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National Semiconductor Adjusts Manufacturing Infrastructure; Company To Dispose of Equipment, Eliminate 200 Positions as Part of Modernization Effort

Jan 21, 2008

Jan. 21, 2008 – National Semiconductor Corporation (NYSE:NSM) announced today that it is disposing of certain manufacturing equipment and reducing staff at its wafer fabrication facilities as the company continues to take steps to modernize facilities and rationalize its capacity.  The company is also leveraging the efficiency improvements made possible by new tools and work processes it has implemented in recent years. 

In connection with the action being announced today, National will eliminate approximately 200 positions and incur a charge of approximately $20 million, of which roughly $12 million is related to severance costs for the eliminated positions, approximately $7 million is related to the impairment and disposal of manufacturing equipment, and about $1 million is related to contractual and other obligations.  Most of the charges described above will be recorded in the current fiscal third quarter of 2008.  The savings that the company expects to realize from this action will benefit the company’s gross margin.  Based on the timing of this action, the savings will be relatively minor in the current fiscal third quarter of 2008.  However, the estimated savings impact would be roughly 1 percentage point of gross margin in the fiscal fourth quarter of 2008 and an additional 1 percentage point of gross margin in the fiscal first quarter of 2009 (ending August 24, 2008).

“Our future growth will be driven by higher-performance, energy-efficient analog products, more and more of which will be produced on 200mm wafer technology,” said Brian L. Halla, National’s chairman and CEO.  “This action today aligns our manufacturing capability with our future needs.”

Over the last several years, National Semiconductor has sold or exited several lower-margin businesses in order to focus on growing its high-value, higher-performance analog products.  During that time, the most notable growth has come from the power management area.  The vast majority of the company’s products are manufactured within its own facilities. 

National’s three wafer fabrication facilities are located in Arlington, Texas; Greenock, Scotland; and South Portland, Maine.  Most of the 200 eliminated positions are in Arlington and Greenock.  The Arlington facility, which primarily runs 150mm wafers, recently ramped up production on a new 200mm production line.  The Greenock facility runs 150mm wafers.  A small number of positions are affected in South Portland, a 200mm wafer facility.  The eliminated positions include both direct and indirect labor, manufacturing jobs as well as managerial, staff and support positions.  Affected employees will receive severance packages commensurate with their length of employment.

The company currently employs approximately 7,600 people worldwide, with more than 400 employees each in Arlington and Greenock and more than 500 employees in South Portland. 

Special Note
This release contains forward-looking statements dependent on a number of risks and uncertainties pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Except for historical information contained herein, the matters set forth in this press release, including management’s expectations regarding future financial performance, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements.  A more complete list of risk factors is included in the Company's Annual Report on Form 10-K for the fiscal year ended May 27, 2007 under the captions “Outlook”, “Risk Factors” and “Management's Discussion and Analysis of Financial Conditions and Results of Operations” contained therein and the Form 10-Q for the quarter ended November 25, 2007.

About National Semiconductor
National Semiconductor, the industry's premier analog company, creates high-value analog devices and subsystems.  National's leading-edge products include power management circuits, display drivers, audio and operational amplifiers, interface products and data conversion solutions. National's key analog markets include wireless handsets, displays, communications infrastructure, medical, automotive, industrial, and test and measurement applications. Headquartered in Santa Clara, Calif., National reported sales of $1.93 billion for fiscal 2007, which ended May 27, 2007.  Additional company and product information is available at www.national.com.