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STATS ChipPAC Reports Second Quarter 2014 Results

SINGAPORE -- 08 AUGUST 2014, UNITED STATES -- (Marketwired) -- 08/08/14 -- STATS ChipPAC Ltd. ("STATS ChipPAC" or the "Company") (SGX-ST: STATSChP) (SGX: S24), a leading provider of advanced semiconductor packaging and test services, today announced results for the second quarter 2014.

Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "Revenue for the second quarter of 2014 increased by 12.2% to $409.9 million from prior quarter and increased by 3.4% from the second quarter of 2013, at the high end of our guidance. We saw strength in the mobile communications segment, driven by multiple important production ramp for the emerging market wireless chipsets and next-generation LTE processors. In addition, we saw general seasonal market rebound in the computing and consumer segments."

Operating margin for the second quarter of 2014 improved to 3.4% of revenue, compared to 0.7% in the prior quarter and 0.9% in second quarter of 2013. Net loss for the second quarter of 2014 was $4.2 million compared to net loss of $15.8 million in the prior quarter and $52.2 million in second quarter of 2013, which included plant closure costs of $36.5 million. Adjusted EBITDA(1) in the second quarter of 2014 was $88.1 million or 21.5% of revenue, compared to $78.4 million or 21.4% of revenue in the prior quarter and $92.5 million and 23.3% in the second quarter of 2013.

Dennis Chia, Chief Financial Officer of STATS ChipPAC, said, "Gross margin for the second quarter of 2014 was higher at 12.2% compared to 10.0% in the prior quarter as we improved revenue sequentially. Gross margin this quarter included higher production ramp-up cost associated with our expansion for several key advanced packaging programs. This quarter, we expanded our advanced flip chip, wafer level and turnkey test capacity to support expected higher demand from our customers in the mobile communications segment. Excluding the new factory construction in Korea, capital expenditure for the second quarter of 2014 was $153.0 million or 37.3% of revenue. Overall capital spending in the second quarter of 2014 was $195.3 million or 47.7% of revenue compared to $113.6 million or 31.1% of revenue in the first quarter of 2014. Cash, cash equivalents and bank deposits were $185.3 million compared to $176.9 million and debt was $1,064.6 million compared to $1,011.9 million at the end of second quarter of 2014 and first quarter of 2014, respectively."

Tan Lay Koon commented, "Based on current visibility, we expect third quarter 2014 revenues to increase 2% to 8% compared to the prior quarter, with adjusted EBITDA(1) in the range of 20% to 25% of revenue. We expect capital expenditure(2) in the third quarter of 2014 to be approximately $175 million to $205 million, including approximately $75 million to $95 million for progressive construction of the new factory in Korea."

The outlook for the third quarter of 2014 is subject to a number of risks and uncertainties that could cause actual events or results to differ materially from those disclosed in the outlook statements. These statements are based on our management's beliefs and assumptions, which involve judgments about future trends, events and conditions, all of which are subject to change and many of which are beyond our control. Please refer to our Financial Statements for the three and six months ended 29 June 2014 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the third quarter of 2014. Investors should consider these assumptions and make their own assessment of the future performance of STATS ChipPAC and note that there may not be a direct correlation between the net income of the Company with adjusted EBITDA(1) as a percentage of revenue.

Investor Conference Call / Live Audio Webcast Details
A conference call has been scheduled for 8:00 a.m. in Singapore on Tuesday, 12 August 2014. During the call, time will be set-aside for analysts and investors to ask questions of executive officers.

The call may be accessed by dialing +65-6823-2299. A live audio webcast of the conference call will be available on STATS ChipPAC's website at www.statschippac.com. A replay of the call will be available 2 hours after the live call through 27 August 2014 at www.statschippac.com and by telephone at 800-616-2127. The conference ID number to access the conference call and replay is 1797158.

Forward-looking Statements
Certain statements in this release are forward-looking statements, including our outlook for the third quarter of 2014, that involve a number of risks and uncertainties that could cause actual results to differ materially from those described in this release. Factors that could cause actual results to differ include, but are not limited to, general business and economic conditions and the state of the semiconductor industry; prevailing market conditions; demand for end-use applications products such as communications equipment, consumer and multi-applications and personal computers; decisions by customers to discontinue outsourcing of test and packaging services; level of competition; our reliance on a small group of principal customers; our continued success in technological innovations; pricing pressures, including declines in average selling prices; intellectual property rights disputes and litigation; our ability to control operating expenses; our substantial level of indebtedness and access to credit markets; potential impairment charges; availability of financing; changes in our product mix; our capacity utilisation; delays in acquiring or installing new equipment; limitations imposed by our financing arrangements which may limit our ability to maintain and grow our business; returns from research and development investments; changes in customer order patterns; customer credit risks; disruption of our operations; shortages in supply of key components and disruption in supply chain; inability to consolidate our Malaysia operations into our China operations and uncertainty as to whether such plan will achieve the expected objectives and results; loss of key management or other personnel; defects or malfunctions in our testing equipment or packages; rescheduling or cancelling of customer orders; adverse tax and other financial consequences if the taxing authorities do not agree with our interpretation of the applicable tax laws; classification of our Company as a passive foreign investment company; our ability to develop and protect our intellectual property; changes in environmental laws and regulations; exchange rate fluctuations; regulatory approvals for further investments in our subsidiaries; majority ownership by Temasek Holdings (Private) Limited ("Temasek") that may result in conflicting interests with Temasek and our affiliates; unsuccessful acquisitions and investments in other companies and businesses; labour union problems in South Korea; uncertainties of conducting business in China and changes in laws, currency policy and political instability in other countries in Asia; natural calamities and disasters, including outbreaks of epidemics and communicable diseases; the continued trading and listing of our ordinary shares on the Singapore Exchange Securities Trading Limited ("SGX-ST"). You should not unduly rely on such statements. We do not intend, and do not assume any obligation, to update any forward-looking statements to reflect subsequent events or circumstances.

Basis of Preparation of Results

The financial statements included in this release have been prepared in accordance with the Singapore Financial Reporting Standards ("FRS").

Our 52-53 week fiscal year ends on the Sunday nearest and prior to 31 December. Our fiscal quarters end on a Sunday and our 13-week second quarter of 2014 ended on 29 June 2014, while our 13-week second quarter of 2013, 13-week fourth quarter of 2013 and 13-week first quarter of 2014 ended on 30 June 2013, 29 December 2013 and 30 March 2014, respectively. References to "$" are to the lawful currency of the United States of America.

About STATS ChipPAC Ltd.
STATS ChipPAC Ltd. (SGX-ST Code: S24) is a leading service provider of semiconductor packaging design, assembly, test and distribution solutions in diverse end market applications including communications, digital consumer and computing. With global headquarters in Singapore, STATS ChipPAC has design, research and development, manufacturing or customer support offices throughout Asia, the United States and Europe. STATS ChipPAC is listed on the SGX-ST. Further information is available at www.statschippac.com. Information contained in this website does not constitute a part of this release.

(1) Adjusted EBITDA is not required by, or presented in accordance with, Singapore Financial Reporting Standards ("FRS"). We define adjusted EBITDA as net income attributable to STATS ChipPAC Ltd. plus income tax expense, interest expense, net, depreciation and amortisation, restructuring charges, share-based compensation, goodwill and equipment impairment, tender offer, debt exchange or debt redemption expenses and write-off of debt issuance costs. Adjusted EBITDA excludes the plant closure costs related to our Malaysia plant and our restructuring actions. We present adjusted EBITDA as a supplemental measure of our performance. Management believes the non-FRS financial measure is useful to investors in enabling them to perform additional analysis.

(2) Capital expenditure refers to acquisitions of production equipment, asset upgrades and infrastructure investments.

                            STATS ChipPAC Ltd.
                       Consolidated Income Statement

                             Three Months Ended         Six Months Ended
                          ------------------------  -----------------------
                            29 June      30 June      29 June      30 June
                           2014 $'000   2013 $'000   2014 $'000  2013 $'000
                          -----------  -----------  -----------  ----------
Net revenues                  409,912      396,366      775,388     802,727
Cost of revenues             (359,862)    (339,455)    (688,818)   (683,382)
                          -----------  -----------  -----------  ----------
Gross profit                   50,050       56,911       86,570     119,345

Operating expenses:
  Selling, general and         25,128       24,268       49,250      47,560
  Research and                 10,751       12,700       20,683      25,075
  Exchange offer and                -       14,129            -      15,701
   redemption expenses
  Write-off of debt                 -        2,176            -       2,392
   issuance costs
                          -----------  -----------  -----------  ----------
    Operating expenses         35,879       53,273       69,933      90,728
                          -----------  -----------  -----------  ----------

Equipment impairment                -            -        2,261           -
                          -----------  -----------  -----------  ----------
Total operating expenses       35,879       53,273       72,194      90,728
                          -----------  -----------  -----------  ----------
Operating income before        14,171        3,638       14,376      28,617
 exceptional item
  Plant closure costs               -      (36,530)           -     (36,530)
                          -----------  -----------  -----------  ----------
Operating income (loss)        14,171      (32,892)      14,376      (7,913)
 after exceptional item
                          -----------  -----------  -----------  ----------

Other income (expenses),
  Interest income                 388          353          950         680
  Interest expense            (12,676)     (13,536)     (25,051)    (28,794)
  Foreign currency               (347)          (8)        (557)       (324)
   exchange loss
  Other non-operating
   income, net                    152           53          161          45
                          -----------  -----------  -----------  ----------
    Total other expenses,     (12,483)     (13,138)     (24,497)    (28,393)
                          -----------  -----------  -----------  ----------

Income (loss) before            1,688      (46,030)     (10,121)    (36,306)
 income taxes
Income tax expense             (3,273)      (3,850)      (6,211)     (8,521)
                          -----------  -----------  -----------  ----------
Net loss                       (1,585)     (49,880)     (16,332)    (44,827)
Less: Net income
 attributable to the non-
 controlling interest          (2,597)      (2,368)      (3,657)     (3,892)
                          -----------  -----------  -----------  ----------
Net loss attributable to
 STATS ChipPAC Ltd.            (4,182)     (52,248)     (19,989)    (48,719)
                          ===========  ===========  ===========  ==========

Net loss per ordinary
 share attributable to
 STATS ChipPAC Ltd.:
  Basic                        $(0.00)      $(0.02)      $(0.01)     $(0.02)
  Diluted                      $(0.00)      $(0.02)      $(0.01)     $(0.02)

Ordinary shares (in
 thousands) used in per
 ordinary share
  Basic and Diluted         2,202,218    2,202,218    2,202,218   2,202,218

Key Ratios and
Gross Margin                     12.2%        14.4%        11.2%       14.9%
Operating Expenses as a %         8.8%        13.5%         9.0%       11.3%
 of Revenue
Operating Margin                  3.4%         0.9%         2.2%        3.6%

Depreciation &                 78,468       76,486      157,420     148,930
 Amortisation, including
 Amortisation of Debt
 Issuance Costs
Capital Expenditures          195,345      105,774      308,965     198,180

                             STATS ChipPAC Ltd.
                Consolidated Statement of Financial Position

                                                 29 June       29 December
                                                  2014            2013
                                                  $'000           $'000
                                             --------------  --------------
Current assets:
  Cash and cash equivalents                         126,892         129,136
  Short-term bank deposits                           57,978          42,042
  Accounts receivable, net                          235,945         238,441
  Other receivables                                  30,711          15,239
  Inventories                                        80,049          71,055
  Prepaid expenses and other current assets          22,364          18,970
                                             --------------  --------------
    Total current assets                            553,939         514,883
Non-current assets:
  Long-term bank deposits                               446          11,604
  Property, plant and equipment, net              1,586,897       1,431,247
  Intangible assets                                  34,799          35,117
  Goodwill                                          381,487         381,487
  Deferred tax assets                                   223             186
  Prepaid expenses and other non-current
   assets                                             3,010           3,146
                                             --------------  --------------
    Total non-current assets                      2,006,862       1,862,787
                                             --------------  --------------
Total assets                                      2,560,801       2,377,670
                                             ==============  ==============

Current liabilities:
  Accounts and other payables                       162,369         138,004
  Payables related to property, plant and
   equipment purchases                              172,121         141,998
  Accrued operating expenses                        129,824         124,640
  Income taxes payable                               11,838          18,207
  Short-term bank borrowings                        100,000          37,947
  Short-term amounts due to related parties             216             100
                                             --------------  --------------
    Total current liabilities                       576,368         460,896
Non-current liabilities:
  Long-term borrowings                              964,644         874,281
  Deferred tax liabilities                           50,253          47,476
  Other non-current liabilities                      21,751          24,228
                                             --------------  --------------
    Total non-current liabilities                 1,036,648         945,985
                                             --------------  --------------
  Total liabilities                               1,613,016       1,406,881
                                             --------------  --------------

  Share capital                                     873,666         873,666
  Retained earnings                                  31,489          51,478
  Other reserves                                     (8,881)         (7,712)
                                             --------------  --------------
    Equity attributable to equity holders of
     STATS ChipPAC Ltd.                             896,274         917,432
  Non-controlling interest                           51,511          53,357
                                             --------------  --------------
  Total equity                                      947,785         970,789
                                             --------------  --------------
  Total liabilities and equity                    2,560,801       2,377,670
                                             ==============  ==============

                             STATS ChipPAC Ltd.
                       Other Supplemental Information

                                         2Q 2014      1Q 2014      2Q 2013
Net Revenues by Product Line
Advanced Packaging ##                     49.2%        49.1%        45.6%
Wirebond Packaging                        30.0%        29.7%        32.0%
Test                                      20.8%        21.2%        22.4%
                                      ------------ ------------ ------------
                                         100.0%       100.0%       100.0%
                                      ============ ============ ============
Net Revenues by End User Market
Communications                            67.5%        67.2%        70.3%
Personal Computers                        8.5%         8.6%         8.5%
Consumer, Multi-applications and          24.0%        24.2%        21.2%
                                      ------------ ------------ ------------
                                         100.0%       100.0%       100.0%
                                      ============ ============ ============
Net Revenues by Region
United States of America                  63.0%        65.1%        68.8%
Asia                                      28.8%        24.6%        19.6%
Europe                                    8.2%         10.3%        11.6%
                                      ------------ ------------ ------------
                                         100.0%       100.0%       100.0%
                                      ============ ============ ============

Number of Testers                          943          948          992
Number of Wirebonders                     4,164        4,118        4,012

## Advanced Packaging includes flip-chip and wafer level packaging.

Investor Relations Contact:
Tham Kah Locke
Vice President of Corporate Finance
Tel: (65) 6824 7788
Fax: (65) 6720 7826
email: Email Contact

Media Contact:
Lisa Lavin
Deputy Director of Marketing Communications
Tel: (208) 867-9859
email: Email Contact

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