Alliance Semiconductor Announces Agreement to Sell Shares of United Semiconductor Corporation.

SAN JOSE, Calif.--(BUSINESS WIRE)--March 20, 1998--

SPECIAL ADVISORY: Except for historical information contained herein, the following material constitutes forward looking statements; actual results could differ materially from those projected in the forward looking statements, as set forth in the last paragraphs of this communication.

Alliance Semiconductor Corporation (NASDAQ:ALSC) today announced that it has agreed to sell 35 million shares of United Semiconductor Corporation ("USC") -- approximately 18 percent of the almost 190 million shares owned by Alliance -- for the sum of 1.05 billion New Taiwan Dollars (approximately US$32.8 million based on the exchange rates prevailing March 4, 1998).

In addition, Alliance has the potential to receive up to an additional 665 million New Taiwan Dollars if a "Liquidity Event," such as an initial public offering of USC, occurs at any time in the future. Alliance paid approximately 383 million New Taiwan Dollars for the shares to be sold.

USC is a joint venture between Alliance, United Microelectronics Corporation ("UMC") and S3 Incorporated, in which Alliance invested approximately 1.9 billion New Taiwan Dollars for an equity interest of approximately 19 percent. USC operates a semiconductor manufacturing facility in Hsin-Chu, Taiwan, R.O.C.

Through the agreement to sell 35 million shares of USC, Alliance will maintain an approximately 15.5 percent equity ownership position of USC, and maintain the right to purchase up to 25 percent of the manufacturing capacity of the facility.

"USC has been a phenomenal success," said N.D. Reddy, Alliance's Chairman, President and CEO. "With this sale, Alliance will receive a substantial return on its investment of the shares to be sold, and retain ownership of more than 80 percent of its original investment. At the same time, Alliance will maintain its right to purchase 25 percent of the manufacturing capacity at this leading-edge foundry. Alliance looks forward to continued achievements by the team at USC."

"The USC venture is an investment and manufacturing model for the industry to follow," said Don Brooks, chief executive officer of UMC Group International Operations. "It was the complementary contributions of Alliance, UMC and S3 that permitted USC to become so successful in such a short period of time.

"With the continued backing of these leading companies, we are confident that USC will continue to achieve success and deliver leading-edge manufacturing technology at required capacity levels."

Terms of the Agreement

Under the terms of the agreement, Alliance will sell 35 million shares (the "Shares") of stock of USC, for a purchase price of 1.05 billion New Taiwan Dollars. If at any time a "Liquidity Event" occurs, Alliance will be entitled to receive, in addition to the initial payment of 1.05 billion New Taiwan Dollars, a contingent payment of up to 19 New Taiwan Dollars per Share, or up to an additional 665 million New Taiwan Dollars.

Upon occurrence of a Liquidity Event, Alliance may elect to receive its contingent payment with respect to all or a portion of the Shares; provided that Alliance may only receive one contingent payment with respect to each Share; and provided further that Alliance may not request to receive a contingent payment with respect to fewer than five million Shares.

Subject to the foregoing, Alliance may request contingent payments with respect to different portions of Shares in connection with different Liquidity Events. A "Liquidity Event" is defined as an event by which UMC, or its successor(s) with respect to USC shares, will have the opportunity to receive value from transfer of its ownership of shares of stock in USC in an arm-length transaction other than by way of transfer to employees for incentives, whether or not UMC or its successor(s) in fact participates in such opportunity.

A Liquidity Event will include, for example, completion of a public offering of USC securities on a recognized securities exchange; a sale of USC stock owned by UMC or by a UMC successor in an arms-length transaction; or a sale of all or substantially all of the assets of USC.

Risk Factors

All statements in this press release reflecting Alliance's anticipation of receiving funds are forward-looking; the risk factors set forth below could cause actual results to differ materially from those in the forward-looking statements.

The parties must obtain approval from Taiwan government authorities (including the Hsin-Chu Science-Based Industrial Park authorities and the Taiwan Securities and Futures Commission) in order for funds to be transferred to Alliance pursuant to the Agreement.

Alliance does not currently anticipate any difficulty in obtaining such approval, but there can be no assurance that such approval will not be delayed or withheld, either with respect to the initial payment or with respect to any contingent payment.

Additionally, there is a risk that the party or parties obliged to make payment (initial or contingent) to Alliance may, due to reasons of credit or otherwise, be unwilling or unable to make payment to Alliance when due (assuming that requisite government approval for such payments is obtained). Moreover, payments to be made to Alliance pursuant to the Agreement will be calculated in New Taiwan Dollars.

The exchange rate of the New Taiwan Dollar to the U.S. dollar is subject to material change, particularly in light of the uncertainties caused by the current financial and economic conditions in Asia; there can be no assurance that on the date or dates Alliance receives payments pursuant to the Agreement (assuming that requisite government approval for such payments is obtained and the obligor(s) makes such payments), the New Taiwan Dollar will not have materially deteriorated in value against the U.S. dollar as compared to the rate prevailing on March 4, 1998 (approximately 32 New Taiwan Dollars to one U.S. dollar).

The forward-looking statements in this press release speak only as of the date hereof. Alliance expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Alliance's expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statement is based, in whole or in part.

Company Information

Alliance Semiconductor Corporation is a leading worldwide supplier of high performance memory and memory intensive logic products. Alliance's product lines include Static Random Access Memory (SRAM), Dynamic Random Access Memory (DRAM), Flash memory, multimedia graphics accelerators and embedded technologies. Alliance designs, develops and markets its products to the desktop and portable computing, networking, telecommunications and instrumentation markets.

Alliance manufactures many of its products using advanced 0.3 and 0.4 micron CMOS technology through a combination of joint venture and independent manufacturing facilities, with many of its leading edge products being developed using advanced 0.25 micron CMOS technology. Alliance was founded in 1985 with headquarters in San Jose, California.

Additional Company information can be found on our home page: http://www.alsc.com.

CONTACT: Alliance Semiconductor

Janine Zanelli, 408/383-4900

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