Semtech
SMTC
#1245
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S$23.18 B
Marketcap
S$248.42
Share price
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended January 30, 2000

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 1-6395

SEMTECH CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 95-2119684
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)

652 Mitchell Road, Newbury Park, California, 91320
(Address of principal executive offices, Zip Code)

Registrant's telephone number, including area code: (805) 498-2111

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
------------------- -------------------
None None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock par value $.01 per share
(Title of Class)



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 if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

Aggregate market value of voting stock held by non affiliates of the registrant
as of April 24, 2000 was $1,897,104,619 and the market price of the Registrant's
stock was $58.19 per share. The number of shares outstanding of the
Registrant's common stock was 32,601,901 at April 24, 2000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference in Part III of
this report: Definitive Proxy Statement in connection with registrant's annual
meeting of shareholders on June 8, 2000.

This report on Form 10-K contains a total of xx pages.
SEMTECH CORPORATION
INDEX TO
FORM 10-K
FOR THE YEAR ENDED JANUARY 30, 2000



PART I


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Item 1 Business 2
Item 2 Properties 15
Item 3 Legal Proceedings 15
Item 4 Submission of Matters to a Vote of Security Holders 15
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PART II
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Item 5 Market for the Registrant's Common Equity and Related Shareholder Matters 16
Item 6 Selected Financial Data 16
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations 17

Item 7A Quantitative and Qualitative Disclosures About Market Risks 23
Item 8 Financial Statements and Supplementary Data 25
Item 9 Changes in or Disagreements with Accountants on Accounting and Financial
Disclosure 42
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PART III
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Item 10 Directors and Executive Officers of the Registrant 42
Item 11 Executive Compensation 42
Item 12 Security Ownership of Certain Beneficial Owners and Management 43
Item 13 Certain Relationships and Related Transactions 43
</TABLE>

PART IV
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Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 44
Signatures 47
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PART I
------


This Annual Report on Form 10-K for the year ended January 30, 2000 (the "Form
10-K") contains certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Forward-looking statements are statements other than historical
information or statements of current condition and relate to future events or
the future financial performance of the Company. Some forward-looking statements
may be identified by use of such terms as "expects," "anticipates," "intends,"
"estimates," "believes" and words of similar import. These forward-looking
statements relate to plans, objectives and expectations for future operations.
In light of the risks and uncertainties inherent in all such projected
operational matters, the inclusion of forward-looking statements in this Form
10-K should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved or that any
of the Company's operating expectations will be realized. Net sales and results
of operations are difficult to forecast and could differ materially from those
projected in the forward-looking statements contained in this Form 10-K for the
reasons detailed in the "Risk Factors" section of this Form 10-K, beginning on
page 9, or elsewhere in this Form 10-K.

ITEM 1. BUSINESS

General

We are a leading supplier of analog and mixed-signal semiconductors. We
design, manufacture and market a range of products for commercial applications,
the majority of which are sold to the communications, industrial and computer
markets. Our semiconductors enable power management, test, protection and a
range of other functions in products that require analog or mixed-signal
processing. Our end customers are primarily original equipment manufacturers, or
OEMs, and include Agilent Technologies, IBM, Intel, Motorola, Samsung and
Schlumberger.


Overview of the Semiconductor Industry

In the broadest sense, the semiconductor industry is divided into two distinct
groups, analog semiconductors and digital semiconductors. Analog semiconductors
condition and regulate "real world" functions such as temperature, speed,
sound and electrical current. Analog signals behave in a continuous manner, in
contrast to digital circuits which behave as on's and off's (expressed in binary
code as 1's and 0's), such as those used by computers. Mixed-signal devices
incorporate both analog and digital functions into a single chip and provide the
ability for digital electronics to interface with the outside world. Where
digital processing exists in an end consumer application such as computers,
personal digital assistant devices (PDAs), networks, cellular phones, automated
test equipment (ATE), and medical devices, analog technology is required.

The market for analog and mixed-signal semiconductors differs from the market
for digital semiconductors. The analog and mixed-signal industry is
characterized by significantly longer product life cycles than the digital
industry because analog technology is applied to real-world functions that
remain relatively consistent. In addition, analog semiconductor manufacturers
tend to have lower capital for manufacturing because their facilities tend to be
less dependent than digital producers on state-of-the-art production equipment.
The end-product markets for analog and mixed-signal semiconductors are smaller
and more varied than the relatively standardized digital semiconductor product
markets. This has resulted in a fragmented market for analog semiconductors, in
contrast to the more homogenous digital semiconductor market.

Another difference between the analog and digital markets is the amount of
talented labor available. The analog industry relies more heavily than the
digital industry on design and applications talent to distinguish its products
from one another. While digital expertise is extensively taught due to its
overall market size, electrical engineering curricula addressing analog
functions are not widely available in universities. Analog and mixed-signal
expertise tends to be learned over time based on experience and hands-on
training. Consequently, personnel with this training are scarce, a fact that
makes it difficult for new suppliers to quickly gain significant market share.

2
Dataquest, a market research firm, estimates that analog devices will
represent approximately $28 billion of the approximately $179 billion overall
market for semiconductors in 2000 and that demand for analog semiconductors will
grow at approximately 14% per year, compounded annually, until 2003. We expect
certain segments of the analog market, however, where end product demand is
strong, to grow at a faster rate than the overall semiconductor market. These
segments include advanced communications, industrial test and personal and
portable computing. The need for analog semiconductors in these markets is based
on the need to enable the reliability of emerging communications devices, extend
battery lives, achieve higher levels of integration, increase portability and
reduce size. Further, because the analog industry is smaller and more fragmented
than the digital industry, it tends to offer high-margin opportunities for those
companies able to introduce innovative new product solutions.

We believe that certain product segments within the analog semiconductor
market will grow even faster than the overall market in the coming years.
Specific factors contributing to the rapid growth in demand for analog and
mixed-signal semiconductors in these segments include the need to enable the
reliability of emerging communications devices, extend battery lives, decrease
voltage tolerances, achieve higher levels of integration, increase portability
and reduce size. These trends increase the need for more complex, high-
performance analog and mixed-signal semiconductors. "High-performance" refers
to devices that have advanced features and superior performance over widely
available "commodity" circuits.



Semtech End Markets

A majority of our products are sold to customers in the computer,
communications and industrial markets. Computer market applications include
desktop computers, servers, workstations, laptop computers, PDAs and computer
add-on cards. End-product applications for our products within the communication
market include local area networks, wide area networks, cellular phones and
base-stations. Industrial applications include automated test equipment, medical
devices and factory automation systems.


<TABLE>
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- ------------------------------------------------------------------------------------------------------
Semtech Main Product Lines Specific End-Product Application by Market
- ------------------------------------------------------------------------------------------------------
Computer Communications Industrial
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<S> <C> <C> <C>
Power Management . Desktop PCs . Cellular phones . Industrial system
. Servers/workstations . Network interface power supplies
. PDAs Cards . Handheld
. Notebook computers Measurement devices
. Add-on cards

Protection . Notebook computers . Cellular phones . Handheld
. USB ports . Network interface Measurement devices
. Printers Cards
. Cellular base-
Stations

High Performance . Workstations . Routers / hubs . Automated test
. Cellular base- Equipment
Stations

Advanced Communications . SONET/ATM
Switches
. Fiber modems
. Cellular base-
Stations

System Management . Notebook computers . Cellular phones . Touch screen
. PDAs Controllers
</TABLE>

3
Business Strategy

Our objective is to be the leading supplier of analog and mixed-signal devices
to the fastest growing segments of our target markets, particularly within the
computer, communications and industrial segments. We will leverage our pool of
skilled technical personnel to develop new products, or where appropriate use
acquisitions, to serve the fastest growing segments of these markets. In order
to capitalize on our strengths in analog and mixed-signal processing design,
manufacturing and marketing, we intend to pursue the following strategies:


Focus on fastest growing market segments

We have chosen to target the analog segments of the fastest growing end
markets. We will enhance this growth potential by focusing on specific products
within the analog and mixed-signal market, including personal computers,
notebook computers, PDAs, cellular phones, and wide-area and local-area
networks. These products are characterized by their need for leading-edge, high-
performance, analog and mixed-signal semiconductor technology.


Continue to release new proprietary products

We are focused on developing proprietary new products to serve our target
markets. These markets have experienced significant levels of change as consumer
demand for increased product performance at competitive price points continues
to grow. Our technical talent markets and develops new products specifically for
these high-margin, fast growing market segments. Over the past three years, our
pool of skilled technical personnel has grown from 75 to over 200, and the
number of new products introduced in fiscal year 2000, fiscal year 1999 and
fiscal year 1998 was 88, 43, and 28, respectively. We believe that our rate of
new product introductions and number of skilled technical personnel are
indicators of our ability to meet our target markets' evolving needs.


Diversify into new markets

We will enter new markets that complement our existing operations through
internal development of new products and by strategic acquisitions. We believe
strategic acquisitions will allow us to expand our pool of skilled technical
personnel as well as expand the range of complementary products that we offer.
We have purchased four companies over the past three years that have permitted
us to successfully enter new market segments and develop new products.


Concentrate on cross-selling our products and services

We consider the ability to cross-sell our products and services a major
opportunity. Many of our large customers produce a wide variety of end products
that require analog and mixed-signal products. By leveraging existing
relationships, we believe that we will be able to sell a wider variety of our
products to these organizations. In addition, we believe our marketing
department's technical expertise permits it to identify and capitalize on these
cross-selling opportunities.


Product Segments

We categorize our business into three main product segments. Our strategically
most important product offerings are included in the Standard Semiconductor
Products segment. Standard Semiconductor Products represent approximately 88% of
our overall net sales for fiscal year 2000. The following is a description of
our main product segments:

4
Standard Semiconductor Products.   Included in Standard Semiconductor Products
are integrated circuits (ICs) and discrete components designed for use in
standard industry applications. Described below are the main product lines
within our Standard Semiconductor Products.

. Power Management Circuits. Power management circuits control, alter,
regulate and condition the electric pulses that flow through electronics.
The largest product types within the power management product line are
linear regulators, switching voltage regulators, combination regulators and
smart regulators. The primary application for these products is power
regulation for computer and communications systems.

. Protection Products. The largest type of protection products we design
and market are transient voltage suppressors (TVS). TVS devices provide
protection for electronic systems where large voltage spikes (called
transients), such as electrostatic discharge (ESD) generated by the human
body, can permanently damage voltage-sensitive components. We also have
developed filter and termination devices that can be sold as a complement
to TVS devices. Specific protection product applications are found in
computer, data-communications, telecommunications and industrial markets.

. High Performance/Automated Test Equipment Circuits. We design and market
a wide variety of high performance products, namely pin electronics,
timing, clock distribution and parametric measurement products for use in
ATE instrumentation applications. Automated test equipment systems are used
by electronic component manufacturers in the testing of their finished
devices. In fiscal year 2000, we began marketing high performance
clock/logic devices intended for use in both ATE and non-ATE applications.

. Advanced Communication Circuits. Through internal investment and the
acquisition of Acapella Limited and Practical Sciences, we are designing a
line of advanced communication ICs. These circuits are designed to
transmit/receive signals over fiber optic lines, provide timing and
synchronization, and other communication functions. Advanced communication
ICs are used for local area networks, wide area networks and cellular phone
base stations. We also derive a small amount of revenue from design
consulting services provided to other manufacturers.

. System Management. Through the acquisition of USAR Systems, we now offer a
line of system management products that include intelligent input/output
and smart battery management devices. The products included in this
offering are touch-screen and touch-pad controllers, pointing stick devices
and battery management circuits. These products are designed to handle
human interface and battery function in portable systems, like notebook
computers, PDSs and cellular phones.

Rectifier and Assembly Products. Rectifiers and assemblies are older-
technology products that are principally sold into the military and aerospace
markets.

. Rectifiers. We have several different categories of silicon rectifiers,
which are primarily used to convert alternating current to direct current.
These products are sold to military, aerospace and medical equipment
customers.

. Assemblies. An assembly is a package of rectifiers of one or more types
encased in epoxy or silicon by various molding techniques, constituting one
or more basic rectifier circuits. Assemblies are used for military,
aerospace and other specialized applications.


Other Products. We produce and sell Other Products, as detailed below.

. Custom and Application Specific Circuits. Other custom and application
specific integrated circuits (ASICs) include a wide variety of customer and
application-specific devices. The end markets for these products include
industrial, consumer, and automotive markets.

. Foundry Wafers. We fabricate silicon wafers for other semiconductor
manufacturers. Much of the processed silicon currently sold goes into
applications for the computer, automotive and industrial markets.

5
Intellectual Capital and Product Development

We believe that emphasis on the development of our intellectual capital and
introduction of new proprietary product designs are key to our success. In
fiscal year 2000, we added 76 experienced engineers, including personnel hired
as the result of the acquisitions of two companies, USAR Systems and Practical
Sciences. In fiscal year 1999, we added 52 experienced engineers, including 36
in research and development. These new engineers were added to staff positions
in the areas of circuit design, applications support, product development and
strategic marketing.

As of the end of fiscal year 2000, we employed over 75 research and design
employees, including more than 70 circuit designers. A majority of these
individuals have senior-level expertise in the design and development of
circuits targeted for use in power management, protection, high performance and
communication applications. We intend to make further investment in research and
development functions during the coming fiscal years. Additional headcount along
with investment in design and development equipment and overall support of
development efforts are the focus of this investment.

In fiscal year 1996, we began to invest heavily in design and applications
intended to aid the introduction of new products. We now have dedicated design
centers in Santa Clara, California; Oxnard, California; Raleigh, North Carolina;
Glasgow, Scotland; and Southampton, England. In addition, dedicated high
performance circuit design occurs at the San Diego location and protection
product design occurs at the Company's Newbury Park headquarters. In the first
quarter of fiscal year 1999, we started a new design center, located in Raleigh,
North Carolina.


Sales and Marketing

Sales made directly to original equipment manufacturers in fiscal year 2000
and in fiscal year 1999 were approximately 80% of net sales and the remaining
20% of net sales were made through independent distributors. The percentage of
sales made directly to original equipment manufacturers has increased in the
last four fiscal years as we sell directly to large strategic customers and as
the contribution from the High Performance Products Group, which has only direct
sales, has increased. We have direct sales offices located in Southern
California, Texas and Connecticut which manage the sales activities of
independent sales representative firms and independent distributors within the
United States and Canada. We also have sales offices in France, Germany and
Scotland as well as independent sales representative firms and independent
distributors to serve the European markets. We maintain a branch sales office in
Taipei, Taiwan and a liaison office in Seoul, Korea along with independent
representatives and distributors for serving the Asian-Pacific territory. We are
also represented outside the United States, Europe and Asia by other independent
sales organizations.


Customers and Sales Data

For fiscal year 2000, we estimated that 2,500 customers purchased our products
either directly from us or through our authorized distributors. The following is
a representative sample of our larger customers:

Representative Customers by End Markets

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Computer Communications Industrial
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<S> <C> <C>
Acer Alcatel Agilent Technologies
Compaq Motorola Asia Electronics
Dell Samsung Honeywell/Allied Signal
IBM Siemens Schlumberger
Intel 3Com Varian
</TABLE>

No one customer accounted for 10% or more of our net sales for the year ended
January 30, 2000 or for fiscal years 1999 or 1998. Customers that buy our
products include major computer and peripheral manufacturers and their

6
sub-contractors, automated test system manufacturers, communications equipment
producers (both data-communication and telecommunication), and a variety of both
large and small companies serving the industrial, automotive, aerospace and
military markets.

During fiscal years 2000, 1999, and 1998, foreign sales were 64%, 53% and 45%,
respectively, of net sales. Significant portions of the sales are to customers
located in the Asian-Pacific region. Sales to customers in this region were
approximately 52% in fiscal year 2000 and 41% of net sales in fiscal year 1999.
The increase in sales to Asia reflects the increased use of foreign-based
subsidiaries and subcontractors by original equipment manufacturers for
assembling their finished products. Due to this trend, we estimate that as much
as two-thirds of all shipments made into Asia are eventually exported back to
North America and European markets. Sales to Japanese and Korean customers,
which are included in the Asian-Pacific regions sales figures, were
approximately 16%, 7% and 4% of net sales in fiscal years 2000, 1999 and 1998,
respectively. Generally, we conduct sales in currency of the United States.


Manufacturing Capabilities

We have manufacturing facilities in California, Texas and Mexico. Our
commercial IC production facilities are located in Santa Clara, California and
Corpus Christi, Texas. Discrete wafer fabrication, testing, probe and some
assembly activity are performed in Newbury Park, California. The San Diego,
California location serves as the headquarters for our High Performance Products
Group, Edge Semiconductor. Design, applications, sales, and other administrative
activities related to the high performance group are conducted at this location.
Our Reynosa, Mexico facility provides relatively low cost assembly and test
capabilities for supporting military and legacy products. We own a manufacturing
facility in Glenrothes, Scotland that was previously used for value-added
manufacturing capabilities of certain legacy product lines for the military and
aerospace industries primarily in the European markets.

A large part of the manufacturing operation is performed by operators working
on standard equipment in our wafer fabrication lines. New designs or process
modifications are tested by both product and process engineering prior to being
incorporated into the manufacturing process. Our wafer fabrication facilities
employ a variety of Bipolar processes and a limited amount of CMOS processes.
The facilities and related fabrication processes used tend to be significantly
less costly than state-of-the-art digital fabrication facilities and likewise
utilize equipment that is less subject to obsolescence. Unlike the digital
industry, our products are less reliant on state-of-the-art manufacturing but
more on design and applications support.

We fabricate a majority of our products from basic materials (principally
silicon, ceramic materials, metals and plastics), all of which are available
from a number of suppliers. We support approximately 50% of our end products
with wafers that are fabricated internally. Outside foundries are used for the
remaining 50% of fabrication capacity. As of the end of fiscal year 2000, we
estimated that we were utilizing approximately 80% of our internal wafer
fabrication capacity. All of the Company's high performance circuits, advanced
communication ICs and a percentage of power management products are fabricated
at outside foundries. Currently all our protection products are fabricated
internally.

We use silicon wafer foundries that are based in the United States, Canada,
Europe and Asia. Currently, our largest foundry suppliers are based in the
United States and Asia. Contractual agreements exist with each of the outside
foundries. With expansion into higher-end communication product lines and
higher-performance devices, we expect that we will increase, as a percentage of
the total, the amount of outside foundries in order to utilize the best
available technology and leverage the capital investment of others.


Competition

The semiconductor industry is highly competitive and we expect competitive
pressures to continue. Our ability to compete effectively and to expand our
business will depend on our ability to continue to recruit applications and
design talent, our ability to introduce new products and the rate at which we
introduce such new products to offset the relatively short product life cycles
found in the industry which is characterized by decreasing unit selling prices

7
over the life of a product, our ability to capitalize on efficiencies and
economies of scale in production and sales, and our ability to maintain or
improve our productivity and product yields to reduce manufacturing costs.

We are in direct and active competition, as to one or more of our product
lines, with at least 30 manufacturers of such products, of varying financial
size and strength. A number of these competitors are dependent on semiconductor
products as their principal source of income, and some are much larger than us.
The number of competitors has grown due to expansion of the market segments in
which we participate. We consider our primary competitors to include Texas
Instruments, National Semiconductor, Linear Technology, Fairchild Semiconductor
and Intersil Semiconductor, all with respect to our power management products;
ST Microelectronics N.V. with respect to our protection products; Analog
Devices, Maxim Integrated Products and ON Semiconductors, all with respect to
our high performance/ATE products; Applied Micro Circuits Corporation, PMC-
Sierra Inc. and Vitesse Semiconductor Corp., all with respect to our advanced
communications products; and Philips Semiconductors, Synaptics Inc. and
Mitsubishi Electric Corp, all with respect to our intelligent input/output
devices. Due to the fragmented nature of the analog semiconductor industry, we
estimate that we have no more than 30% product overlap with any single
competitor identified.


Patents and Licenses

Patents, licenses and other rights have not proven in the past to be
significant to our business. However, competition in the commercial marketplace
has required that certain developed devices be protected by patents. We have
pursued patent protection for certain devices. We intend to pursue these rights
for future products that may require protection from use by competitors. At this
time, we do not license our patents.


Environmental Matters

On February 7, 2000, we were notified by the United States Environmental
Protection Agency with respect to the Casmalia Disposal Site in Santa Barbara,
California. We have been included in the Superfund program to clean up this
disposal site for our involvement in utilizing this site for waste disposal. As
of January 30, 2000, we had provided approximately $245,000 for potential
settlement under this program, however, the ultimate resolution and timing of
the resolution is unknown at this time. We believe the amount provided is
sufficient to cover any liability existing based on the currently available
information.

Certain contaminants have been found in the ground water at the Company's
Newbury Park facility. The Company has data showing that the contaminants are
from an adjacent facility. The contaminants in question have never been used by
the Company at the Newbury Park facility. To protect its interests, the Company
utilizes an environmental firm, specializing in hydrogeology, to perform
periodic monitoring. It is currently not possible to determine the ultimate
amount of possible future clean-up costs, if any, that may be required of the
Company at this site. Accordingly, no reserves for clean-up have been provided
by the Company at this time.


Employees

As of January 30, 2000, we had 731 full-time employees. We have never had a
work stoppage, and our domestic and European employees are not unionized. Our
Mexican Maquiladora operation has unionized employees. Employee relations at the
Mexican plant have been, and are, satisfactory. Competition for key design and
application engineers is significant.


Government Regulations

We are required to comply with numerous government regulations that are normal
and customary to manufacturing businesses, which operate in our markets and
operating locations. In addition, a substantial portion of our sales that serve
the military and aerospace markets consist of products which have been qualified
to be sold in these markets by the U.S. Department of Defense (DOD). These
products mainly consist of discrete rectifiers and

8
rectifier assemblies. In order to maintain these qualifications, we must comply
with certain specifications promulgated by the DOD. As part of maintaining these
qualifications we are routinely audited by DOD personnel. Based on the
specifications as they exist today, we believe we can maintain our
qualifications for the foreseeable future. However, these specifications can be
modified by the DOD in the future which may make the manufacturing of these
products more difficult and thus could adversely impact our profitability in
those product lines.

RISK FACTORS

You should carefully consider and evaluate all of the information in this Form
10-K, including the risk factors listed below. Any of these risks could
materially and adversely affect our business, financial condition and results of
operations.

Keep these risk factors in mind when you read "forward-looking" statements
elsewhere in this Form 10-K. These statements relate to our expectations about
future events and time periods. Generally, the words "anticipate," "expect,"
"intend" and similar expressions identify forward-looking statements. Forward-
looking statements involve risks and uncertainties, and future events and
circumstances could differ significantly from those anticipated in the forward-
looking statements.


Risks Related to Our Business

We may be unsuccessful in developing and selling new products required to
maintain or expand our business

We operate in a dynamic environment characterized by price erosion, rapid
technological change and design and other technological obsolescence. Our
competitiveness and future success depend on our ability to introduce new or
improved products that meet customer needs while achieving acceptable margins.
If we fail to introduce these new products in a timely manner or these products
fail to achieve market acceptance, our business, financial condition and results
of operations could be materially and adversely affected.

The introduction of new products presents significant business challenges
because product development commitments and expenditures must be made well in
advance of product sales. The success of a new product depends on accurate
forecasts of long-term market demand and future technological developments, as
well as on a variety of specific implementation factors including:

. timely and efficient completion of process design and development;

. timely and efficient implementation of manufacturing and assembly
processes;

. product performance;

. the quality and reliability of the product; and

. effective marketing, sales and service.

The failure of our products to achieve market acceptance due to these and other
factors could materially and adversely affect our business, financial condition,
and results of operations.


We may fail to attract or retain the specialized technical and management
personnel required to successfully operate our business

Our future success depends upon our ability to attract and retain highly
qualified technical, marketing and managerial personnel. We are particularly
dependent on a relatively small group of key technical personnel with analog and
mixed-signal expertise. Personnel with analog and mixed-signal expertise are
scarce and competition for personnel with these skills is intense. There can be
no assurance that we will be able to retain existing key technical,

9
marketing and managerial employees or that we will be successful in attracting,
assimilating or retaining other highly qualified technical, marketing and
managerial personnel in the future. If we are unable to retain existing key
employees or are unsuccessful in attracting new highly qualified employees, our
business, financial condition and results of operations could be materially and
adversely affected.


The cyclical nature of the semiconductor industry may limit our ability to
maintain or increase revenue and profit levels during future industry downturns

The semiconductor industry is highly cyclical. Our financial performance may
be materially and adversely affected by significant downturns in the
semiconductor industry as a result of:

. general economic conditions;

. general reductions in inventory levels by customers;

. excess production capacity; and

. accelerated declines in average selling prices of our products.

The occurrence of these or other conditions in the semiconductor industry in the
future could have a material adverse effect on our business, financial condition
and results of operations.


Fluctuations and seasonality in the personal computer industry may have
adverse consequences for our business

Many of our products are used in personal computers and related peripherals.
Industry-wide fluctuations in the personal computer marketplace have in the past
and may in the future materially and adversely affect our business. In addition,
our past results have reflected some seasonality, with demand levels being
higher in computer segments during the third and fourth quarters of the year in
comparison to the first and second quarters.


Economic downturn in our end-markets may have adverse consequences for our
business

We market our products to several commercial markets, including computers and
peripherals, telecommunications, and industrial and test equipment. A downturn
in any of our markets, especially the consumer computer industry, could
materially and adversely affect our business, financial condition and results of
operations. In addition, current efforts being undertaken by companies in the
semiconductor manufacturing industry to increase worldwide semiconductor
manufacturing capacity could lead to general manufacturing overcapacity and to
underutilization of our manufacturing capacity.


We obtain certain components and materials necessary for our manufacturing
operations from a limited number of suppliers

Our reliance on a limited number of outside subcontractors for silicon wafers,
packaging and certain other tasks involves several risks, including potential
inability to obtain an adequate supply of required components and reduced
control over the price, timely delivery, reliability and quality of components.
There can be no assurance that problems will not occur in the future with
suppliers or subcontractors. Disruption or termination of our supply sources or
subcontractors could delay our shipments and could have a material adverse
effect on our business, financial condition and results of operations. Delays
could also damage relationships with current and prospective customers. Any
prolonged inability to obtain timely deliveries or any other circumstances that
would require us to seek alternative sources of supply or to manufacture or
package certain components internally could have a material adverse effect on
our business, financial condition and results of operations.

10
Our future quarterly operating results may fluctuate and therefore may fail to
meet expectations

Our quarterly operating results may fluctuate in the future, may fail to match
our past performance and meet the expectations of analysts and investors. Our
quarterly operating results may fluctuate as a result of:

. general economic conditions in the countries where we sell our products;

. seasonality and variability in the computer market and our other end
markets;

. the timing of our and our competitors' new product introductions;

. product obsolescence;

. the scheduling, rescheduling and cancellation of large orders by our
customers;

. the cyclical nature of demand for our customers' products;

. our ability to develop new process technologies and achieve volume
production at our fabrication facilities;

. changes in manufacturing yields;

. adverse movements in exchange rates, interest rates or tax rates; and

. the availability of adequate supply commitments from our outside suppliers
or subcontractors.

As a result of these factors, our past financial results are not necessarily
indicative of our future results.


We receive a significant portion of our revenues from a small number of
customers

Historically, we have had significant customers, which individually accounted
for approximately 10% of consolidated revenues in certain quarters. The
composition of our largest customers has varied from year to year. In fiscal
year 2000, our top five customers accounted for approximately one-third of our
revenues, and for fiscal year 1999, our top five customers accounted for
approximately 25% of our revenues. We primarily conduct our sales on a purchase
order basis, rather than pursuant to long-term supply contracts. The loss of any
significant customer, any reduction in orders by any of our significant
customers, or the cancellation of a significant customer order, could materially
and adversely affect our business, financial condition and results of
operations.


We are expanding and diversifying our operations, and if we fail to manage our
expanding and more diverse operations successfully, our business, financial
condition and results of operations may be materially and adversely affected

Our strategy includes expansion and diversification of our operations through
internal development. Our diversification into new markets and product lines
will increase demand on our management, financial resources and information and
internal control systems. Our success depends in significant part on our ability
to implement, improve and expand our systems, procedures and controls. If we
fail to do this at a pace consistent with the development of our business, then
our business, financial condition and results of operations could be materially
and adversely affected.

As we seek to expand our operations, we expect to encounter a number of risks,
which may include those associated with:

. hiring additional management and other critical personnel;

11
.  adding equipment and capacity; and

. increasing the scope, geographic diversity and complexity of our
operations.


We have acquired and may continue to acquire other companies and may be unable
to successfully integrate such companies with our operations

In the past we have expanded our operations through strategic acquisitions and
we may continue to expand and diversify our operations with additional
acquisitions. If we are unsuccessful in integrating these companies with our
operations, or if integration is more difficult than anticipated, we may
experience disruptions that could have a material adverse effect on our
business, financial condition and results of operations. Some of the risks that
may affect our ability to integrate companies we acquire include those
associated with:

. unexpected losses of key employees or customers of the acquired company;

. conforming the acquired company's standards, processes, procedures and
controls with our operations;

. coordinating our new product and process development;

. hiring additional management and other critical personnel; and

. increasing the scope, geographic diversity and complexity of our
operations.


We compete against larger, more established entities

The semiconductor industry is intensely competitive and is characterized by
price erosion, rapid technological change and design and other technological
obsolescence. We compete with domestic and international semiconductor
companies, many of which have substantially greater financial and other
resources with which to pursue engineering, manufacturing, marketing and
distribution of their products. Some of these competitors include: Texas
Instruments, National Semiconductor, Linear Technology, Fairchild Semiconductor
and Intersil Semiconductor, all with respect to our power management products;
ST Microelectronics N.V. with respect to our protection products; Analog
Devices, Maxim Integrated Products and ON Semiconductor, all with respect to our
high performance/ATE products; Applied Micro Circuits Corporation, PMC-Sierra
Inc. and Vitesse Semiconductor Corp., all with respect to our advanced
communications products; and Philips Semiconductors, Synaptics Inc. and
Mitsubishi Electric Corp, all with respect to our intelligent input/output
devices. We expect continued competition from existing competitors as well as
competition from new entrants in the semiconductor market. Our ability to
compete successfully in the rapidly evolving area of integrated circuit
technology depends on several factors, including:

. success in designing and manufacturing new products that implement new
technologies;

. protection of our processes and know-how;

. maintaining high product quality and reliability;

. pricing policies of our competitors;

. performance of competitors' products;

. ability to deliver in large volume on a timely basis;

. marketing, manufacturing and distribution capability; and

12
.  financial strength.


Fluctuating production yields may increase production costs and cause
inventory shortages

The manufacture of semiconductor products is a highly complex and precise
process. Defects in masks, impurities in the materials used, contamination of
the manufacturing environment, failure of equipment and other difficulties in
the fabrication process can cause a substantial percentage of wafers to be
rejected or numerous die on each wafer to be nonfunctional. Wafer yields can
decline without warning, resulting in substantially higher production costs and
inventory shortages. Yield problems may take substantial time to analyze and
correct. Yield problems may also arise from our outsourced third party
manufacturers. We may experience production yield problems in the future that
could materially and adversely affect our business, financial condition and
results of operations.


We must commit resources to product production prior to receipt of purchase
commitments and could lose some or all of the associated investment

Sales are made primarily pursuant to purchase orders for current delivery,
rather than pursuant to long-term supply contracts, that may be revised or
canceled without penalty. As a result, we must commit resources to the
production of products without any advance purchase commitments from customers.
Our inability to sell products after we devote significant resources to them
could have a material adverse effect on our business, financial condition and
results of operations.


We may underutilize our manufacturing facilities or we may have inadequate
facilities to meet the demand for our products

We may underutilize our manufacturing facilities from time to time as a result
of reduced demand for our products. If demand for our products does not increase
consistent with our plans and expectations, we will likely underutilize our
manufacturing facilities which could have a material adverse effect on our
business, financial condition and results of operations.

Conversely, there may be situations in the future in which our manufacturing
facilities will be inadequate to meet the demand for our products. Our inability
to generate sufficient manufacturing capacities to meet demand, either through
our own facilities or through outsourcing to third parties, could have a
material adverse effect on our business, financial condition and results of
operations.


We sell and trade with foreign customers which subjects our business to
increased risks applicable to international sales

Sales to foreign customers accounted for approximately 64% of net sales in the
fiscal year ended January 30, 2000 and 53% of net sales for fiscal year 1999.
The percentage of international sales may increase in future years.
International sales are subject to certain risks, including unexpected changes
in regulatory requirements, fluctuations in exchange rates, tariffs and other
barriers, political and economic instability, difficulties in accounts
receivable collection, difficulties in managing distributors and
representatives, difficulties in staffing and managing foreign subsidiary
operations and potentially adverse tax consequences. There can be no assurance
that any of these factors will not have a material adverse effect on our
business, financial condition and results of operations. In addition, even
though the majority of our foreign sales are denominated in U.S. dollars,
currency exchange fluctuations in countries where we do business could
materially and adversely affect us by resulting in pricing that is not
competitive with prices denominated in local currencies.


We may be unable to adequately protect our intellectual property rights

13
Few of our products are protected by patents and we rely primarily on a
combination of nondisclosure agreements and other contractual provisions, as
well as the commitment to confidentiality and loyalty of our employees, to
protect our know-how and processes. We intend to continue to protect our
proprietary technology through copyrights and trade secrets and, to a limited
extent, patents. Despite this intention, we may not be successful in achieving
adequate protection. Our failure to adequately protect our material know-how and
processes could have a material adverse effect on our business, financial
condition and results of operations. There can be no assurance that the steps we
have taken will be adequate to protect our proprietary rights or that a
competitor will not independently develop similar or superior know-how or
processes.

The semiconductor industry is characterized by frequent litigation regarding
patent and intellectual property rights. Due to the number of competitors, the
potential for patent infringement exists and is an ongoing risk since other
companies in our industry could have patent rights which may not be identifiable
when we initiate development efforts. Litigation, which could result in
substantial cost and diversion of resources, may be necessary to enforce our
intellectual property rights or to defend ourselves against infringement claims.
We may also be subject to future intellectual property claims or judgments. If
these were to occur, we may be unable to obtain a license on favorable terms, if
at all, or without a material adverse effect on our business, financial
condition and results of operations.


We are subject to environmental regulations

We are subject to a variety of United States federal, foreign, state and local
governmental laws, rules and regulations related to the use, storage, handling,
discharge or disposal of certain toxic, volatile or otherwise hazardous
chemicals used in our manufacturing process. Any of these regulations could
require us to acquire equipment or to incur substantial other expenses to comply
with environmental regulations. If we were to incur substantial additional
expenses, product costs could significantly increase, thus materially and
adversely affecting our business, financial condition and results of operations.
Any failure to comply with present or future environmental laws, rules and
regulations could result in fines, suspension of production or cessation of
operations, any of which could have a material adverse effect on our business,
financial condition and results of operations.


Our products may be found to be defective, product liability claims may be
asserted against us and we may not have sufficient liability insurance

One or more of our products may be found to be defective after we have already
shipped such products in volume, requiring a product replacement, recall, or a
software fix which would cure the defect but impede performance. We may also be
subject to product returns which could impose substantial costs and have a
material and adverse effect on our business, financial condition and results of
operations.

Product liability claims may be asserted with respect to our technology or
products. Although we currently have product liability insurance, there can be
no assurance that we have obtained sufficient insurance coverage, or that we
will have sufficient resources, to satisfy any product liability claims.


Some of our facilities are located near major earthquake fault lines

Our corporate headquarters, a portion of our manufacturing facilities,
assembly and research and development activities and certain other critical
business operations are located near major earthquake fault lines. We could be
materially and adversely affected in the event of a major earthquake. We do not
maintain earthquake insurance.


Information technology and year 2000 issues

As of the date of this Form 10-K, we have not experienced any significant
disruptions or computer processing errors or failures related to any Year 2000
issues. A significant percentage of the software that runs most of the computers
in the United States relies on two-digit date codes to perform a number of
computation and decision

14
making functions. Commencing on January 1, 2000 these computer programs may fail
from an inability to interpret date codes properly, misreading "00" for the
year 1900 instead of the year 2000.

We have completed a comprehensive program intended to identify, evaluate and
address issues associated with the ability of our information technology and
non-information technology systems to properly recognize the Year 2000 in order
to avoid interruption of the operation of these systems and a material adverse
effect on our operations as a result of the century change. By December 1999, we
completed all Year 2000 compliance testing and any necessary conversions. We
estimate the costs to reprogram, replace and test our information and non-
information technology systems for Year 2000 compliance was between $100,000 and
$150,000 over the life of the project. Costs incurred in connection with Year
2000 compliance efforts were expensed as incurred. We believe that our
information technology and non-information technology systems are Year 2000
compliant. No adverse effects were encountered and no future expense is
expected as a result of Year 2000.


ITEM 2. PROPERTIES

Our headquarters facility is located in Newbury Park, California where we
lease approximately 53,000 square feet under a lease that extends through August
2003. This facility supports certain of our manufacturing operations, as well as
all of our inside sales, marketing and administrative offices.

In addition, we lease two facilities in Santa Clara, California. One facility
houses wafer fabrication operations, contains 10,345 square feet and has a lease
that extends until November 2004. The other facility which houses design
engineering, test and administration, contains 13,250 square feet and has a
lease that extends until November 2000. We lease a facility in Corpus Christi,
Texas, which houses a wafer fabrication line, production testing, and certain
engineering functions, and contains approximately 44,000 square feet under a
lease that extends through December 2001. In addition, we lease space to house
certain of our other manufacturing, design, sales and marketing facilities in
San Diego, California; Oxnard, California; Raleigh, North Carolina; Connecticut;
France; Germany; Taiwan; Korea; Southampton, England; St. Gallen, Switzerland
and Glasgow, Scotland.

In November 1999, we purchased a parcel of land in Camarillo, California for
approximately $5.1 million. We plan to use the land to build a new corporate
headquarters over the next eighteen months. We also own a 20,000 square foot
manufacturing facility in Glenrothes, Fife, Scotland and a 22,000 square foot
building in Reynosa, Mexico.

We believe that our existing leased and owned space is more than adequate for
our current operations, and that suitable replacement and additional space will
be available in the future on commercially reasonable terms.


ITEM 3. LEGAL PROCEEDINGS

We periodically become subject to legal proceedings in the ordinary course of
our business. Other than the action detailed below, we are not currently
involved in any proceedings which we believe will materially and adversely
affect us.

On February 7, 2000, we were notified by the United States Environmental
Protection Agency with respect to the Casmalia Disposal Site in Santa Barbara,
California. We have been included in the Superfund program to clean up this
disposal site for our involvement in utilizing this site for waste disposal. As
of January 30, 2000, we had provided approximately $245,000 for potential
settlement under this program, however, the ultimate resolution and timing of
the resolution is unknown at this time. We believe the amount provided is
sufficient to cover any liability existing based on the currently available
information.


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

During the fourth quarter of the fiscal year covered by this report no matter
was submitted to a vote of the security holders through the solicitation of
proxies or otherwise.

15
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's Common Stock is traded on the NASDAQ National Market under the
symbol "SMTC". The following table sets forth, for the fiscal periods indicated,
the quarterly high and low closing prices.


High Low
--------------------------
Fiscal Year 2000:
First Quarter............................. $17.63 $12.38
Second Quarter............................ 34.03 16.41
Third Quarter............................. 42.69 28.00
Fourth Quarter............................ 68.00 37.25
Fiscal Year 1999:
First Quarter............................. $14.88 $10.56
Second Quarter............................ 13.00 5.19
Third Quarter............................. 11.91 6.44
Fourth Quarter............................ 19.56 11.88

As of April 24, 2000, there were approximately 15,900 recorded holders of the
Company's common stock. The last reported sales price for the Company's common
stock on the NASDAQ National Market System at April 24, 2000 was $58.19 per
share.

The Company discontinued its cash dividend in 1980 and does not anticipate
paying a cash dividend in the current year. The Company declared a two for one
stock split in fiscal years 2000 and 1998 in the form of 100% stock dividends to
shareholders. The Company does not anticipate another stock dividend being
declared in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth summary financial information. Amounts are in
thousands, except per share amounts. The acquisitions of USAR Systems (USAR) in
December 1999, Acapella Limited (Acapella) in April 1998, and Edge Semiconductor
(Edge) in April 1997 were accounted for as poolings of interests. The financial
positions and results of operations of USAR, Acapella, and Edge were included
from November 1, 1999, February 1, 1998, and January 28, 1996, respectively (see
Note 2 to the Consolidated Financial Statements). Weighted average number of
shares and net income per share reflects two-for-one stock splits, effected in
the form of stock dividends that were paid on January 13, 1998 and September 14,
1999. The information set forth below should be read in conjunction with the
Company's complete financial statements, appearing elsewhere in this report.

<TABLE>
<CAPTION>
Year Ended January
------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Net Sales $61,684 $71,595 $102,808 $114,519 $173,768
Gross Profit 25,809 30,683 48,929 54,278 91,037
Operating Income 11,289 12,663 21,809 18,576 42,958
Income Before Taxes 11,343 12,714 22,159 19,362 44,104
Net Income $ 7,531 $ 8,487 $ 14,761 $ 12,895 $ 29,395
- --------------------------------------------------------------------------------------------------------------------
Net Income per Share:
Basic $0.32 $0.31 $0.53 $0.44 $0.95
Diluted $0.30 $0.30 $0.49 $0.41 $0.83
- --------------------------------------------------------------------------------------------------------------------
Weighted Average Number of Shares:
Basic 23,652 27,178 27,956 29,344 30,835
</TABLE>

16
<TABLE>
<S> <C> <C> <C> <C> <C>

Diluted 24,776 28,100 30,236 31,784 35,315
- --------------------------------------------------------------------------------------------------------------------
Total Assets $35,225 $45,688 $67,135 $92,556 $149,350
Long-Term Obligations, Less Current
Maturities $ 1,157 $ 1,256 $ 33 $ 57 $ 131
Working Capital $19,378 $25,585 $41,312 $65,844 $ 96,687
Total Stockholders' Equity $24,937 $33,986 $54,661 $79,771 $125,482
</TABLE>



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS



You should read the following discussion of our financial condition and
results of operations together with the consolidated financial statements and
the notes to consolidated financial statements included elsewhere in this Form
10-K. This discussion contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, as more fully described in the "Risk
Factors" section and elsewhere in this Form 10-K. We undertake no obligation to
update any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.


Overview

We design, develop, manufacture and market a wide range of analog and mixed-
signal semiconductors for commercial and military applications. Our products are
sold principally to customers in the computer, communications and industrial
markets. Computer market applications include desktop computers, servers,
workstations, laptop computers, personal digital assistants (PDAs) and computer
add-on cards. Products within the communications market include local area
networks, wide area networks, cellular phones and base-stations. Industrial
applications include automated test equipment (ATE), medical devices and factory
automation systems. Our focus on these commercial applications over the past
several years represents a substantial transition from our historical business,
which was predominantly military and aerospace applications.

Sales to customers are made on the basis of individual customer purchase
orders. Many large commercial customers, particularly in the personal computer
industry, include terms in their purchase orders, which provide liberal
cancellation provisions. Recent trends within the industry toward shorter lead-
times and "just-in-time" deliveries have resulted in our reduced ability to
predict future shipments. As a result, we expect the percentage of turns-fill
business (orders received and shipped within the same quarter) to increase as a
percentage of net sales.

With a portion of our sales emanating from retail computer and computer
related applications, our past results have reflected some seasonality, with
demand levels being higher in computer segments during the third and fourth
quarters of the year in comparison to the first and second quarters.

One of our strategies is to expand our business through strategic
acquisitions. Over the past three years, we have made several small acquisitions
in order to increase our pool of skilled technical personnel and penetrate new
market segments such as high performance, advanced communications and system
management devices. These acquisitions include: USAR Systems Incorporated;
Practical Sciences, Inc.; Acapella Limited and Edge Semiconductor. The
acquisitions of USAR, Acapella and Edge were accounted for as poolings of
interests.

The results of operations described below give effect to our two-for-one stock
split in the form of a 100% stock dividend that was paid on September 14, 1999.
On October 12, 1999, the Company authorized an increase in the number of shares
of its common stock from 40,000,000 to 100,000,000.

Results of Operations

17
Fiscal Year 2000 Compared With Fiscal Year 1999

Net Sales. We generally recognize revenue upon shipment of our products. We
defer revenue recognition on shipment of certain products to distributors where
return privileges exist until the products are sold through to end users. Net
sales for fiscal year 2000 were $173.8 million, compared to $114.5 million for
fiscal year 1999, a 52% increase. This increase was due in part to favorable
market conditions in the overall semiconductor industry and the growth in sales
into the communications end market.

Gross Profit. Gross profit is equal to our net sales less our cost of sales.
Our cost of sales includes materials, direct labor and overhead. Cost of
inventory is determined by the first-in, first-out method. Gross profit for
fiscal year 2000 was $91.0 million, compared to $54.3 million for the comparable
period in the prior year, a 68% increase. Our gross margins (defined as gross
profit as a percentage of net sales) are generally affected by price changes
over the life of the products and the overall mix of products sold. Higher gross
margins are generally expected from new products and improved production
efficiencies as a result of increased utilization. Conversely, prices for
existing products generally will continue to decrease over their respective life
cycles. Our gross margin was 52% for fiscal year 2000. This compared to a gross
margin of 47% for fiscal year 1999. The improvement is attributed to increased
operating efficiencies associated with higher shipment levels, higher revenue
contribution from products introduced in the last year, and a favorable shift in
product mix toward higher margin product lines. Gross profit for fiscal year
1999 was adversely effected by one-time charges of $1.2 million for write-offs
of discontinued inventory associated with restructuring our Corpus Christi
facility.

Operating Costs and Expenses. Operating costs and expenses generally consist
of selling, general and administrative (SG&A), product development and
engineering costs (R&D), costs associated with acquisitions, and other operating
related charges. Operating costs and expenses were $48.1 million, or 28% of net
sales, for fiscal year 2000. Operating costs and expenses for fiscal year 1999
were $35.7 million, or 31% of net sales. Operating costs and expenses, as a
percentage of net sales, are lower for fiscal year 2000 than previous levels due
to higher shipment rates and greater efficiencies.

SG&A expenses for fiscal year 2000 were $27.2 million, or 16% of net sales,
compared to $20.1 million, or 18% of net sales for fiscal year 1999. The
increase in expenditures was due primarily to the overall growth of our
business, while the decrease in percentage of net sales reflects higher revenue
contributions from newer products. R&D expenses were relatively consistent at
$20.3 million, or 12% of net sales, for fiscal year 2000, compared to $14.0
million, or 12% of net sales, for fiscal year 1999. We continue to invest
heavily in areas deemed critical for developing and marketing new products,
which are generally targeted at broadening our customer base, product lines and
end-product applications.

Operating costs and expenses for fiscal year 2000 include one-time costs of
$531,000 associated with the December 1999 acquisition of USAR Systems.
Operating costs and expenses for fiscal year 1999 include one-time costs of
$255,000 associated with the April 1998 acquisition of Acapella Limited.
Additionally, a one-time restructuring charge of $1.3 million was taken in the
same period in connection with the consolidation of manufacturing capacity and
the write-down of impaired assets at our Corpus Christi, Texas facility.

Interest and Other Income. Interest and other income of $1.2 million was
realized in fiscal year 2000. For fiscal year 1999, interest and other income
was $808,000. Other income and expenses for both periods is primarily interest
income.

Provision for Taxes. Expense for income taxes was $14.7 million in fiscal
year 2000, compared to $6.5 million in fiscal year 1999. The effective tax rate
for fiscal years 2000 and 1999 remained constant at 33%.


Fiscal Year 1999 Compared with Fiscal Year 1998

Net Sales. Net sales for fiscal year 1999 totaled $114.5 million, compared
to $102.8 million in fiscal year 1998, an increase of 11%. The growth in net
sales between fiscal years 1999 and 1998 was primarily due to increased
shipments of integrated circuits and discrete products. Power management,
protection and high

18
performance/ATE specific products were a principal reason for the increase in
sales for both 1999 and 1998. The majority of power management product line
sales are for applications in the computer market. Protection products are used
in both portable computers and communication applications. We experienced a
significant decline in demand during the second quarter of fiscal year 1999
because of weakness in the automated test equipment and personal computer end
markets. The downturn was significant, but relatively brief in that our net
sales returned to higher levels in the third and fourth quarters of fiscal year
1999.

Gross Profit. Gross profit for fiscal year 1999 was $54.3 million, compared
to $48.9 million for fiscal year 1998, an 11% increase. The gross margin,
exclusive of one-time charges for fiscal year 1999, was 48% of net sales. During
the second quarter in fiscal year 1999, we scaled back production capabilities
at the Corpus Christi, Texas facility, which is now solely dedicated to
producing wafers for the protection product line. Included in cost of goods sold
for fiscal year 1999 were one-time charges of $1.2 million for write-offs of
discontinued inventory associated with restructuring our Corpus Christi
facility. Net of one-time charges, gross margin for fiscal year 1999 was 47%.
For fiscal year 1998, our gross margin was 48%.

Operating Costs and Expenses. Operating costs and expenses for fiscal year
1999 were $35.7 million, or 31% of net sales. For fiscal year 1998 operating
costs and expenses were $27.1 million, or 26% of net sales.

Spending on SG&A grew moderately in fiscal year 1999, and was 18% of net
sales. Increased headcount in key sales and strategic marketing positions
accounted for a large portion of the increase. SG&A was 16% of net sales in
fiscal year 1998.

For the fiscal years 1999 and 1998, we spent approximately $14.0 million and
$9.2 million, respectively, on R&D. Fiscal year 1999 R&D expense included the
initial costs associated with the establishment of our Raleigh, North Carolina
design center. Fiscal year 1998 R&D expense included costs associated with the
establishment of our Glasgow, Scotland design center.

Included in fiscal year 1999 operating costs and expenses were one-time
restructuring charges totaling $1.3 million taken during the second quarter. The
charges were for the consolidation of certain manufacturing capacity and the
write-down of impaired assets. The restructuring included the elimination of 60
manufacturing positions and the transition of all commercial integrated circuit
production from our Corpus Christi, Texas facility to our Santa Clara,
California wafer fabrication facility and to outside wafer foundries.

In fiscal years 1999 and 1998, we incurred costs of $255,000 and $1.0 million
for expenses associated with the acquisitions of Acapella Limited and Edge
Semiconductor, respectively. A large portion of the costs associated with these
transactions were for legal, accounting and investment banking fees.

Interest and Other Income. We generated other income of $808,000 for fiscal
year 1999 in comparison to $386,000 in 1998. A majority of other income is
interest income.

Provision for Taxes. Expense for income taxes was $6.5 million in fiscal
year 1999, compared to $7.4 million in fiscal year 1998. The effective tax rate
for fiscal years 1999 and 1998 remained constant at 33%.


Selected Quarterly Financial Data (Unaudited)

The following tables set forth our unaudited consolidated statements of income
data for each of the eight quarterly periods ended January 30, 2000, as well as
that data expressed as a percentage of our net sales for the quarters presented.
You should read this information in conjunction with our consolidated financial
statements and related notes appearing elsewhere in this Form 10-K. We have
prepared this unaudited consolidated information on a basis consistent with our
audited consolidated financial statements, and, in the opinion of our
management, it reflects all normal recurring adjustments that we consider
necessary for a fair presentation of our financial position and operating
results for the quarters presented. You should not draw any conclusions about
our future results from the operating results for any quarter.

<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------------
<S> <C>
</TABLE>

19
<TABLE>
<CAPTION>
May 3, Aug. 2, Nov. 1, Jan. 31, May 2, Aug. 1, Oct. 31, Jan. 30,
1998 1998 1998 1999 1999 1999 1999 2000
-----------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $29,534 $25,539 $28,535 $30,911 $33,044 $38,253 $47,072 $55,399
Cost of sales 15,060 14,882 14,747 15,552 16,445 18,609 22,087 25,590
------- ------- ------- ------- ------- ------- ------- -------
Gross profit (1) 14,474 10,657 13,788 15,359 16,599 19,644 24,985 29,809
Operating costs and expenses:
Selling, general and
Administrative 4,633 4,948 5,147 5,363 5,642 6,067 7,173 8,324
Product development and
Engineering 2,945 3,320 3,689 4,072 4,117 4,527 5,532 6,166
One-time charges 255 1,330 - - - - - 531
------- ------- ------- ------- ------- ------- ------- -------
Total operating costs
and expenses 7,833 9,598 8,836 9,435 9,759 10,594 12,705 15,021
------- ------- ------- ------- ------- ------- ------- -------
Operating income 6,641 1,059 4,952 5,924 6,840 9,050 12,280 14,788
Interest and other income, net 171 199 182 234 254 231 244 417
------- ------- ------- ------- ------- ------- ------- -------
Income before taxes 6,812 1,258 5,134 6,158 7,094 9,281 12,524 15,205
Provisions for taxes 2,275 420 1,715 2,057 2,341 3,063 4,133 5,172
------- ------- ------- ------- ------- ------- ------- -------
Net income $ 4,537 $ 838 $ 3,419 $ 4,101 $ 4,753 $ 6,218 $ 8,391 $10,033
======= ======= ======= ======= ======= ======= ======= =======

Net income per share (2):
Basic $0.16 $0.03 $0.12 $0.14 $0.16 $0.20 $0.27 $0.31
======= ======= ======= ======= ======= ======= ======= =======
Diluted $0.14 $0.03 $0.11 $0.12 $0.14 $0.18 $0.24 $0.27
======= ======= ======= ======= ======= ======= ======= =======

Weighted average number of
shares (2):
Basic 28,892 29,114 29,390 29,984 30,058 30,466 30,933 31,864
Diluted 31,488 30,998 31,326 33,424 33,102 34,612 34,625 36,854
</TABLE>

(1) Approximately $1.2 million, related to the write-down of discontinued
product inventories, was originally classified in operating expenses but has
been reclassified to ''Cost of Sales'' for the second quarter of fiscal year
1999.
(2) Reflects a two-for-one stock split effected in the form of a stock dividend
paid on September 14, 1999.


<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
May 3, Aug. 2, Nov. 1, Jan. 31, May 2, Aug. 1, Oct. 31, Jan. 30,
1998 1998 1998 1999 1999 1999 1999 2000
----------------------------------------------------------------------------------------
As a Percentage of Net Sales:
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 51.0 58.3 51.7 50.3 49.8 48.6 46.9 46.2
----- ----- ----- ----- ----- ----- ----- -----
Gross profit 49.0 41.7 48.3 49.7 50.2 51.4 53.1 53.8
Operating costs and expenses:
Selling, general & administrative 15.7 19.4 18.0 17.3 17.1 15.9 15.2 15.0
Product development and
Engineering 10.0 13.0 12.9 13.2 12.5 11.8 11.8 11.1
One-time charges 0.9 5.2 -- -- -- -- -- 1.0
----- ----- ----- ----- ----- ----- ----- -----
Total operating costs and
Expenses 26.5 37.6 31.0 30.5 29.5 27.7 27.0 27.1
----- ----- ----- ----- ----- ----- ----- -----
Operating income 22.5 4.1 17.4 19.2 20.7 23.7 26.1 26.7
Interest and other income, net 0.6 0.8 0.6 0.8 0.8 0.6 0.5 0.1
----- ----- ----- ----- ----- ----- ----- -----
</TABLE>

20
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before taxes 23.1 4.9 18.0 19.9 21.5 24.3 26.6 27.4
Provision for taxes 7.7 1.6 6.0 6.7 7.1 8.0 8.8 9.3
----- ----- ----- ----- ----- ----- ----- -----
Net income 15.4% 3.3% 12.0% 13.3% 14.4% 16.3% 17.8% 18.1%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>


Net Sales. Our net sales increased quarter over quarter in seven of the
eight quarters ended January 30, 2000. We realized a decrease in net sales in
the quarter ended August 2, 1998 from the quarter ended May 3, 1998, due to
unfavorable market conditions, primarily related to a weakness in the automated
test equipment and personal computer markets. The increase in net sales in
subsequent periods reflects the impact of new product introductions and more
favorable market conditions in the overall semiconductor industry, primarily in
the communications market.

Gross Profit. Gross profit as a percentage of net sales ranged from 41.7% to
53.8% during the eight quarters ended January 30, 2000. The quarter ended August
2, 1998 reflects the impact of unfavorable market conditions, primarily related
to a weakness in the automated test equipment and personal computer markets and
a $1.2 million inventory write-down. The improvement in subsequent quarters is
attributed to increased operating efficiencies associated with higher shipment
levels, higher revenue contribution and a favorable shift in product mix toward
higher margin product lines.

Operating Costs and Expenses. Operating costs and expenses as a percentage of
net sales increased in the quarter ended August 2, 1998 from the quarter ended
May 3, 1998 due to lower sales volumes, less than maximum utilization of our
infrastructure, establishment of a design center in Raleigh, North Carolina and
$1.3 million in one-time charges. On an absolute dollar basis, operating
expenses generally increased quarter over quarter due to an increase in sales
and strategic marketing personnel and increased specialized technical engineers
as well as continued focus on production development and engineering.

Liquidity and Capital Resources

Subsequent to the end of fiscal year 2000, we completed a private offering of
$400.0 million principal amount of convertible subordinated debentures that pay
an interest rate of 4 1/2% and are convertible into our common stock at a
conversion price of $84.46 per share. The notes are due in seven years. We
intend to use the net proceeds of the offering for general corporate purposes,
including working capital, expansion of sales, marketing and customer service
capabilities, and product development. In addition, we may use a portion of the
net proceeds to acquire or invest in complementary businesses, technologies,
services or products.

On January 30, 2000, we had working capital of $96.7 million, compared with
$65.8 million at January 31, 1999. The ratio of current assets to current
liabilities at January 30, 2000 was 5.1 to 1, compared to 6.2 to 1 at January
31, 1999. The decline was primarily due to our use of cash to repurchase stock
and invest in capital equipment.

Cash provided by operating activities was $36.6 million for fiscal year 2000,
compared to $21.2 million for fiscal year 1999. Net operating cash flows were
favorably impacted by net income of $29.4 million compared to $12.9 million in
the prior year period. Net cash provided by operating activities for fiscal year
2000 was also positively impacted by an increase in accounts payable and accrued
liabilities of $9.2 million and an increased income tax liability of $18.3
million. Net income for fiscal year 2000 was reduced by non-cash charges for
depreciation and amortization of $4.1 million. These items were partially offset
by a $9.9 million increase in receivables and an $9.8 million increase in
inventories.

Cash provided by operating activities was $21.2 million in fiscal year 1999
and $16.1 million in fiscal year 1998. The Company had an increase in operating
cash flows for fiscal year 1999 over fiscal year 1998 despite a reduction in net
income year over year, due to depreciation expense of $3.7 million and non-cash
restructuring charges of $2.4 million. In addition the Company increased its tax
liabilities by $4.8 million. Fiscal year 1998 operating cash flows were
favorably impacted by increased tax liability of $4.3 million and accrued
liabilities of $1.8 million, which were partially offset by increases in
inventories and receivables of $2.6 million and $4.7 million, respectively.

21
Investing activities used $31.4 million for fiscal year 2000 compared to $5.3
million in fiscal year 1999 and $7.3 million in fiscal year 1998. Investing
activities for fiscal year 2000 consist of increases in temporary cash
investments and capital expenditures of $16.4 million and $15.0 million,
respectively. Cash used in investing activities for the comparable prior year
period reflects primarily additions to property and equipment.

Our financing activities used $1.0 million during fiscal year 2000 and
provided $6.4 million in fiscal year 1999 and $421,000 in fiscal year 1998.
Financing activities for fiscal year 2000 reflect primarily $13.9 million in
funds used for stock repurchases, partially offset by funds from stock option
exercises. Financing activities for the comparable prior period represent
primarily cash from stock option exercises.

In August of 1998 we agreed to a credit arrangement with a financial
institution for borrowings up to $20.0 million. The line of credit consists of
two parts, the first facility being a $10.0 million line of credit for working
capital needs and the second facility being a reducing revolver loan for
equipment acquisitions. Through our foreign subsidiary, we also maintain an
overdraft credit line in the amount of 300,000 pounds sterling. As January 30,
2000, we had no borrowings outstanding under either of these credit facilities.

New products have been introduced for use in a wide variety of computer, test
and communications systems. In order to develop, design and manufacture new
products, we had to make significant expenditures during the past four years.
These investments aimed at developing new products, including the hiring of many
design and applications engineers and related equipment, will continue. We fully
intend to continue to invest in those areas that have shown potential for viable
and profitable market opportunities. Certain of these expenditures, particularly
the addition of design engineers, do not generate significant payback in the
short-term. We plan to finance these expenditures with cash generated by
operations and cash on-hand.

Purchases of new capital equipment were made primarily to expand manufacturing
capacity and improve efficiency. Funding for these purchases was made from our
operating cash flows and cash reserves. We have made significant investments in
product and process technology, including capital expenditures of $15.0 million,
$5.6 million and $6.2 million in fiscal years 2000, 1999 and 1998, respectively.
We believe that sales generating cash flows, together with the proceeds of the
debt offering, cash reserves and existing credit facilities, are sufficient to
fund operations and capital expenditures for the foreseeable future.


Inflation

Inflationary factors have not had a significant effect on our performance over
the past several years. A significant increase in inflation would affect our
future performance.


Recently Issued Accounting Standards

In June 1998 and June 1999, the FASB issued SFAS No. 133, "Accounting for
Derivative Investments and Hedging Activities," and SFAS No. 137, which delayed
the effective date of SFAS No. 133. We will adopt the statement in February 2001
and do not expect the adoption of this statement to have a material impact on
our financial position or results of operations.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB No. 101 provides
additional guidance on the recognition, presentation and disclosure of revenue
in financial statements. The Company has reviewed this bulletin and believes
that its current revenue recognition policy is consistent with the guidance of
SAB No. 101.


Year 2000 Compliance

As of the date of this Form 10-K, we have not experienced any significant
disruptions or computer processing errors or failures related to any Year 2000
issues. A significant percentage of the software that runs most of the computers
in the United States relies on two-digit date codes to perform a number of
computation and decision

22
making functions. Commencing on January 1, 2000 these computer programs may fail
from an inability to interpret date codes properly, misreading ''00'' for the
year 1900 instead of the year 2000.

We have completed a comprehensive program intended to identify, evaluate and
address issues associated with the ability of our information technology and
non-information technology systems to properly recognize the Year 2000 in order
to avoid interruption of the operation of these systems and a material adverse
effect on our operations as a result of the century change. By December 1999, we
completed all Year 2000 compliance testing and any necessary conversions. We
estimate the costs to reprogram, replace and test our information and non-
information technology systems for Year 2000 compliance was between $100,000 and
$150,000 over the life of the project. Costs incurred in connection with Year
2000 compliance efforts were expensed as incurred. We believe that our
information technology and non-information technology systems are Year 2000
compliant. No adverse effects were encountered and no future expense is
expected as a result of Year 2000.

FORWARD LOOKING STATEMENTS



In addition to historical information, this Form 10-K contains statements
relating to our future results. These statements include certain projections and
business trends which are ''forward-looking'' within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
made only as of the date of this Form 10-K. We do not undertake to update or
revise the forward-looking statements, whether as a result of new information,
future events or otherwise.

Actual results may differ materially from projected results as a result of
certain risks and uncertainties. These risks and uncertainties include, without
limitation, those described under ''Risk Factors'' including those set forth
below and those detailed from time to time in our filings with the SEC:

. successful development and timing of new products;

. ability to attract or retain specialized technical personnel;

. cyclical nature of the semiconductor industry due to global and market
conditions;

. availability of manufacturing capacity;

. fluctuation of quarterly operating results;

. loss of a significant customer or customer order;

. our ability to manage and integrate our expanding and more diverse
operations;

. our ability to integrate strategic acquisitions;

. our ability to compete against larger, more established entities;

. fluctuations in manufacturing yields;

. our ability to protect our intellectual property rights;

. uncertainties of litigation; and

. other risks and uncertainties.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

23
Foreign Currency Risk

As a global enterprise, the Company faces exposure to adverse movements in
foreign currency exchange rates. The Company's foreign currency exposures may
change over time as the level of activity in foreign markets grows and could
have a adverse impact upon the Company's financial results.

Certain of the Company's assets, including certain bank accounts and accounts
receivable, exist in nondollar-denominated currencies, which are sensitive to
foreign currency exchange rate fluctuations. The nondollar-denominated
currencies are principally German Deutschmarks, British Pounds Sterling and
French Francs. Additionally, certain of the Company's current and long-term
liabilities are denominated principally in British Pounds Sterling currencies,
which are also sensitive to foreign currency exchange rate fluctuations.

Because of the relatively small size of each individual currency exposure, the
Company does not employ hedging techniques designed to mitigate foreign currency
exposures. Likewise, the Company could experience unanticipated currency gains
or losses.

Interest Rate Risk

The Company has a line of credit with a financial institution at an interest
rate of 30-day commercial paper plus 2.2%. At any time, a sharp rise in
interest rates could have a material adverse impact upon the Company's cost of
working capital and interest expense. The Company does not currently hedge this
potential interest rate exposure. As of January 30, 2000 the Company had no
long-term debt outstanding.

24
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF INCOME
THREE YEARS ENDED JANUARY 30, 2000
(In thousands-except per share amounts)


<TABLE>
2000 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $173,768 $114,519 $102,808
Cost of Sales 82,731 60,241 53,879
-------- -------- --------
Gross Profit 91,037 54,278 48,929
-------- -------- --------
Operating costs and expenses:
Selling, general and administrative 27,206 20,091 16,925
Product development and engineering 20,342 14,026 9,195
Restructuring charge - 1,330 -
Acquisition costs 531 255 1,000
-------- -------- --------
Total operating costs and expenses 48,079 35,702 27,120
-------- -------- --------
Operating Income 42,958 18,576 21,809
Interest expense (57) (22) (36)
Other income, net 1,203 808 386
-------- -------- --------
Income before taxes 44,104 19,362 22,159
Provision for taxes 14,709 6,467 7,398
-------- -------- --------
NET INCOME $ 29,395 $ 12,895 $ 14,761
======== ======== ========
Earnings per share:
Net income per share -
Basic $0.95 $0.44 $0.53
Diluted $0.83 $0.41 $0.49

Weighted average number of shares -
Basic 30,835 29,344 27,956
Diluted 35,315 31,784 30,236
</TABLE>
See accompanying notes.

25
CONSOLIDATED BALANCE SHEETS
JANUARY 30, 2000 AND JANUARY 31, 1999
(Dollars in thousands-except share amount)

<TABLE>
2000 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 45,225 $41,035
Temporary investments 18,066 1,648
Receivables, less allowances of $750 in 2000 and $878 in 1999 25,223 15,414
Income taxes refundable - 258
Inventories 26,581 16,803
Other current assets 1,223 1,275
Deferred income taxes 4,106 2,139
-------- -------
Total current assets 120,424 78,572
-------- -------
Property, plant and equipment, net 24,397 13,417
Other assets 1,482 89
Deferred income taxes 3,047 478
-------- -------
TOTAL ASSETS $149,350 $92,556
======== =======


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,723 $ 5,296
Accrued liabilities 8,869 5,102
Income taxes payable 1,389 -
Other current liabilities 2,756 2,330
-------- -------
Total current liabilities 23,737 12,728
-------- -------
Other long-term liabilities 131 57
-------- -------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, 100,000,000 authorized
Issued and outstanding 32,048,252 in 2000 and 30,387,960 in 320 304
1999
Additional paid-in capital 53,885 30,309
Retained earnings 71,498 49,411
Accumulated other comprehensive loss (221) (253)
-------- -------
Total Stockholders' equity 125,482 79,771
-------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $149,350 $92,556
======== =======
</TABLE>
See accompanying notes.

26
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
THREE YEARS ENDED JANUARY 30, 2000
(Dollars in thousands-except share amounts)


<TABLE>
<CAPTION>
Common Stock
-------------------------------------
Additional Accumulated
Number Paid-in Retained Treasury Other Stockholders'
of Shares Amount Capital Earnings Stock, at Cost Comprehensive Equity
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 26, 1997 27,365,040 $274 $12,420 $21,571 - $ (279) $ 33,986
Comprehensive income:
Net income - - - 14,761 - - 14,761
Translation adjustment - - - - - 60 60
--------
Comprehensive income - - - - - - 14,821
Exercise of stock options 1,023,420 10 1,921 - - - 1,931
Tax benefit from exercised
stock options - - 3,923 - - - 3,923
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at February 1, 1998 28,388,460 $284 $18,264 $36,332 - (219) $ 54,661
- ------------------------------------------------------------------------------------------------------------------------------------

Comprehensive income:
Net income - - - 12,895 - - 12,895
Translation adjustment - - - - - (34) (34)
--------
Comprehensive income - - - - - - 12,861
Effect of pooling with Acapella
Limited 351,548 4 57 184 - - 245

Exercise of stock options 1,647,952 16 6,129 - - - 6,145
Tax benefit from exercised
stock options - - 5,859 - - - 5,859
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 1999 30,387,960 $304 $30,309 $49,411 - (253) $ 79,771
- ------------------------------------------------------------------------------------------------------------------------------------

Comprehensive income:
Net income - - - 29,395 - - 29,395
Translation adjustment - - - - - 32 32
--------
Comprehensive income - - - - - - 29,427
Effect of pooling with USAR
Systems 495,404 5 1,229 (143) - - 1,091

Stock repurchase (701,000) (7) - - (13,843) (13,850)
Reissued treasury stock 691,000 7 - (7,165) 13,843 - 6,685
Purchase of Practical Sciences 10,000 - 349 - - - 349
Exercise of stock options 1,164,888 11 5,047 - - - 5,058
Tax benefit from exercised
stock options - - 16,951 - - - 16,951
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 30, 2000 32,048,252 $320 $53,885 $71,498 - $(221) $125,482
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


See accompanying notes.

27
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED JANUARY 30, 2000
(Dollars in thousands)
<TABLE>
2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 29,395 $12,895 $14,761
Adjustments to reconcile net income to
net cash provided by operating activities:

Depreciation and amortization 4,118 3,723 2,775
Deferred income taxes (4,536) (802) (876)
(Gain) Loss on disposition of property, plant and equipment - (1) 20
Provision for doubtful accounts 45 135 480
Non-cash portion of restructuring charge - 2,366 -
Changes in assets and liabilities, net of effect of acquisition:
Receivables (9,854) (1,827) (4,732)
Income taxes refundable 258 (258) 68
Inventories (9,778) (955) (2,566)
Other assets (1,081) (251) 9
Accounts payable 5,427 55 (344)
Accrued liabilities 3,767 643 1,813
Income taxes payable 18,340 4,839 4,279
Other liabilities 500 633 457
-------- ------- -------
Net cash provided by operating activities 36,601 21,195 16,144
-------- ------- -------
Cash flows from investing activities:
Temporary investments, net (16,418) 204 (1,095)
Proceeds from sale of property, plant and
equipment - 62 31
Purchases of property, plant and equipment (15,009) (5,590) (6,192)
-------- ------- -------
Net cash used in investing activities (31,427) (5,324) (7,256)
-------- ------- -------
Cash flows from financing activities:
Net repayments under line of credit - - (80)
Repayment of long-term debt - - (1,430)
Exercise of stock options 5,058 6,145 1,931
Repurchase of treasury stock (13,850) - -
Reissuance of treasury stock 6,685 - -
Effect of pooling of interests 1,091 245 -
-------- ------- -------
Net cash provided (used) by financing activities (1,016) 6,390 421
-------- ------- -------
Effect of exchange rate changes on cash and cash equivalents 32 (34) 60
Net increase in cash and cash equivalents 4,190 22,227 9,369
Cash and cash equivalents at beginning of year 41,035 18,808 9,439
-------- ------- -------
Cash and cash equivalents at end of year $ 45,225 $41,035 $18,808
======== ======= =======
</TABLE>


See accompanying notes.

28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Business

Semtech Corporation and its wholly owned subsidiaries (Semtech International,
Semtech Corpus Christi, Semtech Limited, Semtech Santa Clara, Edge
Semiconductor, Acapella Limited, and USAR Systems, together, the Company)
design, develop and manufacture Standard Semiconductor Products, Rectifier and
Assembly Products and Other Products which are used in computer, communications,
military, aerospace, industrial, automotive and consumer applications. The
Company's primary facilities are in Newbury Park, Santa Clara and San Diego,
California; Corpus Christi, Texas; New York, New York; St. Gallen, Switzerland;
Reynosa, Mexico; and Southampton, England.

Fiscal Year

The Company reports results on the basis of fifty-two and fifty-three week
periods. The fiscal years ended January 30, 2000 and January 31, 1999 each
consisted of fifty-two weeks. The fiscal year ended February 1, 1998 consisted
of fifty-three weeks.

Revenue Recognition

The Company generally recognizes product revenue upon shipment. Product design
and engineering revenue is recognized during the period in which services are
performed. The Company defers revenue recognition on shipment of certain
products to distributors where return privileges exist until the products are
sold through to end users.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
Semtech Corporation and its wholly owned subsidiaries. All significant
intercompany transactions and accounts have been eliminated.

Reclassifications

Certain prior year balances have been reclassified to be consistent with
current year presentation.

Recently Issued Accounting Standards

In June 1998 and June 1999, the FASB issued SFAS No. 133, "Accounting for
Derivative Investments and Hedging Activities," and SFAS No. 137, which delayed
the effective date of SFAS No. 133. The Company will adopt the statement in
February 2001 and do not expect the adoption of this statement to have a
material impact on the Company's financial position or results of operations.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB No. 101 provides
additional guidance on the recognition, presentation and disclosure of revenue
in financial statements. The Company has reviewed this bulletin and believes
that its current revenue recognition policy is consistent with the guidance of
SAB No. 101.


Inventories

Inventories are stated at the lower of cost or market and consist of
materials, labor and overhead. Cost is determined by the first-in, first-out
method.

Property, Plant and Equipment

29
Property, plant and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following estimated useful
lives: buildings for thirty years; leasehold improvements for the lesser of
estimated useful life or lease term; machinery and equipment for two to six
years; and furniture and office equipment for three to six years. Maintenance
and repairs are charged to expense as incurred and the costs of additions and
betterments that increase the useful lives of the assets are capitalized.

Income Taxes

Deferred income tax assets or liabilities are computed based on the temporary
differences between the financial statement and income tax bases of assets and
liabilities using the statutory marginal income tax rate in effect for the years
in which the differences are expected to reverse. Deferred income tax expenses
or credits are based on the changes in the deferred income tax assets or
liabilities from period to period.

As of January 30, 2000 and January 31, 1999, approximately $2.6 million and
$3.0 million, respectively, of unremitted income related to the Company's wholly
owned European subsidiaries are not subject to federal and state income taxes
except when such income is paid to the parent company. Federal and state income
taxes have not been provided on this income, as it is management's intention
that these amounts will not be distributed in a taxable transaction.

Earnings per Share

Basic earnings per common share are computed using the weighted average number
of common shares outstanding during the period. Diluted earnings per common
share incorporate the incremental shares issuable upon the assumed exercise of
stock options. The weighted average number of shares used to compute basic
earnings per share in fiscal years 2000, 1999 and 1998 were 30,835,000,
29,344,000, and 27,956,000, respectively. For computation of diluted earnings
per share, the weighted average number of shares used in fiscal years 2000, 1999
and 1998 were 35,315,000, 31,784,000, and 30,236,000, respectively.

Options to purchase approximately 100,000, 1,130,000, and 376,000 shares were
not included in the computation of fiscal years 2000, 1999 and 1998 diluted net
income per share because such options were considered anti-dilutive.

Stock Distribution

On September 14, 1999, the Company effected a two-for-one stock split in the
form of a 100% stock dividend which was payable to shareholders of record as of
August 30, 1999. All shares, per share data, common stock, and stock option
amounts herein have been restated to reflect the effect of this split.

Translation

The assets and liabilities of the Company's foreign subsidiaries are
translated using currency exchange rates at fiscal year end. Income statement
items are translated at average exchange rates prevailing during the period. The
translation gains or losses are included in accumulated other comprehensive
income in the accompanying financial statements. Transaction gains and losses
are insignificant.

Software Development Costs

In accordance with SFAS No. 86, "Accounting for the Costs of Computer Software
to be Sold, Leased, or Otherwise Marketed," development costs related to
software products are expensed as incurred until the technological feasibility
of the product has been established. The cost of purchased software is
capitalized when related to a product which has achieved technological
feasibility or that has an alternative future use. Software development costs
incurred prior to achieving technological feasibility as well as certain
licensing costs are charged to research and development expense as incurred.

Capitalized software development costs are reported at the lower of
unamortized cost or net realizable value. Commencing upon initial product
release, these costs are amortized based on the straight-line method over the

30
estimated life, or a ratio of current revenues to total anticipated revenues,
generally three years for internal software development costs. Fully amortized
software costs are removed from the financial records. As of January 30, 2000,
$1.2 million of capitalized software costs are included in "Other Assets" in the
accompanying consolidated balance sheets. Amortization expense of capitalized
software costs totaled $26,000 as of January 30, 2000 and are included in "Cost
of Sales" in the accompanying consolidated statements of income.

Estimates Used by Management

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.


2. Business Combinations and Purchases

On December 6, 1999, the Company completed a merger with USAR Systems
Incorporated (USAR), based in New York, New York. Under the agreement, USAR
shareholders received 495,404 shares of Semtech common stock for all outstanding
shares of USAR stock. The Company acquired USAR Systems to broaden its product
line for serving the market for portable systems.

The acquisition of USAR was accounted for as a pooling of interests in
accordance with APB Opinion No. 16 and related Securities and Exchange
Commission pronouncements. USAR's financial position and results of operations
prior to the fourth quarter of fiscal year 2000 were immaterial in relation to
Semtech's overall results. Therefore, the effect of the merger prior to November
1, 1999 has been adjusted to retained earnings. Merger related costs of
$531,000 associated with the acquisition of USAR are reflected in the Company's
net income.

During the third quarter of fiscal year 2000, Semtech purchased a
communication design firm, Practical Sciences. Semtech issued 10,000 shares to
the owner of Practical Sciences. The purchase price, based on the Company's
closing stock price on the day of the transaction, was approximately $349,000
and resulted in goodwill of approximately $260,000, which is amortized over six
years. The purchase was made to strengthen the Company's ability to develop
high-speed communications devices.

In fiscal year 1999, the Company acquired Acapella Limited (Acapella) for
approximately 352,000 shares of Semtech common stock. The acquisition of
Acapella was accounted for as a pooling of interests. Acapella's financial
position and results of operations prior to fiscal year 1999 were immaterial in
relation to Semtech's overall results. Therefore, the effect of the merger prior
to February 1, 1998 has been adjusted to retained earnings. The consolidated
balance sheet at January 31, 1999 as well as the consolidated statements of
income and cash flows for the twelve months ended January 31, 1999 include the
results of Acapella. Merger related costs of $255,000 associated with the
acquisition of Acapella are reflected in the Company's net income. The Company
acquired Acapella to strengthen its ability to develop advanced communication
solutions.

In fiscal year 1998, the Company acquired Edge Semiconductor (Edge). The
acquisition was accounted for as a pooling of interests and Edge shareholders
received 2,999,908 shares of common stock. Costs of $1 million were recorded to
cover the expense associated with the acquisition of Edge. The financial
statements of the Company have been restated to include the results of
operations, financial position and cash flows of Edge, as though it had always
been a part of Semtech. The Company acquired Edge to integrate and complement
its existing businesses and technology.


3. Stock Repurchase Programs

On February 2, 1999, the Company announced that its board of directors had
approved a program to repurchase up to $10.0 million of its common stock. On
July 28, 1999, the Company completed this repurchase program and announced that
its board of directors approved the repurchase of an additional $10.0 million of
its common stock. The Company repurchased 701,000 shares under these programs
for approximately $13.9 million. Through

31
December 3, 1999, the Company had reissued all 701,000 shares to cover the
exercise of employee stock options and the acquisition of Practical Sciences
(see Note 2). On December 3, 1999, the Company discontinued any additional
repurchases under its stock repurchase program.

4. Impairment of Assets and Restructuring Charge

Operating income for fiscal year 1999 included total charges of $2.5
million, comprised of $136,000 related to a restructuring program, $1.2 million
for the write-down of long-lived assets, and a $1.2 million write-down of
inventory included in ''Cost of Sales.'' The restructuring program resulted in a
significant reduction of capacity and the elimination of approximately 60
positions during fiscal year 1999.

The asset impairment loss of $1.2 million consists of a write-down of the
Company's Corpus Christi wafer fab, and results from the evaluation of the
Company's ability to recover asset costs after an extensive review of its
business model. The asset impairment loss was determined by comparing the
estimated future cash flows associated with each long-lived asset or group
thereof, as appropriate, to the carrying amount of such asset or group of
assets. The $1.2 million inventory write-down consists of inventory that was
written-down to its estimated net realizable value. As of the end of fiscal year
1999, no amounts included in the charges remained to be spent.


5. Temporary Investments

Temporary investments consist of bank and corporate obligations with
original maturities in excess of three months at the time of purchase. At
January 30, 2000, and January 31, 1999, the fair market value of temporary
investments classified as ''available for sale securities'', approximated cost,
thus no unrealized holding gains or losses were reported in the accompanying
balance sheets. During fiscal year 2000 and 1999, the Company had no sales of
available for sale securities and likewise no realized gain or loss. As of
January 30, 2000, temporary investments consisted of $8.5 million in bank
obligations and $9.5 million in corporate obligations, all of which mature on
various dates through the fiscal year 2001. As of January 31, 1999, temporary
investments consisted solely of corporate obligations.


6. Inventories

The commercial semiconductor industry and the markets in which the
Company's products are used are characterized by rapid changes and short product
life cycles. Consistent with the industry, the Company has experienced declines
in average selling prices over the life of its product lines. The Company has
generally reserved inventory which is considered obsolete or estimated to be in
excess of 18 months demand, and has provided reserves for declines in selling
price below cost. Inventories consisted of the following:

<TABLE>
<CAPTION>
Raw Work in Finished
------------- ------------- -------------
Materials Process Goods Total
------------- ------------- ------------- -------------
(thousands)
<S> <C> <C> <C> <C>
2000
Gross inventories............ $1,471 $17,276 $12,588 $31,335
Total reserves............... (288) (2,030) (2,436) (4,754)
------ ------- ------- -------
Net inventories........... $1,183 $15,246 $10,152 $26,581
====== ======= ======= =======
1999
Gross inventories............ $1,879 $ 9,906 $ 9,016 $20,801
Total reserves............... (426) (1,329) (2,243) (3,998)
------ ------- ------- -------
Net inventories........... $1,453 $ 8,577 $ 6,773 $16,803
====== ======= ======= =======
</TABLE>


7. Property, Plant and Equipment

32
Property, plant and equipment consisted of the following:

<TABLE>
2000 1999
-------- --------
(thousands)
<S> <C> <C>
Property............................................... $ 5,279 $ 165
Building ............................................. 827 1,119
Leasehold improvements ............................... 1,264 1,423
Machinery and equipment .............................. 28,664 22,683
Furniture and office equipment ....................... 6,352 3,537
Construction in progress ............................. 1,642 3
-------- --------
44,028 28,930
Less accumulated depreciation and amortization ....... (19,631) (15,513)
-------- --------
Property, plant and equipment, net ................. $ 24,397 $ 13,417
======== ========
</TABLE>


8. Lines of Credit

The Company has a credit arrangement with a financial institution for
borrowings up to $20.0 million at an interest rate of 30 day commercial paper
plus 2.2% that is available through August 2000. The line of credit consists of
two parts, the first facility is a $10.0 million line of credit for working
capital needs and the second facility is a reducing revolver loan for equipment
acquisitions. The available amount under the reducing revolver loan declines in
equal increments over 84 months. As of January 30, 2000, the Company had
approximately $8.2 million available under the reducing revolver portion. The
arrangement is collateralized by the Company's domestic assets and provides for
financial and non-financial covenants. As of January 30, 2000, the Company had
no borrowings outstanding under this credit facility. Through its foreign
subsidiary, the Company also maintains an overdraft credit line in the amount of
300,000 pounds sterling.


9. Accrued Liabilities

Accrued liabilities consisted of the following:

<TABLE>
<CAPTION>
2000 1999
------ ------
(thousands)
<S> <C> <C>
Payroll and related ............. $5,617 $3,934
Commissions ..................... 1,191 269
Environmental ................... 245 -
Non-income related taxes ........ - 110
Other............................. 1,816 789
------ ------
Accrued liabilities ........... $8,869 $5,102
====== ======
</TABLE>

10. Income Taxes

The provision for taxes consisted of the following:

<TABLE>
<CAPTION>
2000 1999 1998
------- ------ ------
(thousands)
Current:
<S> <C> <C> <C>
Federal............. $18,868 $6,331 $6,963
State............... 377 870 918
Foreign............. - 68 393
------- ------ ------
19,245 7,269 8,274
Deferred:
Federal............. (4,023) (672) (800)
State............... (513) (130) (76)

</TABLE>

33
<TABLE>
<S> <C> <C> <C>
Foreign.............. - - -
------- ------ ------
Provision for taxes.. $14,709 $6,467 $7,398
======= ====== ======
</TABLE>

The components of the net deferred income tax assets at January 30, 2000 and
January 31, 1999 are as follows:

Net short-term deferred income taxes:
<TABLE>
<CAPTION>
2000 1999
------ ------
(thousands)
<S> <C> <C>
Deferred tax assets:
Payroll and related ..................... $ 281 $ 544
Environmental ........................... 100 -
Deferred revenue ........................ 2,188 1,211
Bad debt reserve ........................ 266 245
State income taxes ...................... 1 309
AMT credit carryforward ................. 658 -
Other deferred assets ................... 612 4
------ ------
Total short-term deferred assets .......... 4,106 2,313
Valuation reserve ......................... - (174)
------ ------
Net short-term deferred income taxes ...... $4,106 $2,139
====== ======
</TABLE>

Net long-term deferred income taxes:

<TABLE>
<CAPTION>
2000 1999
------- ------
(thousands)
<S> <C> <C>
Deferred tax assets:
Inventory valuation ......................... $ 1,773 $1,342
Research and development charges ............ 2,484 210
------- ------
Total long-term deferred assets ............... 4,257 1,552
------- ------
Deferred tax liabilities:
Depreciation and amortization ............... (1,173) (792)
Foreign deferred taxes ...................... (37) (37)
------- ------
Total long-term deferred liabilities .......... (1,210) (829)
------- ------
Subtotal ...................................... 3,047 723
Valuation reserve ............................. - (245)
------- ------
Net long-term deferred income taxes ........... $ 3,047 $ 478
======= ======
</TABLE>

The provision for taxes reconciles to the amount computed by applying the
statutory federal rate to income before taxes as follows:

<TABLE>
2000 1999 1998
------- ------ ------
(thousands)
<S> <C> <C> <C>
Computed expected federal income tax .............................. $15,436 $6,583 $7,534
State income taxes, net of federal benefit ........................ 2 599 640
Foreign sales corporation at rates less than statutory rates ...... (385) (276) (346)
Foreign taxes at rates less than domestic rates ................... 28 (7) (5)
Utilization of net operating loss and tax credit carryforwards .... - (644) (546)
Changes in valuation reserve ...................................... (419) - (263)
Permanent differences ............................................. 381 (160) 83
Other ............................................................. (334) 372 301
------- ------ ------
Provision for taxes ............................................... $14,709 $6,467 $7,398
======= ====== ======
</TABLE>

Realization of the net deferred tax assets is dependent on generating
sufficient taxable income during the periods in which temporary differences will
reverse. Although realization is not assured, management believes it is more
likely than not that the net deferred tax assets will be realized. The amount of
the net deferred tax assets considered

34
realizable, however, could be adjusted in the near term if estimates of future
taxable income during the reversal periods are revised.


11. Commitments and Contingencies

The Company leases facilities and certain equipment under lease arrangements
expiring in various years through fiscal year 2008. The aggregate minimum annual
lease payments under leases in effect on January 30, 2000 were as follows:

<TABLE>
<CAPTION>
Capital Operating
Fiscal Year Ending ------- ---------
------------------ Leases Leases
------ ------
(thousands)
<S> <C> <C>
2001 ...................................... $ 46 $1,704
2002 ...................................... 29 1,642
2003 ...................................... 11 1,337
2004 ...................................... - 1,005
2005 ...................................... - 377
Thereafter ................................ - 463
---- ------
Total minimum lease commitments ........... $ 86 $6,528
======
Less: amount representing interest (13)
----
Sub-total 73
Less: current portion (37)
----
Total $ 36
====
</TABLE>

The current portion of capital lease obligations are included in "Other
current liabilities" and the remaining capital lease obligations are included in
"Other long-term liabilities" in the accompanying consolidated balance sheets.
Annual rent expense was $1.5 million, $1.3 million and $1.0 million for fiscal
years 2000, 1999, and 1998, respectively.

On February 7, 2000, the Company was notified by the United States
Environmental Protection Agency with respect to the Casmalia Disposal Site in
Santa Barbara, California. The Company has been included in the Superfund
program to clean up this disposal site for its involvement in utilizing this
site for waste disposal. As of January 30, 2000, the Company provided
approximately $245,000 for potential settlement under this program, however, the
ultimate resolution and timing of the resolution is unknown at this time. The
Company believes the amount provided is sufficient to cover any liability
existing based on the currently available information.

Certain contaminants have been found in the ground water at the Company's
Newbury Park facility. The Company has data showing that the contaminants are
from an adjacent facility. The contaminants in question have never been used by
the Company at the Newbury Park facility. To protect its interests, the Company
utilizes an environmental firm, specializing in hydrogeology, to perform
periodic monitoring. It is currently not possible to determine the ultimate
amount of possible future clean-up costs, if any, that may be required of the
Company at this site. Accordingly, no reserves for clean-up have been provided
by the Company at this time.

Effective June 11, 1998, the Company's Board of Directors approved a
Stockholder Protection Agreement to issue a Right for each share of common stock
outstanding on July 31, 1998 and each share issued thereafter (subject to
certain limitations). These Rights, if not cancelled by the Board of Directors,
can be exercised into a certain number of Series X Junior Participating
Preferred Stock after a person or group of affiliated persons acquire 25% or
more of the Company's common stock and subsequently allow the holder to receive
certain additional Company or acquirer common stock if the Company is acquired
in a hostile takeover.

From time to time, the Company is a defendant in lawsuits involving matters
which are routine to the nature of its business. Management is of the opinion
that the ultimate resolution of all such matters will not have a material
adverse effect on the accompanying consolidated financial statements.

35
12.   Stockholders' Equity

On October 12, 1999, the Company authorized an increase in the number of
shares of the Company's common stock from 40,000,000 to 100,000,000.

The Company has various stock option plans that provide for granting options
to purchase shares of the Company's common stock to employees, directors and
consultants of the Company. The plans provide for the granting of options which
meet the Internal Revenue Code requirements for qualification as incentive stock
options, as well as nonstatutory options. Under these plans, the option price
must be at least equal to the fair market value of the Company's common stock at
the date of the grant for incentive stock options. Most incentive stock options
expire within ten years from the date of grant. Generally, the options vest in
equal annual increments over three to four years from the date of grant.

The plans provide for the issuance of 6,400,000 shares over the remaining life
of the plans. The plans also provide for the further issuance of up to 4,000,000
additional shares, if authorized by the Board, which are reacquired in the open
market or in a private transaction.

Stock option information with respect to the Company's stock option plans is
as follows (in thousands):

<TABLE>
2000 1999 1998
---- ---- ----
Weighted Weighted Weighted
--------- --------- ---------
Shares Average Shares Average Shares Average
----------- --------- ----------- --------- ----------- ---------
Under Exercise Under Exercise Under Exercise
----------- --------- ----------- --------- ----------- ---------
Option Price Option Price Option Price
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding, beginning of year ... 9,578 $ 7.26 7,938 $5.95 4,727 $2.45
Granted .................................. 2,610 23.97 3,794 8.41 4,732 8.17
Canceled ................................. (117) 12.04 (507) 6.92 (498) 3.20
Exercised ................................ (1,856) 6.25 (1,647) 3.73 (1,023) 1.89
------ ------ ------
Options Outstanding, end of year ......... 10,215 $11.65 9,578 $7.26 7,938 $5.88
====== ====== ======
Options exercisable at the end of year ... 3,514 $ 6.68 2,342 $5.65 1,179 $2.27
Weighted average fair value of options
Granted during year ..................... $13.37 $5.25 $5.56
</TABLE>

Information about stock options outstanding at January 30, 2000 is summarized
as follows (in thousands):

<TABLE>
Number Weighted Average Number
------ ---------------- ------
Outstanding Remaining Exercisable
----------- --------- -----------
Exercise Prices 1/30/00 Contract Life at 1/30/00
- --------------- ------- ------------- ----------
<S> <C> <C> <C>
$ 0.63-$ 0.66 87 4.0 Years 87
$ 1.94-$ 2.72 820 6.2 Years 580
$ 3.38-$ 4.88 1,238 6.7 Years 703
$ 5.19-$ 7.88 2,587 8.2 Years 1,011
$ 8.84-$ 13.31 2,906 7.4 Years 1,120
$ 13.56-$ 18.41 1,268 8.4 Years 13
$ 20.00-$ 28.00 737 9.1 Years 0
$ 30.94-$ 41.38 474 9.6 Years 0
$ 48.00-$ 56.94 98 9.9 Years 0
- ------------------- ------- ----------------- -----
$ 0.63-$ 56.94 10,215 7.8 Years 3,514
=================== ======= ================= =====
</TABLE>

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" under which no compensation cost has
been recognized. If the Company had elected to recognize compensation costs
based on the fair value at the date of grant for awards in 2000, 1999, and 1998,
consistent with the provisions of SFAS No. 123, net income and net income per
share would have been reduced to the following pro forma amounts:

36
<TABLE>
2000 1999 1998
---- ---- ----
(in thousands, except per
share amounts)
<S> <C> <C> <C>
Additional compensation expense ............. $21,383 $15,080 $8,095
Proforma net income ......................... $15,230 $ 3,063 $9,609
Proforma basic net income per share ......... $ 0.49 $ 0.10 $ 0.34
Proforma diluted net income per share ....... $ 0.43 $ 0.10 $ 0.32
</TABLE>

The pro forma effect on net income for fiscal years 2000, 1999, and 1998, may
not be representative of the pro forma effect on net income of future years
because the SFAS No. 123 method of accounting for pro forma compensation expense
has not been applied to options granted prior to January 30, 1995.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. Option valuation models also require the input of highly
subjective assumptions such as expected option life and expected stock price
volatility. The following assumptions were applied: (i) expected dividend yields
of 0% for all periods, (ii) expected volatility rates of 0.666 for 2000, 0.778
for 1999, and 0.828 for 1998, (iii) expected lives of 4 to 6 years for all
years, and (iv) risk-free interest rates ranging from 4.63% to 7.01% for all
years.

Because the Company's employee stock-based compensation plans have
characteristics significantly different from those of traded options and because
changes in the subjective input assumptions can materially affect the fair value
estimate, the Company believes that the existing option valuation models do not
necessarily provide a reliable single measure of the fair value of awards from
those plans.


13. Other Income and Expense

Other income (expense) consisted of the following:

<TABLE>
<CAPTION>
2000 1999 1998
------ ----- -----
(thousands)
<S> <C> <C> <C>
Interest income ........................ $1,710 $ 992 $ 469
Gain (loss) on disposition of assets ... - 1 (20)
Foreign currency transaction losses .... (60) (24) (63)
Miscellaneous expense .................. (447) (161) -
------ ----- -----
Other income, net .................... $1,203 $ 808 $ 386
====== ===== =====
</TABLE>

14. Statements of Cash Flows

The Company had the following non-cash activities for each year:
<TABLE>
<CAPTION>
2000 1999 1998
------- ------ ------
(thousands)
<S>
Tax benefits related to exercised <C> <C> <C>

stock options ................. $16,951 $5,859 $3,923
======= ====== ======
</TABLE>

In connection with the acquisition of Practical Sciences (see Note 2), the
Company received property and equipment of approximately $89,000 and recorded
goodwill of approximately $260,000.

Income taxes paid in fiscal years 2000, 1999, and 1998, were $440,000, $2.8
million and $3.5 million, respectively. For those same periods, the Company paid
interest in the amounts of $57,000, $22,000, and $36,000, respectively.

The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.

37
15.   Business Segments and Concentrations of Risk

As of January 30, 2000, the Company operates in three reportable segments:
Standard Semiconductor Products, Rectifier and Assembly Products, and Other
Products. Included in the Standard Semiconductor Products segment are the power
management, protection, high-performance, advanced communications and system
management product lines. The Rectifier and Assembly Products segment includes
the Company's line of assembly and rectifier products. The Other Products
segment is made up of other custom IC and foundry sales.

The accounting policies of the segments are the same as those described above
in the summary of significant accounting policies. The Company evaluates segment
performance based on net sales and operating income of each segment. Management
does not track segment data or evaluate segment performance on additional
financial information. As such, there are no separately identifiable segment
assets nor is there any separately identifiable statements of income data (below
operating income).

Prior to fiscal year 1999, the Company did not track operating income by
reportable segments. Therefore, operating income by segment prior to fiscal 1999
is not available. The Company does not track or assign assets to individual
reportable segments. Likewise, depreciation expense and capital additions are
also not tracked by reportable segments.

<TABLE>
Net Sales 2000 1999 1998
- ------------------------------------------ -------- -------- --------
(in thousands)
<S> <C> <C> <C>
Standard Semiconductor Products ........ $153,229 $ 89,238 $ 76,691
Rectifier and Assembly Products ........ 11,995 13,769 14,865
Other Products ......................... 8,544 11,512 11,252
-------- -------- --------
Total Net Sales ...................... $173,768 $114,519 $102,808
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Operating Income 2000 1999
- ------------------------------------------ ------- -------
(in thousands)
<S> <C> <C>
Standard Semiconductor Products ......... $41,618 $17,062
Rectifier and Assembly Products ....... 745 2,196
Other Products ........................ 1,126 2,075
One-time charges ...................... (531) (2,757)
------- -------
Total Operating Income .............. $42,958 $18,576
======= =======
</TABLE>

The one-time charges include charges in fiscal year 1999 of $2.5 million
related to Standard Semiconductor Products, comprised of $136,000 related to a
restructuring program, $1.2 million for the write-down of long-lived assets, and
a $1.2 million write-down of inventory included in ''Cost of Sales" for the
Standard Semiconductor Products segment.

For the three fiscal years ended January 30, 2000, the Company had no customer
that accounted for more than 10% of net sales. As of January 30, 2000, one
customer accounted for approximately 15% of total accounts receivable. For the
two fiscal years ended January 31, 1999, no customer accounted for more than 10%
of total accounts receivable. A summary of net external sales by region
follows. The Company does not track customer sales by region for each individual
reporting segment.

<TABLE>
<CAPTION>
Net Sales 2000 1999 1998
- ----------------------------- -------- -------- --------
(in thousands)
<S> <C> <C> <C>
Domestic ................. $ 62,574 $ 53,824 $ 56,754
Asia-Pacific ............. 90,151 46,953 32,899
European ................. 21,043 13,742 13,155
-------- -------- --------
Total Net Sales ........ $173,768 $114,519 $102,808
======== ======== ========
</TABLE>
Long lived assets located outside the United States as of the end of fiscal
years 2000 and 1999 were approximately $1.5 million and $2.6 million,
respectively.

38
16.   Subsequent Event

In February 2000, the Company completed the private offering of $400.0 million
aggregate principal amount of its 4 1/2% Convertible Subordinated Notes. The
notes are convertible into the Company's common stock at a conversion price of
$84.46 per share at anytime on or before February 1, 2007 and are redeemable by
the Company after February 5, 2003.

The Company intends to use the net proceeds of the offering for general
corporate purposes, including working capital, expansion of sales, marketing and
customer service capabilities, and product development. In addition, the
Company may use a portion of the net proceeds to acquire or invest in
complementary businesses, technologies, services or products; however, it
currently has no commitments or agreements with respect to any acquisition or
investment.

39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders and Board of Directors of Semtech Corporation:

We have audited the accompanying consolidated balance sheets of Semtech
Corporation (a Delaware corporation) and subsidiaries as of January 30, 2000 and
January 31, 1999, and the related consolidated statements of income,
stockholders' equity and comprehensive income, and cash flows for each of the
three years in the period ended January 30, 2000. These financial statements
and the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Semtech Corporation and
subsidiaries as of January 30, 2000 and January 31, 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended January 30, 2000, in conformity with accounting principles generally
accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II - Valuation and Qualifying Accounts is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.



/S/Arthur Andersen LLP
---------------------------------
ARTHUR ANDERSEN LLP



Los Angeles, California
April 12, 2000

40
SCHEDULE  II



SEMTECH CORPORATION AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED FEBRUARY 1, 1998, JANUARY 31, 1999 AND JANUARY 30, 2000




<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning of Costs and End
Year Other Expenses Deductions of Year
---- ----- ----------- ----------- ----------

Year Ended February 1, 1998
- ---------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
Accounts $1,473,000 $(1,141,000) $480,000 $ (15,000) $797,000


Year Ended January 31, 1999
- ---------------------------
Allowance for doubtful
Accounts $ 797,000 $ - $135,000 $ (54,000) $878,000


Year Ended January 30, 2000
- ---------------------------
Allowance for doubtful
Accounts $ 878,000 $ - $ 45,000 $(173,000) $750,000
</TABLE>

41
ITEM 9.  CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.


PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained at Pages 5 through 11 in Management's Proxy Statement
(the "Proxy Statement"), to be filed within 120 days of the Company's fiscal
year end, under the heading "Election of Directors" and the information
contained on Page 18 of the Proxy Statement regarding appointment of independent
accounts is incorporated by reference herein.

Executive Officers and Certain Other Significant Employees of Registrant
------------------------------------------------------------------------

<TABLE>
<CAPTION>
Name Age Office
---- --- ------
<S> <C> <C>
John D. Poe 48 Chairman and Chief Executive Officer
Raymond E. Bregar 52 Executive Vice President, Power Management Products
David G. Franz, Jr. 38 Vice President, Finance and Chief Financial Officer, and
Secretary
Wylie J. Plummer 45 Vice President, High Performance Products
Jean-Claude Zambelli 56 Vice President, Sales and Marketing
</TABLE>

Mr. Poe became Chairman and Chief Executive Officer of the Company in October
1985. He is a director of the Company. Before serving in this capacity at the
Company, Mr. Poe served as Vice President, Operations, for Silicon General, Inc.
from August 1984 through September 1985. Prior to that position, Mr. Poe was
Military Operations Manager in the Discrete Division at Fairchild Camera and
Instrument, Inc. where he managed the manufacture, design and marketing of
military discrete semiconductors for more than four years.

Mr. Bregar joined the Company in February 1988 and was appointed Vice President,
Engineering. From fiscal 1989 through fiscal 1993, Mr. Bregar served as Vice
President of Discrete Products. Currently Mr. Bregar serves as Executive Vice
President, Corporate Operations, a position he has held since February 1993.
Prior to joining the Company, Mr. Bregar served as business manager of Power
Discretes with Fairchild Semiconductor where he directed the research and
development and manufacturing of the power mosfet and power rectifier product
lines.

Mr. Franz became Vice President, Finance, Chief Financial Officer, and Secretary
in August of 1993. Prior to joining the Company, Mr. Franz was Director of
Finance of the Large Computer Systems Division (formerly Teradata Corporation)
of AT&T from May 1990 through August 1993. Prior to that position Mr. Franz was
employed by the Wickes Companies and Arthur Andersen LLP. Mr. Franz is a
Certified Public Accountant.

Mr. Plummer joined the Company as Vice President, High Performance Products as a
result of the April 1997 acquisition of Edge Semiconductor. Mr. Plummer co-
founded Edge Semiconductor and served as its president until the acquisition.
Prior to Edge, Mr. Plummer held positions with Brooktree, Intel and National
Semiconductor.

Mr. Zambelli was named Vice President of Sales and Marketing in December of
1996. Mr. Zambelli has more than 25 years of experience in the semiconductor
industry and has held senior management positions with several companies. Most
recently, Mr. Zambelli was vice president of sales for Exar Corporation.

None of the officers has any family relationship to any other officer. The
officers are elected annually by the Board of directors and serve at the
discretion of the Board.

ITEM 11. EXECUTIVE COMPENSATION

The information contained in the Proxy Statement at Pages 12 through 15 under
the heading "Executive Compensation" is incorporated by reference herein.

42
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth in the Proxy Statement at Page 5 under the heading
"Principal Shareholders" and Pages 5 and 11 under the heading "Election of
Directors" is incorporated by reference herein.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained in the Proxy Statement at Pages 12 through 15 under
the heading "Executive Compensation" is incorporated by reference herein.

43
PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) The financial statements and the Report of Arthur Andersen LLP are
included in Part II of this Report on the pages indicated.

<TABLE>
<CAPTION>
Page
----
Index of Financial Statements:
<S> <C>
Report of Independent Public Accountants 40
Consolidated statements of income, three years ended January 30, 2000 25
Consolidated balance sheets, January 30, 2000 and January 31, 1999 26
Consolidated statements of stockholders' equity and comprehensive income, three
years ended January 30, 2000 27
Consolidated statements of cash flows, three years ended January 30, 2000 28
Notes to consolidated financial statements 29
</TABLE>

(2) The following financial statement schedule of the Company for the years
ended January 30, 2000, January 31, 1999 and February 1, 1998, is filed as part
of this Report and should be read in conjunction with the financial statements:

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Schedule II - Valuation and Qualifying Accounts 41
</TABLE>


Schedules other than those listed above are omitted since they are not
applicable, not required, or the information required to be set forth herein is
included in the consolidated financial statements or notes thereto.

44
(3)  Exhibits - Incorporated by reference from the Company's previous 10-K
--------
filings unless otherwise indicated

<TABLE>
<S> <C>
3.1 - Certificate of Incorporation, as amended
3.2 - Bylaws
4.1* - Indenture between Semtech Corporation and State Street Bank and Trust
Company of California, N.A.
4.2* - Form of Debenture
4.3* - Registration Rights Agreement by and among Semtech Corporation
as issuer, and Morgan Stanley & Co. Incorporated and Banc of
America Securities LLC, as initial purchasers dated as of February 14, 2000.
10.1 - Security Agreement and Collateral Installment Note
between the Company and Merrill Lynch in the aggregate
amount of $7,500,000, dated August 24, 1992, as amended
on August 15, 1996 for establishing a WCMA line of credit
and an equipment acquisition line

10.2 - Agreement of sublease executed on December 23, 1991,
effective January 1, 1991, by the Company and the Corpus
Christi Airport Development Corporation for a portion of
the Company's plant and facilities

10.3 - Overdraft facility agreement executed on May 26, 1987
between the Company and the Bank of Scotland in the
amount of 300,000 pounds sterling

10.4 - Lease executed on May 1, 1988 and amended on November 1,
1991 by the Company for a portion of its plant and
facilities
10.5 - Lease executed on September 12, 1988 by the Company for a
portion of its plant and facilities

10.6 - The Company's 1987 Stock Option Plan and the related Form
of Option Agreement

10.7 - The Company's 1994 Long-term Stock Incentive Plan and the
related Form of Option Agreement, as amended.
10.8 - The Company's 1994 Non-Employee Directors Stock Option
Plan and the related Form of Option Agreement, as amended.
10.9 - The Company's Long-term Stock Incentive Plan
10.10* - The Company's Non-Director, Non-Executive Officer Long-term
Stock Incentive Plan
13.1 - Annual Report to Shareholders

22.1 - Subsidiaries of the Company

27 - Financial Data Schedule, Article 5, attached
</TABLE>
* Attached as exhibits to this Form 10-K.

45
Pursuant to the requirements of Section 13 or 15(d) 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.


SEMTECH CORPORATION



By /S/ John D. Poe
----------------------------
John D. Poe, Chairman of the Board
and Chief Executive Officer


Date April 25, 2000
------------------------

46
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.



Date: April 25, 2000 /S/ John D. Poe
-------------------- -----------------------------
John D. Poe
Chairman of the Board and Chief
Executive Officer


Date: April 25, 2000 /S/ David G. Franz Jr.
-------------------- ------------------------------
David G. Franz, Jr.
Vice President, Finance
and Chief Financial Officer,
and Secretary
(Principal Accounting
and Financial Officer)


Date: April 25, 2000 /S/ Rock N. Hankin
-------------------- ------------------------------
Rock N. Hankin
Vice Chairman of the Board


Date: April 25, 2000 /S/ James P. Burra
-------------------- ------------------------------
James P. Burra
Director


Date: April 25, 2000 /S/ Allen H. Orbuch
-------------------- ------------------------------
Allen H. Orbuch
Director


Date: April 25, 2000 /S/ James T. Schraith
-------------------- ------------------------------
James T. Schraith
Director


Date: April 25, 2000 /S/ Jack O. Vance
-------------------- ------------------------------
Jack O. Vance
Director



The information contained in the Proxy Statement at Pages 12 and 15 under the
heading "Executive Compensation" is incorporated by reference herein.

47