NATIONAL ANNOUNCES REALIGNMENT OF MANUFACTURING WITH ONE TIME CHARGE OF $75-85M, OFFSET BY CREDITS OF $278M

May 13, 1997 - National Semiconductor Corporation® (NSM:NYSE) today announced a comprehensive realignment of its manufacturing facilities, designed to accelerate its production transition to manufacturing 8-inch wafers with 0.35-micron circuit geometries, reduce costs and rationalize production flows.

To cover the cost of this program, National will take a one-time charge of $75 to $85 million in the fourth quarter, ending May 25, 1997. The action follows the completion of the previously announced sale of the company's former Fairchild Semiconductor business unit which resulted in a one-time credit of $278 million to pre-tax income. The credit represents a $77 million gain on the sale of Fairchild plus a $201 million reversal of the valuation allowance and other accruals related to the sale recorded in the first quarter of this fiscal year.

"This realignment is another step in the pursuit of one of National’s three strategic initiatives to become a world class manufacturing company, as we transition to provide system on a chip solutions for our key data highway partners, exploiting our analog expertise as a starting point for forward integration," said Kamal K. Aggarwal, executive vice president of National's Central Technology and Manufacturing Group.

Approximately $60 million of the charge relates to the write down of certain assets in the Arlington, Texas wafer manufacturing plant, which have become impaired as defined by Financial Accounting Standard 121. The remainder of the charge covers exit costs relating to closure of the company's 5- and 6-inch wafer fabs at its Santa Clara, California headquarters and smaller provisions for actions at other manufacturing facilities.

Products currently manufactured in these two Santa Clara fabs will be transferred to National's sites in Arlington, Texas and Greenock, Scotland over the next 15 months. The Santa Clara 5- and 6-inch fabs currently employ about 500 employees who will be offered opportunities to transfer to other Santa Clara operations, to relocate to other manufacturing locations or be given severance packages.