October 6, 2006 – ASM International NV directors say they have decided to keep the company intact with both its frontend and backend business, and will concentrate on restoring its frontend business to profitability, negating a proposal from shareholders earlier this year calling for a split of the company’s frontend and backend operations.

“Presently, any material change in the company’s business model could be seriously detrimental to achieving the company’s aims of restoring the profitability of its frontend operations,” the company said, in a statement. Further review of the existing business model “is not in the interest of the company or of its shareholders,” but will be revisited once the frontend operations consistently turn a profit.

ASMI also has approved the appointment of former Alcatel COO/CTO Heinrich Kreutzer to its supervisory board and audit committee, following a recommendation at the company’s May general meeting. Also, Lee Wai Kwong, GM of ASM PT’s southern region, has been proposed to join the management board to oversee the company’s backend activities, following the retirement of Patrick Lam.

At its annual meeting of shareholders in May, ASMI presented the “roadmap” for its corporate strategy going forward, proclaiming it will achieve profitability in its frontend equipment business in 2007, reversing a 37 million euro loss in 2005, with strategies including moving operations to Asia, reducing R&D expenses, and tightening working capital requirements and financial controls. The company noted that its frontend gross margins have lagged below peers in recent years, although sales, R&D, and costs had been in line with industry averages. The company stated it believes operational synergy between its frontend and backend businesses “is just beginning to be realized,” tied in part to the IC industry’s migration to Asia, home to ASMI’s frontend manufacturing operation in Singapore, ASM Pacific Technology.

Investment firm Mellon HBV Alternative Strategies, a 6% owner of ASM International NV, had publicly criticized ASMI’s business strategy and called for changes, including a reduced stake in ASM PT, R&D cutbacks, and possibly an outright sale the frontend business. The group also opposed the board appointment of Chuck Del Prado, son of CEO Arthur Del Prado, as well as proposed board members Berend Brix and Van Amerongen, but all appointments were approved at the shareholder meeting.

ASMI had already taken steps to get its core frontend business areas back on track to profitability. In February of this year, the company said it would scale back its NuTool copper plating, planarization, and electrochemical mechanical deposition processes business to “a small operation” to focus on process and IP licensing to focus on licensing the technology. The early-stage technology business was purchased in March 2004 for roughly $43 million, in hopes it would accelerate development and commercialization of advanced back-end-of-line copper/low-k interconnect technologies.

The company also is consolidating the wafer-handling platforms used in its transistor capacitor product group, including atomic layer deposition (ALD) and plasma-enhanced atomic layer deposition (PEALD) acquired from South Korea’s Genitech in April 2004. The restructuring costs were projected to exceed 50 million euros, roughly four times the company’s 12 million euros in revenues over the past three quarters.