<PAGE>

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

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   Form 10-Q

(Mark One)
[X]Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
   Act of 1934.

   For the quarterly period ended July 2, 2000.

[_]Transition report pursuant to Section 13 or 15(d) of the Securities
   Exchange Act of 1934.

   For the transition period from _______________ to _______________.

                       Commission File Number: 001-13748

                                  ZiLOG, Inc.
                                 (Registrant)

<TABLE>
<S>                                            <C>
                  Delaware                                       13-3092996
       (State or other jurisdiction of              (I.R.S. Employer Identification No.)
       incorporation or organization)
</TABLE>

             910 East Hamilton Avenue, Campbell, California, 95008
                   (Address of principal executive offices)

                                (408) 558-8500
             (Registrant's telephone number, including area code)

   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

   As of July 2, 2000, there were 31,120,564 shares of the Company's Voting
Common Stock, $.01 par value, and 10,000,000 shares of the Company's Non-
Voting Common Stock, $.01 par value outstanding.

   This Report contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), regarding future events and the Company's plans and
expectations that involve risks and uncertainties. When used in this Report,
the words "estimate," "project," "intend," "expect," "anticipate" and similar
expressions are intended to identify such forward-looking statements. Such
statements are subject to certain risk and uncertainties, including those
discussed below, which could cause actual results to differ materially from
those projected. Factors that may case or contribute to such differences
include, but are not limited to, those discussed in our 1999 Annual Report on
Form 10-K in "Factors That May Affect Future Results," as well as those
discussed elsewhere in this Report. In light of the important factors that can
materially affect results, including those set forth in this paragraph and
below, the inclusion of forward-looking information herein should not be
regarded as a representation by the Company or any other person that the
objectives or plans for the Company will be achieved. The reader is therefore
cautioned not to place undue reliance on the forward-looking statements
contained herein, which speak only as of the date hereof. ZiLOG undertakes no
obligation to publicly release updates or revisions to these statements.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

                                  ZiLOG, INC.

                UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
              (in thousands, except shares and per share amounts)

<TABLE>
<CAPTION>
                                                         July 2,   December 31,
                                                          2000         1999
                                                        ---------  ------------
<S>                                                     <C>        <C>
                        ASSETS
Current assets:
  Cash and cash equivalents............................ $  42,925   $  60,806
  Accounts receivable, less allowance for doubtful
   accounts of $423 at July 2, 2000 and December 31,
   1999................................................    28,302      31,834
  Inventories..........................................    35,467      28,456
  Prepaid expenses and other current assets............    13,551      12,917
                                                        ---------   ---------
    Total current assets...............................   120,245     134,013
Property, plant and equipment, at cost.................   424,214     413,716
Less: accumulated depreciation and amortization........  (297,003)   (277,570)
                                                        ---------   ---------
  Net property, plant and equipment....................   127,211     136,146
Other assets...........................................    20,250      14,127
                                                        ---------   ---------
                                                        $ 267,706   $ 284,286
                                                        =========   =========

       LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
  Accounts payable..................................... $  19,473   $  21,998
  Accrued compensation and employee benefits...........    32,947      32,656
  Other accrued liabilities............................    23,982      23,797
                                                        ---------   ---------
    Total current liabilities..........................    76,402      78,451

Notes payable..........................................   280,000     280,000

Other non-current liabilities..........................    15,026      15,603

Stockholders' deficiency:
  Preferred Stock, $100.00 par value; 5,000,000 shares
   authorized; 1,500,000 shares designated as Series A
   Cumulative Preferred Stock; 250,000 shares of Series
   A Cumulative Preferred Stock issued and outstanding
   at July 2, 2000 and December 31, 1999; aggregate
   liquidation preference $33,239......................    25,000      25,000
  Common Stock, $0.01 par value; 70,000,000 shares
   authorized; 31,120,564 shares issued and outstanding
   at July 2, 2000 and 30,525,786 shares at December
   31, 1999. Class A Non-voting Common Stock, $0.01 par
   value; 30,000,000 shares authorized; 10,000,000
   shares issued and outstanding at July 2, 2000 and
   December 31, 1999...................................       411         405
Deferred stock compensation............................    (2,070)        --
Additional paid-in capital.............................     5,391       1,113
Accumulated deficit....................................  (132,454)   (116,286)
                                                        ---------   ---------
    Total stockholders' deficiency.....................  (103,722)    (89,768)
                                                        ---------   ---------
                                                        $ 267,706   $ 284,286
                                                        =========   =========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>

                                  ZiLOG, INC.

           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (in thousands)

<TABLE>
<CAPTION>
                                          Three Months
                                             Ended         Six Months Ended
                                        -----------------  ------------------
                                        July 2,  July 4,   July 2,   July 4,
                                         2000      1999      2000      1999
                                        -------  --------  --------  --------
<S>                                     <C>      <C>       <C>       <C>
Net sales..............................  61,497    61,039  $121,015  $115,248
Cost of sales..........................  36,277    41,794    71,137    80,204
                                        -------  --------  --------  --------
Gross margin...........................  25,220    19,245    49,878    35,044
Operating expenses:
  Research and development.............   9,079     8,258    18,840    15,521
  Selling, general and administrative..  14,415    14,598    29,904    29,104
  Special charges......................   1,191     4,686     1,191     4,686
                                        -------  --------  --------  --------
                                         24,685    27,542    49,935    49,311
                                        -------  --------  --------  --------
Operating income (loss)................     535    (8,297)      (57)  (14,267)
Other income (expense):
  Interest income......................     690       565     1,458     1,175
  Interest expense.....................  (7,244)   (7,216)  (14,522)  (14,445)
  Other, net...........................      20      (143)     (296)     (228)
                                        -------  --------  --------  --------
Loss before income taxes and equity
 loss..................................  (5,999)  (15,091)  (13,417)  (27,765)
Provision for income taxes.............     133       250       265       500
                                        -------  --------  --------  --------
Loss before equity loss................  (6,132)  (15,341)  (13,682)  (28,265)
Equity in loss of Qualcore Group,
 Inc. .................................    (297)      --       (297)      --
                                        -------  --------  --------  --------
Net loss............................... $(6,429) $(15,341) $(13,979) $(28,265)
                                        =======  ========  ========  ========
</TABLE>




     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                                  ZiLOG, Inc.

           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                           Six Months Ended
                                                           ------------------
                                                           July 2,   July 4,
                                                             2000      1999
                                                           --------  --------
<S>                                                        <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(13,979) $(28,265)
Adjustments to reconcile net loss to cash (used) provided
 by operating activities:
  Depreciation and amortization...........................   21,087    31,228
  Write-down of assets held for disposal..................      --      3,677
  Write-off of in-process research and development........      --      1,009
Changes in certain assets and liabilities:
  Accounts receivable.....................................    3,532    (1,287)
  Inventories.............................................   (7,011)   (5,580)
  Prepaid expenses and other assets.......................     (358)     (393)
  Accounts payable........................................   (2,525)    6,080
  Accrued compensation and employee benefits..............      291       (22)
  Other accrued and noncurrent liabilities................   (2,070)    8,265
                                                           --------  --------
    Cash (used) provided by operating activities..........   (1,033)   14,712
                                                           --------  --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures....................................  (10,405)   (4,686)
  Acquisition of Seattle Silicon, net of cash acquired....      --     (5,931)
  Purchase of equity interest in Qualcore Group, Inc......   (8,056)      --
                                                           --------  --------
    Cash used by investing activities.....................  (18,461)  (10,617)
                                                           --------  --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock..................    2,124       --
  Principal payments under capital leases.................     (511)     (262)
                                                           --------  --------
    Cash (used) provided by financing activities..........    1,613      (262)
                                                           --------  --------
Increase (decrease) in cash and cash equivalents..........  (17,881)    3,833
Cash and cash equivalents at beginning of period..........   60,806    50,856
                                                           --------  --------
Cash and cash equivalents at end of period................ $ 42,925  $ 54,689
                                                           ========  ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

   The accompanying interim financial information is unaudited. In the opinion
of ZiLOG, Inc.'s ("ZiLOG" or the "Company") management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of interim results have been included. The results for interim
periods are not necessarily indicative of results to be expected for the
entire year. These condensed consolidated financial statements and notes
should be read in conjunction with the Company's annual consolidated financial
statements and notes thereto contained in the Company's 1999 Form 10-K filed
on March 29, 2000. The condensed consolidated balance sheet at December 31,
1999 has been derived from audited financial statements at that date, but does
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Certain
reclassifications have been made to the prior year condensed consolidated
financial statements to conform to the 2000 presentation. Such
reclassifications had no effect on previously reported results of operations
or accumulated deficit.

   As described in Note 10, Stockholders' Equity (Deficiency), to the
consolidated financial statements of the Company's 1999 Annual Report on Form
10-K, ZiLOG's Series A Cumulative Preferred Stock ("Series A Stock")
accumulates dividends at a rate of 13.5% per annum, with dividends payable
quarterly at the election of the Board of Directors. Unpaid dividends are
recognized as a charge to accumulated deficit and as an increase in the
liquidation preference of the Series A Stock. As of July 2, 2000, the Company
has not paid any dividends on the Series A Stock and the corresponding accrued
dividends are $9.1 million. During the three-month period ended July 2, 2000,
$1.1 million of dividends on Series A Stock were accrued and charged to
accumulated deficit.

2. Equity Investment

   On March 22, 2000, ZiLOG acquired 3.0 million shares or 20% of the common
stock of Qualcore Group, Inc. ("Qualcore") for cash of $8.0 million plus
expenses of $0.1 million, $5.5 million paid on March 22, 2000 and $2.5 million
paid on April 14, 2000, pursuant to a Purchase and Sale Agreement. ZiLOG will
account for its investment in Qualcore common stock using the equity method.
Under the terms of the Agreement, ZiLOG has the option ("Option") until June
30, 2001 ("Expiration Date") to acquire all of the remaining common shares of
Qualcore for cash and/or common stock. Following an initial public offering of
ZiLOG's common stock prior to the Expiration Date, the Option will
automatically be exercised. If the Option is not exercised prior to the
Expiration Date, ZiLOG may be required to pay up to $5.2 million to acquire up
to 1.8 million additional shares of Qualcore common stock.

3. Related Party Transactions

   ZiLOG purchased semiconductor design services from Qualcore totaling
approximately $459,000 for the six-month period ended July 2, 2000. For the
six-month period ended July 4, 1999, ZiLOG made no purchases from Qualcore.
ZiLOG had payables to Qualcore of approximately $127,000 at July 2, 2000.
Payment terms between ZiLOG and Qualcore are net zero, payable upon percentage
of completion.

   In January 1999, ZiLOG entered into an agreement with P.T. Astra
Microtronics Technology, now known as Advanced Interconnect Technologies, or
AIT, pursuant to which AIT provides the Company with semiconductor assembly
and test services through January 2003. AIT is owned by Newbrige Asia, an
affiliate of Texas Pacific Group, which in turn is an affiliate of our
principal stockholder. ZiLOG purchased services from AIT totaling
approximately $10.1 million in the first half of 2000, and $10.3 million in
the first half of 1999. The Company had payments due to AIT of approximately
$3.8 million at December 31, 1999 and $2.5 million at July 2, 2000. The
Company's payment terms with AIT are net 30 days.

   The Company sells products and engineering services to GlobeSpan, of which
Texas Pacific Group is a significant stockholder. The Company's net sales to
GlobeSpan totaled approximately $2.7 million and $21,000

                                       5
<PAGE>

during the six-month periods ended July 2, 2000 and July 4, 1999,
respectively. As of July 2, 2000 the Company had accounts receivable from
GlobeSpan of $0.8 million.

4. Inventories

   The components of inventories are as follows (in thousands):

<TABLE>
<CAPTION>
                                                            July 2, December 31,
                                                             2000       1999
                                                            ------- ------------
   <S>                                                      <C>     <C>
   Raw materials........................................... $ 1,453   $ 1,477
   Work-in-process.........................................  25,626    20,146
   Finished goods..........................................   8,388     6,833
                                                            -------   -------
                                                            $35,467   $28,456
                                                            =======   =======
</TABLE>

5. Segment Reporting

   During the second quarter of 2000, ZiLOG reorganized its operating
segments. ZiLOG continues to have two reportable segments, communications and
embedded control. The information presented below has been reclassified to
reflect the change. The Company's embedded control segment is divided into two
business units, Field Programmable Microcontrollers and Home Entertainment.
Consistent with the rules of Statement of Financial Accounting Standards No.
131, the Company has aggregated these two business units into one reportable
segment because both units have similar gross margins and target consumer and
industrial customer applications based largely on ZiLOG's Z-8 line of 8-bit
microcontrollers and digital signal processors. The Communications business
unit is generally more profitable than the Company's other business units and
is predominantly based on the Company's Z80 line of 8-bit microprocessors and
serial communication devices.

   Information regarding reportable segments for the three-month and six-month
periods ended July 2, 2000 and July 4, 1999 is as follows (in thousands):

<TABLE>
<CAPTION>
                                             Embedded  Corporate     Total
                              Communications Control   and Other  Consolidated
                              -------------- --------  ---------  ------------
<S>                           <C>            <C>       <C>        <C>
Three Months Ended July 2,
 2000:
Net sales....................    $24,540     $36,775   $    182     $ 61,497
                                                                    ========
EBITDA.......................      9,841       2,323       (103)    $ 12,061
Special charges..............        --          --      (1,191)      (1,191)
Equity investment............        --          --         297          297
Depreciation and
 amortization................     (2,402)     (8,152)       (58)     (10,612)
Interest income..............        --          --         690          690
Interest expense.............        --          --      (7,244)      (7,244)
                                                                    --------
Loss before income taxes and
 equity loss.................                                       $ (5,999)
                                                                    ========

Six Months Ended July 2,
 2000:
Net sales....................    $47,153     $73,680   $    182     $121,015
                                                                    ========
EBITDA.......................     17,186       4,012        357     $ 21,555
Special charges..............        --          --      (1,191)      (1,191)
Equity investment............        --          --         297          297
Depreciation and
 amortization................     (4,835)    (16,121)       (58)     (21,014)
Interest income..............        --          --       1,458        1,458
Interest expense.............        --          --     (14,522)     (14,522)
                                                                    --------
Loss before income taxes and
 equity loss.................                                       $(13,417)
                                                                    ========
</TABLE>

                                       6
<PAGE>

<TABLE>
<CAPTION>
                                               Embedded  Corporate    Total
                                Communications Control   and Other Consolidated
                                -------------- --------  --------- ------------
<S>                             <C>            <C>       <C>       <C>
Three Months Ended July 4,
 1999:
Net sales.....................     $21,723     $ 39,316   $   --     $ 61,039
                                                                     ========
EBITDA........................       8,919        3,124       --     $ 12,043
Special charges...............         --           --     (4,686)     (4,686)
Depreciation and
 amortization.................      (3,160)     (12,637)      --      (15,797)
Interest income...............         --           --        565         565
Interest expense..............         --           --     (7,216)     (7,216)
                                                                     --------
Loss before income taxes and
 equity loss..................                                       $(15,091)
                                                                     ========

Six Months Ended July 4, 1999:
Net sales.....................     $42,515     $ 72,733   $   --     $115,248
                                                                     ========
EBITDA........................      17,720        3,634       --     $ 21,354
Special charges...............         --           --     (4,686)     (4,686)
Depreciation and
 amortization.................      (6,413)     (24,750)      --      (31,163)
Interest income...............         --           --      1,175       1,175
Interest expense..............         --           --    (14,445)    (14,445)
                                                                     --------
Loss before income taxes and
 equity loss..................                                       $(27,765)
                                                                     ========
</TABLE>

   Major customers: During the three-month and six-month periods ended July 2,
2000, one distributor, Pioneer-Standard Electronics, who buys from both
segments, accounted for approximately 11.9% and 10.4% of net sales,
respectively. A second distributor, Arrow Electronics, who buys from both
segments, accounted for approximately 10.3% of net sales in the six-month
period ended July 2, 2000. For the three-month and six-month periods ended
July 4, 1999, Arrow Electronics accounted for 12.7% and 11.9% of net sales,
respectively.

6. Special Charges

   During the second quarter of 2000, ZiLOG incurred special charges of $1.2
million relating to the Company refocusing its resources on the communications
segment. In connection with this action, 24 people were terminated and 12
people were transferred into the communications segment from other areas of
the company. In the second quarter of 1999 the Company incurred special
charges of $4.7 million comprised of a $1.0 million charge for in-process
research and development acquired from Seattle Silicon and a $3.7 million
charge to write-down assets held for disposal to estimated net realizable
value. The components of special charges are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  Three Months
                                                                     and Six
                                                                     Months
                                                                      Ended
                                                                  -------------
                                                                   July   July
                                                                    2,     4,
                                                                   2000   1999
                                                                  ------ ------
<S>                                                               <C>    <C>
Severance benefits............................................... $  951 $  --
Write-off of impaired assets.....................................    140    --
Contractual liabilities..........................................    100    --
Write-down of assets held for sale...............................    --   3,677
In-process research and development..............................    --   1,009
                                                                  ------ ------
                                                                  $1,191 $4,686
                                                                  ====== ======
</TABLE>

                                       7
<PAGE>

7. Deferred Stock Compensation

   During the three-month and six-month periods ended July 2, 2000 the Company
issued stock options to employees that management has determined to have
exercise prices below the deemed fair value of the Company's common stock on
the date of grant. Accordingly, during the three-month and six-month periods
ended July 2, 2000, ZiLOG recorded deferred compensation of $2.2 million,
representing the excess of the deemed fair value of the common stock on the
date of grant over the options' exercise price. Deferred compensation expense
is being amortized ratably over the four-year option vesting period and
totaled $0.1 million for the three-month and six-month periods ended July 2,
2000.

8. Comprehensive Income

   The Company had no items of other comprehensive income to report in either
of the three-month or six-month periods ended July 2, 2000 and July 4, 1999.

9. Legal Proceedings

   The Company has been named as a defendant in a purported class action
lawsuit that was filed on January 23, 1998 in the U.S. District Court for the
Northern District of California. Some of the Company's executive officers are
also named as defendants. The plaintiffs purport to represent a class of all
persons who purchased our common stock between June 30, 1997 and November 20,
1997. The complaint alleges that the Company and some of the executive
officers made false and misleading statements regarding our business that
caused the market price of our common stock to be artificially inflated during
the defined period. The complaint does not specify the amount of damages
sought. On March 24, 1999, the court granted the Company's motion to dismiss
and entered judgment in favor of all defendants. On April 16, 1999, the
plaintiffs filed their notice of appeal with the Ninth Circuit of Appeals.
This appeal was fully briefed and argued to the Ninth Circuit Court of Appeals
on June 8, 2000. Based upon information presently known to management, the
Company is unable to determine the ultimate resolution of this lawsuit or
whether it will have a material adverse effect on the Company's financial
condition.

   The Company is a party to an insurance coverage lawsuit in the Superior
Court of the State of California in and for Santa Clara County filed on July
29, 1996, in which our former insurers, Pacific Indemnity Company, Federal
Insurance Company and Chubb & Son, Inc., claim that insurance coverage did not
exist for allegations made in two underlying lawsuits brought by some
employees of the Company and their families who claimed that they suffered
personal injuries and discrimination because of alleged exposure to chemicals
at our manufacturing facility in Idaho in 1993 and 1994. The insurers seek a
declaration that insurance coverage under the applicable policies did not
exist, and they seek reimbursement of attorneys' fees, costs, and settlement
funds expended on the Company's behalf totaling approximately $6.3 million
plus interest. Both the insurers and the Company have each brought separate
motions for summary judgment or, in the alternative, motions for summary
adjudication. All such motions were denied by the Superior Court, and the
Court of Appeals denied each party's respective petition for review of each
denial of their summary judgment motions. The Company petitioned the
California Supreme Court for review of the denial of our motion for summary
judgment. The California Supreme Court denied the Company's petition for
review without making a decision on the merits of the dispute. The insurers
have renewed their motion for summary adjudication. The Company is opposing
that motion. No trial date has been set. Based upon information presently
known to management, the Company is unable to determine the ultimate
resolution of this lawsuit or whether it will have a material adverse effect
on the Company's financial condition.

   Four parties have notified ZiLOG that it may be infringing their patents
and other intellectual property rights. In the event ZiLOG determines that
such notices may involve meritorious claims, it may seek a license. Based on
industry practice, ZiLOG believes that in most cases any necessary licenses or
other rights could be obtained on commercially reasonable terms. However,
ZiLOG cannot make any assurances that licenses could be obtained on acceptable
terms or that litigation will not occur. The failure to obtain necessary
licenses or other rights or the advent of litigation arising out of such
claims could have a material adverse effect on ZiLOG.

                                       8
<PAGE>

   ZiLOG is participating in other litigation and responding to claims arising
in the ordinary course of business. The Company intends to defend its
interests vigorously in these matters. Management believes that it is unlikely
that the outcome of these matters will have a material adverse effect on the
Company, although management cannot make any assurances in this regard.

10. Recent Accounting Pronouncement

   In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation--an Interpretation of APB No. 25" ("FIN 44"). FIN 44 clarifies
the application of APB No. 25 and, among other issues clarifies the following:
the definition of an employee for purposes of applying APB No. 25; the
criteria for determining whether a plan qualifies as a noncompensatory plan;
the accounting consequence of various modifications to the terms of previously
fixed stock options or awards; and the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1,
2000, but certain provisions of FIN 44 cover specific events that occurred
after either December 15, 1998 or January 12, 2000. ZiLOG does not expect the
application of FIN 44 to have a material impact on the Company's financial
position or results of operations.

11. Subsequent Event

   On July 27, 2000 ZiLOG acquired Calibre, Inc. ("Calibre") pursuant to a
merger agreement ("the Agreement"), for common stock and vested common stock
options totaling approximately 743,714 shares. The Agreement provides that the
shareholders of Calibre may receive up to 527,799 additional shares of ZiLOG
common stock as earn-out consideration in the event that the Calibre business
achieves certain financial targets in the twelve-month period following the
acquisition. ZiLOG intends to account for the acquisition of Calibre using the
purchase method.

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

   This Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), regarding future events and the Company's plans and
expectations that involve risks and uncertainties. When used in this Report,
the words "estimate," "project," "intend," "expect," "anticipate" and similar
expressions are intended to identify such forward-looking statements. Such
statements are subject to certain risks and uncertainties, including those
discussed below, which could cause actual results to differ materially from
those projected. Factors that may cause or contribute to such differences
include, but are not limited to, those discussed in our 1999 Annual Report on
Form 10-K in "Factors That May Affect Future Results" as well as those
discussed elsewhere in this Report. In light of the important factors that can
materially affect results, including those set forth in this paragraph and
below, the inclusion of forward-looking information herein should not be
regarded as a representation by the Company or any other person that the
objectives or plans for the Company will be achieved. The reader is therefore
cautioned not to place undue reliance on the forward-looking statements
contained herein, which speak only as of the date hereof. ZiLOG undertakes no
obligation to publicly release updates or revisions to these statements.

   The following tables present unaudited results. The Company believes that
all necessary adjustments, consisting only of normal recurring adjustments,
have been included in the amounts shown below to state fairly the selected
quarterly information when read in conjunction with the Condensed Consolidated
Financial Statements included elsewhere herein. Interim results are based on
fiscal quarters of thirteen weeks in duration ending on the last Sunday of
each quarter. The operating results for any quarter are not necessarily
indicative of results for any subsequent quarter or the full fiscal year. All
tabular information is provided in thousands, except percentages.

                                       9
<PAGE>

Results of Operations

   The Company's quarterly operating results have and will vary because of a
number of factors, including the timing and success of new product
introductions, the success of cost reduction programs, changes in product mix,
volume, timing and shipment of orders and fluctuations in manufacturing
productivity. Sales comparisons are also subject to customer order patterns
and seasonality. Because the Company's products are available from both the
Company and distributors, the customer's decision to buy from a distributor or
directly from the Company can affect ZiLOG's quarterly sales and
profitability.

Six Months Ended July 2, 2000 and July 4, 1999.

   Net Sales. Our net sales increased 5.0% to $121.0 million for the six
months ended July 2, 2000 from $115.2 million for the six months ended July 4,
1999 and increased 0.8% for the second quarter of 2000 from the second quarter
of 1999. The increase was primarily the result of higher unit shipments of
communications products and partially the result of higher overall average
selling prices. Net sales of products in our communications segment increased
10.9% to $47.2 million for the six months ended July 2, 2000 as compared to
$42.5 million for the six months ended July 4, 1999 and increased 13.0% for
the second quarter of 2000 from the second quarter of 1999. The increase for
both the three-month and six-month periods resulted primarily from higher unit
shipments of serial communication controllers and other network processor
products. Net sales of products in our embedded control segment increased 1.3%
to $73.7 million for the six months ended July 2, 2000, as compared to $72.7
million for the six months ended July 4, 1999, but decreased 6.5% for the
second quarter of 2000 as compared to the second quarter of 1999. The increase
in embedded control net sales for the six-months ended July 2, 2000 compared
to the same period in 1999 resulted primarily from higher unit shipments of
military, infrared remote and one-time programmable microcontrollers, which
are a subset of our field programmable microcontrollers unit, and was offset
partially by a 50.7% decline in sales of peripheral products. During the six
months ended July 2, 2000, net sales of our peripheral products were
$7.7 million compared to $15.6 million in the six months ended July 4, 1999.
The decrease in embedded control net sales for the second quarter of 2000
compared to the second quarter of 1999 resulted from lower unit shipments of
computer peripheral products, offset partially by higher unit shipments of
infrared remote control and one-time programmable devices. We expect the trend
of decreasing computer peripheral product unit sales to continue and to result
in sales of peripheral products at or below current levels in the foreseeable
future. Our primary customer for our military products placed what we believe
to be a last time buy order for these products in the second quarter of 2000.
We intend to discontinue our line of military products by the end of 2000.
During the three and six months ended July 2, 2000, net sales of military
products were $1.5 million and $4.2 million, respectively.

   Gross Margin. Our cost of sales represents the cost of our wafer
fabrication, assembly and test operations. Cost of sales fluctuates, depending
on manufacturing productivity, product mix, equipment utilization and
depreciation. Gross margin as a percentage of net sales improved to 41.2% for
the six months ended July 2, 2000 from 30.4% for the six months ended July 4,
1999 and to 41.0% for the second quarter of 2000 from 31.5% for the second
quarter of 1999. When compared to comparable time periods in 1999, the
improvement in gross margin for both the three-month and six-month periods
ended July 2, 2000 was primarily attributable to our change in the estimated
useful lives of certain equipment used in our eight-inch wafer fabrication
facility during the third quarter of 1999. As a result of this change in
accounting estimate, our depreciation expense was $9.1 million lower than
would have been recorded under the previous depreciation schedule in the six
months ended July 2, 2000. In addition, our gross margin in the three-month
and six-month periods ended July 2, 2000 as compared to similar periods in
1999 improved as a result of higher net sales, cost reduction programs and
increased factory utilization.

   Research and Development Expenses. Research and development expenses
increased 21.4% to $18.8 million for the six months ended July 2, 2000 from
$15.5 million for the six months ended July 4, 1999 and 9.9% to $9.1 million
for the second quarter of 2000 from $8.3 million for the second quarter of
1999. The increase in research and development expense was attributable
primarily to higher product development costs, including spending at our new
design centers in India, Seattle and Fort Worth. Research and development
expense

                                      10
<PAGE>

during the six months ended July 2, 2000 also included $0.9 million of
amortization relating to goodwill and other intangible assets acquired in
connection with our Seattle and Fort Worth design centers. During the
six months ended July 2, 2000, both of our business segments were engaged in
new product development projects, including eZ80 and Cartezian
microprocessors, 0.35 micron one-time programmable microcontrollers and
integrated television controller products. Our research and development
headcount also increased from 150 employees as of July 4, 1999 to 173
employees as of July 2, 2000. We expect this trend in the increase of research
and development expenses to continue.

   Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 2.7% to $29.9 million for the six months
ended July 2, 2000 from $29.1 million for the six months ended July 4, 1999
but decreased slightly in the second quarter of 2000 from $14.6 million in the
second quarter of 1999. The increase for the six-month period ended July 2,
2000 resulted primarily from higher compensation and employee benefit related
costs. In addition, commissions and marketing expenses were higher for the
six-month period ended July 2, 2000 in connection with increased sales.

   Special Charges. We recognized special charges of $1.2 million in the three
months ended July 2, 2000, consisting of $1.0 million of severance and related
benefits and $0.2 million of asset write-offs and contractual liabilities.
These charges relate to a restructuring of operations intended to focus our
human and financial resources on our communications segment. We terminated 24
people in connection with this action and an additional 12 were re-deployed
from other areas of our business into our communications segment. In the
three-month period ended July 4, 1999, we recorded special charges of $3.7
million for write-downs of equipment held for sale and $1.0 million of
purchased in-process research projects in connection with the acquisition of
assets from Seattle Silicon.

   Other Income/(Expense), Net. Interest income represents interest earned on
cash and cash equivalent balances, all of which have a maturity of less than
ninety days. Interest expense is comprised primarily of interest on our senior
notes and amortization of deferred financing costs. We incur approximately
$26.6 million in interest coupon payments and $1.4 million in amortization of
deferred financing costs annually on our senior notes.

   Income Taxes. Our provision for income taxes was $0.3 million for the six
months ended July 2, 2000 compared to $0.5 million for the six months ended
July 4, 1999. Our tax provisions in 1999 and 2000 related to the foreign
jurisdictions in which we operate where profits have been or are expected to
be earned. Because of our overall loss position, we established a full
valuation allowance for the tax assets originating from current year losses
and we have not realized any benefit in the 2000 tax rate. We will continue to
evaluate the future utilization of the deferred tax assets on a quarterly
basis. In addition, changes in our share ownership may restrict our ability to
utilize our net operating loss carryforwards.

   Equity in Loss of Qualcore. Our equity in loss of Qualcore for the three
months ended July 2, 2000 primarily represents $0.4 million of goodwill
amortization associated with our 20% equity ownership interest in Qualcore.
Goodwill on the Qualcore investment is being amortized over a five-year
period.

EBITDA

   For the second quarter ended July 2, 2000 EBITDA was $12.1 million as
compared to $12.0 million for the corresponding period in 1999. For the six-
month periods ended July 2, 2000 and July 4, 1999, EBITDA was $21.6 million
and $21.4 million, respectively.

   EBITDA is presented because it is a widely accepted financial indicator of
a leveraged company's ability to service and/or incur indebtedness and because
management believes that EBITDA is a relevant measure of the Company's ability
to generate cash without regard to its capital structure or working capital
needs. EBITDA as presented should not be used as an alternative to operating
income or net cash provided/(used) for operating activities, each as measured
under generally accepted accounting principles, and may not be comparable to
similarly titled measures presented by other companies.

                                      11
<PAGE>

   EBITDA represents earnings (losses) from operations before interest income
and expense (including amortization of deferred financing costs), income
taxes, depreciation, amortization of goodwill, non-cash stock compensation
expenses, equity in loss of Qualcore and special charges. EBITDA is presented
because it is a widely accepted financial indicator of a leveraged company's
ability to service and/or incur indebtedness and because management believes
that EBITDA is a relevant measure of the Company's ability to generate cash
without regard to its capital structure or working capital needs. EBITDA as
presented should not be used as an alternative to operating income or net cash
provided/(used) for operating activities, each as measured under generally
accepted accounting principles, and may not be comparable to similarly titled
measures presented by other companies.

Liquidity and Capital Resources

   Our primary cash needs are debt service, working capital and capital
expenditures. We meet these needs with our operating cash flow, cash on hand
and available credit lines. As of July 2, 2000, we had cash and cash
equivalents of approximately $42.9 million. Additionally, we have a senior
secured credit facility from a commercial lender that provides for total
borrowings of up to $40.0 million, consisting of a three-year revolving credit
facility of up to $25.0 million and a five-year capital expenditure line of up
to $15.0 million which expire on December 30, 2001 and 2003, respectively. The
calculated availability under this credit facility was $34.9 million as of
July 2, 2000. Borrowings under the credit facility bear interest at a rate per
annum equal, at our option, to the commercial lender's stated prime rate or
the London Interbank Overnight Rate, commonly known as LIBOR, plus 2.0% (9.2%
at July 2, 2000) for the revolving credit facility and the commercial lender's
prime rate plus 1.0% (10.5% at July 2, 2000) or LIBOR plus 3.0% (10.2% at July
2, 2000) for the capital expenditure line. There were no borrowings under
either facility as of July 2, 2000.

   During the six months ended July 2, 2000, our operating activities used net
cash of $1.0 million, which was primarily attributable to our overall net loss
of $14.0 million, an increase in our inventories and a decrease in our
accounts payable, partially offset by non-cash items, including $21.1 million
of depreciation and amortization. During the six months ended July 4, 1999,
our operating activities provided net cash of $14.7 million which was
primarily attributable to an $8.3 million increase in other accrued and
noncurrent liabilities. In addition, our operating cash flow was improved by
the effect of non-cash items including $31.2 million of depreciation and
amortization, a write-down of assets held for disposal of $3.7 million and an
in-process research and development charge of $1.0 million, partially offset
by our $28.3 million net loss.

   During the six months ended July 2, 2000, our investing activities used
cash of $18.5 million consisting of $10.4 million of capital expenditures and
$8.1 million, including expenses, for the acquisition of a 20% equity
investment in Qualcore with an option to purchase the remaining 80% interest.
We accounted for this investment in Qualcore using the equity method. During
the six months ended July 4, 1999, our investing activities used cash of $10.6
million consisting of $4.7 million of capital expenditures and $5.9 million
for the acquisition of the assets of Seattle Silicon.

   During the six months ended July 2, 2000, cash provided from financing
activities totaled $1.6 million and related primarily to $2.1 million of
proceeds received from issuances of common stock which were offset by
principal payments under capital leases of $0.5 million. Cash used by
financing activities of $0.3 million in the first half of 1999 was from
principal payments under capital leases.

   We incurred substantial indebtedness in connection with our
recapitalization merger. We currently have $280.0 million in aggregate
principal amount of senior notes outstanding which are publicly traded and
subject us to the reporting requirements of the Securities Exchange Act of
1934. Our ability to make scheduled principal payments, or to pay the
interest, premium if any, or to refinance our indebtedness, including the
senior notes, or to fund capital and other expenditures will depend on our
future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory, and other factors
that are beyond our control. The agreement governing our senior notes contains
covenants that, among other things, limit our ability and the ability of our
subsidiaries to incur particular types of additional indebtedness, issue
particular types of

                                      12
<PAGE>

capital stock, pay dividends or distributions, make investments or other
payments, enter into transactions with affiliates, dispose of particular types
of assets, incur liens and engage in mergers and consolidations. The senior
notes will mature on March 1, 2005. Interest on the senior notes accrues at
the rate of 9.5% per annum and is payable semi-annually in arrears on March 1
and September 1, to holders of record on the immediately preceding February 15
and August 15, respectively.

   We have financed our cash requirements for working capital and capital
expenditures primarily through internally generated cash flows and existing
cash reserves. We intend to spend approximately $40.0 million in capital
expenditures in 2000, primarily for expansion of our sub-micron wafer
fabrication capacity in Idaho, of which $10.4 million had been spent as of
July 2, 2000. Based upon the current level of operations, our management
believes that cash flow from operations, available cash and available
borrowings under the credit facility will be adequate to meet our future
requirements for working capital, capital expenditures, and other expenditures
and scheduled interest payments on our indebtedness, including the senior
notes, for at least the next 12 months. We cannot assure you, however, that
the business will generate sufficient cash to enable us to service our
indebtedness, including the senior notes, or make anticipated capital and
other expenditures.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

 Interest Rate Risk

   The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's short-term investment portfolio and long-term debt
obligations. The Company does not use derivative financial investments in its
investment portfolio. The Company's primary investment objectives are to
preserve capital and maintain liquidity. These objectives are met by investing
in high quality credit issuances and limiting the amount of credit exposure to
any one company. The Company mitigates default risk by investing in only the
highest quality securities and monitoring the credit ratings of such
investments. The Company has no cash flow exposure due to rate changes for its
cash equivalents or the Notes as these instruments have fixed interest rates.

   The table below presents principal amounts and related average interest
rates by year of maturity for the Company's cash equivalents and debt
obligations as of July 2, 2000 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                          Fair
                                            2000      2005     Total     Value
                                           -------  --------  --------  --------
<S>                                        <C>      <C>       <C>       <C>
Cash Equivalents:
  Fixed rate.............................. $40,980  $    --   $ 40,980  $ 40,980
  Average interest rate...................    6.49%      --       6.49%      --
Long-Term Debt:
  Fixed rate..............................     --   $280,000  $280,000  $239,400
  Stated interest rate....................     --       9.50%     9.50%      --
</TABLE>

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

   The Company has been named as a defendant in a purported class action
lawsuit that was filed on January 23, 1998 in the U.S. District Court for the
Northern District of California. Certain executive officers of the Company are
also named as defendants. The plaintiff purports to represent a class of all
persons who purchased the Company's Common Stock between June 30, 1997 and
November 20, 1997 (the "Class Period"). The complaint alleges that the Company
and certain of its executive officers made false and misleading statements
regarding the Company that caused the market price of its Common Stock to be
"artificially inflated" during the Class Period. The complaint does not
specify the amount of damages sought. On March 24, 1999, the district court
granted ZiLOG's motion to dismiss and entered judgment in favor of all
defendants. On April 16,

                                      13
<PAGE>

1999, the plaintiffs filed their notice of appeal to the Ninth Circuit Court
of Appeals. The matter was fully briefed and argued to the Ninth Circuit of
Appeals on June 8, 2000. Based upon information presently known to management,
the Company is unable to determine the ultimate resolution of this lawsuit or
whether it will have a material adverse effect on the Company's financial
condition.

   The Company is a party to an insurance coverage lawsuit in the Superior
Court of the State of California in and for Santa Clara County filed on July
29, 1996, in which its former insurers, Pacific Indemnity Company, Federal
Insurance Company and Chubb & Son, Inc., claim that insurance coverage did not
exist for allegations made in two underlying lawsuits brought by employees of
the Company and their families who claimed that they suffered personal
injuries and discrimination because of alleged exposure to chemicals at
Zilog's manufacturing plant in Nampa, Idaho in 1993 and 1994. The insurers
seek a declaration that insurance coverage under the applicable policies did
not exist, and they seek reimbursement of attorneys' fees, costs and
settlement funds expended on the Company's behalf totaling approximately six
million, three hundred thousand dollars ($6,300,000) plus interest. Both the
insurers and the Company have each brought separate motions for summary
judgment or, in the alternative, motions for summary adjudication. All such
motions were denied by the Superior Court, and the Court of Appeals denied
each party's respective petition for review of each denial of their summary
judgment motions. The Company petitioned the California Supreme Court for
review of the denial of its motion for summary judgment. The California
Supreme Court denied the Company's petition for review without making a
decision on the merits of the dispute. No trial date has been set. Based upon
information presently known to management, the Company is unable to determine
the ultimate resolution of this lawsuit or whether it will have a material
adverse effect on the Company's financial condition.

   Four parties have notified ZiLOG that it may be infringing certain patents
and other intellectual property rights. In the event ZiLOG determines that
such notices may involve meritorious claims, ZiLOG may seek a license. Based
on industry practice, ZiLOG believes that in most cases any necessary licenses
or other rights could be obtained on commercially reasonable terms. However,
no assurance can be given that licenses could be obtained on acceptable terms
or that litigation will not occur. The failure to obtain necessary licenses or
other rights or the advent of litigation arising out of such claims could have
a material adverse effect on ZiLOG.

   ZiLOG is participating in other litigation and responding to claims arising
in the ordinary course of business. ZiLOG intends to defend itself vigorously
in these matters. ZiLOG's management believes that it is unlikely that the
outcome of these matters will have a material adverse effect on the Company,
although there can be no assurance in this regard.

Item 6. Exhibits and Reports on Form 8-K

   a) The following exhibits are filed herewith:

     Exhibit 27  Financial Data Schedule

   b) Reports on Form 8-K:

     None.

                                      14
<PAGE>

                                  ZiLOG, INC.

                                   SIGNATURES

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

                                          ZiLOG, INC.

                                                    /s/ Gary Patten
                                          _____________________________________
                                                        Gary Patten
                                                 Senior Vice President and
                                                  Chief Financial Officer
                                              (Principal Financial Officer and
                                                  Duly Authorized Officer)

Date: July 31, 2000

                                       15