<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K
                            ------------------------

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

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

           FOR THE TRANSITION PERIOD FROM __________ TO __________ .

                         COMMISSION FILE NUMBER 0-9653

                                  XICOR, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                  CALIFORNIA                                     94-2526781
       (STATE OR OTHER JURISDICTION OF              (I.R.S. EMPLOYER IDENTIFICATION NO.)
        INCORPORATION OR ORGANIZATION)

              1511 BUCKEYE DRIVE                                   95035
             MILPITAS, CALIFORNIA                                (ZIP CODE)
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 432-8888

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                        COMMON STOCK, WITHOUT PAR VALUE
                                (TITLE OF CLASS)

     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 and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     The aggregate market value of the voting stock (Common Stock, without par
value) held by non-affiliates of the Registrant was approximately $79,418,000 on
March 26, 2001.

     The aggregate number of outstanding shares of Common Stock, without par
value, of the Registrant was 21,501,070 on March 26, 2001.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy Statement for the Registrant's 2001 Annual Meeting of
Shareholders is incorporated by reference in Part III of this Form 10-K.

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<PAGE>   2

                                  XICOR, INC.

                                   FORM 10-K

                      FOR THE YEAR ENDED DECEMBER 31, 2000

                               TABLE OF CONTENTS

<TABLE>
<S>       <C>                                                           <C>
                                  PART I
Item 1.   Business....................................................    1
Item 2.   Properties..................................................    6
Item 3.   Legal Proceedings...........................................    6
Item 4.   Submission of Matters to a Vote of Security Holders.........    6

                                  PART II
Item 5.   Market for Registrant's Common Stock and Related Stockholder
            Matters...................................................    7
Item 6.   Selected Financial Data.....................................    8
Item 7.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations.................................    9
Item 7A.  Quantitative and Qualitative Disclosures About Market
            Risk......................................................   17
Item 8.   Consolidated Financial Statements and Supplementary Data....   18
Item 9.   Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure..................................   33

                                 PART III
Item 10.  Directors and Executive Officers of the Registrant..........   34
Item 11.  Executive Compensation......................................   34
Item 12.  Security Ownership of Certain Beneficial Owners and
            Management................................................   34
Item 13.  Certain Relationships and Related Transactions..............   34

                                  PART IV
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
            8-K.......................................................   35

Signatures............................................................   36

Index to Exhibits.....................................................   37
</TABLE>

                                        i
<PAGE>   3

                                     PART I

     This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Words such as "anticipate," "believes," "expects,"
"future," "intends," "assuming," "projected," "plans" and similar expressions
are used to identify forward-looking statements. You should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this report. Actual results could differ materially from those projected in the
forward-looking statements for many reasons, including the risk factors listed
in the "Factors Affecting Future Results" section of "Management's Discussion &
Analysis of Financial Conditions and Results of Operations" included in Part II,
Item 7 of this report and the risk factors included in Item 1 below.

ITEM 1. BUSINESS

OVERVIEW

     Xicor, Inc. designs, develops, manufactures and markets a wide variety of
programmable mixed-signal integrated circuits and nonvolatile memory products
used in networking, computing, communication, consumer and industrial
applications. By virtue of their nonvolatility, Xicor's devices retain their
information content when power is lost or turned off. Reprogramming is
accomplished by "writing" over the old data without a need for first "erasing"
the old data. Xicor's devices can be reprogrammed bit by bit or in larger groups
of bits called "bytes", "words" and "pages" without being removed from the
system and operate from the same power source used in microcontroller and
microprocessor-based systems, or even lower voltages common in hand-held and
portable products. Xicor products are sold in a variety of packages, including
plastic, ceramic and chip scale packages for small footprint and height.

     The combination of reprogrammability and nonvolatility has enabled Xicor's
customers to develop products with characteristics that can be altered from a
remote location by a technician or on-site by a non-technical user through a
keyboard, or which are automatically self-calibrating, thereby reducing field
service costs. Either the distributor or the end user subsequent to the
production process can customize microcontroller and microprocessor-based
products incorporating Xicor's devices. This simplifies production control,
reduces the lead-time required for such customization and permits lower
inventory levels to be maintained. Xicor products also offer programmable
security locks enabling system producers to prevent changes to embedded
programs.

     Xicor products are grouped in two categories: Mixed-Signal Products and
Memory Products. Xicor is currently increasing its engineering, sales and
marketing efforts related to Mixed-Signal Products and plans to exit the Serial
EEPROM products business, which comprises a significant portion of Xicor's
Memory Products. The compound effect of uncertain sales in the low-density
serial memory business and the expenses necessary to support that business were
also factors in making the decision. Xicor believes that refocusing its efforts
on Mixed-Signal Products will provide a better opportunity for consistent
financial performance; however, Xicor cannot guarantee any improvement or
consistency in its financial performance. Xicor plans to continue to build on
its non-volatile memory expertise, as this capability is a differentiator and a
value-added feature of Xicor's mixed-signal products. Xicor also plans to
continue to support its parallel EEPROM business as this segment of the memory
business generates higher gross margins.

     The exit from Xicor's Serial EEPROM business will substantially change the
company. In order to complete this transition Xicor plans to reduce its
workforce by approximately 125 employees and complete the move to fully
out-sourced assembly and test operations. As a result, Xicor will become a
smaller company. Xicor's first quarter 2001 results will reflect the impact of
restructuring charges and charges to cost of sales to eliminate the Serial
EEPROM product line from its business processes. The charges will include
inventory write-downs, severance costs and other expenses directly associated
with activities supporting this business. The second quarter of 2001 is expected
to be a transition quarter as Xicor under-absorbs fixed costs to manage the
organization and operational changes necessary to complete this process.

                                        1
<PAGE>   4

MIXED-SIGNAL PRODUCTS AND APPLICATIONS

     Xicor's Mixed-Signal Product Group products represented approximately 35%
of sales in 2000; 26% in 1999; and 22% in 1998.

     System Tuning Products, primarily consisting of Digitally Controlled
Potentiometers (XDCP's), represent the most established product line in Xicor's
Mixed-Signal Product Group. XDCP's are digitally controlled solid-state
electronic variable resistors that give the designer and the system more
accuracy and flexibility. Since XDCP's are integrated circuits and are
controlled electronically, greater system reliability can be realized.
Furthermore, XDCP's eliminate the disadvantages of mechanical potentiometers
associated with manual adjustment and moving parts. These devices allow system
engineers to digitally tune and calibrate analog functions.

     Applications for these devices include those requiring high-precision
trimming and calibration such as precision gain and attenuation amplifiers for
communications systems and wireless RF power settings. These devices can also be
used in high-resolution data acquisition systems for industrial control, test
instrumentation and medical equipment.

     In 1999 and 2000 Xicor expanded the XDCP line with products targeted at the
fiber optic market. These devices are functionally integrated solutions that are
designed specifically to support the needs of fiber optic module manufacturers
by integrating several major control and monitoring functions for laser diode
modules in fiber LAN and gigabit Ethernet applications. These functions include
bias current control, modulation control and voltage level sensing.

     Complementing Xicor's System Tuning family is the Company's line of System
Management products that includes supervisory chips for microcontroller based
systems. System management products are targeted for embedded systems that
require controlled power-up and orderly, predictable power-down, reliable
recovery in the event of system failure and the capability of knowing the time
and date of an event. Products include NOVRAMs, Central Processing Unit
supervisors and timekeeping products.

NONVOLATILE MEMORY PRODUCTS AND APPLICATIONS

     There are a variety of nonvolatile memory devices available in the
marketplace, including read-only memories or ROMs, programmable read only
memories or PROMs, electrically programmable read-only memories or EPROMs,
electrically erasable programmable ROMs or EEPROMs, and Flash Memories.

     Xicor has historically focused its efforts on EEPROM products. EEPROMs are
products which are nonvolatile memories that can be reprogrammed in-system
hundreds of thousands of times and can be altered one byte or several bytes at a
time. EEPROMs are termed serial or parallel depending on their connection to the
system's processor. Serial EEPROM devices transmit data through a single
input-output port while parallel devices transmit data through multiple ports
concurrently.

     Xicor's EEPROM memory product sales were approximately 65% of sales in
2000; 74% of sales in 1999; and 78% of sales in 1998 and include the following
product lines:

     Parallel Interface EEPROMs. Xicor supplies a broad line of parallel
interface EEPROMs with densities ranging from 64K to 1 megabit. Parallel
interface EEPROMs are generally used to contain frequently updated data in
communications infrastructure equipment, instrumentation, transportation and
other industrial applications.

     Serial Interface EEPROMs. Xicor supplies a broad line of serial interface
EEPROMs which include password-secured serial EEPROMs, standard serial EEPROMs
and proprietary serial EEPROMs. Many of these memory products are used in
space-sensitive hand held applications. In March 2001, Xicor announced it
intends to exit from offering standalone low-density Serial EEPROM products.

                                        2
<PAGE>   5

MARKETING AND SALES

     Xicor's products are sold worldwide for a broad range of applications,
including communications, consumer, computer and industrial applications. In new
applications, particularly for newly introduced devices, Xicor's products
generally require long "design-in" cycles for customer applications with
extensive field application engineering support by Xicor. Xicor considers close
support of its customers' design efforts to be an important aspect of its
marketing strategy.

     Xicor markets its products directly from its headquarters in Milpitas,
California and from regional domestic and foreign sales offices. Products are
also marketed domestically through a national network of independent sales
representatives, each of which has been granted an exclusive sales territory,
and through non-exclusive national stocking distributors which also handle
competitive products. Xicor's products are also marketed internationally through
a network of independent exclusive and non-exclusive sales representatives and
non-exclusive stocking distributors. Certain of Xicor's shipments are made to
distributors under agreements allowing rights of return and price protection on
unsold merchandise. Xicor's policy is to defer recognition of sales and related
costs on such shipments until the products are sold by the distributors.

     Xicor's international sales constituted approximately 53% of total sales in
2000; 56% in 1999; and 46% in 1998. Xicor's international sales are generally
denominated in U.S. dollars. Due to the magnitude of its international sales,
Xicor is subject to risks common to all international economic activities,
including currency fluctuations, governmental regulation and the risk of
imposition of tariffs or other trade barriers. Further, export sales to certain
countries must be licensed by the Bureau of Export Administration of the US
Department of Commerce.

     One distributor accounted for 19% of Xicor's sales in 2000; 14% in 1999;
and 15% in 1998. Distributors are not themselves end users of Xicor products,
but rather serve as a channel of sale to many end users of Xicor's products. One
OEM customer represented 11% of sales in 1999.

     Customer "design-ins" may not result in volume purchase orders. Further,
volume purchase orders received by Xicor do not necessarily result in sales as
they are in most cases, consistent with industry practice, terminable by the
customer without penalty. Consequently, backlog figures are not necessarily
indicative of future sales.

MANUFACTURING

     Historically, Xicor manufactured in-house all silicon wafers used to
provide the semiconductor chips for its products. However, the rapidly
escalating capital investments necessary to keep pace with technological
advances and the increasing need for larger factories in order to efficiently
spread the high level of fixed costs associated with complex semiconductor
manufacturing operations have led to the emergence of wafer fabrication
foundries, enabling many semiconductor companies to outsource portions or all of
their wafer requirements.

     During 1998 Xicor announced and began to implement a restructuring plan to
change its manufacturing and procurement strategies to significantly increase
outsourcing of wafer fabrication and product testing to overseas subcontractors
and to streamline operations. This change was in response to continuing market
conditions that made it more economical to outsource manufacturing. Xicor's
initial foundry, Yamaha Corporation of Japan, was qualified as an outside
foundry for Xicor in the third quarter of 1998. In the second quarter of 1999
Xicor entered into agreements with Sanyo Electric Co., Ltd. of Japan and ZMD
GmbH of Germany to fabricate wafers for Xicor. In the second half of 1999,
Yamaha produced more than one-third of Xicor's wafer requirements. In the fourth
quarter of 1999, the first wafers from Sanyo and ZMD GmbH were received by Xicor
and passed initial quality criteria. In November 2000, Xicor completed the sale
of its wafer fabrication assets and inventory to Standard MEMS, Inc. ("Standard
MEMS"). At the time of the sale, Xicor and Standard MEMS also entered into a
related foundry agreement for Standard MEMS to become Xicor's foundry. Effective
November 2000, Xicor became a fabless semiconductor company that relies on the
aforementioned semiconductor foundries to produce wafers for Xicor. For the next
two years Standard MEMS is committed to supply, and Xicor is committed to
purchase, certain minimum quantities of wafers.

                                        3
<PAGE>   6

     Each chip on the fabricated wafer is tested and the nonfunctional chips are
identified. The wafers are then shipped to subcontractors in various countries
including Taiwan, Thailand, South Korea, the Philippines, China or Malaysia,
where the wafers are separated into individual chips. Each functional chip is
encapsulated in a plastic or ceramic package having external leads to which the
chip is connected by extremely fine wires. The packaged chips undergo
comprehensive electrical testing offshore at one of Xicor's independent
subcontractors located in various countries including Taiwan, Thailand, South
Korea, the Philippines and China. A limited amount of testing is also performed
in Milpitas. Chip-scale packaged products are encapsulated by subcontractors
based in Israel and the United States and tested in Milpitas. In accordance with
industry practice, Xicor provides a limited warranty for its devices against
defects in materials and workmanship for periods ranging from 90 days to one
year.

     Reliance on overseas wafer fabrication, sort, assembly and test contractors
and Xicor's maintenance of inventories at contractors' facilities entails
certain political and economic risks, including political instability and
expropriation, currency controls and exchange fluctuations, and changes in
tariff and freight rates. Furthermore, in the event Xicor's overseas wafer
fabrication, sort, assembly or test operations, or air transportation to or from
foreign foundries or contractors, were disrupted for any reason, Xicor's
operations could be severely harmed.

     The principal raw materials utilized in the production process are polished
silicon wafers, ultra-pure metals, chemicals and gases. Encapsulation materials
that enclose the chip and provide the external connecting leads are provided by
the independent assembly contractors or are purchased by Xicor and shipped to
such contractors. Shortages could occur in various essential materials due to
interruption of supply or due to increased demand in the industry. Shortages
have occurred in Xicor's history and lead times have been extended in the
industry on occasion without significantly harming Xicor. However, future
shortages, if any, could severely harm Xicor's operations.

RESEARCH AND DEVELOPMENT

     Continuing development of more advanced processes and products is essential
to maintaining and enhancing Xicor's competitive position. Such development
activities are difficult and lengthy. They may not be successfully completed and
future products may not be available on a timely basis or achieve market
acceptance.

     Research and development activities require a high degree of complexity of
design and manufacturing process, and consequently a significant percentage of
Xicor's sales is continuously invested in research and development and in the
pre-production engineering activity related to new products and technologies.
Xicor's research and development expenditures were $15,880,000 in 2000;
$14,560,000 in 1999; and $17,429,000 in 1998.

PATENTS AND LICENSES

     Xicor holds a number of United States patents and corresponding foreign
patents covering various circuit designs and the structure of its devices.
Further, additional patent applications for such products are pending in the
United States and abroad. However, patents granted or pending may not provide
Xicor with any meaningful protection. Similar to other semiconductor
manufacturers, Xicor has granted licenses under its patents and may continue to
do so in the future. Xicor believes that, due to the rapidly changing technology
in the semiconductor industry, its future success will be dependent primarily
upon the technical expertise and creative skills of its personnel rather than
patent protection.

     As is the case with many companies in the semiconductor industry, it may
become necessary or desirable for Xicor to obtain licenses relating to its
products from others. Xicor has received notices claiming infringement of
patents from several semiconductor manufacturers with respect to certain aspects
of Xicor's processes and devices and these matters are under investigation and
review. Although patent holders typically offer licenses and Xicor has entered
into such license agreements, licenses may not be obtainable on acceptable terms
and any dispute may not be resolved without costly litigation.

                                        4
<PAGE>   7

COMPETITION

     The semiconductor industry is highly competitive and characterized by
steadily declining prices, particularly during periods of industry oversupply.
Numerous companies are currently selling products that compete with those of
Xicor. In addition to price, important elements determining success in
competition include product performance, quality and reliability, delivery
capability, diversity of product line, application support, financial strength
and the ability to respond rapidly to technological innovations. Xicor may be at
a disadvantage in competing with major domestic and foreign concerns that have
significant financial resources, established and diverse product lines,
worldwide vertically integrated production facilities and extensive research and
development staffs. Further, the semiconductor industry is characterized by
rapid technological change and Xicor will be required to continually develop or
have access to new and improved manufacturing processes and products to remain
competitive.

EMPLOYEES

     At December 31, 2000 Xicor had approximately 300 employees. None of the
employees are represented by a labor organization and Xicor considers its
employee relations to be good. Many of Xicor's employees are highly skilled and
Xicor's success will depend in significant part on its ability to attract and
retain such employees in the highly competitive semiconductor industry and in
Silicon Valley.

EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth each executive officer of Xicor, their ages
(as of December 31, 2000) and position with Xicor:

<TABLE>
<CAPTION>
          NAME             AGE                         OFFICE
          ----             ---                         ------
<S>                        <C>   <C>
Louis DiNardo............  41    President and Chief Executive Officer
Ralph Griffin............  43    Vice President, Operations
Geraldine N. Hench.......  43    Vice President, Finance and Chief Financial Officer
Klaus G. Hendig..........  61    Senior Vice President, Administration
Michael P. Levis.........  43    Vice President, Marketing
Daniel L. Lewis..........  51    Vice President, Worldwide Sales
James McCreary...........  54    Vice President, Engineering
</TABLE>

     LOUIS DINARDO, PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr. DiNardo joined
Xicor as President and Chief Executive Officer in November 2000. He has been
involved in sales, marketing and operations within the semiconductor industry
for approximately 20 years. Mr. DiNardo came to Xicor from Linear Technology
Corporation (LLTC), where he was General Manager of Mixed-Signal Products.
During his 13 years at LLTC, Mr. DiNardo held positions as Vice
President -- Marketing, Director of North American Distribution, and Area Sales
Manager. Prior to LLTC, Mr. DiNardo worked for 8 years at Analog Devices, where
he was involved primarily in Field Sales and Applications. Mr. DiNardo received
his bachelor's degree from Ursinus College.

     RALPH GRIFFIN, VICE PRESIDENT, OPERATIONS. Mr. Griffin joined Xicor in
December 1996 and became Vice President in 1999. Mr. Griffin has approximately
20 years of experience in semiconductor manufacturing and engineering roles.
From August 1990 to November 1996, Mr. Griffin worked at National Semiconductor
with the Sematech Program, in research and development, and built a 200mm wafer
fabrication plant at National's Santa Clara site. Prior to 1990, Mr. Griffin
held various positions in Process Engineering and Wafer Fab Management working
for Siliconix, Inc, Data General Corp., and Fairchild Semiconductor. Mr. Griffin
received the degrees of Bachelor of Science in Chemical Engineering from
Stanford University and Master of Business Administration from San Jose State
University.

     GERALDINE N. HENCH, VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL
OFFICER. Ms. Hench, a certified public accountant, joined Xicor in November 1987
and became a Vice President in June 1993 and Xicor's Chief Financial Officer in
January 1998. Ms. Hench received the degree of Bachelor of Science in Accounting
from Santa Clara University and the degree of Master of Business Administration
from St. Mary's College.
                                        5
<PAGE>   8

     KLAUS G. HENDIG, SENIOR VICE PRESIDENT, ADMINISTRATION. Mr. Hendig, a
certified public accountant, has been employed by Xicor since February 1981 and
became a Vice President in January 1983. Mr. Hendig served as Xicor's Chief
Financial Officer from September 1987 until January 1998. Mr. Hendig received
the degree of Bachelor of Science in Accounting and Finance from San Jose State
University.

     MICHAEL P. LEVIS, VICE PRESIDENT, MARKETING. Mr. Levis joined Xicor in
January 1998 as Vice President, Marketing. Mr. Levis has 17 years of experience
in marketing and business development. From 1996 through 1997, Mr. Levis served
as General Partner at ASCII of America, a venture capital firm. From 1993
through 1996, Mr. Levis was the Vice President of Marketing at Crosspoint
Solutions, Inc., a semiconductor company. Prior to 1993 Mr. Levis held various
marketing and business development positions at Crosspoint Solutions, Inc.,
Samsung Semiconductors and Zilog, Inc. Mr. Levis received the degree of Bachelor
of Science in Electrical Engineering from Purdue and the degree of Master of
Science in Electrical Engineering from Stanford University.

     DANIEL L. LEWIS, VICE PRESIDENT, WORLDWIDE SALES. Mr. Lewis joined Xicor in
May 1998 as Vice President, Worldwide Sales. Mr. Lewis has 29 years of
experience in various sales and marketing roles. From June 1991 through April
1998, Mr. Lewis was Vice President of Sales at Integrated Device Technology,
Inc. Mr. Lewis received the degree of Bachelor of Science in Electrical
Engineering from the University of Michigan.

     JAMES MCCREARY, VICE PRESIDENT, ENGINEERING. Mr. McCreary joined Xicor in
October 1998 as Vice President, Engineering. From 1996 through 1998 Mr. McCreary
was involved in private business ventures. In 1983 Mr. McCreary co-founded Micro
Linear Corp. where he was Vice President of Engineering from 1983 through 1995.
Mr. McCreary received the degrees of Master of Science in Electrical Engineering
and Ph.D. from the University of California, Berkeley and is the inventor of
several patents.

INSURANCE

     Xicor presently carries various insurance coverage including property
damage, business interruption and general liability including certain product
liability coverage. Xicor has been unable to obtain pollution and earthquake
insurance at reasonable costs and limits.

ITEM 2. PROPERTIES

     Xicor's executive offices are located in an approximately 74,000
square-foot building at 1511 Buckeye Drive, Milpitas, California. This facility,
which houses Xicor's design, research and development and reliability operations
and executive, marketing, and administrative offices, is leased. The lease
expires in 2010 and provides for an annual base rental of $1,185,840, increasing
3.25% annually, and requires Xicor to pay all real estate taxes, utilities and
insurance and to maintain the building and premises. Xicor has one five-year
renewal option upon the same terms and conditions at the higher of 95% of the
then fair market value or $1,148,508 annually.

     Xicor leases an approximately 31,000 square-foot facility adjacent to
Xicor's executive offices that houses its domestic product testing and
distribution operations and a small quick-turn assembly line. This lease expires
in 2010 and provides for an annual base rental of $504,000, increasing 3.25%
annually, and requires Xicor to pay all real estate taxes, utilities and
insurance and to maintain the buildings and premises. Xicor has one five-year
renewal option upon the same terms and conditions at the higher of 95% of the
then fair market value or $504,000 annually.

ITEM 3. LEGAL PROCEEDINGS

     Xicor is not a party, nor is its property subject, to any material pending
legal proceedings.

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

     None

                                        6
<PAGE>   9

                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     Xicor's Common Stock trades on the Nasdaq National Market tier of the
Nasdaq Stock Market(SM) under the symbol XICO. The table below sets forth the
high and low sales prices for the Common Stock as reported by Nasdaq for each
calendar quarter.

<TABLE>
<CAPTION>
                                                             HI         LOW
                                                           -------    -------
<S>                                                        <C>        <C>
Fiscal year ended December 31, 2000
  First quarter..........................................  $26.250    $12.000
  Second quarter.........................................   19.000      4.500
  Third quarter..........................................   12.688      6.188
  Fourth quarter.........................................    8.563      2.813
</TABLE>

<TABLE>
<CAPTION>
                                                             HI         LOW
                                                           -------    -------
<S>                                                        <C>        <C>
Fiscal year ended December 31, 1999
  First quarter..........................................  $ 2.125    $ 1.125
  Second quarter.........................................    4.375      1.281
  Third quarter..........................................    9.000      2.813
  Fourth quarter.........................................   16.563      5.156
</TABLE>

     There were approximately 1,000 shareholders of record on December 31, 2000.
Xicor has never paid cash dividends and does not anticipate paying any cash
dividends in the foreseeable future.

                                        7
<PAGE>   10

ITEM 6. SELECTED FINANCIAL DATA

Financial Operating Information

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                            ------------------------------------------------------
                                              2000        1999        1998       1997       1996
                                            ---------   ---------   --------   --------   --------
                                                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                         <C>         <C>         <C>        <C>        <C>
Operations Data:
Net sales.................................  $ 122,849   $ 114,887   $106,147   $122,453   $123,514
Cost of sales.............................     71,672      80,474     89,844     84,603     74,303
                                            ---------   ---------   --------   --------   --------
  Gross profit............................     51,177      34,413     16,303     37,850     49,211
                                            ---------   ---------   --------   --------   --------
Operating expenses:
  Research and development................     15,880      14,560     17,429     18,475     15,074
  Selling, general and administrative.....     26,122      22,360     22,634     21,753     20,306
  Restructuring charge (credit)...........     (3,841)     23,719      4,985         --         --
                                            ---------   ---------   --------   --------   --------
                                               38,161      60,639     45,048     40,228     35,380
                                            ---------   ---------   --------   --------   --------
Income (loss) from operations.............     13,016     (26,226)   (28,745)    (2,378)    13,831
Interest expense..........................       (817)     (1,407)    (1,872)    (1,834)    (1,421)
Interest income...........................      1,458         704      1,086      1,901      2,001
                                            ---------   ---------   --------   --------   --------
Income (loss) before income taxes.........     13,657     (26,929)   (29,531)    (2,311)    14,411
Provision for income taxes................        491          --         --        220        576
                                            ---------   ---------   --------   --------   --------
Net income (loss).........................  $  13,166   $ (26,929)  $(29,531)  $ (2,531)  $ 13,835
                                            =========   =========   ========   ========   ========
Net income (loss) per share:
  Basic...................................  $    0.62   $   (1.32)  $  (1.53)  $  (0.13)  $   0.74
                                            =========   =========   ========   ========   ========
  Diluted.................................  $    0.57   $   (1.32)  $  (1.53)  $  (0.13)  $   0.70
                                            =========   =========   ========   ========   ========
Shares used in per share calculations:
  Basic...................................     21,189      20,324     19,262     18,967     18,693
                                            =========   =========   ========   ========   ========
  Diluted.................................     23,286      20,324     19,262     18,967     19,820
                                            =========   =========   ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                            ------------------------------------------------------
                                              2000        1999        1998       1997       1996
                                            ---------   ---------   --------   --------   --------
<S>                                         <C>         <C>         <C>        <C>        <C>
Balance Sheet Data:
  Working capital.........................  $  11,559   $   3,573   $  5,382   $ 28,248   $ 37,134
  Total assets............................     64,323      54,794     78,862    115,261    108,214
  Long-term obligations, less current
     portion..............................        715       9,794     13,137     18,974     13,469
  Accumulated deficit.....................   (111,390)   (124,556)   (97,627)   (68,096)   (65,565)
  Shareholders' equity....................     20,215       4,449     30,605     56,108     57,957
</TABLE>

                                        8
<PAGE>   11

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing on pages 18 to 31.

RECENT DEVELOPMENTS

     In March 2001, Xicor announced its intent to increase focus in the
programmable Mixed-Signal product area and to exit from offering standalone
low-density Serial EEPROM memory products. The Serial EEPROM memory business
comprises a significant portion of Xicor's Memory Product Group. In order to
complete this transition Xicor plans to reduce its workforce by approximately
125 employees and complete the move to fully out-sourced assembly and test
operations. Xicor's first quarter 2001 results will reflect the impact of
restructuring charges and charges to cost of sales to eliminate the Serial
EEPROM product line from its business processes. The charges will include
inventory write-downs, severance costs and other expenses directly associated
with activities supporting this business. The second quarter of 2001 is expected
to be a transition quarter as Xicor under-absorbs fixed costs to manage the
organization and operational changes necessary to complete this process.

RESULTS OF OPERATIONS

     Sales for 2000 were $122.8 million, an increase of $7.9 million or 7%
compared to 1999 sales of $114.9 million. Xicor's sales are derived from two
product groups, mixed-signal products and memory products. During 2000, Xicor
continued to progress with its transition to a differentiated product strategy
and completed the year with mixed-signal product sales over $43 million, or 35%
of total net sales and mixed-signal sales growth of 44% over 1999. The increase
in mixed-signal sales was partially offset by a decrease in memory product sales
in 2000 primarily due to product mix and lower average selling prices. Sales
increased 8% in 1999 compared to the $106.1 million reported in 1998 primarily
due to increased sales of product into wireless communications applications and
increased sales of mixed-signal products.

     Gross profit as a percentage of sales was 42% in 2000; 30% in 1999; and 15%
in 1998. The gross profit percentage improved in 2000 compared to 1999 primarily
due to reduced depreciation expense due to the planned closure of the Milpitas
in-house wafer fabrication plant. In addition, the increased portion of sales
generated from products manufactured at third party foundries during 2000 and
the increased percentage of sales of higher margin mixed-signal products during
2000 had a favorable impact on the gross profit percentage when compared to
prior years. The gross profit percentage improved in 1999 compared to 1998 due
to product mix, higher average selling prices and a reduction in the overall
average cost of products shipped due to increased outsourcing and cost
reductions at Xicor's in-house manufacturing operations. The 1998 gross profit
percentage was negatively impacted by lower average selling prices as a result
of competitive price pressures, Xicor's increased manufacturing cost level
associated with increased production capacity and upgrading of the wafer
fabrication operations during 1996 and 1997 and decreased factory utilization.
During 1998 Xicor substantially reduced the production volume in its factory in
response to ongoing weak business conditions. Unfavorable overhead variances
that resulted from the fixed nature of certain manufacturing costs and the
smaller number of units in production were expensed. Additionally, in the second
quarter of 1998, Xicor wrote down inventories by $2.2 million to cover declining
sales prices and inventories of certain devices that were discontinued as Xicor
streamlined its product portfolio.

     Research and development expenses were 13% of sales in 2000 and 1999 and
16% in 1998. Research and development expenses decreased as a percentage of
sales in 1999 compared to 1998 primarily due to lower personnel related costs
and higher sales and, to a lesser extent, lower depreciation.

     Selling, general and administrative expenses represented 21% of sales in
2000; 19% of sales in 1999; and 21% of sales in 1998. The year-over-year
increase in selling, general and administrative expenses from 1999 to 2000
resulted from increased commissions associated with the higher sales level, the
hiring of additional sales and marketing personnel and intensified sales and
marketing activities with the goal of increasing design wins of proprietary
products. Selling, general and administrative expenses declined as a percentage
of sales in 1999 compared to 1998 primarily due to higher sales.
                                        9
<PAGE>   12

     During 1998 Xicor began to revise its manufacturing and procurement
strategies to significantly increase outsourcing of wafer fabrication and
product testing to overseas subcontractors and to streamline operations. This
change was in response to continuing market conditions that made it more
economical to outsource manufacturing. Accordingly, Xicor recorded $5 million in
restructuring charges in 1998, consisting of $2.4 million of equipment
write-offs due to the shifting of activity to an outside wafer foundry and $2.6
million for severance costs relating to a reduction in workforce.

     Based on the progress made on the outsourcing program during 1999, in
December 1999 Xicor's Board of Directors decided to close its Milpitas in-house
wafer fabrication facility during 2000 and use third party foundries for all of
Xicor's wafer fabrication production. In connection with the planned closure of
this facility, Xicor recorded a $23.7 million restructuring charge, consisting
of a $16.3 million non-cash write-down of the wafer fabrication plant assets,
$1.5 million for severance costs relating to a reduction in workforce, fab
closure costs of $3.6 million, idle facilities charges of $0.8 million and
equipment lease costs of $1.5 million. Xicor began pursuing the sale of the
Milpitas manufacturing operations but believed at that time the most likely
outcome would be a piecemeal sale of the equipment.

     In November 2000, Xicor completed the sale of the wafer fabrication assets
and inventory to Standard MEMS, Inc. ("Standard MEMS") for a gross purchase
price of $12.8 million. During 2000 Xicor utilized $1.9 million of restructuring
reserves. Related reductions in workforce of approximately 200 employees,
primarily in manufacturing and related support groups, occurred primarily in the
fourth quarter of 2000. As a result of the sale of the fab, Xicor incurred
restructuring charges at levels significantly below amounts previously estimated
and accrued. The net restructuring credit of $3.8 million recorded in 2000
consists of a reversal of $6.1 million of costs originally included in the
restructuring accrual not utilized due primarily to the sale of the fab to
Standard MEMS, partially offset by $2.3 million principally related to
additional workforce reductions that Xicor identified and committed to in the
fourth quarter of 2000 to streamline operations and further implement the
company's outsourced manufacturing strategy. Savings are estimated at $3.5
million per year upon completion of the restructuring activities in 2001. The
estimated savings are expected to be partially offset by increased outsourcing
costs. At December 31, 2000 the restructuring accrual consisted of $2.0 million
of severance costs to further reduce the workforce by approximately 50 employees
primarily in administrative, manufacturing and support groups and $0.5 million
of other restructuring related costs. Of the 50 employees, 20 were impacted in
January 2001 and the balance are included in the 125 employees previously
discussed.

     At the time of the sale of the wafer fabrication assets and inventory,
Xicor and Standard MEMS also entered into a related foundry agreement for
Standard MEMS to become a Xicor foundry. Under the terms of the foundry
agreement, for the next two years Standard MEMS is committed to supply, and
Xicor is committed to purchase, certain minimum quantities of wafers. The sale
of the wafer fabrication assets and inventory resulted in a net gain of $5.0
million which was recorded as a deferred gain on sale of fab assets and is being
amortized over the two year foundry commitment agreement. Fourth quarter 2000
cost of sales includes a $0.4 million credit related to the amortization of the
deferred gain.

     Interest expense decreased in both 2000 and 1999 compared to the prior year
principally due to normal principal payments of outstanding lease debt. Interest
expense is expected to decrease further in 2001 compared to 2000 due to the sale
of the Milpitas wafer fabrication assets and payoff of related equipment lease
debt in November 2000.

     Interest income increased in 2000 compared to the prior year due to an
increase in the average balance invested caused primarily by funds generated
from operating activities and the issuance of stock under employee stock plans
and, to a lesser extent, higher interest rates. Interest income decreased in
1999 compared to the prior year due to a decrease in the average balance
invested.

     The provision for income taxes for 2000 consisted primarily of federal and
state minimum taxes, which resulted from limitations on the use of net operating
loss carryforwards, and foreign taxes. No taxes were provided in 1999 and 1998
due to the net loss. Net deferred tax assets of $49.9 million at the end of 2000
remain fully reserved because of the uncertainty regarding the ultimate
realization of these assets.

                                        10
<PAGE>   13

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2000, Xicor had $29.1 million in cash and cash equivalents.
Corresponding balances at the end of 1999 and 1998 were $22.2 million and $17.9
million, respectively. In 2000 Xicor generated $11.4 million of cash from
operating activities, $12.8 million of proceeds from the sale of the wafer
fabrication assets and inventory to Standard MEMS and $2.3 million from the
issuance of stock under employee stock plans. Xicor used $13.7 million to repay
long-term obligations and $6.0 million for equipment purchases. In 1999 Xicor
generated $12.7 million of cash from operating activities and $0.8 million from
the issuance of stock under employee stock plans and used $7.5 million to repay
long-term obligations and $1.6 million for capital asset purchases.

     During 2001 Xicor expects to use cash to fund costs associated with
restructuring activities, to repay long-term obligations and purchase equipment
and software. Capital expenditures for 2001 are currently planned at
approximately $4 million and are primarily related to product design,
engineering and testing. At December 31, 2000, Xicor had entered into
commitments for equipment purchases aggregating less than $1.0 million.

     Xicor has a line of credit agreement with a financial institution that
expires March 25, 2002, provides for borrowings of up to $7.5 million against
eligible accounts receivable and is secured by all of Xicor's assets. Interest
on borrowings is charged at the prime lending rate plus 2% and is payable
monthly. At December 31, 2000, the entire $7.5 million was available to Xicor
based on the eligible accounts receivable balances and the borrowing formulas.
To date, no amounts have been borrowed under this line of credit. At December
31, 2000, $1.7 million of the line of credit was reserved to secure a standby
letter of credit. Management believes that currently available cash and the
existing line of credit facility will be adequate to support Xicor's operations
for the next twelve months.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities, and is effective for
fiscal years beginning after June 15, 2000, as amended by SFAS No. 137. Xicor
believes that adoption of this pronouncement will not have a material impact on
its financial position and results of operations. In December 1999, the
Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") 101,
"Revenue Recognition," which outlines the basic criteria that must be met to
recognize revenue and provides guidance for presentation of revenue and for
disclosure related to revenue recognition policies in financial statements filed
with the Securities and Exchange Commission. Adoption of SAB 101 had no material
impact on Xicor's financial position and results of operations.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

     This Annual Report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the belief that refocusing
Xicor's efforts on Mixed-Signal Products will provide a better opportunity for
consistent financial performance; restructuring plans to reduce Xicor's
workforce; plans to complete the move to fully out-sourced assembly and test
operations; the expectation that the second quarter of 2001 will be a transition
quarter as Xicor under-absorbs fixed costs to manage the organization and
operational changes necessary to complete this process; the expectation that
sufficient cash, working capital, and credit will be available to support
operations for the next twelve months, including costs associated with
restructuring activities, repayment of long-term obligations and the purchase of
equipment and software. Except for historical information, the matters discussed
in this Annual Report are forward-looking statements that are subject to certain
risks and uncertainties that could cause the actual results to differ materially
from those projected. Factors that could cause actual results to differ
materially include the following; general economic conditions and conditions
specific to the semiconductor industry; fluctuations in customer demand,
including loss of key customers, order cancellations or reduced bookings;
product mix; competitive factors such as

                                        11
<PAGE>   14

pricing pressures on existing products and the timing and market acceptance of
new product introductions (both by Xicor and its competitors); Xicor's ability
to have available an appropriate amount of low cost foundry production capacity
in a timely manner; our foundry partners' timely ability to successfully
manufacture products for Xicor using Xicor's proprietary technology; any
disruptions of our foundry relationships; manufacturing efficiencies; the
ability to continue effective cost reductions; currency fluctuations; the timely
development and introduction of new products and submicron processes, and the
risk factors listed from time to time in Xicor's SEC reports, including but not
limited to the "Factors Affecting Future Results" section following and Part I,
Item 1. of this Annual Report on Form 10-K. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. Xicor undertakes no obligation to publicly release or otherwise
disclose the result of any revision to these forward-looking statements that may
be made as a result of events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.

FACTORS AFFECTING FUTURE RESULTS

     The risks described below are not the only ones facing our Company.
Additional risks not presently known to us or that we currently believe are not
material may also impair our business operations.

OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, AND AN UNANTICIPATED DECLINE IN
REVENUE MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A DECLINE
IN OUR STOCK PRICE.

     You should not use our past financial performance to predict future
operating results. We have incurred net losses in three of the last four years.
Our recent quarterly and annual operating results have fluctuated, and will
continue to fluctuate, due to the following factors, all of which are difficult
to forecast and many of which are out of our control:

     - the cyclical nature of both the semiconductor industry and the markets
       addressed by our products;

     - competitive pricing pressures and related changes in selling prices;

     - new product announcements and introductions of competing products by us
       or our competitors;

     - market acceptance and subsequent design-in of new products;

     - unpredictability of changes in demand for, or in the mix of, our
       products;

     - the timing of significant orders including the fact that the sales level
       in any specific quarter depends significantly on orders received during
       that quarter;

     - the gain or loss of significant customers;

     - the availability, timely deliverability and cost of wafers and other
       materials from our suppliers;

     - fluctuations in manufacturing yields and significant yield losses which
       affect our ability to fulfill orders;

     - product obsolescence;

     - lower of cost or market inventory adjustments;

     - changes in the channels through which our products are distributed;

     - exchange rate fluctuations;

     - general economic, political and environmental-related conditions, such as
       natural disasters;

     - difficulties in forecasting, planning and managing of inventory levels;
       and

     - unanticipated research and development expenses associated with new
       product introductions.

                                        12
<PAGE>   15

THE PLANNED EXIT FROM A PORTION OF OUR MEMORY BUSINESS WILL CHANGE OUR BUSINESS
MODEL AND WILL CAUSE A REDUCTION IN OUR REVENUES.

     Xicor's planned exit from the Serial EEPROM memory business involves
substantial risk. The transition out of the Serial EEPROM memory business will
require the Company to devote significant time and expense to transition
activities at the same time it is increasing its focus on its Mixed-Signal
Products. Xicor may be unable to successfully complete this transition and if
Xicor's penetration of the Mixed-Signal market does not increase, Xicor's
operating results could be seriously harmed and its stock price could decline.
Further, if the proposed exit is completed, Xicor will be a smaller company with
limited resources and a reduced workforce. Xicor may not be able to effectively
use its limited resources to increase new product development and build its
Mixed-Signal Product business. This could cause a further decline in Xicor's
revenues.

THE SELLING PRICES FOR OUR PRODUCTS ARE VOLATILE AND HAVE HISTORICALLY DECLINED
OVER THE LIFE OF A PRODUCT. IN ADDITION, THE CYCLICAL NATURE OF THE
SEMICONDUCTOR INDUSTRY COULD CREATE FLUCTUATIONS IN OUR OPERATING RESULTS.

     The semiconductor industry has historically been cyclical, characterized by
wide fluctuations in product supply and demand. From time to time, the industry
has also experienced significant downturns, often in connection with, or in
anticipation of, maturing product cycles and declines in general economic
conditions. Downturns of this type occurred in 1997 and 1998 and we are
presently experiencing an economic slowdown. Downturns have been characterized
by diminished product demand, production over-capacity and accelerated decline
of average selling prices, and in some cases have lasted for more than a year.
Our continued success depends on the continued growth of various electronics
industries that use semiconductors, including manufacturers of computers,
communications equipment, automotive electronics, industrial controls, consumer
electronics, data networking and military equipment, and a better supply and
demand balance within the industry. Our business could be harmed in the future
by cyclical conditions in the semiconductor industry or by slower growth in any
of the markets served by our customers' products.

WE DO NOT TYPICALLY ENTER INTO LONG-TERM CONTRACTS WITH OUR CUSTOMERS. FAILURE
TO MAINTAIN SATISFACTORY RELATIONSHIPS WITH OUR KEY CUSTOMERS COULD RESULT IN A
DECLINE IN OUR SALES.

     We do not typically enter into long-term contracts with our customers, and
we cannot be certain as to future order levels from our customers. The
composition of our major customer base changes from year to year as the market
demand for our customers' products changes. A small number of customers have
accounted for a substantial portion of our sales. Our ability to maintain close,
satisfactory relationships with large customers is important to our business. A
reduction, delay, or cancellation of orders from a large customer could harm our
business. In addition, our customers may vary order levels significantly from
period to period, and customers may not continue to place orders with us in the
future at the same levels as in prior periods. The loss of one or more of our
key customers, or reduced orders by any of our key customers, could result in a
decline in our sales.

WE DEPEND ON DISTRIBUTORS AND MANUFACTURERS' REPRESENTATIVES TO GENERATE A
MAJORITY OF OUR SALES.

     For the year ended December 31, 2000 one distributor accounted for 19% of
our sales. Distributors are not themselves end users, but rather serve as a
channel of sale to many end users of our products. We rely on distributors and
manufacturers' representatives to sell our products and these entities could
discontinue selling our products at any time. The loss of any significant
distributor or manufacturers' representative could seriously harm our operating
results by impairing our ability to sell our products.

OUR BACKLOG MAY NOT RESULT IN FUTURE REVENUE, WHICH WOULD SERIOUSLY HARM OUR
BUSINESS.

     Due to possible customer changes in delivery schedules and cancellations of
orders, our backlog at any particular date is not necessarily indicative of
actual sales for any succeeding period. A reduction of backlog during any
particular period, or the failure of our backlog to result in future revenue,
could harm our business.

                                        13
<PAGE>   16

DURING THE FOURTH QUARTER OF 2000 WE BECAME A FABLESS SEMICONDUCTOR COMPANY AND
NOW DEPEND ON A LIMITED NUMBER OF FOUNDRIES TO MANUFACTURE OUR PRODUCTS. THESE
FOUNDRIES MAY NOT BE ABLE TO SATISFY OUR MANUFACTURING REQUIREMENTS, WHICH COULD
CAUSE OUR SALES TO DECLINE.

     We presently rely on the manufacturing capabilities of third party
foundries and if any of these foundries fail to satisfy our requirements on a
timely basis and at competitive prices we could suffer manufacturing delays, a
possible loss of sales and higher than anticipated costs of sales, any of which
could seriously harm our operating results. In addition, we rely on certain of
our foundries as the sole source for the manufacture of some of our products. If
one of our foundries was not able to meet our needs for a particular product, we
may be unable to find alternative manufacturing facilities in a timely manner,
or at all. If that were to happen, we could experience a serious loss of sales
and of key customers.

     As Xicor shifts manufacturing of existing products between foundries,
certain customers require requalification of such products prior to accepting
delivery. Delays in customer qualification schedules or lack of qualification of
such products could result in the loss of sales which could seriously harm our
operating results.

OUR FUTURE SUCCESS DEPENDS IN PART ON THE CONTINUED SERVICES OF OUR KEY DESIGN,
ENGINEERING, SALES, MARKETING AND EXECUTIVE PERSONNEL AND OUR ABILITY TO
IDENTIFY, RECRUIT AND RETAIN QUALIFIED PERSONNEL.

     There is intense competition for qualified personnel in the semiconductor
industry, in particular for the highly skilled engineers involved in the design
and development of our products. Competition is especially intense in Silicon
Valley, where our design, research and development, and corporate headquarters
are located. We may not be able to continue to attract and retain engineers or
other qualified personnel necessary for the development of our business or to
replace engineers or other qualified personnel who may leave our employ in the
future. The failure to recruit and retain key design engineers or other
technical and management personnel could harm our business.

OUR DEPENDENCE ON THIRD-PARTY SUBCONTRACTORS TO SORT, ASSEMBLE AND TEST OUR
PRODUCTS AND SHIP OUR PRODUCTS TO CUSTOMERS SUBJECTS US TO A NUMBER OF RISKS,
INCLUDING AN INADEQUATE SUPPLY OF PRODUCTS AND HIGHER COSTS OF MATERIALS.

     We depend on independent subcontractors to sort, assemble and test our
products and ship our products to customers. Our reliance on these
subcontractors involves the following significant risks:

     - reduced control over delivery schedules and quality;

     - the potential lack of adequate capacity during periods of strong demand;

     - difficulties selecting and integrating new subcontractors;

     - limited warranties by subcontractors on products supplied to us; and

     - potential increases in prices due to capacity shortages and other
       factors.

     These risks may lead to increased costs, delayed product delivery or loss
of competitive advantage, which would harm our profitability and customer
relationships.

OUR OPERATING EXPENSES ARE RELATIVELY FIXED, AND WE ORDER MATERIALS IN ADVANCE
OF ANTICIPATED CUSTOMER DEMAND. THEREFORE, WE HAVE LIMITED ABILITY TO REDUCE
EXPENSES QUICKLY IN RESPONSE TO ANY REVENUE SHORTFALLS.

     Our operating expenses are relatively fixed, and we therefore have limited
ability to reduce expenses quickly in response to any revenue shortfalls.
Consequently, our operating results will be harmed if our sales do not meet our
revenue projections. We may experience revenue shortfalls for the following
reasons:

     - economic slowdowns in the markets we serve;

     - significant pricing pressures that occur because of declines in selling
       prices over the life of a product;

     - the reduction, rescheduling or cancellation of customer orders; and
                                        14
<PAGE>   17

     - sudden shortages of raw materials or fabrication, sort, test or assembly
       capacity constraints that lead our suppliers to allocate available
       supplies or capacity to other customers which, in turn, harm our ability
       to meet our sales obligations.

     In addition, we typically plan our production and inventory levels based on
internal forecasts of customer demand, which are highly unpredictable and can
fluctuate substantially. From time to time, in response to anticipated long lead
times to obtain inventory and materials from our outside suppliers and
foundries, we may order materials and produce finished products in advance of
anticipated customer demand. This advance ordering and production may result in
excess inventory levels or inventory write-downs if expected orders fail to
materialize or prices decrease substantially.

WE HAVE ENTERED INTO CERTAIN MINIMUM WAFER PURCHASE COMMITMENTS WITH FOUNDRY
PARTNERS IN EXCHANGE FOR CAPACITY COMMITMENTS AND PLAN OUR PRODUCTION BASED ON
INTERNAL FORECASTS OF CUSTOMER DEMAND. SHOULD DEMAND FOR CERTAIN OF OUR PRODUCTS
DECREASE SIGNIFICANTLY, WE MAY BE REQUIRED TO MAKE PAYMENTS FOR UNUSED CAPACITY
WHICH WOULD CAUSE OUR COSTS TO INCREASE.

BECAUSE OUR PRODUCTS TYPICALLY HAVE LENGTHY SALES CYCLES, WE MAY EXPERIENCE
SUBSTANTIAL DELAYS BETWEEN INCURRING EXPENSES RELATED TO RESEARCH AND
DEVELOPMENT AND THE GENERATION OF SALES.

     Due to the length of the product design-in cycle we usually require more
than nine months to realize volume shipments after a customer first samples our
product. We first work with customers to achieve a design win, which may take
three months or longer. Our customers then complete the design, testing and
evaluation process and begin to ramp up production, a period which typically
lasts an additional six months or longer. As a result, a significant period of
time may elapse between our research and development efforts and our realization
of revenue, if any, from volume purchasing of our products by our customers.

WE FACE INTENSE COMPETITION FROM COMPANIES WITH SIGNIFICANTLY GREATER FINANCIAL,
TECHNICAL AND MARKETING RESOURCES THAT COULD ADVERSELY AFFECT OUR ABILITY TO
INCREASE SALES OF OUR PRODUCTS.

     We compete with major domestic and international semiconductor companies
such as Atmel Corporation, ST Microelectronics, Maxim, Dallas Semiconductor, and
Texas Instruments, all of whom have substantially greater financial, technical,
marketing, distribution, and other resources than we do. Many of our competitors
have their own facilities for the production of semiconductor components and
have recently added significant capacity for such production. In addition, we
may in the future experience direct competition from our foundry partners. Some
of our foundry partners have the right to fabricate certain products based on
our process technology and co-developed circuit design, and to sell such
products worldwide.

OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND, THEREFORE, OUR
SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP AND INTRODUCE NEW PRODUCTS.

     The markets for our products are characterized by rapidly changing
technologies; evolving and competing industry standards; changing customer
needs; frequent new product introductions and enhancements; increased
integration with other functions; and rapid product obsolescence.

     To develop new products for our target markets, we must develop, gain
access to and use leading technologies in a cost-effective and timely manner and
continue to expand our technical and design expertise. In addition, we must have
our products designed into our customers' future products and maintain close
working relationships with key customers in order to develop new products that
meet their rapidly changing needs.

     Products for communications applications are based on continually evolving
industry standards. Our ability to compete will depend on our ability to
identify and ensure compliance with these industry standards. As a result, we
could be required to invest significant time and effort and incur significant
expense to redesign our products to ensure compliance with relevant standards.

     We cannot assure you that we will be able to identify new product
opportunities successfully, develop and bring to market new products at
competitive costs, achieve design wins or respond effectively to new

                                        15
<PAGE>   18

technological changes or product announcements by our competitors. Furthermore,
we may not be successful in developing or using new technologies or in
developing new products or product enhancements that achieve market acceptance.
Our pursuit of necessary technological advances may require substantial time and
expense. Failure in any of these areas could harm our operating results.

OUR COST OF SALES MAY INCREASE IF WE ARE REQUIRED TO PURCHASE ADDITIONAL
MANUFACTURING CAPACITY IN THE FUTURE.

     To obtain additional manufacturing capacity, we may be required to make
deposits, equipment purchases, loans, enter into joint ventures, equity
investments or technology licenses in or with wafer fabrication companies. These
transactions could involve a commitment of substantial amounts of our capital
and technology licenses in return for production capacity. We may be required to
seek additional debt or equity financing in order to secure this capacity and we
may not be able to obtain such financing.

OUR ABILITY TO COMPETE SUCCESSFULLY WILL DEPEND, IN PART, ON OUR ABILITY TO
PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, WHICH WE MAY NOT BE ABLE TO DO
SUCCESSFULLY.

     We rely on a combination of patents, trade secrets, copyright and mask work
production laws and rights, nondisclosure agreements and other contractual
provisions and technical measures to protect our intellectual property rights.
Policing unauthorized use of our intellectual property, however, is difficult,
especially in foreign countries. Litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets, to
determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Litigation could result in
substantial costs and diversion of resources and could harm our business,
operating results and financial condition regardless of the outcome of the
litigation.

     We hold a number of United States patents and certain corresponding foreign
patents covering various circuit designs and the structure of its devices.
Further, additional patent applications for such products are pending in the
United States and abroad. However, patents granted or pending may not provide us
with any meaningful protection. Our operating results could be seriously harmed
by the failure to be able to protect our intellectual property.

IF WE OR ANY OF OUR FOUNDRIES OR THIRD PARTY SUBCONTRACTORS ARE ACCUSED OF
INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHER PARTIES, WE MAY BECOME
SUBJECT TO TIME-CONSUMING AND COSTLY LITIGATION. IF WE LOSE OR SETTLE CLAIMS, WE
COULD SUFFER A SIGNIFICANT NEGATIVE IMPACT ON OUR BUSINESS AND BE FORCED TO PAY
DAMAGES.

     Third parties have and may continue to assert that our products infringe
their proprietary rights, or may assert claims for indemnification resulting
from infringement claims against us. Any such claims may cause us to delay or
cancel shipment of our products or pay damages that could seriously harm our
business, financial condition and results of operations. In addition,
irrespective of the validity or the successful assertion of such claims, we
could incur significant costs in defending against such claims.

     We have received notices claiming infringement of patents from several
semiconductor manufacturers with respect to certain aspects of our processes and
devices and these matters are under investigation and review. Although patent
holders typically offer licenses and we have entered into such license
agreements, we may not be able to obtain licenses on acceptable terms, and
disputes may not be resolved without costly litigation.

OUR BUSINESS MAY SUFFER DUE TO RISKS ASSOCIATED WITH INTERNATIONAL SALES AND
OPERATIONS.

     Our international sales accounted for approximately one-half of total sales
in 2000. Our international business activities are subject to a number of risks,
any of which could impose unexpected costs on us that would have an adverse
effect on our operating results. These risks include difficulties in complying
with regulatory requirements and standards; tariffs and other trade barriers;
costs and risks of localizing products for foreign countries; severe currency
fluctuation and economic deflation; reliance on third parties to distribute our
products; longer accounts receivable payment cycles; potentially adverse tax
consequences; and burdens of complying with a wide variety of foreign laws.
                                        16
<PAGE>   19

BUSINESS INTERRUPTIONS COULD HARM OUR BUSINESS.

     Our operations and those of certain of our foundries and other
manufacturing subcontractors are vulnerable to interruption by fire, earthquake,
power loss, telecommunications failure and other events beyond our control. Our
facilities in the State of California are currently subject to electrical
blackouts as a consequence of a shortage of available electrical power. In the
event these blackouts continue or increase in severity, they could disrupt the
operations of our affected facilities. In addition, business interruption
insurance may not provide protection due to the deductible periods or be enough
to compensate us for losses that may occur and any losses or damages incurred by
us as a result of business interruptions could significantly harm our business.

WE MAY REQUIRE ADDITIONAL CAPITAL IN ORDER TO BRING NEW PRODUCTS TO MARKET, AND
THE ISSUANCE OF NEW EQUITY SECURITIES WILL DILUTE YOUR INVESTMENT IN OUR COMMON
STOCK.

     To implement our strategy of diversified product offerings, we need to
bring new products to market. Bringing new products to market and ramping up
production requires significant working capital. We have in place a credit
agreement with Coast Business Credit to provide up to $7.5 million of additional
capital to support potential ongoing working capital requirements. We may need
to borrow under this credit facility at some time. We may also sell additional
shares of our stock or seek additional borrowings or outside capital infusions.
We cannot assure you that such financing options will be available on terms
acceptable to us, if at all. In addition, if we issue shares of our common
stock, our shareholders will experience dilution with respect to their
investment.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Xicor does not use derivative financial instruments in its investment
portfolio. Xicor has an investment portfolio of fixed income securities that are
classified as "held-to-maturity securities."

     These securities, like all fixed income instruments, are subject to
interest rate risk and will fall in value if market interest rates increase.
Xicor attempts to limit this exposure by investing primarily in short-term
securities. Due to the short duration and conservative nature of Xicor's
investment portfolio a movement of 10% by market interest rates would not have a
material impact on Xicor's operating results and the total value of the
portfolio over the next fiscal year.

     Xicor is exposed to risks associated with foreign exchange rate
fluctuations due to our international manufacturing and sales activities. Xicor
generally has not hedged currency exposures. These exposures may change over
time as business practices evolve and could negatively impact our operating
results and financial condition. All of our sales are denominated in U.S.
dollars. An increase in the value of the U.S. dollar relative to foreign
currencies could make our products more expensive and therefore reduce the
demand for our products. Such a decline in the demand could reduce sales and/or
result in operating losses.

                                        17
<PAGE>   20

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                  XICOR, INC.

                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                2000         1999
                                                              ---------    ---------
<S>                                                           <C>          <C>
Current assets:
  Cash and cash equivalents.................................  $  29,121    $  22,233
  Accounts receivable.......................................     10,812        8,508
  Inventories...............................................     14,380       13,003
  Prepaid expenses and other current assets.................        639          380
                                                              ---------    ---------
          Total current assets..............................     54,952       44,124
Property, plant and equipment, at cost less accumulated
  depreciation..............................................      9,166        8,835
Other assets................................................        205        1,835
                                                              ---------    ---------
          Total assets......................................  $  64,323    $  54,794
                                                              =========    =========

                        LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  11,132    $   8,018
  Accrued expenses..........................................     12,637       14,343
  Deferred income on shipments to distributors..............     14,258       12,828
  Deferred gain on sale of fab assets.......................      4,600           --
  Current portion of long-term obligations..................        766        5,362
                                                              ---------    ---------
          Total current liabilities.........................     43,393       40,551
Long-term obligations.......................................        715        9,794
                                                              ---------    ---------
          Total liabilities.................................     44,108       50,345
                                                              ---------    ---------
Commitments and contingencies (Notes 5 and 10)
Shareholders' equity:
  Preferred stock, no par value; 5,000 shares authorized;
     none issued or outstanding.............................         --           --
  Common stock, no par value; 75,000 shares authorized;
     21,466 and 20,595 shares issued and outstanding........    131,605      129,005
  Accumulated deficit.......................................   (111,390)    (124,556)
                                                              ---------    ---------
Total shareholders' equity..................................     20,215        4,449
                                                              ---------    ---------
Total liabilities and shareholders' equity..................  $  64,323    $  54,794
                                                              =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        18
<PAGE>   21

                                  XICOR, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                             --------------------------------
                                                               2000        1999        1998
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Net sales..................................................  $122,849    $114,887    $106,147
Cost of sales..............................................    71,672      80,474      89,844
                                                             --------    --------    --------
  Gross profit.............................................    51,177      34,413      16,303
                                                             --------    --------    --------
Operating expenses:
  Research and development.................................    15,880      14,560      17,429
  Selling, general and administrative......................    26,122      22,360      22,634
  Restructuring charge (credit)............................    (3,841)     23,719       4,985
                                                             --------    --------    --------
                                                               38,161      60,639      45,048
                                                             --------    --------    --------
Income (loss) from operations..............................    13,016     (26,226)    (28,745)
Interest expense...........................................      (817)     (1,407)     (1,872)
Interest income............................................     1,458         704       1,086
                                                             --------    --------    --------
Income (loss) before income taxes..........................    13,657     (26,929)    (29,531)
Provision for income taxes.................................       491          --          --
                                                             --------    --------    --------
Net income (loss)..........................................  $ 13,166    $(26,929)   $(29,531)
                                                             ========    ========    ========
Net income (loss) per share:
  Basic....................................................  $   0.62    $  (1.32)   $  (1.53)
                                                             ========    ========    ========
  Diluted..................................................  $   0.57    $  (1.32)   $  (1.53)
                                                             ========    ========    ========
Shares used in per share calculation:
  Basic....................................................    21,189      20,324      19,262
                                                             ========    ========    ========
  Diluted..................................................    23,286      20,324      19,262
                                                             ========    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        19
<PAGE>   22

                                  XICOR, INC.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     COMMON STOCK
                                                  ------------------    ACCUMULATED
                                                  SHARES     AMOUNT       DEFICIT       TOTAL
                                                  ------    --------    -----------    --------
<S>                                               <C>       <C>         <C>            <C>
Balance at December 31, 1997....................  19,092    $124,204     $ (68,096)    $ 56,108
Issuance of shares:
  Private investor..............................   1,000       3,973            --        3,973
  Exercise of stock options.....................      42          55            --           55
Net loss........................................      --          --       (29,531)     (29,531)
                                                  ------    --------     ---------     --------
Balance at December 31, 1998....................  20,134     128,232       (97,627)      30,605
Issuance of shares under employee stock plans
  and other.....................................     461         773            --          773
Net loss........................................      --          --       (26,929)     (26,929)
                                                  ------    --------     ---------     --------
Balance at December 31, 1999....................  20,595     129,005      (124,556)       4,449
Issuance of shares under employee stock plans
  and other.....................................     871       2,600            --        2,600
Net income......................................      --          --        13,166       13,166
                                                  ------    --------     ---------     --------
Balance at December 31, 2000....................  21,466    $131,605     $(111,390)    $ 20,215
                                                  ======    ========     =========     ========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        20
<PAGE>   23

                                  XICOR, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                             --------------------------------
                                                               2000        1999        1998
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Cash flows from operating activities:
  Net income (loss)........................................  $ 13,166    $(26,929)   $(29,531)
  Adjustments to reconcile net income (loss) to cash
     provided by operating activities:
     Depreciation..........................................     4,031      13,235      12,521
     Amortization of fab gain..............................      (436)         --          --
     Non-cash restructuring charge.........................        --      16,338       2,358
     Changes in assets and liabilities:
       Accounts receivable.................................    (2,304)        327       2,168
       Inventories.........................................    (3,709)       (233)     11,163
       Prepaid expenses and other current assets...........      (259)        636          (3)
       Other assets........................................        76           5         (80)
       Accounts payable and accrued expenses...............      (558)      3,578        (946)
       Deferred income on shipments to distributors........     1,430       3,707      (4,792)
       Long-term obligations...............................        --       1,993          --
                                                             --------    --------    --------
Net cash provided by (used in) operating activities........    11,437      12,657      (7,142)
                                                             --------    --------    --------
Cash flows from investing activities:
  Investments in plant and equipment, net..................    (6,020)     (1,555)     (4,872)
  Purchases of short-term investments......................        --          --      (4,356)
  Maturities of short-term investments.....................        --          --      15,728
  Proceeds from the sale of the fab........................    12,825          --          --
                                                             --------    --------    --------
Net cash provided by (used in) investing activities........     6,805      (1,555)      6,500
                                                             --------    --------    --------
Cash flows from financing activities:
  Repayments of long-term obligations......................   (13,675)     (7,523)     (6,611)
  Proceeds from sale of common stock, net of issuance
     costs:
     To private investor...................................        --          --       3,973
     To employees and others...............................     2,321         773          55
                                                             --------    --------    --------
Net cash used in financing activities......................   (11,354)     (6,750)     (2,583)
                                                             --------    --------    --------
Increase (decrease) in cash and cash equivalents...........     6,888       4,352      (3,225)
Cash and cash equivalents at beginning of year.............    22,233      17,881      21,106
                                                             --------    --------    --------
Cash and cash equivalents at end of year...................  $ 29,121    $ 22,233    $ 17,881
                                                             ========    ========    ========
Supplemental information:
Cash paid (refunded) during the year for:
  Interest expense.........................................  $    810    $  1,472    $  1,939
  Income taxes.............................................       305         100        (113)
Equipment acquired pursuant to long-term obligations.......        --         333       1,453
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        21
<PAGE>   24

                                  XICOR, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:

     Xicor, Inc. (Xicor) develops, manufactures and sells programmable
mixed-signal and nonvolatile memory semiconductor devices. Xicor operates in one
reportable segment based on the company's internal organization. One distributor
accounted for 19% of sales in 2000; 14% in 1999; and 15% in 1998. One OEM
customer represented 11% of sales in 1999. Sales are attributed to geographic
areas based on the location to which the product is shipped. Sales by geographic
region were as follows:

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                        -----------------------
                                                        2000     1999     1998
                                                        -----    -----    -----
                                                             (IN MILLIONS)
<S>                                                     <C>      <C>      <C>
United States.........................................  $ 58     $ 51     $ 57
Asia Pacific..........................................    31       37       24
Europe................................................    28       22       22
Other.................................................     6        5        3
                                                        ----     ----     ----
                                                        $123     $115     $106
                                                        ====     ====     ====
</TABLE>

     Xicor has adopted generally accepted accounting principles that are
customary in the industry in which it operates. Following are Xicor's
significant accounting policies:

FISCAL YEAR

     Xicor's fiscal year ends on the Sunday nearest December 31. For purposes of
financial statement presentation, each fiscal year is deemed to have ended on
December 31. Fiscal years 2000 and 1999 each consisted of 52 weeks; 1998
consisted of 53 weeks.

BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of Xicor and its
wholly-owned subsidiaries. Significant intercompany accounts and transactions
have been eliminated.

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

CASH EQUIVALENTS

     Cash equivalents consist principally of United States Government Treasury
Bills and certificates of deposit. Highly liquid investments with maturities of
three months or less at the time of purchase are considered cash equivalents.

CONCENTRATIONS OF CREDIT RISK

     Financial instruments that potentially subject Xicor to concentrations of
credit risk consist principally of cash equivalents and accounts receivable.
Xicor invests primarily in United States Government Treasury Bills and
certificates of deposit and places its investments with high-credit-quality
financial institutions. Xicor's accounts receivable are derived from sales to
original equipment manufacturers and distributors serving a variety of
industries located primarily in the United States, Europe and Asia. Xicor
performs ongoing credit evaluations of its customers and to date has not
experienced any material losses.

                                        22
<PAGE>   25
                                  XICOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

     Xicor measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For financial instruments, including
cash and cash equivalents, short-term investments, accounts receivable, accounts
payable and accrued expenses, the carrying amounts approximate fair value due to
their short maturities. The amounts shown for long-term obligations also
approximate fair value.

INVENTORIES

     Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out basis for raw materials and supplies, and a
standard cost basis (which approximates first-in, first-out) for work in process
and finished goods.

PROPERTY AND EQUIPMENT

     Depreciation for financial reporting purposes is computed using the
straight-line method and the assets' estimated useful lives, principally five
years. Amortization of leasehold improvements is computed over the shorter of
the remaining terms of the leases or the estimated useful lives of the
improvements. Construction in progress consists of leasehold improvements not
completed and equipment received but not yet placed in service. Xicor reviews
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.

REVENUE RECOGNITION

     Certain of Xicor's sales are made to distributors under agreements allowing
rights of return and price protection on unsold merchandise. Because of frequent
sales price reductions and rapid technological obsolescence in the industry,
Xicor defers recognition of such sales until the distributors sell the
merchandise. Amounts billed to the distributors are included as accounts
receivable and the related gross profit is deferred and reflected as a current
liability until the merchandise is sold by the distributors. Revenue from all
other product sales is recognized upon shipment.

     During 2000, Xicor adopted Staff Accounting Bulletin 101 ("SAB 101"),
Revenue Recognition, which was issued by the Securities and Exchange Commission
in December 1999. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for presentation of revenue and for
disclosure related to revenue recognition policies in financial statements filed
with the Securities and Exchange Commission. Adoption of SAB 101 had no material
impact on Xicor's reported revenues and results of operations.

NET INCOME (LOSS) PER SHARE

     Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding. Diluted net income (loss) per share is
computed using the weighted average number of common shares and all dilutive
potential common shares outstanding. The same net income (loss) amounts were
used for Basic Earnings Per Share (EPS) and Diluted EPS for the three years in
the period ended December 31, 2000.

     Potential common shares consisting of 2,097,000 stock options were the only
reconciling items between the number of shares used to calculate Basic EPS and
diluted EPS for the year ended December 31, 2000. For the years ended December
31, 1999 and 1998, the number of shares used in the calculations of both EPS
amounts were the same since stock options aggregating 3,259,000 at a weighted
average price of $3.02 per share and 2,576,000 at a weighted average price of
$2.36 per share, respectively, were excluded as they were antidilutive.

                                        23
<PAGE>   26
                                  XICOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ACCOUNTING FOR STOCK OPTIONS

     In accordance with Statement of Financial Accounting Standards No. 123
(SFAS 123), "Accounting for Stock-Based Compensation", Xicor applies Accounting
Principles Board Opinion No. 25 as interpreted in Financial Accounting Standards
Board Interpretation No. 44 for purposes of accounting for employee stock
options. Because the exercise prices of Xicor's employee stock options equal the
market price of the underlying stock on the date of grant, no compensation
expense at time of grant is recognized in the financial statements. Xicor
provides additional pro forma disclosures as required under SFAS 123 in Note 7.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities, and is effective for
fiscal years beginning after June 15, 2000, as amended by SFAS No. 137. The
adoption of this pronouncement will not have a material impact on our financial
position and results of operations.

NOTE 2 -- RESTRUCTURING:

     During 1998 Xicor began to revise its manufacturing and procurement
strategies to significantly increase outsourcing of wafer fabrication and
product testing to overseas subcontractors and to streamline operations.
Accordingly, Xicor recorded $5 million in restructuring charges in 1998,
consisting of $2.4 million of equipment write-offs associated with equipment not
in service due to the shifting of activity to outside contractors and $2.6
million for severance costs relating to a 38% reduction in workforce primarily
in manufacturing and related support groups and to a lesser extent in the
selling, administrative and engineering functions. Equipment with a net book
value of $2.8 million was written down to its estimated net realizable value of
$0.4 million.

     Throughout 1999, products manufactured by an outside foundry comprised an
increasing proportion of Xicor's production and during the fourth quarter of
1999, two other foundries successfully produced initial wafers based on
specifications provided by Xicor. Since Xicor now had multiple third-party
locations able to produce its products, at significantly lower unit costs than
the Milpitas in-house facility, Xicor decided to close its Milpitas in-house
wafer fabrication facility and use third party foundries for all of Xicor's
wafer fabrication production. In December 1999 Xicor's Board of Directors
approved the plan to close the Milpitas fabrication facility. The decision to
close the Milpitas facility and streamline operations resulted in the recording
of a restructuring charge of $23.7 million in the fourth quarter of 1999. Xicor
began pursuing the sale of the Milpitas manufacturing operations but believed at
that time the most likely outcome would be a piecemeal sale of the equipment.
The $16.3 million restructuring charge related to the write down of the carrying
value of Xicor's fabrication equipment to its estimated fair value less costs to
sell was based on third party estimates. The net fair value of the fabrication
equipment of $1.6 million was included in "other assets" at December 31, 1999.
Severance costs of $1.5 million and fab closure costs totaling $3.6 million were
recorded in 1999. Fab closure costs included decommissioning and clean up costs,
environmental closure costs and equipment decontamination and removal costs. The
restructuring charge also included a charge for idle facilities of $0.8 million
and equipment lease costs of $1.5 million. Severance costs of $2.4 million were
accrued at December 31, 1999 for planned reductions in workforce of
approximately 200 employees, primarily in manufacturing and related support
groups.

     In November 2000, Xicor completed the sale of the wafer fabrication assets
and inventory to Standard MEMS, Inc. ("Standard MEMS") for a gross purchase
price of $12.8 million. During 2000 Xicor utilized $1.9 million of restructuring
reserves. Related reductions in workforce of approximately 200 employees,
primarily in manufacturing and related support groups, occurred primarily in the
fourth quarter of 2000. As a
                                        24
<PAGE>   27
                                  XICOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

result of the sale of the fab, Xicor incurred restructuring charges at levels
significantly below the amount previously estimated and accrued. The net
restructuring credit of $3.8 million recorded in 2000 consists of a reversal of
$6.1 million of costs originally included in the restructuring accrual not
utilized due primarily to the sale of the fab to Standard MEMS, partially offset
by $2.3 million principally related to additional workforce reductions that
Xicor committed to in the fourth quarter of 2000 to streamline operations and
further implement the company's outsourced manufacturing strategy. At December
31, 2000 the restructuring accrual consisted of $2.0 million of severance costs
to further reduce the workforce by approximately 50 employees primarily in
administrative, manufacturing and support groups and $0.5 million of other
restructuring related costs.

     The following tables set forth Xicor's activity for the restructuring
accrual during 2000 and 1999:

<TABLE>
<CAPTION>
                                                            RESTRUCTURING ACCRUAL
                                             ----------------------------------------------------
                                                                  YEAR ENDED
                                                              DECEMBER 31, 2000
                                                            ----------------------
                                             DECEMBER 31,                (CREDIT)/   DECEMBER 31,
                                                 1999       (UTILIZED)    EXPENSE        2000
                                             ------------   ----------   ---------   ------------
                                                                (IN THOUSANDS)
<S>                                          <C>            <C>          <C>         <C>
Fab closure costs..........................    $ 3,555       $   (24)     $(3,531)      $   --
Employee severance and other...............      2,365          (727)         899        2,537
Equipment lease costs......................      1,484        (1,107)        (377)          --
Idle facilities charge.....................        878           (46)        (832)          --
                                               -------       -------      -------       ------
                                                 8,282       $(1,904)     $(3,841)      $2,537
                                                             =======      =======       ======
Less: long-term obligations................     (1,993)
                                               -------
                                               $ 6,289
                                               =======
</TABLE>

<TABLE>
<CAPTION>
                                                            RESTRUCTURING ACCRUAL
                                             ----------------------------------------------------
                                                                  YEAR ENDED
                                                              DECEMBER 31, 1999
                                                            ----------------------
                                             DECEMBER 31,                (CREDIT)/   DECEMBER 31,
                                                 1998       (UTILIZED)    EXPENSE        1999
                                             ------------   ----------   ---------   ------------
                                                                (IN THOUSANDS)
<S>                                          <C>            <C>          <C>         <C>
Fab closure costs..........................    $    --       $    --      $ 3,555       $3,555
Employee severance and other...............      1,350          (449)       1,464        2,365
Equipment lease costs......................         --            --        1,484        1,484
Idle facilities charge.....................         --            --          878          878
                                               -------       -------      -------       ------
                                               $ 1,350       $  (449)     $ 7,381        8,282
                                               =======       =======      =======       ======
Less: long-term obligations................                                             (1,993)
                                                                                        ------
                                                                                        $6,289
                                                                                        ======
</TABLE>

NOTE 3 -- DEFERRED GAIN ON SALE OF FAB ASSETS:

     In November 2000, Xicor completed the sale of the wafer fabrication assets
and inventory located in Milpitas, California to Standard MEMS for a gross
purchase price of $12.8 million. Under a related agreement, Standard MEMS has
become an additional foundry for Xicor and for the next two years is committed
to supply, and Xicor is committed to purchase, certain minimum quantities of
wafers. In light of the two-year minimum wafer purchase commitment at fixed
prices, Xicor has deferred the $5.0 million net gain related to the sale of the
fab and is amortizing the gain over the two-year period. Fourth quarter of 2000
cost of sales includes a $0.4 million credit related to the amortization of the
deferred gain on the sale of the fab assets.

                                        25
<PAGE>   28
                                  XICOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- BALANCE SHEET COMPONENTS:

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         --------------------
                                                           2000        1999
                                                         --------    --------
                                                            (IN THOUSANDS)
<S>                                                      <C>         <C>
INVENTORIES:
  Raw materials and supplies...........................  $    616    $  1,061
  Work in process......................................     9,681       7,419
  Finished goods.......................................     4,083       4,523
                                                         --------    --------
                                                         $ 14,380    $ 13,003
                                                         ========    ========
PROPERTY, PLANT AND EQUIPMENT:
  Leasehold improvements...............................  $  3,846    $  2,582
  Equipment............................................    41,318      42,485
  Furniture and fixtures...............................     1,228       1,343
  Construction in progress.............................       615       1,223
                                                         --------    --------
                                                           47,007      47,633
  Accumulated depreciation.............................   (37,841)    (38,798)
                                                         --------    --------
                                                         $  9,166    $  8,835
                                                         ========    ========
ACCRUED EXPENSES:
  Accrued wages and employee benefits..................  $  2,842    $  3,907
  Accrued restructuring liabilities....................     2,537       6,289
  Other accrued expenses...............................     7,258       4,147
                                                         --------    --------
                                                         $ 12,637    $ 14,343
                                                         ========    ========
</TABLE>

ACCOUNTS RECEIVABLE

     Accounts receivable at December 31, 2000 and 1999 are presented net of an
allowance for doubtful accounts of $0.5 million.

NOTE 5 -- LEASE COMMITMENTS:

     Xicor leases its facilities and certain equipment under non-cancelable
lease agreements. Xicor's major facility leases expire in 2010 and provide for a
five-year renewal option. The base rental increases 3.25% annually. Equipment
leases are for terms of four to six years and require Xicor to pay property
taxes, insurance and maintenance and repair costs.

     Leases that meet certain specific criteria are considered capital leases
and, accordingly, are accounted for as the acquisition of an asset and the
incurrence of a liability. Upon expiration of the related lease, the then fully
depreciated asset (and the related accumulated depreciation) is removed from the
accounts. Assets recorded under capital leases were as follows:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                           ------------------
                                                            2000       1999
                                                           -------    -------
                                                             (IN THOUSANDS)
<S>                                                        <C>        <C>
Equipment................................................  $ 4,435    $ 4,435
Less: accumulated depreciation...........................   (3,351)    (2,465)
                                                           -------    -------
                                                           $ 1,084    $ 1,970
                                                           =======    =======
</TABLE>

                                        26
<PAGE>   29
                                  XICOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Minimum future lease payments under non-cancelable leases as of December
31, 2000 were as follows:

<TABLE>
<CAPTION>
                                                           CAPITAL    OPERATING
                                                           LEASES      LEASES
                                                           -------    ---------
                                                              (IN THOUSANDS)
<S>                                                        <C>        <C>
Years:
2001.....................................................  $  850      $ 1,865
2002.....................................................     699        1,844
2003.....................................................      52        1,837
2004.....................................................      --        1,869
2005.....................................................      --        1,930
2006 - 2010..............................................      --        8,703
                                                           ------      -------
Total minimum lease payments.............................   1,601      $18,048
                                                                       =======
Less amount representing interest........................    (120)
                                                           ------
Present value of minimum lease payments..................   1,481
Less current portion.....................................    (766)
                                                           ------
Long-term lease obligation...............................  $  715
                                                           ======
</TABLE>

     Total rental expense under all operating leases was as follows (including
month-to-month rentals): 2000 -- $3.9 million, 1999 -- $4.6 million, and
1998 -- $4.7 million.

NOTE 6 -- LINE OF CREDIT AGREEMENT:

     Xicor has a line of credit agreement with a financial institution that
expires on March 25, 2002 and provides for borrowings of up to 80% of eligible
accounts receivable, not to exceed $7.5 million. Interest is charged at the
prime lending rate plus 2%, with a minimum rate of 8%, and is payable monthly.
This credit facility is secured by all the assets of Xicor. The agreement
contains restrictions that, among other things, preclude the payment of
dividends, stock repurchases and the sale of assets other than in the normal
course of business. Appropriate approvals were obtained prior to selling the
wafer fabrication assets and inventory in 2000. At December 31, 2000, there were
no borrowings outstanding under this line of credit and $1.7 million of the line
of credit was reserved to secure a standby letter of credit.

NOTE 7 -- COMMON STOCK:

OPTION PLANS

     Xicor has two stock option plans for its employees, the 1990 Plan and the
1998 Plan. The 2000 Director Option Plan provides for an initial grant of 25,000
options to each of the Company's outside directors and automatic annual grants
of 10,000 options thereafter. Directors may also be granted options under the
1998 Plan. The total number of shares of common stock authorized for issuance
under the 1990 Employee Plan, the 1998 Employee Plan and the 2000 Director Plan
are 4,250,000, 3,250,000 and 250,000, respectively.

     Options under the 1990 and 1998 plans generally vest over four years and
expire no later than ten years from date of grant. Options under the 2000
Director Plan vest over a three year period for initial grants and after one
year for subsequent grants and expire no later than ten years from date of
grant. All outstanding

                                        27
<PAGE>   30
                                  XICOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

options were granted at 100% of the fair market value of the stock at the date
of grant. The following table summarizes the option activity under all plans.

<TABLE>
<CAPTION>
                                                        NUMBER          AVERAGE
                                                      OF SHARES       OPTION PRICE
                                                    (IN THOUSANDS)     PER SHARE
                                                    --------------    ------------
<S>                                                 <C>               <C>
Outstanding at December 31, 1997..................       1,999           $5.16
Granted...........................................       2,203            2.31
Exercised.........................................         (42)           1.28
Canceled..........................................      (1,584)           5.86
                                                        ------
Outstanding at December 31, 1998..................       2,576            2.36
Granted...........................................       1,488            3.85
Exercised.........................................        (310)           1.90
Canceled..........................................        (495)           2.79
                                                        ------
Outstanding at December 31, 1999..................       3,259            3.02
Granted...........................................       2,951            6.76
Exercised.........................................        (742)           2.48
Canceled..........................................        (757)           6.23
                                                        ------
Outstanding at December 31, 2000..................       4,711           $4.93
                                                        ======
</TABLE>

     In February 1998, substantially all outstanding options held by employees
under the 1990 Plan with a share price in excess of $2.75 per share were
repriced to $2.75 per share, the fair market value as of the date of the
repricing. A total of 1,217,950 options were repriced and are included in the
grant and cancellation activity for 1998. In 2000, Xicor recorded stock based
compensation of $279,000 for the accelerated vesting and extended terms of
certain previously granted options.

     The number of stock options available for grant were 1,537,550 at December
31, 2000; 681,500 at December 31, 1999; and 426,400 at December 31, 1998. At
December 31, 2000, 6,248,550 shares of common stock were reserved for issuance
upon exercise of stock options. Options outstanding at December 31, 2000 and
related weighted average price and life information follows:

<TABLE>
<CAPTION>
                        OPTIONS OUTSTANDING
                 ---------------------------------   OPTIONS EXERCISABLE
   RANGE OF                            REMAINING     -------------------
EXERCISE PRICES   SHARES     PRICE    LIFE (YEARS)     SHARES     PRICE
---------------  ---------   ------   ------------   ----------   ------
<S>              <C>         <C>      <C>            <C>          <C>
$ 0.69 - $ 0.78    138,000   $ 0.78       7.8           61,000    $0.78
$ 1.09 - $ 1.62    667,000   $ 1.52       7.8          209,000    $1.49
$ 2.13 - $ 2.75    647,000   $ 2.70       5.0          526,000    $2.70
$ 3.75 - $ 5.44  1,785,000   $ 4.10       9.4          108,000    $4.07
$ 5.75 - $ 7.56    903,000   $ 6.53       8.9          109,000    $6.05
$ 9.00 - $12.63    535,000   $12.15       9.2           18,000    $9.80
$17.44 - $18.38     36,000   $17.75       9.2               --       --
---------------  ---------   ------       ---        ---------    -----
$ 0.69 - $18.38  4,711,000   $ 4.93       8.4        1,031,000    $2.97
---------------  ---------   ------       ---        ---------    -----
</TABLE>

     The fair value of options at date of grant was estimated using the
Black-Scholes model. The weighted average grant date fair value of options
granted was $3.86, $2.16, and $0.79 for the three years in the period ended
December 31, 2000. The estimated pro forma stock-based compensation cost
calculated using the assumptions indicated below totaled $3,408,000 in 2000;
$954,000 in 1999; and $2,103,000 in 1998.

                                        28
<PAGE>   31
                                  XICOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following weighted average assumptions are included in the estimated
fair value grant date calculation of Xicor's stock options:

<TABLE>
<CAPTION>
                                                         2000    1999    1998
                                                         ----    ----    ----
<S>                                                      <C>     <C>     <C>
Expected life (years)..................................     5       5       5
Interest rate..........................................  5.89%   5.71%   5.31%
Volatility.............................................    80%     78%     70%
Dividend yield.........................................     0%      0%      0%
</TABLE>

STOCK PURCHASE PLAN

     In 1998, Xicor implemented an Employee Stock Purchase Plan ("ESPP"), which
allows eligible employees to purchase shares of common stock through payroll
deductions. The ESPP consists of consecutive 24-month Offering Periods composed
of four 6-month Purchase Periods. The shares can be purchased at the lower of
85% of the fair market value of the common stock at the date of commencement of
a two-year Offering Period or at the last day of each 6-month Purchase Period.
Purchases are limited to the lesser of 10% of the employee's compensation or
$25,000 per year and may not exceed 1,000 shares during each 6-month Offering
Period. At December 31, 2000, 380,000 shares had been reserved for issuance
under the ESPP. During 2000 and 1999, 116,000 and 106,000 shares, respectively,
were issued under the ESPP.

     The fair value of purchase rights granted under the ESPP at grant date was
estimated using the Black-Scholes model. The weighted average grant date fair
value of purchase rights granted under the ESPP during the years ended December
31, 2000 and 1999 was $120,000 and $52,000, respectively.

     The following weighted average assumptions are included in the estimated
fair value grant date calculation of Xicor's ESPP:

<TABLE>
<CAPTION>
                                                              2000     1999
                                                              -----    -----
<S>                                                           <C>      <C>
Expected life (years).......................................    1.2      0.5
Interest rate...............................................   4.93%    4.54%
Volatility..................................................     80%      78%
Dividend yield..............................................      0%       0%
</TABLE>

PRO FORMA NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE

     The pro forma net income (loss) resulting from the increased compensation
costs for awards granted under the stock option and employee stock purchase
plans was $9,638,000 or $0.45 per basic share and $0.41 per diluted share in
2000; ($27,935,000) or ($1.37) per share in 1999; and ($31,634,000) or ($1.64)
per share in 1998.

ISSUANCE OF SHARES TO PRIVATE INVESTOR

     In November 1998 Xicor and Advanced Technology Materials, Inc. (ATMI)
entered into a strategic alliance focused on integrated circuit (IC) sales into
smart card applications. ATMI, through its Emosyn division, has the right to
become Xicor's exclusive sales channel for Xicor secure memory IC products in
chip or module form to customers for use in smart card applications. Xicor will
continue to sell these products worldwide to all customer applications other
than smart cards. Additionally, Xicor and Emosyn will jointly define future IC
products suitable for the smart card industry, to be manufactured by Xicor and
sold by Emosyn. As part of this agreement, ATMI purchased from Xicor 1,000,000
unregistered shares of Xicor common stock at $4.00 per share, for which it has
certain registration rights. Also, after achieving agreed upon goals, but not
before the end of Year 2001, ATMI may purchase the rights to Xicor's Security IC
product line for use only in smart card applications. The purchase price will be
determined by an agreed upon formula.

                                        29
<PAGE>   32
                                  XICOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Following the purchase, Xicor will continue to supply such chips to Emosyn, and
will also continue to sell its security products using its distribution channels
to all applications other than smart cards. Sales to Emosyn were less than one
percent of total sales in both 2000 and 1999.

NOTE 8 -- EMPLOYEE INCENTIVE CASH BONUS PROFIT SHARING PROGRAM:

     Xicor has an Employee Incentive Cash Bonus Profit Sharing Program (the
"Program"). Under the Program, twice a year (two profit sharing periods) up to
15% of Xicor's consolidated operating income, excluding certain non-product
sales and restructuring charges and credits, is distributed to employees. The
exact percentage to be distributed is determined by a Committee of the Board of
Directors. Profit sharing bonuses relating to 2000 and 1999 totaled $0.5 million
and $0.2 million, respectively. No profit sharing bonuses were paid relating to
1998.

NOTE 9 -- INCOME TAXES:

     The income tax provision consists of the following:

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                    ------------------------
                                                    2000      1999      1998
                                                    ----      ----      ----
                                                         (IN THOUSANDS)
<S>                                                 <C>       <C>       <C>
Federal...........................................  $173      $--       $--
State.............................................   197       --        --
Foreign...........................................   121       --        --
                                                    ----      ---       ---
                                                    $491      $--       $--
                                                    ====      ===       ===
</TABLE>

     The reconciliation between the amount computed by applying the U.S. Federal
statutory rate and the reported tax expense is as follows:

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                  ---------------------------
                                                  2000       1999       1998
                                                  -----      -----      -----
<S>                                               <C>        <C>        <C>
Federal statutory rate..........................   35.0%     (35.0)%    (35.0)%
Operating losses with no current benefit........     --       35.0       35.0
Net benefit of deferred tax assets not
  previously recognized.........................  (32.2)        --         --
Foreign, alternative minimum and other taxes....    0.8         --         --
                                                  -----      -----      -----
                                                    3.6%       0.0%       0.0%
                                                  =====      =====      =====
</TABLE>

                                        30
<PAGE>   33
                                  XICOR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Deferred tax assets (liabilities) are comprised of the following:

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         --------------------
                                                           2000        1999
                                                         --------    --------
                                                            (IN THOUSANDS)
<S>                                                      <C>         <C>
Deferred tax assets:
  Federal and state loss and credit carryforwards......  $ 30,051    $ 27,189
  Capitalized research and development.................     6,735       6,084
  Inventory reserves and basis difference..............     7,420       5,869
  Deferred income on shipments to distributors.........     3,809       3,119
  Restructuring........................................     1,699      10,088
  Depreciation.........................................       979       3,174
  Other................................................     1,972       1,943
                                                         --------    --------
                                                           52,665      57,466
Deferred tax liabilities...............................    (2,735)     (2,958)
Deferred tax assets valuation allowance................   (49,930)    (54,508)
                                                         --------    --------
Net deferred taxes.....................................  $     --    $     --
                                                         ========    ========
</TABLE>

     The deferred tax assets valuation allowance is attributed to U.S. Federal
and state deferred tax assets. Management believes sufficient uncertainty exists
regarding the realizability of the net deferred tax assets such that a full
valuation allowance is required.

     At December 31, 2000, Xicor had Federal tax net operating loss
carryforwards and general business credit carryforwards of approximately $70
million and $1.8 million, respectively. These carryforwards expire in varying
amounts from 2001 through 2015. The net operating loss carryforward includes
approximately $14 million resulting from employee exercises of non-qualified
stock options, the tax benefit of which, when realized, will be accounted for as
an addition to common stock rather than as a reduction of the provision for
income taxes. At December 31, 2000, Xicor also had California state tax net
operating loss and credit carryforwards of approximately $4.2 million and $3.5
million, respectively. These carryforwards expire in varying amounts from 2002
to 2010. Availability of the net operating loss and credit carryforwards may
potentially be reduced in the event of certain substantial changes in equity
ownership.

NOTE 10 -- CONTINGENCIES:

     In the normal course of business, Xicor receives and makes inquiries with
regard to possible patent infringement. Where deemed advisable, Xicor may seek
to enter into or extend licenses or negotiate settlements. Outcomes of such
negotiations may not be determinable at any one point in time; however,
management currently does not believe that such licenses or settlements will
materially affect Xicor's financial position or results of operations.

                                        31
<PAGE>   34

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of Xicor, Inc.

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Xicor, Inc. and its subsidiaries at December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
San Jose, California
January 23, 2001

                                        32
<PAGE>   35

FINANCIAL INFORMATION BY QUARTER (UNAUDITED)

     The following table sets forth unaudited financial information for each
quarterly reporting period in the fiscal years ended December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                2000
                                              ----------------------------------------
                                               FIRST     SECOND      THIRD     FOURTH
                                              -------    -------    -------    -------
                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                           <C>        <C>        <C>        <C>
Net sales...................................  $32,145    $30,121    $31,060    $29,523
Cost of sales...............................   18,546     17,413     18,606     17,107
Research and development....................    4,074      3,953      3,966      3,887
Selling, general and administrative.........    6,395      6,556      6,774      6,397
Restructuring charge (credit)...............       --       (189)      (256)    (3,396)
Net income..................................    3,023      2,402      2,045      5,696
Net income per share:
  Basic.....................................     0.14       0.11       0.10       0.27
  Diluted...................................     0.13       0.10       0.09       0.25
Shares used in per share calculations:
  Basic.....................................   20,894     21,172     21,280     21,411
  Diluted...................................   23,306     23,048     23,153     22,635
</TABLE>

<TABLE>
<CAPTION>
                                                                1999
                                              ----------------------------------------
                                               FIRST     SECOND      THIRD     FOURTH
                                              -------    -------    -------   --------
                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                           <C>        <C>        <C>       <C>
Net sales...................................  $25,656    $28,751    $29,542   $ 30,938
Cost of sales...............................   21,001     21,305     18,840     19,328
Research and development....................    3,559      3,683      3,581      3,737
Selling, general and administrative.........    5,262      5,553      5,864      5,681
Restructuring charge........................       --         --         --     23,719
Net income (loss)(1)........................   (4,397)    (1,993)     1,074    (21,613)
Net income (loss) per share:
  Basic.....................................    (0.22)     (0.10)      0.05      (1.05)
  Diluted...................................    (0.22)     (0.10)      0.05      (1.05)
Shares used in per share calculations:
  Basic.....................................   20,173     20,257     20,364     20,500
  Diluted...................................   20,173     20,257     22,141     20,500
</TABLE>

---------------
(1) See Management's Discussion and Analysis of Financial Condition and Results
    of Operations for factors contributing to the losses.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None

                                    PART III

     Certain information required by Part III is omitted from this Report in
that the Registrant will file a definitive proxy statement pursuant to
Regulation 14A (the "Proxy Statement") not later than 120 days after the end of
the fiscal year covered by this Report, and certain information included therein
is incorporated herein by reference.

                                        33
<PAGE>   36

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Certain information concerning Xicor's directors and executive officers
required by this Item is incorporated by reference to the information contained
in the sections captioned "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in Xicor's Proxy Statement.

     The information concerning Xicor's executive officers required by this Item
is included in Part I hereof under the caption "Executive Officers of the
Registrant".

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference to the
information contained in the section captioned "Executive Compensation" in
Xicor's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference to the
information contained in the section captioned "Security Ownership of Certain
Beneficial Owners and Management" in Xicor's Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference to the
information contained in the section captioned "Election of Directors" in
Xicor's Proxy Statement.

                                        34
<PAGE>   37

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) The following documents are filed as a part of this report:

        (1) FINANCIAL STATEMENTS.

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
            <S>                                                           <C>
            Consolidated Balance Sheets as of December 31, 2000 and        18
              1999......................................................
            Consolidated Statements of Operations for each of the three    19
              years in the period ended December 31, 2000...............
            Consolidated Statements of Shareholders' Equity for each of    20
              the three years in the period ended December 31, 2000.....
            Consolidated Statements of Cash Flows for each of the three    21
              years in the period ended December 31, 2000...............
            Notes to Consolidated Financial Statements..................   22
            Report of Independent Accountants...........................   32
</TABLE>

        (2) FINANCIAL STATEMENT SCHEDULES.

           All schedules have been omitted since the required information is not
           applicable, not significant or because the information required is
           included in the consolidated financial statements or notes thereto.

        (3) EXHIBITS. The exhibits listed in the accompanying Index to Exhibits
           are filed or incorporated by reference as part of this Annual Report.

        (b) REPORTS ON FORM 8-K.

           Report on Form 8-K filed with the Securities and Exchange Commission
           on November 17, 2000.

                                        35
<PAGE>   38

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Milpitas, State of California, on the 28th day of March 2001.

                                          XICOR, INC.
                                          Registrant

                                          By        /s/ LOUIS DINARDO
                                            ------------------------------------
                                                       Louis DiNardo
                                               President and Chief Executive
                                                           Officer
                                               (Principal Executive Officer)

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Louis DiNardo and Geraldine N. Hench, and
each of them, jointly and severally, his attorneys-in-fact, each with the power
of substitution, for him in any and all capacities, to sign any and all
amendments to this Report on Form 10-K and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                    DATE
                      ---------                                     -----                    ----
<S>                                                    <C>                              <C>

               /s/ J. DANIEL MCCRANIE                       Chairman of the Board       March 28, 2001
-----------------------------------------------------
                (J. Daniel McCranie)

                  /s/ LOUIS DINARDO                     President and Chief Executive   March 28, 2001
-----------------------------------------------------   Officer, (Principal Executive
                   (Louis DiNardo)                                Officer)

                  /s/ JULIUS BLANK                                Director              March 28, 2001
-----------------------------------------------------
                   (Julius Blank)

                 /s/ ANDREW W. ELDER                              Director              March 28, 2001
-----------------------------------------------------
                  (Andrew W. Elder)

               /s/ EMMANUEL HERNANDEZ                             Director              March 28, 2001
-----------------------------------------------------
                (Emmanuel Hernandez)

                /s/ GEOFFREY WINKLER                              Director              March 28, 2001
-----------------------------------------------------
                 (Geoffrey Winkler)

               /s/ GERALDINE N. HENCH                    Vice President, Finance and    March 28, 2001
-----------------------------------------------------      Chief Financial Officer
                (Geraldine N. Hench)                    (Principal Financial Officer
                                                          and Principal Accounting
                                                                  Officer)
</TABLE>

                                        36
<PAGE>   39

                                  XICOR, INC.

                               INDEX TO EXHIBITS
                                  ITEM 14(a)3.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<S>      <C>
 3.1     Amended and Restated Articles of Incorporation dated
         December 9, 1987 filed as Exhibit 3.1 with Form 10-K for the
         year ended December 31, 1987, is hereby incorporated by
         reference.
 3.2     By-laws, as amended to date, filed as Exhibit 3.2 with Form
         10-K for the year ended December 31, 1987, is hereby
         incorporated by reference.
 3.2A    Certificate of Amendment of By-Laws effective as of January
         28, 1998 filed as Exhibit 3.2A with Form 10-K for the year
         ended December 31, 1998, is hereby incorporated by
         reference.
 3.2B    Certificate of Amendment of By-Laws effective as of June 4,
         1999 filed as Exhibit 3.2B with Form 10-K for the year ended
         December 31, 1999, is hereby incorporated by reference.
 3.2C    Certificate of Amendment of By-Laws effective as of May 30,
         2000 is filed herewith as Exhibit 3.2C.
10.1     Xicor, Inc. 1990 Incentive and Non-incentive Stock Option
         Plan (As Amended and Restated January 26, 2000) filed as
         Exhibit 4.2 with Form S-8 Registration Statement Number
         333-54436 on January 26, 2001, is hereby incorporated by
         reference.
10.2     Lease dated March 24, 2000, filed as Exhibit 10.5 with Form
         10-Q for the quarterly period ended April 2, 2000, is hereby
         incorporated by reference.
10.3     Lease dated November 23, 1983, Exhibit 1 of the Exhibits
         filed with Form 10-K for the year ended December 31, 1983,
         is hereby incorporated by reference.
10.3A    Amendment to lease dated November 23, 1983 filed as Exhibit
         10.3A with Form 10-K for the year ended December 31, 1990,
         is hereby incorporated by reference.
10.3B    Amendment to lease dated November 23, 1983 filed as Exhibit
         10.3B with Form 10-K for the year ended December 31, 1999,
         is hereby incorporated by reference.
10.6     Form of Indemnification Agreement entered into between
         Xicor, Inc. and each of its Officers and Directors filed as
         Exhibit 10.6A with Form 10-Q for the quarterly period ended
         June 30, 1996, is hereby incorporated by reference.
10.7     Lingsen-Xicor Dedicated Production Agreement dated September
         21, 1988 as amended on March 11, 1989, April 14, 1989 and
         September 8, 1989 filed as Exhibit 10.8 with Form 10-K for
         the year ended December 31, 1989, is hereby incorporated by
         reference.
10.8     Loan and Security Agreement dated March 10, 1993 with
         CoastFed Business Credit Corporation filed as Exhibit 10.8
         with Form 10-K for the year ended December 31, 1992, is
         hereby incorporated by reference.
10.8A    Fourth Amendment to Loan Documents and Letter of Credit
         Collateral Agreement filed as Exhibit 10.8A with Form 10-Q
         for the quarterly period ended July 4, 1999, is hereby
         incorporated by reference.
10.9     Xicor, Inc. 2000 Director Option Plan filed as Exhibit 4.3
         with Form S-8 Registration Statement Number 333-54436 on
         January 26, 2001, is hereby incorporated by reference.
10.10*   Xicor-Yamaha Semiconductor Manufacturing Foundry Agreement
         dated February 6, 1997 filed as Exhibit 10.10 with Form 10-K
         for the year ended December 31, 1998, is hereby incorporated
         by reference.
10.11    Xicor, Inc. 1998 Employee Stock Purchase Plan filed as
         Exhibit 10.11 with Form 10-K for the year ended December 31,
         1998, is hereby incorporated by reference.
</TABLE>

                                        37
<PAGE>   40

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<S>      <C>
10.12    Xicor, Inc. 1998 Nonstatutory Stock Option Plan (as Amended
         and Restated December 12, 2000) filed as Exhibit 4.1 with
         Form S-8 Registration Statement Number 333-54436 on January
         26, 2001, is hereby incorporated by reference.
10.13*   Foundry Agreement by and between Xicor, Inc. and Zentrum
         Mikroelektronic Dresden GmbH dated April 8, 1999 filed as
         Exhibit 10.13 with Form 10-K for the year ended December 31,
         1999, is hereby incorporated by reference.
10.14*   Xicor-Sanyo Semiconductor Manufacturing Foundry Agreement
         dated May 1, 1999 filed as Exhibit 10.14 with Form 10-K for
         the year ended December 31, 1999, is hereby incorporated by
         reference.
10.15    Asset Purchase Agreement between Standard MEMS, Inc. and
         Xicor, Inc. dated October 24, 2000 filed as Exhibit 2.1 with
         Form 8-K on November 17, 2000, is hereby incorporated by
         reference.
10.16**  Xicor-Standard MEMS Semiconductor Manufacturing Foundry
         Agreement dated October 24, 2000 is filed herewith as
         Exhibit 10.16.
21.      List of Subsidiaries.
23.      Consent of PricewaterhouseCoopers LLP.
24.      Powers of Attorney (included on the signature pages hereof).
</TABLE>

---------------

 * Confidential treatment has been granted as to certain portions of this
   Exhibit.

** Confidential treatment of certain portions has been requested.

                                        38