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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
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                                   FORM 10-K
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
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<TABLE>
<CAPTION>
                                         (Mark One)
<S>   <C>
/X/   Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
      [Fee Required]
      For the fiscal year ended January 1, 1996
      Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934
      [No Fee Required]
      For the transition period from to
</TABLE>

 
COMMISSION FILE NUMBER: 1-10079
 
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                       CYPRESS SEMICONDUCTOR CORPORATION
             (Exact name of registrant as specified in its charter)
 

<TABLE>
<S>                                             <C>
                  DELAWARE                                       94-2885898
      (State or other jurisdiction of                         (I.R.S. Employer
       incorporation or organization)                       Identification No.)
</TABLE>

 
            3901 NORTH FIRST STREET, SAN JOSE, CALIFORNIA 95134-1599
             (Address of principal executive offices and zip code)
 
       Registrant's telephone number, including area code: (408) 943-2600
 
          Securities registered pursuant to Section 12(b) of the Act:
 

<TABLE>
<S>                                             <C>
                                                           NAME OF EACH EXCHANGE
            TITLE OF EACH CLASS                             ON WHICH REGISTERED
        Common Stock, $.01 par value                      New York Stock Exchange
</TABLE>

 
          Securities registered pursuant to Section 12(g) of the Act:
 
                                      None
 
     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 the Form 10-K or any amendment to this
form 10-K.  /X/
 
     At March 5, 1996, registrant had outstanding 79,725,519 shares of Common
Stock. The market value of voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on March 5,
1996 on the New York Stock Exchange, was approximately $969,242,601. Shares of
Common Stock held by each executive officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
                 Parts of the Proxy Statement for Registrant's 1996
 
     Annual Meeting of Stockholders are incorporated by reference in Items 10,
11, 12 and 13 of Part III of this 10-K Report.
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                                     PART I
 

ITEM I.  BUSINESS
 
     THIS ITEM CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE FACTORS SET FORTH IN "FACTORS
AFFECTING FUTURE RESULTS" AND ELSEWHERE IN THIS REPORT.
 
GENERAL
 
     Cypress Semiconductor Corporation ("Cypress" or the "Company") designs,
develops, manufactures and markets a broad line of high performance digital and
mixed-signal integrated circuits for a range of markets, including computers,
data communications, telecommunications and instrumentation systems. The Company
currently offers approximately 358 products from its memory products,
programmable products, computation products and data communications divisions.
Cypress's products are marketed worldwide through a network of 23 North American
sales offices, 7 North American distributors, 25 U.S. sales representative
firms, 8 European sales offices, 2 Japanese sales offices, an office in
Singapore, an office in Taiwan and 35 international sales representative firms.
The Company sells its products to a wide range of customers, including AT&T,
Alcatel, Cisco Systems, Compaq Computer, Digital Equipment, Hewlett-Packard,
IBM, Intel, Motorola, NEC, Northern Telecom, Siemens, and 3Com Corporation. In
1995, international sales accounted for 34% of the Company's total sales.
 
     The Company's initial strategy was to provide innovative high performance
CMOS (complementary metal-oxide silicon) integrated circuits to niche markets,
which were believed to be too small to warrant the considerable investment which
would be required for the major established international semiconductor
manufacturers to target those markets. The Company modified its strategy during
1992 to focus on selected high volume products, particularly in the static RAM
and PLD markets, to bring those products to market quickly and at reduced cost
and to achieve significant market acceptance of those targeted products. Because
of the highly competitive nature of the semiconductor industry, its cyclicality
and anticipated pressure on average selling prices over the life of any
particular product, the Company's ability to successfully implement this
strategy and achieve its revenue, earnings and gross margin goals will depend
upon a number of factors, including its ability to maintain its position in the
high performance markets, to increase its presence in the more competitive high
volume markets, to continue to successfully design and develop new products
utilizing advanced semiconductor design and process technologies in a timely
fashion, to improve manufacturing yields and reduce manufacturing costs and
cycle time and to effectively market and sell its products in light of
significant domestic and international competition.
 
     The Company was incorporated in California in December 1982. The Company's
initial public offering of Common Stock occurred in May 1986 at which time the
Company's Common Stock commenced trading on the Nasdaq National Market. In
February 1987, the Company reincorporated in Delaware. The Company listed its
Common Stock on the New York Stock Exchange on October 17, 1988.
 
PRODUCTS
 
     In 1993, in order to lower costs and accelerate its response to market
opportunities, Cypress reduced the number of business units from eight to
four -- two focused on core technologies (Memory Products Division and
Programmable Products Division) and two on end-market segments (Data
Communications Division and Computation Products Division). Because the
semiconductor industry is characterized by rapid technological change, resulting
in products with higher speed, densities and performance capabilities and
continuing evolution of process technologies, the Company's success will
continue to depend upon timely development, introduction and market acceptance
of new products in these areas.
 
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MEMORY PRODUCTS DIVISION (MPD)
 
     Static RAMs (Static Random Access Memories).  High speed static RAMs are
used for storage and retrieval of data in computers, data communication,
telecommunication and other electronic systems. Because a computer is required
to read from or write into its memory several times to complete an operation,
high performance system designers are very sensitive to memory access time,
which can be a major bottleneck in overall system performance. Fast static RAMs
are used for functions such as "cache memory" to store the data being processed
by the computer's central processing unit (CPU). The static RAM market is
characterized by the requirements for many different "densities" (number of bits
per memory circuit) and "organizations" (number of bits available to the user in
a single access of the RAM). This organizational differentiation of the static
RAM market -- when combined with the different RAM features incorporated by
various manufacturers, the need for both military and commercial products, the
need for different package types and the usual grading of product by speed and
power -- produces a complex market structure. The Company's continued progress
in lowering its manufacturing costs has allowed the Memory Products Division to
compete effectively in the high volume personal computer, workstation, data
communication and telecommunication markets.
 
     Multichip Modules.  The Company's high density memory and logic modules are
assembled from high performance devices in a single surface mount package in
order to create custom or standard enhanced single circuit equivalents such as
multi-megabyte static RAMs and complete cache memories used within many high
performance personal computers. These modules can provide the solution to many
of the advanced circuit "building blocks" required by modern systems designers.
The multichip modules allow the Company increased visibility into customer
trends and future needs for single chip memory products and an additional means
to satisfy the present needs of customer systems already incorporating Cypress
products.
 
PROGRAMMABLE PRODUCTS DIVISION (PPD)
 
     EPROMs (Erasable Programmable Read-Only Memories).  EPROMs are the memory
elements used in computers, peripherals, and telecommunication systems which
store fixed data that is not to be altered during normal machine operations.
Customers purchase blank EPROMS which are then programmed for their specific
application needs. Cypress has been a supplier of high performance CMOS EPROMS
since 1984. These early devices were the first to combine the fast memory access
of PROMS with the low power consumption of CMOS technology. The Company offers a
broad family of EPROM products ranging in density from 4K bits to 1 MEG bits
which are available with a variety of standard and proprietary user-interfaces.
 
     PLDs (Programmable Logic Devices).  The "logic" in an electrical system
performs the non-memory functions, such as "floating-point mathematics," or the
organization and routing of signals throughout a computer system. This
constitutes a significant portion of the circuitry in most systems. The Company
manufactures several logic circuits which are programmable by the user. The
Company's PLD products allow the user to replace many standard logic devices
with a single device, thus reducing package count and cost, improving
performance and allowing miniaturization. The Company's PLD portfolio consists
of a wide variety of devices ranging from the Flash 16V8 to the very high
density CPLD (complex PLD's) and FPGA's (field programmable gate arrays). All
Cypress products are supported by the WARP(TM) software tool set which is based
on VHDL (very high speed integrated circuit hardware description language), an
industry standard.
 
     FCT (Fast CMOS Technology) Logic Devices.  FCT logic devices are used in a
wide variety of applications whenever the need arises for a very high speed
standard logic function. Cypress entered this market segment in late 1993 when
it acquired certain inventory and technology from Performance Semiconductor. The
Company now offers a full complement of standard logic and bus interface
functions at both 8 and 16 bits.
 
DATA COMMUNICATIONS DIVISION (DCD)
 
     The Company's DataCom products provide a range of products which provide
connectivity and timing in backplanes, mass storage and networking. In 1995, the
Company renewed and expanded new product efforts in
 
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the Specialty Memory (FIFOs and Dual Port RAMs) business segment which the
Company believes will provide broadened product portfolio and an increased
revenue stream in 1996. The Company's new family of synchronous FIFOs has been
transferred to production, and its Dual Port RAM family has been expanded to
include higher densities and wider bus widths. These products are used in the
new switching architectures of cellular telephone base stations, and high
performance networks such as EtherNet and ATM.
 
     The VME business segment sales and continued new design-ins continue to be
strong. A new product, Raceway, which resulted from a cooperative effort with
Mercury Computer Systems, has been added to the product line and supports a
cross point switch backplane architecture in very high performance systems.
 
     The first of the DataCom PLL (phase locked loop) based products,
RoboClock(TM) and HOTLink(TM), have been in production for several years and
revenues attributed to such products have continued to increase. The SST (Serial
Sonet Transceiver), a clock and data separator for ATM and the newest of the
physical layer interface products, has become one of the DCD top ten revenue
products.
 
     DCD's first EtherNet products are currently completing the design and
sampling phase. In the first quarter of 1996, one of these products, the coaxial
tap transceiver entered production. This product brings the original EtherNet
interface up to date in performance on a current low cost technology. The second
of these products, the 100 Mbit transceiver is expected to enter production by
mid 1996.
 
     The combination of these products serving different applications represent
the broad offering of products to the large and expanding data communications
market. They illustrate the commitment of the DataCom Division to provide a
multiplicity of products and solutions to the complex problem of data transfer
between systems.
 
COMPUTATION PRODUCTS DIVISION (CPD)
 
     Timing Technology Devices.  The Company serves the timing technology device
market through its business unit, Timing Technology, in Kirkland, Washington.
Timing technology devices are widely used in personal computers, disk drives,
modems and video games. Timing Technology's clock oscillators control the
intricate timing of all aspects of a microprocessor based system, including
signals for the CPU, video controller, keyboard, disk drives, system bus, serial
ports and real-time clock. Timing Technology's clock synthesizer integrates
essentially all clock requirements of a microprocessor based system, thus
reducing size, power consumption and cost.
 
     PC Logic.  The Company serves the PC compatible systems logic market with
products from its PC Logic business unit. Cypress's hyperCache(TM) PC chipset is
the highly integrated product which the Company is expected to release. The
Company's hyperCache(TM) chipset incorporates the equivalent of the nine static
RAMs that are typically added externally to enhance the performance of competing
chipsets.
 
RESEARCH AND DEVELOPMENT
 
     The Company places great emphasis on research and development. This is
partially reflected by significant management time committed to continuously
improve process and product design development cycle time. The Company's current
product strategy requires rapid development of new products using emerging
process technologies while minimizing research and development costs. The
Company performs research and development at two levels. Research and
development relating to process technology is managed at the corporate level,
while research and development relating to new product design is managed at the
operating level by each of the Company's divisions, in cooperation with the new
product production teams.
 
     The Company's research and development expenditures in 1995 were $71.7
million (12% of revenues), compared with $53.2 million (13% of revenues) in 1994
and $49.8 million (16% of revenues) in 1993. Although actual research and
development spending increased from the prior year, the rate of growth in
research and development spending was surpassed by the growth in revenues. The
Company expects to continue to increase spending in research and development in
order to maintain its competitiveness in new product design and process
technology development.
 
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MANUFACTURING
 
     The Company manufactures its products at four sub-micron wafer fabrication
facilities using its proprietary 0.5, 0.65, 0.8 and 1.2-micron CMOS, 0.8 and
0.5-micron BiCMOS and 0.65-micron Flash technologies. To further its competitive
position, the Company has programs to reduce manufacturing cycle times, improve
yields and lower costs. The Company invested $100 million in 1995 to increase
the capacity of its existing wafer fabrication plants, Fabs I -- III. Fab IV,
the Company's newest plant, located next to Fab III in Minnesota, commenced
operations in the second half of 1995. In 1995, the Company also broke ground on
what will be its largest plant, Fab V, which is adjacent to Fab II in Round
Rock, Texas. The Company expects Fab V to produce its first revenue in 1997.
Based on bigger clean rooms and improved efficiencies, the Company believes that
its capacity will be $1.7 billion with Fabs I through IV operating at full
capacity, and will increase to $2.5 billion with the addition of Fab V. Assembly
and Test operations continue in Asia with offshore contractors. In the second
quarter of 1995, the Company broke ground on a new highly automated assembly and
test manufacturing plant in the Philippines. Fully utilized, this new plant is
expected to increase assembly and test manufacturing capacity by 600 million
units. The new plant is scheduled to become operational in mid-1996 and will
initially cost the Company approximately $120 million.
 
     The process technology for the fabrication of the Company's CMOS
semiconductor products is highly complex and sensitive to dust and other
contaminants, requiring production in a highly controlled, clean environment.
Although the fabrication process is highly controlled, the equipment may not
perform flawlessly. Minute impurities, difficulties in the production process or
defects in the masks can cause a substantial percentage of the wafers to be
rejected or individual die on each wafer to be nonfunctional, which results in
the so called "yield" problem that is indigenous to the semiconductor industry.
The Company's philosophy is to prevent wafer fab yield loss and/or quality
problems to the extent possible through analytical manufacturing controls. The
Company tests its products at various stages in the fabrication process,
performs high temperature burn-in qualification as well as continuous
reliability monitoring on all products, and conducts numerous quality control
inspections throughout the entire production flow using its quality-control
analytical equipment. The Company has, on occasion, experienced delayed product
shipments due to lower than acceptable production yields. Accordingly, to the
extent the Company does not achieve acceptable product yields, its operating
results will be adversely affected.
 
     The raw materials and equipment used in the production of the Company's
integrated circuits are available from several suppliers and the Company is not
dependent upon any single source of supply. Shortages could occur in various
essential materials due to interruption of supply or due to increased demand in
the industry. Shortages have occurred in the Company's history and lead times
have been extended in the industry on occasion without materially adversely
affecting the Company; however, there can be no assurance that future shortages,
if any, would not have a material adverse effect on the Company's business,
financial condition or result of operation.
 
     Federal, state and local regulations impose various environmental controls
on the discharge of chemicals and gases used in the manufacturing process.
Increasing public attention has been focused on the environmental impact of
semiconductor operations. The Company believes that its activities conform to
present environmental regulations in all material respects. However, the Company
has from time to time received notice of non-compliance by certain operations
and with filing obligations under applicable federal regulations and local
ordinances. While the Company has not experienced any materially adverse effects
on its operations from governmental regulations, there can be no assurance that
such regulations will not in the future impose the need for additional capital
equipment, penalties or other requirements or result in liability for personal
injury or property damage. Further, any failure by semiconductor companies,
including the Company, to adequately control the use of or restrict the
discharge of hazardous substances could also subject them to significant future
liabilities.
 
MARKETING AND SALES
 
     The Company uses four channels to sell its products: direct OEM (original
equipment manufacturer) sales by the Cypress sales force, direct OEM sales by
manufacturing representative firms, sales through
 
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domestic distributors and sales through international trading companies and
representative firms. The Company's marketing and sales effort is organized
around four regions: North America, Europe, Japan and Asia/Pacific. The Company
also has a strategic accounts group which is responsible for specific customers
with worldwide operations. The Company augments its sales effort with FAE's
(field application engineers) who are specialists in the Company's product
portfolio and work with customers to "design in" Cypress products for their
systems. FAE's also help the Company identify emerging markets and new products.
 
     International revenues accounted for 34% of the Company's total revenues in
1995 compared to 32% in 1994 and 27% in 1993, respectively. The Company warrants
its products against defects in materials and workmanship for a period of one
year and the product warranty is generally limited to a refund of the original
purchase price of the product.
 
BACKLOG
 
     Cypress's sales are typically made pursuant to standard purchase orders for
delivery of catalog products. Generally, the Company's customer relationships
are not subject to long-term contracts. Quantities of the Company's products to
be delivered and delivery schedules, under purchase orders outstanding from time
to time, are frequently revised to reflect changes in customer needs. For these
reasons, the Company's backlog as of any particular date is not representative
of actual sales for any succeeding period and the Company believes that backlog
is not a good indicator of future revenue.
 
COMPETITION
 
     The semiconductor industry is intensely competitive and has been
characterized by price erosion, rapid technological change and heightened
foreign competition in many markets. The industry consists of major domestic and
international semiconductor companies, many of which have substantially greater
financial, technical, marketing, distribution and other resources than the
Company, as well as emerging companies attempting to obtain a share of the
existing market. The Company faces competition from other domestic and foreign
high performance integrated circuit manufacturers, many of which have advanced
technological capabilities and have increased their participation in the CMOS
and BiCMOS market sector. The ability of the Company to compete successfully in
the rapidly evolving high performance end of the integrated circuit technology
spectrum depends on elements both within and outside of its control, including
success in developing new products and process technologies, product quality and
price, diversity of product line, cost effectiveness, the pace at which
customers incorporate the Company's products into their systems, the number and
nature of its competitors and general economic conditions. The Company believes
it competes favorably with respect to developing new products and process
technologies, product quality and price, diversity of product line and cost
effectiveness. Price competition in the future could further erode average
selling prices and adversely affect revenues and operating results.
 
     In the low to medium density static RAM area (16K-bit or less in density),
the Company competes against equivalent products of a few manufacturers such as
Integrated Device Technology (IDT). There is more significant price competition
in the higher-volume 256K-bit and 1M-bit static RAM area, in which the Company's
competitors include IDT, Motorola, Micron Technology, Alliance Semiconductor,
Integrated Silicon Solution, Inc., Hitachi and other Japanese and Korean
manufacturers, as well as several smaller niche oriented semiconductor start
ups.
 
     There are few CMOS competitors in the relatively small high speed PROM
market. However, with the Company's entry into the EPROM market, the Company
will increasingly compete in CMOS EPROMs with Advanced Micro Devices (AMD), SGS
Thompson, Texas Instruments, Fujitsu, Atmel and Waferscale Integration. The
Company competes extensively against bipolar PROM circuit manufacturers such as
Philips Corporation, AMD and National Semiconductor Corporation.
 
     The Company's PLD competition consists of bipolar products from companies
such as AMD and Texas Instruments, and from CMOS PLDs from larger competitors,
including Samsung, AMD, Actel, Altera, Lattice Semiconductor Corporation and
Xilinx. Additionally, the sale of PLDs is, in part, dependent on the
availability of user design software. Like the Company, both Altera and Xilinx
have such software packages.
 
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     The Company's data communications and logic products compete against
bipolar products of similar functionality from established companies such as
AMD, as well as CMOS versions of these products from companies such as IDT,
Samsung and Sharp.
 
     The Company competes against companies such as ICS/Avasem and Chrontel with
respect to timing technology products; IDT, Quality Semiconductor and Pericom
with respect to FCT products; and IDT, among others, with respect to module
products.
 
     The Company's system logic products compete with products from Intel, Opti,
VLSI and Taiwanese manufacturers Silicon Integrated Systems, Acer Lab, Inc. and
United Microelectronics Corporation.
 
PATENTS AND LICENSES
 
     The Company currently has 59 patents and has 140 additional patent
applications on file with the United States Patent Office and is preparing to
file more patent applications. In addition to factors such as innovation,
technological expertise and experienced personnel, the Company believes that
patents are becoming increasingly important to compete in the industry and has
an active program to acquire additional patent protection.
 
     There can be no assurance that any patent owned by the Company will not be
invalidated, circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to the Company or that any of the Company's
pending or future patent applications, whether or not being currently challenged
by applicable governmental patent examiners, will be issued with the scope of
the claims sought by the Company, if at all. Furthermore, there can be no
assurance that others will not develop technologies that are similar or superior
to the Company's technology, duplicate the Company's technology or design around
the patents owned by the Company.
 
     In addition, the Company is currently and may in the future be involved in
litigation with respect to alleged infringement by the Company of another
party's patents, and may in the future be involved in litigation to enforce its
patents or other (including the Texas Instruments and AMD litigation discussed
under Item 3 hereof) intellectual property rights, to protect its trade secrets,
to determine the validity or scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation has in the
past resulted and could in the future result in substantial costs and diversion
of resources and payment of substantial damages and/or royalties or prohibitions
against utilization of essential technologies, and could have a material adverse
effect on the Company's business, financial condition or results of operations.
From time to time the Company has received, and may receive in the future,
notice of claims of infringement of other parties' proprietary rights. Although
the Company does not believe that its products or processes infringe the
proprietary rights of any third parties, there can be no assurance that
infringement or invalidity claims (or claims for indemnification resulting from
infringement claims) will not be asserted against the Company or that any such
assertions will not materially adversely affect the Company's business,
financial condition or results of operations. Irrespective of the validity or
the successful assertion of such claims, the Company could incur significant
costs with respect to the defense thereof which could have a material adverse
effect on the Company's business, financial condition or results of operations.
Moreover, if any claims or actions are asserted against the Company, although
the Company might seek to obtain a license under a third party's intellectual
property rights, there can be no assurance that, under such circumstances, a
license would be available under reasonable terms or at all.
 
     The Company has entered into technology license agreements with third
parties which give those parties the right to use patents and other technology
developed by the Company and which give the Company the right to use patents and
other technology developed by such other parties, some of which involve payment
of royalties and some of which involve access to technology used in the
Company's operations. The Company anticipates that it will continue to enter
into such licensing arrangements in the future. There can be no assurance that
such licenses will continue to be available to the Company on commercially
reasonable terms in the future. The loss of or inability to obtain licenses to
key technology in the future could have a material adverse effect on the
Company's business, operating results or financial condition.
 
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EMPLOYEES
 
     As of January 1, 1996, the Company and its subsidiaries had 1,859
employees, as compared to 1,423 at the end of fiscal 1994. The Company's ability
to attract and retain qualified personnel is essential to its continued success.
None of the Company's employees is represented by a collective bargaining
agreement, nor has the Company ever experienced any work stoppage. The Company
believes that its employee relations are good.
 

I
TEM 2.  PROPERTIES
 
     The Company's executive offices, engineering and research and development
facilities are located in an approximately 60,000 square foot building at 195
Champion Court, San Jose, California under a lease which will expire in 1999.
Located immediately adjacent to the Company's executive offices is one of the
Company's wafer fabrication facilities (Fab I) which also includes R & D
manufacturing operations. This facility is located in an approximately 61,000
square feet leased building at 3901 North First Street, San Jose, California.
The current lease expires in 1999. The lease rates for these facilities are
subject to variations based on the London interbank offering rate (LIBOR) and a
requirement to sell or acquire the property at the end of the lease term (see
Note 7 of the Consolidated Financial Statements).
 
     Research and development and other Company staff functions are located on
the San Jose site. This office space is composed of approximately 75,000 square
feet in a building located at 4001 North First Street, San Jose, California
under a lease which expires in 1996. The Company has reached an agreement with
the owner of this office space pursuant to which the Company will purchase this
space.
 
     In December 1988, the Company purchased the two undeveloped industrial lots
on either side of its headquarters building. These similarly sized lots,
comprising a total of approximately 8.5 acres, will be retained for future
expansion of the San Jose building complex. In the second quarter of 1995, the
Company broke ground on a new highly automated assembly and test manufacturing
plant in Cavite, Philippines. This facility is expected to more than double the
Company's unit output from the current 50 million units per quarter to 120
million units per quarter by the end of 1997. The Company owns an approximately
100,000 square foot wafer fabrication facility (Fab II) in Round Rock, Texas. In
1995, the Company began construction of a new fab, Fab V, adjacent to Fab II.
Fab V construction will result in a 225,000-square-foot facility, with a
35,000-square-foot clean room. In addition, the Company also owns approximately
170,000 square foot wafer fabrication facility (Fab III) and leases
approximately 100,000 square foot wafer fabrication facility (Fab IV) on 18
acres of land in Bloomington, Minnesota. The Fab IV lease rate is subject to
variations based on LIBOR and a requirement to sell or acquire the property at
the end of the lease term (see Note 7 of the Consolidated Financial Statements).
 
     The Company leases additional space for domestic sales and design centers
in Huntsville, Alabama; Calabasas, Irvine, San Diego and San Jose, California;
Denver and Colorado Springs, Colorado; Clearwater, Orlando and Pompano Beach,
Florida; Roswell, Georgia; Palatine, Illinois; Columbia, Maryland; Minnetonka,
Minnesota; Starkville, Mississippi; Nashua, New Hampshire; Laurence Harbor, New
Jersey; Poughkeepsie, New York; Raleigh, North Carolina; Beaverton and Portland,
Oregon; Trevose, Pennsylvania; Austin, Houston and Richardson, Texas; and
Toronto, Ontario, Canada. The Company leases international sales and design
centers in La Hope, Belgium; Las Ails Cede and Serves, France; Milan and
Orbassano, Italy; Tokyo and Osaka, Japan; Taby, Sweden; Cheshire, Basingstoke
and Hertfordshire, United Kingdom; Zorneding, Germany; Singapore, Singapore;
Taipei, Taiwan; and Bangalore, India.
 

ITEM 3.  LEGAL PROCEEDINGS
 
     Texas Instruments (TI) has charged the Company and three other
semiconductor companies with infringement of two patents, primarily covering the
plastic encapsulation process used to package semiconductor devices. This action
was filed before the International Trade Commission (ITC) in Washington, D.C.,
and in the U.S. District Court in Dallas, Texas. The ITC has ruled that the
plastic packaging process known as "bottom gating" does infringe, but "top
gating", used now by the Company, does not infringe TI's patent. The Company
contends that TI's patents are invalid in their entirety. In March 1993, the
U.S. District Court of
 
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Appeals for the Federal Circuit affirmed the ITC's ruling. In May 1995, in a
case before the U.S. District Court in Dallas, Texas, a jury delivered a verdict
of $17.8 million against the Company. In August 1995, the judge reversed the
decision stating that TI failed to prove that the Company infringed on TI's
patents covering the plastic encapsulation process used to package semiconductor
devices. In the first quarter of 1995, the Company recorded a one-time pre-tax
charge of $17.8 million with respect to the original decision. The Company
continues to hold this reserve pending further resolution of this matter. TI has
filed an appeal, in which the Company will continue to defend itself.
 
     In January and February 1992, the Company and certain of its officers were
named defendants in three purported class-action suits filed in the U.S.
District Court for the Northern District of California. The suits filed are for
alleged violations of the Securities Exchange Act of 1934 and certain provisions
of state law regarding disclosure of short-term business prospects. In 1992, the
three securities class-action complaints were consolidated by the U.S. District
Court for the Northern District of California. In June 1995, the U.S. District
Court for the Northern District of California dismissed this lawsuit by a
summary judgement. The plaintiffs have filed an appeal with the Ninth Circuit,
in which the Company will continue to defend itself.
 
     In June 1995, AMD charged the Company with patent infringement and filed
suit in the U.S. District Court in Delaware. The suit claims that the Company
infringed several of AMD's programmable logic patents. Only a limited amount of
discovery has been completed to date, and no trial date has been set. The
Company believes that it has meritorious defenses. In November 1995, the Company
filed a patent infringement action against AMD in the United States District
Court for the District of Minnesota. The Company allenges infringement by AMD of
a number of the Company's patents in this action. No discovery has yet gone
forward in this action, and AMD has not yet filed an answer. The Company and AMD
are involved in settlement discussions with respect to each of the
above-referenced actions.
 
     The Company will vigorously defend itself in these matters and, subject to
the inherent uncertainties of litigation and based upon discovery completed to
date, management believes that the resolution of these matters will not have a
material adverse impact on the Company's financial position or results of
operations. However, should the outcome of any of the actions be unfavorable,
Cypress may be required to pay damages and other expenses, which could have a
material adverse effect on the Company's financial position or results of
operations. In addition, the Company could be required to alter certain of its
production processes or products as a result of these matters.
 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     On October 18, 1995, the Company's stockholders approved an amendment to
the Company's Certificate of Incorporation, increasing the authorized number of
shares of the common stock of the Company from 75,000,000 to 250,000,000.
 
EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Certain information regarding each of the Company's current executive
officers is set forth below:
 

<TABLE>
<CAPTION>
                                                                                        EXECUTIVE
                                                                                         OFFICER
             NAME                AGE                       POSITION                       SINCE
- ------------------------------   ---    ----------------------------------------------- ---------
<S>                              <C>    <C>                                             <C>
T. J. Rodgers.................   48     President and Chief Executive Officer              1982
Antonio R. Alvarez............   39     Vice President, Research and Development           1993
Emmanuel Hernandez............   40     Vice President, Finance and Administration,        1993
                                        Chief Financial Officer
J. Daniel McCranie............   52     Vice President, Marketing and Sales                1993
Lothar Maier..................   41     Vice President, Wafer Fabrication,                 1994
                                        President, Cypress Semiconductor (Minnesota),
                                        Inc.
</TABLE>

 
                                        8

<PAGE>   10
 
     Except as set forth below, each of the Company's executive officers has
been engaged in his principal occupation described above during the past five
years. There is no family relationship between any director or executive officer
of the Company.
 
     T.J. Rodgers is a co-founder of the Company and has been its President and
Chief Executive Officer since 1982. Mr. Rodgers serves as a director of Vitesse
Semiconductor Corporation and C-Cube Corporation.
 
     Antonio R. Alvarez joined the Company in May 1987 as a Senior Technical
Engineer. Mr. Alvarez was transferred to the Company's subsidiary, Aspen
Semiconductor Corporation, in April 1988 as the Manager of BiCMOS Technology. In
October 1989, Mr. Alvarez returned to the Company as Vice President, Research
and Development. In February 1993, Mr. Alvarez also became responsible for Fab 1
when it was merged with the research and development department. Prior to
joining the Company in 1987, Mr. Alvarez worked in various engineering and
management positions at Motorola Corporation from September 1979 through July
1987. His last position at Motorola was as a senior member of the technical
staff. Mr. Alvarez became an executive officer of the Company in March 1993.
 
     Emmanuel Hernandez joined the Company in June 1993 as Corporate Controller.
In January 1994, Mr. Hernandez was promoted to Vice President, Finance and
Administration, and Chief Financial Officer. Prior to joining the Company from
1976 to 1993, Mr. Hernandez held various financial positions with National
Semiconductor Corporation.
 
     J. Daniel McCranie joined the Company in October 1993 as Vice President of
Marketing and Sales. Prior to joining the Company, from 1989 to 1993, Mr.
McCranie was President and CEO of SEEQ Technology. Mr. McCranie also held the
position of Vice President of Sales and Marketing for SEEQ for five years prior
to becoming President and CEO. Previously, he held marketing and sales positions
at Harris Semiconductor, AMD, American Microsystems and Signetics.
 
     Lothar Maier joined the Company in July 1983 as Manufacturing Engineering
Manager. Mr. Maier assumed full responsibility for Fab I in February of 1988,
and held this position until the end of December 1990. Mr. Maier was transferred
to the Company's subsidiary, Cypress Semiconductor (Minnesota), Inc. in January
1991 as subsidiary President and presently holds that position. In addition, Mr.
Maier was promoted to Vice President of Wafer Fabrication of the Company in
September, 1994.
 
                                        9

<PAGE>   11
 

                                    PART II
 

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS
 
     The Company's Common Stock is listed on the New York Stock Exchange under
the trading symbol "CY." The following table sets forth, for the periods
indicated, the low, high and closing sales prices for the Common Stock. The
Company has not paid cash dividends and has no present plans to do so. At
January 1, 1996 there were approximately 2,552 holders of record of the
Company's Common Stock. Prior period shares and stock prices have been restated
to reflect a two-for-one stock split which was effected in October 1995.
 

<TABLE>
<CAPTION>
                                                                        PRICE RANGE OF COMMON
                                                                              STOCK($)
                                                                      -------------------------
                                                                       LOW      HIGH      CLOSE
                                                                      -----     -----     -----
<S>                                                                   <C>       <C>       <C>
Fiscal year ended January 1, 1996:
  First Quarter...................................................    10.75     16.13     14.31
  Second Quarter..................................................    13.06     21.63     20.13
  Third Quarter...................................................    17.06     27.38     18.81
  Fourth Quarter..................................................    11.50     19.19     12.63
Fiscal year ended January 2, 1995:
  First Quarter...................................................     6.69      9.44      8.07
  Second Quarter..................................................     6.94      9.38      8.19
  Third Quarter...................................................     7.88     10.25      8.19
  Fourth Quarter..................................................     7.75     11.75     11.57
</TABLE>

 

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA
 

<TABLE>
<CAPTION>
                                                                YEAR ENDED(1)(2)
                                              ----------------------------------------------------
                                                1995       1994       1993       1992       1991
                                              --------   --------   --------   --------   --------
<S>                                           <C>        <C>        <C>        <C>        <C>
                                                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating results:
  Revenues..................................  $596,071   $406,359   $304,512   $272,242   $286,829
  Acquisition-related non-recurring
     charges................................        --         --    (18,271)        --         --
  Restructuring and other non-recurring
     costs..................................   (17,800)        --        408    (39,700)        --
  Operating Income (loss)...................   159,171     77,792     10,686    (35,636)    44,759
  Income (loss) before tax..................   161,384     80,115     12,567    (32,928)    51,771
  Net income (loss).........................   102,477     50,472      8,043    (21,010)    34,171
  Net income (loss) per share
     Primary................................  $   1.15   $   0.61   $   0.11   $  (0.28)  $   0.42
     Fully diluted..........................  $   1.09   $   0.60         --         --         --
  Weighted average common and common
     equivalent shares outstanding
     Primary................................    89,347     82,313     76,218     74,514     80,668
     Fully diluted..........................    97,583     88,602         --         --         --
Balance sheet data:
  Cash and short-term investments...........  $161,618   $193,275   $ 80,590   $ 82,046   $103,703
  Working capital...........................   190,580    225,952    124,651    133,966    150,735
  Total assets..............................   750,728    555,699    340,648    320,504    374,603
  Long term debt and capital lease
     obligations (excluding current
     portion)...............................    95,879     93,653         --      1,597      3,310
  Stockholders' equity......................   472,099    352,999    271,685    262,061    298,612
</TABLE>

 
(1) The Company operates on a 52- or 53-week fiscal year, ending on the Monday
     closest to December 31.
 
(2) All share data has been restated to reflect a two-for-one stock split which
     was effected in October 1995.
 
                                       10

<PAGE>   12
 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
         CONDITION
 
     THIS ITEM CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1993 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE FACTORS SET FORTH IN "FACTORS
AFFECTING FUTURE RESULTS" AND ELSEWHERE IN THIS REPORT.
 
OVERVIEW
 
     In 1995, the Company continued its growth trend by recording revenues of
$596.1 million, an increase of 46.7% over last year and 95.8% over 1993. The
growth in revenues contributed to record profits of $102.5 million or $1.09 per
share, compared to $50.5 million, or $0.60 per share in 1994 and $8.0 million,
or $0.11 per share in 1993. The growth in revenues was primarily due to a
significant increase in unit sales in each of the Company's four major product
lines: Memory Products, Programmable Products, Data Communications, and
Computation Products. The increase in profitability was again driven by the
Company's efforts to improve gross margin. As a result of lower fixed costs per
unit due to increased volume, reduced cost of manufacturing wafers, and slower
average selling price reductions than in prior years, the Company in 1995 was
able to improve absolute gross margin by 9% over 1994 and 13% over 1993.
 
     In 1996, the Company plans to bring into production a new assembly and test
manufacturing plant in the Philippines. Fully utilized, this new plant is
expected to increase assembly and test manufacturing capacity by 600 million
units. The new plant is scheduled to become operational in mid-1996 and will
initially cost the Company approximately $120 million. The Company also began
construction of a new fab in Texas ("Fab V") in 1995. The new fab is expected to
be a key contributor to the Company's goal of reaching the $2 billion revenue
level by the year 2000. Fab V is scheduled to be operational in the second
quarter of 1997, and when half utilized, will cost the Company approximately
$350 million.
 
     In August 1995, the Company announced a two-for-one stock split in the form
of a 100% common stock dividend to stockholders of record as of October 19,
1995. In October, the stockholders approved an amendment to the Company's
Certificate of Incorporation, increasing the number of authorized shares of the
Company's common stock from 75,000,000 to 250,000,000 in conjunction with the
stock dividend. Stockholders of record as of October 19, 1995, received
certificates representing one additional share for every share held at that
time. The shares were distributed on October 31, 1995. All share and per share
amounts in the accompanying consolidated financial statements and notes thereto
have been adjusted for all periods presented to give effect to this stock
dividend, except for the amounts disclosed for treasury shares, which were not
split, and are stated at their historical amounts.
 
RESULTS OF OPERATIONS
 
     In 1995, revenues increased to a record $596.1 million, an increase of
46.7% over the $406.4 million recorded in 1994 and 95.8% over the $304.5 million
recorded in 1993. The growth in revenues was primarily due to a significant
increase in unit sales in each of the Company's four major product lines,
especially in the Memory Products Division ("MPD"), which includes the sale of
Static Random Access Memory ("SRAM") products. Unit sales of SRAM products in
1995 increased 85.2% over 1994 and 170.0% over 1993. The growth in unit sales of
high-speed SRAM products, particularly the 256K and 64K products, resulted in a
significant increase in sales to the Telecommunications, Data Communications,
and Personal Computer ("PC") and related markets. As a result of its substantial
sales volume, coupled with a slightly higher average selling price for SRAM
products, MPD generated 61.7% of the Company's revenue in 1995, a 9.8% increase
over 1994 and a 27.9% increase over 1993.
 
     The Programmable Products Division ("PPD"), the Company's second largest
revenue producing product line, produced 14.9% of the Company's revenue in 1995.
PPD's contribution to total revenue decreased from the 24.2% recorded in 1994
and 27.7% in 1993. Although PPD's contribution as a percentage of total revenues
decreased in 1995, the product line's revenue in absolute sales dollars grew in
comparison to 1994 and 1993. While average selling prices were lower
year-to-year, sales volumes increased substantially.
 
                                       11

<PAGE>   13
 
Revenue growth in PPD can be attributed to increased revenue generated by the
Programmable Read-Only Memory line of products, which are also sold to the PC
and Telecommunications markets and by the Fast CMOS Technology Logic Device line
of products, which was acquired from Performance Semiconductor Corporation in
1993.
 
     The Data Communications Division ("DCD") also experienced significant
growth in revenues in 1995 as unit sales increased 46.9% over 1994 and 100.0%
over 1993. The growth was primarily due to proprietary products established
across all of DCD's product lines. Proprietary positions in the Specialty Memory
and VMEbus products fueled double-digit growth. The largest growth occurred in
DCD's Channel line, where several products, including the HOTLink(TM)
point-to-point communication devices and Programmable Skew Clock Buffers
(RoboClock(TM)), all made significant contributions to revenue. This increase in
volume more than offset the 8.0% decline in the average selling price for DCD
products.
 
     The Computation Products Division's ("CPD") revenue is primarily generated
from its Timing Technology line of products. The Company began serving this
market through its acquisition of IC Designs, Inc., in the fourth quarter of
1993. In 1995, revenues generated from the CPD product line increased 16.2% over
1994 primarily due to increased unit volume.
 
     The Company's cost of revenues as a percentage of revenues for 1995
decreased to 46% compared with 55% in 1994 and 59% in 1993. Manufacturing costs
as a percent of revenues continued to decline due to increased wafer volume in
the Company's domestic fabrication facilities ("fabs") for 1995 relative to 1994
of 44.7%, die size reductions and introduction of new technologies which
resulted in a lower cost per unit. In order to offset the decrease in average
selling prices traditionally experienced in the semiconductor market, the
Company must continue to find ways to lower manufacturing costs and introduce
new products in order to remain competitive in the marketplace and improve gross
margins. One such method of reducing costs is to shrink the size of each die in
order to produce more die on a single wafer. With the development of new
designs, the Company has been able to decrease the die size on many of its
products, thus reducing the cost of each die. In order to reduce the cost of
back-end manufacturing, the Company moved a majority of its assembly and test
operations offshore in 1992 to take advantage of lower production costs in Asia.
In 1995, the benefits of this move had an even greater impact as production
volume increased at these operations.
 
     The Company is continuing its efforts to increase capacity in its domestic
fabs and in back-end manufacturing in order to maintain growth in revenues. In
1996, the Company plans to bring into production a new assembly and test
manufacturing plant in the Philippines. Fully utilized, this new plant is
expected to increase the Company's assembly and test manufacturing capacity by
600 million units. The new plant is scheduled to become operational in mid-1996
and will initially cost the Company approximately $120 million. The Company also
began construction on a new fab in Texas ("Fab V"). The new fab is expected to
be a key contributor to the Company's goal of reaching the $2 billion revenue
level by the year 2000. Fab V is expected to be operational in mid 1997 and,
when half utilized, will cost approximately $350 million.
 
     Research and development ("R&D") expenses decreased to 12% of revenues in
1995, compared to 13% in 1994 and 16% in 1993. Although actual spending in R&D
increased significantly in 1995, growing to $71.7 million compared to $53.2
million and $49.8 million in 1994 and 1993, respectively, the rate of growth in
R&D spending was outpaced by the rate of growth in revenues. The Company expects
R&D spending to continue to increase in absolute dollars as a consequence of
opening two new design centers in Austin, Texas, and Bangalore, India, in 1995,
as well as increasing activity in many of its existing design centers and
fabrication plants to develop new products and process technologies,
respectively.
 
     Selling, general and administration ("SG&A") expenses decreased to 12% of
revenues in 1995, compared to 13% in 1994 and 15% in 1993. Absolute spending
grew to $71.3 million in 1995, compared to $52.8 million and $46.3 million in
1994 and 1993, respectively. Although actual SG&A spending grew in 1995 in
comparison to the two previous years, its rate of growth was less than the rate
of growth in revenues. The increase in actual spending for SG&A expenses is
primarily attributable to an increase in headcount and associated spending in
sales and marketing in an effort to penetrate new markets and support the
Company's existing line of products. The Company expects absolute spending in
sales and marketing to continue to increase as a result of the Company's efforts
to sustain revenue growth. General and administrative expenses
 
                                       12

<PAGE>   14
 
also grew in 1995 as the Company incurred legal expenditures in excess of those
historically incurred, principally as a result of the Texas Instruments and the
shareholder class-action lawsuit.
 
     Income from operations increased significantly in 1995, growing to a record
$159.2 million. Income from operations in 1994 and 1993 was $77.8 million and
$10.7 million, respectively. The increase in operating income can be attributed
to growing revenues and improved margins as the Company focused on reducing
operating expenses by improving manufacturing efficiencies. Reducing operating
income in 1995 was a $17.8 million reserve recorded to reflect the original
verdict delivered in the patent infringement lawsuit filed by Texas Instruments.
The judge in the case reversed the decision later in the year and the plaintiff
has filed an appeal which is still pending. The Company will continue to
maintain the reserve pending further resolution of this matter (see Note 7 of
the Notes to Consolidated Financial Statements). Included in operating income
for 1993 were non-recurring charges of $18.3 million related to the acquisitions
of IC Designs and the FCT product line from Performance Semiconductor.
 
     Net interest income in 1995 was $2.2 million, a slight decrease from the
$2.3 million recorded in 1994 and a slight increase from the $1.9 million
recorded in 1993. Cash investments increased in March 1994 with net proceeds
received from the issuance of convertible subordinated notes. The higher average
balance of investments coupled with higher short-term interest rates resulted in
the Company recording $8.5 million in interest income in 1995 compared with $6.4
million in 1994 and $2.2 million in 1993. Also associated with the issuance of
the convertible subordinated notes was a corresponding increase in interest
expense. In 1995, the Company recorded $6.2 million in interest expense, an
increase of $2.2 million from 1994 and $6.0 million from 1993.
 
     The Company recorded income tax expense of $58.9 million in 1995, compared
to $29.6 million in 1994 and $4.5 million in 1993. The effective tax rates in
1995, 1994 and 1993 were 36.5%, 37.0% and 36.0% respectively.
 
     In 1995, the Company's net income grew to $102.5 million, a significant
increase from the $50.5 million recorded in 1994 and the $8.0 million recorded
in 1993. Net income in 1993 would have been $19.5 million without the
acquisition-related, non-recurring charges recorded that year.
 
FACTORS AFFECTING FUTURE RESULTS
 
     The Company believes that, notwithstanding the various objectives,
projections, estimates and other forward-looking statements set forth in this
document, its future operating results will continue to be subject to variations
based on a wide variety of factors, which could lead the Company's operating
results to be materially different from those projected in such forward-looking
statements. Such factors include, but are not limited to: general economic
conditions, the cyclical nature of both the semiconductor industry and the
markets addressed by the Company's products such as the networking, computer and
telecommunications markets, failure of expected growth in demand for, or areas
of expected new demand for, semiconductor products to materialize, the
availability and extent of utilization of manufacturing capacity, fluctuations
in manufacturing yields, price erosion, competitive factors, the timing of new
product introductions, product obsolescence and the ability to develop and
implement new technologies including the ramp of our RAM3 process to full
commercial production. The Company is also dependent on subcontract vendors for
a portion of the assembly and test manufacturing of its products which presents
risks including the lack of guaranteed production capacity, delays in delivery,
susceptibility to disruption in supply, and reduced control over product costs,
adverse weather conditions, and manufacturing yields. The Company's operating
results could also be impacted by sudden fluctuations in customer requirements,
currency exchange rate fluctuations and other economic conditions affecting
customer demand and the cost of operations in one or more of the global markets
in which the Company does business. Typically, the Company requires new orders,
in addition to its existing backlog, to meet each quarter's revenue plan.
 
     As a participant in the semiconductor industry, the Company operates in a
technologically advanced, rapidly changing and highly competitive environment.
While the Company cannot predict what effect these and other factors will have
on the Company, they could result in significant volatility in the Company's
future performance. To the extent the Company's performance may not meet
expectations published by external
 
                                       13

<PAGE>   15
 
sources, public reaction could result in a sudden and significantly adverse
impact on the market price of the Company's securities, particularly on a
short-term basis.
 
     The Company's corporate headquarters and some manufacturing facilities are
located near major earthquake faults. As a result, in the event of a major
earthquake, the Company could suffer damages which could materially and
adversely affect the operating results and financial condition of the Company.
 
     Current pending litigation and claims are set forth in Note 7 of the Notes
to Consolidated Financial Statements. The Company will vigorously defend itself
in these matters and, subject to the inherent uncertainties of litigation and
based upon discovery completed to date, management believes that the resolution
of these matters will not have a material adverse impact on the Company's
financial position or results of operations. However, should the outcome of any
of the actions be unfavorable, the Company may be required to pay damages and
other expenses, which could have a material adverse effect on the Company's
financial position or results of operations. In addition, the Company could be
required to alter certain of its production processes or products as a result of
these matters.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's financial condition remained strong throughout 1995. Cash,
cash equivalents and short-term investments totaled $161.6 million at the end of
fiscal year 1995, a decrease of $31.7 million from fiscal year-end 1994. Cash
used for investing activities of $187.0 million and financing activities of
$27.1 million was offset in part by cash generated from operating activities of
$190.3 million.
 
     Cash from operating activities grew to $190.3 million in 1995, compared to
$122.1 million in 1994. This increase of $68.2 million is primarily due to the
increase in net income to $102.5 million recorded this year, accompanied by
growth in the non-cash effects of depreciation and amortization expense. These
increases to cash from operating activities were partially offset by the net
change in operating assets and liabilities.
 
     Cash used for investing activities in 1995 was $187.0 million, a $35.5
million decrease from the $222.5 million used for investing activities in 1994.
Last year, the Company recorded a use of cash of $117.0 million, related to the
increase in short-term investments as a result of proceeds received from the
1994 issuance of convertible subordinated notes. In 1995, the Company purchased
$194.9 million in capital equipment, mainly to increase capacity in the
Company's fabrication facilities in Minnesota, Texas and San Jose. This
represented an increase in capital purchases of $82.5 million, compared to the
$112.4 million in capital purchased in 1994. The Company expects to invest
approximately $300 million for capital additions in 1996 and had committed
approximately $220 million for the construction or purchase of property, plant,
and equipment as of January 1, 1996.
 
     In 1995, the Company recorded cash used for financing activities of $27.1
million, compared to the generation of cash from financing activities of $96.0
million in 1994. During the last quarter of 1995, the Company implemented its
stock repurchase program, with the Board of Directors approving the repurchase
of $70.0 million of the Company's stock. Consequently, by the end of 1995, the
Company repurchased $37.9 million of treasury stock. No treasury stock was
repurchased in 1994. In 1994, the cash generated from financing activities was
primarily due to net proceeds of $89.4 million received from the issuance of
convertible subordinated notes.
 
     Last year, the Company entered into two operating lease agreements with
respect to its office and manufacturing facilities in San Jose and Minnesota,
respectively. In 1995, the Company entered into an additional lease agreement
related to its new fabrication facility "Fab IVb" also located in Minnesota.
These agreements require that the Company maintain a specific level of
restricted cash or investments to serve as collateral for these leases. In 1995,
the Company added $20.8 million in restricted investments to the $18.5 million
recorded in 1994. All restricted investments are classified as non-current
assets on the balance sheet.
 
     The Company anticipates that existing sources of liquidity and cash flows
from operations will be sufficient to satisfy its cash needs in the current
fiscal year. The Company may, from time to time, as market conditions warrant,
purchase its common stock in the open market, invest in complementary
technologies, products, or businesses, or raise additional capital through
public and private markets.
 
                                       14

<PAGE>   16
 

I
TEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                       CYPRESS SEMICONDUCTOR CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
           (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                         JANUARY 1,     JANUARY 2,
                                                                            1996           1995
                                                                         ----------     ----------
<S>                                                                      <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents..........................................     $   9,487      $  33,308
  Short-term investments.............................................       152,131        159,967
                                                                         ----------     ----------
  Total cash, cash equivalents, and short-term investments...........       161,618        193,275
  Accounts receivable, net of allowances for doubtful accounts and
     customer returns of $2,828 in 1995 and $1,393 in 1994...........       108,587         67,763
  Other receivables..................................................         8,335          2,426
  Inventories........................................................        28,978         28,372
  Other current assets...............................................        44,119         25,278
                                                                         ----------     ----------
     Total current assets............................................       351,637        317,114
Property, plant and equipment, net...................................       336,593        201,590
Other assets, including restricted investments of $39,257 in 1995
  and $18,513 in 1994................................................        62,498         36,995
                                                                         ----------     ----------
                                                                          $ 750,728      $ 555,699
                                                                           ========       ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable...................................................     $  82,315      $  55,777
  Accrued compensation and employee benefits.........................        21,353         10,544
  Other accrued liabilities..........................................        25,447         11,714
  Deferred income on sales to distributors...........................        13,190          9,688
  Income taxes payable...............................................        18,752          3,439
                                                                         ----------     ----------
     Total current liabilities.......................................       161,057         91,162
Convertible subordinated notes.......................................        95,879         93,653
Deferred income taxes................................................        15,653         11,209
Other long-term liabilities..........................................         6,040          6,676
                                                                         ----------     ----------
     Total liabilities...............................................       278,629        202,700
                                                                         ----------     ----------
Commitments and contingencies (Note 7)
Stockholders' equity:
  Preferred stock, $.01 par value, 5,000,000 shares authorized; none
     issued and outstanding..........................................            --             --
  Common stock, $.01 par value, 250,000,000 shares authorized;
     88,924,000 and 82,594,000 issued; 81,501,000 and 77,821,000
     outstanding.....................................................           889            826
  Additional paid-in capital.........................................       292,713        238,272
  Retained earnings..................................................       262,462        159,985
                                                                         ----------     ----------
                                                                            556,064        399,083
  Less shares of common stock held in treasury, at cost; 7,423,000
     shares at January 1, 1996 and 4,773,000 at January 2, 1995......       (83,965)       (46,084)
                                                                         ----------     ----------
     Total stockholders' equity......................................       472,099        352,999
                                                                         ----------     ----------
                                                                          $ 750,728      $ 555,699
                                                                           ========       ========
</TABLE>

 
          See accompanying notes to consolidated financial statements.
 
                                       15

<PAGE>   17
 
                       CYPRESS SEMICONDUCTOR CORPORATION
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
           (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                         YEAR ENDED
                                                           --------------------------------------
                                                           JANUARY 1,    JANUARY 2,    JANUARY 3,
                                                              1996          1995          1994
                                                           ----------    ----------    ----------
<S>                                                        <C>           <C>           <C>
Revenues................................................   $  596,071    $  406,359    $  304,512
                                                           ----------    ----------    ----------
  Costs and expenses:
  Cost of revenues......................................      276,160       222,620       179,821
  Research and development..............................       71,667        53,188        49,798
  Selling, general and administrative...................       71,273        52,759        46,344
  Acquisition-related non-recurring charges.............           --            --        18,271
  Restructuring and other non-recurring costs...........       17,800            --          (408)
                                                           ----------    ----------    ----------
  Total operating costs and expenses....................      436,900       328,567       293,826
                                                           ----------    ----------    ----------
Operating income........................................      159,171        77,792        10,686
Interest expense........................................       (6,239)       (4,041)         (289)
Interest income and other...............................        8,452         6,364         2,170
                                                           ----------    ----------    ----------
Income before income taxes..............................      161,384        80,115        12,567
Provision for income taxes..............................      (58,907)      (29,643)       (4,524)
                                                           ----------    ----------    ----------
Net income..............................................   $  102,477    $   50,472    $    8,043
                                                            =========     =========     =========
Net income per share:
  Primary...............................................   $     1.15    $     0.61    $     0.11
                                                            =========     =========     =========
  Fully diluted.........................................   $     1.09    $     0.60    $       --
                                                            =========     =========     =========
Weighted average common and common equivalent shares
  outstanding:
  Primary...............................................   89,347,000    82,313,000    76,218,000
  Fully diluted.........................................   97,583,000    88,602,000            --
</TABLE>

 
          See accompanying notes to consolidated financial statements.
 
                                       16

<PAGE>   18
 
                       CYPRESS SEMICONDUCTOR CORPORATION
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (SHARES AND DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                    COMMON STOCK      ADDITIONAL                               TOTAL
                                  ----------------     PAID-IN      RETAINED    TREASURY    STOCKHOLDERS'
                                  SHARES    AMOUNT     CAPITAL      EARNINGS     STOCK         EQUITY
                                  ------    ------    ----------    --------    --------    ------------
<S>                               <C>       <C>       <C>           <C>         <C>         <C>
Balances at December 28, 1992...  70,235     $731      $ 186,219    $101,470    $(26,359)     $262,061
Issuance of common stock under
  employee stock plans and
  other.........................   4,066       41         17,031                                17,072
Tax benefit resulting from stock
  option transactions...........                           4,234                                 4,234
Repurchase of common stock under
  share repurchase program......  (1,900)                                        (19,725)      (19,725)
Net income for the year.........                                       8,043                     8,043
                                  ------    ------    ----------    --------    --------    ------------
Balances at January 3, 1994.....  72,401      772        207,484     109,513     (46,084)      271,685
Issuance of common stock under
  employee stock plans and
  other.........................   5,420       54         24,448                                24,502
Tax benefit resulting from stock
  option transactions...........                           6,340                                 6,340
Net income for the year.........                                      50,472                    50,472
                                  ------    ------    ----------    --------    --------    ------------
Balances at January 2, 1995.....  77,821      826        238,272     159,985     (46,084)      352,999
Issuance of common stock under
  employee stock plans and
  other.........................   6,330       63         31,460                                31,523
Tax benefit resulting from stock
  option transactions...........                          22,981                                22,981
Repurchase of common stock under
  share repurchase program......  (2,650)                                        (37,881)      (37,881)
Net income for the year.........                                     102,477                   102,477
                                  ------    ------    ----------    --------    --------    ------------
Balances at January 1, 1996.....  81,501     $889      $ 292,713    $262,462    $(83,965)     $472,099
                                  ======    ======      ========    ========    ========     =========
</TABLE>

 
          See accompanying notes to consolidated financial statements.
 
                                       17

<PAGE>   19
 
                       CYPRESS SEMICONDUCTOR CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                            YEAR ENDED
                                                              JANUARY 1,    JANUARY 2,    JANUARY 3,
                                                                 1996          1995          1994
                                                              ----------    ----------    ----------
<S>                                                           <C>           <C>           <C>
Cash flow from operating activities:
  Net income...............................................    $ 102,477    $   50,472     $   8,043
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation and amortization.........................       64,733        45,039        41,245
     Non-cash interest and amortization of debt issuance
       costs...............................................        2,639         1,639            --
     Provision for restructuring and other non-recurring
       costs...............................................       17,800            --          (408)
     Acquisition-related non-recurring charges.............           --            --        18,271
     Deferred income taxes.................................       (8,464)        1,258        (6,209)
     Changes in operating assets and liabilities:
       Receivables.........................................      (46,733)      (15,985)       (7,093)
       Inventories.........................................         (606)          913        11,800
       Other assets........................................      (20,407)       (3,909)       (2,278)
       Accounts payable and accrued liabilities............       32,644        31,999        (1,132)
       Deferred income.....................................        3,502           837         3,488
       Income taxes payable and deferred income taxes......       42,738         9,885         3,203
                                                              ----------    ----------    ----------
Net cash flow generated from operating activities..........      190,323       122,148        68,930
                                                              ----------    ----------    ----------
Cash flow from investing activities:
  Decrease (increase) in short-term investments............        7,836      (117,034)       26,742
  Acquisition of property, plant, and equipment............     (194,878)     (112,370)      (55,485)
  Sale of equipment........................................           --         7,918            --
  Acquisition of IC Designs, Inc., net of cash acquired....           --            --       (16,629)
  Acquisition of FCT product line..........................           --            --        (5,270)
  Buyout of minority interest in subsidiaries..............           --            --        (7,356)
  Sale of Ross Technology, Inc.............................           --            --        17,087
  Other....................................................           --          (969)         (967)
                                                              ----------    ----------    ----------
Net cash flow used for investing activities................     (187,042)     (222,455)      (41,878)
                                                              ----------    ----------    ----------
Cash flow from financing activities:
  Issuance of convertible subordinated notes, net of
     issuance costs........................................           --        89,443            --
  Restricted investments related to building lease
     agreements............................................      (20,744)      (18,513)           --
  Repurchase of common stock...............................      (37,881)           --       (19,725)
  Issuance of capital stock................................       31,523        24,502        20,449
  Other....................................................           --           526        (2,490)
                                                              ----------    ----------    ----------
Net cash flow generated (used) for financing activities....      (27,102)       95,958        (1,766)
                                                              ----------    ----------    ----------
Net increase (decrease) in cash and cash equivalents.......      (23,821)       (4,349)       25,286
Cash and cash equivalents, beginning of year...............       33,308        37,657        12,371
                                                              ----------    ----------    ----------
Cash and cash equivalents, end of year.....................    $   9,487    $   33,308     $  37,657
                                                                ========     =========      ========
Supplemental disclosures:
  Cash paid during the year for:
     Interest..............................................    $   4,014    $    1,677     $     289
     Income taxes..........................................    $  30,744    $   24,214     $   1,635
</TABLE>

 
          See accompanying notes to consolidated financial statements.
 
                                       18

<PAGE>   20
 

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1: THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
 
THE COMPANY
 
     Cypress Semiconductor Corporation (the "Company" or "Cypress") was
incorporated in California in December 1982, commenced business activities on
April 7, 1983, and reincorporated in Delaware in February 1987. The Company
designs, develops, and manufactures a broad range of high-performance integrated
circuits. The Company sells to the networking, military, computer,
telecommunications, and instrumentation application markets.
 
     The Company's operations outside the U.S. primarily relate to foreign sales
offices. The assets, liabilities, and results of operations of these entities
were not significant for any of the years presented. Export revenues,
principally to customers in Europe and Japan, were 34%, 32%, and 27% of total
revenues in 1995, 1994, and 1993, respectively. As of January 1, 1996, all of
the Company's subsidiaries are wholly owned, except for Cypress Semiconductor
(Texas), Inc. ("CTI"), the Company's wafer fabrication facility in Texas, which
is approximately 17% owned by Altera Corporation ("Altera"). Altera receives
wafer fab capacity commensurate with its investment.
 
     No one customer accounted for greater than 10% of revenues in 1995, 1994,
or 1993. Additionally, sales to one distributor accounted for 10% and 11% of
total revenues in 1994 and 1993, respectively. No one distributor accounted for
greater than 10% of revenues in 1995.
 
     In August 1995, the Company announced a two-for-one stock split in the form
of a 100% common stock dividend to stockholders of record as of October 19,
1995. In October, the stockholders approved an amendment to the Company's
Certificate of Incorporation, increasing the number of authorized shares from
75,000,000 to 250,000,000 in conjunction with the stock dividend. Stockholders
of record as of October 19, 1995, received certificates representing one
additional share for every share held at that time. The shares were distributed
on October 31, 1995. In addition, all shares previously authorized, but not
issued, under the 1994 Stock Option Plan and the Employee Qualified Stock
Purchase Plan were doubled in accordance with the terms of such plans as a
result of the stock dividend. All share and per share amounts in the
accompanying consolidated financial statements and notes thereto have been
adjusted for all periods presented to give effect to this stock dividend except
for the amounts disclosed for treasury shares, which were not split, and are
stated at their historical amounts.
 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Fiscal Year
 
     Fiscal years 1995, 1994, and 1993 ended January 1, 1996, January 2, 1995,
and January 3, 1994, respectively. The Company operates on a 52- or 53-week
fiscal year, ending on the Monday closest to December 31. Fiscal years 1995 and
1994 each comprised 52 weeks and fiscal year 1993 comprised 53 weeks. Certain
prior year amounts have been adjusted to conform to current year presentation.
 
  Management Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles 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.
 
  Principles of Consolidation
 
     The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
 
                                       19

<PAGE>   21
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Revenue Recognition
 
     Revenue from product sales direct to customers is recognized upon shipment.
Certain of the Company's sales to domestic distributors are made under
agreements allowing certain rights of return and price protection on merchandise
unsold by the distributors. Accordingly, the Company defers recognition of sales
and profit on such sales until the merchandise is sold by the distributors.
 
  Fair Value of Financial Instruments
 
     The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash and cash equivalents, trade accounts
receivable, accounts payable and accrued expenses, the carrying amounts
approximate fair value due to their short maturities. The amounts shown for
long-term debt also approximate fair value.
 
  Cash Equivalents and Short-Term Investments
 
     All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
 
     Effective January 4, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 "SFAS 115", "Accounting for Certain Investments in
Debt and Equity Securities." Upon adoption of SFAS 115, the Company classified,
and continues to classify, all investments as available for sale, based upon the
Company's intention to use these investments to fund working capital needs. The
investments, which all have contractual maturities of less than two years, are
carried at cost plus accrued interest, which approximated market for the entire
fiscal year.
 
     A summary of the carrying amounts of the investments are as follows:
 

<TABLE>
<CAPTION>
                                                                         JANUARY 1,     JANUARY 2,
                                                                            1996           1995
                                                                         ----------     ----------
<S>                                                                      <C>            <C>
                                                                            (DOLLARS IN THOUSANDS)
Corporate debt securities............................................     $   6,125      $   5,958
State and municipal obligations......................................       130,606        138,195
Other................................................................        15,400         15,814
                                                                         ----------     ----------
Total................................................................     $ 152,131      $ 159,967
                                                                           ========       ========
</TABLE>

 
  Concentration of Credit Risk
 
     Financial instruments that potentially subject the Company to significant
concentration of credit risk consist principally of cash equivalents, short-term
investments, and trade accounts receivable. The Company places its cash
equivalents and short-term investments in a variety of financial instruments
such as municipal securities and U.S. Government securities. The Company further
limits its exposure to these investments by placing such investments with
various financial institutions. The Company routinely performs credit
evaluations of these financial institutions.
 
     The Company sells its product to original equipment manufacturers and
distributors throughout the world. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. The Company maintains an allowance for
uncollectible accounts receivable based upon expected collectibility of all
accounts receivable.
 
                                       20

<PAGE>   22
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Inventories
 
     Inventories are valued at standard costs that approximate actual costs, but
not in excess of market. Cost is determined on a first-in, first-out basis.
Market is based on estimated net realizable value. The components of inventories
are as follows:
 

<TABLE>
<CAPTION>
                                                                         JANUARY 1,     JANUARY 2,
                                                                            1996           1995
                                                                         ----------     ----------
<S>                                                                      <C>            <C>
                                                                            (DOLLARS IN THOUSANDS)
Raw materials........................................................     $  9,859       $  8,519
Work-in-process......................................................       12,682         12,325
Finished goods.......................................................        6,437          7,528
                                                                         ----------     ----------
Total................................................................     $ 28,978       $ 28,372
                                                                           =======        =======
</TABLE>

 
  Property, Plant, and Equipment
 
     Property, plant, and equipment are stated at cost. Depreciation and
amortization are computed for financial reporting purposes using the
straight-line method over the estimated useful lives of the assets, or lease
term if less than useful life. Accelerated methods of computing depreciation are
used for tax purposes. The components of property, plant, and equipment are as
follows:
 

<TABLE>
<CAPTION>
                                                          USEFUL LIVES     JANUARY 1,     JANUARY 2,
                                                            IN YEARS          1995           1995
                                                          ------------     ----------     ----------
<S>                                                       <C>              <C>            <C>
                                                                              (DOLLARS IN THOUSANDS)
Land...................................................                    $    8,850     $    7,558
Machinery and equipment................................       3 to 5          501,377        336,747
Buildings and leasehold improvements...................      7 to 10           38,821         32,257
Furniture and fixtures.................................            5            5,384          4,110
                                                                           ----------     ----------
                                                                              554,432        380,672
Accumulated depreciation and amortization..............                      (217,839)      (179,082)
                                                                           ----------     ----------
Total..................................................                    $  336,593     $  201,590
                                                                            =========      =========
</TABLE>

 
  Goodwill
 
     Goodwill acquired in connection with the purchase of other businesses is
recorded at cost and amortized over a four- or five-year period using the
straight-line method. The Company periodically determines whether there has been
any permanent impairment in the value of the goodwill whenever events indicate
that the carrying value of such goodwill may not be recoverable. The measurement
of possible impairment is based on determining whether projected undiscounted
future cash flows from operations exceed the net book value of the goodwill as
of the measurement date. As of January 1, 1996, there has been no such
impairment.
 
  Income Taxes
 
     The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The
statement requires that the Company follow the liability method of accounting
for income taxes which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences between
the financial statement carrying amounts and the tax bases of assets and
liabilities.
 
                                       21

<PAGE>   23
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Net Income per Share
 
     Net income per share is computed using the weighted average number of
shares of outstanding common stock and common equivalent shares, when dilutive.
Common equivalent shares include shares issuable under the Company's stock
option plans as determined by the treasury stock method. Fully diluted earnings
per share assumes full conversion of the convertible subordinated notes into
common shares and the elimination of the related interest requirements (net of
income taxes).
 
  Translation of Foreign Currencies
 
     The Company translates accounts denominated in foreign currencies in
accordance with Statement of Financial Accounting Standards No. 52, using the
United States dollar as the functional currency. Sales to customers are
primarily denominated in U.S. dollars and foreign currency transaction gains and
losses have not been material in any year.
 
NOTE 2:  RESTRUCTURING AND OTHER NON-RECURRING COSTS
 
     In May 1995, in a case before the U.S. District Court in Dallas, Texas, a
jury delivered a verdict of $17.8 million against the Company in a patent
infringement lawsuit filed by Texas Instruments ("TI"). In August, the judge
reversed the decision stating TI failed to prove that Cypress infringed on TI's
patents covering the plastic encapsulation process used to package semiconductor
devices. TI has filed an appeal, in which the Company will continue to defend
itself. In March 1995, the Company recorded a one-time pre-tax charge of $17.8
million with respect to the original decision. The Company will continue to
maintain this reserve pending further resolution of this matter.
 
     In June 1993, Cypress sold its SPARC(TM) microprocessor subsidiary, Ross
Technology, Inc., to Fujitsu Limited for $21.8 million. The Company received an
aggregate of $16.6 million in 1993 and $4.3 million in 1994, and the remaining
balance of $0.9 million in 1995. In addition to the divestiture of Ross, the
Company restructured the equity in two of its subsidiaries, Aspen Semiconductor
Corporation and Multichip Technology, Incorporated, by acquiring employee
minority interests consisting of stock options and stock received from exercised
stock options. Aspen Semiconductor was absorbed into two of Cypress's divisions,
Static Memory and Programmable Products. Multichip Technology is now integrated
as a part of the Static Memory Division. These restructuring activities and the
divestiture in Ross resulted in a net one-time pre-tax credit of $408,000.
 
NOTE 3:  ACQUISITIONS AND RELATED CHARGES
 
     In the fourth quarter of 1993, the Company acquired 100% of IC Designs,
Inc., a manufacturer of timing technology products for the personal computer
market, for $16.3 million plus $4 million for certain covenants not to compete.
The aggregate purchase price of $20.3 million was allocated to assets purchased
and liabilities assumed based on independent appraisal as follows:
 

<TABLE>
        <S>                                                               <C>
        Current assets................................................    $6,600,000
        Covenant not to compete.......................................     4,000,000
        R&D in process................................................    11,000,000
        Completed technology..........................................     4,000,000
        Goodwill......................................................     2,000,000
        Other assets..................................................       400,000
        Current liabilities...........................................    (1,800,000)
        Deferred taxes................................................    (5,900,000)
                                                                          ----------
        Total.........................................................    $20,300,000
                                                                          ==========
</TABLE>

 
                                       22

<PAGE>   24
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following summarizes the unaudited pro forma results of operations of
the Company for 1993 assuming the acquisition of IC Designs had occurred at the
beginning of 1993 (dollars in thousands, except per share amounts):
 

<TABLE>
<CAPTION>
                                                                            YEAR ENDED
                                                                            JANUARY 3,
                                                                               1994
                                                                            ----------
        <S>                                                                 <C>
                                                                            (UNAUDITED)
        Revenues.........................................................    $317,280
        Net income.......................................................    $  9,076
        Net income per share.............................................    $   0.12
</TABLE>

 
     In December 1993, the Company acquired the inventory and technology of the
high-speed logic product line of Performance Semiconductor for an aggregate cost
of $5.3 million. This cost has been allocated based on independent appraisal as
follows:
 

<TABLE>
        <S>                                                               <C>
        Inventory.....................................................    $2,100,000
        R & D in process..............................................     3,100,000
        Completed technology..........................................     1,100,000
        Liabilities...................................................    (1,000,000)
                                                                          ----------
        Total.........................................................    $5,300,000
                                                                          ==========
</TABLE>

 
     The pro forma effect of this product line is not significant. These
acquisitions have been accounted for on the purchase method and the intangible
assets acquired, including covenants not to compete, completed technology and
goodwill, are being amortized over three to five years.
 
     Acquired R&D in process aggregating $14.1 million was charged to expense in
the fourth quarter of 1993. In addition, the Company recorded a non-recurring
charge of $4.2 million for certain restructuring activities of Cypress,
necessitated by the increased volume requirements associated with these
acquisitions.
 
NOTE 4:  CONVERTIBLE SUBORDINATED NOTES
 
     On March 31, 1994, the Company completed a $110 million private placement
of 7-year discounted convertible subordinated notes. The notes are due in the
year 2001, with a coupon rate of 3.15 percent and a yield-to-maturity of 6.04
percent. The notes are convertible into approximately 7,940,000 shares of common
stock and are callable by the Company three years after the date of issuance.
Net proceeds were $89.4 million, after issuance costs of $2.9 million. The
discount is being amortized using the effective interest rate method over the
life of the notes. At year-end, the amount of the convertible subordinated notes
required to be reflected as a liability on the Company's balance sheet totalled
$95.9 million, which approximates fair market value.
 
NOTE 5:  COMMON STOCK OPTION AND OTHER EMPLOYEE BENEFIT PLANS
 
1994 STOCK OPTION PLAN
 
     In 1994, the Company adopted the 1994 Stock Option Plan, which replaced the
Company's 1985 Incentive Stock Option Plan and the 1988 Directors' Stock Option
Plan (the "Terminated Plans") with respect to future option grants. Under terms
of the 1994 Stock Option Plan, options may be granted to qualified employees,
consultants, officers and directors of the Company or its majority-owned
subsidiaries. Options become exercisable over a vesting period as determined by
the Board of Directors and expire over terms not exceeding ten years from the
date of grant. The option price for shares granted under the 1994 Stock Option
Plan is typically equal to the fair market value of the common stock at the date
of grant. The 1994 Stock Option Plan includes shares that remained available
under the Terminated Plans and provides for an
 
                                       23

<PAGE>   25
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
annual increase in shares available for issuance pursuant to nonstatutory stock
options equal to 4.5% of the Company's outstanding common stock at the end of
each fiscal year.
 
     Table 1 summarizes information relating to shares under option and shares
available for grant under the Terminated and 1994 Stock Option Plans.
 
TABLE 1.  SHARES UNDER OPTION AND AVAILABLE FOR GRANT
 

<TABLE>
<CAPTION>
                                                                                       OUTSTANDING
                                                                                         OPTIONS
                                                     SHARES AVAILABLE     NUMBER      -------------
                                                        FOR GRANT        OF SHARES     PRICE RANGE
                                                     ----------------    ---------    -------------
<S>                                                  <C>                 <C>          <C>
Balance, December 28, 1992.........................      4,635,238       18,143,356   $ 1.00-$ 9.25
  Options granted..................................     (6,472,540)      6,472,540    $ 5.00-$ 7.19
  Options exercised................................             --       (3,161,502)  $ 1.00-$ 5.50
  Options cancelled................................      2,748,884       (2,748,884)  $ 1.00-$ 7.19
                                                     ----------------    ---------
Balance, January 3, 1994...........................        911,582       18,705,510   $ 1.00-$ 9.25
  Options authorized...............................      6,000,000              --               --
  Options granted..................................     (5,548,722)      5,548,722    $ 7.56-$11.25
  Options exercised................................             --       (3,915,126)  $ 1.00-$ 8.44
  Options cancelled................................      1,367,318       (1,367,318)  $ 1.25-$10.00
                                                     ----------------    ---------
Balance, January 2, 1995...........................      2,730,178       18,971,788   $ 1.00-$11.25
  Options authorized...............................      3,502,026              --               --
  Options granted..................................     (7,504,204)      7,504,204    $12.13-$24.50
  Options exercised................................             --       (5,735,670)  $ 1.00-$24.50
  Options cancelled................................      1,292,221       (1,292,221)  $ 1.00-$24.50
                                                     ----------------    ---------
Balance, January 1, 1996...........................         20,221       19,448,101   $ 1.00-$24.50
                                                      ============       =========
Options exercisable on January 1, 1996.............                      7,449,572    $ 1.00-$24.50
                                                                         =========
</TABLE>

 
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
 
     In 1986, the Company approved an Employee Qualified Stock Purchase Plan
("ESPP"), which allows eligible employees of the Company and its subsidiaries to
purchase shares of common stock through payroll deductions. The ESPP consists of
consecutive 24-month offering periods composed of four 6-month exercise periods.
The shares can be purchased at the lower of 85% of the fair market value of the
common stock at the date of commencement of this two-year offering period or at
the last day of each 6-month exercise period. Purchases are limited to 10% of an
employee's eligible compensation, subject to a maximum annual employee
contribution limited to a $25,000 market value (calculated as employee's
enrollment price multiplied by purchased shares). Of the 7,600,000 shares
authorized under the ESPP, 5,230,934 shares were issued through 1995 including,
582,432, 900,496, and 905,014 shares in 1995, 1994, and 1993, respectively.
 
OTHER EMPLOYEE BENEFIT PLANS
 
     The Company also maintains a Section 401(k) Plan, Profit Sharing Plan, and
Key Employee Bonus Plan. The 401(k) Plan provides participating employees with
an opportunity to accumulate funds for retirement and hardship. Eligible
participants may contribute up to 20% of their eligible earnings to the Plan
Trust.
 
     Under the Profit Sharing Plan, all qualified employees are provided an
equal share of bonus payments, which are based on the Company achieving a
targeted level of earnings per share. In 1995, 1994, and 1993,
 
                                       24

<PAGE>   26
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
$7,575,000, $5,241,000 and $1,599,000, respectively, were charged to operations
in connection with the Profit Sharing Plan.
 
     In 1994, a Key Employee Bonus Plan was established which provides for bonus
payments to selected employees upon achievement of certain Company and
individual performance targets. In 1995 and 1994, $4,937,000 and $1,902,000,
respectively, were charged to operations in connection with this Plan.
 
NOTE 6:  INCOME TAXES
 
     The components of the provision for income taxes are summarized in Table 2.
Income before taxes is principally attributed to domestic operations.
 
     The tax provision differs from the amounts obtained by applying the
statutory U.S. federal income tax rate to income before taxes as shown in Table
3.
 
TABLE 2.  COMPONENTS OF THE PROVISION FOR INCOME TAXES
 

<TABLE>
<CAPTION>
                                                                             YEAR ENDED
                                                              JANUARY 1,     JANUARY 2,     JANUARY 3,
                                                                 1996           1995           1994
                                                              ----------     ----------     ----------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                                           <C>            <C>            <C>
Current tax expense:
  U.S. Federal.............................................    $ 60,163       $ 24,998       $  9,507
  State and local..........................................       6,988          3,286          1,055
  Foreign..................................................         220            101            171
                                                              ----------     ----------     ----------
Total current..............................................      67,371         28,385         10,733
                                                              ----------     ----------     ----------
Deferred tax expense (benefit):
  U.S. Federal.............................................      (7,849)           709         (5,918)
  State and local..........................................        (615)           549           (291)
                                                              ----------     ----------     ----------
Total deferred.............................................      (8,464)         1,258         (6,209)
                                                              ----------     ----------     ----------
Total......................................................    $ 58,907       $ 29,643       $  4,524
                                                                =======        =======        =======
</TABLE>

 
TABLE 3.  TAX PROVISION DIFFERENCES
 

<TABLE>
<CAPTION>
                                                                             YEAR ENDED
                                                              JANUARY 1,     JANUARY 2,     JANUARY 3,
                                                                 1996           1995           1994
                                                              ----------     ----------     ----------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                                           <C>            <C>            <C>
Statutory rate.............................................         35%            35%            35%
Tax at U.S. statutory rate.................................    $ 56,484       $ 28,040       $  4,398
State income taxes, net of federal benefit.................       4,142          2,492            497
Tax credits................................................      (1,013)          (300)          (679)
Net Foreign Sales Corporation (FSC) benefit................        (479)          (427)          (974)
Benefit of tax free investments............................      (2,254)        (1,324)            --
Other, net.................................................       2,027          1,162          1,282
                                                              ----------     ----------     ----------
Total......................................................    $ 58,907       $ 29,643       $  4,524
                                                                =======        =======        =======
</TABLE>

 
                                       25

<PAGE>   27
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The components of the net deferred tax assets at January 1, 1996, and
January 2, 1995, under FAS 109 were as follows:
 

<TABLE>
<CAPTION>
                                                                         JANUARY 1,     JANUARY 2,
                                                                            1996           1995
                                                                         ----------     ----------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                                      <C>            <C>
Deferred tax assets:
Deferred income on sales to distributors.............................     $   5,654      $   3,988
Inventory reserves and basis differences.............................         7,677          5,077
Restructuring and legal reserves.....................................        11,027          2,032
Asset valuation and other reserves...................................        10,822          6,851
State tax, net of federal tax........................................           455            297
Other, net...........................................................         2,388          4,616
                                                                         ----------     ----------
Total deferred tax assets............................................        38,023         22,861
                                                                         ----------     ----------
Deferred tax liabilities:
Excess of tax over book depreciation.................................       (17,294)       (11,829)
Other, net...........................................................        (1,271)           (38)
                                                                         ----------     ----------
Total deferred tax liabilities.......................................       (18,565)       (11,867)
                                                                         ----------     ----------
Net deferred tax assets..............................................     $  19,458      $  10,994
                                                                           ========       ========
</TABLE>

 
     The net deferred tax asset at January 1, 1996, is substantially realizable
through carry-back to prior years' taxable income. Other Current Assets include
current net deferred tax assets of $35,111,000 at January 1, 1996, and
$22,203,000 at January 2, 1995, respectively.
 
NOTE 7:  COMMITMENTS AND CONTINGENCIES
 
OPERATING LEASE COMMITMENTS
 
     The Company leases most of its manufacturing and office facilities under
noncancelable operating lease agreements that expire at various dates through
2004. These leases require the Company to pay taxes, insurance, and maintenance
expenses, and provide for renewal options at the then fair market rental value
of the property.
 
     In September 1994, the Company entered into a five-year operating lease for
office and manufacturing facilities in San Jose, California. In December 1994,
the Company entered into a ten-year operating lease for its second wafer
fabrication facility "Fab IV" in Bloomington, Minnesota. In October 1995, the
Company entered into an additional lease financing agreement related to Fab IVb
in Minnesota. These leases require quarterly payments which vary based on the
London interbank offering rate (LIBOR). All leases provide the Company with the
option of either acquiring the properties at their original cost or arranging
for the property to be acquired at the end of the respective lease terms. The
Company is contingently liable under certain first-loss clauses for up to $34.0
million at January 1, 1996. Furthermore, the Company must maintain restricted
cash or investments ($39.3 million at January 1, 1996) to serve as collateral
for these leases and maintain compliance with certain financial covenants.
Management believes that this contingent liability will not have a material
adverse effect on the Company's financial position or results of operations.
 
                                       26

<PAGE>   28
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The aggregate annual rental commitments under noncancelable operating
leases as of January 1, 1996, are:
 

<TABLE>
<CAPTION>
                                                                            (DOLLARS IN
        FISCAL YEAR                                                          THOUSANDS)
        -------------------------------------------------------------------------------
        <S>                                                                 <C>
        1996................................................................   $ 4,402
        1997................................................................     4,704
        1998................................................................     3,502
        1999................................................................     2,676
        2000................................................................     2,546
        2001 and thereafter.................................................     9,700
                                                                            -----------
        Total...............................................................   $27,530
                                                                             ========
</TABLE>

 
     Rental expense was approximately $5,995,000 in 1995, $4,954,000 in 1994,
and $4,036,000 in 1993.
 
LITIGATION AND ASSERTED CLAIMS
 
     In the normal course of business, the Company receives and makes inquiries
with regard to possible patent infringement. Where deemed advisable, the Company
may seek or extend licenses or negotiate settlements.
 
     In May 1995, in a case before the U.S. District Court in Dallas, Texas, a
jury delivered a verdict of $17.8 million against the Company in a patent
infringement lawsuit filed by Texas Instruments ("TI"). In August, the judge
reversed the decision stating that TI failed to prove that Cypress infringed on
TI's patents covering the plastic encapsulation process used to package
semiconductor devices. TI has filed an appeal, in which the Company will
continue to defend itself. In March 1995, the Company recorded a one-time
pre-tax charge of $17.8 million with respect to the original decision. The
Company will continue to maintain this reserve pending further resolution of
this matter.
 
     In June 1995, the U.S. District Court of Northern California dismissed by a
summary judgement a class-action lawsuit filed against the Company and certain
of its officers. The suit was filed for alleged violations of the Securities and
Exchange Act of 1934 and certain provisions of state law regarding disclosure of
short-term business prospects. The plaintiffs have filed an appeal, in which the
Company will continue to defend itself.
 
     In June 1995, Advanced Micro Devices "AMD" charged the Company with patent
infringement and filed suit in the U.S. District Court in Delaware. The suit
filed by AMD claims the Company infringed on several of AMD's programmable logic
patents. No trial date has been set.
 
     The Company will vigorously defend itself in these matters and, subject to
the inherent uncertainties of litigation and based upon discovery completed to
date, management believes that the resolution of these matters will not have a
material adverse impact on the Company's financial position or results of
operation. However, should the outcome of any of the actions be unfavorable, the
Company may be required to pay damages and other expenses, which could have a
material adverse effect on the Company's financial position or results of
operations. In addition, the Company could be required to alter certain of its
production processes or products as a result of these matters.
 
PURCHASE COMMITMENTS
 
     At January 1, 1996, the Company has purchase commitments aggregating $220
million principally for manufacturing equipment and facilities.
 
                                       27

<PAGE>   29
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 8:  RELATED PARTIES
 
     During 1990, the Company made a cost-basis investment of $1.0 million in
Vitesse Semiconductor Series E Preferred Stock (which has been converted to
common stock since Vitesse's initial public offering) and guaranteed an
equipment lease line of credit for Vitesse, of $3.5 million, maturing on August
31, 1997. The outstanding principal balance related to the lease line at January
1, 1996, is $0.3 million. As of January 1, 1996, the Company's cost-basis
investment is $1,000,000. The Company's chairman, board member, and its
president are members of the Vitesse Board of Directors.
 
     During 1992, the Company made a cost-basis investment of $2.0 million in
QuickLogic Series D preferred stock. An additional $1,015,000 was invested in
1995, $189,000 in 1994 and $195,000 in 1993. The Company also recorded sales to
QuickLogic of $5,769,000 in 1995 and $1,972,000 in 1994 and at fiscal year-end
1995 and 1994, the Company had a receivable due from QuickLogic of $717,000 and
$787,000, respectively, and a payable due to QuickLogic of $64,000 and $207,000,
respectively. Under certain circumstances, the Company may be required to make
additional investments in QuickLogic. The Company's chairman is a member of the
Board of Directors of QuickLogic.
 
     During 1995, 1994, and 1993, the Company paid approximately $281,000,
$254,000, and $291,000, respectively, to a member of the Board of Directors for
consulting services.
 
                                       28

<PAGE>   30
 
 
                      REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders and Board of Directors of
  CYPRESS SEMICONDUCTOR CORPORATION:
 
     In our opinion, the consolidated financial statements listed in the index
appearing under item 14 (a)(1) and (2) on page 32 present fairly, in all
material respects, the financial position of Cypress Semiconductor Corporation
and its subsidiaries at January 1, 1996 and January 2, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended January 1, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
 
PRICE WATERHOUSE LLP
San Jose, California
January 19, 1996

 
                                       29

<PAGE>   31
 
                            QUARTERLY FINANCIAL DATA
 

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                                     ------------------------------------------------
                                                     JANUARY 1,    OCTOBER 2,    JULY 3,     APRIL 3,
                                                        1996          1995         1995        1995
                                                     ----------    ----------    --------    --------
                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>           <C>           <C>         <C>
Revenues..........................................    $ 177,279     $ 161,155    $134,273    $123,365
Gross profit......................................       96,712        87,295      73,374      62,531
Net income........................................       35,550        32,219      25,602       9,105
Net income per share
  Primary.........................................    $    0.40     $    0.35    $   0.29    $   0.11
                                                       ========      ========    ========    ========
  Fully diluted...................................    $    0.38     $    0.33    $   0.27    $   0.11
                                                       ========      ========    ========    ========
</TABLE>

 

<TABLE>
<CAPTION>
                                                     JANUARY 2,    OCTOBER 3,    JULY 4,     APRIL 4,
                                                        1995          1994         1994        1994
                                                     ----------    ----------    --------    --------
                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>           <C>           <C>         <C>
Revenues..........................................    $ 111,172     $ 104,013    $100,217    $ 90,957
Gross profit......................................       52,206        47,250      44,541      39,742
Net income........................................       15,765        13,611      11,571       9,525
Net income per share
  Primary.........................................    $    0.19     $    0.16    $   0.14    $   0.12
                                                       ========      ========    ========    ========
  Fully diluted...................................    $    0.18     $    0.16    $     --    $     --
                                                       ========      ========    ========    ========
</TABLE>

 

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
     Not applicable.
 
                                       30

<PAGE>   32
 

                                    PART III
 
     Certain information required by Part III is omitted from this Report in
that the registrant will file a definitive proxy statement pursuant to
Regulation 14A (the "Proxy Statement") not later than 120 days after the end of
the fiscal year covered by this Report, and certain information included therein
is incorporated herein by reference.
 

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The information concerning the Company's directors required by this Item is
incorporated by reference to the Company's Proxy Statement.
 
     The information concerning the Company's executive officers required by
this Item is included in Part I hereof under the title "Executive Officers of
the Registrant".
 

ITEM 11.  EXECUTIVE COMPENSATION
 
     The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
 
                                       31

<PAGE>   33
 

                                    PART IV
 

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
     (a) The following documents are filed as a part of this report:
 

<TABLE>
<CAPTION>
(1)                                   FINANCIAL STATEMENTS                               PAGE
        --------------------------------------------------------------------------------------
<S>     <C>                                                                             <C>
        Consolidated Balance Sheets at January 1, 1996 and January 2, 1995..............   15
        Consolidated Statements of Operations for the three years ended January 1,          
        1996............................................................................   16
        Consolidated Statements of Stockholders' Equity for the three years ended           
        January 1, 1996.................................................................   17
        Consolidated Statements of Cash Flows for the three years ended January 1,          
        1996............................................................................   18
        Notes to Consolidated Financial Statements......................................   19
        Report of Independent Accountants...............................................   29
</TABLE>

 

<TABLE>
<CAPTION>
(2)                               FINANCIAL STATEMENT SCHEDULE                           PAGE
        --------------------------------------------------------------------------------------
<S>     <C>                                                                             <C>
    I.  Valuation and qualifying accounts and reserves..................................    F-1
</TABLE>

 
     All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
 
                                       32

<PAGE>   34
 
(3) Exhibits
 

<TABLE>
<CAPTION>
  EXHIBIT
   NUMBER                                       DESCRIPTION
- ------------  -------------------------------------------------------------------------------
<S>           <C>
3.1(1)        Restated Certificate of Incorporation, as amended.
3.2(3)        Certificate of Amendment of Restated Certificate of Incorporation, as amended.
3.2(a)        Certificate of Amendment of Restated Certificate of Incorporation, as amended.
3.3(1)        Bylaws, as amended.
10.1(3)(6)    1985 Incentive Stock Option Plan, and forms of Incentive Stock Option Agreement
              and Nonstatutory Option Agreement, as amended.
10.2(1)(6)    Form of Indemnification Agreement.
10.3(2)(6)    1988 Directors' Stock Option Plan and form of Agreement, as amended.
10.4(6)       Bialek consulting agreement, dated April 1, 1995.
10.5(4)(6)    1994 Stock Option Plan.
10.6(5)(6)    Employee Qualified Stock Purchase Plan, as amended.
10.7(5)       Indenture dated March 15, 1994 between the Company and The First National Bank
              of Boston.
10.8(5)       Lease Agreement dated December 29, 1994 between the Company and Sumitomo Bank
              Leasing and Finance, Inc.
10.9(5)       Lease dated September 1, 1994 between the Company and BNP Leasing Corporation.
10.10(5)(6)   Cypress Semiconductor Corporation 1995 Key Employee Bonus Plan Agreement.
10.11(5)(6)   Loan agreement for J. Daniel McCranie.
10.12(5)(6)   Relocation agreement for Lothar Maier
21.1          Subsidiaries of the Company.
23.1          Consent of Independent Accountants.
24.1          Power of Attorney (see page 34).
(1)           Previously filed as exhibits to Registration Statement on Form S-1 (No.
              33-12153) which became effective on March 4, 1987 and incorporated herein by
              reference.
(2)           Previously filed as an exhibit to the Company's Annual Report on Form 10-K for
              the fiscal year ended December 31, 1990.
(3)           Previously filed as an exhibit to the Company's Annual Report on Form 10-K for
              the fiscal year ended December 28, 1992.
(4)           Previously filed as an exhibit to the Company's Annual Report on Form 10-K for
              the fiscal year ended January 3, 1994.
(5)           Previously filed as an exhibit to the Company's Annual Report on Form 10-K for
              the fiscal year ended January 2, 1995.
(6)           Management compensatory plan, contract or arrangement.
(b)           Reports on Form 8-K
              None.
</TABLE>

 
                                       33

<PAGE>   35
 

                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Cypress Semiconductor Corporation, a
corporation organized and existing under the laws of the State of Delaware, has
duly caused this Annual Report to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of San Jose, State of California, on the
29th day of March 1996.
 
                                          CYPRESS SEMICONDUCTOR CORPORATION
 
                                                    /s/ EMMANUEL HERNANDEZ
                                          By:
 
                                                     Emmanuel Hernandez,
                                                Chief Financial Officer, Vice
                                                        President,
                                                  Finance and Administration
 
                               POWER OF ATTORNEY
 
     Each of the officers and directors of Cypress Semiconductor Corporation
whose signature appears below hereby constitutes and appoints T.J. Rodgers and
Emmanuel Hernandez and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution, each with power to act alone, to sign
and execute on behalf of the undersigned any amendment or amendments to this
Report on Form 10-K, and to perform any acts necessary to be done in order to
file such amendment, and each of the undersigned does hereby ratify and confirm
all that said attorneys-in-fact and agents, or their or his substitutes, shall
do or cause to be done by virtue hereof.
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated:
 

<TABLE>
<CAPTION>
              SIGNATURE                               TITLE                        DATE
- -------------------------------------  ------------------------------------ -------------------
<C>                                    <S>                                  <C>
          /s/ T.J. RODGERS             President, Chief Executive Officer   March 29, 1996
- -------------------------------------  and Director (Principal Executive
            T.J. Rodgers               Officer)

       /s/ EMMANUEL HERNANDEZ          Chief Financial Officer,             March 29, 1996
- -------------------------------------  Vice-President, Finance and
         Emmanuel Hernandez            Administration (Principal Financial
                                       and Accounting Officer)

        /S/ PIERRE R. LAMOND           Chairman of the Board of Directors   March 29, 1996
- -------------------------------------
          Pierre R. Lamond

         /s/ FRED B. BIALEK            Director                             March 29, 1996
- -------------------------------------
           Fred B. Bialek

          /S/ ERIC BENHAMOU            Director                             March 29, 1996
- -------------------------------------
            Eric Benhamou

          /S/ JOHN C. LEWIS            Director                             March 29, 1996
- -------------------------------------
            John C. Lewis
</TABLE>

 
                                       34

<PAGE>   36
 
                                  SCHEDULE II
 
                       CYPRESS SEMICONDUCTOR CORPORATION
 
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 

<TABLE>
<CAPTION>
                                                     CHARGED TO    CHARGED TO
                                        BEGINNING      COSTS         OTHER                    ENDING
             DESCRIPTION                 BALANCE    AND EXPENSES    ACCOUNTS    DEDUCTIONS    BALANCE
- --------------------------------------  ---------   ------------   ----------   ----------   ---------
<S>                                     <C>         <C>            <C>          <C>          <C>
1993
Allowance for sales returns and
  doubtful accounts...................  $ 833,000    $  738,000     $125,000    $ (349,000)  $1,347,000
1994
Allowance for sales returns and
  doubtful accounts...................  $1,347,000   $  610,000     $     --    $ (564,000)  $1,393,000
1995
Allowance for sales returns and
  doubtful accounts                     $1,393,000   $1,400,000     $ 85,000    $  (50,000)  $2,828,000
</TABLE>

 
                                       F-1





<PAGE>   1
                                                                  Exhibit 3.2(a)


                            CERTIFICATE OF AMENDMENT
                                       OF
                          CERTIFICATE OF INCORPORATION
                                       OF
                        CYPRESS SEMICONDUCTOR CORPORATION

         CYPRESS SEMICONDUCTOR CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), pursuant to the
provisions of the General Corporation Law of the State of Delaware (the "GCL"),
DOES HEREBY CERTIFY as follows:

         FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by deleting the second, third and fourth sentences of Section 4(a) of
the Certificate of Incorporation in its present form and substituting therefor a
new second sentence of Section 4(a) in the following form:

         "The total number of shares of all classes of stock which the
         Corporation has authority to issue is Two Hundred Fifty Five Million
         (255,000,000), consisting of Two Hundred Fifty Million (250,000,000)
         shares of Common Stock, $0.01 par value (the "Common Stock"), and Five
         Million (5,000,000) shares of Preferred Stock, $0.01 par value (the
         "Preferred Stock")."

         SECOND: The amendment to the Certificate of Incorporation of the
Corporation set forth in this Certificate of Amendment has been duly adopted in
accordance with the provisions of Section 242 of the GCL (a) the Board of
Directors
 of the Corporation having duly adopted a resolution setting forth such
amendment and declaring its advisability and submitting it to the stockholders
of the Corporation for their approval, and (b) the stockholders of the
Corporation having duly adopted such amendment by a vote of the holders of a
majority of the outstanding stock entitled to vote thereon by written consent of
the stockholders.

         IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment to be signed by Emmanuel
Hernandez, its Chief Financial Officer this 23rd day of October, 1995.


                                            CYPRESS SEMICONDUCTOR CORPORATION

                                            BY:
                                               ---------------------------

[Corporate Seal]



<PAGE>   1
                                                                 Exhibit 10.4(6)



April 1, 1995

Mr. Fred Bialek
200 Winding Way
Woodside, CA  94062

Dear Fred,

Since your prior consulting agreement terminated April 1, 1995, this will set
forth the current terms and conditions of your consulting agreement with Cypress
(the "Company").

1)       You shall provide consulting services to perform the Company's Board of
         Directors duties, division and subsidiary duties, and whatever mergers
         and acquisitions activity that the Company's management asks of you
         until this agreement is terminated. You are expected to work generally
         on your own and employ your own methods and to work the hours and
         schedule necessary to complete the services. You will do most of your
         work out of your own office, but when necessary, the Company will
         provide an office space, other facilities and a phone for your use.

2)       You may provide your consulting services to any non-related Company 
         entity with the exception of a direct competitor to the Company.

3)       In return for the services listed above and until this agreement is 
         terminated, the Company shall compensate you as follows:

         a)       You shall receive the same standard monetary compensation as 
                  the outside directors of the Company's Board of Directors.

         b)       You shall be granted
 stock options consistent with those
                  granted to the outside directors of the Company's Board of
                  Directors. You will be granted a nonstatutory option to
                  purchase 10,000 shares on May 29th of each year, exercisable
                  at the fair market value on the date of grant and vesting on a
                  date four years after the date of grant.

         c)       You shall receive an annualized fixed retainer for your 
                  services of $269,346 payable on the first day of each month.

         d)       You shall be reimbursed for your out-of-pocket business 
                  expenses for travel, lodging, phone and administrative support
                  upon receipt of invoice.

<PAGE>   2
                                                              Exhibit 10.4(6)
                                                              Pg. 2


4)       This agreement is valid until April 1, 1996 unless terminated by
         either party with 30 days written notice. This agreement may be
         extended for one-year periods (subject to a 30-day right to terminate)
         only by an Extension to Consulting Agreement in the form of Exhibit A
         signed by you and Cypress.

5)       This agreement supersedes all prior consulting agreements, which shall
         now be deemed terminated.

6)       In carrying out services under this agreement, you shall be and act as
         an independent contractor, and shall be subject to the Company's
         direction only as to specific areas that the Company desires your
         services and advice.

Please indicate your acceptance of this agreement by signing a copy and
returning it to me.

Sincerely,

/s/ T.J. Rodgers
- ----------------------------------
T.J. Rodgers
President and CEO
Cypress Semiconductor Corporation





I accept the terms and conditions of this agreement.

/s/ Fred Bialek                              Dated:  June 22, 1995
- ----------------------------------                 ------------------
Fred Bialek



<PAGE>   1
                                                             Exhibit 10.11(5)(6)

                                 PROMISSORY NOTE

$210,000                                                           San Jose, CA
                                                              December 28, 1995

FOR VALUE RECEIVED, October 7, 1993, the undersigned DAN McCRANIE promises to 
pay to the order of CYPRESS SEMICONDUCTOR CORPORATION, a Delaware corporation 
(the Company) the principal sum of Two Hundred and Ten Thousand Dollars 
($210,000) on or before October 7, 1998. This note bears interest at the rate 
of four percent (4%) per annum.

The entire principal and interest due pursuant to this note shall be due and
payable in a lump sum on October 7, 1998, the fifth anniversary of this Note.
Subject to continuing employment with the Company, principal and interest on
this Note shall be forgiven October 7, 1998. If Mr. McCranie voluntarily
terminates his employment with the Company, the full amount of the note plus
accumulated interest shall be repaid to the Company within one year from
termination date. If employment is involuntarily terminated for reasons other
than gross negligence or malfeasance, the full principal and interest amounts
shall be forgiven. This note may be prepaid at any time without penalty.

If an action is instituted for collection of this Note, the undersigned agrees
to pay court costs and reasonable attorney's fees incurred
 by the holder
thereof.

This Promissory Note supersedes the Promissory Note dated October 7, 1993.




/s/ DAN MCCRANIE
- ----------------------------------
Dan McCranie



<PAGE>   1
Exhibit 21.1

                              List of Subsidiaries


<TABLE>
<CAPTION>
                                                               Jurisdiction of
Name                                                           Incorporation
- ----                                                           -------------
<S>                                                            <C>
Cypress Semiconductor (Minnesota) Inc. (CMI)...............    Delaware
                                                              
Cypress Semiconductor (Texas) Inc. (CTI)...................    Delaware
                                                              
Cypress Export, Inc. ......................................    Barbados
                                                              
Cypress Investment Corporation. ...........................    Delaware
                                                              
Cypress Semiconductor International, Inc. .................    Delaware
                                                              
Cypress Semiconductor SARL.................................    France
                                                              
Cypress Semiconductor GmbH ................................    Germany
                                                              
Cypress Semiconductors India Private Limited. .............    India
                                                              
Cypress Semiconductor Italia S.r.l. .......................    Italy
                                                              
Cypress Semiconductor K.K. ................................    Japan
                                                              
Cypress Semiconductor AB ..................................    Scandinavia
                                                              
Cypress Semiconductor Limited .............................    UK
                                                              
Cypress Semiconductor Singapore Pte. Ltd. .................    Singapore
</TABLE>

                                                              
                                                              





<PAGE>   1
                                                                   Exhibit 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-54637, 33-57499 and 33-59153 and No. 333-535) of
Cypress Semiconductor Corporation of our report dated January 19, 1996 appearing
on page 29 of this Form 10-K.




PRICE WATERHOUSE LLP
San Jose, California
March 28, 1996






<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER AND YEAR ENDED JANUARY 1, 
1996.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   3-MOS                   YEAR
<FISCAL-YEAR-END>                          JAN-01-1996             JAN-01-1996
<PERIOD-START>                             OCT-03-1995             JAN-03-1995
<PERIOD-END>                               JAN-01-1996             JAN-01-1996
<CASH>                                           9,487                   9,487
<SECURITIES>                                   152,131                 152,131
<RECEIVABLES>                                  108,587                 108,587
<ALLOWANCES>                                     2,828                   2,828
<INVENTORY>                                     28,978                  28,978
<CURRENT-ASSETS>                               351,637                 351,637
<PP&E>                                         554,432                 554,432
<DEPRECIATION>                                 217,839                 217,839
<TOTAL-ASSETS>                                 750,728                 750,728
<CURRENT-LIABILITIES>                          161,057                 161,057
<BONDS>                                         95,879                  95,653
<PREFERRED-MANDATORY>                              889                     889
<PREFERRED>                                          0                       0
<COMMON>                                             0                       0
<OTHER-SE>                                     471,210                 471,210
<TOTAL-LIABILITY-AND-EQUITY>                   750,728                 750,728
<SALES>                                        161,155                 418,793
<TOTAL-REVENUES>                               161,155                 418,793
<CGS>                                           80,567                 276,160
<TOTAL-COSTS>                                   80,567                 276,160
<OTHER-EXPENSES>                                21,300                  71,667
<LOSS-PROVISION>                                     0                       0
<INTEREST-EXPENSE>                               1,530                   6,239
<INCOME-PRETAX>                                 55,991                 161,384
<INCOME-TAX>                                    20,441                  58,907
<INCOME-CONTINUING>                             35,550                 102,477
<DISCONTINUED>                                       0                       0
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                            0                       0
<NET-INCOME>                                    35,550                 102,477
<EPS-PRIMARY>                                     0.40                    1.15
<EPS-DILUTED>                                     0.38                    1.09
        

</TABLE>