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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended April 1, 2007

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to
.

Commission File Number: 001-15181



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FAIRCHILD SEMICONDUCTOR
INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                    
|-------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                       |  | 04-3363001                         
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S.Employer Identification No.)

82 Running Hill Road

South Portland, Maine 04106

(Address of principal executive offices,
including zip code)

Registrants telephone number, including area code: (207) 775-8100



---

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 whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large Accelerated filer  x    Accelerated filer ̈Non-accelerated
filer ̈

Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

The number of shares outstanding of each of the issuers classes
of common stock as of the close of business on April 1, 2007:



|                    |  |                 
|------------------- |  | ----------------
|Title of Each Class |  | Number of Shares
|Common Stock        |  | 123,733,164     



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##### Table of Contents

FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX



|                              |  |                                                                                                            |  |     
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                            |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                                           
|                              |  |                                                                                                           
|Item 1.                       |  | Financial Statements (Unaudited)                                                                           |  |     
|                              |  |                                                                                                           
|                              |  | Consolidated Balance Sheets as of April 1, 2007 and December 31, 2006                                      |  | 3   
|                              |  |                                                                                                           
|                              |  | Consolidated Statements of Operations for the Three Months Ended April 1, 2007 and April 2, 2006           |  | 4   
|                              |  |                                                                                                           
|                              |  | Consolidated Statements of Comprehensive Income for the Three Months Ended April 1, 2007 and April 2, 2006 |  | 5   
|                              |  |                                                                                                           
|                              |  | Consolidated Statements of Cash Flows for the Three Months Ended April 1, 2007 and April 2, 2006           |  | 6   
|                              |  |                                                                                                           
|                              |  | Notes to Consolidated Financial Statements (Unaudited)                                                     |  | 7   
|                              |  |                                                                                                           
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                      |  | 24  
|                              |  |                                                                                                           
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                 |  | 31  
|                              |  |                                                                                                           
|Item 4.                       |  | Controls and Procedures                                                                                    |  | 31  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                           
|                              |  |                                                                                                           
|Item 1.                       |  | Legal Proceedings                                                                                          |  | 32  
|                              |  |                                                                                                           
|Item 1A.                      |  | Risk Factors                                                                                               |  | 34  
|                              |  |                                                                                                           
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                |  | 44  
|                              |  |                                                                                                           
|Item 6.                       |  | Exhibits                                                                                                   |  | 44  
|                              | 
|Signature                     |  | 45                                                                                                        



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions)



|                                                                                                                   |  |               |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                   |  | April 1, 2007 |         |   | December 31, 2006 |  
|                                                                                                                   | 
|                                                                                                                   |  | (Unaudited)   |         |   |                   |  
|ASSETS                                                                                                             |  |               |         |   |                   |   |         |  
|Current assets:                                                                                                    |  |               |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                          |  | $             | 315.6   |   |                   | $ | 525.2   |  
|Short-term marketable securities                                                                                   |  |               | 111.2   |   |                   |   | 59.1    |  
|Accounts receivable, net of allowances of $38.6 and $40.4 at April 1, 2007 and December 31, 2006, respectively     |  |               | 170.2   |   |                   |   | 163.3   |  
|Inventories                                                                                                        |  |               | 241.4   |   |                   |   | 238.9   |  
|Deferred income taxes, net of allowances of $33.3 and $33.1 at April 1, 2007 and December 31, 2006, respectively   |  |               | 11.6    |   |                   |   | 11.5    |  
|Other current assets                                                                                               |  |               | 24.8    |   |                   |   | 30.5    |  
|                                                                                                                   |  |               |         |   |                   |   |         |  
|Total current assets                                                                                               |  |               | 874.8   |   |                   |   | 1,028.5 |  
|Property, plant and equipment, net                                                                                 |  |               | 641.8   |   |                   |   | 646.4   |  
|Deferred income taxes, net of allowances of $171.3 and $162.5 at April 1, 2007 and December 31, 2006, respectively |  |               | 6.0     |   |                   |   | 0.9     |  
|Intangible assets, net                                                                                             |  |               | 139.1   |   |                   |   | 103.6   |  
|Goodwill                                                                                                           |  |               | 345.7   |   |                   |   | 229.9   |  
|Long-term marketable securities                                                                                    |  |               | 2.0     |   |                   |   | 2.1     |  
|Other assets                                                                                                       |  |               | 35.3    |   |                   |   | 34.2    |  
|                                                                                                                   |  |               |         |   |                   |   |         |  
|Total assets                                                                                                       |  | $             | 2,044.7 |   |                   | $ | 2,045.6 |  
|                                                                                                                   |  |               |         |   |                   |   |         |  
|                                                                                                                   |  |              
|LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS EQUITY                                                             |  |               |         |   |                   |   |         |  
|Current liabilities:                                                                                               |  |               |         |   |                   |   |         |  
|Current portion of long-term debt                                                                                  |  | $             | 3.8     |   |                   | $ | 2.8     |  
|Accounts payable                                                                                                   |  |               | 108.2   |   |                   |   | 90.2    |  
|Accrued expenses and other current liabilities                                                                     |  |               | 119.7   |   |                   |   | 169.5   |  
|                                                                                                                   |  |               |         |   |                   |   |         |  
|Total current liabilities                                                                                          |  |               | 231.7   |   |                   |   | 262.5   |  
|Long-term debt, less current portion                                                                               |  |               | 587.8   |   |                   |   | 589.7   |  
|Deferred income taxes                                                                                              |  |               | 35.0    |   |                   |   | 35.0    |  
|Other liabilities                                                                                                  |  |               | 36.1    |   |                   |   | 24.0    |  
|Minority interest                                                                                                  |  |               | 1.3     |   |                   |   |        |  
|                                                                                                                   |  |               |         |   |                   |   |         |  
|Total liabilities                                                                                                  |  |               | 891.9   |   |                   |   | 911.2   |  
|Commitments and contingencies                                                                                      |  |               |         |   |                   |   |         |  
|Temporary equitydeferred stock units                                                                              |  |               | 2.7     |   |                   |   | 2.2     |  
|Stockholders equity:                                                                                              |  |               |         |   |                   |   |         |  
|Common stock                                                                                                       |  |               | 1.2     |   |                   |   | 1.2     |  
|Additional paid-in capital                                                                                         |  |               | 1,336.5 |   |                   |   | 1,319.1 |  
|Accumulated deficit                                                                                                |  |               | (174.3  | ) |                   |   | (182.5  | )
|Accumulated other comprehensive income (loss)                                                                      |  |               | (2.1    | ) |                   |   | 1.0     |  
|Less treasury stock (at cost)                                                                                      |  |               | (11.2   | ) |                   |   | (6.6    | )
|                                                                                                                   |  |               |         |   |                   |   |         |  
|Total stockholders equity                                                                                         |  |               | 1,150.1 |   |                   |   | 1,132.2 |  
|                                                                                                                   |  |               |         |   |                   |   |         |  
|Total liabilities, temporary equity and stockholders equity                                                       |  | $             | 2,044.7 |   |                   | $ | 2,045.6 |  
|                                                                                                                   |  |               |         |   |                   |   |         |  

See accompanying notes to unaudited consolidated financial statements.



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)



|                                                |  |                    |       |   |              |   |       |  
|----------------------------------------------- |  | ------------------ | ----- | - | ------------ | - | ----- | -
|                                                |  | Three Months Ended |      
|                                                |  | April 1,2007       |       |   | April 2,2006 |  
|Total revenue                                   |  | $                  | 402.6 |   |              | $ | 409.5 |  
|Cost of sales                                   |  |                    | 291.1 |   |              |   | 287.0 |  
|                                                |  |                    |       |   |              |   |       |  
|Gross profit                                    |  |                    | 111.5 |   |              |   | 122.5 |  
|                                                |  |                    |       |   |              |   |       |  
|Gross profit %                                  |  |                    | 27.7  | % |              |   | 29.9  | %
|                                                |  |                   
|Operating expenses:                             |  |                    |       |   |              |   |       |  
|Research and development                        |  |                    | 26.9  |   |              |   | 26.2  |  
|Selling, general and administrative             |  |                    | 57.2  |   |              |   | 60.0  |  
|Amortization of acquisition-related intangibles |  |                    | 6.8   |   |              |   | 5.9   |  
|Restructuring and impairments                   |  |                    | 0.6   |   |              |   |      |  
|Gain on sale of product line, net               |  |                    |      |   |              |   | (3.2  | )
|Purchased in-process research and development   |  |                    | 3.7   |   |              |   |      |  
|                                                |  |                    |       |   |              |   |       |  
|Total operating expenses                        |  |                    | 95.2  |   |              |   | 88.9  |  
|                                                |  |                    |       |   |              |   |       |  
|Operating income                                |  |                    | 16.3  |   |              |   | 33.6  |  
|                                                |  |                   
|Other expense, net                              |  |                    | 4.7   |   |              |   | 5.9   |  
|                                                |  |                    |       |   |              |   |       |  
|Income before income taxes                      |  |                    | 11.6  |   |              |   | 27.7  |  
|                                                |  |                   
|Provision for income taxes                      |  |                    | 5.3   |   |              |   | 1.1   |  
|                                                |  |                    |       |   |              |   |       |  
|Net income                                      |  | $                  | 6.3   |   |              | $ | 26.6  |  
|                                                |  |                    |       |   |              |   |       |  
|                                                |  |                   
|Net income per common share:                    |  |                    |       |   |              |   |       |  
|Basic                                           |  | $                  | 0.05  |   |              | $ | 0.22  |  
|                                                |  |                    |       |   |              |   |       |  
|Diluted                                         |  | $                  | 0.05  |   |              | $ | 0.21  |  
|                                                |  |                    |       |   |              |   |       |  
|                                                |  |                   
|Weighted average common shares:                 |  |                    |       |   |              |   |       |  
|Basic                                           |  |                    | 123.4 |   |              |   | 121.4 |  
|                                                |  |                    |       |   |              |   |       |  
|Diluted                                         |  |                    | 125.7 |   |              |   | 123.9 |  
|                                                |  |                    |       |   |              |   |       |  

See accompanying notes to unaudited consolidated financial statements.



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)

(In millions)

(Unaudited)



|                                                                                            |  |                    |      |   |              |   |      |  
|------------------------------------------------------------------------------------------- |  | ------------------ | ---- | - | ------------ | - | ---- | -
|                                                                                            |  | Three Months Ended |     
|                                                                                            |  | April 1,2007       |      |   | April 2,2006 |  
|Net income                                                                                  |  | $                  | 6.3  |   |              | $ | 26.6 |  
|Other comprehensive income (loss), net of tax:                                              |  |                    |      |   |              |   |      |  
|Net change associated with hedging transactions                                             |  |                    | (0.3 | ) |              |   | 0.3  |  
|Net amount reclassified to earnings for hedging                                             |  |                    |     |   |              |   | (0.5 | )
|Net change associated with unrealized holding loss on marketable securities and investments |  |                    |     |   |              |   | (0.8 | )
|                                                                                            |  |                    |      |   |              |   |      |  
|Comprehensive income                                                                        |  | $                  | 6.0  |   |              | $ | 25.6 |  
|                                                                                            |  |                    |      |   |              |   |      |  

See accompanying notes to unaudited consolidated financial statements.



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)



|                                                                               |  |                    |        |   |              |   |       |  
|------------------------------------------------------------------------------ |  | ------------------ | ------ | - | ------------ | - | ----- | -
|                                                                               |  | Three Months Ended |       
|                                                                               |  | April 1,2007       |        |   | April 2,2006 |  
|Cash flows from operating activities:                                          |  |                    |        |   |              |   |       |  
|Net income                                                                     |  | $                  | 6.3    |   |              | $ | 26.6  |  
|Adjustments to reconcile net income to cash provided by operating activities:  |  |                    |        |   |              |   |       |  
|Depreciation and amortization                                                  |  |                    | 32.0   |   |              |   | 28.3  |  
|Non-cash stock-based compensation expense                                      |  |                    | 6.1    |   |              |   | 5.3   |  
|Loss on disposal of property, plant, and equipment                             |  |                    |       |   |              |   | 0.5   |  
|Non-cash financing expense                                                     |  |                    | 0.4    |   |              |   | 0.6   |  
|Deferred income taxes, net                                                     |  |                    | (4.4   | ) |              |   | 0.8   |  
|Purchased in-process research and development                                  |  |                    | 3.7    |   |              |   |      |  
|Gain on sale of product line                                                   |  |                    |       |   |              |   | (3.2  | )
|Changes in operating assets and liabilities, net of acquisitions:              |  |                    |        |   |              |   |       |  
|Accounts receivable, net                                                       |  |                    | 0.4    |   |              |   | (19.9 | )
|Inventories                                                                    |  |                    | 6.1    |   |              |   | (12.3 | )
|Other current assets                                                           |  |                    | 4.3    |   |              |   | (4.9  | )
|Current liabilities                                                            |  |                    | (41.8  | ) |              |   | (18.8 | )
|Other assets and liabilities, net                                              |  |                    | 10.9   |   |              |   |      |  
|                                                                               |  |                    |        |   |              |   |       |  
|Cash provided by operating activities                                          |  |                    | 24.0   |   |              |   | 3.0   |  
|                                                                               |  |                    |        |   |              |   |       |  
|                                                                               |  |                   
|Cash flows from investing activities:                                          |  |                    |        |   |              |   |       |  
|Purchase of marketable securities                                              |  |                    | (79.1  | ) |              |   | (61.9 | )
|Sale of marketable securities                                                  |  |                    | 28.2   |   |              |   | 67.8  |  
|Maturity of marketable securities                                              |  |                    | 0.1    |   |              |   | 9.1   |  
|Capital expenditures                                                           |  |                    | (16.7  | ) |              |   | (23.0 | )
|Purchase of molds and tooling                                                  |  |                    | (0.5   | ) |              |   | (0.5  | )
|Acquisitions and divestitures, net of cash acquired                            |  |                    | (171.8 | ) |              |   | 6.6   |  
|                                                                               |  |                    |        |   |              |   |       |  
|Cash used in investing activities                                              |  |                    | (239.8 | ) |              |   | (1.9  | )
|                                                                               |  |                    |        |   |              |   |       |  
|                                                                               |  |                   
|Cash flows from financing activities:                                          |  |                    |        |   |              |   |       |  
|Repayment of long-term debt                                                    |  |                    | (0.9   | ) |              |   | (2.2  | )
|Proceeds from issuance of common stock and from exercise of stock options, net |  |                    | 13.6   |   |              |   | 8.0   |  
|Purchase of treasury stock                                                     |  |                    | (6.5   | ) |              |   | (2.0  | )
|                                                                               |  |                    |        |   |              |   |       |  
|Cash provided by financing activities                                          |  |                    | 6.2    |   |              |   | 3.8   |  
|                                                                               |  |                    |        |   |              |   |       |  
|                                                                               |  |                   
|Net change in cash and cash equivalents                                        |  |                    | (209.6 | ) |              |   | 4.9   |  
|Cash and cash equivalents at beginning of period                               |  |                    | 525.2  |   |              |   | 330.7 |  
|                                                                               |  |                    |        |   |              |   |       |  
|Cash and cash equivalents at end of period                                     |  | $                  | 315.6  |   |              | $ | 335.6 |  
|                                                                               |  |                    |        |   |              |   |       |  

See accompanying notes to unaudited consolidated financial statements.



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1  Basis
of Presentation

The accompanying interim consolidated financial statements of Fairchild Semiconductor International, Inc. (the company) have been
prepared in conformity with accounting principles generally accepted in the United States of America, consistent in all material respects with those applied in the companys Annual Report on Form 10-K for the year ended December 31, 2006.
The interim financial information is unaudited, but reflects all normal adjustments, which are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. The financial statements should be read
in conjunction with the financial statements in the companys Annual Report on Form 10-K for the year ended December 31, 2006. Certain amounts for prior periods have been reclassified to conform to the current presentation. The
companys results for the three months ended April 1, 2007 consists of 13 weeks, while results for the three months ended April 2, 2006 consists of 14 weeks. The results for the interim periods are not necessarily indicative of the
results of operations that may be expected for the full year.

Note 2  Financial Statement Details



|                                               |               |              |         |                  |   |        
|---------------------------------------------- | ------------- | ------------ | ------- | ---------------- | - | -------
|                                               |               | April 1,2007 |         | December 31,2006
|                                               | (In millions)
|Inventories                                    |               |              |         |                  |   |        
|Raw materials                                  |               | $            | 31.5    |                  | $ | 31.3   
|Work in process                                |               |              | 128.2   |                  |   | 130.5  
|Finished goods                                 |               |              | 81.7    |                  |   | 77.1   
|                                               |               |              |         |                  |   |        
|                                               |               | $            | 241.4   |                  | $ | 238.9  
|                                               |               |              |         |                  |   |        
|                                               |               |             
|                                               |               | April 1,2007 |         | December 31,2006
|                                               | (In millions)
|Property, plant and equipment                  |               |              |         |                  |   |        
|Land and improvements                          |               | $            | 26.8    |                  | $ | 26.5   
|Buildings and improvements                     |               |              | 314.0   |                  |   | 312.8  
|Machinery and equipment                        |               |              | 1,408.9 |                  |   | 1,397.3
|Construction in progress                       |               |              | 54.6    |                  |   | 59.0   
|                                               |               |              |         |                  |   |        
|Total property, plant and equipment            |               |              | 1,804.3 |                  |   | 1,795.6
|Less accumulated depreciation                  |               |              | 1,162.5 |                  |   | 1,149.2
|                                               |               |              |         |                  |   |        
|                                               |               | $            | 641.8   |                  | $ | 646.4  
|                                               |               |              |         |                  |   |        
|                                               |               |             
|                                               |               | April 1,2007 |         | December 31,2006
|                                               | (In millions)
|Accrued expenses and other current liabilities |               |              |         |                  |   |        
|Payroll and employee related accruals          |               | $            | 45.1    |                  | $ | 93.7   
|Accrued interest                               |               |              | 4.4     |                  |   | 1.9    
|Income taxes payable                           |               |              | 23.0    |                  |   | 25.5   
|Restructuring                                  |               |              | 0.8     |                  |   | 1.0    
|Reserve for losses                             |               |              | 12.3    |                  |   | 14.0   
|Other                                          |               |              | 34.1    |                  |   | 33.4   
|                                               |               |              |         |                  |   |        
|                                               |               | $            | 119.7   |                  | $ | 169.5  
|                                               |               |              |         |                  |   |        



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Note 3  Computation of Net Income per Share

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares
outstanding during the period, plus the dilutive effect of potential future issuances of common stock relating to stock options and other potentially dilutive securities. Potentially dilutive common equivalent securities consist of stock options,
performance units (PUs), deferred stock units (DSUs), restricted stock units (RSUs) and shares obtainable upon the conversion of the Convertible Senior Subordinated Notes, due November 1, 2008. In calculating diluted earnings per share, the
dilutive effect of stock options is computed using the average market price for the respective period. Potential shares related to certain of the companys outstanding stock options were excluded because they were anti-dilutive, but could be
dilutive in the future. The following table sets forth the computation of basic and diluted earnings per share.



|                                                                              |  |                                      |       |               |   |      
|----------------------------------------------------------------------------- |  | ------------------------------------ | ----- | ------------- | - | -----
|                                                                              |  | Three Months Ended                  
|                                                                              |  | April 1,2007                         |       | April 2, 2006
|                                                                              |  | (In millions, except per share data)
|Basic:                                                                        |  |                                      |       |               |   |      
|Net income                                                                    |  | $                                    | 6.3   |               | $ | 26.6 
|                                                                              |  |                                      |       |               |   |      
|Weighted average shares outstanding                                           |  |                                      | 123.4 |               |   | 121.4
|                                                                              |  |                                      |       |               |   |      
|Net income per share                                                          |  | $                                    | 0.05  |               | $ | 0.22 
|                                                                              |  |                                      |       |               |   |      
|                                                                              |  |                                     
|Diluted:                                                                      |  |                                      |       |               |   |      
|Net income                                                                    |  | $                                    | 6.3   |               | $ | 26.6 
|                                                                              |  |                                      |       |               |   |      
|Basic weighted average shares outstanding                                     |  |                                      | 123.4 |               |   | 121.4
|Assumed exercise of common stock equivalents                                  |  |                                      | 2.3   |               |   | 2.5  
|                                                                              |  |                                      |       |               |   |      
|Diluted weighted average common and common equivalent shares                  |  |                                      | 125.7 |               |   | 123.9
|                                                                              |  |                                      |       |               |   |      
|Net income per share                                                          |  | $                                    | 0.05  |               | $ | 0.21 
|                                                                              |  |                                      |       |               |   |      
|                                                                              |  |                                     
|Anti-dilutive common stock equivalents, non-vested stock, DSUs, RSUs, and PUs |  |                                      | 16.6  |               |   | 16.6 
|                                                                              |  |                                      |       |               |   |      

In addition, the computation of diluted earnings per share did not include the assumed conversion of the
Convertible Senior Subordinated Notes because the effect would have been anti-dilutive. As a result, $2.8 million of interest expense was not added back to the numerator for the three months ended April 1, 2007 and April 2, 2006. Potential
common shares of 6.7 million were not included in the denominator for all periods presented.

Note 4  Supplemental Cash Flow Information



|               |  |                    |     |              |   |     
|-------------- |  | ------------------ | --- | ------------ | - | ----
|               |  | Three Months Ended
|               |  | April 1,2007       |     | April 2,2006
|               |  | (In millions)     
|Cash paid for: |  |                    |     |              |   |     
|Income taxes   |  | $                  | 6.6 |              | $ | 15.2
|               |  |                    |     |              |   |     
|Interest       |  | $                  | 6.8 |              | $ | 13.4
|               |  |                    |     |              |   |     

Note 5  Marketable Securities

The company invests excess cash in marketable securities consisting primarily of commercial paper, U.S. Government securities, and auction rate securities.

All of the companys marketable securities are classified as available-for-sale. In accordance with Statement of Financial Accounting Standards (SFAS) 115,
Accounting for Certain Investments in Debt and Equity Securities, available-for-sale



8



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securities are carried at fair value with unrealized gains and losses included as a component of other comprehensive income within stockholders equity,
net of any related tax effect. Realized gains and losses and declines in value judged by management to be other than temporary on these investments are included in interest income and expense. For the purpose of computing realized gains and losses,
cost is identified on a specific identification basis.

The following table presents the amortized cost and estimated fair value of available-for-sale
securities by contractual maturity at April 1, 2007.



|                                        |               |               |       |             |   |      
|--------------------------------------- | ------------- | ------------- | ----- | ----------- | - | -----
|                                        |               | AmortizedCost |       | MarketValue
|                                        | (In millions)
|Due in one year or less                 |               | $             | 1.8   |             | $ | 1.8  
|Due after one year through three years  |               |               | 0.4   |             |   | 0.4  
|Due after three years through ten years |               |               | 1.3   |             |   | 1.3  
|Due after ten years                     |               |               | 109.7 |             |   | 109.7
|                                        |               |               |       |             |   |      
|                                        |               | $             | 113.2 |             | $ | 113.2
|                                        |               |               |       |             |   |      

Note 6  Goodwill and Intangible Assets

The following table presents a summary of acquired intangible assets.



|                                |  |                       |  |   |                      |               |   |                         |                         |  |   |                      |  |   |                         |  
|------------------------------- |  | --------------------- |  | - | -------------------- | ------------- | - | ----------------------- | ----------------------- |  | - | -------------------- |  | - | ----------------------- | -
|                                |  |                       |  |   | As of April 1, 2007  |               |   |                         | As of December 31, 2006 | 
|                                |  | Period ofAmortization |  |   | Gross CarryingAmount |               |   | AccumulatedAmortization |                         |  |   | Gross CarryingAmount |  |   | AccumulatedAmortization |  
|                                |  |                       |  |   |                      | (In millions) |   |                         |                        
|Identifiable intangible assets: |  |                       |  |   |                      |               |   |                         |                         |  |   |                      |  |   |                         |  
|Developed technology            |  | 2-15 years            |  | $ | 237.7                |               | $ | (129.3                  | )                       |  | $ | 225.6                |  | $ | (124.8                  | )
|Customer base                   |  | 8 -10 years           |  |   | 80.5                 |               |   | (56.2                   | )                       |  |   | 55.8                 |  |   | (54.1                   | )
|Core technology                 |  | 10 years              |  |   | 3.7                  |               |   |                        |                         |  |   |                     |  |   |                        |  
|Covenant not to compete         |  | 5 years               |  |   | 30.4                 |               |   | (30.4                   | )                       |  |   | 30.4                 |  |   | (30.4                   | )
|Assembled workforce             |  | 5 years               |  |   | 1.0                  |               |   | (0.2                    | )                       |  |   | 1.0                  |  |   | (0.1                    | )
|Process technology              |  | 5 years               |  |   | 1.5                  |               |   |                        |                         |  |   |                     |  |   |                        |  
|Patents                         |  | 4 years               |  |   | 5.4                  |               |   | (5.2                    | )                       |  |   | 5.4                  |  |   | (5.2                    | )
|Trademarks and tradenames       |  | 1 year                |  |   | 25.1                 |               |   | (24.9                   | )                       |  |   | 24.9                 |  |   | (24.9                   | )
|                                |  |                       |  |   |                      |               |   |                         |                         |  |   |                      |  |   |                         |  
|Subtotal                        |  |                       |  |   | 385.3                |               |   | (246.2                  | )                       |  |   | 343.1                |  |   | (239.5                  | )
|Goodwill                        |  |                       |  |   | 345.7                |               |   |                        |                         |  |   | 229.9                |  |   |                        |  
|                                |  |                       |  |   |                      |               |   |                         |                         |  |   |                      |  |   |                         |  
|Total                           |  |                       |  | $ | 731.0                |               | $ | (246.2                  | )                       |  | $ | 573.0                |  | $ | (239.5                  | )
|                                |  |                       |  |   |                      |               |   |                         |                         |  |   |                      |  |   |                         |  

The following table presents the carrying amount of goodwill by reporting unit.



|                                |               |                |       |                 |   |                  |  |       |      |  |   |      
|------------------------------- | ------------- | -------------- | ----- | --------------- | - | ---------------- |  | ----- | ---- |  | - | -----
|                                |               | AnalogProducts |       | FunctionalPower |   | StandardProducts |  | Total
|                                | (In millions)
|Balance as of April 1, 2007     |               | $              | 131.3 |                 | $ | 159.9            |  | $     | 54.5 |  | $ | 345.7
|Balance as of December 31, 2006 |               | $              | 15.5  |                 | $ | 159.9            |  | $     | 54.5 |  | $ | 229.9

During the three months ended April 1, 2007, goodwill and other gross intangible assets increased $115.8
million and $42.2 million, respectively, due to the acquisition of System General Corporation (System General), the total of which was assigned to the Analog Products group (see Item 1, Note 13 for further information).

The following table presents the estimated amortization expense for intangible assets for the remainder of 2007 and for each of the five succeeding fiscal years.



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|                                |  |               |     
|------------------------------- |  | ------------- | ----
|Estimated Amortization Expense: |  | (In millions)
|Remainder of 2007               |  | $             | 16.8
|2008                            |  |               | 21.9
|2009                            |  |               | 21.8
|2010                            |  |               | 21.8
|2011                            |  |               | 17.5
|2012                            |  |               | 15.3

Note 7  Segment Information

Fairchild designs, develops, manufactures and markets high performance multi-market semiconductors. The company is currently organized into three reportable segments: Functional Power, Analog Products and Standard
Products. Functional Power includes high voltage, low voltage, automotive and radio frequency products. Analog Products includes system power, power conversion, signal conditioning, switches and interface products. Standard Products includes
optoelectronics, standard linear, logic, standard diode and transistors, bipolar and foundry products.

The following table presents selected operating
segment financial information for the three months ended April 1, 2007 and April 2, 2006.



|                                     |  |                    |       |   |              |   |       |  
|------------------------------------ |  | ------------------ | ----- | - | ------------ | - | ----- | -
|                                     |  | Three Months Ended |      
|                                     |  | April 1,2007       |       |   | April 2,2006 |  
|                                     |  | (In millions)      |      
|Revenue and operating income (loss): |  |                    |       |   |              |   |       |  
|Functional Power                     |  |                    |       |   |              |   |       |  
|Total revenue                        |  | $                  | 227.0 |   |              | $ | 222.8 |  
|Operating income                     |  |                    | 29.8  |   |              |   | 27.7  |  
|                                     |  |                    |       |   |              |   |       |  
|Analog Products                      |  |                    |       |   |              |   |       |  
|Total revenue                        |  |                    | 79.9  |   |              |   | 81.7  |  
|Operating income (loss)              |  |                    | (13.3 | ) |              |   | 3.2   |  
|                                     |  |                    |       |   |              |   |       |  
|Standard Products                    |  |                    |       |   |              |   |       |  
|Total revenue                        |  |                    | 95.7  |   |              |   | 105.0 |  
|Operating income                     |  |                    | 6.5   |   |              |   | 4.8   |  
|                                     |  |                    |       |   |              |   |       |  
|Other                                |  |                    |       |   |              |   |       |  
|Operating loss (1)                   |  |                    | (6.7  | ) |              |   | (2.1  | )
|                                     |  |                    |       |   |              |   |       |  
|Total consolidated                   |  |                    |       |   |              |   |       |  
|Total revenue                        |  | $                  | 402.6 |   |              | $ | 409.5 |  
|Operating income                     |  | $                  | 16.3  |   |              | $ | 33.6  |  

---

|(1) | The three months ended April 1, 2007 includes $6.1 million of stock-based compensation expense and $0.6 million of restructuring and impairments expense. The three months ended
April 2, 2006 includes $5.3 million of stock-based compensation expense and a net gain of $3.2 million on the sale of a product line.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 8  Restructuring and Impairments

During the three months ended April 1, 2007, the company recorded $0.6 million in
severance charges associated with the 2006 Infrastructure Realignment Program. There were no restructuring and impairment charges recorded during the first quarter of 2006.

The following table presents a summary of the activity in the companys accrual for restructuring and impairment costs for the three months ended April 1, 2007 (in millions).



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##### Table of Contents

|                                         |  |                             |     |            |   |          |  |   |                           |   |  |   |    
|---------------------------------------- |  | --------------------------- | --- | ---------- | - | -------- |  | - | ------------------------- | - |  | - | ---
|                                         |  | AccrualBalance at12/31/2006 |     | NewCharges |   | CashPaid |  |   | AccrualBalance at4/1/2007
|2005 Infrastructure Realignment Program: |  |                             |     |            |   |          |  |   |                           |   |  |   |    
|Employee Separation Costs                |  | $                           | 0.1 |            | $ |         |  | $ | (0.1                      | ) |  | $ |   
|                                         |  |                             |     |           
|2006 Infrastructure Realignment Program: |  |                             |     |            |   |          |  |   |                           |   |  |   |    
|Employee Separation Costs                |  |                             | 0.9 |            |   | 0.6      |  |   | (0.7                      | ) |  |   | 0.8
|                                         |  |                             |     |            |   |          |  |   |                           |   |  |   |    
|                                         |  | $                           | 1.0 |            | $ | 0.6      |  | $ | (0.8                      | ) |  | $ | 0.8
|                                         |  |                             |     |            |   |          |  |   |                           |   |  |   |    

The company expects to complete payment of substantially all of the above restructuring accruals by the second
quarter of 2007.

Note 9  Income Taxes

In June
2006, the Financial Accounting Standards Board (FASB) issued Interpretation (FIN) 48, Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial
statements in accordance with SFAS 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. This statement also provides guidance on derecognition, classification, interest and penalties, accounting in the interim periods, disclosure, and transition. The company adopted FIN 48 on January 1, 2007. With the
implementation of FIN 48, the company recognized a cumulative effect adjustment increasing January 1, 2007 retained earnings by $1.9 million. The company also recognized a $1.8 million increase to deferred tax assets; however, due to a full
valuation allowance against the companys U.S. deferred taxes, there was no retained earnings impact. At the date of adoption, the company had $62.7 million of unrecognized tax benefits, which increased to $65.1 million as of April 1,
2007. Of the total unrecognized tax benefits at the date of adoption and April 1, 2007, $10.5 million and $11.3 million, respectively, would impact the effective tax rate, if recognized. The remaining unrecognized tax benefits, would not impact
the effective tax rate, if recognized, as the company has a full valuation allowance against its U.S. deferred taxes.

As of April 1, 2007, due to the
statute of limitations being reached during the first quarter of 2008, the company reclassified $0.8 million from other long-term liabilities to other current liabilities in anticipation of a resolution of some of the companys income tax
recognition exposures within the next 12 months.

The companys major tax jurisdictions as of the adoption of FIN 48 are the U.S. and Korea. For the
U.S., the company has open tax years dating back to 1999 due to the carryforward of tax attributes. In Korea, the company has five open tax years dating back to 2002.

Penalty and interest relating to uncertain tax positions is recognized as a component of income tax expense. The company had accrued $2.3 million as of January 1, 2007 and $1.7 million as of April 1, 2007.
To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

Note 10  Stock-Based Compensation

The following table
summarizes stock-based compensation expense under SFAS 123(R), Share-Based Payment, by financial statement line for the three months ended April 1, 2007 and April 2, 2006, respectively.



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|                                    |  |                    |     |              |   |    
|----------------------------------- |  | ------------------ | --- | ------------ | - | ---
|                                    |  | Three Months Ended
|                                    |  | April 1,2007       |     | April 2,2006
|                                    |  | (In millions)     
|Cost of Sales                       |  | $                  | 1.7 |              | $ | 0.7
|Research and Development            |  |                    | 0.9 |              |   | 1.0
|Selling, General and Administrative |  |                    | 3.5 |              |   | 3.6
|                                    |  |                    |     |              |   |    
|                                    |  | $                  | 6.1 |              | $ | 5.3
|                                    |  |                    |     |              |   |    

Upon adoption of SFAS 123(R), the company capitalized $0.8 million of stock-based compensation cost into inventory
for the three months ended April 2, 2006.

Stock Options

The following table summarizes stock option activity for the three months ended April 1, 2007 (in thousands).



|                                   |  |        |  
|---------------------------------- |  | ------ | -
|                                   |  | Shares |  
|Outstanding at beginning of period |  | 22,844 |  
|Granted                            |  | 991    |  
|Exercised                          |  | (557   | )
|Forfeited                          |  | (90    | )
|Expired                            |  | (327   | )
|                                   |  |        |  
|Outstanding at end of period       |  | 22,861 |  
|                                   |  |        |  

The weighted average exercise price of stock options granted during the period was $17.94 and the related weighted
average grant-date fair value was $7.83.

Deferred Stock Units

The following table summarizes DSU activity for the three months ended April 1, 2007 (in thousands).



|                                 |  |        |  
|-------------------------------- |  | ------ | -
|                                 |  | Shares |  
|Nonvested at beginning of period |  | 330    |  
|Vested                           |  | (1     | )
|                                 |  |        |  
|Nonvested at end of period       |  | 329    |  
|                                 |  |        |  

Restricted Stock Units

The following table summarizes RSU activity for the three months ended April 1, 2007 (in thousands).



|                                 |  |        |  
|-------------------------------- |  | ------ | -
|                                 |  | Shares |  
|Nonvested at beginning of period |  | 303    |  
|Granted                          |  | 443    |  
|Vested                           |  | (54    | )
|Forfeited                        |  | (3     | )
|                                 |  |        |  
|Nonvested at end of period       |  | 689    |  
|                                 |  |        |  

The weighted average grant-date fair value of RSUs granted during the period was $17.95.

Performance Units

The following table summarizes PU activity
for the three months ended April 1, 2007 (in thousands).



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|                                 |  |        |  
|-------------------------------- |  | ------ | -
|                                 |  | Shares |  
|Nonvested at beginning of period |  | 812    |  
|Granted (1)                      |  | 235    |  
|Vested                           |  | (266   | )
|Forfeited                        |  | (14    | )
|                                 |  |        |  
|Nonvested at end of period       |  | 767    |  
|                                 |  |        |  

---

|(1) | For 2007, represents the estimated award based on the 2007 full year performance metric attainment.
|--- | ---------------------------------------------------------------------------------------------------

The weighted average grant-date fair value of PUs granted during the period was $17.94.

The fair value of each option
grant for the companys plans is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions, utilizing the guidance provided in SFAS 123(R) as well as Securities and Exchange
Commission Staff Accounting Bulletin SAB 107 (SAB 107). The fair value estimate of each DSU, RSU and PU is equal to the closing market price on the date of grant.



|                        |  |                    |   |  |              |  
|----------------------- |  | ------------------ | - |  | ------------ | -
|                        |  | Three Months Ended |  
|                        |  | April 1,2007       |   |  | April 2,2006 |  
|Expected volatility     |  | 41.7               | % |  | 53.2         | %
|Dividend yield          |  |                   |   |  |             |  
|Risk-free interest rate |  | 4.8                | % |  | 4.5          | %
|Expected life, in years |  | 5.0                |   |  | 3.9          |  
|Forfeiture rate         |  | 6.7                | % |  | 5.6          | %

Expected volatility.The company utilizes an average of implied volatility and the most recent historical
volatility commensurate with expected life. Effective for fiscal year 2007, the company modified its volatility assumption to include an implied volatility factor. The company determined during the annual review of its volatility assumption, that it
would be appropriate to include implied volatility, as described in SAB 107. The change in assumption was immaterial to stock-based compensation expense during the first quarter of 2007.

Dividend yield.The company does not pay a dividend, therefore this input is not applicable.

Risk-free interest
rate.The company estimated the risk-free interest rate based on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected life assumption.

Expected life.The company has evaluated expected life based on history and exercise patterns across its demographic population. The company believes that this historical data is the best estimate of the
expected life of a new option, and that generally all groups of our employees exhibit similar exercise behavior. In the first quarter of 2007, the company performed an annual review of the expected life assumption and determined that an expected
life of 5.0 is more indicative of actual exercise behavior than the previous 3.9 years. Accordingly, all grants for 2007 will be assigned an expected life of 5.0 years. The change in assumption was immaterial to stock-based compensation expense
during the first quarter of 2007.

Forfeiture rate.The company has applied an annual forfeiture rate of 6.7%, 5.9%, 0.6% and 4.6% to all unvested
options, RSUs, DSUs and PUs, respectively, as of April 1, 2007. This analysis is re-evaluated at least annually and the forfeiture rate is adjusted as necessary.

Note 11  Derivatives

The company uses derivative instruments to manage exposures to changes in foreign
currency exchange rates and interest rates. In accordance with SFAS 133, Accounting for Certain Derivative Instruments and Certain Hedging Activities, the fair value of these hedges is recorded on the balance sheet.

Foreign Currency Derivatives. The company uses currency forward and combination option contracts to hedge a portion of its forecasted foreign exchange denominated
revenues and expenses. The company monitors its foreign currency exposures to maximize the overall effectiveness of its foreign currency hedge positions. Currencies hedged include the euro, Japanese yen, Philippine Peso, Malaysian ringgit and Korean
won. The companys objectives for holding derivatives are to minimize the risks using the most effective methods to eliminate or reduce the impacts of these exposures.



13



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Changes in the fair value of derivative instruments related to time value are included in the assessment of hedge
effectiveness. Hedge ineffectiveness, determined in accordance with SFAS 133 and SFAS 138,Accounting for Certain Derivative Instruments and Certain Hedging Activities  an amendment of FASB Statement 133, did not have a material impact
on earnings for the three months ended April 1, 2007. No cash flow hedges were derecognized or discontinued for the three months ended April 1, 2007 and April 2, 2006.

Derivative gains and losses included in OCI are reclassified into earnings at the time the forecasted transaction is recognized. The company estimates that the entire $0.1 million of net unrealized derivative gains
included in OCI will be reclassified into earnings within the next twelve months.

Interest Rate Derivatives.The companys variable-rate debt
exposes the company to variability in interest payments due to changes in interest rates. The company uses a forward interest rate swap to mitigate the interest rate risk on a portion of its variable-rate borrowings in order to manage fluctuations
in cash flows resulting from changes in interest rates on variable-rate debt.

Effectiveness of this hedge is calculated by comparing the fair value of the
derivative to a hypothetical derivative that would be a perfect hedge of floating rate debt. The value of the hedge at inception was zero and there was no ineffectiveness as of April 1, 2007.

Derivative gains and losses included in OCI are reclassified into earnings at the time the forecasted transaction is recognized. There is currently $0.5 million of
unrealized losses included in OCI. The amounts are subsequently reclassified into interest expense as a yield adjustment in the same period in which the related interest on the floating-rate debt obligations affect earnings.

Note 12  Contingencies

Phosphorus Mold Compound Litigation
and Claims.From time to time since late 2001, the company has received claims from a number of customers seeking damages resulting from certain products manufactured with a phosphorus-containing mold compound. Mold compound is the plastic resin
used to encapsulate semiconductor chips. This particular mold compound causes some chips to short in some situations, resulting in chip failure. The company has been named in lawsuits relating to these mold compound claims. In January 2005 the
company was named as a defendant in a lawsuit filed by Lucent Technologies Inc. in the Superior Court of New Jersey. The Lucent lawsuit alleges breach of contract, breach of warranty and fraud claims and seeks unspecified damages allegedly caused by
the companys products. The company believes it has strong defenses against Lucents claims and intends to vigorously defend the lawsuit. On January 5, 2007, White Rock Networks sued the company and two distributors, Arrow Electronics
and All American Semiconductor, in the U.S. District Court for the Eastern District of Texas, for violations of the Texas Deceptive Trade Practices Act (DTPA) relating to the mold compound issue, claiming unspecified damages. The company has not yet
been served in the case. The company believes it has strong defenses against White Rock Networks claims and intends to vigorously defend the lawsuit if it is served on the company.

Several other customers have made claims for damages or threatened to begin litigation as a result of the mold compound issue if their claims are not resolved according to their demands, and the company may face
additional lawsuits as a result. The company has resolved similar claims with several of its leading customers. The company has exhausted insurance coverage for such customer claims. While the exact amount of these losses is not known, the company
recorded a reserve for estimated potential settlement losses of $11.0 million in the Consolidated Statement of Operations during the second quarter of 2004 and an additional $6.9 million in the fourth quarter of 2005. These estimates were based upon
assessments of the potential liability using an analysis of the claims and historical experience. At April 1, 2007 and December 31, 2006, the reserve for estimated potential settlement losses was $4.1 million and $5.8 million,
respectively. If the company continues to receive additional claims for damages from customers beyond the period of time normally observed for such claims, if more of these claims proceed to litigation, or if the company chooses to settle claims in
settlement of or to avoid litigation, then the company may incur a liability in excess of the current reserve.

Patent Litigation with Power
Integrations, Inc. On October 20, 2004, the company and its wholly owned subsidiary, Fairchild Semiconductor Corporation, were sued by Power Integrations, Inc. in the United States District Court for the District of Delaware. Power
Integrations alleges that certain of the companys pulse width modulation (PWM) integrated circuit products infringe four Power Integrations U.S. patents, and seeks a permanent injunction preventing the company from manufacturing, selling or
offering



14



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##### Table of Contents

the products for sale in the United States, or from importing the products into the United States, as well as money damages for past infringement. The
company has analyzed the Power Integrations patents in light of the companys products and, based on that analysis, do not believe the companys products violate Power Integrations patents. Accordingly, the company is vigorously
contesting this lawsuit. The trial in the case has been divided into three phases. The first phase, held October 2-10, 2006, was on infringement, the willfulness of any infringement, and damages. On October 10, 2006, a jury returned a
verdict finding that 33 of the companys PWM products infringe one or more of seven claims of the four patents being asserted. The jury also found that the companys infringement was willful, and assessed damages against the company of
approximately $34 million. That verdict remains subject to the companys appeal. The second phase of the trial will be on the validity of the Power Integrations patents being asserted, and will be before a different jury. The enforceability of
the patents will be handled in a third phase before the judge who is overseeing the case. For Power Integrations to prevail in the case and receive a judgment and injunction against the company, the patent claims found to have been infringed must
also be found to be valid and enforceable in the remaining phases of the trial. The company believes it has identified inventions and publications, known as prior art, that pre-date the Power Integrations patents which the company believes would
invalidate the patents. The company is also claiming that Power Integrations officials engaged in inequitable conduct before the United States Patent and Trademark Office at the time when one or more of the patents was obtained, and the company
believes that conduct should make the patent claims unenforceable.

In the second phase of the trial, the Power Integrations patents will be presumed to be
valid and the company will have the burden of proving, by clear and convincing evidence, that the patents are invalid. To the extent the company is unable to do this, Power Integrations will be entitled to a judgment and damages as further discussed
below. Power Integrations may also seek an injunction to prevent the company from making, selling or offering to sell in the United States, or from importing into the United States, products that infringe patents that are found valid and
enforceable. Power Integrations has announced its intention to seek such an injunction in such event. The second phase of the jury trial was previously scheduled to begin December 4, 2006, but it was canceled by order of the Delaware U.S.
District Court. The court questioned whether the KSR v. Teleflex case, then pending before the U.S. Supreme Court, might impact the dispute between Fairchild and Power Integrations. The court found that the same issue of obviousness, a defense to
the validity of the Power Integrations patents, permeates the validity contentions in this case. At issue in the KSR case was whether the defense of obviousness has been improperly restricted by lower court rulings. The U.S. Supreme
court decided the KSR case on April 30, 2007. The second phase of the Power Integrations v. Fairchild Semiconductor jury trial on validity issues is now scheduled to begin on June 4, 2007.

The jury in the first phase of the trial assessed damages against the company of approximately $34 million. Because the jury also found that the companys
infringement was willful, the judge in the case will have discretion to increase the damages award by up to three times the amount of the final damages award. The final damages award would be determined after the next two phases of the trial. To the
extent the company succeeds in proving the patent claims invalid, the damages amount may be reduced, including to zero if the company proves all the claims invalid or unforceable. If the company is not successful, damages may also be increased by
the judge to account for certain sales by the company after October 20, 2006 and as a result of the willful infringement finding. It is also possible that the company could be required to pay Power Integrations attorneys fees and
pre-judgment interest.

Although the company believes, based on the prior art the company has identified, that the company has invalidity and
unenforceability defenses to Power Integrations patent claims, the results of litigation are difficult to predict and no assurance can be given that the company will succeed in proving the patents invalid or unenforceable. As discussed above,
the judge overseeing the case has discretion over the amount of damages awarded, and over the granting and scope of any injunction against the company. Any damages award or injunction would be subject to appeal and the company would expect to
carefully consider an appeal at the appropriate time. In such a case, if the company chooses to appeal, the company would likely be required to post a bond or provide other security for some or the entire amount of the final damages award during the
pendency of the appeal.

The company has analyzed the potential for a loss from this litigation in accordance with Statement of Financial Accounting
Standards 5, Accounting for Contingencies. Due to the companys beliefs about its position in the case, and because the company is unable to reasonably estimate the amount of loss the company would incur if the company does not prevail,
the company has not recorded a reserve for contingent loss. Should the company ultimately lose the lawsuit, such result could have an adverse impact on the companys ability to sell products found to be infringing, either directly or indirectly
in the U.S.

In a separate action, the company filed a lawsuit on April 11, 2006, against Power Integrations in the United States District Court for
the Eastern District of Texas. The lawsuit asserts that Power Integrations PWM products infringe U.S. Patent No. 5,264,719. This lawsuit has since been transferred to the United States District Court for the District of Delaware. Intersil
Americas owns U.S. Patent



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No. 5,264,719, for High Voltage Lateral Semiconductor Devices, and is a co-plaintiff with the company in the lawsuit. The company has held license
rights under the patent since acquiring Intersils power discrete business in 2001, and the company more recently secured exclusive rights to assert the patent against Power Integrations. The company intends to take all possible steps to seek a
court order to stop Power Integrations from making, using, selling, offering for sale or importing the infringing products into the U.S. and to obtain monetary damages for Power Integrations infringing activities.

During the first quarter of 2007, the company acquired a majority interest of System General Corporation, which is also involved in patent litigation with Power
Integrations. System General is a Taipei-based designer and seller of analog semiconductor devices. As of the date of this filing the company owns approximately 95.6% of System General shares, and expects to acquire all remaining shares before the
end of September 2007. System General is currently appealing the outcome of proceedings before the U.S. International Trade Commission (ITC) involving allegations of patent infringement, and is a defendant in a patent infringement lawsuit in the
U.S. District Court for the Northern District of California. Both the ITC proceeding and the lawsuit were initiated by Power Integrations. As in all litigation, the results of these matters are difficult to predict and no assurance can be given as
to the outcome of these proceedings. An adverse outcome in these matters could negatively impact the companys financial results. The company has analyzed the potential for a loss from this litigation in accordance with Statement of Financial
Accounting Standards 5, Accounting for Contingencies. Due to the companys beliefs about its position in the case, and because the company is unable to reasonably estimate the amount of loss the company would incur if the company does
not prevail, the company has not recorded a reserve for contingent loss. Should the company ultimately lose the lawsuit, such result could have an adverse impact on the companys ability to sell products found to be infringing, either directly
or indirectly in the U.S.

ZTE Corporation v. Fairchild Semiconductor Corporation. On December 30, 2004, the companys wholly owned
subsidiary, Fairchild Semiconductor Corporation, was sued by Zhongxing Telecom Ltd. (ZTE), a communications equipment manufacturer, in the Intermediate Peoples Court of Shenzhen, Guangdong Province, Peoples Republic of China. The
complaint filed by ZTE alleges that certain of the companys products were defective and caused personal injury and/or property loss to ZTE. ZTE claims 65,733,478 Chinese yuan as damages. The company contested the lawsuit in a trial held on
October 20, 2005. On December 29, 2006, the company was informed that the court had ruled in favor of ZTE and had ordered Fairchild to pay RMB 65,733,478 (equivalent to approximately $8.5 million U.S. dollars based on exchange rates at
April 1, 2007) to ZTE. The company maintains that ZTEs product liability claims are invalid and has appealed to the Higher Peoples Court of Guangdong Province. The company is awaiting the outcome of a hearing on the appeal held on
April 18, 2007. The lawsuit relates to alleged defects in products shipped in late 2002 and early 2003. The company did not sell the allegedly defective products to ZTE directly. Among other defenses, the company has argued that limitations on
damages in the companys contract with its distributor at the time of shipment should limit any damages recovery by ZTE. The company recorded a charge of approximately $8.2 million in the fourth quarter 2006 related to this legal proceeding.

From time to time the company is involved in legal proceedings in the ordinary course of business. The company believes that there is no such
ordinary-course litigation pending that could have, individually or in the aggregate, a material adverse effect on the companys business, financial condition, results of operations or cash flows.

Note 13  Acquisitions and Divestitures

On January 2,
2007, the company launched a tender offer in Taiwan to acquire 100% of the outstanding shares of Taipei-based System General. System General is a leading supplier of analog power management semiconductors for AC/DC offline power conversion in
computers, LCD monitors, printers, chargers, and consumer products. At the closing of the tender offer on February 5, 2007, 65,459,517 shares of System General stock were acquired, representing 95.6% of System Generals outstanding shares.
The total amount paid in cash for the company, net of cash acquired, was approximately $171.8 million. The company intends to acquire the remaining System General shares through a share swap and merger during the summer of 2007 provided that certain
conditions are met, including obtaining required regulatory approvals.

The operating results of System General since February 5, 2007 have been
included in the accompanying consolidated financial statements based on the 95.6% ownership interest of the fair value of System General. The remaining portion of the acquired net assets represents the minority interests ownership and is
reflected on our balance sheet based on the historical carrying amounts of the acquired enterprise. In connection with the acquisition, the company recorded a charge of $3.7 million for in-process research and development. The company also acquired
goodwill of approximately $115.8 million with the remainder of the purchase price in excess of the fair value of net tangible assets allocated to various other intangible assets. The purchase price allocation as of April 1, 2007 is based on the
companys estimate of the fair value of identifiable intangible and net tangible assets acquired. The final purchase price allocation will be completed upon completion of this analysis and the purchase of the remaining 4.4% outstanding shares
of System General.



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The acquisition is considered immaterial and, therefore, no proforma results of operations are presented.

Note 14  Condensed Consolidating Financial Statements

The
company operates through its wholly owned subsidiary Fairchild Semiconductor Corporation and other indirect wholly owned subsidiaries. Fairchild Semiconductor International, Inc. and certain of Fairchild Semiconductor Corporations subsidiaries
are guarantors under the companys senior credit facility and Fairchild Semiconductor Corporations 5% Convertible Senior Subordinated Notes. These guarantees are joint and several. Accordingly, presented below are condensed consolidating
balance sheets of Fairchild Semiconductor International, Inc. as of April 1, 2007 and December 31, 2006 and related condensed consolidating statements of operations for the three months ended April 1, 2007 and April 2, 2006 and
condensed consolidating statements of cash flows for the three months ended April 1, 2007 and April 2, 2006.



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)



|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|------------------------------------------------------------ |  | ------------------------------------------------------- | ------- | - | ----------------------------------------------- | - | ------- | --------------------- |  | - | ------------------------- | - |  | ------------ | ------- | - | ----------------------------------------------------- | - | -------- | - |  | - | ------- | -
|                                                             |  | April 1, 2007                                           |        
|                                                             |  | UnconsolidatedFairchildSemiconductorInternational, Inc. |         |   | UnconsolidatedFairchildSemiconductorCorporation |   |         | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Eliminations |         |   | ConsolidatedFairchildSemiconductorInternational, Inc. |  
|                                                             |  | (In millions)                                           |        
|ASSETS                                                       |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Current assets:                                              |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Cash and cash equivalents                                    |  | $                                                       |        |   |                                                 | $ | 81.2    |                       |  | $ |                          |   |  | $            | 234.4   |   |                                                       | $ |         |   |  | $ | 315.6   |  
|Short-term marketable securities                             |  |                                                         |        |   |                                                 |   | 109.5   |                       |  |   |                          |   |  |              | 1.7     |   |                                                       |   |         |   |  |   | 111.2   |  
|Accounts receivable, net                                     |  |                                                         |        |   |                                                 |   | 16.3    |                       |  |   |                          |   |  |              | 153.9   |   |                                                       |   |         |   |  |   | 170.2   |  
|Inventories                                                  |  |                                                         |        |   |                                                 |   | 44.6    |                       |  |   | 0.5                       |   |  |              | 196.3   |   |                                                       |   |         |   |  |   | 241.4   |  
|Deferred income taxes, net                                   |  |                                                         |        |   |                                                 |   |        |                       |  |   |                          |   |  |              | 11.6    |   |                                                       |   |         |   |  |   | 11.6    |  
|Other current assets                                         |  |                                                         |        |   |                                                 |   | 15.1    |                       |  |   |                          |   |  |              | 9.7     |   |                                                       |   |         |   |  |   | 24.8    |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Total current assets                                         |  |                                                         |        |   |                                                 |   | 266.7   |                       |  |   | 0.5                       |   |  |              | 607.6   |   |                                                       |   |         |   |  |   | 874.8   |  
|                                                             |  |                                                         |         |   |                                                 |  
|Property, plant and equipment, net                           |  |                                                         |        |   |                                                 |   | 259.5   |                       |  |   | 1.6                       |   |  |              | 380.7   |   |                                                       |   |         |   |  |   | 641.8   |  
|Deferred income taxes                                        |  |                                                         |        |   |                                                 |   | 3.9     |                       |  |   |                          |   |  |              | 2.1     |   |                                                       |   |         |   |  |   | 6.0     |  
|Intangible assets, net                                       |  |                                                         |        |   |                                                 |   | 24.1    |                       |  |   | 11.1                      |   |  |              | 103.9   |   |                                                       |   |         |   |  |   | 139.1   |  
|Goodwill                                                     |  |                                                         |        |   |                                                 |   | 167.7   |                       |  |   | 61.7                      |   |  |              | 116.3   |   |                                                       |   |         |   |  |   | 345.7   |  
|Long-term marketable securities                              |  |                                                         |        |   |                                                 |   | 2.0     |                       |  |   |                          |   |  |              |        |   |                                                       |   |         |   |  |   | 2.0     |  
|Investment in subsidiary                                     |  |                                                         | 1,154.9 |   |                                                 |   | 1,213.6 |                       |  |   | 441.2                     |   |  |              | 299.6   |   |                                                       |   | (3,109.3 | ) |  |   |        |  
|Other assets                                                 |  |                                                         |        |   |                                                 |   | 16.2    |                       |  |   | 1.9                       |   |  |              | 17.2    |   |                                                       |   |         |   |  |   | 35.3    |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Total assets                                                 |  | $                                                       | 1,154.9 |   |                                                 | $ | 1,953.7 |                       |  | $ | 518.0                     |   |  | $            | 1,527.4 |   |                                                       | $ | (3,109.3 | ) |  | $ | 2,044.7 |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|                                                             |  |                                                         |        
|LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS EQUITY       |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   | 
|Current liabilities:                                         |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Current portion of long-term debt                            |  | $                                                       |        |   |                                                 | $ | 3.8     |                       |  | $ |                          |   |  | $            |        |   |                                                       | $ |         |   |  | $ | 3.8     |  
|Accounts payable                                             |  |                                                         |        |   |                                                 |   | 32.6    |                       |  |   | 0.6                       |   |  |              | 75.0    |   |                                                       |   |         |   |  |   | 108.2   |  
|Accrued expenses and other current liabilities               |  |                                                         |        |   |                                                 |   | 58.0    |                       |  |   | 1.3                       |   |  |              | 60.4    |   |                                                       |   |         |   |  |   | 119.7   |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Total current liabilities                                    |  |                                                         |        |   |                                                 |   | 94.4    |                       |  |   | 1.9                       |   |  |              | 135.4   |   |                                                       |   |         |   |  |   | 231.7   |  
|                                                             |  |                                                         |         |   |                                                 |  
|Long-term debt, less current portion                         |  |                                                         |        |   |                                                 |   | 587.8   |                       |  |   |                          |   |  |              |        |   |                                                       |   |         |   |  |   | 587.8   |  
|Net intercompany (receivable) payable                        |  |                                                         |        |   |                                                 |   | 79.0    |                       |  |   | (237.3                    | ) |  |              | 158.3   |   |                                                       |   |         |   |  |   |        |  
|Deferred income taxes                                        |  |                                                         |        |   |                                                 |   | 27.0    |                       |  |   |                          |   |  |              | 8.0     |   |                                                       |   |         |   |  |   | 35.0    |  
|Other liabilities                                            |  |                                                         |        |   |                                                 |   | 11.0    |                       |  |   |                          |   |  |              | 25.1    |   |                                                       |   |         |   |  |   | 36.1    |  
|Minority interest                                            |  |                                                         |        |   |                                                 |   |        |                       |  |   |                          |   |  |              | 1.3     |   |                                                       |   |         |   |  |   | 1.3     |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Total liabilities                                            |  |                                                         |        |   |                                                 |   | 799.2   |                       |  |   | (235.4                    | ) |  |              | 328.1   |   |                                                       |   |         |   |  |   | 891.9   |  
|                                                             |  |                                                         |         |   |                                                 |  
|Commitments and contingencies                                |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Temporary equitydeferred stock units                        |  |                                                         | 2.7     |   |                                                 |   |        |                       |  |   |                          |   |  |              |        |   |                                                       |   |         |   |  |   | 2.7     |  
|Stockholders equity:                                        |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Common stock                                                 |  |                                                         | 1.2     |   |                                                 |   |        |                       |  |   |                          |   |  |              |        |   |                                                       |   |         |   |  |   | 1.2     |  
|Additional paid-in capital                                   |  |                                                         | 1,336.5 |   |                                                 |   |        |                       |  |   |                          |   |  |              |        |   |                                                       |   |         |   |  |   | 1,336.5 |  
|Retained earnings (accumulated deficit)                      |  |                                                         | (174.3  | ) |                                                 |   | 1,154.9 |                       |  |   | 753.4                     |   |  |              | 1,201.0 |   |                                                       |   | (3,109.3 | ) |  |   | (174.3  | )
|Accumulated other comprehensive loss                         |  |                                                         |        |   |                                                 |   | (0.4    | )                     |  |   |                          |   |  |              | (1.7    | ) |                                                       |   |         |   |  |   | (2.1    | )
|Less treasury stock (at cost)                                |  |                                                         | (11.2   | ) |                                                 |   |        |                       |  |   |                          |   |  |              |        |   |                                                       |   |         |   |  |   | (11.2   | )
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Total stockholders equity                                   |  |                                                         | 1,152.2 |   |                                                 |   | 1,154.5 |                       |  |   | 753.4                     |   |  |              | 1,199.3 |   |                                                       |   | (3,109.3 | ) |  |   | 1,150.1 |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  
|Total liabilities, temporary equity and stockholders equity |  | $                                                       | 1,154.9 |   |                                                 | $ | 1,953.7 |                       |  | $ | 518.0                     |   |  | $            | 1,527.4 |   |                                                       | $ | (3,109.3 | ) |  | $ | 2,044.7 |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |  |              |         |   |                                                       |   |          |   |  |   |         |  



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)



|                                                |                                                         |                                  |      |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |      
|----------------------------------------------- | ------------------------------------------------------- | -------------------------------- | ---- | ----------------------------------------------- |  | - | --------------------- | - |  | ------------------------- | ---- | - | ------------ | - | ----- | ----------------------------------------------------- |  | - | ------ | - |  | - | -----
|                                                |                                                         | Three Months Ended April 1, 2007
|                                                | UnconsolidatedFairchildSemiconductorInternational, Inc. |                                  |      | UnconsolidatedFairchildSemiconductorCorporation |  |   | GuarantorSubsidiaries |   |  | Non-GuarantorSubsidiaries |      |   | Eliminations |   |       | ConsolidatedFairchildSemiconductorInternational, Inc.
|                                                | (In millions)                                          
|Total revenue                                   |                                                         | $                                |     |                                                 |  | $ | 131.3                 |   |  | $                         | 0.4  |   |              | $ | 741.5 |                                                       |  | $ | (470.6 | ) |  | $ | 402.6
|Cost of sales                                   |                                                         |                                  |     |                                                 |  |   | 116.8                 |   |  |                           | 1.4  |   |              |   | 643.5 |                                                       |  |   | (470.6 | ) |  |   | 291.1
|                                                |                                                         |                                  |      |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |      
|Gross profit (loss)                             |                                                         |                                  |     |                                                 |  |   | 14.5                  |   |  |                           | (1.0 | ) |              |   | 98.0  |                                                       |  |   |       |   |  |   | 111.5
|                                                |                                                         |                                  |      |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |      
|                                                |                                                         |                                  |      |                                                 |  |  
|Operating expenses:                             |                                                         |                                  |      |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |      
|Research and development                        |                                                         |                                  |     |                                                 |  |   | 14.9                  |   |  |                           | 3.3  |   |              |   | 8.7   |                                                       |  |   |       |   |  |   | 26.9 
|Selling, general and administrative             |                                                         |                                  |     |                                                 |  |   | 35.2                  |   |  |                           | 1.4  |   |              |   | 20.6  |                                                       |  |   |       |   |  |   | 57.2 
|Amortization of acquisition-related intangibles |                                                         |                                  |     |                                                 |  |   | 1.4                   |   |  |                           | 0.5  |   |              |   | 4.9   |                                                       |  |   |       |   |  |   | 6.8  
|Restructuring and impairments                   |                                                         |                                  |     |                                                 |  |   | 0.6                   |   |  |                           |     |   |              |   |      |                                                       |  |   |       |   |  |   | 0.6  
|Purchased in-process research & development     |                                                         |                                  |     |                                                 |  |   |                      |   |  |                           |     |   |              |   | 3.7   |                                                       |  |   |       |   |  |   | 3.7  
|                                                |                                                         |                                  |      |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |      
|Total operating expenses                        |                                                         |                                  |     |                                                 |  |   | 52.1                  |   |  |                           | 5.2  |   |              |   | 37.9  |                                                       |  |   |       |   |  |   | 95.2 
|                                                |                                                         |                                  |      |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |      
|                                                |                                                         |                                  |      |                                                 |  |  
|Operating income (loss)                         |                                                         |                                  |     |                                                 |  |   | (37.6                 | ) |  |                           | (6.2 | ) |              |   | 60.1  |                                                       |  |   |       |   |  |   | 16.3 
|                                                |                                                         |                                  |      |                                                 |  |  
|Other (income) expense, net                     |                                                         |                                  |     |                                                 |  |   | 6.9                   |   |  |                           |     |   |              |   | (2.2  | )                                                     |  |   |       |   |  |   | 4.7  
|Equity in subsidiary (income) loss              |                                                         |                                  | (6.3 | )                                               |  |   | (53.2                 | ) |  |                           | 3.7  |   |              |   |      |                                                       |  |   | 55.8   |   |  |   |     
|                                                |                                                         |                                  |      |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |      
|                                                |                                                         |                                  |      |                                                 |  |  
|Income (loss) before income taxes               |                                                         |                                  | 6.3  |                                                 |  |   | 8.7                   |   |  |                           | (9.9 | ) |              |   | 62.3  |                                                       |  |   | (55.8  | ) |  |   | 11.6 
|                                                |                                                         |                                  |      |                                                 |  |  
|Provision for income taxes                      |                                                         |                                  |     |                                                 |  |   | 2.4                   |   |  |                           |     |   |              |   | 2.9   |                                                       |  |   |       |   |  |   | 5.3  
|                                                |                                                         |                                  |      |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |      
|                                                |                                                         |                                  |      |                                                 |  |  
|Net income (loss)                               |                                                         | $                                | 6.3  |                                                 |  | $ | 6.3                   |   |  | $                         | (9.9 | ) |              | $ | 59.4  |                                                       |  | $ | (55.8  | ) |  | $ | 6.3  
|                                                |                                                         |                                  |      |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |      



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)



|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|------------------------------------------------------------------------------ | ------------------------------------------------------- | -------------------------------- | ---- | ----------------------------------------------- |  | - | --------------------- | - | ------------------------- | - | - | ----------------------------------------------------- | - | ----- | - |  | - | ------ | -
|                                                                               |                                                         | Three Months Ended April 1, 2007 |     
|                                                                               | UnconsolidatedFairchildSemiconductorInternational, Inc. |                                  |      | UnconsolidatedFairchildSemiconductorCorporation |  |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |   |   | ConsolidatedFairchildSemiconductorInternational, Inc. |  
|                                                                               | (In millions)                                           |                                 
|Cash flows provided by (used in) operating activities:                         |                                                         | $                                |     |                                                 |  | $ | (58.8                 | ) |                           | $ |  |                                                       | $ | 82.8  |   |  | $ | 24.0   |  
|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|                                                                               |                                                         |                                  |      |                                                 | 
|Investing activities:                                                          |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|Purchase of marketable securities                                              |                                                         |                                  |     |                                                 |  |   | (75.4                 | ) |                           |   |  |                                                       |   | (3.7  | ) |  |   | (79.1  | )
|Sale of marketable securities                                                  |                                                         |                                  |     |                                                 |  |   | 25.0                  |   |                           |   |  |                                                       |   | 3.2   |   |  |   | 28.2   |  
|Maturity of marketable securities                                              |                                                         |                                  |     |                                                 |  |   | 0.1                   |   |                           |   |  |                                                       |   |      |   |  |   | 0.1    |  
|Capital expenditures                                                           |                                                         |                                  |     |                                                 |  |   | (6.4                  | ) |                           |   |  |                                                       |   | (10.3 | ) |  |   | (16.7  | )
|Purchase of molds and tooling                                                  |                                                         |                                  |     |                                                 |  |   |                      |   |                           |   |  |                                                       |   | (0.5  | ) |  |   | (0.5   | )
|Acquisitions and divestitures, net of cash                                     |                                                         |                                  |     |                                                 |  |   | (171.8                | ) |                           |   |  |                                                       |   |      |   |  |   | (171.8 | )
|Investment (in) from affiliate                                                 |                                                         |                                  | (7.1 | )                                               |  |   | 7.1                   |   |                           |   |  |                                                       |   |      |   |  |   |       |  
|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|Cash used in investing activities                                              |                                                         |                                  | (7.1 | )                                               |  |   | (221.4                | ) |                           |   |  |                                                       |   | (11.3 | ) |  |   | (239.8 | )
|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|                                                                               |                                                         |                                  |      |                                                 | 
|Financing activities:                                                          |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|Repayment of long-term debt                                                    |                                                         |                                  |     |                                                 |  |   | (0.9                  | ) |                           |   |  |                                                       |   |      |   |  |   | (0.9   | )
|Proceeds from issuance of common stock and from exercise of stock options, net |                                                         |                                  | 13.6 |                                                 |  |   |                      |   |                           |   |  |                                                       |   |      |   |  |   | 13.6   |  
|Purchase of treasury stock                                                     |                                                         |                                  | (6.5 | )                                               |  |   |                      |   |                           |   |  |                                                       |   |      |   |  |   | (6.5   | )
|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|Cash provided by (used in) financing activities                                |                                                         |                                  | 7.1  |                                                 |  |   | (0.9                  | ) |                           |   |  |                                                       |   |      |   |  |   | 6.2    |  
|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|Net change in cash and cash equivalents                                        |                                                         |                                  |     |                                                 |  |   | (281.1                | ) |                           |   |  |                                                       |   | 71.5  |   |  |   | (209.6 | )
|Cash and cash equivalents at beginning of period                               |                                                         |                                  |     |                                                 |  |   | 362.3                 |   |                           |   |  |                                                       |   | 162.9 |   |  |   | 525.2  |  
|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|Cash and cash equivalents at end of period                                     |                                                         | $                                |     |                                                 |  | $ | 81.2                  |   |                           | $ |  |                                                       | $ | 234.4 |   |  | $ | 315.6  |  
|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|                                                                               |                                                         |                                  |      |                                                 | 
|Supplemental Cash Flow Information:                                            |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|Cash paid during the period for:                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|Income taxes                                                                   |                                                         | $                                |     |                                                 |  | $ | 0.1                   |   |                           | $ |  |                                                       | $ | 6.5   |   |  | $ | 6.6    |  
|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  
|Interest                                                                       |                                                         | $                                |     |                                                 |  | $ | 6.8                   |   |                           | $ |  |                                                       | $ |      |   |  | $ | 6.8    |  
|                                                                               |                                                         |                                  |      |                                                 |  |   |                       |   |                           |   |   |                                                       |   |       |   |  |   |        |  



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET



|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|------------------------------------------------------------ |  | ------------------------------------------------------- | ------- | - | ----------------------------------------------- | - | ------- | --------------------- |  | - | ------------------------- | - | ------------ | - | ------- | ----------------------------------------------------- | - | -------- | - |  | - | ------- | -
|                                                             |  | December 31, 2006                                       |        
|                                                             |  | UnconsolidatedFairchildSemiconductorInternational, Inc. |         |   | UnconsolidatedFairchildSemiconductorCorporation |   |         | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   | Eliminations |   |         | ConsolidatedFairchildSemiconductorInternational, Inc. |  
|                                                             |  | (In millions)                                           |        
|ASSETS                                                       |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Current assets:                                              |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Cash and cash equivalents                                    |  | $                                                       |        |   |                                                 | $ | 362.3   |                       |  | $ |                          |   |              | $ | 162.9   |                                                       | $ |         |   |  | $ | 525.2   |  
|Short-term marketable securities                             |  |                                                         |        |   |                                                 |   | 59.1    |                       |  |   |                          |   |              |   |        |                                                       |   |         |   |  |   | 59.1    |  
|Accounts receivable, net                                     |  |                                                         |        |   |                                                 |   | 18.3    |                       |  |   | (0.1                      | ) |              |   | 145.1   |                                                       |   |         |   |  |   | 163.3   |  
|Inventories                                                  |  |                                                         |        |   |                                                 |   | 43.7    |                       |  |   | 0.5                       |   |              |   | 194.7   |                                                       |   |         |   |  |   | 238.9   |  
|Deferred income taxes, net                                   |  |                                                         |        |   |                                                 |   |        |                       |  |   |                          |   |              |   | 11.5    |                                                       |   |         |   |  |   | 11.5    |  
|Other current assets                                         |  |                                                         |        |   |                                                 |   | 18.1    |                       |  |   |                          |   |              |   | 12.4    |                                                       |   |         |   |  |   | 30.5    |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Total current assets                                         |  |                                                         |        |   |                                                 |   | 501.5   |                       |  |   | 0.4                       |   |              |   | 526.6   |                                                       |   |         |   |  |   | 1,028.5 |  
|                                                             |  |                                                         |         |   |                                                 |  
|Property, plant and equipment, net                           |  |                                                         |        |   |                                                 |   | 264.4   |                       |  |   | 1.6                       |   |              |   | 380.4   |                                                       |   |         |   |  |   | 646.4   |  
|Deferred income taxes                                        |  |                                                         |        |   |                                                 |   |        |                       |  |   |                          |   |              |   | 0.9     |                                                       |   |         |   |  |   | 0.9     |  
|Intangible assets, net                                       |  |                                                         |        |   |                                                 |   | 25.6    |                       |  |   | 11.7                      |   |              |   | 66.3    |                                                       |   |         |   |  |   | 103.6   |  
|Goodwill                                                     |  |                                                         |        |   |                                                 |   | 167.7   |                       |  |   | 61.8                      |   |              |   | 0.4     |                                                       |   |         |   |  |   | 229.9   |  
|Long-term marketable securities                              |  |                                                         |        |   |                                                 |   | 2.1     |                       |  |   |                          |   |              |   |        |                                                       |   |         |   |  |   | 2.1     |  
|Investment in subsidiary                                     |  |                                                         | 1,133.4 |   |                                                 |   | 985.3   |                       |  |   | 250.2                     |   |              |   | 259.6   |                                                       |   | (2,628.5 | ) |  |   |        |  
|Other assets                                                 |  |                                                         |        |   |                                                 |   | 14.8    |                       |  |   | 2.0                       |   |              |   | 17.4    |                                                       |   |         |   |  | $ | 34.2    |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Total assets                                                 |  | $                                                       | 1,133.4 |   |                                                 | $ | 1,961.4 |                       |  | $ | 327.7                     |   |              | $ | 1,251.6 |                                                       | $ | (2,628.5 | ) |  | $ | 2,045.6 |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|                                                             |  |                                                         |        
|LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS EQUITY       |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |  
|Current liabilities:                                         |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Current portion of long-term debt                            |  | $                                                       |        |   |                                                 | $ | 2.8     |                       |  | $ |                          |   |              | $ |        |                                                       | $ |         |   |  | $ | 2.8     |  
|Accounts payable                                             |  |                                                         |        |   |                                                 |   | 25.1    |                       |  |   | 0.6                       |   |              |   | 64.5    |                                                       |   |         |   |  |   | 90.2    |  
|Accrued expenses and other current liabilities               |  |                                                         |        |   |                                                 |   | 95.8    |                       |  |   | 4.2                       |   |              |   | 69.5    |                                                       |   |         |   |  |   | 169.5   |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Total current liabilities                                    |  |                                                         |        |   |                                                 |   | 123.7   |                       |  |   | 4.8                       |   |              |   | 134.0   |                                                       |   |         |   |  |   | 262.5   |  
|                                                             |  |                                                         |         |   |                                                 |  
|Long-term debt, less current portion                         |  |                                                         |        |   |                                                 |   | 589.7   |                       |  |   |                          |   |              |   |        |                                                       |   |         |   |  |   | 589.7   |  
|Net intercompany (receivable) payable                        |  |                                                         |        |   |                                                 |   | 88.1    |                       |  |   | (245.8                    | ) |              |   | 157.7   |                                                       |   |         |   |  |   |        |  
|Deferred income taxes                                        |  |                                                         |        |   |                                                 |   | 26.1    |                       |  |   |                          |   |              |   | 8.9     |                                                       |   |         |   |  |   | 35.0    |  
|Other liabilities                                            |  |                                                         |        |   |                                                 |   | 0.5     |                       |  |   |                          |   |              |   | 23.5    |                                                       |   |         |   |  |   | 24.0    |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Total liabilities                                            |  |                                                         |        |   |                                                 |   | 828.1   |                       |  |   | (241.0                    | ) |              |   | 324.1   |                                                       |   |         |   |  |   | 911.2   |  
|                                                             |  |                                                         |         |   |                                                 |  
|Commitments and contingencies                                |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Temporary equitydeferred stock units                        |  |                                                         | 2.2     |   |                                                 |   |        |                       |  |   |                          |   |              |   |        |                                                       |   |         |   |  |   | 2.2     |  
|Stockholders equity:                                        |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Common stock                                                 |  |                                                         | 1.2     |   |                                                 |   |        |                       |  |   |                          |   |              |   |        |                                                       |   |         |   |  |   | 1.2     |  
|Additional paid-in capital                                   |  |                                                         | 1,319.1 |   |                                                 |   |        |                       |  |   |                          |   |              |   |        |                                                       |   |         |   |  |   | 1,319.1 |  
|Retained earnings (accumulated deficit)                      |  |                                                         | (182.5  | ) |                                                 |   | 1,133.4 |                       |  |   | 568.7                     |   |              |   | 926.4   |                                                       |   | (2,628.5 | ) |  |   | (182.5  | )
|Accumulated other comprehensive income (loss)                |  |                                                         |        |   |                                                 |   | (0.1    | )                     |  |   |                          |   |              |   | 1.1     |                                                       |   |         |   |  |   | 1.0     |  
|Less treasury stock (at cost)                                |  |                                                         | (6.6    | ) |                                                 |   |        |                       |  |   |                          |   |              |   |        |                                                       |   |         |   |  |   | (6.6    | )
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Total stockholders equity                                   |  |                                                         | 1,131.2 |   |                                                 |   | 1,133.3 |                       |  |   | 568.7                     |   |              |   | 927.5   |                                                       |   | (2,628.5 | ) |  |   | 1,132.2 |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  
|Total liabilities, temporary equity and stockholders equity |  | $                                                       | 1,133.4 |   |                                                 | $ | 1,961.4 |                       |  | $ | 327.7                     |   |              | $ | 1,251.6 |                                                       | $ | (2,628.5 | ) |  | $ | 2,045.6 |  
|                                                             |  |                                                         |         |   |                                                 |   |         |                       |  |   |                           |   |              |   |         |                                                       |   |          |   |  |   |         |  



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)



|                                                |                                                         |                                  |       |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |       |  
|----------------------------------------------- | ------------------------------------------------------- | -------------------------------- | ----- | ----------------------------------------------- |  | - | --------------------- | - |  | ------------------------- | ---- | - | ------------ | - | ----- | ----------------------------------------------------- |  | - | ------ | - |  | - | ----- | -
|                                                |                                                         | Three Months Ended April 2, 2006 |      
|                                                | UnconsolidatedFairchildSemiconductorInternational, Inc. |                                  |       | UnconsolidatedFairchildSemiconductorCorporation |  |   | GuarantorSubsidiaries |   |  | Non-GuarantorSubsidiaries |      |   | Eliminations |   |       | ConsolidatedFairchildSemiconductorInternational, Inc. | 
|                                                | (In millions)                                           |                                 
|Total revenue                                   |                                                         | $                                |      |                                                 |  | $ | 377.1                 |   |  | $                         | 1.0  |   |              | $ | 500.0 |                                                       |  | $ | (468.6 | ) |  | $ | 409.5 |  
|Cost of sales                                   |                                                         |                                  |      |                                                 |  |   | 337.4                 |   |  |                           | 0.8  |   |              |   | 417.4 |                                                       |  |   | (468.6 | ) |  |   | 287.0 |  
|                                                |                                                         |                                  |       |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |       |  
|Gross profit                                    |                                                         |                                  |      |                                                 |  |   | 39.7                  |   |  |                           | 0.2  |   |              |   | 82.6  |                                                       |  |   |       |   |  |   | 122.5 |  
|                                                |                                                         |                                  |       |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |       |  
|                                                |                                                         |                                  |       |                                                 |  |  
|Operating expenses:                             |                                                         |                                  |       |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |       |  
|Research and development                        |                                                         |                                  |      |                                                 |  |   | 15.4                  |   |  |                           | 3.6  |   |              |   | 7.2   |                                                       |  |   |       |   |  |   | 26.2  |  
|Selling, general and administrative             |                                                         |                                  |      |                                                 |  |   | 39.2                  |   |  |                           | 1.8  |   |              |   | 19.0  |                                                       |  |   |       |   |  |   | 60.0  |  
|Amortization of acquisition-related intangibles |                                                         |                                  |      |                                                 |  |   | 1.3                   |   |  |                           | 0.6  |   |              |   | 4.0   |                                                       |  |   |       |   |  |   | 5.9   |  
|Gain on sale of product line, net               |                                                         |                                  |      |                                                 |  |   |                      |   |  |                           | (3.0 | ) |              |   | (0.2  | )                                                     |  |   |       |   |  |   | (3.2  | )
|                                                |                                                         |                                  |       |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |       |  
|Total operating expenses                        |                                                         |                                  |      |                                                 |  |   | 55.9                  |   |  |                           | 3.0  |   |              |   | 30.0  |                                                       |  |   |       |   |  |   | 88.9  |  
|                                                |                                                         |                                  |       |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |       |  
|                                                |                                                         |                                  |       |                                                 |  |  
|Operating income (loss)                         |                                                         |                                  |      |                                                 |  |   | (16.2                 | ) |  |                           | (2.8 | ) |              |   | 52.6  |                                                       |  |   |       |   |  |   | 33.6  |  
|                                                |                                                         |                                  |       |                                                 |  |  
|Other (income) expense, net                     |                                                         |                                  |      |                                                 |  |   | 7.8                   |   |  |                           |     |   |              |   | (1.9  | )                                                     |  |   |       |   |  |   | 5.9   |  
|Equity in subsidiary income                     |                                                         |                                  | (26.6 | )                                               |  |   | (46.2                 | ) |  |                           | (3.4 | ) |              |   |      |                                                       |  |   | 76.2   |   |  |   |      |  
|                                                |                                                         |                                  |       |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |       |  
|                                                |                                                         |                                  |       |                                                 |  |  
|Income before income taxes                      |                                                         |                                  | 26.6  |                                                 |  |   | 22.2                  |   |  |                           | 0.6  |   |              |   | 54.5  |                                                       |  |   | (76.2  | ) |  |   | 27.7  |  
|                                                |                                                         |                                  |       |                                                 |  |  
|Provision (benefit) for income taxes            |                                                         |                                  |      |                                                 |  |   | (4.4                  | ) |  |                           |     |   |              |   | 5.5   |                                                       |  |   |       |   |  |   | 1.1   |  
|                                                |                                                         |                                  |       |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |       |  
|                                                |                                                         |                                  |       |                                                 |  |  
|Net income                                      |                                                         | $                                | 26.6  |                                                 |  | $ | 26.6                  |   |  | $                         | 0.6  |   |              | $ | 49.0  |                                                       |  | $ | (76.2  | ) |  | $ | 26.6  |  
|                                                |                                                         |                                  |       |                                                 |  |   |                       |   |  |                           |      |   |              |   |       |                                                       |  |   |        |   |  |   |       |  



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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)



|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|------------------------------------------------------------------------------ |  | ------------------------------------------------------- | ---- | - | ----------------------------------------------- | - | ----- | --------------------- |  | ------------------------- | - |  | ----------------------------------------------------- | ----- | - |  | - | ----- | -
|                                                                               |  | Three Months Ended April 2, 2006                        |     
|                                                                               |  | UnconsolidatedFairchildSemiconductorInternational, Inc. |      |   | UnconsolidatedFairchildSemiconductorCorporation |   |       | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |   |  | ConsolidatedFairchildSemiconductorInternational, Inc. |      
|                                                                               |  | (In millions)                                           |     
|Cash flows provided by (used in) operating activities:                         |  | $                                                       |     |   |                                                 | $ | (31.6 | )                     |  | $                         |  |  | $                                                     | 34.6  |   |  | $ | 3.0   |  
|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|                                                                               |  |                                                         |      |   |                                                
|Investing activities:                                                          |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|Purchase of marketable securities                                              |  |                                                         |     |   |                                                 |   | (61.9 | )                     |  |                           |  |  |                                                       |      |   |  |   | (61.9 | )
|Sale of marketable securities                                                  |  |                                                         |     |   |                                                 |   | 67.8  |                       |  |                           |  |  |                                                       |      |   |  |   | 67.8  |  
|Maturity of marketable securities                                              |  |                                                         |     |   |                                                 |   | 9.1   |                       |  |                           |  |  |                                                       |      |   |  |   | 9.1   |  
|Capital expenditures                                                           |  |                                                         |     |   |                                                 |   | (7.5  | )                     |  |                           |  |  |                                                       | (15.5 | ) |  |   | (23.0 | )
|Purchase of molds and tooling                                                  |  |                                                         |     |   |                                                 |   |      |                       |  |                           |  |  |                                                       | (0.5  | ) |  |   | (0.5  | )
|Net proceeds from sale of product line                                         |  |                                                         |     |   |                                                 |   | 6.6   |                       |  |                           |  |  |                                                       |      |   |  |   | 6.6   |  
|Investment (in) from affiliate                                                 |  |                                                         | (6.0 | ) |                                                 |   | 6.0   |                       |  |                           |  |  |                                                       |      |   |  |   |      |  
|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|Cash provided by (used in) investing activities                                |  |                                                         | (6.0 | ) |                                                 |   | 20.1  |                       |  |                           |  |  |                                                       | (16.0 | ) |  |   | (1.9  | )
|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|                                                                               |  |                                                         |      |   |                                                
|Financing activities:                                                          |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|Repayment of long-term debt                                                    |  |                                                         |     |   |                                                 |   | (2.2  | )                     |  |                           |  |  |                                                       |      |   |  |   | (2.2  | )
|Proceeds from issuance of common stock and from exercise of stock options, net |  |                                                         | 8.0  |   |                                                 |   |      |                       |  |                           |  |  |                                                       |      |   |  |   | 8.0   |  
|Purchase of treasury stock                                                     |  |                                                         | (2.0 | ) |                                                 |   |      |                       |  |                           |  |  |                                                       |      |   |  |   | (2.0  | )
|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|Cash provided by (used in) financing activities                                |  |                                                         | 6.0  |   |                                                 |   | (2.2  | )                     |  |                           |  |  |                                                       |      |   |  |   | 3.8   |  
|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|Net change in cash and cash equivalents                                        |  |                                                         |     |   |                                                 |   | (13.7 | )                     |  |                           |  |  |                                                       | 18.6  |   |  |   | 4.9   |  
|Cash and cash equivalents at beginning of period                               |  |                                                         |     |   |                                                 |   | 180.9 |                       |  |                           |  |  |                                                       | 149.8 |   |  |   | 330.7 |  
|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|Cash and cash equivalents at end of period                                     |  | $                                                       |     |   |                                                 | $ | 167.2 |                       |  | $                         |  |  | $                                                     | 168.4 |   |  | $ | 335.6 |  
|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|                                                                               |  |                                                         |      |   |                                                
|Supplemental Cash Flow Information:                                            |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|Cash paid during the period for:                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|Income taxes                                                                   |  | $                                                       |     |   |                                                 | $ | 12.3  |                       |  | $                         |  |  | $                                                     | 2.9   |   |  | $ | 15.2  |  
|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  
|Interest                                                                       |  | $                                                       |     |   |                                                 | $ | 13.4  |                       |  | $                         |  |  | $                                                     |      |   |  | $ | 13.4  |  
|                                                                               |  |                                                         |      |   |                                                 |   |       |                       |  |                           |   |  |                                                       |       |   |  |   |       |  



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Except as otherwise indicated in this Quarterly Report on Form 10-Q, the terms we, our, the company, Fairchild and Fairchild International refer to Fairchild
Semiconductor International, Inc. and its consolidated subsidiaries, including Fairchild Semiconductor Corporation, our principal operating subsidiary. We refer to individual corporations where appropriate.

Overview

Our primary business goal for 2007 is to focus on new
product development. The development of new products will increase our mix of more proprietary, higher margin products as we continue to discontinue outdated, lower margin products. We anticipate annual capital expenditures to be at the high end of
our stated range of 6-8% of sales as we focus on opportunities to increase capacity at our factories. When opportunity for rapid payback exists, we may exceed the high end of this range. Lastly, we continue to tightly control our production output
to match end market demand through tight control of our inventory. This includes keeping our distribution inventory on hand at 11 weeks, plus or minus a week and managing to the higher end of our target range during a down cycle and the lower end of
the target range during an up cycle. At the end of the first quarter and end of 2006, distribution inventory on hand was at slightly less than 12 weeks. We also continue to manage our internal inventories, with a target range of 10 weeks of internal
inventory, plus or minus a week. Our internal inventory was within the target range at just under 11 weeks at the end of the first quarter of 2007.

The
Analog Products Group strategy is to develop leading edge products that provide performance and cost advantages to our customers. As part of this strategy, we have accelerated investments in research and development for continued development of
advanced process and package technology. We provide differentiated products with clear performance advantages by working closely with our customers to understand their system needs and delivering products on time with stable lead times. We believe
our R&D investments in Analog Products will generate sales growth opportunities in the future. In addition, during the first quarter of 2007, we acquired 95.6% of the controlling interest of System General. We believe the integration of System
General will contribute to sales and gross margins increases across our entire power conversion business.

The Functional Power Group continues to develop
leading edge MOFSET silicon technology, state of the art packaging technologies and integrated custom power system solutions. By integrating our technology, expertise and packaging technologies into a complete solution for our customers, we expect
to steadily improve gross margins and at the same time, the value proposition to our customers. In our Low Voltage product line, we are able to deliver exceptional product performance by optimizing silicon processes to satisfy specific application
requirements for our customers. This typically enables us to deliver solutions with greater energy efficiency and smaller form factors than is commonly available. Our High Voltage solutions are designed to provide improved energy efficiency in
consumer, industrial, and automotive applications. We produce a wide range of Smart Power Modules that enable the transition from single speed AC motors to variable speed AC and DC motors which are as much as 60% more energy efficient. We believe
the growing focus on energy efficiency around the world will continue to drive strong growth in this product line.

The Standard Products Group continues
to follow our asset-light investment strategy for many of our standard products, which typically have lower gross margins and lower or negative long-term sales growth potential. Through this strategy we are gradually transferring the
manufacturing for these mature products to third-party subcontractors, where appropriate, thereby allowing our own manufacturing facilities to focus on building higher growth, higher margin and more proprietary products. This business also improves
return on invested capital by minimizing the operating expenses required to support the business. We believe that by following this long term asset-light approach for mature products, we will improve our return on invested capital and
lessen our exposure to falling prices on commodity products during industry downturns.



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##### Table of Contents

The first quarter of 2007 consists of 13 weeks compared to 14 weeks for the first quarter of 2006.

Results of Operations

The following table summarizes certain
information relating to our operating results as derived from our unaudited consolidated financial statements.



|                                                |                       |                    |       |               |       |   |  |   |       |   |  |       |  
|----------------------------------------------- | --------------------- | ------------------ | ----- | ------------- | ----- | - |  | - | ----- | - |  | ----- | -
|                                                |                       | Three Months Ended |      
|                                                | April 1, 2007         |                    |       | April 2, 2006 |      
|                                                | (Dollars in millions) |                   
|Total revenues                                  |                       | $                  | 402.6 |               | 100.0 | % |  | $ | 409.5 |   |  | 100.0 | %
|Gross profit                                    |                       |                    | 111.5 |               | 27.7  | % |  |   | 122.5 |   |  | 29.9  | %
|                                                |                       |                    |       |              
|Operating expenses:                             |                       |                    |       |               |       |   |  |   |       |   |  |       |  
|Research and development                        |                       |                    | 26.9  |               | 6.7   | % |  |   | 26.2  |   |  | 6.4   | %
|Selling, general and administrative             |                       |                    | 57.2  |               | 14.2  | % |  |   | 60.0  |   |  | 14.7  | %
|Amortization of acquisition-related intangibles |                       |                    | 6.8   |               | 1.7   | % |  |   | 5.9   |   |  | 1.4   | %
|Restructuring and impairments                   |                       |                    | 0.6   |               | 0.1   | % |  |   |      |   |  | 0.0   | %
|Gain on sale of product line, net               |                       |                    |      |               | 0.0   | % |  |   | (3.2  | ) |  | -0.8  | %
|Purchased in-process research and development   |                       |                    | 3.7   |               | 0.9   | % |  |   |      |   |  | 0.0   | %
|                                                |                       |                    |       |               |       |   |  |   |       |   |  |       |  
|Total operating expenses                        |                       |                    | 95.2  |               | 23.6  | % |  |   | 88.9  |   |  | 21.7  | %
|                                                |                       |                    |       |              
|Operating income                                |                       |                    | 16.3  |               | 4.0   | % |  |   | 33.6  |   |  | 8.2   | %
|                                                |                       |                    |       |              
|Other expense, net                              |                       |                    | 4.7   |               | 1.2   | % |  |   | 5.9   |   |  | 1.4   | %
|                                                |                       |                    |       |               |       |   |  |   |       |   |  |       |  
|Income before income taxes                      |                       |                    | 11.6  |               | 2.9   | % |  |   | 27.7  |   |  | 6.8   | %
|                                                |                       |                    |       |              
|Provision for income taxes                      |                       |                    | 5.3   |               | 1.3   | % |  |   | 1.1   |   |  | 0.3   | %
|                                                |                       |                    |       |               |       |   |  |   |       |   |  |       |  
|Net income                                      |                       | $                  | 6.3   |               | 1.6   | % |  | $ | 26.6  |   |  | 6.5   | %
|                                                |                       |                    |       |               |       |   |  |   |       |   |  |       |  

Total Revenues.Total revenues for the first three months of 2007 decreased $6.9 million, or
2%, as compared to the same period in 2006. The first quarter of 2007 includes $5.1 million of revenue from our acquisition of System General (see Item 1, Note 13 for additional information). In addition, our results for the first quarter of
2007 consist of 13 weeks as compared to 14 weeks in the same period in 2006. Revenues in the first quarter of 2007 were negatively impacted by reduced demand from both distributors and OEM customers as they rebalanced their inventory levels.

Geographic revenue information is based on the customer location within the indicated geographic region. The following table presents, as a percentage of
sales, geographic sales for the United States, Other Americas, Europe, China, Taiwan, Korea and Other Asia/Pacific (which for our geographic reporting purposes includes Japan and Singapore and excludes Korea) for the three months ended April 1,
2007.



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|                   |  |                    |   |  |              |  
|------------------ |  | ------------------ | - |  | ------------ | -
|                   |  | Three Months Ended |  
|                   |  | April 1,2007       |   |  | April 2,2006 |  
|United States      |  | 9                  | % |  | 10           | %
|Other Americas     |  | 3                  |   |  | 3            |  
|Europe             |  | 14                 |   |  | 12           |  
|China              |  | 27                 |   |  | 24           |  
|Taiwan             |  | 20                 |   |  | 21           |  
|Korea              |  | 13                 |   |  | 15           |  
|Other Asia/Pacific |  | 14                 |   |  | 15           |  
|                   |  |                    |   |  |              |  
|Total              |  | 100                | % |  | 100          | %
|                   |  |                    |   |  |              |  

Gross Profit.The decrease in gross profit for the first quarter of 2007, as compared to 2006, was
primarily due to decreases in factory utilization as we tightly controlled our production output to match a slower than first quarter 2006 end market demand. The gross profit decline was partially offset by reduced variable compensation accruals of
approximately $4.0 million. Included in gross profit in the first quarter of 2007 is a purchase accounting charge of $2.1 million related to the incremental expense for the recognition of the step-up of inventory to fair value at the acquisition
date (see Item 1, Note 13 for additional information).

Operating Expenses. Research and development (R&D) expenses were roughly
flat as a percentage of sales for the first quarter of 2007, as compared to 2006. Increases in R&D spending, which is in alignment with our strategic decision to increase new product development in 2007, was offset by a decrease in variable
compensation accruals of approximately $2.0 million. Selling, general and administrative (SG&A) expenses were also roughly flat as a percentage of sales for the first quarter of 2007, as compared to 2006, primarily as a result of tighter
spending controls and decreased variable compensation accruals of approximately $2.8 million.

The increase in amortization of acquisition-related
intangibles was due to a partial quarter of expense related to intangible assets acquired from System General in the first quarter of 2007 (see Item 1, Note 6 and Note 13 for additional information). We expect the full quarter impact on
amortization expense from the System General acquisition to be approximately $1.4 million in future quarters.

Gain on sale of product line, net. In
2006, we announced the sale of the light-emitting diode (LED) lamps and displays product line to Everlight International Corporation, a U.S. subsidiary of Everlight Electronics Company Ltd., of Taiwan, as the LED lamps and displays product line did
not fit our strategic direction. As a result of the sale, we recorded a net gain of $3.2 million in the first quarter of 2006.

Restructuring and
Impairments.In order to better align our cost structure with our revenues, we continually consider the rationalization of both our manufacturing operations and our workforce levels. In the first quarter of 2007, we recorded restructuring
charges of $0.6 million related to our 2006 Infrastructure Realignment Program.

There were no restructuring and impairment charges recorded during the
first quarter of 2006.

The 2006 Infrastructure Realignment Program is expected to be substantially complete by the second quarter of 2007 and
impacts approximately 33 non-manufacturing personnel. We anticipate annual cost savings associated with the employee separation of approximately $3.4 million beginning in the third quarter of 2007. In addition, we expect annualized cost savings of
$0.3 million associated with depreciation savings related to the asset impairment charge.

Purchased In-Process Research and Development (IPR&D).In the first quarter of 2007, we recorded $3.7 million of IPR&D as a result of the acquisition of System General (see Item 1, Note 13 for additional information).

Other Expense, net.

The following table presents a summary of Other expense, net for the three months ended
April 1, 2007 and April 2, 2006.



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|                   |               |                    |      |              |  |   |      |  
|------------------ | ------------- | ------------------ | ---- | ------------ |  | - | ---- | -
|                   |               | Three Months Ended |     
|                   | April 1,2007  |                    |      | April 2,2006 | 
|                   | (In millions) |                   
|Interest expense   |               | $                  | 9.7  |              |  | $ | 11.3 |  
|Interest income    |               |                    | (5.1 | )            |  |   | (5.4 | )
|Other expense, net |               |                    | 0.1  |              |  |   |     |  
|                   |               |                    |      |              |  |   |      |  
|Other expense, net |               | $                  | 4.7  |              |  | $ | 5.9  |  
|                   |               |                    |      |              |  |   |      |  

Interest expense.Interest expense in the first quarter of 2007 decreased $1.6 million as
compared to 2006, due to the refinancing of our variable rate term loan in the second quarter of 2006 and lower term loan balances. In addition, there was an extra week of interest expense in the first quarter of 2006.

Interest income.Interest income in the first quarter of 2007 decreased $0.3 million as compared to 2006 due to a lower level of invested cash
balances, despite improved rates of return earned on cash and short-term marketable securities. In addition, there was an extra week of interest income in the first quarter of 2006.

Income Taxes.The effective tax rate for the first quarter of 2007 was 45.7%, compared to 3.8% for the first quarter of 2006. The effective tax rate for 2007 includes an underlying effective tax rate of
25.3%. Impacting this underlying effective tax rate are discrete tax benefits associated with future foreign tax rate increases impacting current deferred tax assets and benefits as a result of our recent System General acquisition, offset by tax
expense as a result of increasing estimates on finalization of tax filings and audit outcomes, foreign tax rate increases that were effective at the beginning of 2007 and certain deferred tax liabilities that were not in the first quarter of 2006.
The effective tax rate for 2006 includes an underlying effective tax rate of 16.6% coupled with discrete tax benefits as a result of finalization of certain tax filings and audit outcomes.

Changes in the location of taxable income and losses could result in significant changes in the underlying effective tax rate.

In the future, we plan to repatriate certain non-U.S. earnings, which have been taxed in the U.S. but earned offshore. The repatriation will not result in additional
U.S. taxes. Deferred taxes are not provided for the remaining undistributed earnings of our foreign subsidiaries that are considered to be indefinitely reinvested outside of the U.S. in accordance with APB Opinion 23, Accounting of Income Taxes
 Special Areas. As a result of the acquisition of System General, we are evaluating our current repatriation approach. System General maintains operations in Taiwan, and local laws incent companies to declare and distribute annual
dividends. We are analyzing these rules and the potential financial impact if future earnings were paid as dividends.

Reportable Segments.

Beginning in the first quarter of 2007, we transferred responsibility for our bipolar transistors product line from the Functional Power Group
(FPG) to the Standard Products Group (SPG). Management believes that the opportunities and challenges facing this business are better suited to the management focus and capabilities of the SPG management team. The financial performance of FPG and
SPG has been restated in 2006 to reflect this change.

The following table presents comparative disclosures of revenue and gross profit of our reportable
segments.



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##### Table of Contents

|                  |  |                       |       |            |               |   |               |      |   |                        |   |       |         |  |            |       |  |               |   |  |                        |   |  |   |      |  
|----------------- |  | --------------------- | ----- | ---------- | ------------- | - | ------------- | ---- | - | ---------------------- | - | ----- | ------- |  | ---------- | ----- |  | ------------- | - |  | ---------------------- | - |  | - | ---- | -
|                  |  | Three Months Ended    |      
|                  |  | April 1, 2007         |       |            | April 2, 2006 |  
|                  |  | Revenue               |       | % of total |               |   | GrossProfit % |      |   | OperatingIncome (loss) |   |       | Revenue |  | % of total |       |  | GrossProfit % |   |  | OperatingIncome (loss) |  
|                  |  | (Dollars in millions) |      
|Functional Power  |  | $                     | 227.0 |            | 56.4          | % |               | 31.6 | % |                        | $ | 29.8  |         |  | $          | 222.8 |  | 54.4          | % |  | 31.2                   | % |  | $ | 27.7 |  
|Analog Products   |  |                       | 79.9  |            | 19.8          | % |               | 28.3 | % |                        |   | (13.3 | )       |  |            | 81.7  |  | 20.0          | % |  | 40.1                   | % |  |   | 3.2  |  
|Standard Products |  |                       | 95.7  |            | 23.8          | % |               | 19.7 | % |                        |   | 6.5   |         |  |            | 105.0 |  | 25.6          | % |  | 19.8                   | % |  |   | 4.8  |  
|Other (1)         |  |                       |      |            | 0.0           | % |               | 0.0  | % |                        |   | (6.7  | )       |  |            |      |  | 0.0           | % |  | 0.0                    | % |  |   | (2.1 | )
|                  |  |                       |       |            |               |   |               |      |   |                        |   |       |         |  |            |       |  |               |   |  |                        |   |  |   |      |  
|Total             |  | $                     | 402.6 |            | 100.0         | % |               | 27.7 | % |                        | $ | 16.3  |         |  | $          | 409.5 |  | 100.0         | % |  | 29.9                   | % |  | $ | 33.6 |  
|                  |  |                       |       |            |               |   |               |      |   |                        |   |       |         |  |            |       |  |               |   |  |                        |   |  |   |      |  

---

|(1) | The three months ended April 1, 2007 includes $6.1 million of stock-based compensation expense and $0.6 million of restructuring and impairments expense. The three months ended
April 2, 2006 includes $5.3 million of stock-based compensation expense and a net gain of $3.2 million on the sale of a product line.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Functional Power.Functional Power revenues increased approximately 2% in the first three months of 2007, compared to the same period in 2006. Our results for the first quarter of 2007 include 13 weeks compared to 14
weeks in the first quarter of 2006. In the first quarter of 2007, increases in average selling prices due to product mix and price related improvements contributed approximately 5% to the revenue increase, offset by decreases in unit volumes of
approximately 3%. Revenue increases were primarily driven by strong market demand in our high voltage and auto business, partially offset by a decrease in low voltage due to pricing pressure. Gross profits increased due to improved product mix and
pricing offset somewhat by lower factory utilization.

Functional Power had operating income of $29.8 million in the first quarter of 2007, compared to
$27.7 million for the comparable period in 2006. The increase in operating income was due to higher gross profits and lower SG&A expenses, slightly offset by higher R&D expenses. R&D expenses increased due to new product development,
which was slightly offset by lower variable compensation accruals of approximately $0.7 million. SG&A expenses decreased mainly due to lower variable compensation accruals of approximately $1.3 million.

Analog Products.Analog Products revenues decreased approximately 2% in the first three months of 2007, as compared to the same period in 2006. Included in
revenue in the first quarter of 2007 is $5.1 million of revenue from our acquisition of System General (see Item 1, Note 13 for additional information). Our results for the first quarter of 2007 include 13 weeks compared to 14 weeks in the
first quarter of 2006. In the first quarter of 2007, excluding System General, decreases in unit volumes contributed approximately 9% to the revenue decline, offset by product mix and price related increases in average selling prices of 7%. Revenue
declines were also due to lower orders from a major customer and efforts to reduce inventories at our distributors. Gross profit decreased due to lower unit volumes and lower production. Included in gross profit in the first quarter of 2007, is $2.3
million of gross profit from System General offset by a purchase accounting charge of $2.1 million for the incremental expense related to the recognition of the step-up of inventory to fair value at the acquisition date.

Analog Products had operating loss of $13.3 million in the first quarter of 2007, compared to operating income of $3.2 million for the comparable period in 2006. The
change in operating loss was due to lower gross profit and higher R&D and SG&A expenses. R&D and SG&A expenses increased primarily due to the acquisition of System General, which was slightly offset by lower variable compensation
accruals of approximately $1.2 million and $0.9 million, respectively. Acquisition amortization increased due to the System General acquisition in the first quarter of 2007 (see Item 1, Note 6 and Note 13 for additional information).

Standard Products.Standard Products revenues decreased approximately 9% in the first quarter of 2007, as compared to the same period
in 2006. Our results for the first quarter of 2007 include 13 weeks compared to 14 weeks in the first quarter of 2006. In the first quarter of 2007, decreases in unit volumes contributed approximately 12% to the revenue decline, offset by product
mix and price related increases in average selling prices of 3%. The decrease in unit volumes was driven by weaker demand in the PC market. Generally, we anticipate that Standard Products as a percentage of total revenue will continue to decrease,
as we expect to experience faster growth in our Analog Products and Functional Power segments.While we anticipate revenues will continue to decline as a percentage of our total revenues, our strategy is to manage Standard Products more
selectively, while maintaining or increasing our margins in this business. Gross profit decreased due to weaker demand, lower unit volumes and lower factory utilization.



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##### Table of Contents

Standard Products had operating income of $6.5 million in the first quarter of 2007, compared to $4.8 million for the
comparable period in 2006. The increase in operating income was primarily due to lower R&D and SG&A spending. R&D expenses decreased due to lower variable compensation accruals of approximately $0.1 million and the consolidation of some
product engineering activities. SG&A expenses decreased mainly due to spending controls and lower variable compensation accruals of approximately $0.7 million.

Liquidity and Capital Resources

We have a borrowing capacity of $100.0 million on a revolving basis for working capital and general
corporate purposes, including acquisitions, under our senior credit facility. At April 1, 2007, $19.4 million was drawn on the revolver and after adjusting for outstanding letters of credit we had up to $79.4 million available under this senior
credit facility. We had additional outstanding letters of credit of $1.1 million that do not fall under the senior credit facility. We also had $14.3 million of undrawn credit facilities at certain of our foreign subsidiaries. These amounts
outstanding do not impact available borrowings under the senior credit facility.

Our senior credit facility, which includes the $375.0 million term loan
and the $100.0 million revolving line of credit, the indenture governing our 5% Convertible Senior Subordinated Notes, and other debt instruments we may enter into in the future, impose various restrictions and contain various covenants that could
limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities. The restrictive covenants include limitations on consolidations, mergers and acquisitions, creating
liens, paying dividends or making other similar restricted payments, asset sales, capital expenditures and incurring indebtedness, among other restrictions. The covenants in the senior credit facility also include financial measures such as a
minimum interest coverage ratio, a maximum net leverage ratio and a minimum EBITDA (earnings before interest, taxes, depreciation and amortization) less capital expenditures measure. At April 1, 2007, we were in compliance with these covenants.
The senior credit facility also limits our ability to modify our certificate of incorporation and bylaws, or enter into shareholder agreements, voting trusts or similar arrangements. Under our debt instruments, the subsidiaries of Fairchild
Semiconductor Corporation cannot be restricted, except to a limited extent, from paying dividends or making advances to Fairchild Semiconductor Corporation. We believe that funds to be generated from operations, together with existing cash, will be
sufficient to meet our debt obligations over the next twelve months. We expect that existing cash and available funds from our senior credit facility and funds generated from operations will be sufficient to meet our anticipated operating
requirements and to fund our research and development and planned capital expenditures over the next twelve months. We had capital expenditures of $16.7 million in the first three months of 2007.

We frequently evaluate opportunities to sell additional equity or debt securities, obtain credit facilities from lenders or restructure our long-term debt to further
strengthen our financial position. The sale of additional equity or convertible securities could result in additional dilution to our stockholders. Additional borrowing or equity investment may be required to fund future acquisitions. We funded our
acquisition of System General with cash (see Item 1, Note 13 for additional information).

While not deemed material, we have noted in Item 1, Note 9
that as of April 1, 2007, we had $11.3 million of unrecognized tax benefits, compared to approximately $8.5 million at December 31, 2006. As of April 1, 2007, $0.8 million of the unrecognized tax benefit is classified as a current liability and is
expected to be settled within the next year. The timing of the expected cash outflow relating to the remaining balance is not reliably determinable at this time.

As of April 1, 2007, our cash, cash equivalents and short-term and long-term marketable securities were $428.8 million, a decrease of $157.6 million from December 31, 2006.

During the first three months of 2007, our cash provided by operating activities was $24.0 million compared to $3.0 million in the comparable period of 2006. The
following table presents a summary of net cash provided by operating activities during the first quarter of 2007 and 2006, respectively.



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|                                            |               |                    |       |              |  |   |       |  
|------------------------------------------- | ------------- | ------------------ | ----- | ------------ |  | - | ----- | -
|                                            |               | Three Months Ended |      
|                                            | April 1,2007  |                    |       | April 2,2006 | 
|                                            | (In millions) |                   
|Net income                                  |               | $                  | 6.3   |              |  | $ | 26.6  |  
|Depreciation and amortization               |               |                    | 32.0  |              |  |   | 28.3  |  
|Non-cash stock-based compensation           |               |                    | 6.1   |              |  |   | 5.3   |  
|Deferred income taxes, net                  |               |                    | (4.4  | )            |  |   | 0.8   |  
|Purchased in-process research & development |               |                    | 3.7   |              |  |   |      |  
|Other, net                                  |               |                    | 0.4   |              |  |   | (2.1  | )
|Change in other working capital accounts    |               |                    | (20.1 | )            |  |   | (55.9 | )
|                                            |               |                    |       |              |  |   |       |  
|Cash provided by operating activities       |               | $                  | 24.0  |              |  | $ | 3.0   |  
|                                            |               |                    |       |              |  |   |       |  

The increase in cash provided by operating activities was driven by a reduction in our accounts receivable and
inventory balances in the first quarter of 2007, as compared to the same period in 2006, which was offset by increased payments in 2007 on our variable compensation accruals and reduced net income.

Cash used in investing activities during the first three months of 2007 totaled $239.8 million compared to $1.9 million for the comparable period of 2006. The increase
in the use of cash is primarily the result of the net cash payment of $171.8 million for the acquisition of System General. Our capital expenditures as a percent of sales during the first three months of 2007 was 4% compared to 6% in the comparable
period in 2006.

Cash provided by financing activities totaled $6.2 million in the first three months of 2007 as compared to $3.8 million in the comparable
period of 2006. The increase was primarily due to proceeds received from the purchase of stock by three executives of a subsidiary and their designees, offset slightly by an increase in cash paid for the purchase of treasury stock.

Liquidity and Capital Resources of Fairchild International, Excluding Subsidiaries

Fairchild Semiconductor International, Inc. is a holding company, the principal asset of which is the stock of its sole subsidiary, Fairchild Semiconductor Corporation. Fairchild Semiconductor International, Inc. on a
stand-alone basis had no cash flow from operations and has no cash requirements for the next twelve months.

Forward Looking Statements

This quarterly report includes forward-looking statements as that term is defined in Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements can be identified by the use of forward-looking terminology such as we believe, we expect, we intend, may, will, should, seeks,
approximately, plans, estimates, anticipates, or hopeful, or the negative of those terms or other comparable terms, or by discussions of our strategy, plans or future performance. For
example, the Outlook section below contains numerous forward-looking statements. All forward-looking statements in this report are made based on managements current expectations and estimates, which involve risks and uncertainties, including
those described below and more specifically in the Risk Factors section. Among these factors are the following: our ability to complete our acquisition of System General Corporation, including failing to satisfy the conditions to the share swap and
merger; changes in regional or global economic or political conditions (including as a result of terrorist attacks and responses to them); changes in demand for our products; changes in inventories at our customers and distributors; technological
and product development risks; including the risks of failing to maintain the right to use some technologies or failing to adequately protect our own intellectual property against misappropriation or infringement; availability of manufacturing
capacity; the risk of production delays; the inability to attract and retain key management and other employees; risks related to warranty and product liability claims; risks inherent in doing business internationally; changes in tax regulations or
the migration of profits from low tax jurisdictions to higher tax jurisdictions; availability of raw materials; competitors actions; loss of key customers, including but not limited to distributors; order cancellations or reduced bookings;
changes in manufacturing yields or output; and significant litigation. Factors that may affect our operating results are described in the Risk Factors section in the quarterly and annual reports we file with the Securities and Exchange Commission.
Such risks and uncertainties could cause actual results to be materially different from those in the forward-looking statements. Readers are cautioned not to place undue reliance on the forward-looking statements.



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Policy on Business Outlook Disclosure and Quiet Periods

It is our current policy to update our business outlook at least twice each quarter. The first update is near the beginning of each quarter, within the press release that
announces the previous quarters results. The second update is within a press release issued approximately two months into each quarter. The business outlook below is consistent with the business outlook included in our April 19, 2007
press release announcing first quarter results. On June 6, 2007, we intend to publish a mid-quarter press release to update our business outlook. The current business outlook is accessible at the Investor Relations section of our website at
http://investor.fairchildsemi.com. Toward the end of each quarter, and until that quarters results are publicly announced, we observe a quiet period, when the business outlook is not updated to reflect managements
current expectations. The quiet period for the second quarter of 2007 will be from June 16, 2007 until July 19, 2007 when we plan to release our second quarter results. Except during quiet periods, the business outlook posted on our
website reflects current guidance unless and until updated through a press release, SEC filing or other public announcement. During quiet periods, our business outlook, as posted on our website, announced in press releases and provided in quarterly,
annual and special reports or other filings with the SEC, should be considered to be historical, speaking as of prior to the quiet period only and not subject to update by the company. During quiet periods, Fairchild Semiconductor representatives
will not comment about the business outlook of the companys financial results or expectations for the quarter in question.

Outlook

We expect our second quarter revenues to increase 1%  4% and gross margins to be approximately flat compared to the first quarter of 2007. At the
start of the second quarter, we had about 90% of our sales guidance booked and scheduled to ship. We expect our R&D and SG&A spending to be approximately $91.0  $93.0 million and for net interest and other expenses to be approximately
$5.0  $5.5 million for the second quarter. The outlook provided includes the expected results of System General.

Recently Issued Financial
Accounting Standards

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities 
Including an amendment of FASB Statement 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of this statement is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement is effective as of the beginning of the
fiscal year that begins after November 15, 2007. We have yet to determine the impact, if any, of SFAS 159 on our consolidated financial position and results of operations.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Reference is made to Part II, Item 7A, Quantitative and Qualitative Disclosure about Market Risk, in Fairchild Semiconductor Internationals annual report on Form 10-K for the year ended December 31, 2006 and under the
subheading Quantitative and Qualitative Disclosures about Market Risk in Managements Discussion and Analysis of Financial Condition and Results of Operations on page 52 of the Form 10-K. There were no material changes
in the information we provided in our Form 10-K during the period covered by this Quarterly Report.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

We maintain disclosure controls and procedures designed to assure, as much as is reasonably possible, that information required to be
disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is communicated to management and recorded, processed, summarized and disclosed within the specified time periods. As of the end of the period covered by this report,
our chief executive officer (CEO) and chief financial officer (CFO) have evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures. Based on the evaluation, our CEO and CFO concluded that as of
April 1, 2007, our disclosure controls and procedures are effective.



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Inherent Limitations on Effectiveness of Controls

The companys management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or
that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or
mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of a control effectiveness in future periods are subject to
risks. Over time, controls may become inadequate because of changes in conditions or a deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the
first three months of 2007 that have materially affected, or are reasonably likely to materially affect, our own internal control over financial reporting.

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

Phosphorus Mold Compound Litigation and
Claims. From time to time since late 2001, we have received claims from a number of customers seeking damages resulting from certain products manufactured with a phosphorus-containing mold compound. Mold compound is the plastic resin used to
encapsulate semiconductor chips. This particular mold compound causes some chips to short in some situations, resulting in chip failure. We have been named in lawsuits relating to these mold compound claims. In January 2005 we were named as a
defendant in a lawsuit filed by Lucent Technologies Inc. in the Superior Court of New Jersey. The Lucent lawsuit alleges breach of contract, breach of warranty and fraud claims and seeks unspecified damages allegedly caused by our products. We
believe we have strong defenses against Lucents claims and intend to vigorously defend the lawsuit. On January 5, 2007, White Rock Networks sued us and two distributors, Arrow Electronics and All American Semiconductor, in the U.S.
District Court for the Eastern District of Texas, for violations of the Texas Deceptive Trade Practices Act (DTPA) relating to the mold compound issue, claiming unspecified damages. We have not yet been served in the case. We believe we have strong
defenses against White Rock Networks claims and intend to vigorously defend the lawsuit if it is served on us.

Several other customers have made
claims for damages or threatened to begin litigation as a result of the mold compound issue if their claims are not resolved according to their demands, and we may face additional lawsuits as a result. We have resolved similar claims with several of
our leading customers. We have exhausted insurance coverage for such customer claims. While the exact amount of these losses is not known, we recorded a reserve for estimated potential settlement losses of $11.0 million in the Consolidated Statement
of Operations during the second quarter of 2004 and $6.9 million in the fourth quarter of 2005. These estimates were based upon current assessments of the potential liability using an analysis of the claims and our historical experience in defending
and/or resolving these claims. At April 1, 2007 and December 31, 2006, the reserve for estimated potential settlement losses was $4.1 million and $5.8 million, respectively. If we continue to receive additional claims for damages from
customers beyond the period of time normally observed for such claims, if more of these claims proceed to litigation, or if we choose to settle claims in settlement of or to avoid litigation, then we may incur a liability in excess of the current
reserve.

Patent Litigation with Power Integrations, Inc. On October 20, 2004, we and our wholly owned subsidiary, Fairchild Semiconductor
Corporation, were sued by Power Integrations, Inc. in the United States District Court for the District of Delaware. Power Integrations alleges that certain of our pulse width modulation (PWM) integrated circuit products infringe four Power
Integrations U.S. patents, and seeks a permanent injunction preventing us from manufacturing, selling or offering the products for sale in the United States, or from importing the products into the United States, as well as money damages for past
infringement. We have analyzed the Power Integrations patents in light of our products and, based on that analysis, do not believe our products violate Power Integrations patents. Accordingly, we are vigorously contesting this lawsuit. The
trial in the case has been divided into three phases. The first phase, held October 2-10, 2006, was on infringement, the willfulness of any infringement, and damages. On October 10, 2006, a jury



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returned a verdict finding that 33 of our PWM products infringe one or more of seven claims of the four patents being asserted. The jury also found that our
infringement was willful, and assessed damages against us of approximately $34 million. That verdict remains subject to our appeal. The second phase of the trial will be on the validity of the Power Integrations patents being asserted, and will be
before a different jury. The enforceability of the patents will be handled in a third phase before the judge who is overseeing the case. For Power Integrations to prevail in the case and receive a judgment and injunction against us, the patent
claims found to have been infringed must also be found to be valid and enforceable in the remaining phases of the trial. We believe we have identified inventions and publications, known as prior art, that pre-date the Power Integrations patents
which we believe would invalidate the patents. We are also claiming that Power Integrations officials engaged in inequitable conduct before the United States Patent and Trademark Office at the time when one or more of the patents was obtained, and
we believe that conduct should make the patent claims unenforceable.

In the second phase of the trial, the Power Integrations patents will be presumed to
be valid and we will have the burden of proving, by clear and convincing evidence, that the patents are invalid. To the extent we are unable to do this, Power Integrations will be entitled to a judgment and damages as further discussed below. Power
Integrations may also seek an injunction to prevent us from making, selling or offering to sell in the United States, or from importing into the United States, products that infringe patents that are found valid and enforceable. Power Integrations
has announced its intention to seek such an injunction in such event. The second phase of the jury trial was previously scheduled to begin December 4, 2006, but it was canceled by order of the Delaware U.S. District Court. The court questioned
whether the KSR v. Teleflex case, then pending before the U.S. Supreme Court, might impact the dispute between Fairchild and Power Integrations. The court found that the same issue of obviousness, a defense to the validity of the Power Integrations
patents, permeates the validity contentions in this case. At issue in the KSR case was whether the defense of obviousness has been improperly restricted by lower court rulings. The U.S. Supreme Court decided the KSR case on April 30,
2007. The second phase of the Power Integrations v. Fairchild Semiconductor jury trial on validity issues is now scheduled to begin on June 4, 2007.

The jury in the first phase of the trial assessed damages against us of approximately $34 million. Because the jury also found that our infringement was willful, the judge in the case will have discretion to increase the damages award by up
to three times the amount of the final damages award. The final damages award would be determined after the next two phases of the trial. To the extent we succeed in proving the patent claims invalid, the damages amount may be reduced, including to
zero if we prove all the claims invalid or unforceable. If we are not successful, damages may also be increased by the judge to account for certain sales by us after October 20, 2006 and as a result of the willful infringement finding. It is
also possible that we could be required to pay Power Integrations attorneys fees and pre-judgment interest.

Although we believe, based on the
prior art we have identified, that we have invalidity and unenforceability defenses to Power Integrations patent claims, the results of litigation are difficult to predict and no assurance can be given that we will succeed in proving the
patents invalid or unenforceable. As discussed above, the judge overseeing the case has discretion over the amount of damages awarded, and over the granting and scope of any injunction against us. Any damages award or injunction would be subject to
appeal and we would expect to carefully consider an appeal at the appropriate time. In such a case, if we choose to appeal, we would likely be required to post a bond or provide other security for some or the entire amount of the final damages award
during the pendency of the appeal.

We have analyzed the potential for a loss from this litigation in accordance with Statement of Financial Accounting
Standards 5, Accounting for Contingencies. Due to our beliefs about our position in the case, and because we are unable to reasonably estimate the amount of loss we would incur if we do not prevail, we have not recorded a reserve for
contingent loss. Should we ultimately lose the lawsuit, such result could have an adverse impact on our ability to sell products found to be infringing, either directly or indirectly in the U.S.

In a separate action, we filed a lawsuit on April 11, 2006, against Power Integrations in the United States District Court for the Eastern District of Texas. The
lawsuit asserts that Power Integrations PWM products infringe U.S. Patent No. 5,264,719. This lawsuit has since been transferred to the United States District Court for the District of Delaware. Intersil Americas owns U.S. Patent
No. 5,264,719, for High Voltage Lateral Semiconductor Devices, and is a co-plaintiff with us in the lawsuit. We have held license rights under the patent since acquiring Intersils power discrete business in 2001, and we more recently
secured exclusive rights to assert the patent against Power Integrations. We intend to take all possible steps to seek a court order to stop Power Integrations from making, using, selling, offering for sale or importing the infringing products into
the U.S. and to obtain monetary damages for Power Integrations infringing activities.

A company that we are acquiring is also involved in patent
litigation with Power Integrations. We are in the process of acquiring System General Corporation, a Taipei-based designer and seller of analog semiconductor devices. As of the date of this filing we own



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approximately 95.6% of System General shares and expect to acquire all remaining shares before the end of September 2007. System General is currently
appealing the outcome of proceedings before the U.S. International Trade Commission (ITC) involving allegations of patent infringement, and is a defendant in a patent infringement lawsuit in the U.S. District Court for the Northern District of
California. Both the ITC proceeding and the lawsuit were initiated by Power Integrations. As in all litigation, the results of these matters are difficult to predict and no assurance can be given as to the outcome of these proceedings. An adverse
outcome in these matters after completion of the acquisition could negatively impact our financial results.

ZTE Corporation v. Fairchild Semiconductor
Corporation. On December 30, 2004, our wholly owned subsidiary, Fairchild Semiconductor Corporation, was sued by Zhongxing Telecom Ltd. (ZTE), a communications equipment manufacturer, in the Intermediate Peoples Court of Shenzhen,
Guangdong Province, Peoples Republic of China. The complaint filed by ZTE alleges that certain of our products were defective and caused personal injury and/or property loss to ZTE. ZTE claims 65,733,478 Chinese yuan as damages. We contested
the lawsuit in a trial held on October 20, 2005. On December 29, 2006, we were informed that the court had ruled in favor of ZTE and had ordered Fairchild to pay RMB 65,733,478 (equivalent to approximately $8.5 million U.S. dollars based
on exchange rates at April 1, 2007) to ZTE. We maintain that ZTEs product liability claims are invalid and have appealed to the Higher Peoples Court of Guangdong Province. The lawsuit relates to alleged defects in products shipped
in late 2002 and early 2003. We did not sell the allegedly defective products to ZTE directly. Among other defenses, we have argued that limitations on damages in our contract with our distributor at the time of shipment should limit any damages
recovery by ZTE. We recorded a charge of approximately $8.2 million in the fourth quarter 2006 related to this legal proceeding.

From time to time we are
involved in legal proceedings in the ordinary course of business. We believe that there is no such ordinary-course litigation pending that could have, individually or in the aggregate, a material adverse effect on our business, financial condition,
results of operations or cash flows.



|Item 1A. | Risk Factors
|-------- | ------------

A description of the risk factors associated with our
business is set forth below. We review and update our risk factors each quarter. The description set forth below includes any changes to and supersedes the description of the risk factors associated with our business previously disclosed in Part I,
Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. The risks described below are not the only ones facing us. Additional risks not currently known to us or that we currently believe are immaterial also
may impair our business operations and financial condition.

The price of our common stock has fluctuated widely in the past and may fluctuate widely in
the future.

Our common stock, which is traded on The New York Stock Exchange, has experienced and may continue to experience significant price and
volume fluctuations that could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in financial results, earnings below analysts
estimates and financial performance and other activities of other publicly traded companies in the semiconductor industry could cause the price of our common stock to fluctuate substantially. In addition, in recent periods, our common stock, the
stock market in general and the market for shares of semiconductor industry-related stocks in particular have experienced extreme price fluctuations which have often been unrelated to the operating performance of the affected companies. Any similar
fluctuations in the future could adversely affect the market price of our common stock.

We maintain a backlog of customer orders that is subject to
cancellation, reduction or delay in delivery schedules, which may result in lower than expected revenues.

We manufacture products primarily pursuant to
purchase orders for current delivery or to forecast, rather than pursuant to long-term supply contracts. The semiconductor industry is subject to rapid changes in customer outlooks or unexpected build ups of inventory in the supply channel as a
result of shifts in end market demand. Accordingly, many of these purchase orders or forecasts may be revised or canceled without penalty. As a result, we must commit resources to the production of products without any advance purchase commitments
from customers. Even in cases where our standard terms and conditions of sale or other contractual arrangements do not permit a customer to cancel an order without penalty, we may from time to time accept cancellations because of industry practice
or custom or other factors. Our inability to sell products after we devote significant resources to them could have a material adverse effect on both our levels of inventory and revenues.



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Downturns in the highly cyclical semiconductor industry or changes in end user market demands could reduce the
profitability and overall value of our business, which could cause the trading price of our stock to decline or have other adverse effects on our financial position.

The semiconductor industry is highly cyclical, and the value of our business may decline during the down portion of these cycles. In the past, we and the rest of the semiconductor industry have experienced
backlog cancellations and reduced demand for our products, resulting in significant revenue declines, due to excess inventories at computer and telecommunications equipment manufacturers and general economic conditions, especially in the technology
sector. We may experience renewed, possibly more severe and prolonged, downturns in the future as a result of such cyclical changes. Even as demand increases following such downturns, our profitability may not increase because of price competition
that historically accompanies recoveries in demand. For example, in 2002, we sold approximately 7% more units than in 2001, yet our revenues were essentially unchanged. And, in 2003 we sold approximately the same number of units as in 2002, while at
the same time experiencing revenue declines due to price decreases. In addition, we may experience significant changes in our profitability as a result of variations in sales, changes in product mix, changes in end user markets and the costs
associated with the introduction of new products, and our efforts to reduce excess inventories that may have built up as a result of any of these factors. The markets for our products depend on continued demand for consumer electronics such as
personal computers, cellular telephones, and digital cameras, and automotive, household and industrial goods. These end user markets may experience changes in demand that could adversely affect our prospects.

We may not be able to develop new products to satisfy changing demands from customers.

Our failure to develop new technologies, or react to changes in existing technologies, could materially delay development of new products, which could result in decreased revenues and a loss of market share to our
competitors. The semiconductor industry is characterized by rapidly changing technologies and industry standards, together with frequent new product introductions. Our financial performance depends on our ability to design, develop, manufacture,
assemble, test, market and support new products and enhancements on a timely and cost-effective basis. New products often command higher prices and, as a result, higher profit margins. We may not successfully identify new product opportunities and
develop and bring new products to market or succeed in selling them into new customer applications in a timely and cost-effective manner. Products or technologies developed by other companies may render our products or technologies obsolete or
noncompetitive. Many of our competitors are larger, older and well established international companies with greater engineering and research and development resources than us. A fundamental shift in technologies in our product markets that we fail
to identify correctly or adequately, or that we fail to capitalize on, in each case relative to our competitors, could have material adverse effects on our competitive position within the industry. In addition, to remain competitive, we must
continue to reduce die sizes, develop new packages and improve manufacturing yields. We cannot assure you that we can accomplish these goals.

If some
original equipment manufacturers do not design our products into their equipment, our revenue may be adversely affected.

The success of our products
often depends on whether original equipment manufacturers (OEMs), or their contract manufacturers, choose to incorporate or design in our products, or identify our products, with those from a limited number of other vendors, as approved
for use in particular OEM applications. Even receiving design wins from a customer does not guarantee future sales to that customer. We may be unable to achieve these design wins due to competition over the subject
products functionality, size, electrical characteristics or other aspect of its design, price, or due to our inability to service expected demand from the customer or other factors. Without design wins, we would only be able to sell our
products to customers as a second source, if at all. If an OEM designs another suppliers product into one of its applications, it is more difficult for us to achieve future design wins with that application because, for the customer, changing
suppliers involves significant cost, time, effort and risk. In addition, achieving a design win with a customer does not ensure that we will receive significant revenue from that customer and we may be unable to convert design into actual sales.

We depend on demand from the consumer, original equipment manufacturer, contract manufacturing, industrial, automotive and other markets we serve for
the end market applications which incorporate our products. Reduced consumer or corporate spending due to increased oil prices or other economic factors could affect our revenues.

Our revenue and gross margin guidance are based on certain levels of consumer and corporate spending. If our projections of these expenditures fail to materialize, due to reduced consumer or corporate spending from
increased oil prices or otherwise, our revenues and gross margins could be adversely affected.



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Our failure to protect our intellectual property rights could adversely affect our future performance and growth.

Failure to protect our existing intellectual property rights may result in the loss of valuable technologies. We rely on patent, trade secret,
trademark and copyright law to protect such technologies. Some of our technologies are not covered by any patent or patent application, and we cannot assure you that:



| |  |  | the patents owned by us or numerous other patents which third parties license to us will not be invalidated, circumvented, challenged or licensed to other
companies; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any of our pending or future patent applications will be issued within the scope of the claims sought by us, if at all.
| | - |  | -----------------------------------------------------------------------------------------------------------------------

In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not applied for in some countries.

We also seek to protect our proprietary technologies, including technologies that may not be patented or patentable, in part by confidentiality agreements and, if
applicable, inventors rights agreements with our collaborators, advisors, employees and consultants. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that such persons or
institutions will not assert rights to intellectual property arising out of such research. Some of our technologies have been licensed on a non-exclusive basis from National Semiconductor, Samsung Electronics and other companies which may license
such technologies to others, including our competitors. In addition, under a technology licensing and transfer agreement, National Semiconductor has limited royalty-free, worldwide license rights (without right to sublicense) to some of our
technologies. If necessary or desirable, we may seek licenses under patents or intellectual property rights claimed by others. However, we cannot assure you that we will obtain such licenses or that the terms of any offered licenses will be
acceptable to us. The failure to obtain a license from a third party for technologies we use could cause us to incur substantial liabilities and to suspend the manufacture or shipment of products or our use of processes requiring the technologies.

Our failure to obtain or maintain the right to use some technologies may negatively affect our financial results.

Our future success and competitive position depend in part upon our ability to obtain or maintain proprietary technologies used in our principal products, which is
achieved in part by defending claims by competitors and others of intellectual property infringement. The semiconductor industry is characterized by claims of intellectual property infringement and litigation regarding patent and other intellectual
property rights. From time to time, we may be notified of claims (often implicit in offers to sell us a license to another companys patents) that we may be infringing patents issued to other companies, and we may subsequently engage in license
negotiations regarding these claims. Such claims relate both to products and manufacturing processes. Even though we maintain procedures to avoid infringing others rights as part of our product and process development efforts, it is impossible
to be aware of every possible patent which our products may infringe, and we cannot assure you that we will be successful. Furthermore, even if we conclude our products do not infringe anothers patents, others may not agree. We have been and
are involved in lawsuits, and could become subject to other lawsuits, in which it is alleged that we have infringed upon the patent or other intellectual property rights of other companies. For example, since October 2004, we have been in litigation
with Power Integrations, Inc. See Item 1, Legal Proceedings. Our involvement in this lawsuit and future intellectual property litigation, or the costs of avoiding or settling litigation by purchasing licenses rights or by other means, could
result in significant expense to our company, adversely affecting sales of the challenged products or technologies and diverting the efforts and attention of our technical and management personnel, whether or not such litigation is resolved in our
favor. We may decide to settle patent infringement claims or litigation by purchasing license rights from the claimant, even if we believe we are not infringing, in order to reduce the expense of continuing the dispute or because we are not
sufficiently confident that we would eventually prevail. In the event of an adverse outcome as a defendant in any such litigation, we may be required to:



| |  |  | pay substantial damages;
| | - |  | ------------------------



| |  |  | indemnify our customers for damages they might suffer if the products they purchase from us violate the intellectual property rights of others;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | stop our manufacture, use, sale or importation of infringing products;
| | - |  | ----------------------------------------------------------------------



| |  |  | expend significant resources to develop or acquire non-infringing technologies;
| | - |  | -------------------------------------------------------------------------------



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| |  |  | discontinue manufacturing processes; or
| | - |  | ---------------------------------------



| |  |  | obtain licenses to the intellectual property we are found to have infringed.
| | - |  | ----------------------------------------------------------------------------

We cannot assure you that we would be successful in such development or acquisition or that such licenses would be available under reasonable terms. Any such development, acquisition or license could require the
expenditure of substantial time and other resources.

We may not be able to consummate future acquisitions or successfully integrate acquisitions into
our business.

We have made twelve acquisitions of various sizes since we became an independent company in 1997, and we plan to pursue additional
acquisitions of related businesses. We are also in the process of acquiring Taipei-based System General Corporation, a leading supplier of analog power management semiconductors for AC/DC offline power conversion in computers, LCD monitors,
printers, chargers, and consumer products. The transaction is structured as a tender offer by one of our subsidiaries for all outstanding shares of System General followed by a share swap and merger. We launched the tender offer on January 2,
2007, in Taiwan and the tender offer period closed on January 31, 2007 with 95.6% of the shares tendered. We expect to complete the acquisition in the third quarter of 2007. The costs of acquiring and integrating related businesses, or our
failure to integrate them successfully into our existing businesses, could result in our company incurring unanticipated expenses and losses. In addition, we may not be able to identify or finance additional acquisitions or realize any anticipated
benefits from acquisitions we do complete.

We are constantly pursuing acquisition opportunities and consolidation possibilities and are frequently
conducting due diligence or holding preliminary discussions with respect to possible acquisition transactions, some of which could be significant. No material potential acquisition transactions are subject to a letter of intent or otherwise so far
advanced as to make the transaction reasonably certain, other than the System General transaction discussed above.

If we acquire another business, the
process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of
existing operations. Some of the risks associated with acquisitions include:



| |  |  | unexpected losses of key employees, customers or suppliers of the acquired company;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | conforming the acquired companys standards, processes, procedures and controls with our operations;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | coordinating new product and process development;
| | - |  | -------------------------------------------------



| |  |  | hiring additional management and other critical personnel;
| | - |  | ----------------------------------------------------------



| |  |  | negotiating with labor unions; and
| | - |  | ----------------------------------



| |  |  | increasing the scope, geographic diversity and complexity of our operations.
| | - |  | ----------------------------------------------------------------------------

In addition, we may encounter unforeseen obstacles or costs in the integration of other businesses we acquire.

Possible
future acquisitions could result in the incurrence of additional debt, contingent liabilities and amortization expenses related to intangible assets, all of which could have a material adverse effect on our financial condition and operating results.

We depend on suppliers for timely deliveries of raw materials of acceptable quality. Production time and product costs could increase if we were to
lose a primary supplier or if a primary supplier increased the prices of raw materials. Product performance could be affected and quality issues could develop as a result of a significant degradation in the quality of raw materials we use in our
products.

Our manufacturing operations depend upon obtaining adequate supplies of raw materials on a timely basis. Our results of operations could be
adversely affected if we were unable to obtain adequate supplies of raw materials in a timely manner or if the costs of raw materials increased significantly. Results could also be adversely affected if there is a significant degradation in the
quality of raw materials used in our products, or if the raw materials give rise to compatibility or performance issues in our products, any of which could lead to an increase in customer returns or product warranty claims.



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Although we maintain rigorous quality control systems, errors or defects may arise from a supplied raw material and be beyond our detection or control. For
example, some phosphorus-containing mold compound received from one supplier and incorporated into our products has resulted in a number of claims for damages from customers. We purchase raw materials such as silicon wafers, lead frames, mold
compound, ceramic packages and chemicals and gases from a limited number of suppliers on a just-in-time basis. From time to time, suppliers may extend lead times, limit supplies or increase prices due to capacity constraints or other factors. We
subcontract a minority of our wafer fabrication needs, primarily to Advanced Semiconductor Manufacturing Corporation, Phenitec Semiconductor, Taiwan Semiconductor Manufacturing Company, Central Semiconductor Manufacturing Corporation, UMC, WIN
Semiconductor, Jilin Magic Semiconductor, More Power Electric Corporation and New Japan Radio Corporation. In order to maximize our production capacity, some of our back-end assembly and testing operations are also subcontracted. Primary back-end
subcontractors include Amkor, AUK, Enoch, SP Semiconductor, UTAC Thai Ltd., Liteon, GEM Services and STATS ChipPAC.

Our operations and ability to satisfy
customer obligations could be adversely affected if our relationships with these subcontractors were disrupted or terminated.

Delays in beginning
production at new facilities, expanding capacity at existing facilities, implementing new production techniques, or incurring problems associated with technical equipment malfunctions, all could adversely affect our manufacturing efficiencies.

Our manufacturing efficiency is an important factor in our profitability, and we cannot assure you that we will be able to maintain our manufacturing
efficiency or increase manufacturing efficiency to the same extent as our competitors. Our manufacturing processes are highly complex, require advanced and costly equipment and are continuously being modified in an effort to improve yields and
product performance. Impurities or other difficulties in the manufacturing process can lower yields. In 2003, we began initial production at a new assembly and test facility in Suzhou, China. We are transferring some production from subcontractors
to this facility. Delays or technical problems in completing these transfers could lead to order cancellations and lost revenue. In addition, we are currently engaged in an effort to expand capacity at some of our manufacturing facilities. As is
common in the semiconductor industry, we have from time to time experienced difficulty in beginning production at new facilities or in completing transitions to new manufacturing processes at existing facilities. As a consequence, we have suffered
delays in product deliveries or reduced yields.

We may experience delays or problems in bringing our factory in Suzhou, China or other new manufacturing
capacity to full production. Such delays, as well as possible problems in achieving acceptable yields, or product delivery delays relating to existing or planned new capacity could result from, among other things, capacity constraints, construction
delays, upgrading or expanding existing facilities or changing our process technologies, any of which could result in a loss of future revenues. Our operating results could also be adversely affected by the increase in fixed costs and operating
expenses related to increases in production capacity if revenues do not increase proportionately.

Approximately two-thirds of our sales are made to
distributors who can terminate their relationships with us with little or no notice. The termination of a distributor could reduce sales and result in inventory returns.

Distributors accounted for 66% of our net sales for the quarter ended April 1, 2007. Our top five distributors worldwide accounted for 21% of our net sales for the quarter ended April 1, 2007. As a general
rule, we do not have long-term agreements with our distributors, and they may terminate their relationships with us with little or no advance notice. Distributors generally offer competing products. The loss of one or more of our distributors, or
the decision by one or more of them to reduce the number of our products they offer or to carry the product lines of our competitors, could have a material adverse effect on our business, financial condition and results of operations. The
termination of a significant distributor, whether at our or the distributors initiative, or a disruption in the operations of one or more of our distributors, could reduce our net sales in a given quarter and could result in an increase in
inventory returns.

The semiconductor business is very competitive, especially in the markets we serve, and increased competition could reduce the value
of an investment in our company.

The semiconductor industry is, and the standard component or multi-market semiconductor product markets in
particular are, highly competitive. Competitors offer equivalent or similar versions of many of our products, and customers may switch from our products to competitors products on the basis of price, delivery terms, product performance,
quality, reliability and customer service or a combination of any of these factors. Competition is especially intense in the multi-market semiconductor segment because it is relatively easier for customers to switch suppliers of more standardized,
multi-market products like ours, compared to switching suppliers of more highly integrated or customized semiconductor products such as processors or system-on-a-chip products, which we



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do not manufacture. Even in strong markets, price pressures may emerge as competitors attempt to gain a greater market share by lowering prices. Competition
in the various markets in which we participate comes from companies of various sizes, many of which are larger and have greater financial and other resources than we have and thus are better able to pursue acquisition candidates and can better
withstand adverse economic or market conditions. In addition, companies not currently in direct competition with us may introduce competing products in the future.

We may not be able to attract or retain the technical or management employees necessary to remain competitive in our industry.

Our
continued success depends on the retention and recruitment of skilled personnel, including technical, marketing, management and staff personnel. In the semiconductor industry, the competition for qualified personnel, particularly experienced design
engineers and other technical employees, is intense, particularly in the up portions of our business cycle, when competitors may try to recruit our most valuable technical employees. There can be no assurance that we will be able to
retain our current personnel or recruit the key personnel we require.

If we must reduce our use of stock options and other equity awards, our
competitiveness in the employee marketplace could be adversely affected. Our results of operations could vary as a result of the methods, estimates and judgments we use to value our stock-based compensation.

Like most technology companies, we have a history of using broad-based employee stock option programs to recruit and retain our workforce in a competitive employment
marketplace. Although we have reduced our use of traditional stock options in the past several years in favor of deferred stock units, restricted stock units and performance-based equity awards, we still use stock options and expect to continue to
use them as one component of our stock-based compensation program. As a result, our success will depend in part upon the continued use of stock options as a compensation tool. We plan to seek stockholder approval for increases in the number of
shares available for grant under the Fairchild Semiconductor Stock Plan as well as other amendments that may be adopted from time to time which require stockholder approval. If these proposals do not receive stockholder approval, we may not be able
to grant stock options and other equity awards to employees at the same levels as in the past, which could adversely affect our ability to attract, retain and motivate qualified personnel, and we may need to increase cash compensation in order to
attract, retain and motivate employees, which could adversely affect our results of operations.

The calculation of stock-based compensation expense under
SFAS 123(R) requires us to use valuation methodologies and a number of estimates, assumptions and conclusions regarding matters such as the expected volatility of our share price, the expected life of our options, the expected dividend rate with
respect to our common stock, expected forfeitures and the exercise behavior of our employees. See Item 1, Note 10 of this report for further information. There are no means, under applicable accounting principles, to compare and adjust this
expense if and when we learn of additional information that may affect the estimates that we previously made, with the exception of changes in expected forfeitures of stock-based awards. Certain factors may arise over time that lead us to change our
estimates and assumptions with respect to future stock-based compensation, resulting in variability in our stock-based compensation expense over time. Changes in forecasted stock-based compensation expense could impact our gross margin percentage,
research and development expenses, marketing, general and administrative expenses and our tax rate.

We may face product warranty or product liability
claims that are disproportionately higher than the value of the products involved.

Our products are typically sold at prices that are significantly
lower than the cost of the equipment or other goods in which they are incorporated. For example, our products that are incorporated into a personal computer may be sold for several dollars, whereas the personal computer might be sold by the computer
maker for several hundred dollars. Although we maintain rigorous quality control systems, we manufacture and sell approximately 16 billion individual semiconductor devices per year to customers around the world, and in the ordinary course of our
business we receive warranty claims for some of these products that are defective or that do not perform to published specifications. Since a defect or failure in our product could give rise to failures in the goods that incorporate them (and
consequential claims for damages against our customers from their customers), we may face claims for damages that are disproportionate to the revenues and profits we receive from the products involved. We attempt, through our standard terms and
conditions of sale and other customer contracts, to limit our liability by agreeing only to replace the defective goods or refund the purchase price. Nevertheless, we have received claims for other charges, such as for labor and other costs of
replacing defective parts or repairing the products into which the defective products are incorporated, lost profits and other damages. In addition, our ability to



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reduce such liabilities, whether by contracts or otherwise, may be limited by the laws or the customary business practices of the countries where we do
business. And, even in cases where we do not believe we have legal liability for such claims, we may choose to pay for them to retain a customers business or goodwill or to settle claims to avoid protracted litigation. Our results of
operations and business could be adversely affected as a result of a significant quality or performance issue in our products, if we are required or choose to pay for the damages that result.

For example, from time to time since late 2001, we have received claims from a number of customers seeking damages resulting from certain products manufactured with a
phosphorus-containing mold compound. Mold compound is the plastic resin used to encapsulate semiconductor chips. This particular mold compound causes some chips to short in some situations, resulting in chip failure. We have been named in lawsuits
relating to these mold compound claims. In January 2005, we were named as a defendant in a lawsuit filed by Lucent Technologies Inc. in the Superior Court of New Jersey. The Lucent lawsuit alleges breach of contract and breach of warranty claims and
seeks unspecified damages allegedly caused by our products. Lucent amended the lawsuit in the second quarter of 2006 to include a fraud claim against us. We believe we have strong defenses against Lucents claims and intend to vigorously defend
the lawsuit. On January 5, 2007, White Rock Networks sued us and two distributors, Arrow Electronics and All American Semiconductor, in the U.S. District Court for the Eastern District of Texas, for violations of the Texas Deceptive Trade
Practices Act (DTPA) relating to the mold compound issue, claiming unspecified damages. We have not yet been served in the case. We believe we have strong defenses against White Rock Networks claims and intend to vigorously defend the lawsuit
if it is served on us.

Several other customers have made claims for damages or threatened to begin litigation as a result of the mold compound issue if
their claims are not resolved according to their demands, and we may face additional lawsuits as a result. We have resolved similar claims with several of our leading customers. We have exhausted insurance coverage for such customer claims. While
the exact amount of these losses is not known, we recorded a reserve for estimated potential settlement losses of $11.0 million in the Consolidated Statement of Operations during the second quarter of 2004 and $6.9 million the fourth quarter of
2005. These estimates were based upon assessments of the potential liability using an analysis of the claims and historical experience. At April 1, 2007 and December 31, 2006, the reserve for estimated potential settlement losses was $4.1
million and $5.8 million, respectively. If we continue to receive additional claims for damages from customers beyond the period of time normally observed for such claims, if more of these claims proceed to litigation, or if we choose to settle
claims in settlement of or to avoid litigation, then we may incur a liability in excess of the current reserve.

In a related action, we filed a lawsuit in
August 2002 against the mold compound supplier, Sumitomo Bakelite Co., Ltd. and other related parties in California Superior Court for Santa Clara County, alleging claims for breach of contract, misrepresentation, negligence and other claims and
seeking unspecified damages, including damages caused to our customers as a result of mold compound supplied by Sumitomo. Other manufacturers also filed lawsuits against Sumitomo relating to the same mold compound issue. On September 30, 2005,
we agreed to settle the lawsuit against Sumitomo. We previously agreed to settle litigation against Amkor Technology, Inc., a co-defendant with Sumitomo.

Our international operations subject our company to risks not faced by domestic competitors.

Through our subsidiaries we maintain
significant operations and facilities in the Philippines, Malaysia, China, South Korea and Singapore. We have sales offices and customers around the world. Approximately 74% of our revenues in the first quarter of 2007 were from Asia. The following
are some of the risks inherent in doing business on an international level:



| |  |  | economic and political instability;
| | - |  | -----------------------------------



| |  |  | foreign currency fluctuations;
| | - |  | ------------------------------



| |  |  | transportation delays;
| | - |  | ----------------------



| |  |  | trade restrictions;
| | - |  | -------------------



| |  |  | changes in laws and regulations relating to, amongst other things, import and export tariffs, taxation, environmental regulations, land use rights and property,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | work stoppages; and
| | - |  | -------------------



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| |  |  | the laws of, including tax laws, and the policies of the United States toward, countries in which we manufacture our products.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------

We acquired significant operations and revenues when we acquired a business from Samsung Electronics and, as a result, are subject to risks inherent in doing business
in Korea, including political risk, labor risk and currency risk.

As a result of the acquisition of the power device business from Samsung Electronics
in 1999, we have significant operations and sales in South Korea and are subject to risks associated with doing business there. Korea accounted for 13% of our revenue for the quarter ended April 1, 2007.

Relations between South Korea and North Korea have been tense over most of South Koreas history, and more recent concerns over North Koreas nuclear
capability, and relations between the United States and North Korea, have created a global security issue that may adversely affect Korean business and economic conditions. We cannot assure you as to whether or when this situation will be resolved
or change abruptly as a result of current or future events. An adverse change in economic or political conditions in South Korea or in its relations with North Korea could have a material adverse effect on our Korean subsidiary and our company. In
addition to other risks disclosed relating to international operations, some businesses in South Korea are subject to labor unrest.

Our Korean sales are
increasingly denominated primarily in U.S. dollars while a significant portion of our Korean operations costs of goods sold and operating expenses are denominated in South Korean won. Although we have taken steps to fix the costs subject to
currency fluctuations and to balance won revenues and won costs as much as possible, a significant change in this balance, coupled with a significant change in the value of the won relative to the dollar, could have a material adverse effect on our
financial performance and results of operations (see Item 3, Quantitative and Qualitative Disclosures about Market Risk).

A change in foreign tax
laws or a difference in the construction of current foreign tax laws by relevant foreign authorities could result in us not recognizing the benefits we anticipated in connection with the transaction structure used to consummate the acquisition of
the power device business.

The transaction structure we used for the acquisition of the power device business is based on assumptions about the various
tax laws, including income and withholding tax, and other relevant laws of foreign jurisdictions. In addition, our Korean subsidiary was granted a ten-year tax holiday under Korean law in 1999. The first seven years are tax-free, followed by three
years of income taxes at 50% of the statutory rate. In 2000, the tax holiday was extended such that the exemption amounts were increased to 78% in the eighth year and a 28% exemption was added to the eleventh year. Our Chinese subsidiary, Fairchild
Semiconductor (Suzhou), Co. Ltd, as one of the incentives for locating in the Suzhou Industrial Park, was granted by the Chinese government a 10 year preferential income tax holiday. On March 16, 2007, the Chinese government passed the unified
enterprise income tax law with the intention to unify the taxing structure amongst both foreign invested enterprises as well as domestic enterprises. The new legislation, which becomes effective January 1, 2008, will be closely reviewed to
determine the extent of the impact for 2008 and future years. If our assumptions about tax and other relevant laws are incorrect, or if foreign taxing jurisdictions were to change or modify the relevant laws, or if our Korean subsidiary were to lose
its tax holiday, we could suffer adverse tax and other financial consequences or lose the benefits anticipated from the transaction structure we used to acquire that business.

We have significantly expanded our manufacturing operations in China and, as a result, will be increasingly subject to risks inherent in doing business in China, which may adversely affect our financial
performance.

In 2003, we began construction of a new assembly and test facility in Suzhou, China. The factory began production in July 2003 and is
steadily increasing its output. Although we expect a significant portion of our production from this facility will be exported out of China, especially initially, we are hopeful that a significant portion of our future revenue will result from the
Chinese markets in which our products are sold, and from demand in China for goods that include our products. Our ability to operate in China may be adversely affected by changes in that countrys laws and regulations, including those relating
to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. In addition, our results of operations in China are subject to the economic and political situation there. We believe that our operations
in China are in compliance with all applicable legal and regulatory requirements. However, there can be no assurance that Chinas central or local governments will not impose new, stricter regulations or interpretations of existing regulations
that would require additional expenditures. Changes in the political environment or government policies could result in revisions to laws or regulations or their interpretation and enforcement, increased taxation, restrictions on imports, import
duties or currency revaluations. In addition, a significant destabilization of relations between China and the United States could result in restrictions or prohibitions on our operations or the sale of our products in China. The legal system of



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China relating to foreign trade is relatively new and continues to evolve. There can be no certainty as to the application of its laws and regulations in
particular instances. Enforcement of existing laws or agreements may be sporadic and implementation and interpretation of laws inconsistent. Moreover, there is a high degree of fragmentation among regulatory authorities resulting in uncertainties as
to which authorities have jurisdiction over particular parties or transactions.

We are subject to many environmental laws and regulations that could
affect our operations or result in significant expenses.

Increasingly stringent environmental regulations restrict the amount and types of pollutants
that can be released from our operations into the environment. While the cost of compliance with environmental laws has not had a material adverse effect on our results of operations historically, compliance with these and any future regulations
could require significant capital investments in pollution control equipment or changes in the way we make our products. In addition, because we use hazardous and other regulated materials in our manufacturing processes, we are subject to risks of
liabilities and claims, regardless of fault, resulting from our use, transportation, emission, discharge, storage, recycling or disposal of hazardous materials, including personal injury claims and civil and criminal fines, any of which could be
material to our cash flow or earnings. For example:



| |  |  | we currently are remediating contamination at some of our operating plant sites;
| | - |  | --------------------------------------------------------------------------------



| |  |  | we have been identified as a potentially responsible party at a number of Superfund sites where we (or our predecessors) disposed of wastes in the past; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | significant regulatory and public attention on the impact of semiconductor operations on the environment may result in more stringent regulations, further
increasing our costs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Although most of our known environmental liabilities are covered by indemnification agreements with Raytheon
Company, National Semiconductor, Samsung Electronics and Intersil Corporation, these indemnities are limited to conditions that occurred prior to the consummation of the transactions through which we acquired facilities from those companies.
Moreover, we cannot assure you that their indemnity obligations to us for the covered liabilities will be available, or, if available, adequate to protect us.

We are a leveraged company with a ratio of debt to equity at April 1, 2007 of approximately 0.5 to 1, which could adversely affect our financial health and limit our ability to grow and compete.

At April 1, 2007, we had total debt of $591.6 million and the ratio of this debt to equity was approximately 0.5 to 1. On June 22, 2006 we reduced the
outstanding balance on the term loan by $50 million to $394 million. On June 26, 2006 we refinanced the existing senior credit facility consisting of a term loan of $375 million, replacing the previous $450 million term loan and replacing the
previous $180 million revolving line of credit with a $100 million revolving line of credit, of which $79.4 million remained undrawn as of April 1, 2007, adjusted for outstanding letters of credit. In addition, there is a $200 million
uncommitted incremental term loan feature. Despite reducing some of our long-term debt, we continue to carry substantial indebtedness which could have important consequences. For example, it could:



| |  |  | require us to dedicate a portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, research and development efforts and other general corporate purposes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increase the amount of our interest expense, because certain of our borrowings (namely borrowings under our senior credit facility) are at variable rates of
interest, which, if interest rates increase, could result in higher interest expense;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increase our vulnerability to general adverse economic and industry conditions;
| | - |  | -------------------------------------------------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | restrict us from making strategic acquisitions, introducing new technologies or exploiting business opportunities;
| | - |  | ------------------------------------------------------------------------------------------------------------------



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| |  |  | make it more difficult for us to satisfy our obligations with respect to the instruments governing our indebtedness;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | place us at a competitive disadvantage compared to our competitors that have less indebtedness; or
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | limit, along with the financial and other restrictive covenants in our debt instruments, among other things, our ability to borrow additional funds, dispose of
assets, repurchase stock or pay cash dividends. Failing to comply with those covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of
operations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Despite current indebtedness levels, we may still be able to incur substantially more indebtedness. Incurring more
indebtedness could exacerbate the risks described above.

We may be able to incur substantial additional indebtedness in the future. The indenture
governing Fairchild Semiconductor Corporations outstanding 5% Convertible Senior Subordinated Notes Due 2008 does not limit the amount of additional debt that we may incur. Although the terms of the credit agreement relating to the senior
credit facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, additional indebtedness incurred in compliance with
these restrictions or upon further amendment of the credit facility could be substantial. The senior credit facility, from June 2006, permits borrowings of up to $100 million in revolving loans under the line of credit and up to $200 million under
the uncommitted incremental term loan feature, in addition to the outstanding $375 million term loan that is currently outstanding under that facility. As of April 1, 2007, adjusted for outstanding letters of credit, we had up to $79.4 million
available under the revolving loan portion of the senior credit facility. If new debt is added to our subsidiaries current debt levels, the substantial risks described above would intensify.

We may not be able to generate the necessary amount of cash to service our indebtedness, which may require us to refinance our indebtedness or default on our
scheduled debt payments. Our ability to generate cash depends on many factors beyond our control.

Our historical financial results have been, and our
future financial results are anticipated to be, subject to substantial fluctuations. We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will
be realized on schedule or at all, or that future borrowings will be available to us under our senior credit facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. In addition, because our senior
credit facility has variable interest rates, the cost of those borrowings will increase if market interest rates increase. If we are unable to meet our expenses and debt obligations, we may need to refinance all or a portion of our indebtedness on
or before maturity, sell assets or raise equity. We cannot assure you that we would be able to refinance any of our indebtedness, sell assets or raise equity on commercially reasonable terms or at all, which could cause us to default on our
obligations and impair our liquidity. Restrictions imposed by the credit agreement relating to our senior credit facility restrict or prohibit our ability to engage in or enter into some business operating and financing arrangements, which could
adversely affect our ability to take advantage of potentially profitable business opportunities.

The operating and financial restrictions and covenants in
the credit agreement relating to our senior credit facility may limit our ability to finance our future operations or capital needs or engage in other business activities that may be in our interests. The credit agreement imposes significant
operating and financial restrictions that affect our ability to incur additional indebtedness or create liens on our assets, pay dividends, sell assets, engage in mergers or acquisitions, make investments or engage in other business activities.
These restrictions could place us at a disadvantage relative to competitors not subject to such limitations.

In addition, the senior credit facility also
requires us to maintain specified financial ratios. Our ability to meet those financial ratios can be affected by events beyond our control, and we cannot assure you that we will meet those ratios. As of April 1, 2007, we were in compliance
with these ratios. A breach of any of these covenants, ratios or restrictions could result in an event of default under the senior credit facility. Upon the occurrence of an event of default under the senior credit facility, the lenders could elect
to declare all amounts outstanding under the senior credit facility, together with accrued interest, to be immediately due and payable. If we were unable to repay those amounts, the lenders could proceed against our assets, including any collateral
granted to them to secure the indebtedness. If the lenders under the senior credit facility accelerate the payment of the indebtedness, we cannot assure you that our assets would be sufficient to repay in full that indebtedness and our other
indebtedness.



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|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

On
February 15, 2007, we sold a total of 359,578 shares of common stock to three executives of a subsidiary and their designees in exchange for total consideration of $6.5 million. The sales were made pursuant to the exemption from registration
under the Securities Act of 1933, as amended, provided by Regulation D under that act.

The following table provides information with respect to purchases
made by the company of its own common stock during the first quarter of 2007.



|                   |  |                                               |  |                             |       |                                                                               |   |                                                                                                          |  
|------------------ |  | --------------------------------------------- |  | --------------------------- | ----- | ----------------------------------------------------------------------------- | - | -------------------------------------------------------------------------------------------------------- | -
|Period             |  | Total Number ofShares (or Units)Purchased (1) |  | Average PricePaid per Share |       | Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs |   | Maximum Number (orApproximate Dollar Value)of Shares that May Yet BePurchased Under the Plansor
Programs
|January 1, 2007   |  |                                               |  |                             |       |                                                                               |   |                                                                                                          |  
|January 28, 2007   |  |                                              |  | $                           |      |                                                                               |  |                                                                                                          | 
|January 29, 2007  |  |                                               |  |                             |       |                                                                               |   |                                                                                                          |  
|February 25, 2007  |  |                                              |  |                             |      |                                                                               |  |                                                                                                          | 
|February 26, 2007 |  |                                               |  |                             |       |                                                                               |   |                                                                                                          |  
|April 1, 2007      |  | 345,300                                       |  |                             | 18.73 |                                                                               |  |                                                                                                          | 
|                   |  |                                               |  |                             |       |                                                                               |   |                                                                                                          |  
|Total              |  | 345,300                                       |  | $                           | 18.73 |                                                                               |  |                                                                                                          | 
|                   |  |                                               |  |                             |       |                                                                               |   |                                                                                                          |  

---

|(1) | All of these shares were purchased by the company in open-market transactions to satisfy its obligations to deliver shares under the companys employee stock purchase plan or
for other Board of Director authorized transactions. The purchase of these shares satisfied the conditions of the safe harbor provided by the Securities Exchange Act of 1934.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 6. | Exhibits
|------- | --------



|            |  |                                                                                                                                      
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                          
|31.01       |  | Section 302 Certification of the Chief Executive Officer.                                                                            
|            | 
|31.02       |  | Section 302 Certification of the Chief Financial Officer.                                                                            
|            | 
|32.01       |  | Certification, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Mark S. Thompson.
|            | 
|32.02       |  | Certification, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Mark S. Frey.    

Items 3, 4, and 5 are not applicable and have been omitted.



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.



|                   |  |  |  |                                            
|------------------ |  |  |  | -------------------------------------------
|                   |  |  |  | Fairchild Semiconductor International, Inc.
|                   |  | 
|Date: May 11, 2007 |  |  |  | /s/ Robin A. Sawyer                        
|                   |  |  |  | Robin A. Sawyer                            
|                   |  |  |  | Vice President, Corporate Controller       
|                   |  |  |  | (Principal Accounting Officer)             



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