. Fabricates semiconductors based on customers' own or third parties’
integrated circuit designs
. Developed leading edge integrated wafer manufacturing services, including
copper interconnects capabilities, within three years after founding in April 2000
. One of the leading semiconductor foundries in the world

Compound annual growth rate
> The worldwide sales compound annual growth rate of the semiconductor foundry industry
. Is projected to be 21.8% from 1998 to 2008
. Compared to 9.5% for the semiconductor industry as a whole for the same period
according to IC Insights, a leading semiconductor industry publication

> Fabless semiconductor companies, which have expanded geographic reach and worldwide sales
> Integrated device manufacturers, which have outsourced manufacturing requirements for complex
semiconductor devices to become more cost competitive

SMI believes it is well positioned to benefit from
. Fabless semiconductor company growth and
. Integrated device manufacturer outsourcing

> The China domestic market for electronic information products in China
. Grew from US$20.2 billion in 1999 to US$77.1 billion in 2002
. According to China’s Ministry of Information Industry
> SMI believes its position as a leading foundry in China
. Allows it to meet Chinese semiconductor sourcing demand
. And to meet electronic products for export demand

. SMI's Fab 1 facility in Shanghai was selected as one of the two "Top Fabs of 2003" by
Semiconductor International, a leading industry publication.
. Ranked second in a readers’ poll of top global foundries of 2003 conducted by Silicon Strategies,
another leading semiconductor industry publication.

. SMI believes it is the only semiconductor foundry to have reached capacity in excess of 40,000
8-inch wafers per month
. Had an aggregate capacity as of December 31, 2003 of 49,000 8-inch wafers per month for wafer
fabrication and 9,000 wafers per month for copper interconnects
. Operates an 8-inch wafer fabrication facilities in the Zhangjiang High-Tech Park in Shanghai,
China and, as a result of a recent (Motorola) acquisition, an 8-inch wafer fab in Tianjin, China.

. Currently constructing 12-inch wafer fabrication facilities in Beijing
. SMI believes it will be the first 12-inch fabrication facility in China.

Manufacturing
> Semiconductor fabrication services using 0.35 micron to 0.13 micron process technology for
. Logic technologies
(including standard logic, mixed-signal, radio frequency and high voltage circuits)
. Memory technologies
(including dynamic random access memory, static random access memory, flash, electronically
erasable programmable read-only memory and mask read-only memory)
. Specialty technologies
(including liquid crystal on silicon, complementary metal oxide silicon image sensor and
system-on-chip)
Services
> In addition to wafer fabrication, SMI service offerings include libraries and circuit design blocks,
design support, mask-making and wafer probing.
> Also works with partners to provide assembly and testing services.

. Rather than competing solely on price, SMI intends to compete on process technology,
performance, quality and service
. In more advanced technologies, the competition tends to be greater

SMI is currently the subject of a lawsuit in the United States brought by TSMC in December 2003
. Relating to alleged infringement of five U.S. patents and
. Misappropriation of alleged technical and operational trade secrets relating to methods for
conducting semiconductor fab operations and manufacturing integrated circuits.

> SMI financial statements are prepared in U.S. dollars
. SMI sales are denominated in U.S. dollars
. Operating expenses & capital expenditures are denominated in U.S. dollars, Japanese Yen, Euros
and Renminbi Yuan (conversion rate set by the People’s Bank of China)
> If the dollar falls against the other denominations, then costs increase in US$ terms
> If China were to devalue its currency relative to the US dollar
. Then sales expressed in US$ would decline and SMI products would become more expensive
(in terms of US$)
. The Chinese government remains under international pressure to allow the Renminbi rate to float

Very capital intensive, requires additional financing

SMI expects capital expenditures in 2004 and 2005 to total US$1,950 million and US$1,373 million
. For expansion of operations in Shanghai and Tianjin and
. To complete the construction, equipping and ramp-up of Fab 4, Fab 5 and Fab 6C in Beijing.
. Operating cash flows are insufficient to meet capital expenditure requirements.

> $1 billion to SMI
. US$403.0 million of the net proceeds for constructing and ramping up Beijing fabs
. US$600 million of the net proceeds for upgrading the technology and increasing the capacity at
Shanghai and Tianjin fabs.
> $679 mm to selling 55 shareholders, including Motorola* (will own 7.8% post IPO, down from
11.4% pre IPO), Singapore government (less than 1% pre IPO), General Motors (less than 1%
pre IPO) and 52 others
*SMI acquired a fabrication plan from Motorola in January 2004