UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2003.

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ___________________ to ___________________ .

Commission file number 000-31173

ChipPAC, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	77-0463048
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

47400 Kato Road, Fremont, California 94538

(Address of Principal Executive Offices, Zip Code)

Registrant’s Telephone Number, Including Area Code (510) 979-8000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding as of May 5, 2003
Class A common stock, $.01 par value	95,067,337
Class B common stock, $.01 par value	None

TABLE OF CONTENTS

			Page
PART I    FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Unaudited Condensed Consolidated Balance Sheets	3
		Unaudited Condensed Consolidated Statements of Operations	4
		Unaudited Condensed Consolidated Statements of Cash Flows	5
		Notes to Unaudited Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
	Item 4.	Controls and Procedures	21
PART II    OTHER INFORMATION
	Item 1.	Legal Proceedings	22
	Item 2.	Changes in Securities and Use of Proceeds	22
	Item 3.	Defaults Upon Senior Securities	22
	Item 4.	Submission of Matters to a Vote of Security Holders	22
	Item 5.	Other Information	22
	Item 6.	Exhibits and Reports on Form 8-K	22
	Signatures		26
	Certifications		27

2

ChipPAC, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

	March 31, 2003			December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents	$	16,679		$	34,173
Short-term investments		10,000			10,000
Accounts receivable, less allowances for doubtful accounts of $403 and $391		40,107			38,793
Inventories		15,388			15,299
Prepaid expenses and other current assets		6,105			5,285
Total current assets		88,279			103,550
Property, plant and equipment, net		333,443			336,397
Other assets		31,490			30,257
Total assets	$	453,212		$	470,204
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	40,151		$	39,755
Accrued expenses and other current liabilities		18,884			29,400
Total current liabilities		59,035			69,155
Long-term debt		217,887			217,887
Convertible subordinated notes		50,000			50,000
Other long-term liabilities		18,286			17,618
Total liabilities		345,208			354,660
Stockholders’ equity :
Common stock, Class A—par value $0.01 per share; 250,000 shares authorized, 94,984 and 94,093 shares issued and outstanding at March 31, 2003 and December 31, 2002		950			941
Common stock, Class B—par value $0.01 per share; 250,000 shares authorized, no shares issued or outstanding at March 31, 2003 and December 31, 2002		—			—
Additional paid in capital		278,939			276,916
Receivables from stockholders		(388	)		(480	)
Accumulated other comprehensive income		9,169			9,169
Accumulated deficit		(180,666	)		(171,002	)
Total stockholders’ equity		108,004			115,544
Total liabilities and stockholders’ equity	$	453,212		$	470,204

The accompanying notes are an integral part of these financial statements.

3

ChipPAC, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	For the Three Months Ended March 31,
	2003			2002
Revenue	$	88,568		$	79,213
Cost of revenue		78,527			69,658
Gross profit		10,041			9,555
Operating expenses:
Selling, general and administrative		9,466			9,774
Research and development		2,854			2,336
Total operating expenses		12,320			12,110
Operating loss		(2,279	)		(2,555	)
Non-operating (income) expenses:
Interest expense		7,268			8,647
Interest income		(119	)		(70	)
Foreign currency (gains) losses		(222	)		78
Other income, net		(42	)		(165	)
Total non-operating expenses		6,885			8,490
Loss before income taxes		(9,164	)		(11,045	)
Provision for income taxes		500			500
Net loss	$	(9,664	)	$	(11,545	)
Net loss per share:
Basic	$	(0.10	)	$	(0.15	)
Diluted	$	(0.10	)	$	(0.15	)
Weighted average shares used in per share calculation:
Basic		94,398			76,794
Diluted		94,398			76,794

The accompanying notes are an integral part of these financial statements.

4

ChipPAC, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	For the Three Months Ended March 31,
	2003			2002
Cash flows from operating activities:
Net loss	$	(9,664	)	$	(11,545	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		16,029			13,389
Amortization of debt issuance cost		452			628
Foreign currency (gains) losses		(222	)		78
(Gain) loss on sale of equipment		(39	)		(30	)
Changes in assets and liabilities:
Accounts receivable		(1,314	)		976
Inventories		(89	)		(570	)
Prepaid expenses and other current assets		(820	)		(435	)
Other assets		(1,927	)		62
Accounts payable		396			(3,544	)
Accrued expenses and other current liabilities		(10,516	)		(4,763	)
Other long-term liabilities		369			756
Net cash used in operating activities		(7,345	)		(4,998	)
Cash flows from investing activities:
Purchase of short-term investments		(7,998	)		—
Proceeds from sale of short-term investments		7,998			—
Acquisition of intangible assets		(818	)		(1,832	)
Acquisition of property and equipment		(9,757	)		(7,773	)
Proceeds from sale of equipment		39			36
Malaysian acquisition, net of cash and cash equivalents acquired		(1,737	)		(1,592	)
Net cash used in investing activities		(12,273	)		(11,161	)
Cash flows from financing activities:
Proceeds from revolving loans and other line of credit		10,526			55,596
Repayment of revolving loans and other line of credit		(10,526	)		(50,000	)
Increase in debt issuance costs		—			(125	)
Repayment of long-term debt		—			(32,440	)
Repayment of notes from stockholders		92			294
Proceeds from common stock issuance		2,032			65,320
Repurchase of common stock		—			(13	)
Net cash provided by financing activities		2,124			38,632
Net increase (decrease) in cash		(17,494	)		22,473
Cash and cash equivalents at beginning of period		34,173			41,872
Cash and cash equivalents at end of period	$	16,679		$	64,345

The accompanying notes are an integral part of these financial statements.

5

ChipPAC, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended March 31, 2003

(Unaudited)

Note 1:    Interim Statements

In the opinion of management of ChipPAC, Inc. (“ChipPAC” or the “Company”), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial information included therein. This financial data should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2002 included in ChipPAC’s 2002 Annual Report on Form 10-K.

The results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for any other period or the fiscal year that ends on December 31, 2003. The interim period ended on March 30, 2003, the Sunday nearest March 31st.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be realized in the period in which it is incurred if a reasonable estimate of fair value can be made. Companies are required to adopt SFAS No. 143 for fiscal years beginning after June 15, 2002, but early adoption is encouraged. The adoption of SFAS No. 143 in the first quarter of 2003 did not have a material impact on its financial position and results of operations.

In May 2002, the FASB issued SFAS No. 145, “Rescission of SFAS Nos. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections.” Among other things, SFAS No. 145 rescinds various pronouncements regarding early extinguishment of debt and allows extraordinary accounting treatment for early extinguishment only when the provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” are met. SFAS No. 145 provisions regarding early extinguishment of debt are generally effective for fiscal years beginning after May 15, 2002. Upon adoption of SFAS No. 145 in the first quarter of 2003, the Company has to reclassify any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APB Opinion No. 30 for classification as an extraordinary item and show it within income from continuing operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Exit or Disposal Activities.” SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” The scope of SFAS No. 146 also includes costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002 and early application is encouraged. The Company adopted SFAS No. 146 during the first quarter of fiscal year 2003. The effect on adoption of SFAS No. 146 changes on a prospective basis the timing of when restructuring charges are recorded from a commitment date approach to when the liability is incurred.

In November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45, or FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 requires that a liability be recorded in the guarantor’s balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued, including a reconciliation of changes in the entity’s product warranty liabilities. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The Company adopted FIN 45 in the first quarter of 2003 and has met the disclosure requirements of FIN 45. The adoption of FIN 45 has no material impact on its financial statements.

6

In November 2002, the Emerging Issues Task Force, or EITF, reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company believes that the adoption of this standard will have no material impact on its financial statements.

In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the pro forma effect in interim financial statements. The transition and annual disclosure requirements of SFAS No. 148 are effective for fiscal years ended after December 15, 2002. The interim disclosure requirements are effective for interim periods beginning after December 15, 2002. The Company adopted SFAS No. 148 in the first quarter of 2003. The adoption of SFAS No. 148 has no material impact on its financial statements.

In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, or FIN 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The Company believes that the adoption of this standard will have no material impact on its financial statements.

Stock-Based Compensation

The Company has adopted the disclosure only provisions of SFAS No. 123. Accordingly, no compensation expense has been recognized for the Company’s stock option and purchase plan activity as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. If compensation expense had been determined based on the grant date fair value for awards during the three month period ended March 31, 2003, in accordance with the provisions of SFAS No. 123, the Company’s net loss and loss per share would have been adjusted to the pro forma amounts indicated below:

	For the Three Months Ended March 31,
	2003			2002
	(In thousands, except for per share amounts)
Net loss as reported	$	(9,664	)	$	(11,545	)
Add: Total stock-based employee compensation included in net loss, net of related tax effects		—			—
Deduct: Total stock-based employee compensation expense determined under fair value based method for awards, net of related tax effects		(1,044	)		(1,402	)
Pro forma net loss	$	(10,708	)	$	(12,947	)
Loss per share as reported:
Basic	$	(0.10	)	$	(0.15	)
Diluted	$	(0.10	)	$	(0.15	)
Pro forma loss per share:
Basic	$	(0.11	)	$	(0.17	)
Diluted	$	(0.11	)	$	(0.17	)

Basis of Presentation

The financial statements have been prepared on a consolidated basis. The condensed consolidated financial statements include the accounts of ChipPAC, Inc. and its majority controlled and owned subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation.

7

Note 2:    Selected Balance Sheet Accounts

The components of inventories were as follows (in thousands):

	March 31, 2003		December 31, 2002
Raw materials	$	12,375	$	11,198
Work in process		2,744		3,293
Finished goods		269		808
	$	15,388	$	15,299

Property, plant and equipment were comprised of the following (in thousands):

	March 31, 2003			December 31, 2002
Land use rights	$	12,509		$	12,368
Buildings and improvements		79,176			78,021
Equipment		528,230			518,093
		619,915			608,482
Less accumulated depreciation and amortization		(286,472	)		(272,085	)
	$	333,443		$	336,397

Other assets were comprised of the following (in thousands):

	March 31, 2003		December 31, 2002
Deposits	$	1,219	$	836
Long-term employee loans		813		802
Debt issuance costs, net of amortization of $6,396 and $5,944		9,679		10,132
Intangible assets, net of amortization of $18,401 and $17,087		17,058		17,300
Other		2,721		1,187
	$	31,490	$	30,257

Intangible assets balances as of March 31, 2003 are summarized as follows (in thousands):

	Gross Assets		Accumulated Amortization		Net Assets
Intellectual property	$	16,013	$	5,542	$	10,471
Software and software development		15,024		9,076		5,948
Licenses		4,422		3,783		639
	$	35,459	$	18,401	$	17,058

Amortization expense for intangible assets is summarized as follows (in thousands):

	Three Months Ended March 31,
		2003		2002
Intellectual property	$	562	$	513
Software and software development		616		622
Licenses		136		35
	$	1,314	$	1,170

Intangible assets are being amortized over estimated useful lives of three to seven years. Estimated future amortization expense is as follows (in thousands):

April 1, 2003 to December 31, 2003	$	3,891
2004		4,354
2005		4,397
2006		2,747
2007		1,409
Thereafter		260
Total	$	17,058

8

Accrued expenses and other liabilities were comprised of the following (in thousands):

	March 31, 2003		December 31, 2002
Payroll and related items	$	10,423	$	14,778
Interest payable		4,727		9,210
Other expenses		3,734		5,412
	$	18,884	$	29,400

In 2001, ChipPAC’s management approved restructuring plans to realign its organization and reduce operating costs. These actions were designed to better align ChipPAC’s workforce with the decrease in demand and to reduce selling, general, and administrative expenses. These plans were a combination of reductions in work force and employee furloughs. Restructuring and related charges of $6.3 million were expensed in the year 2001. During the quarter ended March 31, 2002, the Company utilized $0.3 million of the restructuring accrual for reduction in workforce and wrote off the executive officer loans against the related $1.5 million loan loss reserve. As of March 31, 2002, the Company cumulatively completed 568 of the planned 751 employee separations. As of December 31, 2002, the Company completed its initiatives contemplated under the restructuring plan and cumulatively completed 646 of the planned 751 employee separations. There were no further terminations or other restructuring activities in the three month period ended March 31, 2003. The details of the accrued restructuring costs as of December 31, 2002 were as follows (in thousands):

	Beginning Accrual		Expenditures			December 31, 2001		Expenditures			March 31, 2002		Adjustments			Expenditures			December 31, 2002
Employee separations	$	4,732	$	(3,100	)	$	1,632	$	(300	)	$	1,332	$	(1,283	)	$	(49	)	$	—
Loan loss reserve		1,500		—			1,500		(1,500	)		—		—			—			—
	$	6,232	$	(3,100	)	$	3,132	$	(1,800	)	$	1,332	$	(1,283	)	$	(49	)	$	—

Note 3:    Line of Credit and Other Bank Borrowings 

Line of Credit

The Company has a borrowing capacity of $50.0 million for working capital and general corporate purposes under the revolving credit line portion of the senior credit facility. The revolving credit line under the senior credit facility matures on July 31, 2005. During the three month period ended March 31, 2003, the Company borrowed $10.0 million against the revolving line of credit for general corporate purposes at the interest rate of 6.75% per annum. As of March 31, 2003, there was no outstanding balance on the revolving line of credit and the entire $50.0 million was available to the Company.

The Company has also established two separate lines of credit with Korean Exchange Bank and Cho Hung Bank, with credit limits of $10.2 million and $8.0 million, respectively. During the three month period ended March 31, 2003, no borrowings were made against either of these lines of credit. Both agreements are subject to an annual review by Korean Exchange Bank and Cho Hung Bank for the continued use of the credit line facility. The Company also has a line of credit available with Southern Bank Bhd. for $0.5 million. During the three month period ended March 31, 2003, the Company borrowed $0.5 million against this line of credit loan for general corporate purposes at the interest rate of 6.9% per annum. As of March 31, 2003, there was no outstanding balance on this credit line.

Other Bank Borrowings

The Company established a loan with Cho Hung Bank in 2002 providing for a loan of $16.7 million utilized for general corporate purposes. As of March 31, 2003, $16.7 million remained outstanding under the loan with an interest rate of 4.6%. The loan has a maturity date of April 22, 2004.

Note 4:    Common Stock Offerings

On January 30, 2002, the Company sold 10,000,000 shares of Class A common stock in an underwritten public offering for $6.00 per share. On February 14, 2002, the Company sold an additional 1,425,600 shares of Class A common stock in conjunction with the underwriter’s exercise of their over-allotment option for $6.00 per share. In connection with these sales, the Company received net proceeds of approximately $63.8 million, after deducting underwriting discounts, commissions and estimated offering expenses. Net proceeds of $62.4 million from this offering were used to pay down term loans and revolving loans. The remaining $1.3 million was used for general corporate purposes.

9

On May 30, 2002, the Company sold 12,000,000 shares of Class A common stock in an underwritten public offering for $8.75 per share. In connection with these sales, the Company received net proceeds of approximately $99.2 million, after deducting underwriting discounts, commissions and estimated offering expenses. Net proceeds of $50.0 million from this offering were used to pay down term loans and revolving loans. The remaining $49.2 million was used for general corporate purposes.

Sources and Use of Funds From Issuance of Common Stock

	January Offering			May Offering			Totals
Source of funds:
Gross proceeds from issuance of common stock	$	68,554		$	105,000		$	173,554
Less: related issuance costs		(4,768	)		(5,830	)		(10,598	)
Net proceeds from issuance of common stock	$	63,786		$	99,170		$	162,956
Use of funds:
Repayment of senior credit facilities	$	62,438		$	50,000		$	112,438
General corporate purposes		1,348			49,170			50,518
	$	63,786		$	99,170		$	162,956

Note 5:    Acquisition of Malaysian Business

On June 30, 2000, the Company consummated the acquisition of Intersil’s packaging and test operations located in Kuala Lumpur, Malaysia, along with related intellectual property for approximately $71.5 million in cash and preferred stock.

The terms of the acquisition of the Malaysian business require the Company to pay until June 30, 2003 additional contingent incentive payments to Intersil based on the achievement of milestones with respect to the transfer of the seller’s packaging business. The Company records these contingent payments as additional purchase price if and when they are earned. In the event that Intersil were to achieve all of the milestones, Intersil would receive an additional sum of approximately $17.9 million in the aggregate. For the three months period ended March 31, 2003, the Company paid $1.7 million relating to the achievement of milestones and cumulatively $16.2 million of contingent incentive payments have been paid since the acquisition. Additionally, in 2000, $2.4 million of other purchase price adjustments were recorded based on the difference between the final closing balance sheet and the estimated closing balance sheet of the Malaysian business. As of March 31, 2003, deferred tax of $5.0 million has been recorded on all of these adjustments. This resulted in a further increase in non-current assets. These payments increased the effective purchase price and were allocated to non-current assets.

There was no goodwill arising from the acquisition of the Malaysian business. The fair value of total assets and liabilities exceeded the purchase price by $56.2 million as of July 1, 2000. This amount, reduced by the additional contingent incentive payments made as of March 31, 2003, has been allocated in full to non-current assets as summarized below:

Non-current assets	Estimated Fair Value		Initial Excess of Fair Value of Acquired Net Assets Over Cost			Total Additional Purchase Price		Adjusted Fair Value
	(in millions)
Land and buildings	$	27.9	$	(11.1	)	$	4.4	$	21.2
Plant and equipment		93.9		(36.9	)		16.4		73.4
Intellectual property		20.9		(8.2	)		2.8		15.5
	$	142.7	$	(56.2	)	$	23.6	$	110.1

Note 6:    Earnings Per Share

SFAS No. 128 requires a reconciliation of the numerators and denominators of the basic and diluted per share computations. Basic earnings per share (“EPS”) is computed by dividing net income (loss) available to stockholders (numerator) by the weighted average number of shares of common stock outstanding (denominator) during the period. Diluted EPS is computed using the weighted average number of shares of common stock and all potentially dilutive shares of common stock outstanding during the period. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and the if-converted method is used for determining the number of shares assumed issued from the conversion of the convertible subordinated notes.

As of March 31, 2003, there were options outstanding to purchase 8.6 million shares of Class A common stock with a weighted average exercise price of $3.69, which could potentially dilute basic EPS in the future, but were not included in diluted

10

EPS as their effect would have been antidilutive. The Company also has outstanding the $50.0 million convertible subordinated notes which are convertible into approximately 5.0 million shares of Class A common stock at $9.96 per share but were not included in diluted EPS as their effect would also have been antidilutive. The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the periods presented below.

	Three Months Ended March 31, 2003							Three Months Ended March 31, 2002
	Net Loss			Shares	Per-Share Amount			Net Loss			Shares	Per-Share Amount
	(In thousands, except per share amounts)
Basic EPS:
Net loss per share	$	(9,664	)	94,398	$	(0.10	)	$	(11,545	)	76,794	$	(0.15	)
Diluted EPS:
Net loss per share	$	(9,664	)	94,398	$	(0.10	)	$	(11,545	)	76,794	$	(0.15	)

Note 7:    Contingent Liabilities

On June 30, 2000, the Company consummated the acquisition of Intersil’s packaging and test operations located in Kuala Lumpur, Malaysia, along with related intellectual property for approximately $71.5 million in cash and preferred stock.

The terms of the acquisition of the Malaysian business require the Company to pay until June 30, 2003 additional contingent incentive payments to Intersil based on the achievement of milestones with respect to the transfer of the seller’s packaging business, previously subcontracted by Intersil to third parties, to the Company. The Company records these contingent payments as additional purchase price if and when they are earned. In the event that Intersil were to achieve all of the milestones, Intersil would receive an additional sum of approximately $17.9 million in the aggregate. For the quarter ended March 31, 2003, the Company paid $1.7 million relating to the achievement of milestones and cumulatively $16.2 million of contingent incentive payments have been paid since the acquisition. These payments increased the effective purchase price and were allocated to non-current assets.

During the quarter ended June 30, 2002, an assessment of approximately 16.0 billion Korean Won (approximately $12.8 million U.S. Dollars at March 31, 2003) was made by the Korean National Tax Administration or NTA, relating to withholding tax not collected on the loan between the Company’s subsidiaries in Korea and Hungary. The prevailing tax treaty does not require withholding on the transactions in question. There were no further assessments made during the quarter ended March 31, 2003. The Company has appealed the assessment through the NTA’s Mutual Agreement Procedure and believes that the assessment will be overturned. As of March 31, 2003, no accrual has been made. On July 18, 2002, the Icheon tax office of the NTA approved a suspension of the proposed assessment until resolution of the disputed assessment. The NTA required a corporate guarantee of 120% of the assessment in exchange for the suspension. The Company has complied with the guarantee request on August 1, 2002. No further assessments have been made.

11

Note 9:    Supplemental Financial Statements of Guarantor/Non-Guarantor Entities

In connection with the recapitalization, in August 1999, ChipPAC International Company Limited, (“CP Int’l”), issued senior subordinated debt securities which are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis, by the parent company, ChipPAC, Inc. (“CPI”) and by ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Korea Company Limited (“CPK”), ChipPAC Malaysia Sdn. Bhd. (“CPM”), ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability Company (the “Guarantor Subsidiaries”). All Guarantor Subsidiaries are wholly owned direct or indirect subsidiaries of CPI. ChipPAC Shanghai Limited (“CPS”) did not provide guarantees (the “Non-Guarantor Subsidiary”). The following is consolidated financial information for CP Int’l, CPI, CPM, and CPK, CPS, ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability Company, segregated between the Guarantor and Non-Guarantor Subsidiaries.

12

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS

March 31, 2003

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	1,920		$	109		$	13,210		$	1,440		$	—		$	16,679
Short-term investments		10,000			—			—			—			—			10,000
Intercompany accounts receivable		97,782			59,762			19,244			15,589			(192,377	)		—
Accounts receivable, net		17			—			40,052			38			—			40,107
Inventories		—			—			11,926			3,462			—			15,388
Prepaid expenses and other current assets		1,222			38			3,968			877			—			6,105
Total current assets		110,941			59,909			88,400			21,406			(192,377	)		88,279
Property, plant and equipment, net		5,301			5,853			220,799			101,490			—			333,443
Intercompany loans receivable		—			238,500			—			—			(238,500	)		—
Investment in subsidiaries		44,203			—			57,261			—			(101,464	)		—
Other assets		3,813			7,027			20,113			537			—			31,490
Total assets	$	164,258		$	311,289		$	386,573		$	123,433		$	(532,341	)	$	453,212
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Intercompany accounts payable	$	990		$	35,426		$	135,924		$	20,037		$	(192,377	)	$	—
Accounts payable		1,689			89			29,822			8,551			—			40,151
Accrued expenses and other current liabilities		3,575			3,809			6,164			5,336			—			18,884
Total current liabilities		6,254			39,324			171,910			33,924			(192,377	)		59,035
Long-term debt, less current portion		—			201,187			16,700			—			—			217,887
Convertible subordinated notes		50,000			—			—			—			—			50,000
Intercompany loans payable		—			—			204,500			34,000			(238,500	)		—
Other long-term liabilities		—			—			18,286			—			—			18,286
Total liabilities		56,254			240,511			411,396			67,924			(430,877	)		345,208
Stockholders’ equity (deficit):
Common stock		950			—			—			—			—			950
Additional paid in capital		278,939			81,689			140,692			115,093			(337,474	)		278,939
Receivables from stockholders		(388	)		—			—			—			—			(388	)
Accumulated other comprehensive income		9,169			—			8,705			464			(9,169	)		9,169
Accumulated deficit		(180,666	)		(10,911	)		(174,220	)		(60,048	)		245,179			(180,666	)
Total stockholders’ equity (deficit)		108,004			70,778			(24,823	)		55,509			(101,464	)		108,004
Total liabilities and stockholders’ equity (deficit)	$	164,258		$	311,289		$	386,573		$	123,433		$	(532,341	)	$	453,212

13

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2003

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
Intercompany revenue	$	6,992		$	248		$	—		$	16,201		$	(23,441	)	$	—
Customer revenue		—			—			88,547			21			—			88,568
		6,992			248			88,547			16,222			(23,441	)		88,568
Cost of revenue		142			149			86,635			15,042			(23,441	)		78,527
Gross profit		6,850			99			1,912			1,180			—			10,041
Operating expenses:
Selling, general and administrative		5,612			79			2,896			879			—			9,466
Research and development		827			—			1,969			58			—			2,854
Total operating expenses		6,439			79			4,865			937			—			12,320
Operating income (loss)		411			20			(2,953	)		243			—			(2,279	)
Non-operating (income) expenses
Inter-company interest expense		—			—			4,058			808			(4,866	)		—
Interest expense		1,055			6,021			192			—			—			7,268
Interest income		(74	)		—			(44	)		(1	)		—			(119
Inter-company interest income		—			(4,866	)		—			—			4,866			—
(Income) loss from investment in subsidiaries		9,061			—			565			—			(9,626	)		—
Foreign currency (gains) loss		(1	)		—			(224	)		3			—			(222	)
Other (income) expenses, net		—			—			(40	)		(2	)		—			(42	)
Total non-operating (income) expense		10,041			1,155			4,507			808			(9,626	)		6,885
Loss before income taxes		(9,630	)		(1,135	)		(7,460	)		(565	)		9,626			(9,164	)
Provision for income taxes		34			124			342			—			—			500
Net loss	$	(9,664	)	$	(1,259	)	$	(7,802	)	$	(565	)	$	9,626		$	(9,664	)

14

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2003

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(9,664	)	$	(1,259	)	$	(7,802	)	$	(565	)	$	9,626		$	(9,664	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		265			149			11,852			3,763			—			16,029
Amortization of debt issuance cost		81			371			—			—			—			452
Foreign currency (gains) loss		(1	)		—			(224	)		3			—			(222	)
(Gain) loss on sale of equipment		—			—			(39	)		—			—			(39	)
Equity income from investment in subsidiaries		9,061			—			565			—			(9,626	)		—
Changes in assets and liabilities:
Intercompany accounts receivable		18,393			9,246			3,921			1,274			(32,834	)		—
Accounts receivable		—			—			(1,292	)		(22	)		—			(1,314	)
Inventories		—			—			169			(258	)		—			(89	)
Prepaid expenses and other current assets		(254	)		(38	)		(1,116	)		588			—			(820	)
Other assets		(324	)		—			(1,604	)		1			—			(1,927	)
Intercompany accounts payable		30			(24,794	)		(4,054	)		(4,016	)		32,834			—
Accounts payable		316			(1,864	)		3,094			(1,150	)		—			396
Accrued expenses and other current liabilities		(1,702	)		(5,449	)		(2,443	)		(922	)		—			(10,516	)
Other long-term liabilities		—			—			372			(3	)		—			369
Net cash provided by (used in) operating activities		16,201			(23,638	)		1,399			(1,307	)		—			(7,345	)
Cash flows from investing activities:
Purchase of short-term investments		(7,998	)		—			—			—			—			(7,998	)
Proceeds from sale of short-term investments		7,998			—			—			—			—			7,998
Acquisition of intangible assets		(150	)		—			(668	)		—			—			(818	)
Acquisition of property and equipment		92			(419	)		(6,817	)		(2,613	)		—			(9,757	)
Proceeds from sale of equipment		—			—			39			—			—			39
Malaysian acquisition, net of cash and cash equivalent acquired		—			—			(1,737	)		—			—			(1,737	)
Investment in subsidiaries		(20,000	)		—			—			—			20,000			—
Net cash used in investing activities		(20,058	)		(419	)		(9,183	)		(2,613	)		20,000			(12,273	)
Cash flows from financing activities:
Proceeds from revolving loans and other line of credit		—			10,000			526			—			—			10,526
Repayment of revolving loans and other line of credit		—			(10,000	)		(526	)		—			—			(10,526	)
Intercompany loan payments		—			14,000			(14,000	)		—			—			—
Intercompany capital contributions		—			—			20,000			—			(20,000	)		—
Repayment of notes from stockholders		92			—			—			—			—			92
Proceeds from common stock issuance		2,032			—			—			—			—			2,032
Net cash provided by financing activities		2,124			14,000			6,000			—			(20,000	)		2,124
Net decrease in cash		(1,733	)		(10,057	)		(1,784	)		(3,920	)		—			(17,494	)
Cash and cash equivalents at beginning of period		3,653			10,166			14,994			5,360			—			34,173
Cash and cash equivalents at end of period	$	1,920		$	109		$	13,210		$	1,440		$	—		$	16,679

15

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS

December 31, 2002

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	3,653		$	10,166		$	14,994		$	5,360		$	—		$	34,173
Short-term investments		10,000			—			—			—			—			10,000
Intercompany accounts receivable		116,175			69,010			23,165			16,863			(225,213	)		—
Accounts receivable, net		17			—			38,760			16			—			38,793
Inventories		—			—			12,095			3,204			—			15,299
Prepaid expenses and other current assets		968			—			2,852			1,465			—			5,285
Total current assets		130,813			79,176			91,866			26,908			(225,213	)		103,550
Property, plant and equipment, net		5,528			5,582			222,698			102,589			—			336,397
Intercompany loans receivable		—			252,500			—			—			(252,500	)		—
Investment in subsidiaries		33,263			—			57,827			—			(91,090	)		—
Other assets		3,550			7,398			18,720			589			—			30,257
Total assets	$	173,154		$	344,656		$	391,111		$	130,086		$	(568,803	)	$	470,204
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Intercompany accounts payable	$	960		$	60,221		$	139,978		$	24,054		$	(225,213	)	$	—
Accounts payable		1,373			1,953			26,729			9,700			—			39,755
Accrued expenses and other current liabilities		5,277			9,258			8,607			6,258			—			29,400
Total current liabilities		7,610			71,432			175,314			40,012			(225,213	)		69,155
Long-term debt, less current portion		—			201,187			16,700			—			—			217,887
Convertible subordinated notes		50,000			—			—			—			—			50,000
Intercompany loans payable		—			—			218,500			34,000			(252,500	)		—
Other long-term liabilities		—			—			17,618			—			—			17,618
Total liabilities		57,610			272,619			428,132			74,012			(477,713	)		354,660
Stockholders’ equity (deficit):
Common stock		941			—			—			—			—			941
Additional paid in capital		276,916			81,689			120,692			115,093			(317,474	)		276,916
Receivables from stockholders		(480	)		—			—			—			—			(480	)
Accumulated other comprehensive income		9,169			—			8,705			464			(9,169	)		9,169
Accumulated deficit		(171,002	)		(9,652	)		(166,418	)		(59,483	)		235,553			(171,002	)
Total stockholders’ equity (deficit)		115,544			72,037			(37,021	)		56,074			(91,090	)		115,544
Total liabilities and stockholders’ equity (deficit)	$	173,154		$	344,656		$	391,111		$	130,086		$	(568,803	)	$	470,204

16

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2002

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
Intercompany revenue	$	7,109		$	—		$	—		$	15,398		$	(22,507	)	$	—
Customer revenue		1			—			79,193			19			—			79,213
		7,110			—			79,193			15,417			(22,507	)		79,213
Cost of revenue		59			—			77,687			14,419			(22,507	)		69,658
Gross profit		7,051			—			1,506			998			—			9,555
Operating expenses:
Selling, general and administrative		6,335			74			2,573			792			—			9,774
Research and development		651			—			1,685			—			—			2,336
Total operating expenses		6,986			74			4,258			792			—			12,110
Operating income (loss)		65			(74	)		(2,752	)		206			—			(2,555	)
Non-operating (income) expenses:
Inter-company interest expense		—			—			7,766			860			(8,626	)		—
Interest expense		1,082			7,538			27			—			—			8,647
Interest income		(20	)		(22	)		(17	)		(11	)		—			(70	)
Inter-company interest income		—			(8,573	)		(53	)		—			8,626			—
(Income) loss from investment in subsidiaries		10,499			—			550			—			(11,049	)		—
Foreign currency gains		—			—			166			(88	)		—			78
Other (income) expenses, net		—			—			(160	)		(5	)		—			(165	)
Total non-operating (income) expense		11,561			(1,057	)		8,279			756			(11,049	)		8,490
Income (loss) before income taxes		(11,496	)		983			(11,031	)		(550	)		11,049			(11,045	)
Provision for income taxes		49			81			370			—			—			500
Net income (loss)	$	(11,545	)	$	902		$	(11,401	)	$	(550	)	$	11,049		$	(11,545	)

17

ChipPAC, Inc.

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2002

(In thousands)

(Unaudited)

	Parent Guarantor CPI			Issuer CP Int’l			Other Guarantors			Non- Guarantor China			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(11,545	)	$	902		$	(11,401	)	$	(550	)	$	11,049		$	(11,545	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		389			—			9,957			3,043			—			13,389
Amortization of debt issuance cost		82			546			—			—			—			628
Foreign currency (gains) loss		—			—			166			(88	)		—			78
Loss on sale of equipment		—			—			(32	)		2			—			(30	)
Equity income from investment in subsidiaries		10,499			—			550			—			(11,049	)		—
Changes in assets and liabilities:
Intercompany accounts receivable		(67,132	)		(39,355	)		1,449			(5,295	)		110,333			—
Accounts receivable		13			11			957			(5	)		—			976
Inventories		—			—			(105	)		(465	)		—			(570	)
Prepaid expenses and other current assets		58			—			(660	)		167			—			(435	)
Other assets		42			—			86			(66	)		—			62
Intercompany accounts payable		76			60,994			49,998			(735	)		(110,333	)		—
Accounts payable		428			(653	)		(4,127	)		808			—			(3,544	)
Accrued expenses and other current liabilities		1,448			(6,712	)		250			251			—			(4,763	)
Other long-term liabilities		—			—			756			—			—			756
Net cash provided by (used in) operating activities		(65,642	)		15,733			47,844			(2,933	)		—			(4,998	)
Cash flows from investing activities:
Acquisition of intangible assets		—			—			(1,832	)		—			—			(1,832	)
Acquisition of property, plant and equipment		—			—			(6,293	)		(1,480	)		—			(7,773	)
Proceeds from sale of equipment		—			—			36			—			—			36
Malaysian acquisition, net of cash and cash equivalents acquired		—			—			(1,592	)		—			—			(1,592	)
Investment in subsidiaries		—			—			(6,960	)		—			6,960			—
Net cash used in investing activities		—			—			(16,641	)		(1,480	)		6,960			(11,161	)
Cash flows from financing activities:
Proceeds from revolving loans and other line of credit		—			50,000			5,596			—			—			55,596
Repayment of revolving loans		—			(50,000	)		—			—			—			(50,000	)
Increase in debt issuance costs		(95	)		(30	)		—			—			—			(125	)
Net proceeds from long-term debt		—			(32,440	)		—			—			—			(32,440	)
Repayment of notes from stockholders		294			—			—			—			—			294
Intercompany loan payments		—			—			—			6,960			(6,960	)		—
Proceeds from common stock issuance		65,320			—			—			—			—			65,320
Repurchase of common stock		(13	)		—			—			—			—			(13	)
Net cash provided by (used in) financing activities		65,506			(32,470	)		5,596			6,960			(6,960	)		38,632
Net increase (decrease) in cash		(136	)		(16,737	)		36,799			2,547			—			22,473
Cash and cash equivalents at beginning of period		1,842			17,093			20,939			1,998			—			41,872
Cash and cash equivalents at end of period	$	1,706		$	356		$	57,738		$	4,545		$	—		$	64,345

18

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All references are to ChipPAC’s fiscal quarters ended March 31, 2003 and March 31, 2002, unless otherwise indicated. This quarterly report on Form 10-Q contains forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “target,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and speak only as of their dates. These forward-looking statements are based on our current expectations and are subject to a number of risks and uncertainties, including those identified under Exhibit 99.1 filed with our annual report on Form 10-K for the year ended December 31, 2002 and other risks and uncertainties indicated from time to time in our filings with the SEC. Actual results could differ materially from these forward-looking statements. In addition, important factors to consider in evaluating these forward-looking statements include changes in external market factors, changes in our business or growth strategy or an inability to execute our strategy due to changes in our industry or the economy generally, the emergence of new or growing competitors and various other competitive factors. Also, terrorist acts, was, political unrest or disease epidemics in the regions where we have operations could materially affect our financial condition and our results of operations. In light of these risks and uncertainties, there can be no assurance that the matters referred to in the forward-looking statements contained in this quarterly report will in fact occur.

Results of Operations

Three month period ended March 31, 2003 compared to three month period ended March 31, 2002

Revenue.    Revenue was $88.6 million for the three month period ended March 31, 2003, an increase of 11.9% compared to revenue of $79.2 million for the same period in 2002. Several new customers were added in the later half of 2002 and these new customers started ramping production in the period ended March 31, 2003. This contributed to the increase of revenue over the same period in 2002. Assembly unit volumes for the three month period ended March 31, 2003, increased 8.1% and average selling prices per assembly unit increased 3.9% compared to the same period in 2002.

Gross Profit.    Gross profit during the three month period ended March 31, 2003 was $10.0 million, compared to gross profit of $9.6 million for the same period in 2002, an increase of 4.2% and was due to the increase in revenue described above. Gross margin as a percent of revenue was 11.3% for the three month period ended March 31, 2003, as compared to 12.1% in the same period in 2002. For the three month period ended March 31, 2003 compared to the same period in 2002, gross profit percentage declined primarily as a result of rising costs in reaction to macroeconomic issues including South Korean exchange rate valuations and increased oil and gold market prices. Overall equipment utilization was approximately 58 % for the three months period ended March 31, 2003 as compared to 53 % in the same period in 2002.

Selling, General, and Administrative.    Selling, general and administrative expenses were $9.5 million for the three month period ended March 31, 2003, which is a decrease of 3.1% compared $9.8 million for the same period in 2002. The decrease in expenses for the three month period in 2003 as compared to the same period in 2002 was mainly attributed to additional expenses associated with hiring and maintaining employees in the areas of administration, sales and marketing in China during the period in 2002 which did not occur in the period in 2003. These expenses were incurred to meet the increase in unit volumes and product mix occurring in our China plant.

Research and Development.    Research and development expenses for the three month period ended March 31, 2003 were $2.9 million versus $2.3 million for the same period in 2002, an increase of 26.1% from the three month period ended March 31, 2002. Throughout 2002, we increased our research and development staffing and projects at all three of our plants. The increased staffing and increased number of projects in 2003 drove the additional spending compared to the same period in 2002.

Interest Expense.    Total outstanding interest-bearing debt decreased to $267.9 million at March 31, 2003 compared to $356.8 million at March 31, 2002. The decrease in debt outstanding of $88.9 million from March 31, 2002 to March 31, 2003, was due to the pay down of our senior loans and other line of credits, funded by our January 2002 and May 2002 public offerings. Related interest expense was $7.3 million for the three month period ended March 31, 2003, a decrease of 15.1% as compared to the same period ended March 31, 2002. The reduction in interest expense was due to reduced interest rates on our borrowings and reduced debt levels.

Foreign Currency Gains/(Losses).    Net foreign currency gains were $0.2 million for the three month period ended March 31, 2003, as compared to a net foreign currency loss of $0.1 million for the same period in 2002. These non-cash gains and losses were primarily due to the fluctuations between the exchange rate of the United States Dollar and the South Korean Won related to long-term severance benefits payable to our South Korean employees in Korean Won.

19

Income Taxes.    Consolidated income tax provisions were $0.5 million for both of the three month periods ended March 31, 2003 and 2002. We have a mix of tax rates across the various jurisdictions in which we do business, and our current estimated provision for 2003 is $2.0 million with $0.5 million recognized in the three month period ended March 31, 2003. This estimate does not take into account any future benefit from loss carryforwards, which we may realize once we again achieve profitability and begin generating taxable income.

Critical Accounting Policies

For critical accounting policies affecting us, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2002. Critical accounting policies affecting us have not changed materially since December 31, 2002.

Liquidity and Capital Resources

Our ongoing primary cash needs are for operations and equipment purchases. We spent $9.8 million on capital expenditures during the three month period ended March 31, 2003, as compared to $7.8 million in capital expenditures during the same period in 2002.

The terms of the acquisition of the Malaysian business require contingent incentive payments to Intersil, up to a maximum of $17.9 million through June 30, 2003. During the three month period ended March 31, 2003, we have paid $1.7 million relating to contingent incentive payments and cumulatively we have paid $16.2 million under this arrangement.

On January 30, 2002, we sold 10,000,000 shares of Class A common stock in an underwritten public offering for $6.00 per share. On February 14, 2002, we sold an additional 1,425,600 shares of Class A common stock in conjunction with the underwriter’s exercise of their over-allotment option at the public offering price for $6.00 per share. In connection with these sales, we received net proceeds of approximately $63.8 million, after deducting underwriting discounts, commissions and estimated offering expenses. Net proceeds of $62.4 million from this offering were used to pay down term loans and revolving loans. The remaining $1.4 million was used for general corporate purposes.

On May 30, 2002, we sold 12,000,000 shares of Class A common stock in an underwritten public offering for $8.75 per share. In connection with these sales, we received net proceeds of approximately $99.2 million, after deducting underwriting discounts, commissions and estimated offering expenses. Net proceeds of $50.0 million from this offering were used to pay down term loans. The remaining $49.2 million was used for general corporate purposes.

As of March 31, 2003, our total debt consisted of $267.9 million of borrowings, which was comprised of $165.0 million of senior subordinated notes, $36.2 million in term loans, $16.7 million in foreign loans and $50.0 million of convertible subordinated notes. For the three month period ended March 31, 2003, these borrowings had weighted average interest rates of 12.8%, 5.6%, 4.6% and 8.0%, respectively.

Our total potential commitments on our loans, operating leases, and Intersil incentive payments as of March 31, 2003, were as follows (in thousands):

	Total		Within 1 Year		2–3 Years		4–5 Years		After 5 Years
On balance sheet commitments:
Senior credit facilities and other long-term debt	$	52,887	$	—	$	16,700	$	36,187	$	—
Senior subordinated notes		165,000		—		—		—		165,000
Convertible subordinated notes		50,000		—		—		—		50,000
Total on balance sheet commitments		267,887		—		16,700		36,187		215,000
Off balance sheet commitments:
Operating leases		64,607		6,705		13,748		12,019		32,135
Royalty/licensing agreements		1,498		371		781		346
Contingent payments to Intersil (relating to purchase of Malaysian business)		1,738		1,738		—		—		—
Total off balance sheet commitments		67,843		8,814		14,529		12,365		32,135
Total commitments	$	335,730	$	8,814	$	31,229	$	48,552	$	247,135

20

Our senior credit facilities, as amended, contain covenants restricting our operations and requiring that we meet specified financial tests. Beginning with the quarter ended December 31, 2002, the financial covenants will consist solely of a minimum interest coverage ratio and a maximum senior leverage ratio based on a rolling 12-months calculation. There were no violations of the covenants under the senior credit facilities, as amended, through March 31, 2003.

During the quarter ended June 30, 2002, an assessment of approximately 16.0 billion Korean Won (approximately $12.8 million U.S. Dollars at March 31, 2003), was made by the Korean National Tax Administration or NTA, relating to withholding tax not collected on the loan between our subsidiaries in Korea and Hungary. The prevailing tax treaty does not require withholding on the transactions in question. There were no further assessments made during the quarter ended March 31, 2003. We have appealed the assessment through the NTA’s Mutual Agreement Procedure and believe that the assessment will be overturned. As of March 31, 2003, no accrual has been made. On July 18, 2002, the Icheon tax office of the NTA approved a tax suspension of the proposed assessment until resolution of the disputed assessment. The NTA required a corporate guarantee of 120% of the assessment in exchange for the suspension. We complied with the guarantee request on August 1, 2002. No further assessments have been made.

We believe that our existing cash balances, cash flows from operations and available borrowings under our senior credit facilities of $50.0 million will provide sufficient cash resources to meet our projected operating and other cash requirements for the next twelve months. An event of default under any debt instrument, if not cured or waived, could have a material adverse effect on us. We may require capital sooner than currently expected. We cannot assure you that additional financing will be available when we need it or, if available, that it will be available on satisfactory terms. In addition, the terms of our senior credit facilities and senior subordinated notes significantly reduce our ability to incur additional debt. Failure to obtain any such required additional financing could have a material adverse effect on our company.

Other than the covenants on the debt as discussed above, we have no performance guarantees or unconsolidated entities. Our off-balance sheet commitments are limited to equipment operating leases, royalty/license agreements, leases on office and manufacturing space and additional contingent incentive payments to Intersil. Our total off-balance sheet obligations are approximately $67.8 million as of March 31, 2003.

For the three month period ended March 31, 2003, cash used in operations was $7.3 million and for the three month period ended March 31, 2002, cash used in operations was $5.0 million. Cash used in operations mainly consisted of net loss plus depreciation and amortization less change in accrued expenses, which was primarily due to the interest payment made. During the three month period ended March 31, 2003, $0.5 million from debt issuance cost amortization and $0.2 million from foreign currency gains were adjusted back to the net loss, as these items do not require the outlay of cash.

For the three month period ended March 31, 2003, cash used in investing activities was $12.3 million versus $11.2 million for same period in 2002. During the three month period ended March 31, 2003, $9.8 million was spent on capital expenditures and $1.7 million was invested in the purchase of the Malaysian business, including purchased intellectual property.

For the three month period ended March 31, 2003, cash provided by financing activities was $2.1 million as compared to $38.6 million for the same period in 2002. As of March 31, 2003, there were no outstanding borrowing on the revolving loan and the line of credit facilities. In February 2003, $2.0 million was provided by the issuance of new common stock through the Employee Stock Purchase Plan.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risks affecting us, see Item 7A “Quantitative Disclosure About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2002. Our exposure to market risks has not changed materially since December 31, 2002.

ITEM 4.    CONTROLS AND PROCEDURES

Within the last year, in response to recent legislation and additional requirements, we have reviewed our internal control structure and our disclosure controls and procedures. As a result of such review we implemented minor changes, primarily to formalize and document the procedures already in place. Our current disclosure controls and procedures are designed to ensure that material information related to ChipPAC, Inc. (including our consolidated subsidiaries) is made known to our disclosure committee, including our Chief Financial Officer, General Counsel and Chief Accounting Officer on a regular basis, in particular during the period in which the quarterly reports are being prepared. As required, we will evaluate the effectiveness of these disclosure controls and procedures on a quarterly basis, and did so within 90 days prior to the filing of this quarterly report. We believe as of that date, these controls and procedures were operating effectively as designed.

21

The Audit Committee of our Board of Directors reviewed the results of our most recent evaluation. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are adequate to ensure the clarity and material completeness of our disclosures in periodic reports required to be filed with the SEC and there are no significant deficiencies in the design or operation of internal controls which could significantly affect our ability to record, process, summarize and report financial data.

PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We are not involved in any legal proceedings the outcome of which we believe would have a material adverse effect on our business, financial condition or results of operations. From time to time, however, we are involved in claims that arise in the ordinary course of business, and we maintain insurance that we believe to be adequate to cover these claims.

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable

ITEM 5.    OTHER INFORMATION

Not applicable

ITEM 6.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

Exhibit Number	Description
2.1	Amended and Restated Agreement and Plan of Merger of ChipPAC, Inc., a California corporation, and ChipPAC, Inc., a Delaware corporation.**
2.2	Agreement and Plan of Recapitalization and Merger, dated as of March 13, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.*
2.3	First Amendment to Agreement and Plan of Recapitalization and Merger, dated as of June 16, 1999 by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.*
2.4	Second Amendment to Agreement and Plan of Recapitalization and Merger, dated as of August 5, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.*
3.1	Amended and Restated Certificate of Incorporation of ChipPAC, Inc.**
3.2	Amended and Restated By-Laws of ChipPAC, Inc.**
4.1	Specimen certificate for ChipPAC, Inc. Common Stock.**
10.1	Credit Agreement, dated as of August 5, 1999, as amended and restated as of June 30, 2000, by and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston, as Administrative Agent, Sole Lead Manager and Collateral Agent.*

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Exhibit Number	Description
10.2	Guaranty, dated as of August 5, 1999, by and among ChipPAC, Inc. and certain subsidiaries of ChipPAC, Inc., in favor of Credit Suisse First Boston (incorporated by reference to Exhibit 4.5 of the Company’s registration statement on Form S-3 (Registration No. 333-69704)).
10.3	Amendment No. 1 to Amended and Restated Credit Agreement, dated as of March 13, 2001, by and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston, as Administrative Agent, Sole Lead Manager and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2002 (No. 000-31173)).
10.4	Amendment No. 2 to Amended and Restated Credit Agreement, as amended, dated as of December 31, 2001 by and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2001 (No. 000-31173)).
10.5	Amendment No. 3 to Amended and Restated Credit Agreement, as amended, dated as of December 31, 2001 by and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K (No. 000-31173)).
10.6	Amendment No. 4 to Amended and Restated Credit Agreement, as amended, dated as of May 17, 2002 by and among ChipPAC International Company Limited, ChipPAC, Inc, the Lenders listed therein and Credit Suisse First Boston, as Administrative Agent and Collateral Agent. (incorporated by reference to the Company’s quarterly report on Form 10-Q for the period ended September 30, 2002).
10.7	Subsidiary Guaranty Agreement, dated as of August 5, 1999, by and among ChipPAC Korea Company Ltd., ChipPAC Limited, ChipPAC (Barbados) Ltd., ChipPAC Luxembourg S.a.R.L., ChipPAC Liquidity Management Hungary Limited Liability Company and ChipPAC International Company Limited, in favor of Firstar Bank of Minnesota, N.A.*
10.7.1	Subsidiary Guaranty Agreement, dated as of October 12, 2001, by ChipPAC Malaysia Sdn. Bhd, in favor of U.S. Bank, N.A. (incorporated by reference to Exhibit 4.7 of the Company’s registration statement on Form S-3 (Registration No. 333-69704)).
10.8	Amended and Restated Registration Agreement, dated as of August 5, 1999, by and among ChipPAC, Inc. the Hyundai Group (as defined therein), the Bain Group (as defined therein), the SXI Group (as defined therein), Intel Corporation, ChipPAC Equity Investors LLC, and Sankaty High Yield Asset Partners, L.P.*
10.8.1	Amendment No. 1 to Amended and Restated Registration Agreement, dated as of June 30, 2000, by and among ChipPAC, Inc., Sapphire Worldwide Investments, Inc., the Bain Stockholders (as defined therein) and SXI Group LLC.**
10.8.2	Form of Amendment No. 2 to Amended and Restated Registration Agreement, dated as of July 13, 2000, by and among ChipPAC, Inc., Qualcomm Incorporated, SXI Group LLC and the Bain Shareholders (as defined therein).**
10.8.3	Form of Amendment No. 3 to Amended and Restated Registration Agreement, dated as of August 2, 2000, by and among ChipPAC, Inc., Bain Capital, Inc., SXI Group LLC and the Bain Shareholders (as defined therein).**
10.9	Transition Services Agreement, dated as of August 5, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc., ChipPAC Korea Company Ltd., Hyundai Electronics Company (Shanghai) Ltd., ChipPAC Assembly and Test (Shanghai) Company Ltd., ChipPAC Barbados Limited and ChipPAC Limited.*
10.10	Lease Agreement, dated as of June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*
10.10.1	Amendment Agreement, dated September 30, 1998, to Lease Agreement, dated June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*
10.10.2	Amendment Agreement 2, dated September 30, 1999, to Lease Agreement, dated June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*
10.11	Agreement Concerning Supply of Utilities, Use of Welfare Facilities and Management Services for Real Estate, dated as of June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*

23

Exhibit Number	Description
10.12	Service Agreement, dated as of August 5, 1999, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Limited.+*
10.13	Sublease Agreement, dated as of May 1, 1998, by and between Hyundai Electronics America and ChipPAC, Inc.*
10.14	Employment letter agreement, dated as of January 10, 2003 between ChipPAC, Inc. and Robert Krakauer. (incorporated by reference to the Company’s annual report on Form 10-K for the period December 31, 2002)
10.15	Employment letter agreement, dated as of January 13, 2003 between ChipPAC, Inc. and Patricia McCall. (incorporated by reference to the Company’s annual report on Form 10-K for the period December 31, 2002)
10.16	Employment Agreement, dated as of October 1, 1999, between ChipPAC, Inc. and Dennis McKenna.*
10.17	ChipPAC, Inc. 1999 Stock Purchase and Option Plan.*
10.18	ChipPAC, Inc. 2000 Equity Incentive Plan.**
10.19	ChipPAC, Inc. 2000 Employee Stock Purchase Plan.**
10.20	Form of Key Employee Purchased Stock Agreement.*
10.20.1	Form of Key Employee Purchased Stock Agreement (with Loan).*
10.21	Form of Employee Restricted Stock Agreement.*
10.22	Form of Directors Tranche I Stock Option Agreement.*
10.23	Form of Employees Tranche I Stock Option Agreement.*
10.24	Form of Tranche II Stock Option Agreement.*
10.25	Indenture, dated as of July 29, 1999, by and among ChipPAC International Limited, ChipPAC Merger Corp. and Firstar Bank of Minnesota, N.A., as trustee.*
10.26	First Supplemental Indenture, dated as of August 5, 1999, by and among ChipPAC International Company Limited, ChipPAC, Inc. and Firstar Bank of Minnesota, N.A., as trustee.*
10.27	12.75% Senior Subordinated Notes Due 2009.*
10.28	Form of Series B 12.75% Senior Subordinated Notes Due 2009.*
10.29	Intellectual Property Rights Agreement, entered into as of June 30, 2000, by and between Intersil Corporation and ChipPAC Limited.**
10.30	Supply Agreement, entered into as of June 30, 2000, by and between Intersil Corporation and ChipPAC Limited.**
10.31	Shareholders Agreement, dated as of June 30, 2000, by and among ChipPAC, Inc., the Bain Group (as defined therein), the SXI Group (as defined therein) and Sapphire Worldwide Investments, Inc.**
10.32	Class A Common Stock Purchase Agreement, dated as of July 13, 2000, by and between ChipPAC, Inc. and Qualcomm Incorporated.**
10.33	Promissory Note, dated as of August 2, 2000 by and between Dennis McKenna and ChipPAC, Inc.**
10.34	Promissory Note, dated as of August 2, 2000, by and between Robert Krakauer and ChipPAC, Inc.**
10.35	Employment letter agreement, dated as of November 15, 1999 between ChipPAC, Inc. and Robert Krakauer (incorporated by reference to the Company’s annual report on Form 10-K for the period December 31, 2000).

24

Exhibit Number	Description
10.36	Employment letter agreement, dated as of October 4, 2000 between ChipPAC, Inc. and Richard Freeman (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2001).
10.37	Employment letter agreement, dated as of October 9, 2000 between ChipPAC, Inc. and Patricia McCall (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2001).
10.38	Indenture, dated as of June 15, 2001, by and between ChipPAC, Inc. and Firstar Bank, N.A. as trustee (incorporated by reference to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2001).
10.39	Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC International Company Limited and Citicorp Capital Investors Limited (incorporated by reference to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2001).
10.40	Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC, Inc. and Citicorp Mezzanine III, L.P. (incorporated by reference to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2001).
10.41	Patent and Technology License Agreement, dated as of August 5, 1999, by and between Hyundai Electronics Industries, Co., Ltd. and ChipPAC Limited (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2001). +
21.1	Subsidiaries of ChipPAC, Inc., ChipPAC International Company Limited, ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Liquidity Management Limited Liability Company, ChipPAC Luxembourg S.a.R.L. and ChipPAC Korea Company Ltd. (incorporated by reference to the Company’s quarterly report on Form 10-Q for the period ended on June 30, 2002).
99.1	Risk Factors (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2002).
99.2	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.3	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Incorporated by reference to the Company’s Form S-4 (No. 333-91641).

** Incorporated by reference to the Company’s Form S-1 (No. 333-39428).

+ Confidential treatment has been granted as to certain portions of these exhibits, which are incorporated by reference.

(b) Reports on Form 8-K.

None

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, as of May 14, 2003.

CHIPPAC, INC.

(Registrant)

/s/    ROBERT KRAKAUER

ROBERT KRAKAUER

Senior Vice President and Chief Financial Officer

/s/    MICHAEL G. POTTER

MICHAEL G. POTTER

Vice President, Controller and Chief Accounting Officer

26

CHIPPAC, INC.

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis P. McKenna, the Chief Executive Officer of ChipPAC, Inc. (the “registrant”), certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2003 of the registrant;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. Robert Krakauer, the registrant’s other certifying officer, and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. Robert Krakauer, the registrant’s other certifying officer, and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. Robert Krakauer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

May 14, 2003	/s/    DENNIS P. MCKENNA
	Dennis P. McKenna Chief Executive Officer

27

CHIPPAC, INC.

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Krakauer, the Chief Financial Officer of ChipPAC, Inc. (the “registrant”), certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2003 of the registrant;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. Dennis P. McKenna, the registrant’s other certifying officer, and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. Dennis P. McKenna, the registrant’s other certifying officer, and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. Dennis P. McKenna and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

May 14, 2003	/s/    ROBERT KRAKAUER
	Robert Krakauer Chief Financial Officer

28