http://www.zarlink.com
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

            [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 28, 2001

                                       OR

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

                          Commission file number 1-8139

                           ZARLINK SEMICONDUCTOR INC.
             (Exact name of registrant as specified in its charter)

                    CANADA                                NONE
         (State or other jurisdiction of            (I.R.S. Employer
          incorporation or organization)           Identification No.)

                 400 March Road
             Ottawa, Ontario, Canada                     K2K 3H4

              (Address of principal                   (Postal Code)
                executive offices)

       Registrant's telephone number, including area code: (613) 592-0200

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 ( )

The number of common shares outstanding as at February 1, 2002 was 126,905,044.


<PAGE>

                           ZARLINK SEMICONDUCTOR INC.

                                      INDEX

PART I. FINANCIAL INFORMATION (Unaudited)

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


            Consolidated Balance Sheets -
            December 28, 2001 and March 30, 2001 ..........................    3

            Consolidated Statements of Loss-
            Three months ended December 28, 2001 and December 29, 2000 ....    4
            Nine months ended December 28, 2001 and December 29, 2000 .....    4

            Consolidated Statements of Cash Flows -
            Nine months ended December 28, 2001 and December 29, 2000 .....    5

            Notes to the Consolidated Financial Statements ................    6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION  AND RESULTS OF OPERATIONS ..............................   13

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
        MARKET RISK .......................................................   21

PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...............   21

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................................   21


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION (Unaudited)

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                           Zarlink Semiconductor Inc.
                           CONSOLIDATED BALANCE SHEETS
                    (in millions of U.S. dollars, U.S. GAAP)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                Dec. 28,       March 30,
                                                                  2001           2001
                                                               ---------       ---------
<S>                                                            <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents                                    $  101.5        $  179.9
  Short-term investments                                           27.3              --
  Accounts receivable                                              29.0            54.2
  Inventories                                                      44.9            84.9
  Investment tax credits recoverable                                 --            10.0
  Deferred income tax assets                                        9.1             0.8
  Prepaid expenses and other                                       13.4             8.1
                                                               --------        --------
                                                                  225.2           337.9
                                                               --------        --------
Fixed assets:
  Cost                                                            380.3           361.9
  Accumulated amortization                                       (278.8)         (264.1)
                                                               --------        --------
                                                                  101.5            97.8
                                                               --------        --------
Long-term receivables                                              15.4            10.0
Long-term investments                                              15.9            15.7
Acquired intangible assets                                           --             3.9
Other assets                                                        1.9             3.6
                                                               --------        --------

                                                               $  359.9        $  468.9
                                                               ========        ========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued liabilities                     $   70.9        $   93.2
  Income and other taxes payable                                    3.9             5.1
  Deferred income tax liabilities                                    --             4.6
  Deferred revenue                                                  3.9             3.7
  Current portion of long-term debt                                 3.7             5.8
                                                               --------        --------
                                                                   82.4           112.4
Long-term debt                                                      1.9             4.8
Pension liability                                                  11.2            10.9
Deferred income tax liabilities                                    14.4             4.6
                                                               --------        --------
                                                                  109.9           132.7
                                                               --------        --------
Redeemable preferred shares                                        20.6            21.4
                                                               --------        --------
Shareholders' equity:
  Common shares                                                   687.6           682.3
  Deficit                                                        (500.2)         (400.2)
  Accumulated other comprehensive income                           42.0            32.7
                                                               --------        --------
                                                                  229.4           314.8
                                                               --------        --------
                                                               $  359.9        $  468.9
                                                               ========        ========
</TABLE>

        (See accompanying notes to the consolidated financial statements)


                                       3
<PAGE>

                           Zarlink Semiconductor Inc.
                         CONSOLIDATED STATEMENTS OF LOSS
        (in millions of U.S dollars, except per share amounts, U.S. GAAP)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                            Three Months Ended          Nine Months Ended
                                                                           Dec. 28,     Dec. 29,       Dec. 28,    Dec. 29,
                                                                            2001          2000           2001        2000
                                                                          ---------    ---------      ---------   ---------
<S>                                                                       <C>          <C>            <C>         <C>
Revenue                                                                   $    51.7    $   112.1      $   170.0   $   367.8
Cost of revenue                                                                30.5         53.0          126.6       175.8
                                                                          ---------    ---------      ---------   ---------
Gross margin                                                                   21.2         59.1           43.4       192.0
                                                                          ---------    ---------      ---------   ---------

Expenses:
  Research and development                                                     18.4         21.6           57.4        56.8
  Selling and administrative                                                   13.9         26.4           44.7        68.3
  Stock compensation                                                            3.8          2.0           10.1         3.1
  Special charge                                                                 --           --           34.6          --
  Amortization of acquired intangibles                                          2.2         22.7            4.4        43.2
                                                                          ---------    ---------      ---------   ---------
                                                                               38.3         72.7          151.2       171.4
                                                                          ---------    ---------      ---------   ---------
Operating income (loss) from continuing operations                            (17.1)       (13.6)        (107.8)       20.6
Equity loss from investment in Optenia, Inc.                                   (0.8)          --           (2.2)         --
Other income (expense)                                                         (0.3)         0.4            8.5         0.1
Debt issue costs                                                                 --         --               --        (0.4)
                                                                          ---------    ---------      ---------   ---------
Income (loss) from continuing operations before income taxes                  (18.2)       (13.2)        (101.5)       20.3
Income tax recovery (expense)                                                  (0.1)        (3.1)           3.0       (19.5)
                                                                          ---------    ---------      ---------   ---------
Net income (loss) from continuing operations                                  (18.3)       (16.3)         (98.5)        0.8
                                                                          ---------    ---------      ---------   ---------
Loss from discontinued operations                                                --         (5.6)            --        (5.7)
                                                                          ---------    ---------      ---------   ---------

Net loss for the period                                                   $   (18.3)   $   (21.9)     $   (98.5)  $    (4.9)
                                                                          =========    =========      =========   =========

Net loss attributable to common shareholders after preferred
  share dividends                                                         $   (18.8)   $   (22.4)     $  (100.0)  $    (6.4)
                                                                          =========    =========      =========   =========

Net loss per common share from continuing operations:
      Basic                                                               $   (0.15)  $    (0.14)    $    (0.80)      (0.01)
                                                                          =========    =========      =========   =========
      Diluted                                                             $   (0.15)  $    (0.14)    $    (0.80)      (0.01)
                                                                          =========    =========      =========   =========

Net loss per common share:
      Basic                                                               $   (0.15)  $    (0.18)    $    (0.80)      (0.05)
                                                                          =========    =========      =========   =========
      Diluted                                                             $   (0.15)  $    (0.18)    $    (0.80)      (0.05)
                                                                          =========    =========      =========   =========

Weighted average number of common shares outstanding
  (millions):
      Basic                                                                   126.0        124.4          125.4       119.9
                                                                          =========    =========      =========   =========
      Diluted
                                                                              128.4        126.0          127.5       120.8
                                                                          =========    =========      =========   =========
</TABLE>

        (See accompanying notes to the consolidated financial statements)


                                       4
<PAGE>

                           Zarlink Semiconductor Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    (in millions of U.S. dollars, U.S. GAAP)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                                  Dec. 28,       Dec. 29,
                                                                                    2001           2000
                                                                                  --------       --------
<S>                                                                               <C>            <C>
CASH PROVIDED BY (USED IN)
Operating activities:
  Net loss for the period                                                         $  (98.5)      $   (4.9)
  Amortization of capital and other assets                                            20.2          101.0
  Investment tax credits                                                                --            4.8
  Stock compensation expense                                                          10.1            3.1
  Loss on disposal of capital assets                                                   0.3            1.5
  Equity loss from investment                                                          2.2             --
  Deferred income taxes                                                               (2.7)           4.8
  Change in pension liability                                                          0.4           (2.4)
  Decrease (increase) in working capital:
      Accounts receivable                                                             25.5           13.1
      Inventories                                                                     40.3           (4.0)
      Accounts payable and accrued liabilities                                       (17.7)         (19.1)
      Deferred revenue                                                                  --           (3.3)
      Other                                                                           (2.6)          (7.1)
                                                                                  --------       --------
    Total                                                                            (22.5)          87.5
                                                                                  --------       --------

Investing activities:
  Change in short-term investments                                                   (28.0)          26.4
  Expenditures for capital and other assets                                          (27.3)         (59.1)
  Proceeds from disposal of capital assets                                             0.2            1.0
  Proceeds from repayment of note receivable                                           4.4             --
  Acquisitions                                                                          --            6.9
  Proceeds from sale of prior year discontinued operations, net                        1.3             --
  Increase in long-term investments                                                   (2.0)          (5.1)
                                                                                  --------       --------
     Total                                                                           (51.4)         (29.9)
                                                                                  --------       --------

Financing activities:
  Repayment of long-term debt                                                         (0.9)         (11.1)
  Repayment of capital lease liabilities                                              (4.2)         (17.6)
  Dividends on preferred shares                                                       (1.5)          (1.5)
  Issue of common shares, net                                                          3.3            4.8
  Repurchase of common and preferred shares                                           (0.7)          (0.3)
                                                                                  --------       --------
     Total                                                                            (4.0)         (25.7)
                                                                                  --------       --------

Effect of currency translation on cash                                                (0.5)          (3.4)
                                                                                  --------       --------

Increase (decrease) in cash and cash equivalents                                     (78.4)          28.5

Cash and cash equivalents, beginning of period                                       179.9          134.5
                                                                                  --------       --------

Cash and cash equivalents, end of period                                          $  101.5       $  163.0
                                                                                  ========       ========
</TABLE>

        (See accompanying notes to the consolidated financial statements)


                                       5
<PAGE>

                           ZARLINK SEMICONDUCTOR INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
       (in millions of U.S. dollars, except per share amounts, U.S. GAAP)
                                   (Unaudited)

1. Change in reporting currency


      Zarlink  Semiconductor Inc. (the "Company") has historically  prepared and
      filed its financial  statements in Canadian dollars and in accordance with
      Canadian  Generally  Accepted   Accounting   Principles  ("GAAP")  with  a
      reconciliation  to United  States  (U.S.) GAAP.  During the quarter  ended
      December 28, 2001,  the Company  adopted the United  States  dollar as its
      reporting   currency  for  presentation  of  its  consolidated   financial
      statements.  Historical consolidated financial statements were restated in
      accordance  with U.S. GAAP. In addition,  the Company also began preparing
      and reporting complete financial statements in accordance with U.S. GAAP.


      The  Company  made  this  change to  enhance  its  communication  with its
      shareholders,  customers,  and suppliers using the currency and accounting
      rules that are more familiar to these groups.  This  presentation  is also
      more  consistent  with the  presentation  of the financial  results of its
      industry counterparts and competitors.

      There has been no change in the  functional  currencies  used in preparing
      these unaudited consolidated financial statements.

2. Name change

      On July 25,  2001,  the  Company  formally  changed  its name  from  Mitel
      Corporation to Zarlink  Semiconductor  Inc.  ("Zarlink")  after  receiving
      shareholder approval at its annual general  shareholders'  meeting on that
      date. In connection with the name change,  the Company began trading under
      the  symbol  "ZL" on the New York Stock  Exchange  and the  Toronto  Stock
      Exchange on  September  7, 2001.  All reports  filed by the Company  under
      Section 13 or 15 (d) of the Securities Exchange Act, as amended,  prior to
      September 7, 2001 were filed under the name "Mitel Corporation".

3. Basis of presentation

      In the opinion of  management of the Company,  the unaudited  consolidated
      financial statements reflect all adjustments, which consist only of normal
      and  recurring  adjustments,  necessary  to present  fairly the  financial
      position at December 28, 2001 and the results of  operations  and its cash
      flows for the three and nine month  periods  ended  December  28, 2001 and
      December 29, 2000, in accordance  with U.S. GAAP,  applied on a consistent
      basis.

      These  financial  statements  should  be  read  in  conjunction  with  the
      financial  statements and notes thereto  contained in the Company's Annual
      Report on Form 10-K for the year  ended  March  30,  2001 and the  Current
      Report on Form-8K dated December 28, 2001. The Company's  fiscal  year-end
      is the last Friday in March.

      Due to the cyclical nature of the business,  the results of operations for
      the periods presented are not necessarily  indicative of the results to be
      expected for the full year.

      All information is presented in U.S. dollars, unless otherwise stated.


                                       6
<PAGE>

4. Inventories

                                                     Dec. 28,     March 30,
                                                       2001         2001
                                                     --------     ---------
      Raw materials                                  $   4.3       $  12.4
      Work-in-process                                   25.0          46.3
      Finished goods                                    15.6          26.2
                                                     -------       -------
                                                     $  44.9       $  84.9
                                                     =======       =======

      During  the  first  quarter  ended  June  29,  2001,  and in  light of the
      semiconductor industry-wide slow down and higher channel inventories,  the
      Company recorded an excess  inventory charge to cost of revenue  amounting
      to  $29.1  for  inventories  estimated  to be  beyond  its  needs  for the
      following 12 months.

5. Acquired Intangible Assets

      The balance of the acquired  intangibles  related to developed  technology
      amounting  to $1.6 was  written  down to nil in the  third  quarter  ended
      December  28,  2001.  The total write down of $1.6 was  included  with the
      regular  amortization  of  acquired  intangibles  of  $0.6  on the  income
      statement in the nine months ended  December 28, 2001. In addition,  fully
      amortized  acquired  intangible  assets of $172.7  were  removed  from the
      accounts of the Company at December 28, 2001.

6. Accounts payable and accrued liabilities

                                                            Dec. 28,   March 30,
                                                              2001       2001
                                                            --------   ---------

      Trade payables                                         $   6.1   $  20.5
      Employee-related payables                                  9.4      11.1
      Goods received not invoiced                                0.1       8.7
      Provision for disposal of discontinued operations         10.7      12.8
      Restructuring provisions (note 10)                        12.0       6.7
      Other accrued liabilities                                 32.6      33.4

                                                             -------   -------
                                                             $  70.9   $  93.2
                                                             =======   =======

7. Redeemable Preferred Shares

      There were 35,200  preferred  shares  repurchased and cancelled during the
      nine  months  ended  December  28,  2001  for cash  consideration  of $0.6
      (Cdn$0.9).  As at  December  28,  2001,  there were  1,558,700  redeemable
      preferred shares issued and outstanding (March 30, 2001 - 1,593,900).

      During  the third  quarter,  a $0.32  (Cdn$0.50)  per share  dividend  was
      declared and paid on the redeemable preferred shares.

8. Capital stock:

      a)                                            Dec. 28,         March 30,
                                                      2001             2001
                                                   -----------      -----------
      Shares outstanding:
        Common shares                              126,775,462      126,136,799

      The Company has not declared or paid any dividends on its common shares.


                                       7
<PAGE>

         On June 7, 2001,  the Company  announced  its intention to continue its
         normal course  issuer bid program for up to 6,308,907  common shares (5
         percent of 126,178,148  common shares issued and outstanding at May 28,
         2001)  between June 9, 2001 and June 8, 2002.  All  repurchased  shares
         will be  cancelled.  In the nine months ended  December  28,  2001,  no
         shares were repurchased under the normal course issuer bid program.

      b) A summary of the Company's stock option activity is as follows:

                                                  Nine Months Ended
                                               Dec. 28,        Dec. 29,
                                                 2001            2000
                                             -----------      -----------
      Outstanding options:
      Balance, beginning of period             9,464,693        9,017,262
      Granted                                  2,125,550        2,868,225
      Exercised                                 (638,663)      (1,033,377)
      Forfeited                                 (983,599)        (493,330)
                                             -----------      -----------
      Balance, end of period                   9,967,981       10,358,780
                                             ===========      ===========

      At a Special  Meeting  of  Shareholders  held on  December  7,  2001,  the
      Company's  shareholders  approved  certain  amendments  to the 1991  Stock
      Option Plan for Key Employees  and  Non-Employee  Directors,  including an
      increase in the maximum  number of stock options  granted or available for
      grant to 12 percent of outstanding common shares.

      Available for grant at December 28, 2001 were 5,064,552  (March 30, 2001 -
      1,979,470) common shares.  The exercise price on outstanding stock options
      ranges  from  $1.41 to $23.41  (Cdn$2.25  to  Cdn$37.35)  per  share  with
      exercise periods extending to January 2008.

      c)    The net income per common share figures were calculated based on net
            income after the  deduction of preferred  share  dividends and using
            the weighted monthly average number of shares outstanding during the
            respective  periods.  Diluted  earnings  per  share is  computed  in
            accordance  with the treasury  stock method and based on the average
            number of common shares and dilutive common share equivalents.

<TABLE>
<CAPTION>
                                                                                  Three Months Ended     Nine Months Ended
                                                                                  Dec. 28,   Dec. 29,   Dec. 28,   Dec. 29,
                                                                                   2001        2000       2001       2000
                                                                                  --------   --------   --------   --------
<S>                                                                                <C>        <C>        <C>        <C>
      Weighted average shares for basic EPS (millions):                            126.0      124.4      125.4      119.9
      Weighted average shares on conversion of stock options (millions)              1.7         --        1.4         --
      Weighted average issued shares subject to restrictions (millions)              0.7        1.6        0.7        0.9
                                                                                   -----      -----      -----      -----
      Adjusted weighted average shares and share equivalents (millions)            128.4      126.0      127.5      120.8
                                                                                   =====      =====      =====      =====
</TABLE>

      The  following   options  were  excluded  in  the   computation  of  share
      equivalents  because the  options'  exercise  price  exceeded  the average
      market price of the common shares:

      i)    Options  outstanding for the three months ended December 28, 2001 to
            purchase  2,996,080  shares of common  stock at an average  price of
            $11.71 (Cdn$18.69) per share;

      ii)   Options  outstanding  for the nine months ended December 28, 2001 to
            purchase  3,086,580  shares of common  stock at an average  price of
            $11.64 (Cdn$18.57) per share;

      iii)  Options  outstanding  for the nine months ended December 29, 2000 to
            purchase  394,250  shares of  common  stock at an  average  price of
            $21.41 (Cdn$32.12) per share.


                                       8
<PAGE>

9. Comprehensive income (loss)

      The components of comprehensive income (loss) were as follows:

<TABLE>
<CAPTION>
                                                                       Three Months Ended        Nine Months Ended
                                                                      Dec. 28,     Dec. 29,     Dec. 28,     Dec. 29,
                                                                        2001         2000         2001         2000
                                                                      --------     --------     --------     --------
<S>                                                                   <C>          <C>          <C>          <C>
 Net loss for the period                                              $ (18.3)     $ (21.9)     $ (98.5)     $ (4.9)
 Other comprehensive income:
   Unrealized net derivative gains on cash flow hedges                    1.9           --          1.4          --
   Change in cumulative translation adjustment                            4.0          3.6          7.9         2.9
                                                                      -------      -------      -------      ------
Comprehensive loss for the period                                     $ (12.4)     $ (18.3)     $ (89.2)     $ (2.0)
                                                                      =======      =======      =======      ======
</TABLE>

      The unrealized net derivative gain on cash flow hedges was attributable to
      the change in the value of outstanding  foreign currency forward contracts
      related to the Company's hedging program that were designated as cash flow
      hedges.

      During the third quarter of Fiscal 2002,  the Company  recorded a $0.1 net
      reduction  in  the  quarter's  earnings,  representing  a  loss  on  hedge
      ineffectiveness.  During the nine months  ended  December  28,  2001,  the
      Company recorded a $1.5 net reduction in the earnings, representing a loss
      on hedge ineffectiveness.

      The Company  also  recorded a gain to other  comprehensive  income for the
      third quarter of $1.9 which was attributable to the change in the value of
      outstanding  foreign currency forward  contracts  related to the Company's
      hedging program that were designated as cash flow hedges.

      The components of accumulated comprehensive income was as follows:

<TABLE>
<CAPTION>
                                                               Three Months Ended         Nine Months Ended
                                                              Dec. 28,     Dec. 29,     Dec. 28,     Dec. 29,
                                                                2001         2000          2001        2000
                                                              --------     --------     --------     --------
<S>                                                           <C>          <C>          <C>          <C>
Balance, beginning of period                                  $  36.1      $   6.6      $  32.7      $   7.3
                                                              -------      -------      -------      -------
Unrealized net derivative gain on cash flow hedges                1.9           --          1.4           --
                                                              -------      -------      -------      -------
Movements in exchange rates -
     Canadian Dollar                                              5.2         (1.4)         7.0         10.4
     United Kingdom Pound Sterling                               (0.8)         4.3          1.5         (6.2)
     Swedish Krona                                               (0.4)         0.3         (1.0)        (0.9)
     Other currencies                                            --            0.4          0.4         (0.4)
                                                              -------      -------      -------      -------
Change in cumulative translation account                          4.0          3.6          7.9          2.9
                                                              -------      -------      -------      -------
Balance, end of period                                        $  42.0      $  10.2      $  42.0      $  10.2
                                                              =======      =======      =======      =======
</TABLE>

10. Special charge

      On May 10, 2001, the Company's Board of Directors approved a restructuring
      program to reduce the Company's manufacturing costs and operating expenses
      in  response  to  adverse  market  conditions.  Accordingly,  the  Company
      recorded a pre-tax  special charge of $34.6 related to that program in the
      quarter  ended  June 29,  2001.  The  special  charge was  comprised  of a
      workforce  reduction charge of approximately  $26.7 primarily  relating to
      the cost of severance and benefits for the  termination  of  approximately
      439  employees  throughout  the world in Fiscal  2002.  In  addition,  the
      special  charge  included  the cost of lease and contract  settlements  of
      approximately   $7.9.  As  at  December  28,  2001,  the  balance  of  the
      restructuring   provision   included  in  accounts   payable  and  accrued
      liabilities amounted to $12.0 (March 30, 2001 - $6.7).


                                       9
<PAGE>

11. Information on business segments

      The Company's reportable business segments from continuing  operations are
      comprised of the  Communications and Medical groups.  Reportable  segments
      are  business  units that offer  different  products  and services and are
      managed separately because of these differences.

      The  Communications   business   specializes  in  broadband   connectivity
      solutions  over wired,  wireless  and optical  media.  The  Communications
      business includes network access products that provide connectivity to the
      network's  core  backbone  such as feeder,  aggregation  and  transmission
      applications  and those  that  address  the  multi-protocol  physical  and
      network layers.  In addition,  the  Communications  business includes user
      access products that allow users to connect to the network. These products
      include  wireless  and  infotainment   applications.   The  Communications
      business also includes  custom  products that involve the design of custom
      applications-specific  integrated  circuits  ("ASICs")  as well as  custom
      foundry services for external parties.

      The Medical  business  provides ASIC  solutions for  applications  such as
      pacemakers, hearing aids and portable instruments.


      The  Company  evaluates  the  performance  of each  business  segment  and
      allocates resources based on operating income from continuing  operations,
      which  excludes  any  intersegment  sales of products  and  services.  The
      Company does not allocate amortization of intangibles,  stock compensation
      expense,  special charges or gains, interest income or interest expense or
      income taxes to its reportable segments. In addition, total assets are not
      allocated to each  segment;  however,  depreciation  of capital  assets is
      allocated  to the  segments  based  on the  asset  usage.  The  accounting
      policies of the  reportable  segments are the same as those of the Company
      and as reflected in the consolidated financial statements.

<TABLE>
<CAPTION>
                                                                          Unallocated
Three Months Ended December 28, 2001          Communications     Medical     Costs         Total
                                              --------------     -------  -----------     -------
<S>                                                <C>           <C>         <C>          <C>
Revenue                                            $  42.7       $  9.0      $   --       $  51.7
Amortization of buildings
  and equipment                                        5.2          0.1          --           5.3
Amortization of acquired intangibles                    --           --         2.2           2.2
Stock compensation expense                              --           --         3.8           3.8
Segment's operating income (loss)
  from continuing operations                         (12.3)         1.2        (6.0)        (17.1)
</TABLE>

<TABLE>
<CAPTION>
                                                                          Unallocated
Three Months Ended December 29, 2000          Communications     Medical     Costs         Total
                                              --------------     -------  -----------     -------
<S>                                               <C>            <C>         <C>          <C>
      Revenue                                     $  104.0       $  8.1      $    --      $  112.1
      Amortization of buildings
        and equipment                                 14.3          0.1           --          14.4
      Amortization of acquired intangibles              --           --         22.7          22.7
      Stock compensation expense                        --           --          2.0           2.0
      Segment's operating income (loss)
        from continuing operations                    12.2         (1.1)       (24.7)        (13.6)
</TABLE>


                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                                           Unallocated
Nine Months Ended December 28, 2001           Communications    Medical       Costs         Total
                                              --------------    -------    -----------     --------
<S>                                               <C>           <C>           <C>          <C>
Revenue                                           $  144.2      $  25.8       $   --       $  170.0
Amortization of buildings and equipment               15.6          0.3           --           15.9
Amortization of acquired intangibles                    --           --          4.4            4.4
Excess inventory charge to cost of sales                --           --         29.1           29.1
Stock compensation expense                              --           --         10.1           10.1
Special charge                                          --           --         34.6           34.6
Segment's operating income (loss) from
continuing operations                                (35.9)         6.3        (78.2)        (107.8)
</TABLE>

<TABLE>
<CAPTION>
                                                                           Unallocated
Nine Months Ended December 29, 2000           Communications    Medical       Costs         Total
                                              --------------    -------    -----------     --------
<S>                                                <C>           <C>          <C>           <C>
Revenue                                            $ 343.9       $ 23.9       $   --        $ 367.8
Amortization of buildings and equipment               43.0          0.5           --           43.5
Amortization of acquired intangibles                    --           --         43.2           43.2
Stock compensation expense                              --           --          3.1            3.1
Segment's operating income from continuing
operations                                            65.9          1.0        (46.3)          20.6
</TABLE>

12. Subsequent events

      (a) Sale of Bromont Foundry

      On January 21, 2002, the Company signed a definitive  agreement with Dalsa
      Corporation  ("Dalsa")  to sell its foundry  facility in Bromont,  Quebec,
      Canada,  and the related  inventories  and business to Dalsa.  The Company
      will  receive  $13.5  (Cdn$21.6)  in cash  proceeds and will retain a 19.9
      percent interest in the Bromont business.  The closing of the transaction,
      which is subject to the satisfaction of customary conditions,  is expected
      to occur in February 2002.

      The Company  expects to record a net loss when  realized on closing in the
      fourth  quarter of Fiscal 2002.  The loss,  net of  transaction  costs and
      taxes, is expected to approximate $5.0.

      (b) Sale of Building

      In connection with the sale of the Systems  business on February 16, 2001,
      and the associated real estate  agreement,  the Company completed the sale
      of its  recently  constructed  world  headquarters  on January 10, 2002 to
      Mitel Research Park Corporation for cash proceeds of $7.4 and entered into
      an operating  lease for a period of ten years.  The excess of the building
      cost and fair value over the sale  proceeds  amounted  to $2.8 and will be
      capitalized as leasehold improvements to be amortized over the life of the
      operating lease.

13. Recently issued accounting standards

      The  Financial   Accounting  Standards  Board  has  issued  Statements  of
      Financial Accounting  Standards ("SFAS") No. 141, "Business  Combinations"
      and No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires
      all business combinations  subsequent to June 30, 2001 to be accounted for
      under the purchase method of accounting.  The pooling-of-interests  method
      is  no  longer  allowed.   SFAS  No.  142  requires  that  upon  adoption,
      amortization  of goodwill will cease and,  instead,  the carrying value of
      goodwill  will be evaluated  for  impairment  on at least an annual basis.
      SFAS No. 142 is effective for fiscal years  beginning  after  December 15,
      2001. The Company is evaluating the impact of adoption of these  standards
      and has  not yet  determined  the  effect  of  adoption  on its  financial
      position and results of operations.


                                       11
<PAGE>

      In October 2001,  the Financial  Accounting  Standards  Board (the "FASB")
      issued  SFAS No.  144,  "Accounting  for the  Impairment  or  Disposal  of
      Long-Lived Assets" ("SFAS 144"), which addresses financial  accounting and
      reporting  for the  impairment  or disposal  of  long-lived  assets.  This
      Statement supersedes SFAS 121, and the accounting and reporting provisions
      of APB 30,  for the  disposal  of a segment  of a  business.  The  Company
      expects  to adopt  SFAD 144 in the first  quarter  of Fiscal  2003.  As at
      December  28,  2001,  the  Company had not  completed  its  assessment  to
      determine  the  impact of  adopting  this  pronouncement,  if any,  on its
      consolidated financial statements.

14. Comparative figures

      Certain of the Fiscal 2001 comparative  figures have been  reclassified to
      conform to the presentation adopted in Fiscal 2002.


                                       12
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS
(in millions of U.S. dollars,  except per share amounts,  and in accordance with
U.S. GAAP)

The Company changed its legal name to Zarlink Semiconductor Inc. after receiving
shareholder  approval at the Company's annual general  shareholders'  meeting on
July 25, 2001.  In  connection  with the name change,  the Company began trading
under the  symbol  "ZL" on the New York Stock  Exchange  and the  Toronto  Stock
Exchange on September 7, 2001.

Zarlink  is a global  provider  of  semiconductors  for  voice,  data and  video
networks and for medical applications.  Zarlink's  semiconductor  Communications
business specializes in broadband  connectivity  solutions over wired,  wireless
and  optical  media.   Zarlink's   semiconductor   Medical   business   provides
applications  specific  integrated  circuit ("ASIC")  solutions for applications
such as pacemakers, hearing aids and portable instruments. The Company presently
employs  approximately  1,900  people  worldwide,  including  approximately  500
designers.

The following  discussion and analysis  explains  trends in Zarlink's  financial
condition and results of operations for the three and nine months ended December
28, 2001,  compared with the  corresponding  periods in the previous year.  This
discussion is intended to help  shareholders  and other readers  understand  the
dynamics of Zarlink's  business  and the key factors  underlying  its  financial
results.  This discussion  should be read in conjunction  with the  consolidated
financial statements and notes thereto included elsewhere in this Form 10-Q, and
with the Company's audited  consolidated  financial statements and notes thereto
for the fiscal year ended March 30, 2001.

The Company has  historically  prepared and filed its  financial  statements  in
Canadian dollars and in accordance with Canadian Generally  Accepted  Accounting
Principles  ("GAAP") with a reconciliation  to United States (U.S.) GAAP. During
the quarter  ended  December 28,  2001,  the Company  adopted the United  States
dollar as its reporting currency for presentation of its consolidated  financial
statements.  Historical  consolidated  financial  statements  were  restated  in
accordance  with U.S.  GAAP. In addition,  the Company also began  preparing and
reporting complete financial statements in accordance with U.S. GAAP.

The Company made this change to enhance its communication with its shareholders,
customers and suppliers  using the currency and  accounting  rules that are more
familiar to these groups.  This  presentation  is also more  consistent with the
presentation  of  the  financial  results  of  its  industry   counterparts  and
competitors.

RESULTS OF CONTINUING OPERATIONS
--------------------------------

Business Segment Review
-----------------------

Zarlink's continuing  operations as a semiconductor company are comprised of two
reportable  business  segments - Communications  and Medical.  Zarlink sells its
products  through both direct and  indirect  channels of  distribution.  Factors
affecting the choice of distribution include,  among others,  end-customer type,
the level of product complexity,  the stage of product introduction,  geographic
presence and location of markets, and volume levels.

Zarlink's   Communications   business  specializes  in  broadband   connectivity
solutions over wired, wireless and optical media. Network access and user access
products  represent the two major growth  categories  in this business  segment.
Network  access  products  include  products  that  provide  connectivity  to  a
network's   core  backbone  such  as  feeder,   aggregation   and   transmission
applications and products that address the  multi-protocol  physical and network
layers. In simple terms, network access  semiconductor  products connect network
equipment together.  User access products allow users to connect to the network.
These  products   include   wireless  (for  example,   cellular   chipsets)  and
infotainment  applications  (for  example,  set top boxes and digital  TV).  The
Communications business also includes custom products that involve the design of
custom ASICs as well as custom foundry services for external parties.

On January 21, 2002 and subsequent to the end of the third quarter,  the Company
entered  into  an  agreement  with  Dalsa  Corporation   ("Dalsa"),  a  Canadian
semiconductor  company,  to sell its Bromont foundry business.  The Company will
receive cash  consideration of $13.5 (Cdn$21.6) and retain a 19.9 percent equity
interest in the


                                       13
<PAGE>

Bromont business.  The transaction is expected to close in the fourth quarter of
Fiscal 2002. As a result of the sale, the Company  expects to record a net loss,
after income taxes and certain  transaction costs, of $5.0 in the fourth quarter
of  Fiscal  2002.  Approximately  250  employees  affiliated  with  the  Bromont
operation will be  transferred  to Dalsa as part of the  agreement.  The Company
also entered into an agreement with Dalsa for the continued supply of integrated
circuits and wafers.

Zarlink's  Medical  business  provides ASIC solutions for  applications  such as
pacemakers, hearing aids and portable instruments.

<TABLE>
<CAPTION>
                                                                        Three Months Ended      Nine Months Ended
                                                                       Dec. 28,    Dec. 29,    Dec. 28,    Dec. 29,
(millions of US dollars, except per share amounts, U.S. GAAP)            2001        2000        2001        2000
                                                                       --------    --------    --------    --------
<S>                                                                    <C>         <C>         <C>         <C>
Consolidated revenue from continuing operations                        $  51.7     $ 112.1     $ 170.0     $ 367.8
Communications segment revenue                                            42.7       104.0       144.2       343.9
Medical segment revenue                                                    9.0         8.1        25.8        23.9

Operating income (loss) from continuing operations                       (17.1)      (13.6)     (107.8)       20.6
Communications segment operating income (loss)                           (12.3)       12.2       (35.9)       65.9
Medical segment operating income (loss)                                    1.2        (1.1)        6.2         1.0

Net income (loss) from continuing operations for the period              (18.3)      (16.3)      (98.5)        0.8
Net loss per common share from continuing operations -  Basic             (0.15)      (0.14)      (0.80)      (0.01)
Net loss for the period                                                  (18.3)      (21.9)      (98.5)       (4.9)
Net loss per common share - Basic                                         (0.15)      (0.18)      (0.80)      (0.05)
Weighted average common shares outstanding (millions) - Basic             126.0       124.4       125.4       119.9
</TABLE>

Beginning  late  in  the  third  quarter  of  Fiscal  2001,  the  communications
semiconductor  industry experienced a significant downturn in sales.  Management
believes that a variety of factors have combined to create market  uncertainties
that will likely  extend  through the  remainder of the 2002 fiscal year.  These
factors include a large inventory  build-up in the  telecommunications  and data
equipment  sectors,  a reduced  demand  for  infrastructure  equipment  from the
telephone companies, especially by Competitive Local Exchange Carriers ("CLECs")
in the United  States,  and a slowing of the growth  rate of the U.S.  and world
economies in general.

Revenue  from  continuing  operations  for the quarter  totaled  $51.7,  down 54
percent from $112.1 in the third quarter of Fiscal 2001.

Sales  continue  to be  adversely  affected by  customer  and channel  inventory
adjustments  in the  Company's  network and user access  business,  a trend that
began  during the  second  half of Fiscal  2001.  Reflecting  the  semiconductor
communications  industry in general,  the Company has experienced a reduction in
the orders normally booked and shipped in the same quarter (often referred to as
"turns"),  and order  push-outs and  cancellations,  both  resulting from market
uncertainties.  Since  the  fourth  quarter  of Fiscal  2001,  the  Company  has
experienced a significant  decrease in order push-outs and  cancellations,  with
customers  typically placing orders to meet their short-term  needs.  Management
believes that these adverse  industry trends will continue through the remainder
of Fiscal 2002.

During this slowdown, the Company continued to secure design wins and introduced
new products to the market.

In the nine months ended December 28, 2001, the Company recorded a net loss from
continuing  operations of $98.5, or $0.80 per share,  after excess inventory and
other  charges to cost of revenue of $29.1,  a pre-tax  restructuring  charge of
$34.6 and the amortization of acquired intangibles of $4.4. This compares to net
income from continuing  operations of $0.8, or a loss of $0.01 per share, in the
first nine months of Fiscal 2001, after the amortization of acquired intangibles
of $43.2.


                                       14
<PAGE>

Communications Segment

                                                  Nine Months Ended
                                               Dec. 28,      Dec. 29,
(millions of U.S. dollars, U.S. GAAP)            2001          2000
Communications revenue by product:             --------      --------
  Network Access                               $  63.3       $ 157.5
  User Access                                     31.3          71.1
  Custom Products                                 49.6         115.3
                                               -------       -------
Total Communications                           $ 144.2       $ 343.9
                                               =======       =======

Communications revenue mix by product:
  Network Access                                    44%           46%
  User Access                                       22%           21%
  Custom Products                                   34%           33%
                                               -------       -------
Total Communications                               100%          100%
                                               =======       =======
Communications operating income (loss)         $ (35.9)       $ 65.9
                                               =======       =======

Communications sales for the nine months ended December 28, 2001 reached $144.2,
representing a decrease of 58 percent over the $343.9 achieved in the first nine
months of Fiscal 2001. The decrease was principally due to the factors described
above.

In the first  nine  months of Fiscal  2002,  Communications  operating  loss was
$35.9,  compared to  operating  income of $65.9  recorded  last year in the same
period. The loss was due to the lower sales volumes across the segment.

Medical Segment

                                                  Nine Months Ended
                                               Dec. 28,      Dec. 29,
(millions of U.S. dollars, U.S. GAAP)            2001          2000
                                               --------      --------
Revenue:
Medical                                         $ 25.8        $ 23.9
Medical operating income                        $  6.2        $  1.0

For the nine months ended December 28, 2001,  sales reached $25.8,  an 8 percent
increase over the $23.9  achieved in the first nine months of Fiscal 2001 due to
growing  markets  and new  product  introductions.  For the first nine months of
Fiscal 2002,  Medical  recorded an operating  income of $6.2 up from $1.0 in the
corresponding period of fiscal 2001 as a result of improved sales and margins.

Geographic Revenue

Revenue  from  continuing  operations,  based  on  the  geographic  location  of
customers, was distributed as follows:

<TABLE>
<CAPTION>
                                                 Nine Months               Nine Months
                                                    Ended       % of          Ended         % of
(millions of U.S. dollars, U.S. GAAP)           Dec. 28, 2001   Total      Dec. 29, 2000    Total
                                                -------------   -----      -------------    -----
<S>                                               <C>            <C>         <C>             <C>
United States                                     $   51.8       30%         $  150.1        41%
Europe                                                60.1       35             110.0        30
Asia - Pacific                                        42.7       25              91.7        25
Canada                                                12.0        8              10.1         3
Other Regions                                          3.4        2               5.9         1
                                                  --------      ---          --------       ---
                                                  $  170.0      100%         $  367.8       100%
                                                  ========      ===          ========       ===
</TABLE>


                                       15
<PAGE>

For the nine months ended  December 28, 2001, the net movement in exchange rates
from the same period in Fiscal  2001  positively  impacted  total  revenue  from
continuing  operations by 1 percent ($0.3). The positive foreign exchange impact
was primarily a result of changes in the UK pound sterling and the Swedish Krona
exchange rates.

GROSS MARGIN
------------

<TABLE>
<CAPTION>
                                                             Three Months Ended        Nine Months Ended
                                                            Dec. 28,    Dec. 29,      Dec. 28,    Dec. 29,
(millions of U.S. dollars, U.S. GAAP)                         2001        2000          2001        2000
                                                            --------    --------      --------    --------
<S>                                                          <C>         <C>          <C>         <C>
Gross margin                                                 $ 21.2      $ 59.1       $ 43.4      $ 192.0
As a percent of revenue                                          41%         53%          26%          52%
As a percent of revenue,  excluding excess Q1 Fiscal             41%         53%          43%          52%
2002 inventory charge of $29.1
</TABLE>

During the first quarter ended June 29, 2001, the Company reviewed its inventory
requirements  for the following 12 months in light of the current  semiconductor
industry-wide  slowdown  and  higher  channel  inventories.  As a result of this
review,  the Company recorded an excess inventory charge to cost of sales in the
first quarter of Fiscal 2002 amounting to $29.1 for inventories  estimated to be
beyond its needs for the following 12 months.

Excluding  the effect of the excess  inventory  charge of $29.1,  the  Company's
gross  margin as a percent of revenue was 43 percent  for the nine months  ended
December  28,  2001.  The lower gross  margin in the first nine months of Fiscal
2002  compared  to  the  first  nine  months  of  Fiscal  2001  was  principally
attributable  to lower  sales  volumes  in the  communications  segment  and the
associated   negative   manufacturing   variances  resulting  from  lower  plant
utilization.

OPERATING EXPENSES
------------------

Research and Development

<TABLE>
<CAPTION>
                                                      Three Months Ended         Nine Months Ended
                                                      Dec. 28,   Dec. 29,       Dec. 28,    Dec. 29,
      (millions of U.S. dollars, U.S. GAAP)             2001       2000           2001        2000
                                                      --------   --------       --------    --------
<S>                                                    <C>        <C>            <C>         <C>
      R&D expenses                                     $ 18.4     $ 21.6         $ 57.4      $ 56.8
      As a percent of revenue                              36%        19%            34%         15%
</TABLE>

In the communication segment's network access product line, the focus was in the
following areas:

o     Building  network  timing  and  synchronization  products  for high  speed
      applications;
o     Delivering multi-channel  carrier-class  convergence solutions,  including
      TDM/ATM to IP;
o     Supporting   high-speed  access  using  digital  subscriber  line  ("DSL")
      solutions;
o     Providing  high quality  voice in packet  switching  applications  via QoS
      solutions and,
o     Very Short Reach ("VSR")  parallel optical  solutions  targeted at terabit
      speeds and higher.

In keeping with Zarlink's  drive to concentrate its R&D resources on high-growth
opportunities,  the R&D team in Irvine,  California,  which  originated from the
Vertex  acquisition last year, has become a Design Center supporting the Network
Access convergence  strategy.  The Irvine Design Center will focus its expertise
in IP  switching  technology  and  Quality of Service  ("QoS") on  speeding  the
development of products that support IP traffic in converged, multi-format, wide
area networks. Management believes that this step strengthens the ability of the
Network  Access group to compete in the WAN  convergence  market,  where Zarlink
already  competes  in such areas as  network  timing  and  synchronization,  TDM
switching,  voice echo  cancellation,  inverse  multiplexing  for ATM (IMA), and
SARs.

In the  communication  segment's  user access product line, the focus was in the
following areas:


                                       16
<PAGE>

o     Providing a single chip 2.5G cellular solution;
o     Providing a single chip  solution  incorporating  multiple  tuners  (three
      tuners on a chip) for  terrestrial,  satellite and cable  digital  tuning;
      and,
o     Delivering  chip-based  solutions  to  integrate  set-top box features for
      Integrated Digital TV ("iDTV").

In medical, the focus was on wearable and implantable devices, including:

o     Digital  hearing  aids for improved  sound  quality that is matched to the
      patient;
o     Pacemakers  with the  ability to record and track the  performance  of the
      heart; and,
o     Application-specific  standard products  ("ASSPs") as opposed to ASICs for
      portable and pacing applications.

The  increased  R&D expenses in the first nine months of Fiscal 2002 were due to
incremental R&D resulting from the  consolidation of Vertex,  which was acquired
on July 28,  2000,  coupled with the  increased  R&D activity in the network and
user access  product  lines.  The rate of growth in R&D spending  was  partially
offset by a weakened  Canadian  dollar  where the  Company's  principal  network
access R&D activities are carried out. Management expects that R&D spending will
continue at similar levels through the rest of Fiscal 2002.

Selling and Administrative ("S&A")

<TABLE>
<CAPTION>
                                                      Three Months Ended          Nine Months Ended
                                                     Dec. 28,    Dec. 29,         Dec. 28,    Dec. 29,
      (millions of U.S. dollars, U.S. GAAP)            2001        2000             2001        2000
                                                     --------    --------         --------    --------
<S>                                                  <C>          <C>              <C>         <C>
      S&A expenses                                   $ 13.9       $ 26.4           $ 44.7      $ 68.3
      As a percent of revenue                            27%          24%              26%         19%
</TABLE>

S&A expenses  decreased by 47 percent from the third  quarter last year to $13.9
in the third quarter of Fiscal 2002 and by 35 percent from the first nine months
of last year to $44.7 for the nine months ended  December 28, 2001. The decrease
was  primarily  due  to  cost   reduction   programs  and  the  effects  of  the
restructuring  program  implemented  mid-way  through the quarter ended June 29,
2001. S&A expenses increased as a percentage of revenue in the third quarter and
first nine months of Fiscal 2002 from the respective  periods in Fiscal 2001 due
to the lower sales volumes in Fiscal 2002.

Stock Compensation Expense

The  Company's  stock  compensation  expense  arises from  retention  conditions
associated with options awarded to certain  employees of Vertex  Networks,  Inc.
which was acquired in July 2000,  from  certain  stock  options  subjected to an
exchange program, and certain stock options awarded to former employees.

Special Charge

During the first  quarter  ended June 29, 2001,  the Company  recorded a pre-tax
special charge to income amounting to $34.6. The associated tax recovery on this
charge amounted to $3.9.

On May 10,  2001,  the  Company's  Board of Directors  approved a  restructuring
program to reduce the Company's  manufacturing  costs and operating  expenses in
response to adverse  market  conditions.  Accordingly,  the  Company  recorded a
pre-tax  special  charge of $34.6  related to that program in the quarter  ended
June 29, 2001.  The special  charge  comprised a workforce  reduction  charge of
approximately $26.7 primarily relating to the cost of severance and benefits for
the termination of  approximately  439 employees  throughout the world in Fiscal
2002. In addition,  the special  charge  included the cost of lease and contract
settlements of approximately $7.9. As at December 28, 2001, the Company employed
approximately 1,900 people worldwide.


                                       17
<PAGE>

Amortization of Acquired Intangibles

Amortization  of  acquired  intangibles  decreased  in the first nine  months of
Fiscal 2002 to $4.4 from $43.2 in Fiscal  2001.  The lower  amortization  in the
first  nine  months  of  Fiscal  2002 was due to  Fiscal  2001,  fourth  quarter
write-downs  of the  investment  in Vertex to reduce  the net book  value of the
intangible  assets to be  amortized.  In addition,  the Fiscal 2002 year to date
amortization of $4.4 includes an accelerated  write down of $1.6 associated with
the impairment of other acquired intangibles to reduce the carrying value to nil
as at December 28, 2001.

Other Operating Income and Expense Items

OTHER INCOME (EXPENSE)
----------------------

Other income  (expense) is comprised of interest  income on cash and  short-term
investments  held,  interest  expense on long-term debt and capital leases,  and
certain foreign exchange gains and losses.

Interest  income  was  $1.0 and $4.6 for the  respective  three  and nine  month
periods ended  December 28, 2001 as compared to $2.2 and $6.5 in the  respective
same  periods  in Fiscal  2001.  The  decrease  in each  period was due to lower
average cash balances on hand.

Interest  expense was $0.2 and $0.6 for the three and nine month  periods  ended
December 28, 2001,  compared with $3.3 and $10.1 for the  respective  periods in
Fiscal  2001.  Management  expects  interest  expense to decrease in Fiscal 2002
compared to Fiscal  2001 as a result of the full  repayment  of the U.S.  dollar
denominated long-term debt in the fourth quarter of Fiscal 2001.

During  the third  quarter  of Fiscal  2002,  the  Company  recorded  a $0.1 net
reduction   in  the   quarter's   earnings,   representing   a  loss  on   hedge
ineffectiveness.  During the nine months ended  December  28, 2001,  the Company
recorded a $1.5 net  reduction  in the  earnings,  representing  a loss on hedge
ineffectiveness.  The company also  recorded a net reduction to earnings of $1.0
(Cdn$1.6)  in the three and nine months ended  December 28, 2001,  related to an
overhedged  position  in  certain  currencies  as a  result  of  changes  in the
Company's  foreign currency  forecasts.  Also impacting other income in the nine
months ended December 28, 2001,  was a $7.0  (Cdn$10.8) net increase in earnings
due to the  reversal  of a  loss  on the  revaluation  of  Fiscal  2001  forward
contracts relating to the Fiscal 2002 hedging program.  This reversal was due to
the designation of these contracts as cash flow hedges in Fiscal 2002.

INCOME TAXES
------------

The income  tax  expense  for the  quarter  ended  December  28,  2001 was $0.1,
compared with income tax expense of $3.1 for the same period in Fiscal 2001. The
year to date income tax recovery of $3.0 included  recoveries of $3.9 associated
with the special and excess  inventory  charge  recorded in the first quarter of
Fiscal 2002.  Excluding the tax recovery on these special  charges,  the Company
recorded a tax expense of $0.9 in the first nine months of Fiscal 2002.  The tax
expense was recorded as a result of certain income taxes in Canada,  such as the
large   corporation  tax,  without  the  benefit  of  tax  recoveries  in  other
jurisdictions.

BACKLOG
-------

                                             Dec. 28,    Sept. 28,     March 30,
      (millions of U.S. dollars)               2001         2001         2001
                                             --------    ---------    ----------

      Backlog from continuing operations      $ 60.8      $ 76.7       $ 118.6

Generally,  manufacturing  lead  times for  semiconductor  products  are  longer
because  of the  nature  of the  production  process.  However,  as  orders  are
sometimes  booked and shipped within the same fiscal quarter (often  referred to
as "turns"),  order backlog is not necessarily indicative of a sales outlook for
the quarter or year.  Most of the backlog is scheduled  for delivery in the next
twelve months.


                                       18
<PAGE>

The backlog  decrease from the end of fiscal 2001 and from the end of the second
quarter  of  this  fiscal  year  was   attributable   to  the  downturn  in  the
communications  semiconductor industry, described elsewhere in this Management's
Discussion and Analysis.

NET INCOME (LOSS)
-----------------

The  Company  recorded  a net loss of $18.3,  or $0.15 per share in the  quarter
ended  December 28,  2001.  This  compares to a net loss of $21.9,  or $0.18 per
share,  in the same period of Fiscal  2001.  The Company  recorded a net loss of
$98.5,  or $0.80 per share in the nine months  ended  December  28,  2001.  This
compares to a net loss of $4.9, or $0.05 per share, in the same period of Fiscal
2001.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

At December 28, 2001, cash, cash equivalent and short-term  investment  balances
totaled $128.8, down from $179.9 at March 30, 2001.

Cash outflow from operations  before working  capital changes  amounted to $68.0
during the first nine months of Fiscal  2002  compared to an inflow of $107.9 in
the  first  nine  months of Fiscal  2001 as a result  of the  special  and other
charges and lower operating earnings on reduced sales. Since March 30, 2001, the
Company's working capital,  as reflected in the consolidated  statements of cash
flows,  decreased  by $45.5  mostly  due to  lower  receivables  resulting  from
improved  collections,  to the  write-down of  inventories,  and to an inventory
reduction program. The inventory reduction program is in response to the decline
in sales as a result of the  industry  downturn.  As a  standard  practice,  the
Company  maintains a minimum of critical  inventory  at its  foundries to ensure
continuity of supply for its manufacturing requirements.

Cash paid for capital  asset  additions  amounted to $27.3 during the first nine
months of Fiscal  2002  (nine  months  ended  December  29,  2000 - $59.1).  The
additions were primarily  related to the  construction of a new building for the
Company's  head  office  in  Ottawa,  Canada,  (see  below)  and  to  continuing
improvements to information technology resources and design tools.

On January 10, 2002 and subsequent to the end of the third quarter,  the Company
sold its newly  constructed  head office to Mitel Research Park  Corporation for
cash  proceeds of $7.4 and entered into an  operating  lease for a period of ten
years.  The excess of the building  cost and fair value over the sales  proceeds
amounted  to $2.8  and  will be  capitalized  as  leasehold  improvements  to be
amortized over the life of the operating lease.

Long-term debt decreased due to scheduled  repayments against capital leases and
in  respect  of the first  annual  installment  against  the 1996  Canada-Quebec
government loan.

On June 7, 2001, the Company announced its Board of Directors had authorized the
continuation  of its normal  course  issuer  bid  program  to  repurchase  up to
6,308,907  common shares,  representing  5 percent of 126,178,148  common shares
issued and  outstanding  at May 28, 2001.  The purchases  will take place on the
open  market  through  the  stock  exchanges  of New  York  and  Toronto  over a
twelve-month  period beginning on June 9, 2001 and ending on June 8, 2002. As at
December 28, 2001, no shares were  purchased  under the normal course issuer bid
program.

In addition to cash,  cash  equivalent  and  short-term  investment  balances of
$128.8 as at December  28,  2001,  the Company  had a  revolving  demand  credit
facility  of  approximately  $15.7  (Cdn$25.0),  of  which  $3.0  (Cdn$4.8)  was
outstanding  in the form of letters  of credit.  Accordingly,  the  Company  had
unused and available  demand bank lines of credit  amounting to $12.7 (Cdn$20.2)
as at December  28,  2001.  Management  believes the Company is in a position to
meet all  foreseeable  business  cash  requirements,  including  the Fiscal 2002
restructuring  program described  elsewhere in this Management's  Discussion and
Analysis,  and debt service from its cash balances on hand,  existing  financing
facilities and cash flow from operations.


                                       19
<PAGE>

OTHER
-----

Foreign Currency Translation

Management periodically evaluates the financial and operational  independence of
its  foreign  operations  and the  resulting  accounting  classification  of the
foreign subsidiaries as self-sustaining enterprises. Should a foreign subsidiary
cease to be classified as  self-sustaining,  then translation gains or losses on
consolidating the foreign subsidiary's  financial statements would be charged to
operating  income instead of a separate  component of shareholders'  equity.  At
December 28, 2001, the accumulated other  comprehensive  income balance was in a
credit position of $42.0 as compared to a credit position of $32.7 at the end of
Fiscal 2001.  The stronger U.S.  dollar as measured  against,  principally,  the
Canadian dollar caused the increase in the translation account balance since the
end of fiscal 2001.

Recently Issued Accounting Standards

The  Financial  Accounting  Standards  Board has issued  Statements of Financial
Accounting  Standards  ("SFAS") No. 141,  "Business  Combinations"  and No. 142,
"Goodwill  and Other  Intangible  Assets".  SFAS No. 141  requires  all business
combinations  subsequent to June 30, 2001 to be accounted for under the purchase
method of accounting. The pooling-of-interests method is no longer allowed. SFAS
No. 142 requires that upon  adoption,  amortization  of goodwill will cease and,
instead,  the carrying  value of goodwill will be evaluated for impairment on at
least an annual  basis.  SFAS No. 142 is effective  for fiscal  years  beginning
after  December 15, 2001.  The Company is  evaluating  the impact of adoption of
these  standards  and has not yet  determined  the  effect  of  adoption  on its
financial position and results of operations.

In October 2001, the Financial  Accounting  Standards  Board (the "FASB") issued
SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived  Assets"
("SFAS  144"),  which  addresses  financial  accounting  and  reporting  for the
impairment or disposal of long-lived assets. This Statement supersedes SFAS 121,
and the  accounting  and  reporting  provisions of APB 30, for the disposal of a
segment  of a  business.  The  Company  expects  to adopt  SFAD 144 in the first
quarter of Fiscal 2003.  As at December 28, 2001,  the Company had not completed
its assessment to determine the impact of adopting this  pronouncement,  if any,
on its consolidated financial statements.

European Union and the Euro

On January 1, 1999, 11 of 15 member countries of the European Union  established
fixed conversion rates between their existing currencies  ("legacy  currencies")
and one common  currency - the Euro.  The Euro trades on currency  exchanges and
may be used in business  transactions.  The  conversion  to the Euro  eliminates
currency  exchange  rate  risk  between  the  member  countries.  The  Company's
operating  subsidiaries  that were affected by the Euro  conversion  established
plans to address the issues raised by the Euro currency conversion. These issues
included the need to adapt computer and financial systems,  competitive  impacts
of  cross-border  price  transparency,  and  recalculating  currency  risk.  The
required  system  conversion  costs were not material due to Zarlink's  existing
ability to transact in multiple  currencies.  Due to significant  uncertainties,
the Company cannot reasonably estimate the effects one common currency will have
on  pricing  and the  resulting  impact,  if  any,  on the  Company's  financial
condition or its results of operations.

Forward-Looking Statements

Certain  statements  in this  Management's  Discussion  and Analysis  constitute
forward-looking  statements.  Such forward-looking  statements involve known and
unknown  risks,  uncertainties  and other  factors  that may  cause  the  actual
results,  performance or achievements  of Zarlink,  or industry  results,  to be
materially  different  from any  future  results,  performance  or  achievements
expressed   or  implied  by  such   forward-looking   statements.   Such  risks,
uncertainties  and  assumptions  include the  following:  general  economic  and
business  conditions;  demographic  changes;  import  protection and regulation;
rapid technology development and changes;  timing of product introductions;  the
mix of  products/services;  industry  competition,  industry  capacity and other
industry trends; and the ability of Zarlink to attract and retain key employees.


                                       20
<PAGE>

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Market  risk  represents  the risk of loss that may impact  Zarlink's  financial
statements due to adverse  changes in financial  markets.  Zarlink is exposed to
market risk from changes in interest rates and foreign exchange rates. To manage
these risks,  Zarlink uses certain derivative financial  instruments,  including
interest rate swaps,  forward  contracts and other  derivative  instruments from
time to time, that have been authorized pursuant to board-approved  policies and
procedures.  Zarlink does not hold or issue financial instruments for trading or
speculative purposes.

Zarlink  currently uses forward contracts and foreign currency options to reduce
the exposure to foreign  exchange risk. The most  significant  foreign  exchange
exposures for Zarlink  relate to the U.S.  dollar,  U.K.  pound sterling and the
Euro.  As at December 28, 2001,  there were no material  changes in  information
about market risks as disclosed in the  Company's  Form 10-K for the fiscal year
ended March 30, 2001.

PART II - OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

A Special  Meeting of  Shareholders  was held on December  7, 2001 at  Zarlink's
headquarters in Ottawa,  Canada.  At the Special Meeting,  the following matters
were presented to shareholders for approval:

Motion  1: In  respect  of  amendments  to the 1991  Stock  Option  Plan for Key
Employees  and  Non-Employee   Directors  to  increase  the  stock  option  pool
outstanding and available for grant to 12 percent of common shares  outstanding.

Motion 2: In respect of other amendments to the Stock Option Plan.

The results of matters submitted to a vote of shareholders were as follows:

Motion 1:                                        Shares
For                                              56,378,034
Against                                          18,426,848

Motion 2:                                        Shares
For                                              71,290,335
Against                                          3,514,547

ITEM 6. EXHIBITS AND REPORT ON FORM 8-K

a) Exhibits

      99 - Consolidated  Financial  Statements in U.S. Dollars and in accordance
      with Canadian Generally Accepted Accounting Principles.

      99.1 -  Management's  Discussion  and Analysis of Financial  Condition and
      Results of Operations - Canadian Supplement.

b) Reports on Form 8-K

There were no reports on Form 8-K filed during the three  months ended  December
28, 2001.


                                       21
<PAGE>

                                    SIGNATURE

Pursuant to the  requirements of Section 13 or 15(d) 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.

                                                ZARLINK SEMICONDUCTOR INC.

February 8, 2002                                JEAN-JACQUES CARRIER
----------------                                --------------------
Date                                            Jean-Jacques Carrier
                                                Senior Vice President of Finance
                                                  and Chief Financial Officer


                                       22
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT NO.           DESCRIPTION                                    PAGE

99              Selected Consolidated Financial Statements
                in U.S.  Dollars  and in  accordance  with
                Canadian  Generally  Accepted   Accounting
                Principles.                                          24 -28

99.1            Management's  Discussion  and  Analysis of
                Financial   Condition   and   Results   of
                Operations - Canadian Supplement.                    30-31


                             23