1.25           (1.42)           (0.04)
                                                           ============    ============    ============     ============
Diluted EPS         As reported........................            1.58            1.29           (1.32)           (0.04)
                                                           ============    ============    ============     ============
                    Pro forma..........................            1.53            1.21           (1.42)           (0.04)
                                                           ============    ============    ============     ============
Basic EPS per ADS   As reported .......................            8.07            6.69           (6.59)           (0.19)
                                                           ============    ============    ============     ============
                    Pro forma..........................            7.79            6.27           (7.08)           (0.20)
                                                           ============    ============    ============     ============
Diluted EPS per ADS As reported........................            7.91            6.47           (6.59)           (0.19)
                                                           ============    ============    ============     ============
                    Pro forma..........................            7.63            6.05           (7.08)           (0.20)
                                                           ============    ============    ============     ============
</TABLE>


     The pro forma amounts reflect compensation expense related to 1996, 1997,
1998, 1999 and 2000 option plans granted and vested only. In future years, the
annual compensation expense will increase relative to the fair value of the
options granted and vested in those future years.

     e. According to US FAS 130, the statement of comprehensive income (loss)
for the years ended December 31, 2000 and 2001 are present below:

<TABLE>
                                                                               Years Ended December 31
                                                               ------------------------------------------------------
                                                                  1999           2000                 2001
                                                               ----------     ----------    -------------------------
                                                                   NT$            NT$           NT$            US$
<S>                                                             <C>            <C>          <C>               <C>
Net income (loss) based on US GAAP ........................     4,641,301      3,929,996    (4,046,603)      (115,617)
Translation adjustment on subsidiaries -- net
  of income tax benefit of NT$43,489 in 1999,
  income tax expense of NT$223,564 in 2000 and
  income tax expense of NT$187,282 in 2001 ................      (130,468)       670,691       561,846         16,053
                                                               ----------     ----------    ----------     ----------
Comprehensive income (loss) ...............................     4,510,833      4,600,687    (3,484,757)       (99,564)
                                                               ==========     ==========    ==========     ==========
</TABLE>

   f. Consolidation

     The 1999 net revenues, cost of revenues and operating expense of ISE Labs
before the date of acquisition in the amounts of NT$736,765, NT$475,250 and
NT$117,880, respectively, were consolidated in the 1999 consolidated financial
statements. The net revenues for the pre-acquisition period only represented 2%
of the ASE's consolidated net revenues in 1999 and such presentation has no
impact on the 1999 consolidated net income and shareholders' equity under US
GAAP. If the results of ISE Labs were consolidated from the date of
acquisition, the net revenues, gross profit and income from operation of 1999
consolidated statement of income will be NT$31,872,796, NT$8,388,480 and
NT$4,704,924, respectively.

   g. US GAAP cash flow information

     The following represents the major caption of cash flow under US GAAP
pursuant to US FAS 95:

<TABLE>
                                                                                Years Ended December 31
                                                               -----------------------------------------------------------
                                                                   1999            2000                   2001
                                                               -----------     -----------     ---------------------------
                                                                    NT$             NT$             NT$             US$
<S>                                                             <C>             <C>             <C>                <C>
Cash flows
   Net cash provided by operating activities ..............      6,988,434      17,466,420      10,723,952         306,399
   Net cash used in investing activities ..................    (14,953,647)    (33,550,389)    (14,211,788)       (406,051)
   Net cash provided by financing activities ..............     11,768,774      17,759,155         618,555          17,673
                                                               -----------     -----------     -----------     -----------
   Net increase (decrease) in cash ........................      3,803,561       1,675,186      (2,869,281)        (81,979)
   Cash, beginning of year ................................      8,173,901      11,809,112      14,166,495         404,757
   Effect of exchange rate changes in cash ................       (168,350)        682,197         473,515          13,529
                                                               -----------     -----------     -----------     -----------
                                                                11,809,112      14,166,495      11,770,729         336,307
                                                               ===========     ===========     ===========     ===========
</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)   proceeds from sales of treasury stock and purchases of treasury stock are
     shown in the financing activities under US GAAP (as opposed to investing
     activities under ROC GAAP).

                                     F-45
<PAGE>

   h. New accounting standards

     ASE is required by SEC Staff Accounting Bulletin No. 74, to disclose the
impact of recently issued accounting standards will have on its financial
statements when adopted in a future period, as well as make certain disclosure
about recently issued accounting standards.

     In June 2001, the US Financial Accounting Standards Board issued US FAS
141, "Accounting for business combinations", and US FAS 142, "Goodwill and
other intangible assets". ASE must adopt these standards on January 1, 2002,
which may affect accounting for business combinations consummated after June
30, 2001 and that for existing goodwill and other intangible assets of ASE upon
adoption. The standards require, among other provisions, companies to review
for possible impairment of goodwill existing at the date of adoption and
perform subsequent impairment tests on 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 FAS 141 and US FAS 142. Under
the new standards, ASE will no longer amortize goodwill while the other
intangible assets will continue to be amortized over its estimated useful
lives, which, if supportable, may be a period that exceeds the current maximum
period of 40 years. As of December 31, 2000 and 2001, ASE has unamortized
goodwill of approximately NT$7,652,686 and NT$6,900,661 (US$197,162),
respectively. Total amortization expenses of goodwill under ROC GAAP incurred
for the years ended December 31, 1999, 2000, and 2001 are NT$507,816,
NT$559,807 and NT$692,919 (US$19,798), respectively. ASE has not yet completed
its assessment of the impact these new standards may have on the accompanying
financial statements and cannot estimate whether related impact would be
material or not.

     In June 2001, the US Financial Accounting Standards Board issued US FAS
143, "Accounting for Asset Retirement Obligations". US FAS 143 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 FAS
143 will be adopted by ASE on January 1, 2003 and is not expected to have a
material impact on its consolidated financial information relating to US GAAP.

     In August 2001, the US Financial Accounting Standards Board issued US FAS
144, "Accounting for the Impairment or Disposal of Long-lived Assets", which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. US FAS 144 supersedes US FAS 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of",
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations for a disposal of a segment of a business". US FAS
144 is effective for years beginning after December 15, 2001, with earlier
application encouraged. The impact of adopting this accounting standard is not
expected to have a material effect on the ASE's consolidated financial position
and results of operations.

29.  Subsequent Event

     During April 2002, ASE's ownership percentage in ASE Test fell below 50%
and as of May 17, 2002 is 49.77%. ASE continues to consolidate ASE Test because
ASE effectively controls ASE Test. Mr. Richard Chang, the Vice Chairman of ASE
also serves as the Chairman of ASE Test. Mr. Chang has committed to vote his
shares of ASE Test as of April 30, 2002, which represented a 1.05% ownership
interest in ASE Test, in concert with ASE.

                                     F-46

<PAGE>


Item 19.  Exhibits.

1.    (a)   Memorandum and Articles of Association of the Registrant
            (incorporating all amendments as of July 11, 2000) (incorporated by
            reference to Exhibit 3.1 to the Company's registration statement on
            Form F-1 (file no. 333-44622) (the "Form F-1")).

2.    (a)   Amended and Restated Deposit Agreement 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-1).

      (b)   Form of Underwriting Agreement (incorporated by reference to
            Exhibit 1.1 to the Form F-1).

4.    (a)   Stock Purchase Agreement dated as of March 15, 1999 between ASE
            Test Limited and the Selling Shareholder relating to the purchase
            and sale of 12,250,000 shares of Common Stock of ISE Labs, Inc.
            (incorporated by reference to Exhibit 10.1 of 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)   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 the ASE Test
            1999 Registration Statement).

      (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 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).

<PAGE>


      (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).

      (t)   Exchange Agency Agreement between ASE Inc. and Citibank, N.A., as
            exchange agent (incorporated by reference to Exhibit 10.26 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 June 28, 2001 (the "2000
            20-F")).

      (v)   Service Agreement dated as of July 1, 2000 between ASE Electronics
            (M) Sdn. Bhd. and ASE (U.S.) Inc. (incorporated by reference to
            Exhibit 4(v) to the 2000 20-F).

      (w)   Service Agreement dated as of July 1, 2000 between ASE Test Inc.
            and ASE (U.S.) Inc. (incorporated by reference to Exhibit 4(w) to
            the 2000 20-F).

      (x)   Service Agreement dated as of July 1, 2000 between ASE (Korea) Inc.
            and ASE (U.S.) Inc. (incorporated by reference to Exhibit 4(x) to
            the 2000 20-F).

      (y)   Service Agreement dated as of July 1, 2001 between ASE (Chung-Li)
            Inc. and ASE (U.S.) Inc. (incorporated by reference to Exhibit 4(y)
            to the 2000 20-F).

      (z)   Service Agreement dated as of July 1, 2001 between Advanced
            Semiconductor Engineering, Inc. and ASE (U.S.) Inc. (incorporated
            by reference to Exhibit 4(z) to the 2000 20-F).

      (aa)  Commission Agreement dated as of July 1, 2000 between ASE
            Electronics (M) Sdn. Bhd. and Gardex International Limited.
            (incorporated by reference to Exhibit 4(aa) to the 2000 20-F).

      (bb)  Commission Agreement dated as of July 1, 2000 between ASE Test Inc.
            and Gardex International Limited. (incorporated by reference to
            Exhibit 4(bb) to the 2000 20-F).

      (cc)  Commission Agreement dated as of July 1, 2000 between ASE (Korea)
            Inc. and Gardex International Limited. (incorporated by reference
            to Exhibit 4(cc) to the 2000 20-F).

      (dd)  Commission Agreement dated as of July 1, 2000 between ASE (Chung
            Li) Inc. and Gardex International Limited. (incorporated by
            reference to Exhibit 4(dd) to the 2000 20-F).

      (ee)  Commission Agreement dated as of July 1, 2000 between Advanced
            Semiconductor Engineering, Inc. and Gardex International Limited.
            (incorporated by reference to Exhibit 4(ee) to the 2000 20-F).

      (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).

<PAGE>


      (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 Zone.
            (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).

      (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 Company's registration statement on Form
            F-3 filed on May 30, 2002 (the "Form F-3")).

      (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.

<PAGE>

      (yy)  Service Agreement dated as of August 1, 2001 between ASE
            Electronics (M) Sdn. Bhd. and ASE (U.S.) Inc. (incorporated by
            reference to Exhibit 10.21 to the Form F-3).

      (zz)  Service Agreement dated as of August 1, 2001 between ASE Test Inc.
            and ASE (U.S.) Inc. (incorporated by reference to Exhibit 10.22 to
            the Form F-3).

      (aaa) Service Agreement dated as of August 1, 2001 between ASE (Korea)
            Inc. and ASE U.S.) Inc. (incorporated by reference to Exhibit 10.23
            to the Form F-3).

      (bbb) Service Agreement dated as of August 1, 2001 between ASE (Chung-Li)
            Inc. and ASE (U.S.) Inc. (incorporated by reference to Exhibit
            10.24 to the Form F-3).

      (ccc) Service Agreement dated as of August 1, 2001 between Advanced
            Semiconductor Engineering, Inc. and ASE (U.S.) Inc. (incorporated
            by reference to Exhibit 10.25 to the Form F-3).

      (ddd) Commission Agreement dated as of August 1, 2001 between ASE
            Electronics (M) Sdn. Bhd. and Gardex International Limited.
            (incorporated by reference to Exhibit 10.26 to the Form F-3).

      (eee) Commission Agreement dated as of August 1, 2001 between ASE Test
            Inc. and Gardex International Limited. (incorporated by reference
            to Exhibit 10.27 to the Form F-3).

      (fff) Commission Agreement dated as of August 1, 2001 between ASE (Korea)
            Inc. and Gardex International Limited. (incorporated by reference
            to Exhibit 10.28 to the Form F-3).

      (ggg) Commission Agreement dated as of August 1, 2001 between ASE (Chung
            Li) Inc. and Gardex International Limited. (incorporated by
            reference to Exhibit 10.29 to the Form F-3).

      (hhh) Commission Agreement dated as of August 1, 2001 between Advanced
            Semiconductor Engineering, Inc. and Gardex International Limited.
            (incorporated by reference to Exhibit 10.30 to the Form F-3).

      (iii) ASE Inc. Employee Bonus Plan.

      8. List of Subsidiaries. (incorporated by reference to Exhibit 21.1 to
         the Form F-3).

      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.

<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      ADVANCED SEMICONDUCTOR ENGINEERING, INC.


                                      By: /s/ JOSEPH TUNG
                                          -----------------------
                                          Joseph Tung
                                          Chief Financial Officer
Date: June 28, 2002

<PAGE>

                                EXHIBITS INDEX


Exhibit
Number                        Description
------                        -----------

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

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

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


     4(iii) ASE Inc. Employee Bonus Plan.