NATIONAL SEMICONDUCTOR AND THREE-FIVE SYSTEMS ANNOUNCE ALLIANCE TO JOINTLY DEVELOP LIQUID CRYSTAL MICRODISPLAYS

August 14, 1997 -- National Semiconductor Corporation® (NYSE:NSM) and Three-Five Systems, Inc. (NYSE:TFS) today announced a strategic relationship for the development and manufacture of liquid crystal-on-silicon microdisplays. These high resolution microdisplays project video or still images onto large screens or allow graphic information to be viewed on small personal information devices such as pagers and cellular telephones.

The agreement makes National and Three-Five the first suppliers with high-volume silicon and liquid crystal manufacturing technology to provide a complete microdisplay solution. The new displays offer significant advantages over other technologies in cost, size, weight and power consumption. The SVGA displays deliver resolution of 800 columns x 600 rows in a one-half-inch display. SXGA products provide 1,280 columns x 1,024 rows in a 0.8-inch diagonal unit.

National's Executive Vice President for Worldwide Sales and Marketing, Patrick J. Brockett said, "National is focused on producing system-on-a-chip solutions for the information appliance market. Microdisplays are a key element in information access appliances and in viewing images on the information highway. The expertise and proven manufacturing strength of National and Three-Five Systems will help accelerate the growth of new applications."

Three-Five Systems' Chairman, President and CEO David R. Buchanan described the alliance as a logical fit. "National is focused on silicon solutions and Three-Five has the highest volume liquid crystal display manufacturing line in North America, with emphasis on developing new display technology," Buchanan said. "This alliance allows National and Three-Five each to focus on its core competency of silicon and liquid crystal displays respectively. We each brought a new concept of technology to the relationship and combined our strengths to deliver a new display technology and product within months of our initial discussions."

National sees the new displays enabling the proliferation of information access in both the home and the workplace with flat display panels mounted on the walls, the refrigerator, and in conference rooms and offices.

In addition to front and rear projection systems, small personal information appliances such as pagers and cell phones will also benefit from the application of these high clarity, small displays used as direct readouts.

The new displays use a reflective technology rather than a transmissive approach. Light enters the open face of the display and is reflected from the underlying silicon backplane which also controls the liquid crystals to form the viewable pattern. This image is then either projected through an optical system or viewed directly for handheld applications.

Prototypes of the new microdisplays are currently being sampled to a number of leading projection and display systems manufacturers. National and Three-Five Systems are exclusive suppliers to each other for the products covered by this agreement.

National Semiconductor Corporation, a Fortune 500 company, produces system on a chip silicon solutions for the information highway, based on its leadership in analog and mixed signal technologies. National is headquartered in Santa Clara, California, and focuses on the communications, personal systems and consumer markets. National has annual sales of approximately $2 billion and 12,500 employees worldwide. Additional company and product information is available on the World Wide Web at www.national.com.

Three-Five Systems, Inc. designs and manufactures user interface devices for operational control and information display functions in products of original equipment manufacturers. The company specializes in liquid crystal display (LCD) and light emitting diodes (LED) components and technology in providing its custom design and manufacturing services for customers in the communications, medical electronics, industrial process control, wireless data collection and office automation marketplaces. Three-Five operates the highest volume LCD manufacturing line in North America and a research and development laboratory dedicated to advanced display technologies. The company's website can be located at www.threefive.com.