LETTER TO SHAREHOLDERS

Dear ShareholdersˇG

In the first half of 2003, the semiconductor industry continued to experience a pattern of decline as seen in the previous years. Market prices for Flash products continued to decline due to an oversupply condition for the majority of the year, until the 2nd half of 2003, we saw the semiconductor industry experienced a more healthy recovery. Macronix, however, continued to rise to the challenges of this difficult market place by actively focusing on allocation of resources to critical areas within the company. As a result of the employees' strong efforts, we were able to effectively control our operating costs thereby reducing our operating losses and gross profit was returning to profitability in the fourth quarter of 2003. Macronix successfully met its financial projections for 2003 by realizing net revenue of $17.39 billion (NT). Despite experiencing a before-tax loss of $8.198 billion (NT), net cash flow for 2003 stood at $3.097 billion (NT).

Macronix has consistently continued to focus our resources on research, technology development and manufacturing efficiency of our Flash memory products. In 2003, we worked even harder to improve our production cost infrastructure and enhance our production capabilities via technological advances and overall expansion of capacity. When comparing with figures from 2002, Flash product revenue increased 33% with unit shipments increasing 59% in 2003. Additional increases in gross profits were realized when we launched our N-Bit (multi-level cell) technology for our Flash product line. As an example, our production costs for the 8M bit N-bit flash device have been reduced by approximately 44%. We are also happy to report that revenues from our other non-volatile product line, Mask ROM, were responsible for 43% of our total revenue for 2003. Macronix continues to be the leader in Mask ROM business worldwide, holding the number 1 position for the 5th year in a row. With the continual support of world-class customers and ongoing technological improvement of our products, the Mask ROM product line is a consistent source of profit for Macronix.

As a company, we are continuing our focus on research and development of our Flash and Mask ROM product lines. Macronix has begun mass production of 16Mb and 32Mb NOR Flash on our advanced 0.15µm technology. We are also in process of developing 0.13µm 128Mb Flash as well as migrating our 128Mb N-Bit (2 bit/cell) product down to 0.15µm geometry. Last October, Macronix and Renesas Technology of Japan entered into an agreement to jointly develop advanced 0.13µm DINOR Flash technology. In the near future, Macronix will begin to tap into the exciting potential of the N-Bit's technology and develop products that are below 0.13µm geometry extending down to 90nm. We are also intending to expand into the arena of Data Flash with our proprietary PHINES technology. The fact that the has hailed this as the key breakthrough in Flash Memory technology is simply the latest proof that our research and development capabilities are acknowledged throughout the industry and around the world.

Macronix continues to push the density envelope with our Mask ROM product line. Our high-performance 512Mb (90ns) Mask ROM device has already moved into the pilot-run stage. This year, we intend to greatly expand our application base and dovetail into our N-Bit technology in order to accelerate our program information coding. As our clients' needs change, Macronix continues to strive and offer new solutions. Our objective is to deliver solutions that will give our clients' shorter delivery times and a diverse portfolio of memory products. We look forward to becoming one of the world's foremost suppliers of non-volatile memory products and technology.

According to a well-regarded market research firm, Web-Feet Research, the gradually recovering economy and a steady rise in demand for handheld digital consumer products in the coming year, should result in a 20% plus rate of growth for the NOR Flash market. Based on the current industry forecast, Macronix anticipates that our Fab utilization rates will continue to remain high. Our near-term goal is to reach annual production output of 620,000 8" equivalent wafers. Moreover, we plan to make additional investments into our Fab 2 and Fab 3 facilities to expand Flash memory production. In 2004, we anticipate that revenue from Flash products, as a proportion of total revenue, will rise by an estimated 48%. The unit shipments are also projected to increase by 57% over 2003 unit shipments. The Mask ROM unit shipments are also on pace to exceed 2003 shipments by an estimated 34%.

During this year, Macronix will continue to focus its' efforts on maximizing our internal resources for development of "core" projects. We will strive to optimize production capacity, inventory control and align our business systems to meet the demands generated by market conditions. We aim to offer our customers an even wider array of product choices in order to expand our customer base.

In conclusion, the year ahead provides ample ground for optimism. We sincerely thank each of you, our shareholders, for your sustained faith and support. We are also grateful to our employees for their diligent efforts throughout. We have full confidence that the future prospects for Macronix are bright indeed.

We wish you health, success and all the best in the coming year.

Chairman President