Wave Issue 2001 1/10/00 Article 14-01

***S3 to Recognize One-Time $800 Million Pre-Tax Gain in First
Calendar Quarter
(January 5)

S3 Incorporated announced that it will recognize an $800 million
pre-tax gain ($500 million after-tax) in its Statement of
Operations for the first calendar quarter of 2000.

The gain represents the appreciation of S3's investment in United
Semiconductor Corporation (USC). The event that triggered this
gain is the now completed merger of USC into United
Microelectronics Corporation (UMC). As a result of this merger,
S3 now owns approximately 252 million shares of UMC. The gain,
which S3 is required to recognize as "Other Income" upon
completion of the merger, represents the difference between S3's
cost of its investments in USC and the most recent quoted market
price of UMC shares on the Taiwan Stock Exchange.

Due to regulatory restrictions, the majority of the company's UMC
shares may not be sold until July 2000. These regulatory
restrictions will gradually expire between July 2000 and January
2004. As the regulatory restrictions expire, and if the company
liquidates its UMC shares, it is likely that the amount of any
future realized gain will be different than the accounting gain
reported in the first calendar quarter.

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