<PAGE>   1
 
                                  SCHEDULE 14A
                                 (RULE 14A-101)
 
                    INFORMATION REQUIRED IN PROXY STATEMENT
 
                            SCHEDULE 14A INFORMATION
          PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
                    EXCHANGE ACT OF 1934 (AMENDMENT NO.   )
 
Filed by the Registrant [X]
 
Filed by a Party other than the Registrant [ ]
 
Check the appropriate box:
 

<TABLE>
<S>                                             <C>
[X]  Preliminary Proxy Statement                [ ]  Confidential, for Use of the Commission
                                                     Only (as permitted by Rule 14a-6(e)(2))
[ ]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>


                       CYPRESS SEMICONDUCTOR CORPORATION 
- --------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)
 
- --------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
[X]  No fee required.
 
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
     (1)  Title of each class of securities to which transaction applies:
 
     (2)  Aggregate number of securities to which transaction applies:
 
     (3)  Per unit price or other underlying value of transaction computed
          pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
          filing fee is calculated and state how it was determined):
 
     (4)  Proposed maximum aggregate value of transaction:
 
     (5)  Total fee paid:
 
[ ]  Fee paid previously with preliminary materials:
 
[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing.
 
     (1)  Amount Previously Paid:
 
     (2)  Form, Schedule or Registration Statement No.:
 
     (3)  Filing Party:
 
     (4)  Date Filed:

<PAGE>   2
April 5, 1999


Dear Stockholder:

        You are cordially invited to attend the Cypress Semiconductor
Corporation Annual Meeting of Stockholders to be held on Thursday, May 6, 1999
at 10:00 a.m., local time, at the company's offices located at 3939 North First
Street, San Jose, California 95134.

        At the Annual Meeting, you will be asked to elect five directors and
ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants for this fiscal year.

        Because of the continuing significance of the composition of the
Company's Board of Directors, you will also be asked to consider a proposal by
the Company regarding the composition of the Company's Board of Directors and a
stockholder proposal regarding the same issue. The Company's proposal would
reiterate a longstanding policy of seeking the best possible candidates for the
Company's Board of Directors based on criteria such as industry expertise and
management experience without regard to race, gender, age, national origin,
religion, sexual orientation or physical limitations whereas the stockholder
proposal would require the Company to make factors such as race and gender a
priority in the Board nominee selection process. The Board believes it
appropriate to provide another opportunity for the stockholders, as the owners
of the Company, to give their input on this matter which the Board considers to
be of the utmost importance. Cypress strongly believes that the only criteria
which should be used in the process of selecting nominees for the board of a
semiconductor company are those which relate to the nominees' ability to
contribute to running such a company well. We therefore strongly urge you to
support the Company's proposal and vote against the stockholder proposal.

        We hope you will be able to attend the Annual Meeting on May 6th for a
report on the status of the Company's business and performance during 1998 and
near-term plans. There will be an opportunity for stockholders to ask questions.
Whether or not you plan to attend the meeting, please sign and return the
enclosed proxy card to ensure your representation at the meeting.

                                            Very truly yours,

                                            T.J. RODGERS, President and CEO




<PAGE>   3



                        CYPRESS SEMICONDUCTOR CORPORATION

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                                   MAY 6, 1999


TO THE STOCKHOLDERS:

     NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Cypress
Semiconductor Corporation (the "Company"), a Delaware corporation, will be held
on Thursday, May 6, 1999 at 10:00 a.m., local time, at its offices located at
3939 North First Street, San Jose, California 95134, for the following purposes:

     1.   To elect five directors to serve for the ensuing year and until their
          successors are elected.

     2.   To ratify the appointment of PricewaterhouseCoopers LLP as independent
          accountants of the Company for the fiscal year ending January 2, 2000.

     3.   To vote on the Company's proposal regarding the composition of the
          Company's Board of Directors.

     4.   If properly presented, to vote on a stockholder's proposal regarding
          the composition of the Company's Board of Directors which proposal is
          OPPOSED by the Company's Board of Directors.

     5.   To transact such other business as may properly come before the
          meeting or any adjournment thereof.

     The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on March 15, 1999 are entitled to receive notice of, to attend and to
vote at the meeting and any adjournment thereof. All stockholders are cordially
invited to attend the meeting in person. Any stockholder attending the meeting
may vote in person even if such stockholder returned a proxy.

                                                   FOR THE BOARD OF DIRECTORS

                                                   EMMANUEL HERNANDEZ, Secretary
San Jose, California
April 5, 1999



<PAGE>   4



- --------------------------------------------------------------------------------
IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
- --------------------------------------------------------------------------------

                        CYPRESS SEMICONDUCTOR CORPORATION

                                 ---------------

               PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

        The enclosed Proxy is solicited on behalf of the Board of Directors of
Cypress Semiconductor Corporation (the "Company") for use at the Company's
Annual Meeting of Stockholders ("Annual Meeting") to be held Thursday, May 6,
1999, at 10:00 a.m., local time, or at any adjournment(s) or postponement(s)
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at 3939 North
First Street, San Jose, California 95134.

        The Company's principal executive offices are located at 3901 North
First Street, San Jose, California 95134. The telephone number at that address
is (408) 943-2600.

        These proxy solicitation materials were mailed on or about April 5, 1999
to all stockholders entitled to vote at the Annual Meeting.


                 INFORMATION CONCERNING SOLICITATION AND VOTING

RECORD DATE AND SHARES OUTSTANDING

        Stockholders of record at the close of business on March 15, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the Record Date, _____________ shares of the Company's Common Stock were
outstanding (the "Common Stock").

REVOCABILITY OF PROXIES

        Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.

VOTING AND SOLICITATION

        Every stockholder voting for the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of votes to which the
stockholder's shares are entitled, or distribute such stockholder's votes on the
same principle among as many candidates as the stockholder may select, provided
that votes cannot be cast for more than five candidates. However, no stockholder
shall be entitled to cumulate votes unless the candidate's name has been placed
in nomination prior to the voting and the stockholder, or any other stockholder,
has given notice at the meeting prior to the voting of the intention to cumulate
the stockholder's votes. On all other matters each share has one vote.


                                      -2-


<PAGE>   5

        The cost of this solicitation will be borne by the Company. The Company
may reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone or e-mail.

QUORUM; ABSTENTIONS; BROKER NON-VOTES

        The required quorum for the transaction of business at the Annual
Meeting is a majority of the shares of Common Stock outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD" from a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as votes eligible to be cast by the Common Stock present in
person or represented by proxy at the Annual Meeting and "entitled to vote on
the subject matter" (the "Votes Cast") with respect to such matter.

        While abstentions (votes "WITHHELD") will be counted for purposes of
determining both the presence or absence of a quorum for the transaction of
business and the total number of Votes Cast with respect to a particular matter,
broker non-votes with respect to proposals set forth in this Proxy Statement
will not be considered Votes Cast and, accordingly, will not affect the
determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.

COST OF SOLICITING PROXIES

        The cost of soliciting proxies (in the form of Written Consent attached
hereto) has been, or will be, borne by the Company. The Company has retained
Georgeson & Co. Inc. to assist in the solicitation of proxies at an estimated
fee of $6,500 plus reimbursement of reasonable expenses. In addition to
solicitation by mail, the Company requests banks, brokers and other custodians,
nominees and fiduciaries to send Proxy Statements to the beneficial owners and
to secure their instructions as to consents. The Company may reimburse such
banks, brokers and other custodians, nominees, fiduciaries and other persons
representing beneficial owners of Shares for their expenses in forwarding
solicitation material to such beneficial owners.

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS

        Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 2000 Annual Meeting of
Stockholders must be received by the Company no later than December 8, 1999 in
order to be included in the proxy statement and form of proxy relating to that
meeting.


                                      -3-


<PAGE>   6



                      PROPOSAL ONE -- ELECTION OF DIRECTORS

NOMINEES

        A Board of five directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the five nominees named below, all of whom are presently directors of the
Company. In the event that any nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner in accordance with cumulative voting as will ensure the election of as
many of the nominees listed below as possible. In such event, the specific
nominees for whom such votes will be cumulated will be determined by the proxy
holders. The term of office of each person elected as a director will continue
until the next Annual Meeting of Stockholders or until his successor has been
elected and qualified. It is not expected that any nominee will be unable or
will decline to serve as a director.

        The name of and certain information regarding each nominee is set forth
below.


<TABLE>
<CAPTION>

                                                                                          DIRECTOR
         NAME OF NOMINEE              AGE               PRINCIPAL OCCUPATION                SINCE 
         ---------------              ---               --------------------                ----- 

<S>                                   <C>    <C>                                          <C> 
T.J. Rodgers......................    51     President and Chief Executive Officer          1982
                                                of the Company

Fred B. Bialek....................    65     Business Consultant                            1991

Eric A. Benhamou..................    43     Chairman of the Board and Chief Executive      1993
                                                Officer of  3COM Corporation

John C. Lewis.....................    63     Chairman of the Board of Amdahl                1993
                                                Corporation

Alan F. Shugart...................    68     Former Chief Executive Officer of Seagate      1998
                                                Technology Inc.
</TABLE>


        Except as set forth below, each of the nominees has been engaged in his
principal occupation described above during the past five years. There are no
family relationships among directors or executive officers 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
C-Cube Corporation.

        Fred B. Bialek has been an independent business consultant since
November 1986, during which time he has been active in the negotiation and
execution of merger and acquisition transactions for semiconductor and other
technology companies. Mr. Bialek has acted as a consultant to Cypress in certain
of its acquisitions, including Cypress Semiconductor (Minnesota) Inc. ("CMI"),
the Company's third wafer fabrication facility. Mr. Bialek, who was a founder of
National Semiconductor Corporation, has over 30 years operating experience in
semiconductor and related technology industries.


                                      -4-


<PAGE>   7



        Eric A. Benhamou was Vice President and General Manager of 3COM
Corporation ("3COM"), a data networking company, from September 1987 to April
1990. From April 1990 to September 1990, he was Chief Operating Officer of 3COM.
In September 1990, he was promoted to and has since served as Chairman of the
Board, President and Chief Executive Officer of 3COM Corporation. Since August
1998, Mr. Benhamou has served as Chairman of the Board and Chief Executive
Officer of 3COM Corporation. Mr. Benhamou also serves as a director of Netscape
Communications Corporation and Legato Systems Inc.

        John C. Lewis has been Chairman of the Board of Amdahl Corporation, a
computer manufacturer, since 1987. He was President of Amdahl from 1977 until
1987, and Chief Executive Officer of Amdahl from 1983 until 1992 and from 1996
through 1997. Mr. Lewis also serves as a director of Vitesse Semiconductor
Corporation, Pinnacle Systems, Inc. and Cygnus Inc.

        Alan F. Shugart founded Seagate Technology Inc., a manufacturer of
computer disk drives, in 1979 and served as Chief Executive Officer until July
1998. In 1998, he established Al Shugart International, a management consulting
company. Mr. Shugart also serves as a director of San Disk Corporation, Valence
Technology, Inc., Inktomi Corporation, Siros Technologies, Inc., Sarnoff Digital
Communications, Sierra Imaging, Inc. and Blue Sky Research.

REQUIRED VOTE

        The five nominees receiving the highest number of affirmative votes of
the shares present or represented and entitled to be voted for them shall be
elected as directors. Votes withheld from any director are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, but have no further legal effect under Delaware law.

BOARD MEETINGS AND COMMITTEES

        Eric A. Benhamou serves as Chairman of the Board of Directors of the
Company. The Board of Directors held a total of five meetings during the fiscal
year 1998, which ended on January 3, 1999. During fiscal 1998, T.J. Rodgers,
Fred B. Bialek, Eric A. Benhamou and John C. Lewis attended all such meetings of
the Board of Directors and of the committees, if any, upon which such director
served. Alan F. Shugart was elected to the Board of Directors of the Company in
September 1998 and attended both of the two meetings of the Board of Directors
held subsequent to his election as a director of the Company. The Board of
Directors has an Audit Committee and a Compensation Committee. On December 16,
1998 at a duly held meeting, the Board of Directors formed a Nominating
Committee consisting of two independent directors from the Company's Board of
Directors. Independent directors are generally defined as directors who are not
employees or officers, or relatives of employees or directors, of the Company,
are not consultants or paid advisors to the Company and do not have any
financial or other pecuniary interest in the Company.

        The Audit Committee, which consists of Messrs. Benhamou and Lewis,
consults with the Company's independent accountants concerning the scope of the
audit and reviews with them the results of their examination; and reviews and
approves any material accounting policy changes affecting the Company's
operating results and reviews the Company's control procedures and personnel.
The Audit Committee held two meetings in fiscal 1998.

        The Compensation Committee, which consists of Messrs. Benhamou and
Lewis, reviews compensation and benefits for the Company's senior executives and
has authority to grant stock options


                                      -5-

<PAGE>   8



under the Company's 1994 Stock Option Plan, as amended (the "1994 Option Plan")
to employees and consultants (including officers and directors who are also
employees or consultants of the Company). The Compensation Committee held five
meetings during fiscal 1998.

        The Nominating Committee was formed on December 16, 1998 and held no
meetings during fiscal year 1998.


COMPENSATION OF DIRECTORS

        Standard Arrangements

        Directors who are not employees receive $5,000 each quarter.

        The 1994 Option Plan provides for the automatic grant of nonstatutory
options to outside directors of the Company. Each outside director is granted an
initial option to purchase 80,000 shares of Common Stock (the "Initial Option")
and an additional option to purchase 20,000 shares of Common Stock (a
"Subsequent Option") on a date one year after the date of grant of the Initial
Option and on the same date each year thereafter. The Initial Option becomes
exercisable over a five-year period in annual installments of 16,000 shares,
with the first such installment exercisable one year from the outside director's
election to the Board. The Subsequent Options become exercisable five years
after the date on which they are granted in annual installments of 4,000 shares,
with the first such installments exercisable one year from the date of grant.
Consequently, the 1994 Option Plan provides for an on-going vesting program of
20,000 shares per year to outside directors. The exercise price of options
granted under the 1994 Option Plan is the fair market value of the Company's
Common Stock on the date of grant.

        Other Arrangements

        The Company has a consulting relationship with one of its directors,
Fred B. Bialek. See "Certain Transactions."



                                      -6-


<PAGE>   9



                                   MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each person
who is known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each of the Company's directors, (iii) the Company's Chief
Executive Officer and each of the four other most highly compensated individuals
who served as executive officers of the Company at fiscal year end (the "Named
Officers") and (iv) all individuals who served as directors or executive
officers at fiscal year end as a group:



<TABLE>
<CAPTION>

                                                                     SHARES BENEFICIALLY OWNED      
                                                                    ----------------------------
            DIRECTORS, OFFICERS AND 5% STOCKHOLDERS                   NUMBER           PERCENT      
- ---------------------------------------------------------------     ------------    ------------
<S>                                                                 <C>             <C>  
DIRECTORS
   T.J. Rodgers (1).............................................         2,418,101      2.46%
   Fred B. Bialek (2)...........................................           345,836        *
   Eric A. Benhamou (3).........................................           112,000        *
   John C. Lewis(4).............................................           124,000        *
   Alan F. Shugart(5)...........................................             -0-          *

NAMED OFFICERS
   J. Daniel McCranie(6)........................................           339,215        *
   Antonio R. Alvarez(7)........................................           254,141        *
   Emmanuel T. Hernandez(8).....................................           290,671        *
   Lothar Maier(9)..............................................           279,439        *
All directors and executive officers at fiscal year end as a group       
    (9 persons) (10)............................................         4,163,423      4.24%
</TABLE>


 * Less than 1%.

- ----------------------

(1)     Mr. Rodgers is also President and Chief Executive Officer of the
        Company. Includes 828,946 shares held directly and options to purchase
        1,542,594 shares of Common Stock exercisable within 60 days of the
        Record Date. Also includes 46,561 shares of Common Stock issuable upon
        conversion of $1,100,000 of the Company's 6% Convertible Subordinated
        Notes due 2002.

(2)     Represents options to purchase 345,836 shares of Common Stock
        exercisable within 60 days of the Record Date.

(3)     Represents options to purchase 112,000 shares of Common Stock
        exercisable within 60 days of the Record Date.

(4)     Represents options to purchase 124,000 shares of Common Stock
        exercisable within 60 days of the Record Date.

(5)     Mr. Shugart was granted options to purchase 80,000 shares of Common
        Stock upon joining the Company's Board of Directors on September 2, 1998
        and does not have any options exercisable within 60 days of the Record
        Date.

(6)     Includes 48,049 shares held directly. Also includes options held by Mr.
        McCranie to purchase 291,166 shares of Common Stock exercisable within
        60 days of the Record Date.

(7)     Represents options to purchase 254,141 shares of Common Stock
        exercisable within 60 days of the Record Date.

(8)     Includes 1,003 shares held directly and 12,232 shares transferred to his
        children. Also includes options held by Mr. Hernandez to purchase
        277,436 shares of Common Stock exercisable within 60 days of the Record
        Date.

(9)     Includes 60,081 shares held directly. Also includes options held by Mr.
        Maier to purchase 219,358 shares of Common Stock exercisable within 60
        days of the Record Date.

(10)    Includes 950,331 shares held directly by executive officers and
        directors of the Company. Also includes options to purchase an aggregate
        of 3,166,531 shares of Common Stock exercisable within 60 days of the
        Record Date and 46,561 shares of Common Stock issuable upon conversion
        of T.J. Rodger's holdings of $1,100,000 of the Company's 6% Convertible
        Subordinated Notes due 2002.
   


                                       -7-


<PAGE>   10



EXECUTIVE COMPENSATION

     The following table shows, as to each of the Named Officers, information
concerning compensation paid for services to the Company in all capacities
during the three fiscal years ended January 3, 1999.

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                                    LONG-TERM
                                                                                                   COMPENSATION
                                                                                                      AWARDS
                                                ANNUAL COMPENSATION                                 SECURITIES            ALL
                                        ------------------------------------                        UNDERLYING           OTHER
  NAME AND PRINCIPAL POSITION           YEAR       SALARY(1)        BONUS(2)         OTHER          OPTIONS (#)     COMPENSATION(7)
- -------------------------------------   ----       ----------      ---------       ---------        ----------      ---------------

<S>                                    <C>         <C>             <C>             <C>                 <C>          <C>          
T.J. Rodgers ........................  1998        $344,453        $ 58,238        $  1,000(3)         200,000              --
 President, Chief Executive            1997        $327,626        $  1,151        $ 12,199(4)         200,000           1,200
 Officer and Director                  1996        $278,976        $  1,250        $  2,500(3)         300,000              --

J. Daniel McCranie ..................  1998        $321,054        $ 57,937              --            192,000
 Vice President, Marketing and         1997        $288,263        $  1,175              --             70,000        $    392
 Sales                                 1996        $259,345        $  1,250              --             52,500        $    600

Antonio R. Alvarez ..................  1998        $281,538        $ 39,680              --            135,000              --
 Vice President, Memory                1997        $228,261        $    993              --             52,000              --
 Products Division and Research        1996        $196,285        $  1,250              --             94,500              --
 and Development

Lothar Maier ........................  1998        $238,000        $ 45,728        $  8,846(5)         128,000             230
 Vice President, Worldwide             1997        $215,818        $    952        $ 17,808(6)          60,000        $    623
 Wafer Manufacturing                   1996        $180,265        $  1,250        $ 88,027             52,500             454

Emmanuel T. Hernandez ...............  1998        $246,192        $ 86,485              --            233,000              --
 Vice President, Finance and           1997        $219,670        $    993              --            200,000        $    577
 Administration, and                   1996        $180,265        $  1,250              --             52,500        $    600
 Chief Financial Officer
</TABLE>


- ----------------------

(1)     Compensation is included in the year earned.

(2)     Includes cash bonus awarded to each employee under the Company's New
        Product Bonus Plan in fiscal 1998. Fiscal 1998 bonuses include amounts
        earned under the Company's 1998 Key Employee Bonus Plan by virtue of the
        success in accomplishing certain group- and individual-specific goals,
        in fiscal 1998. No bonuses were earned under the 1996 Key Employee Bonus
        Plan or 1997 Key Employee Bonus Plan; however, bonuses earned in the
        fourth quarter of fiscal 1995 were paid in fiscal 1996 and 1997 and were
        dependent upon each employee's continuous status as an employee of the
        Company at the time of such payment.

(3)     Represents cash bonuses of $1,000 and $2,500 earned and paid to Mr.
        Rodgers under the Company's Patent Award Program in fiscal 1998 and 1996
        respectively.

(4)     Represents cash bonus of $1,500 earned and paid to Mr. Rodgers under the
        Company's Patent Award Program as well as a 14- year service award of
        $10,699 paid to Mr. Rodgers in fiscal 1997.

(5)     Represents cash payout of PTO earned by Mr. Maier of $8,846.

(6)     Includes a cash bonus of $1,000 earned and paid to Mr. Maier under the
        Company's Patent Award Program, a 14-year service award of $8,846 paid
        to Mr. Maier in fiscal 1997, and a cash payout of PTO earned by Mr.
        Maier of $7,962.

(7)     Represents that portion of the Company's contribution toward the
        purchase of computers made pursuant to its Computer Purchase Program,
        which is available to all employees.

                                      -8-

<PAGE>   11



  The following table shows, as to each of the Named Officers, option grants
during the last fiscal year and the potential realizable value of those options,
assuming 5% and 10% appreciation, at the end of their term:



<TABLE>
<CAPTION>

                                      OPTION GRANTS IN FISCAL 1998
                                            INDIVIDUAL GRANTS
                        ----------------------------------------------------
                              NUMBER OF     % OF TOTAL                           POTENTIAL REALIZABLE VALUE
                             SECURITIES       OPTIONS                             AT ASSUMED ANNUAL RATE
                             UNDERLYING     GRANTED TO                           OF STOCK PRICE APPRECIATION
                              OPTIONS     EMPLOYEES IN    EXERCISE    EXPIRATION       FOR OPTION TERM
         NAME                GRANTED(1)   FISCAL YEAR(2)   PRICE(3)      DATE(4)      5%(5)         10%(5)
- -------------------     ----------------  --------------  --------    ---------   ----------    ----------
<S>                     <C>               <C>             <C>         <C>        <C>           <C>      
T.J. Rodgers                  200,000       3.24%         $8.3750       9/17/08    1,053,398    2,669,519
                                                      
J. Daniel Mccranie            160,000       3.11%         9.8750        1/30/08    1,162,197    2,945,236
                               32,000                     8.3750        9/17/08
                                                      
Antonio R. Alvarez            100,000       2.19%         8.9375        1/22/08      746,419    1,891,573
                               35,000                     8.3750        9/17/08
                                                      
Lothar Maier                   50,000       2.07%        10.0000        2/12/08      725,273    1,837,983
                               78,000                     8.3750        9/17/08

Emmanuel T. Hernandez(6)      200,000       3.78%         8.7500        5/15/08    1,274,376    3,229,520
                               33,000                     8.3750        9/17/08
</TABLE>

                                              
(1)     Options granted under the Company's 1994 Stock Option Plan typically
        have a ten-year term, vest over a five-year period of employment and
        have an exercise price equal to market value on the date of grant.

(2)     Options to purchase an aggregate of 6,162,000 shares of Common Stock of
        the Company were granted to employees during the fiscal year ended
        January 3, 1999.

(3)     The exercise price may be paid by check, cash or delivery of shares that
        are already owned.

(4)     Options may terminate before their expiration dates if the optionee's
        status as an employee or consultant is terminated, upon the optionee's
        death or upon an acquisition of the Company.

(5)     Potential realizable value is based on an assumption that the market
        price of the stock appreciates at the stated rate, compounded annually,
        from the date of grant until the end of the ten-year option term. These
        values are calculated based on requirements promulgated by the
        Securities and Exchange Commission and do not reflect the Company's
        estimate of future stock price appreciation. Annual compounding results
        in total appreciation of 63% (at 5% per year) and 159% (at 10% per
        year). If the price of the Company's Common Stock were to increase at
        such rates from the price at 1998 fiscal year end ($8.3125 per share)
        over the next ten years, the resulting stock prices at 5% and 10%
        appreciation would be $13.54 and $21.53, respectively.

(6)     Mr. Hernandez was granted options to purchase 200,000 shares of Common
        Stock on October 23, 1997 with vesting over 8 years at the rate of
        25,000 shares annually. In 1998, the stock option grant was cancelled
        and a replacement option to purchase 200,000 shares of Common Stock was
        issued with vesting every quarter beginning in July 1998 at the rate of
        12,500 shares per quarter through October 2001. In addition to the 
        12,500 shares vesting quarterly, 25,000 shares vested in October 1998 
        and 75,000 shares will vest in October 2001.


                                      -9-

<PAGE>   12



        The following table shows, for each of the Named Officers, information
concerning options exercised during fiscal 1998 and the value of options held at
fiscal year end:

                 AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND
                       FISCAL 1998 YEAR-END OPTION VALUES



<TABLE>
<CAPTION>

                                                      NUMBER OF SECURITIES        VALUE OF UNEXERCISED
                                                      UNDERLYING UNEXERCISED       IN-THE-MONEY OPTIONS
                            SHARES                  OPTIONS AT FISCAL YEAR END    AT FISCAL YEAR END (1):   
                          ACQUIRED ON     VALUE     ---------------------------------------------------------
          NAME             EXERCISE     REALIZED    EXERCISABLE   UNEXERCISABLE    EXERCISABLE     UNEXERCISABLE
          ----             --------     --------    -----------   -------------    -----------     -------------

<S>                       <C>           <C>         <C>           <C>              <C>             <C> 
Lothar Maier.............   46,108      $ 184,404     197,488         263,996       $15,505.50         $0.00
</TABLE>




(1)     Calculated by determining the difference between the fair market value
        of the securities underlying the options at January 3, 1999 ($8.3125)
        and the exercise price of the options.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

        Overview

        The Compensation Committee of the Board of Directors has the
responsibility to review compensation programs and benefits for the Company's
employees generally, and specifically for the executive officers of the Company,
and has exclusive authority to grant stock options to the executive officers of
the Company. The Company applies a consistent philosophy to compensation for all
employees including its executive officers, based on the premise that the
achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives. The Company strives to achieve
those objectives through teamwork that is focused on meeting the defined
expectations of customers and stockholders.

        Goals of the Company's Compensation Program

        The goals of the Compensation Committee are to align executive
compensation with business objectives and performance, and to enable the Company
to attract, retain and reward executive officers who contribute to the long-term
success of the Company. The Company's compensation program for executive
officers is based on the same principles applicable to compensation decisions
for all employees of the Company:

             Competitive Levels of Compensation. The Company is committed to
             providing a compensation program that helps attract and retain the
             best people in the industry. To ensure that pay is competitive, the
             Company periodically reviews the compensation practices of other
             leading companies in the semiconductor industry. The Company
             believes that its compensation levels fall within the median of
             industry compensation levels.

                                      -10-



<PAGE>   13

             Performance-Driven Rewards. Executive officers are rewarded based
             upon corporate performance, business unit performance and
             individual performance. Corporate performance and business unit
             performance are evaluated by reviewing the extent to which
             strategic and business plan goals are met, including such factors
             as sales, operating profit, performance relative to competitors and
             timely new product introductions. Individual performance is
             evaluated by measuring organization progress against set
             objectives.

             Performance and Compensation Feedback. At the beginning of the
             performance cycle, key quarterly and annual objectives are set for
             each officer. The CEO gives ongoing feedback on performance to each
             officer. At the end of the performance cycle, the Compensation
             Committee evaluates the extent to which the key objectives have
             been accomplished, which evaluation affects decisions on merit
             increases and stock option grants.

        Components of the Company's Compensation Program

        The Company's compensation program, which consists of cash- and
equity-based compensation, allows the Company to attract and retain highly
skilled officers, provide useful products and services to customers, enhance
stockholder value, motivate technological innovation and adequately reward its
executive officers and other employees. The components are:

             CASH-BASED COMPENSATION:

             The Committee sets base salary for officers on the basis of level
        of responsibility, prior performance and other factors after reviewing
        the compensation levels for competitive positions in the market.

             The Company has a New Product Bonus Plan under which it distributes
        to all employees, including executive officers, payments based on the
        Company's achieving certain levels of new product revenue, plus
        attaining certain levels of profitability. The Company believes that all
        employees share the responsibility of achieving revenue and profit
        levels. Under the New Product Bonus Plan, specific Company performance
        criteria must be met in each fiscal quarter for employees to be eligible
        for bonuses. For 1997, the Company met these criteria only for the third
        quarter of fiscal year 1997. For 1998, the Company met these criteria
        only for the third quarter of fiscal year 1998.

             The Company adopted a Key Employee Bonus Plan effective at the 
        beginning of fiscal year 1998, in which the Chief Executive Officer, the
        Company's Vice Presidents and certain other key employees participated.
        Plan participants would earn bonuses (in each case a percentage of the
        participant's base salary) based on the Company's achievement of a
        targeted level of sales and earnings per share, as well as success in
        accomplishing certain group and individual specific goals. In 1998
        bonuses were paid for quarterly goal accomplishments, but there were no
        bonuses paid under the sales and earnings portions of the plans.


                                      -11-


<PAGE>   14



             EQUITY-BASED COMPENSATION:

             Stock options provide additional incentives to officers to work to
        maximize stockholder value. The options become exercisable over a
        defined period of employment with the Company to encourage officers to
        continue in the employ of the Company. In line with its compensation
        philosophy, the Company grants stock options to all employees,
        commensurate with their potential contributions to the Company. Stock
        options are included as part of the initial employment compensation
        package, and are also awarded for promotions and pursuant to the annual
        Evergreen Stock Program, which provides long-term incentives to
        virtually all employees based on performance and potential
        contributions.


        Compensation of the Chief Executive Officer

        T.J. Rodgers has been President and Chief Executive Officer of the
Company since its incorporation in 1982. In determining Mr. Rodgers'
compensation, the Committee evaluates corporate performance, individual
performance, compensation paid to other executive officers of the Company and
total compensation (including salary, bonus and equity compensation) paid to
chief executive officers of comparable companies. In 1998, Mr. Rodgers'
annualized salary was $344,453, and he received cash bonuses of $3,072 under the
New Product Bonus Plan, a cash bonus of $1,000 under the Company's Patent Award
Program and a payment under the Key Employee Bonus Plan of $40,069. A
fundamental tenet of Cypress' compensation policy, particularly with respect to
compensation of the CEO, is to link the level of compensation obtained to the
Company's performance as measured by profitability and long-term growth. One way
that Cypress establishes this link is to award Mr. Rodgers with compensation in
the form of options to purchase stock, since the market will reward superior
Company performance by increasing the value of his equity and penalize
unsatisfactory performance by diminishing or eliminating such value. Through his
equity ownership in the Company, which consisted of 828,946 shares of Common
Stock and options to purchase 1,542,594 shares of Common Stock as of the Record
Date, Mr. Rodgers shares with the other stockholders of the Company a
significant stake in the success of the Company's business. A second way that
Cypress establishes the link between Company performance and level of
compensation is by its bonus plan, which awards variable compensation based to a
substantial degree on an objective measure of the Company's profitability and
long-term growth. It is the philosophy of Cypress and this Committee to bias
compensation toward this kind of variable compensation as well as equity awards,
meaning that when the Company performs well, as principally indicated by
profitability, employees, and in particular the CEO, will be very well
compensated, to a level which may exceed the median of industry compensation
levels. When the Company's performance is below target levels, however, variable
compensation will be limited or non-existent and equity compensation will not
attain the same value, meaning that the CEO's overall compensation package may
well be below industry median levels. During fiscal year 1998, the Company
failed to achieve its targeted levels of sales and earnings per share as set
forth in the fiscal year 1998 key employee bonus plan. Consistent with these
objectives in 1998, Mr. Rodgers was not awarded a bonus under the Sales and EPS
portions of the Plan. Mr. Rodgers did receive bonuses in fiscal year 1998 for
accomplishments under the quarterly goals portion of the plan.

                                                   COMPENSATION COMMITTEE OF THE
                                                         BOARD OF DIRECTORS

                                                         -- John E. Lewis
                                                         -- Eric A. Benhamou


                                      -12-


<PAGE>   15



COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

        No member of the Compensation Committee was or is an officer or employee
of the Company.

CERTAIN TRANSACTIONS

        In October 1993, J. Daniel McCranie, Vice President of Marketing and
Sales, incurred $210,000 of indebtedness to the Company, which indebtedness
bears interest at 4% per annum and is unsecured. In 1995, the Company and Mr.
McCranie agreed to extend the length of time that such indebtedness is payable
by two years, such that the indebtedness was due on October 7, 1998, provided
that in the event Mr. McCranie was still employed by the Company on October 7,
1998, the promissory note would be canceled and the indebtedness forgiven.
Consistent with its terms, the promissory note was cancelled on October 7, 1998
as Mr. McCranie was and still continues to serve as employee of the Company.

        On April 1, 1998 the Company entered into a one-year consulting
agreement with Fred B. Bialek, a member of the Company's Board of Directors. In
addition to his compensation as a member of the Board, Mr. Bialek will be paid
an annualized fixed retainer of $290,000. Prior to its expiration, the
consulting agreement is terminable by either the Company or Mr. Bialek 30 days
following written notice of such termination.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

        Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
on Form 3 and changes in ownership on Form 4 or 5 with the Securities and
Exchange Commission (the "SEC") and the National Association of Securities
Dealers. Such officers, directors and 10% stockholders are also required by SEC
rules to furnish the Company with copies of all Section 16(a) forms that they
file.

        Based solely on its review of the copies of such forms received by it,
the Company believes that, during the fiscal year ended January 3, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and 10%
stockholders were satisfied.


                                      -13-




<PAGE>   16



COMPANY STOCK PRICE PERFORMANCE

        The following graph shows a five-year comparison of cumulative total
return for the Company's stock, the Standard & Poor's 500 Stock Index and the
S&P Electronic Index for Semiconductor and Component Manufacturers.

                   COMPARISON OF FIVE YEAR CUMULATIVE RETURN*



<TABLE>
<CAPTION>
                                         CYPRESS                             S&P ELECTRONICS
        MEASUREMENT PERIOD            SEMICONDUCTOR                         (SEMICONDUCTORS)
      (FISCAL YEAR COVERED)               CORP.              S&P 500              INDEX
<S>                                 <C>                 <C>                 <C>
JAN-94                                     100                 100                 100
JAN-95                                     171                 101                 120
JAN-96                                     187                 139                 163
DEC-96                                     215                 171                 298
DEC-97                                     128                 229                 316
JAN-99                                     123                 294                 528
</TABLE>

 

*       ASSUMES $100 INVESTED ON JANUARY 3, 1994 IN EACH INVESTMENT.  TOTAL
        RETURN ASSUMES REINVESTMENT OF DIVIDENDS.  PAST RESULTS ARE NOT AN
        INDICATION OF FUTURE INVESTMENT RETURNS.


                                      -14-


<PAGE>   17



                   PROPOSAL TWO -- RATIFICATION OF APPOINTMENT
                           OF INDEPENDENT ACCOUNTANTS

        The Board of Directors has appointed PricewaterhouseCoopers LLP,
independent accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending January 2, 2000 and recommends that
stockholders vote for ratification of such appointment. In the event of a
negative vote on such ratification, the Board of Directors will reconsider its
selection.

        PricewaterhouseCoopers LLP has audited the Company's financial
statements annually since 1982. Its representatives are expected to be present
at the meeting, will have the opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate questions.

REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS

        Affirmative votes constituting a majority of the Votes Cast will be
required to approve this proposal.

        THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR 1999.



                                 PROPOSAL THREE-
               COMPANY PROPOSAL REGARDING COMPOSITION OF THE BOARD

        The future success of Cypress Semiconductor Corporation, as well as the
long term value of the Company's stock, depends on the ability of the Company to
develop and introduce new products that compete effectively on the basis of
price and performance and address other requirements of the Company's customers.
The semiconductor industry is intensely competitive and has been characterized
by price erosion, rapid technological change and heightened foreign competition
in many market segments.

        Although many factors will determine whether the Company can
successfully address the demands of its customers, Cypress believes none is more
important than the composition of the Company's Board of Directors. The Board,
among other things, sets the strategic direction of the Company, selects and
provides guidance to management personnel, and makes key decisions affecting the
future of the business. Cypress believes that it is essential that the people
acting in these crucial capacities are the best qualified available.

        The concept of "best qualified directors" is clearly a relative one,
varying by industry and company. The Company's views on the issue have been
expressed frequently in a variety of public fora over the years, and are
relatively well known. In short, Cypress believes that the people responsible
for setting the strategic direction of the Company, selecting and providing
guidance to management personnel and making key decisions affecting the future
of the business should have as much relevant industry experience as possible
combined with excellent judgement and commitment to the Company and its
stockholders. More particularly, the Company believes that each director who
serves on the Company's Board of Directors must, among other things, meet as
many of the following criteria as possible: (1) have significant experience as a
chief executive officer of an important technology company; (2) have extensive
direct expertise in the semiconductor business based on education and management
experience; and (3) have direct experience in the management of a company that
buys from the semiconductor industry. Competition among semiconductor companies
for such


                                      -15-


<PAGE>   18



qualified individuals to serve on their boards of directors is intense. However,
without such experience and knowledge, the Company believes, the Board cannot
effectively lead the Company in the highly competitive environment of the
semiconductor industry.

        Unfortunately, in recent years, there has been considerable disagreement
over what constitutes the best qualified directors for a company. Some have
asserted that every company can benefit from the perspectives of various
different "kinds" of people--based on, for example, the color of their skin or
gender--on its board of directors, and that including individuals with these
characteristics, separate and apart from considerations of industry experience
and similar qualities, should be a priority for companies. While Cypress has
considered a significant number of promising candidates for the Board--as
determined by reference to judgment, relevant industry expertise and
commitment--who happen to be women and minorities, the Company strongly
disagrees with the relevance of such factors in and of themselves and believes
that the vast majority of its stockholders feel the same way. Last year, the
Cypress stockholders had the opportunity to express their views on this issue by
voting for or against two stockholder proposals, one submitted by the Company
and the other by Mercy Health Services, which presented these alternative views
on the selection of directors. A substantial majority of stockholders voted in
favor of the Cypress proposal while a majority opposed Mercy Health Services'
proposal.

        Because of the continuing significance of this issue as demonstrated by,
among other things, the substantial interest generated by and time devoted to
the two proposals at last year's annual meeting of the stockholders, the Board
believes it appropriate to provide another opportunity for the stockholders, as
owners of the Company, to give their input on a matter which the Board considers
to be of the utmost importance. The Board also believes that a reiteration of
last year's public statement of the Company's policy toward attracting the best
qualified directors, combined with a clear indication of what that policy means
to the Company and its stockholders, will make the Company even more attractive
to the best qualified board candidates. Accordingly, the Board wishes to again
put the following proposal before the Company's stockholders, and again
recommends approval of the following resolutions:

        RESOLVED: That the Board of Directors seek to nominate the best
        qualified candidates for membership to the Board, and that such
        candidates shall consist of those men and women demonstrating excellent
        judgment and commitment to the Company and its stockholders combined
        with extensive business or financial experience and expertise,
        preferably where such experience or expertise is relevant to the
        semiconductor industry as demonstrated by meeting as many as possible of
        the following criteria: having previously served as a senior Executive
        Officer of an important technology company or a company serving the
        technology industry, having direct expertise in the semiconductor
        business based on education and management experience, and having direct
        experience in the management of a company that buys from the
        semiconductor industry.

        RESOLVED FURTHER: That the Board nominate for membership to the Board
        men and women having the most desirable qualifications as determined by
        the above factors, without regard to their race, gender, age, religion,
        national origin, sexual orientation or physical limitations.

        RESOLVED FURTHER: That in order to attract the best qualified
        candidates, the Board issue a statement setting forth the above
        qualifications as those that the Board considers in nominating
        candidates to the Board.


                                      -16-


<PAGE>   19



REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS

        Affirmative votes constituting a majority of the Votes Cast will be
required to approve this proposal.

        THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
AFOREMENTIONED PROPOSAL.



        From time to time, the individual stockholders of the Company submit
proposals which they believe should be voted upon by the stockholders. This
year, the following proposal was submitted and accompanied by a notice of
intention to present the proposal for action at the Annual Meeting of
Stockholders. Information regarding the name, address and number of shares of
Company stock held by the stockholder proponent will be furnished by the Company
to any person, orally or in writing, as requested, promptly upon the receipt of
any oral or written request therefor. Any such request should be directed to the
Secretary of the Company.

        Each stockholder proponent must appear personally or by proxy at the
Annual Meeting of Stockholders to present its proposal for action. If properly
presented, the following proposal will be voted on by the stockholders and may
be approved only upon this proposal's receipt of affirmative votes constituting
a majority of the Votes Cast.

        The following stockholder proposal is OPPOSED by the Company's Board of
Directors.


                                 PROPOSAL FOUR-
             STOCKHOLDER PROPOSAL REGARDING COMPOSITION OF THE BOARD

                           BOARD INCLUSIVENESS REVIEW


        Employees, customers, and stockholders reflect a greater diversity of
backgrounds than ever before. We believe that the board composition of major
corporations should reflect the people in the workforce and marketplace of the
Twenty-first Century if our company is going to remain competitive.

        The Department of Labor's 1995 Glass Ceiling Commission reported ("Good
for Business: Making Full Use of the Nation's Human Capital") that diversity and
inclusiveness in the workplace positively impact the bottom line. A Covenant
Fund report of S&P 500 companies revealed that ". . . firms that succeed in
shattering their own glass ceiling racked up stock-market records that were
nearly 2.5 times better than otherwise-comparable companies."

        The Investor Responsibility Research Center (IRRC) reports that in 1996,
representation at senior management levels was only at 12 percent for the over
39,000 companies required to submit the EEO-1 Report. The Glass Ceiling
Commission reported that companies select from only half of the available talent
within the U.S. workforce.

        If we are to be prepared for the 21st Century, we must learn how to
compete in an increasingly diverse global marketplace, by promoting and
selecting the best qualified people regardless of race, gender or physical

                                      -17-


<PAGE>   20



challenge. Sun Oil's CEO Robert Campbell stated (Wall Street Journal, 8/12/96):
"Often what a woman or minority person can bring to the board is some
perspective a company has not had before-adding some modern-day reality to the
deliberation process. Those perspectives are of great value, and often missing
from an all-white, male gathering. They can also be inspirational to the
company's diverse workforce."

        We believe that the judgement and perspectives of a more diverse board
will improve the quality of corporate decision-making. A growing proportion of
stockholders is attaching value to board inclusiveness, since the board is
responsible for representing shareholder interests. The Teachers Insurance and
Annuity Association and College Retirement Equities Fund, the largest U.S.
institutional investor, recently issued a set of corporate governance guidelines
which included a call for "diversity of directors by experience, sex, age, and
race."

        We therefore, urge our company to enlarge its search for qualified board
members.

RESOLVED: SHAREHOLDERS REQUEST THAT:

1. The company make available to shareholders, at reasonable expense, a report
four months from the date of the annual meeting, which includes a description
of:

- - Efforts to encourage diversified representation on the board;

- - Criteria for board qualification;

- - The process of selecting board nominees, and board committee members;

- - A public statement committing the company to a policy of board inclusiveness,
with a program of steps to be taken and the time line expected to move in that
direction.

2.      The Board Nominating Committee make a greater effort to locate qualified
        women and persons of color as candidates for nomination to the board.


            RECOMMENDATION OF THE BOARD AGAINST STOCKHOLDER PROPOSAL

        Cypress's Board of Directors unanimously recommends a vote "AGAINST" the
above proposal. The Company agrees that the composition of the Board of
Directors is an important issue since the Board, among other things, sets the
strategic direction of the Company, selects and provides guidance to management
personnel, and makes key decisions affecting the future of the business.
Although the concept of the "best qualified" director is clearly a relative one,
varying by industry and company, Cypress believes there should be only one
primary criterion for selecting new members to any corporation's Board of
Directors--the Board member's ability to assist the Company in its primary
mission of making a profit for the stockholders--and that such ability is
directly proportional to the Board member's industry and management experience.

        As was the case last year, the proponent of the stockholder's proposal
seeks to commit the Company to a Board member selection policy in which a Board
candidate's gender and race would be a priority consideration, even though the
Company believes gender and race are only minimally relevant--if they are
relevant at all--to a candidate's ability to make a semiconductor company more
profitable. The proponent seeks to commit the Company to a "program of steps" to
move in that direction and, presumably, to nominate a female or minority
candidate for the Board prior to, or as promptly as possible after, the Company
issuing a report on the subject by September 1999. While the Cypress Board has
already considered a significant number of promising candidates for the
Board--as determined by reference to

                                      -18-


<PAGE>   21

relevant industry experience, judgment and commitment--who also happen to be
women and minorities, the Company strongly disagrees with the relevance of such
factors in and of themselves and believes that the vast majority of its
stockholders feel the same way.

        Committing the Company to a Board member selection policy based
primarily on a social-issues agenda can be a dangerous course for any investor
to approve. Lipper Analytical Services has analyzed the performance of "ethical
mutual funds" which invest with a social-issues agenda, and then managed $4.1
billion in investments. According to the 1997 study conducted by Lipper
Analytical Services, the "ethical mutual funds" (which can include growth funds,
balanced funds, income funds and global funds) produced a return of 5.65% in the
twelve months preceding the study, while the S&P 500 returned 20.65% over the
same period. Thus, those mutual funds that chose to invest in corporations on a
social-issues agenda rather than in corporations focused primarily on
profit-making lost $615 million (relative to what they could have achieved if
invested in the S&P 500) for their investors all in the name of the "higher
good."

        The investments in Cypress Semiconductor Corporation stock include the
retirement savings of thousands of retirees, the college funds of numerous
children, the savings of many hardworking Americans and, indeed, the investments
of the Company's own employees through the Company's Employee Stock Purchase
Plan. These individuals depend on the Company, through the efforts of its
management and Board of Directors, to achieve its profit-making function. Having
an experienced and highly qualified Board is particularly critical for Cypress
during difficult periods for the semiconductor industry such as this one, when
overcapacity and sluggish demand make business conditions particularly
challenging and experienced leadership is all the more essential.

        The Company believes that the primary criteria for selecting a Board
member is the Board member's ability to assist the Company in its mission of
making a profit for the stockholders. The Company chooses its Board members with
this consideration in mind by selecting only the most qualified individuals
available regardless of their race, gender, age, religion, national origin,
sexual orientation or physical limitations. The Company's criteria for board
membership have been publicly announced in the past. The essential criteria for
Cypress board membership are:

        (1)     experience as a senior Executive Officer of an important
                technology company or a company serving the technology industry;

        (2)     direct expertise in the semiconductor business based on
                education and management experience; and

        (3)     direct experience in the management of a company that buys from
                the semiconductor industry.

        The Company believes that placing arbitrary racial or gender quotas on
corporate boards is fundamentally wrong and injurious to the stockholder.

        In summary, the Company disagrees with this stockholder's proposal
because the proponent of this stockholder's proposal seeks to make a policy of
board inclusiveness and a "diversity of directors by experience, sex, age and
race" a priority consideration in selecting board members, even though the
Company believes gender and race are only minimally relevant--if they are
relevant at all--to a candidate's ability to make a semiconductor company more
profitable. The Company believes that the "best qualified" individuals for
membership to the Board are men or women having the most desirable
qualifications as determined by industry and management experience, without
regard to their race, gender, age, religion, national origin, sexual orientation
or physical limitations. The Cypress Board has considered in the past, and will
consider in the future, promising candidates for the Board--as determined by
reference to relevant industry experience, judgement and commitment--who happen
to be women and minorities, but believes

                                      -19-


<PAGE>   22


strongly that it is contrary to the stockholders' interests, and could have
serious adverse consequences on the Company's ability to compete and achieve its
profit-making goals, to make race and gender key determinants in the board
selection process.


REQUIRED VOTE;

        Affirmative votes constituting a majority of the Votes Cast will be
required to approve this proposal.

        THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST"
THE AFOREMENTIONED PROPOSAL.





                                  OTHER MATTERS

        The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.

        It is important that your stock be represented at the meeting,
regardless of the number of shares which you hold. You are, therefore, urged to
execute and return the accompanying proxy in the envelope which has been
enclosed, at your earliest convenience.



                                           FOR THE BOARD OF DIRECTORS

                                           EMMANUEL HERNANDEZ, Secretary


Dated:  April 5, 1999


                                      -20-




<PAGE>   23
P
R
O
X
Y



                        CYPRESS SEMICONDUCTOR CORPORATION

                  PROXY FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

   
        The undersigned stockholder of CYPRESS SEMICONDUCTOR CORPORATION, a
Delaware corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated April 5, 1999, and
hereby appoints T.J. Rodgers and Emmanuel Hernandez, and each of them, proxies
and attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the 1999 Annual
Meeting of Stockholders of CYPRESS SEMICONDUCTOR CORPORATION to be held on
Thursday, May 6, 1999, at 10:00 a.m., local time, at its offices located at 3939
North First Street, San Jose, California 95134 and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote, if then and there personally present, on
the matters set forth below.
    

        A majority of such attorneys or substitutes as shall be present and
shall act at said meeting or any adjournment or adjournments thereof (or if only
one shall represent and act, then that one) shall have and may exercise all the
powers of said attorneys-in-fact hereunder.


                                                               SEE REVERSE
                   CONTINUED AND TO BE SIGNED ON REVERSE SIDE      SIDE



<PAGE>   24

[X]   PLEASE MARK
      VOTES AS IN
      THIS EXAMPLE

   
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS OF THE
COMPANY, FOR THE COMPANY'S PROPOSAL REGARDING COMPOSITION OF THE BOARD OF
DIRECTORS, AGAINST THE STOCKHOLDER'S PROPOSAL REGARDING COMPOSITION OF THE BOARD
OF DIRECTORS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
    

   
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3 BELOW.
    
                                                        
1. ELECTION OF DIRECTORS: 

NOMINEES:  T.J. Rodgers; Fred B. Bialek; Eric A. Benhamou; 
           John C. Lewis; Alan F. Shugart

           [ ] FOR     [ ] WITHHELD

[ ] 
    ---------------------------------------------
    For all nominees except as noted above


                                  FOR       AGAINST   ABSTAIN          
2. PROPOSAL TO RATIFY             [ ]         [ ]       [ ]
   THE APPOINTMENT OF                                          
   PRICEWATERHOUSECOOPERS                                                  
   LLP AS THE                                                        
   INDEPENDENT                                                       
   ACCOUNTANTS OF THE                                                
   COMPANY FOR FISCAL                                                
   1999.                                                             



   
                                  FOR       AGAINST   ABSTAIN
3. COMPANY'S PROPOSAL REGARDING   [ ]         [ ]       [ ]
   COMPOSITION OF THE BOARD OF
   DIRECTORS.
    


THE BOARD OF DIRECTORS OPPOSES THE FOLLOWING STOCKHOLDER PROPOSAL, AND 
STRONGLY URGES A VOTE AGAINST ITEM 4 BELOW:

                                  FOR       AGAINST   ABSTAIN
4. STOCKHOLDER PROPOSAL           [ ]         [ ]       [ ]
   REGARDING COMPOSITION OF
   THE BOARD OF DIRECTORS.

   
MARK HERE     [ ]
FOR ADDRESS                                                                    
CHANGE AND                                                                     
NOTE BELOW
    

   
In their discretion, the proxies are authorized to vote upon such other matter
or matters which may properly come before the meeting or any adjournment or
adjournments thereof. (This Proxy should be marked, dated, signed by each
stockholder(s) exactly as his or her name appears hereon, and returned promptly
in the enclosed envelope. Persons signing in a fiduciary capacity should so
indicate. If shares are held by joint tenants or as community property, both
should sign.)
    

                                  
Signature:                              Date
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Signature:                              Date
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