<PAGE>

                                 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 April 1, 2000

             [_] 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 0-27026


                       PERICOM SEMICONDUCTOR CORPORATION
            (Exact Name of Registrant as Specified in Its Charter)

          CALIFORNIA                                     77-0254621
(State or Other Jurisdiction of                      (I.R.S. Employer
 Incorporation or Organization)                     Identification No.)

                               2380 BERING DRIVE
                          SAN JOSE, CALIFORNIA  95131
                                 (408) 435-0800
                  (Address of Principal Executive Offices and
                Issuer's Telephone Number, Including Area Code)


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 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 outstanding shares of the Registrant's Common Stock as of April
28, 2000 was 12,145,105.
<PAGE>

                       Pericom Semiconductor Corporation

                 Form 10-Q for the Quarter Ended April 1, 2000

                                     INDEX


PART I.  FINANCIAL INFORMATION                                              Page
                                                                            ----
     Item 1: Financial Statements

             Condensed Balance Sheets as of
             March 31, 2000 and June 30, 1999..................................3

             Condensed Statements of Income
             for the three months and nine months ended
             March 31, 2000 and March 31, 1999.................................4

             Condensed Statements of Cash Flows
             for the nine months ended
             March 31, 2000 and March 31, 1999.................................5

             Notes to Condensed Financial Statements...........................6

     Item 2: Management's Discussion and Analysis of
             Financial Condition and Results of Operations.....................9

     Item 3: Quantitative and Qualitative Disclosures about
             Market Risk......................................................21


PART II. OTHER INFORMATION

     Item 6: Exhibits and Reports on Form 8-K.................................22

     Signatures...............................................................23

                                       2
<PAGE>

                        PART I.  FINANCIAL INFORMATION
                          Item 1: Financial Statements

                       Pericom Semiconductor Corporation
                            Condensed Balance Sheets
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                       March 31,            June 30,
                                                                                         2000               1999 (1)
                                                                                       --------             --------
                                                                                      (Unaudited)
<S>                                                                                    <C>                  <C>
                                    ASSETS
Current assets:
     Cash and equivalents...........................................................   $113,576             $  8,328
     Short-term investments.........................................................     18,186               17,397
     Accounts receivable:
          Trade (net of allowances of $3,693, and $2,570)...........................     10,702                9,719
          Other receivables.........................................................        526                  346
     Inventories....................................................................     14,688                9,835
     Prepaid expenses and other current assets......................................        243                  582
     Deferred income taxes..........................................................        356                  356
                                                                                       --------             --------
                Total current assets................................................    158,277               46,563
Property and equipment - net........................................................      7,721                6,509
Investment in and advances to investee..............................................      4,240                2,611
Other assets........................................................................        328                  242
                                                                                       --------             --------
               Total................................................................   $170,566             $ 55,925
                                                                                       ========             ========

                 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable...............................................................   $  8,420             $  7,295
     Accrued liabilities............................................................      3,072                1,604
     Income taxes payable...........................................................      1,564                   22
                                                                                       --------             --------
               Total current liabilities............................................     13,056                8,921
Deferred income taxes...............................................................        624                  624
Shareholders' equity:
     Common stock...................................................................    128,163               25,600
     Accumulated other comprehensive loss...........................................        (85)                 (33)
     Retained earnings..............................................................     28,808               20,813
                                                                                       --------             --------
               Total shareholders' equity...........................................    156,886               46,380
                                                                                       --------             --------
               Total................................................................   $170,566             $ 55,925
                                                                                       ========             ========
</TABLE>
---------
(1)  Derived from the June 30, 1999 audited balance sheet included in the
Company's Annual Report on Form 10-K.

                  See notes to condensed financial statements.

                                       3
<PAGE>

                       Pericom Semiconductor Corporation
                         Condensed Statements of Income
                                  (Unaudited)
                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                                   Three Months Ended                 Nine Months Ended
                                                                        March 31,                         March 31,
                                                                  2000             1999             2000             1999
                                                                -------          -------          -------          -------
<S>                                                            <C>              <C>              <C>              <C>
Net revenues................................................... $23,033          $14,754          $60,667          $43,811
Cost of revenues...............................................  13,294            8,585           35,108           26,187
                                                                -------          -------          -------          -------
     Gross profit..............................................   9,739            6,169           25,559           17,624
                                                                -------          -------          -------          -------
Operating expenses:
     Research and development..................................   2,133            1,565            5,626            4,375
     Selling, general and administrative.......................   3,230            2,227            8,502            6,614
                                                                -------          -------          -------          -------
          Total................................................   5,363            3,792           14,128           10,989
                                                                -------          -------          -------          -------

Income from operations.........................................   4,376            2,377           11,431            6,635
Equity in net loss of investee.................................     (65)             (50)            (233)            (203)
Interest income................................................     769              320            1,517            1,039
                                                                -------          -------          -------          -------
Income before income taxes.....................................   5,080            2,647           12,715            7,471
Provision for income taxes.....................................   1,829              900            4,720            2,540
                                                                -------          -------          -------          -------
Net income..................................................... $ 3,251          $ 1,747          $ 7,995          $ 4,931
                                                                -------          -------          -------          -------
Basic earnings per share....................................... $  0.32          $  0.19          $  0.81          $  0.53
                                                                -------          -------          -------          -------
Diluted earnings per share..................................... $  0.28          $  0.17          $  0.71          $  0.48
                                                                -------          -------          -------          -------
Shares used in computing basic earnings per share..............  10,285            9,414            9,870            9,360
                                                                -------          -------          -------          -------
Shares used in computing diluted earnings per share............  11,725           10,516           11,191           10,225
                                                                =======          =======          =======          =======
</TABLE>


                  See notes to condensed financial statements.

                                       4
<PAGE>

                       Pericom Semiconductor Corporation
                       Condensed Statements of Cash Flows
                                  (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                   Nine Months Ended
                                                                       March 31,
                                                               ------------------------
                                                                 2000             1999
                                                               --------         --------
<S>                                                            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................... $  7,995         $  4,931
Adjustments to reconcile net income to net cash
     Provided by (used for) operating activities:
     Depreciation and amortization............................    1,751            1,200
     Equity in net loss of joint venture......................      233              203
     Changes in assets and liabilities:
          Accounts receivable.................................   (1,163)          (3,703)
          Inventories.........................................   (4,853)            (346)
          Prepaid expenses and other current assets...........      340             (319)
          Accounts payable....................................    1,125              335
          Accrued liabilities.................................    1,469             (323)
          Income taxes payable................................    1,542              300
                                                               --------         --------
Net cash provided by (used in) operating activities...........    8,439            2,278
                                                               --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
          Additions to property and equipment.................   (2,963)          (2,122)
          Purchase of short-term investments..................   (5,243)         (11,451)
          Maturities of short-term investments................    4,400           11,532
          Increase in other assets............................      (86)             (11)
          Advances to investee................................   (1,862)          (1,190)
                                                               --------         --------
Net cash used for investing activities........................   (5,754)          (3,242)
                                                               --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
          Sale of common stock................................  102,563              505
                                                               --------         --------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
                                                                105,248             (459)
CASH AND EQUIVALENTS:
          Beginning of period.................................    8,328            8,773
                                                               --------         --------
          End of period....................................... $113,576         $  8,314
                                                               ========         ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
     Cash paid during the period for:
          Income taxes........................................ $  2,129         $  2,240
                                                               ========         ========
</TABLE>


                  See notes to condensed financial statements.

                                       5
<PAGE>

                       Pericom Semiconductor Corporation
                    Notes To Condensed Financial Statements
                                  (Unaudited)

1. BASIS OF PRESENTATION

The financial statements have been prepared by Pericom Semiconductor Corporation
("Pericom" or the "Company"), pursuant to the rules and regulations of the
Securities and Exchange Commission.  In the opinion of management, these
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments and accruals, necessary for a fair presentation of
the Company's financial position as of March 31, 2000 and the results of
operations and cash flows for the three and nine-month periods ended March 31,
2000 and 1999.  This unaudited quarterly information should be read in
conjunction with the audited financial statements of Pericom and the notes
thereto incorporated by reference in the Company's Annual Report on Form 10-K as
filed with the Securities and Exchange Commission.

The preparation of the interim condensed financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the interim
condensed financial statements and the reported amounts of revenue and expenses
during the period.  Actual amounts could differ from these estimates.  The
results of operations for the three and nine-month period ended March 31, 2000
are not necessarily indicative of the results to be expected for the entire
year.

The Company's fiscal periods in the accompanying financial statements have been
shown as ending on June 30 and March 31.  Fiscal year 1999 ended on July 3,
1999.  The three and nine-month periods in fiscal years 2000 and 1999 ended on
April 1, 2000 and March 27, 1999, respectively.

The Company participates in a dynamic high technology industry and believes that
changes in any of the following areas could have a material adverse effect on
the Company's future financial position or results of operations: advances and
trends in new technologies; competitive pressures in the form of new products or
price reductions on current products; changes in the overall demand for products
and services offered by the Company; changes in customer relationships;
litigation or claims against the Company based on intellectual property, patent,
product, regulatory or other factors; risks associated with changes in domestic
and international economic and/or political conditions or regulations;
availability of necessary components; and the Company's ability to attract and
retain employees necessary to support its growth.

2. EARNINGS PER SHARE

Basic earnings per share is based upon the weighted average number of common
shares outstanding.  Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.

                                       6
<PAGE>

Basic and diluted earnings per share for the three and nine-month periods ended
March 31, 2000 and March 31, 1999 are computed as follows:

<TABLE>
<CAPTION>
                                                                       Three Months Ended             Nine Months Ended
                                                                            March 31,                     March 31,
                                                                       2000           1999           2000           1999
                                                                      -------        -------        -------        -------
<S>                                                                  <C>             <C>            <C>            <C>
Net income.........................................................   $ 3,251        $ 1,747        $ 7,995        $,4,931
                                                                      =======        =======        =======        =======
Computation of common shares outstanding - basic earnings
 per share:
          Weighted average shares of common stock..................    10,285          9,414          9,870          9,360
                                                                      -------        -------        -------        -------

Shares used in computing basic earnings per share..................    10,285          9,414          9,870          9,360
                                                                      =======        =======        =======        =======

Basic earnings per share...........................................   $  0.32        $  0.19        $  0.81        $  0.53
                                                                      =======        =======        =======        =======

Computation of common shares outstanding - diluted earnings
 per share:
          Weighted average shares of common stock..................    10,285          9,414          9,870          9,360
          Dilutive options using the treasury stock method.........     1,440          1,102          1,321            865
                                                                      -------        -------        -------        -------

Shares used in computing diluted earnings per share................    11,725         10,516         11,191         10,225
                                                                      =======        =======        =======        =======

Diluted earnings per share.........................................   $  0.28        $  0.17        $  0.71        $  0.48
                                                                      =======        =======        =======        =======
</TABLE>

3. INVENTORIES

Inventories consist of (in thousands):

<TABLE>
<CAPTION>
                                                               March 31,           June 30,
                                                                 2000                1999
                                                               -------              ------
<S>                                                            <C>                 <C>
Finished goods..............................................   $ 5,256              $2,620
Work in process.............................................     5,948               5,972
Raw materials...............................................     3,484               1,243
                                                               -------              ------
                                                               $14,688              $9,835
                                                               =======              ======
</TABLE>


4. ACCRUED LIABILITIES

Accrued liabilities consist of (in thousands):

<TABLE>
<CAPTION>
                                                               March 31,           June 30,
                                                                 2000                1999
                                                                ------              ------
<S>                                                            <C>                 <C>
Accrued compensation..........................................  $1,651              $  908
External sales representative commissions.....................     612                 572
Other accrued expenses........................................     809                 124
                                                                ------              ------
                                                                $3,072              $1,604
                                                                ======              ======
</TABLE>

                                       7
<PAGE>

5. INDUSTRY AND SEGMENT INFORMATION

Under SFAS No. 131, the Company operates in one reportable segment:  The Company
designs, manufactures and markets high performance digital, analog and mixed-
signal integrated circuits used for the transfer, routing, and timing of digital
and analog signals within and between computer, networking, datacom and telecom
systems.

6. COMPREHENSIVE INCOME

SFAS No. 130 requires an enterprise to report, by major components and as a
single total, the change in net assets during the period from nonowner sources.
For the three and nine-month periods ended March 31, 2000 and 1999,
comprehensive income, which was comprised of the Company's net income for the
periods and changes in cumulative unrealized gain/(loss) on short-term
investments was as follows:

<TABLE>
<CAPTION>
                                                   Three Months Ended              Nine Months Ended
                                                        March 31,                      March 31,
                                                 ----------------------------------------------------
                                                   2000           1999            2000          1999
                                                 ------         ------          ------         ------
<S>                                              <C>            <C>            <C>             <C>
Net income.....................................  $3,251         $1,747          $7,995         $4,931
Unrealized gain/(loss) on investment...........       3            ---             (52)           ---
                                                 ------         ------          ------         ------
Comprehensive income...........................  $3,254         $1,747          $7,943         $4,931
                                                 ======         ======          ======         ======
</TABLE>

                                       8
<PAGE>

                  Item 2: Management's Discussion and Analysis
                of Financial Condition and Results of Operations


                       Pericom Semiconductor Corporation

The following information should be read in conjunction with the unaudited
financial statements and notes thereto included in Part 1 - Item 1 of this
Quarterly Report and the audited financial statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K (the "Form 10-
K").

This Quarterly Report to Shareholders includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act.  All statements other than statements of historical fact are
"forward-looking statements" for purposes of these provisions, including any
statements regarding: projections of revenues, expenses or other financial
items; the plans and objectives of management for future operations; the
Company's tax rate; the adequacy of allowances for returns, price protection and
other concessions; proposed new products or services; the sufficiency of cash
generated from operations and cash balances; the Company's exposure to interest
rate risk; the potential for ongoing costs, liabilities, and exposure related to
the Year 2000 problem;  future economic conditions or performance; and
assumptions underlying any of the foregoing.  In some cases, forward-looking
statements can be identified by the use of terminology such as "may," "will,"
"expects," "plans," "anticipates," "estimates," "potential," or "continue," or
the negative thereof or other comparable terminology.  Although the Company
believes that the expectations reflected in the forward-looking statements
contained herein are reasonable, there can be no assurance that such
expectations or any of the forward-looking statements will prove to be correct,
and actual results could differ materially from those projected or assumed in
the forward-looking statements.  The Company's future financial condition and
results of operations, as well as any forward-looking statements, are subject to
risks and uncertainties, including but not limited to the factors set forth in
the Company's Form 10-K under the heading "Factors That May Affect Future
Results", in (i) this Management's Discussion and Analysis of Financial
Condition and Results of Operations, particularly under the subheading
"Additional Factors that May Affect Results", and (ii) Note 1 to the Notes to
Condensed Financial Statements.  All forward-looking statements and reasons why
results may differ included in this Quarterly Report are made as of the date
hereof, and the Company assumes no obligation to update any such forward-looking
statement or reason why actual results may differ.

                                       9
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data as a
percentage of net revenues for the periods indicated.

<TABLE>
<CAPTION>
                                                          Three Months Ended               Nine Months Ended
                                                               March 31,                        March 31,
                                                         ----------------------------------------------------
                                                          2000             1999            2000          1999
                                                         -----            -----           -----         -----
<S>                                                      <C>             <C>              <C>           <C>
Net revenues............................................ 100.0%           100.0%          100.0%        100.0%
Cost of revenues........................................  57.7%            58.2%           57.9%         59.8%
                                                         -----            -----           -----         -----
     Gross profit.......................................  42.3%            41.8%           42.1%         40.2%
                                                         -----            -----           -----         -----
Operating expenses:
     Research and development...........................   9.3%            10.6%            9.3%         10.0%
     Selling, general and administrative................  14.0%            15.1%           14.0%         15.1%
                                                         -----            -----           -----         -----
          Total.........................................  23.3%            25.7%           23.3%         25.1%
                                                         -----            -----           -----         -----
Income from operations..................................  19.0%            16.1%           18.8%         15.1%
Other income, net.......................................   3.1%             1.8%            2.1%          1.9%
                                                         -----            -----           -----         -----
Income before income taxes..............................  22.1%            17.9%           21.0%         17.1%
Provision for income taxes..............................   7.9%             6.1%            7.8%          5.8%
                                                         -----            -----           -----         -----
Net income..............................................  14.1%            11.8%           13.2%         11.3%
                                                         =====            =====           =====         =====
</TABLE>

Net Revenues

Net revenues consist primarily of product sales, which are recognized upon
shipment, less an estimate for returns and allowances.  Net revenues increased
56% from $14.8 million for the quarter ended March 31, 1999 to $23.0 million for
the quarter ended March 31, 2000.  The increase in net revenues resulted from
overall strength in the semiconductor industry, continued market acceptance of
the Company's existing products and sales of new products in the Company's
SiliconInterface, SiliconSwitch and SiliconClock product lines, offset in part
by a decline in the weighted average selling price of all products.  Sales to
domestic and international distributors as a percent of total revenues dropped
from 63% for the third quarter of fiscal 1999 to 50% for the third quarter of
fiscal 2000.  No customer accounted for 10% of net revenues in the third quarter
of fiscal 2000 whereas sales to Techmosa, an international distributor, and
Pioneer, a domestic distributor, accounted for approximately 15% and 10%,
respectively, of net revenues in the third quarter of fiscal 1999.

Net revenues increased 38% from $43.8 million for the nine-month period ended
March 31, 1999 to $60.7 million for the nine-month period ended March 31, 2000.
The increase in net revenues is attributable to the overall strength in the
semiconductor industry, continued market acceptance of the Company's existing
products and sales of new products in the Company's SiliconInterface,
SiliconSwitch and SiliconClock product lines, partially offset by a decline in
the weighted average selling price of all products.  Sales to domestic and
international distributors as a percent of total revenues decreased slightly to
57% in the first nine months of fiscal 2000 from 58% in the comparable period in
fiscal 1999.  Sales to Techmosa, an international distributor, accounted for
approximately 11% of net revenues in the first nine months of fiscal 2000 and
15% of net revenues for the first nine months of fiscal 1999.

Gross Profit

Gross profit increased 58% from $6.2 million for the quarter ended March 31,
1999 to $9.7 million for the corresponding quarter ended March 31, 2000.  Gross
profit as a percentage of net revenues, or gross margin, increased from 41.8% in
the third quarter of fiscal 1999 to 42.3% in the third quarter of fiscal 2000.

                                       10
<PAGE>

The increase in gross margin resulted from the introduction and sale of new
products at higher gross margins, a shift in mix towards a higher margin product
line, and cost reductions achieved through reduced wafer, assembly and test
costs.  These margin increases were partially offset by  decreases in average
selling prices in the Company's various product lines.

Gross profit increased 45% from $17.6 million for the nine-month period ended
March 31, 1999 to $25.6 million for the nine-month period ended March 31, 2000.
Gross margin for the same nine-month periods increased from 40.2% last year to
42.1% this year.  These increases are for the same reasons cited in the above
analysis of the three-month periods ended March 31, 2000 and 1999.

Research and Development

Research and development expenses increased 36% from $1.6 million for the
quarter ended March 31, 1999 to $2.1 million for the corresponding quarter ended
March 31, 2000, but decreased as a percentage of net revenues from 10.6% to
9.3%.  Research and development expenses increased from $4.4 million for the
nine-month period ended March 31, 1999, to $5.6 million for the nine-month
period ended March 31, 2000, an increase of 29%, but also decreased as a percent
of sales from 10.0% to 9.3% for those periods.  The increase in expense in each
period was attributable to development costs for new products in each of the
Company's product lines and expansion of the Company's engineering staff and
related infrastructure as the Company continued its commitment to new product
development.

The Company believes that continued spending on research and development to
develop new products and improve manufacturing processes is critical to the
Company's success and, consequently, expects to increase research and
development expenses in future periods.

Selling, General and Administrative

Selling, general and administrative expenses consist primarily of personnel and
related overhead costs for sales, marketing, finance, human resources and
general management.  Such costs include advertising, sales materials, sales
commissions and other marketing and promotional expenses.  Selling, general and
administrative expenses increased 45% from $2.2 million for the quarter ended
March 31, 1999 to $3.2 million for the corresponding quarter ended March 31,
2000, but decreased as a percentage of net revenues from 15.1% to 14.0%.
Selling, general and administrative expenses increased from $6.6 million for the
nine-month period ended March 31, 1999, to $8.5 million for the nine-month
period ended March 31, 2000, an increase of 29%, but also decreased as a percent
of sales from 15.1% to 14.0% for those periods.  The increase in expense in each
period was primarily attributable to increased staffing levels and increases in
commissions due to sales growth.

The Company anticipates that selling, general and administrative expenses will
increase in future periods due to increased staffing levels, particularly in
sales and marketing, as well as increased commission expense to the extent the
Company achieves higher sales levels.

Other Income, Net

Other income, net includes interest income and the Company's allocated portion
of net losses of Pericom Technology, Inc. ("PTI").  Other income, net increased
from $270,000 for the quarter ended March 31, 1999 to $704,000 for the
corresponding quarter ended March 31, 2000.  For the quarters ending March 31,
1999 and March 31, 2000, respectively the Company's share of the net losses of
PTI increased from $50,000 to $65,000 and interest income rose from $320,000 to
$769,000 due to interest earned on the increased cash balances that resulted
from the net proceeds from the Company's secondary public offering in March
2000.  For the nine-month period ending March 31, 1999 and March 31, 2000,
respectively, other income, net rose from $836,000 to $1,284,000 as the
Company's share of the net losses of PTI increased from $203,000 to $233,000 and
interest income rose from $1,039,000 to $1,517,000 due to interest earned on the
increased cash balances that resulted from the net proceeds from the Company's
secondary public offering in March 2000.

                                       11
<PAGE>

Provision for Income Taxes

The provision for income taxes increased from $900,000 for the quarter ended
March 31, 1999 to $1,829,000 for the corresponding quarter ended March 31, 2000.
The effective tax rate of 36% in the current years third quarter is up from 34%
used in the comparable period last year.  This is due primarily to the increase
in taxable income.  For the nine-months ending March 31, 2000 and March 31, 1999
the provision for income taxes was $4,720,000 and $2,540,000 and the effective
tax rates were 37.1% and 34%, respectively.  The effective rate for the nine-
month period ended March 31, 2000 is higher than the nine-month period ended
March 31, 1999 because a 40% effective tax rate was used in the first quarter
ended September 30, 1999 due to the expiration of the research and development
tax credit which caused the effective rate to rise.  The research and
development tax credit has since been extended and the Company expects to use
the lower tax rate in future periods for an expected overall 36-37% rate for the
current year. The provision for income taxes also differed from the federal
statutory rate due to state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Prior to the Company's initial public offering in October 1997, the Company used
proceeds from the private sale of equity securities, bank borrowings and
internal cash flow to support the Company's operations, acquire capital
equipment and finance inventory and accounts receivable growth.  Operating
activities generated $8.4 million of cash during the first nine months of fiscal
2000 and $2.3 million of cash during the first nine months of fiscal 1999.

Net cash used for investing activities increased from $3.2 million for the nine
months ended March 31, 1999 to $5.8 million for the nine months ended March 31,
2000.  The Company made capital expenditures of approximately $3.0 million
during the first nine months of fiscal 2000 compared with $2.1 million in the
comparable period of fiscal 2000, and also increased net purchases of short-term
investments by $924,000 during the first nine months of the current fiscal year
compared to the same period last year.

On March 8, 2000 the Company sold 2.2 million shares of common stock in a
secondary public offering.  Net proceeds, before expenses, from this offering
were $101,376,000 after underwriting discounts and commissions.  Expenses are
expected to be approximately $500,000.  These funds are invested in short-term
money market funds.

As of March 31, 2000, the Company's principal sources of liquidity included
cash, cash equivalents and short-term investments of approximately $131.8
million.  Management believes that existing cash balances and cash generated
from operations will be sufficient to fund necessary purchases of capital
equipment and to provide working capital at least through the next 12 months.
However, future events may require the Company to seek additional capital
sooner.  If the Company determines that it needs to seek additional capital, the
Company may not be able to obtain adequate capital on terms acceptable to it.

YEAR 2000 DISCLOSURE

The date is now past January 1, 2000 and the Company has not experienced any
immediate adverse impact from the transition to the year 2000.  However, the
Company cannot provide assurance that its suppliers and customers have not or
will not be affected in a manner that is not yet apparent.  The Company uses
software, computer technology and other services internally developed and
provided by third-party vendors that may fail due to the year 2000 phenomenon.
This failure may involve significant time and expense, and uncorrected problems
could seriously harm the Company's business.  In addition, the potential failure
of the Company's customers to ensure that their operations are year 2000
compliant could have an adverse effect on them, which in turn could limit their
ability to use the Company's products and services or process the Company's
invoices in a timely manner.  Furthermore, customers or potential customers may
delay

                                       12
<PAGE>

purchasing the Company's products and services to the extent such customers or
potential customers are required to devote resources to resolving the year 2000
problem. Therefore, the Company will continue to monitor year 2000 compliance
and the year 2000 compliance of the Company's suppliers and customers.

Additional Factors That May Affect Operating Results or the Price of the
Company's Common Stock

IF THE COMPANY DOES NOT DEVELOP PRODUCTS THAT ITS CUSTOMERS AND END-USERS DESIGN
INTO THEIR PRODUCTS, OR IF THEIR PRODUCTS DO NOT SELL SUCCESSFULLY, THE
COMPANY'S BUSINESS AND OPERATING RESULTS WOULD BE HARMED.

The Company has relied in the past and continues to rely upon its relationships
with its customers and end-users who design high-performance systems for
insights into product development strategies for emerging system requirements.
The Company generally incorporates new products into a customer's or end-user's
product or system at the design stage.  However, these design efforts, which can
often require significant expenditures by the Company, may precede product
sales, if any, by a year or more.  Moreover, the value to the Company of any
design win will depend in large part on the ultimate success of the customer's
or end-user's product and on the extent to which the system's design
accommodates components manufactured by the Company's competitors.  If the
Company fails to achieve design wins or if the design wins fail to result in
significant future revenues, the Company's operating results would be harmed.
If the Company has problems developing or maintaining its relationships with its
customers and end-users, the Company's ability to develop well-accepted new
products may be impaired.  See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "The demand for the Company's
products depends on the growth of the Company's end users' markets" and "A large
portion of the Company's revenues are derived from sales to a few customers, who
may cease purchasing from the Company at any time."

THE COMPANY EXPECTS THAT THE PRICE OF ITS COMMON STOCK MAY FLUCTUATE
SUBSTANTIALLY DUE TO FACTORS NOT WITHIN THE COMPANY'S CONTROL.

The trading price of the Company's common stock has been and is likely to
continue to be highly volatile.  The Company's stock price could fluctuate
widely in response to factors not within the Company's control, including:

     .  quarter-to-quarter variations in operating results;

     .  announcements of technological innovations or new products by the
        Company or its competitors;

     .  general conditions in the semiconductor and electronic systems
        industries;

     .  changes in earnings estimates by analysts; and

     .  price and volume fluctuations in the overall stock market, which have
        particularly affected the market prices of many high technology
        companies.

In the past, the Company's quarterly operating results have varied significantly
and are likely to fluctuate in the future.  A wide variety of factors affect the
Company's operating results.  These factors might include the following:

     .  the timing of new product introductions and announcements by the Company
        and by its competitors;

     .  customer acceptance of new products introduced by the Company;

     .  growth or reduction in the size of the market for interface ICs;

     .  a decline in the gross margins of the Company's products;

                                       13
<PAGE>

     .  general conditions in the semiconductor industry;

     .  changes in the Company's product mix;

     .  delay or decline in orders received from distributors;

     .  the availability of manufacturing capacity with the Company's wafer
        suppliers;

     .  changes in manufacturing costs;

     .  fluctuations in manufacturing yields;

     .  the ability of customers to pay the Company;

     .  expenses incurred in obtaining, enforcing, and defending intellectual
        property rights; and

     .  increased research and development expenses associated with new product
        introductions or process changes.

All of these factors are difficult to forecast and could seriously harm the
Company's operating results.  The Company's expense levels are based in part on
the Company's expectations regarding future sales and are largely fixed in the
short term.  Therefore, the Company may be unable to reduce its expenses fast
enough to compensate for any unexpected shortfall in sales.  Any significant
decline in demand relative to management's expectations or any material delay of
customer orders could harm the Company's operating results.  In addition, if the
Company's operating results in future quarters fall below public market
analysts' and investors' expectations, the market price of the Company's common
stock would likely decrease.  See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Product price declines and
fluctuations may cause the Company's future financial results to vary."

THE MARKETS FOR THE COMPANY'S PRODUCTS ARE CHARACTERIZED BY RAPIDLY CHANGING
TECHNOLOGY, AND THE COMPANY'S FINANCIAL RESULTS COULD BE HARMED IF THE COMPANY
DOES NOT SUCCESSFULLY DEVELOP AND IMPLEMENT NEW MANUFACTURING TECHNOLOGIES OR
DEVELOP, INTRODUCE AND SELL NEW PRODUCTS.

The markets for the Company's products are characterized by rapidly changing
technology, frequent new product introductions and declining selling prices over
product life cycles.  The Company currently offers over 400 products.  The
Company's future success depends upon the timely completion and introduction of
new products, across all of the Company's product lines, at competitive price
and performance levels.  The success of new products depends on a variety of
factors, including the following:

     .  product performance and functionality;

     .  customer acceptance;

     .  competitive pricing;

     .  successful and timely completion of product development;

     .  sufficient wafer fabrication capacity; and

     .  achievement of acceptable manufacturing yields by the Company's wafer
        suppliers.

The Company may also experience delays, difficulty in procuring adequate
fabrication capacity for the development and manufacture of new products or
other difficulties in achieving volume production of these products.  Even
relatively minor errors may significantly affect the development and manufacture
of new products.  If the Company fails to complete and introduce new products in
a timely manner at competitive price and performance levels, the Company's
business would be significantly harmed.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

                                       14
<PAGE>

INTENSE COMPETITION IN THE SEMICONDUCTOR INDUSTRY MAY REDUCE THE DEMAND FOR THE
COMPANY'S PRODUCTS OR THE PRICES OF ITS PRODUCTS, WHICH COULD REDUCE THE
COMPANY'S REVENUES.

The semiconductor industry is intensely competitive.  The Company's competitors
include Cypress Semiconductor Corporation, Integrated Circuit Systems, Inc.,
Integrated Device Technology, Inc., Maxim Integrated Products, Inc., and Texas
Instruments, Inc.  Most of those competitors have substantially greater
financial, technical, marketing, distribution and other resources, broader
product lines and longer-standing customer relationships than the Company does.
The Company also competes with other major or emerging companies that sell
products to certain segments of the Company's markets.  Competitors with greater
financial resources or broader product lines may have a greater ability to
sustain price reductions in the Company's primary markets in order to gain or
maintain market share.

Management believes that the Company's future success will depend on its ability
to continue to improve and develop its products and processes.  Many of the
Company's competitors maintain internal manufacturing capacity for the
fabrication and assembly of semiconductor products.  This ability may provide
them with more reliable manufacturing capability, shorter development and
manufacturing cycles and time-to-market advantages.  In addition, competitors
with their own wafer fabrication facilities that are capable of producing
products with the same design geometries as the Company's may be able to
manufacture and sell competitive products at lower prices.  Any introduction of
products by competitors that are manufactured with improved process technology
could seriously harm the Company's business.  As is typical in the semiconductor
industry, competitors have developed and marketed products that function
similarly or identically to the Company's.  If the Company's products do not
achieve performance, price, size or other advantages over products offered by
competitors, the Company's products may lose market share.  Competitive
pressures could also reduce market acceptance of the Company's products, reduce
prices and increase expenses.  See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

The Company also faces competition from the makers of ASICs and other system
devices.  These devices may include interface logic functions, which may
eliminate the need or sharply reduce the demand for the Company's products in
particular applications.

PRODUCT PRICE DECLINES AND FLUCTUATIONS MAY CAUSE THE COMPANY'S FUTURE FINANCIAL
RESULTS TO VARY.

Historically, selling prices in the semiconductor industry generally, as well as
for the Company's products, have decreased significantly over the life of each
product.  Management expects that selling prices for the Company's existing
products will continue to decline over time and that average selling prices for
the Company's new products will decline significantly over the lives of these
products.  Declines in selling prices for the Company's products, if not offset
by reductions in the costs of producing these products or by sales of new
products with higher gross margins, would reduce the Company's overall gross
margins and could seriously harm the Company's business.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

THE DEMAND FOR THE COMPANY'S PRODUCTS DEPENDS ON THE GROWTH OF THE COMPANY'S END
USERS' MARKETS.

The Company's continued success depends in large part on the continued growth of
markets for the products into which the Company's semiconductor products are
incorporated.  These markets include the following:

     .  computers and computer related peripherals;

     .  data communications and telecommunications equipment;

     .  electronic commerce and the Internet; and

     .  consumer electronics equipment.

                                       15
<PAGE>

Any decline in the demand for products in these markets could seriously harm the
Company's business, financial condition and operating results.  These markets
have also historically experienced significant fluctuations in demand.  The
Company may also be seriously harmed by slower growth in the other markets in
which the Company sells its products.  See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "A large portion of the
Company's revenues are derived from sales to a few customers, who may cease
purchasing from the Company at any time."

DOWNTURNS IN THE SEMICONDUCTOR INDUSTRY, RAPIDLY CHANGING TECHNOLOGY AND
EVOLVING INDUSTRY STANDARDS CAN HARM THE COMPANY'S OPERATING RESULTS.

The semiconductor industry has historically been cyclical and periodically
subject to significant economic downturns--characterized by diminished product
demand, accelerated erosion of selling prices and overcapacity--as well as
rapidly changing technology and evolving industry standards.  In the past, the
Company's operating results have been harmed by excess supply in the
semiconductor industry.  For example, management believes that the Company's net
revenues fell from $41.2 million in fiscal 1996 to $33.2 million in fiscal 1997
primarily due to a cyclical downturn in the semiconductor industry.
Accordingly, the Company may in the future experience substantial period-to-
period fluctuations in the Company's business and operating results due to
general semiconductor industry conditions, overall economic conditions or other
factors.  The Company's business is also subject to the risks associated with
the effects of legislation and regulations relating to the import or export of
semiconductor products.  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Product price declines and
fluctuations may cause the Company's future financial results to vary."

THE COMPANY'S CONTRACTS WITH ITS WAFER SUPPLIERS DO NOT OBLIGATE THE WAFER
SUPPLIERS TO A MINIMUM SUPPLY OR SET PRICES.  ANY INABILITY OR UNWILLINGNESS OF
THE COMPANY'S WAFER SUPPLIERS TO MEET THE COMPANY'S MANUFACTURING REQUIREMENTS
WOULD DELAY THE COMPANY'S PRODUCTION AND PRODUCT SHIPMENTS AND HARM THE
COMPANY'S BUSINESS.

In fiscal 1999, the Company purchased approximately 85% of its wafers from
Chartered Semiconductor Manufacturing Ltd.  In the third quarter of fiscal 2000,
Chartered accounted for approximately 69% of the Company's wafer manufacturing.
In both fiscal years, only four other suppliers manufactured the remainder of
the Company's wafers.  The Company's reliance on independent wafer suppliers to
fabricate the Company's wafers at their production facilities subjects the
Company to possible risks such as:

     .  lack of adequate capacity;

     .  lack of available manufactured products;

     .  lack of control over delivery schedules; and

     .  fires, earthquakes, damage to production facilities or technical
        difficulties limiting production and reducing yields.

Any inability or unwillingness of the Company's wafer suppliers generally, and
Chartered in particular, to provide adequate quantities of finished wafers to
meet the Company's needs in a timely manner would delay the Company's production
and product shipments and seriously harm the Company's business.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

At present, the Company purchases wafers from its suppliers through the issuance
of purchase orders based on the Company's rolling six-month forecasts.  The
purchase orders are subject to acceptance by each wafer supplier.  The Company
does not have long-term supply contracts which obligate the Company's suppliers
to a minimum supply or set prices.  The Company also depends upon its wafer
suppliers to participate in process improvement efforts, such as the transition
to finer geometries.  If the Company's suppliers are unable or unwilling to do
so, the Company's development and introduction of new products could be delayed.
Furthermore, sudden shortages of raw materials or production capacity
constraints can lead wafer suppliers to allocate available capacity to customers
other than the Company or for the suppliers' internal uses, interrupting the
Company's ability to meet its product delivery obligations.  Any significant

                                       16
<PAGE>

interruption in the Company's wafer supply would seriously harm the Company's
operating results and the Company's customer relations.  The Company's reliance
on independent wafer suppliers may also lengthen the development cycle for the
Company's products, providing time-to-market advantages to the Company's
competitors that have in-house fabrication capacity.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations," "The
Company depends on single or limited source assembly subcontractors with whom
the Company does not have written contracts" and "The complexity of the
Company's products makes the Company highly susceptible to manufacturing
problems, which could increase the Company's costs and delay its product
shipments."

In the event that the Company's suppliers are unable or unwilling to manufacture
the Company's key products in required volumes, the Company will have to
identify and qualify additional wafer foundries.  The qualification process can
take up to six months or longer.  Furthermore, the Company is unable to predict
whether additional wafer foundries will become available to the Company or will
be in a position to satisfy any of the Company's requirements on a timely basis.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

THE COMPANY DEPENDS ON SINGLE OR LIMITED SOURCE ASSEMBLY SUBCONTRACTORS WITH
WHOM THE COMPANY DOES NOT HAVE WRITTEN CONTRACTS.

The Company primarily relies on foreign subcontractors for the assembly and
packaging of the Company's products and, to a lesser extent, for the testing of
finished products.  Some of these subcontractors are the Company's single source
supplier for some of the Company's new packages.  In addition, changes in the
Company's or a subcontractor's business could cause the Company to become
materially dependent on a single subcontractor.  The Company has, from time to
time, experienced difficulties in the timeliness and quality of product
deliveries from its subcontractors and may experience similar or more severe
difficulties in the future.  The Company generally purchases these single or
limited source components or services pursuant to purchase orders and have no
guaranteed arrangements with these subcontractors.  These subcontractors could
cease to meet the Company's requirements for components or services, or there
could be a significant disruption in supplies from them, or degradation in the
quality of components or services supplied by them.  Any circumstance that would
require the Company to qualify alternative supply sources could delay shipments,
result in the loss of customers and limit or reduce the Company's revenues.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

THE COMPANY MAY HAVE DIFFICULTY ACCURATELY PREDICTING REVENUES FOR FUTURE
PERIODS.

The Company's expense levels are based in part on anticipated future revenue
levels, which can be difficult to predict.  The Company's business is
characterized by short-term orders and shipment schedules.  The Company does not
have long-term purchase agreements with any of its customers, and customers can
typically cancel or reschedule their orders without significant penalty.  The
Company typically plans production and inventory levels based on forecasts of
customer demand generated with input from customers and sales representatives.
Customer demand is highly unpredictable and can fluctuate substantially.  If
customer demand falls significantly below anticipated levels, the Company's
gross profit would be reduced.  See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "The Company may not provide
adequate allowances for exchanges, returns and concessions."

THE COMPANY COMPETES WITH OTHERS TO ATTRACT AND RETAIN KEY PERSONNEL, AND ANY
LOSS OF, OR INABILITY TO ATTRACT, KEY PERSONNEL WOULD HARM THE COMPANY.

To a greater degree than non-technology companies, the Company's future success
will depend on the continued contributions of its executive officers and other
key management and technical personnel.  None of these individuals has an
employment agreement with the Company and each one would be difficult to
replace.  The Company does not maintain any key person life insurance policies
on any of these individuals.  The loss of the services of one or more of the
Company's executive officers or key personnel or the inability to continue to
attract qualified personnel could delay product development cycles or otherwise
harm the Company's business, financial condition and results of operations.

                                       17
<PAGE>

The Company's future success also will depend on its ability to attract and
retain qualified technical, marketing and management personnel, particularly
highly skilled design, process and test engineers, for whom competition is
intense.  In particular, the current availability of qualified engineers is
limited and competition among companies for skilled and experienced engineering
personnel is very strong.  During strong business cycles, the Company expects to
experience continued difficulty in filling its needs for qualified engineers and
other personnel.

THE COMPANY'S LIMITED ABILITY TO PROTECT ITS INTELLECTUAL PROPERTY AND
PROPRIETARY RIGHTS COULD HARM THE COMPANY'S COMPETITIVE POSITION.

The Company's success depends in part on its ability to obtain patents and
licenses and preserve other intellectual property rights covering the Company's
products and development and testing tools.  In the United States, the Company
holds eighteen patents covering certain aspects of the Company's product designs
and has thirteen additional patent applications pending.  Copyrights, mask work
protection, trade secrets and confidential technological know-how are also key
to the Company's business.  Additional patents may not be issued to the Company
or the Company's patents or other intellectual property may not provide
meaningful protection.  The Company may be subject to, or initiate, interference
proceedings in the U.S. Patent and Trademark Office.  These proceedings can
consume significant financial and management resources.  The Company may become
involved in litigation relating to alleged infringement by the Company of
others' patents or other intellectual property rights.  This type of litigation
is frequently expensive to both the winning party and the losing party and takes
up significant amounts of management's time and attention.  In addition, if the
Company loses such a lawsuit, a court could require the Company to pay
substantial damages and/or royalties or prohibit the Company from using
essential technologies.  For these and other reasons, this type of litigation
could seriously harm the Company's business.  Also, although the Company may
seek to obtain a license under a third party's intellectual property rights in
order to bring an end to certain claims or actions asserted against the Company,
the Company may not be able to obtain such a license on reasonable terms or at
all.

Because it is important to the Company's success that the Company be able to
prevent competitors from copying the Company's innovations, management intends
to continue to seek patent, trade secret and mask work protection for the
Company's technologies.  The process of seeking patent protection can be long
and expensive, and management cannot be certain that any currently pending or
future applications will actually result in issued patents, or that, even if
patents are issued, they will be of sufficient scope or strength to provide
meaningful protection or any commercial advantage to the Company.  Furthermore,
others may develop technologies that are similar or superior to the Company's
technology or design around the patents the Company owns.

The Company also relies on trade secret protection for its technology, in part
through confidentiality agreements with the Company's employees, consultants and
third parties.  However, these parties may breach these agreements.  In
addition, the laws of some territories in which the Company develops,
manufactures or sells the Company's products may not protect the Company's
intellectual property rights to the same extent as do the laws of the United
States.

The process technology used by the Company's independent foundries, including
process technology that the Company developed with its foundries, can generally
be used by them to produce their own products or to manufacture products for
other companies, including the Company's competitors.  In addition, the Company
does not generally have the right to implement the process technology used to
manufacture the Company's products with foundries other than the foundry with
which the Company developed the process technology.

THE COMPANY MAY NOT PROVIDE ADEQUATE ALLOWANCES FOR EXCHANGES, RETURNS AND
CONCESSIONS.

The Company recognizes revenue from the sale of products when shipped, less an
allowance based on future authorized and historical patterns of returns, price
protection, exchanges and other concessions.  Management believes that the
Company's methodology and approach are appropriate.  However, if the

                                       18
<PAGE>

actual amounts the Company incurs exceed the allowances, it could decrease the
Company's revenue and corresponding gross profit. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

THE COMPLEXITY OF THE COMPANY'S PRODUCTS MAKES THE COMPANY HIGHLY SUSCEPTIBLE TO
MANUFACTURING PROBLEMS, WHICH COULD INCREASE THE COMPANY'S COSTS AND DELAY ITS
PRODUCT SHIPMENTS.

The manufacture and assembly of the Company's more than 400 products are highly
complex and sensitive to a wide variety of factors, including:

     .  the level of contaminants in the manufacturing environment;

     .  impurities in the materials used; and

     .  the performance of manufacturing personnel and production equipment.

In a typical semiconductor manufacturing process, silicon wafers produced by a
foundry are cut into individual die.  These die are assembled into individual
packages and tested for performance.  The Company's wafer fabrication suppliers
have from time to time experienced lower than anticipated yields of good die.
In the event of such decreased yields, the Company would incur additional costs
to sort wafers, an increase in average cost per useable die and an increase in
the time to market for the Company's products.  These conditions could reduce
the Company's net revenues and gross margin and harm the Company's customer
relations.

The Company does not manufacture any of its products.  Therefore, the Company is
referred to in the semiconductor industry as a "fabless" producer.
Consequently, the Company depends upon third party manufacturers to produce
semiconductors that meet the Company's specifications.  The Company currently
has third party manufacturers that can produce semiconductors that meet the
Company's needs.  However, as the industry continues to progress to smaller
manufacturing and design geometries, the complexities of producing
semiconductors will increase.  Decreasing geometries may introduce new problems
and delays that may affect product development and deliveries.  Due to the
nature of the industry and the Company's status as a "fabless" semiconductor
company, the Company could encounter fabrication-related problems that may
affect the availability of the Company's products, delay its shipments or
increase its costs.  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Almost all of the Company's wafer
suppliers and assembly subcontractors are located in southeast Asia, which
exposes the Company to the problems associated with international operations."

A LARGE PORTION OF THE COMPANY'S REVENUES ARE DERIVED FROM SALES TO A FEW
CUSTOMERS, WHO MAY CEASE PURCHASING FROM THE COMPANY AT ANY TIME.

A relatively small number of customers have accounted for a significant portion
of the Company's net revenues in each of the past several fiscal years.  The
Company expects this trend to continue for the foreseeable future.  Sales to
domestic and international distributors represented 36% of the Company's net
revenues in fiscal 1997, 49% in fiscal 1998 and 57% in fiscal 1999.  During the
first nine months of fiscal 2000, sales to domestic and international
distributors represented 57% of net revenues.  Techmosa, an international
distributor that in turn ships to many end users, accounted for approximately
11% of net revenues during the first nine months of fiscal 2000.  Sales to the
Company's top five customers accounted for approximately 38% of net revenues for
the first nine months of fiscal 2000.  See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

The Company does not have long-term sales agreements with any of its customers.
The Company's customers are not subject to minimum purchase requirements, may
reduce or delay orders periodically due to excess inventory and may discontinue
selling the Company's products at any time.  The Company's distributors
typically offer competing products in addition to the Company's products.  The
loss of one or more significant customers, or the decision by a significant
distributor to carry the product lines of the Company's competitors, could
decrease the Company's revenues.  See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

                                       19
<PAGE>

ALMOST ALL OF THE COMPANY'S WAFER SUPPLIERS AND ASSEMBLY SUBCONTRACTORS ARE
LOCATED IN SOUTHEAST ASIA, WHICH EXPOSES THE COMPANY TO THE PROBLEMS ASSOCIATED
WITH INTERNATIONAL OPERATIONS.

Almost all of the Company's wafer suppliers and assembly subcontractors are
located in southeast Asia, which exposes the Company to risks associated with
international business operations, including the following:

     .  disruptions or delays in shipments;

     .  changes in economic conditions in the countries where these
        subcontractors are located;

     .  currency fluctuations;

     .  changes in political conditions;

     .  potentially reduced protection for intellectual property;

     .  foreign governmental regulations;

     .  import and export controls; and

     .  changes in tax laws, tariffs and freight rates.

In particular, there is a potential risk of conflict and further instability in
the relationship between Taiwan and the People's Republic of China.  Conflict or
instability could disrupt the operations of several of the Company's assembly
subcontractors located in Taiwan.  See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "The Company depends on single
or limited source assembly subcontractors with whom the Company does not have
written contracts" and "Because the Company sells its products to customers
outside of the United States, the Company faces foreign business, political and
economic risks that could seriously harm it."

BECAUSE THE COMPANY SELLS ITS PRODUCTS TO CUSTOMERS OUTSIDE OF THE UNITED
STATES, THE COMPANY FACES FOREIGN BUSINESS, POLITICAL AND ECONOMIC RISKS THAT
COULD SERIOUSLY HARM IT.

Sales outside the United States accounted for approximately 48% of the Company's
net revenues in fiscal 1999, and 45% in the first nine months of fiscal 2000.
Management expects that export sales will continue to represent a significant
portion of net revenues.  Management intends to expand the Company's sales
efforts outside the United States.  This expansion will require significant
management attention and financial resources and further subject the Company to
international operating risks.  These risks include:

     .  tariffs and other barriers and restrictions;

     .  unexpected changes in regulatory requirements;

     .  the burdens of complying with a variety of foreign laws; and

     .  delays resulting from difficulty in obtaining export licenses for
        technology.

The Company is also subject to general geopolitical risks in connection with its
international operations, such as political and economic instability and changes
in diplomatic and trade relationships.  In addition, because the Company's
international sales are denominated in U.S. dollars, increases in the value of
the U.S. dollar could increase the price in local currencies of the Company's
products in foreign markets and make the Company's products relatively more
expensive than competitors' products that are denominated in local currencies.
Regulatory, geopolitical and other factors could seriously harm the Company's
business or require the Company to modify its current business practices.  See
"The Company depends on single or limited source assembly subcontractors with
whom the Company does not have written contracts," "Almost all of the Company's
wafer suppliers and assembly subcontractors are located in southeast Asia, which
exposes the Company to the problems associated with international operations."

                                       20
<PAGE>

THE COMPANY'S POTENTIAL FUTURE ACQUISITIONS MAY NOT BE SUCCESSFUL BECAUSE THE
COMPANY HAS NOT MADE ACQUISITIONS IN THE PAST.

The Company may use a portion of the net proceeds from the secondary offering
completed in March 2000 to make acquisitions.  The Company has depended on
internal growth in the past and has not made any acquisitions.  As part of the
Company's business strategy, management expects to seek acquisition prospects
that would complement the Company's existing product offerings, improve market
coverage or enhance the Company's technological capabilities.  The Company has
no current agreements or negotiations underway with respect to any acquisitions,
and the Company may not be able to locate suitable acquisition opportunities.
Future acquisitions could result in the following:

     .  potentially dilutive issuances of equity securities;

     .  large one-time write-offs;

     .  the incurrence of debt and contingent liabilities or amortization
        expenses related to goodwill and other intangible assets;

     .  difficulties in the assimilation of operations, personnel, technologies,
        products and the information systems of the acquired companies;

     .  diversion of management's attention from other business concerns; and

     .  risks of entering geographic and business markets in which the Company
        has no or limited prior experience and potential loss of key employees
        of acquired organizations.

Management is not certain that the Company will be able to successfully
integrate any businesses, products, technologies or personnel that may be
acquired in the future.  The Company's failure to do so could seriously harm its
business.  See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

THE COMPANY'S OPERATIONS AND FINANCIAL RESULTS COULD BE SEVERELY HARMED BY
NATURAL DISASTERS.

The Company's headquarters and some of its major suppliers' manufacturing
facilities are located near major earthquake faults.  One of the foundries the
Company uses is located in Taiwan, which recently suffered a severe earthquake.
The Company did not experience significant disruption to its operations as a
result of that earthquake.  However, if a major earthquake or other natural
disaster were to affect the Company's suppliers, the Company's sources of supply
could be interrupted, which would seriously harm the Company's business.  See
"The Company depends on single or limited source assembly subcontractors with
whom the Company does not have written contracts."

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At March 31, 2000, our investment portfolio consisted of investment-grade fixed
income securities, excluding those classified as cash equivalents, of $18.2
million.  These securities are subject to interest rate risk and will decline in
value if market interest rates increase.  For example, if market interest rates
were to increase immediately and uniformly by 10% per annum from levels as of
March 31, 2000, the fair market value of the portfolio would decrease.  However,
we do not believe that such a decrease would have a material effect on our
results of operations over the next fiscal year.  Due to the short duration and
conservative nature of these instruments, we do not believe that we have a
material exposure to interest rate risk.

                                       21
<PAGE>

                          PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

         a.  Exhibits

             Exhibit 27.1 - Financial Data Schedule


         b.  Reports on Form 8-K.

             No reports on Form 8-K were filed with the Securities and Exchange
             Commission during the quarter ended March 31, 2000.

                                       22
<PAGE>

                                   SIGNATURES

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.



                       Pericom Semiconductor Corporation
                                  (Registrant)



Date:  May 10, 2000                     By: /s/ Alex Hui
                                            ------------
                                            Alex Hui
                                            Chief Executive Officer



Date:  May 10, 2000                     By: /s/ Patrick B. Brennan
                                            ----------------------
                                            Patrick B. Brennan
                                            Chief Financial Officer
                                            (Chief Accounting Officer)

                                       23