Will rename the new UMC Group Foundry Nippon Foundry Inc. (NFI)

The UMC Group (head office: Hsinchu, Taiwan, Chairman: Robert H.C. Tsao) a dedicated wafer foundry group led by United Microelectronics Corporation, and Nippon Steel Corporation ("NSC") announced today that NSC will transfer its 56% interest in Nippon Steel Semiconductor Corporation ("NPNX") to UMC Group. UMC Group will take control of NPNX and rename it Nippon Foundry Inc. The delivery of share certificates is scheduled to for completion by December 98, as soon as the takeover bid procedures under the Securities and Exchange Law are completed. Subsequently, the name of NPNX will be changed to better reflect its position as a member of the UMC Group.

UMC Group, the world's second largest independent foundry manufacturer, has been studying the business opportunities in the global foundry marketplace for some time, paying special attention to the growing fabless design industry in Japan. Aware of this interest, NSC approached the UMC Group with a proposal to more fully develop the business potential of NPNX, improving its competitiveness and technology. After evaluating the various considerations, the UMC Group concluded that this investment in NPNX and the infusion of UMC technology and foundry management know-how, will enable UMC Group and NPNX to capture an early lead in the foundry market potential in Japan.

NSC, in an effort to reconstruct NPNX whose business performance has been deteriorating for the past three years under the impact of the world-wide semiconductor recession, has been sending in managers and providing guarantees for loans. Moreover, since the NPNX decision of the end of last year to shift away from DRAM specialization into foundry business, NSC has continued to support NPNX in all aspects of its business including marketing. However, in the subsequent circumstances compounded by further declines of DRAM prices and structural changes in the semiconductor markets worldwide, NSC has now decided that an attempt to reconstruct NPNX by offering the mandate for the management of NPNX to UMC Group should be the best conceivable way.

Following completion of the transaction, the UMC Group will infuse its technologies and management know-how into NPNX. In the coming months, UMC Group plans to equip-the NPNX facilities with 0.25 um capabilities so that NPNX can operate in Tateyama as a more competitive, stronger dedicated foundry, the newest member of the UMC Group.

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