Document:

<PAGE>

                                                                   EXHIBIT 10.27

   ***PORTIONS OF THIS EXHIBIT HAVE BEEN DELETED PURSUANT TO A REQUEST FOR
      CONFIDENTIAL TREATMENT. THE CONFIDENTIAL PORTIONS HAVE BEEN FILED
      SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                            WAFER FOUNDRY AGREEMENT
                            -----------------------

     This Agreement is made on this 29th day of June, 2000 ("Effective Date") by
and between POWER INTEGRATIONS, INC., a corporation duly organized and existing
under the laws of the State of Delaware, U.S.A., having its principal place of
business at 477 North Mathilda Avenue, Sunnyvale, California 94086 ("PI"), and

MATSUSHITA ELECTRONICS CORPORATION, a corporation duly organized under the laws
of Japan, having its principal place of business at 1-1 Saiwai-cho, Takatsuki-
shi, Osaka-fu, 569 Japan ("MEC"), and

MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD., a corporation duly organized under the
laws of Japan, acting through Semiconductor Marketing & Sales Office for
Overseas having its principal place of business at Twin 21 National Tower, 1-61
Shiromi 2 Chome, Chuo-ku, Osaka 540-0001 Japan ("MEI"), (MEC and MEI shall be
hereby regarded as single party when indicated as "MEC/MEI").

                                   RECITALS
                                   --------

     A.   PI is the owner and developer of certain integrated circuit process
technologies required to manufacture high voltage integrated circuits.

     B.   PI has no wafer fabrication facility and desires to obtain a cost
competitive foundry to manufacture wafers for PI, in order to provide a source
for the wafers PI requires, and to assure a long term supply of wafers.

     C.   MEC/MEI has wafer fabrication facilities in Japan and desires full
utilization and efficient operation of its wafer fabrication facilities.

     D.   MEC/MEI and PI have established a fruitful business relationship.

     E.   MEC and PI intend to enter into a Technology License Agreement (the
"License Agreement") at the same time that they enter into this Agreement.

                                   AGREEMENT

     PI and MEC/MEI, intending to be legally bound, hereby agree as follows:
<PAGE>

                                   ARTICLE I
                                   ---------

                                  DEFINITIONS
                                  -----------

     For the purpose of this Agreement, all capitalized terms not otherwise
defined in this Agreement, including its exhibits, shall have the meanings set
forth in the License Agreement, and the following terms have the following
meanings:

     1.1  "Fab" means any of the existing or future wafer fabrication facilities
in Japan or the United States of any company in the Matsushita Group.

     1.2  "Wafer(s)" means wafer(s) for Products which MEC fabricates under this
Agreement for sale to PI through MEI.

     1.3  "Prior Wafer Foundry Agreement" means the Wafer Foundry Agreement
entered into among MEC, MEI and PI as of June 29, 1990, as amended June 29,
1995.

                                  ARTICLE II
                                  ----------

             MEC DEVELOPMENT ASSISTANCE AND WAFER FOUNDRY SERVICE
             ----------------------------------------------------

     2.1  Information Transfer.  Information relating to the Baseline Process,
          --------------------
Products and Updates, if any, shall continue to be transferred, pursuant to the
provisions of Article II of the License Agreement, from PI to MEC/MEI and from
MEC/MEI to PI for purposes of prototype development fabrication and production
fabrication by MEC/MEI at the Fab pursuant to the terms of this Article II.

     2.2  5-Inch Wafer Manufacturing.
          --------------------------

          For PI Products that will be second sourced by MEC, the mask set and
          sample wafer costs will be shared equally between MEC and PI.

     2.3  Updates of Baseline Process.
          ---------------------------

          (a) MEC/MEI shall use its best efforts to bring-up Updates of Baseline
Process, if any, at the Fab at which PI Products then are made in order to
supply PI with prototype Wafers and production Wafers as contemplated by this
Agreement.

          (b) The parties agree that each party shall pay all of its own
expenses incurred in order to perform its obligations under Section 2.3(a).

          (c) During the term of this Agreement, the allocation of the costs and
expenses incurred by MEC, after consultation with PI and if requested by PI, for
(i) improvement of the existing manufacturing processes for PI Products; or (ii)
establishment of a new manufacturing process, and/or (iii) transfer of
manufacturing process from one Fab to another Fab, whichever is necessary to
diligently comply with this Agreement shall be negotiated in good faith between
the parties hereto.

     2.4  Bring-Up of New Products, etc.
          ------------------------------
<PAGE>

          (a) Throughout the term of this Agreement, MEC/MEI shall make its best
effort to commit human, capital and financial resources necessary and reasonably
calculated to permit it to timely fulfill all of its obligations under this
Agreement, including, but not limited to, appropriate capital expenditures and
allocation of capacity, facilities and experienced personnel for an
engineering/manufacturing team to ensure an expeditious Product technology
transfer; an expeditious bring-up of new Products including Updates of Products
at the Fab; and a smooth production build-up beyond the period of prototype
development of such Products.

          (b) During the period of prototype production development and sample
Wafer production development for new Products including Updates of Products, PI
shall bear the cost of mask making for all PI Products and pay for all Wafers
requested by and delivered to PI.

          (c) During the period of prototype production development and sample
Wafer production development for new Products including Updates of Products,
MEC/MEI shall bear any and all the costs of Wafers used or disposed of by
MEC/MEI for the production or development.

     2.5  Qualification of a New Fab.  A Fab not qualified previously shall be
          --------------------------
qualified by PI for the purpose of this Agreement in the event three runs of
wafers for the qualifying Product at that Fab have passed the evaluation test of
PI then in effect.  MEC/MEI shall bear all costs of qualifying any new Fab,
including the cost of all Wafers used or disposed of by MEC/MEI or PI during
such qualification.

                                  ARTICLE III
                                  -----------

                                  WAFER SUPPLY
                                  ------------

     3.1  Wafer Quantities.
          ----------------

          (a) During the term of this Agreement, MEC/MEI shall make available
for delivery to PI, from the production capacity of the Fab, not less than the
quantities of tested wafers as are set forth in Exhibit A ("Wafer Pricing and
Capacity").  The terms "Standard Process" and "DC Process" shall mean the
definitions given for those terms in Appendix A ("Baseline Process") of the
License Agreement.

          (b) At either party's request, the parties shall negotiate in good
faith the terms and conditions for MEC/MEI to supply to PI, and for PI to
purchase from MEC/MEI, more than the minimum quantities of wafers agreed between
the parties.

          (c) PI shall order Products in lots, each of which contains the number
of Wafers as set forth in Exhibit A to this Agreement ("Wafer Pricing and
Capacity").

     3.2  Prices.

          (a) The purchase price payable by PI to MEC/MEI for the quantities of
wafers set forth in Exhibit A will be as set forth in that Exhibit A.

          (b) Wafers shall be tested in accordance with test procedures as
agreed by MEC and PI.  All Wafers shall be FOB point of shipment by MEC/MEI.

          (c) Any gain or loss due to the exchange rate between Japanese Yen and
United States Dollars will be shared equally by PI and MEC per Exhibit B
("Exchange Rate") at the time the Wafer
<PAGE>

order is placed.

     3.3  Most Favored Customer.  The prices of Wafers purchased by PI under
          ---------------------
this Agreement shall be the lowest price charged by MEC/MEI to any foundry
customers for similar products being purchased in similar volumes under similar
terms and conditions as this Agreement and during the term hereof.  Should
MEC/MEI sell or agree to sell the same or similar products at lower price under
more favorable terms and conditions or at the same price under more favorable
terms and conditions, MEC/MEI will notify PI in writing within thirty (30) days
of the effective date of such sale or agreement and shall automatically extend
to PI as of such effective date the benefit of such more favorable prices or
terms and conditions.

     3.4  Leadtimes.  After the bring-up of the baseline process:
          ---------

          (a) MEC/MEI will complete mask sets for any PI Product within seven
(7) working days after the receipt by MEC/MEI of a final database tape for such
PI Product. PI will bear all the costs of mask tooling.

          (b) MEC/MEI will ship to PI prototype Wafers of any PI Products within
forty (40) working days after availability of mask sets for such PI Product.
MEC/MEI and PI will negotiate in good faith the possibility of making available
to PI fast-turn lots for certain prototype Wafers.  PI will pay for those
prototype wafers.

          (c) MEC/MEI will ship the first (1st) shipment of the Wafers ordered
by PI for that month no later than forty (40) working days after the start of
the production as per PI's purchase order for such PI Products, unless PI's
purchase order specifies a later delivery date.  The rest of the ordered Wafers
for that month will be shipped so that PI receives all such Wafers, in equal
weekly quantities to the extent practicably possible, within forty (40) working
days after the first (1st) shipment.  MEC/MEI shall use its reasonable and best
efforts to improve actual leadtime for the production of Wafers.

          (d) In the event the production of new Products (including Updates of
the Products) requires more complicated manufacturing process to MEC, including
the case, but not limited to, where the increase of the number of masks used for
such production, or the manufacturing processes of the Products are transferred
from the present Fab to another qualified Fab, the leadtime stated in Section
3.4(c) may be changed according to such different conditions if both parties
agree to such change.

     3.5  Order Forecasts.  Once PI Product enters volume production, MEC/MEI
          ---------------
shall provide PI sufficient information concerning wafer lot sizes and cycle
times to enable PI to plan its purchase orders.  PI agrees to place monthly
orders/releases for tested Wafers with MEC/MEI.  PI shall issue purchase orders
and rolling six (6) month forecasts on a monthly basis as follows:

          (a) PI shall deliver an initial binding purchase order covering four
(4) months of deliveries of tested Wafers and a nonbinding forecast[s] for same
for the following two (2) months.

          (b) In order to allow MEC the smooth production of the Wafers, by the
twenty-fifth (25th) day of each month during the term of this Agreement, PI
shall deliver a purchase order and updated forecast, specifying (i) its firm,
noncancellable order for Wafer starts for the next four (4) months ahead; the
first month of which is specified by product, and the next three months of which
are forecast by product, against which the numbers of Wafers (but not
necessarily the product mix) stated in PI's actual
<PAGE>

orders shall be the same, and (ii) the quantities of Wafers to be ordered by PI
for the months five (5) and six (6) months ahead, against which PI's actual
orders will be within the range of plus or minus thirty percent (30%).

     3.6  Acceptance.  All Wafers delivered to PI by MEC/MEI hereunder shall be
          ----------
subject to the inspection and acceptance criteria being used at the time of this
Agreement or the ones to be mutually agreed upon by the parties hereto during
the term of this Agreement, which basically consists of PCM test and visual
inspection criteria.  In the event any lot or Wafers is found to fail such
applicable inspection and acceptance criteria, PI shall have the right to reject
such lot or Wafers by giving notice of such effect within sixty (60) days after
PI receives them and return them at MEC/MEI's cost and risk after obtaining a
return authorization number from MEC/MEI in writing.  PI shall provide MEC/MEI
with a report specifying the reason for such rejection.  MEC/MEI shall provide
either a refund, or a replacement lot of the Wafers within forty-five (45) days
after the receipt thereof pursuant to the mutual consent of the parties.  All
rejected products may be subject to inspection by MEC/MEI to confirm that they
are defective.  Any product not rejected by PI within sixty (60) days after
receipt by PI shall be deemed accepted.

     3.7  Warranty.  EXCEPT AS EXPRESSLY SET FORTH IN SECTION 3.7 HEREOF,
          --------
MEC/MEI MAKES AND PI RECEIVES NO WARRANTIES OR CONDITIONS ON THE WAFERS, EXPRESS
OR IMPLIED, STATUTORY OR OTHERWISE, AND MEC/MEI SPECIFICALLY DISCLAIMS ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.  MEC/MEI
AGREES TO KEEP RECORDS FOR THREE (3) YEARS OF EACH PROCESSED LOT MANUFACTURED
AND SUMMARIES OF PROCESS MONITORS FOR ONE (1) YEAR FOR WARRANTY TRACEABILITY.
THE FOREGOING IS PI'S SOLE REMEDY FOR BREACH OF WARRANTY BY MEC/MEI WITH RESPECT
TO ANY WAFERS SUPPLIED BY MEC/MEI.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, IN THE EVENT ANY CUSTOMER OF PI CLAIMS ANY INCONVENIENCE IN
ANY PRODUCTS RESULTING FROM MEC'S DIFFUSION OF WAFERS AND PI DECIDES TO DEAL
WITH SUCH INCONVENIENCE, MEC SHALL GIVE NECESSARY SUPPORT TO PI UPON REQUEST.

     3.8  Terms and Conditions.  To the extent not inconsistent with the
          --------------------
provisions of this Agreement, the terms and conditions of PI's standard purchase
order shall apply to MEC/MEI's provision of goods and services to PI under this
Agreement.

     3.9  Payment Terms.  Payment for the Wafers shall be by telephonic transfer
          -------------
within thirty (30) days after bill of lading date and secured by a standby
letter of credit to be opened at a first class bank selected by PI and
reasonably acceptable to MEC/MEI.  MEC/MEI agrees to negotiate terms or
alternate forms of payment as proposed by PI.

     3.10  Title and Transportation.  All shipments to PI will be made F.O.B.
           ------------------------
point of shipment.  Title and risk of loss and damage will pass to PI upon
delivery of Products to the carrier at the shipping point in good conditions.
Unless written instructions from PI specify the method of shipment, MEC/MEI will
use the least expensive means of shipment which will permit on time delivery of
the products to PI.
<PAGE>

                                  ARTICLE IV
                                  ----------

                                EXPORT CONTROL
                                --------------

     4.1  Technical Data.  Each party hereby assures the others that it will
          --------------
not, without prior authorization, if required, of the Office of Export
Administration, U.S. Department of Commerce, 14th and Constitution Ave., N.W.,
Washington, D.C. 20230, export or re-export (as defined in Section 779.1(b)-(c)
of the Export Administration Regulations - "Regulations" - and any amendments
thereto) the technical data covered thereby.  PI shall inform MEC in writing of
the technical data restricted under such Regulations as well as its restricted
country group upon PI's disclosure or provision of technical information.

     4.2  Other Restrictions.  In exercising its rights under this Agreement,
          ------------------
each party agrees to comply strictly and fully with all export controls imposed
on Wafers, by any country or organization or nations within whose jurisdiction
each party operates or does business.  Each party agrees not to export or permit
export of Wafers or any related technical data or complying with the export
control laws in the relevant jurisdiction.

     4.3  Each party shall not export the Product to any country designated as
"Countries against which the sanctions should be taken" by certain resolutions
of the Security Council of the United Nations regarding the sanctions against
certain countries, as long as such resolutions remain valid and effective.  For
purposes of this Agreement, any re-export in violation of such resolutions by a
customer of either MEC or PI will not be considered to be an export in violation
of such resolutions by MEC or PI, as the case may be, so long as MEC or PI, as
the case may be, did not knowingly participate in such re-export.

     4.4  During and after the term of this Agreement, to the extent the same
practically is within its control, each party shall not sell, lease or otherwise
dispose of, directly or indirectly, any Product to customers whom such party
knows intend to make use of the Product for Military Purposes (defined
hereinbelow).  For the purpose of this Agreement, "Military Purposes" means the
design, development, manufacture or use of any weapons, including without
limitation nuclear weapons, biological weapons, chemical weapons and missiles.

     4.5  In the event either party violates the provisions of this Article IV,
the non-violating party shall have the right to require reasonable written
assurances from the violating party that such violation, whether or not past
incidents of violation can be cured, will not continue in the future, and if the
violating party does not deliver such assurances to the non-violating party
promptly after its request, the non-violating party may suspend the performance
of its obligations under this Agreement until such time as it receives such
assurances, without any prejudice to the rights and remedies which the non-
violating party may have under this Agreement.  In the event that such assurance
is not delivered to the non-violating party within three (3) months after
request, the non-violating party shall the right to terminate forthwith, without
any prejudice to the rights and remedies which it may have hereunder, this
Agreement, by giving a written notice to the violating party.
<PAGE>

                                   ARTICLE V
                                   ---------

                          EXPIRATION AND TERMINATION
                          --------------------------

     5.1  Term of Agreement. This Agreement shall become effective as of the
          -----------------
Effective Date and shall continue in full force and effect, unless sooner
terminated as elsewhere provided in this Agreement, until the fifth (5th)
anniversary of the Effective Date, at which time it shall expire.

     5.2  Renewal.  If this Agreement has not earlier terminated, the parties
          -------
agree to negotiate in good faith, beginning on the fourth (4th) anniversary of
the date of this Agreement, for the continuation on mutually agreeable terms and
conditions of this Agreement.

     5.3  Termination.
          -----------

          (a) Except as otherwise set forth in this section, if either party
shall at any time default, without any material causative fault on the part of
the other party, by failing to substantially perform any material provision of
this Agreement, and such default shall not be cured within sixty (60) days after
written notice to it from the other party specifying the nature of the default,
the non-defaulting party shall have the right to terminate this Agreement at any
time thereafter by giving written notice of termination to the other party, and
upon the giving of such notice of termination, this Agreement shall terminate
immediately.  The party receiving notice shall have the right to cure any such
default up to the date of termination.

          (b) Each party shall have the right to terminate this Agreement by
giving written notice of termination to the other at any time upon or after, (i)
the filing by the other party of a petition in bankruptcy or insolvency, or (ii)
upon or after the filing of any voluntary or involuntary petition or answer
seeking reorganization, readjustment or arrangement of the other party's
business under any law relating to bankruptcy or insolvency, or (iii) upon or
after the appointment of a receiver for all or substantially all of its
property, or (iv) upon or after the making by the other party of any assignment
or attempted assignment for the benefit of creditors, or (v) upon or after the
institution of any proceedings for the liquidation or winding up of the other
party's business or for the termination of its corporate charter; and this
Agreement shall terminate automatically on the thirtieth (30th) day after such
notice of termination is given, without further notice, demand or opportunity to
cure.

     5.4  Consequences of Expiration.  Upon expiration of this Agreement, all
          --------------------------
rights and obligations of the parties hereunder shall cease and determine,
except for rights and obligations which, by the terms of this Agreement,
continue after the expiration or earlier termination of this Agreement and
except that the expiration of this Agreement shall not release either party from
any of its obligations accrued hereunder prior to the time expiration becomes
effective.

     5.5  Consequences of Termination.  Upon termination of this Agreement, all
          ---------------------------
rights and obligations of the parties hereunder shall cease and determine,
except for rights and obligations which, by the terms of this Agreement,
continue after the expiration or earlier termination of this Agreement and
except that no termination of this Agreement shall release either party from any
of its obligations accrued hereunder prior to the time such termination becomes
effective.
<PAGE>

                                  ARTICLE VI
                                  ----------

                     MISCELLANEOUS AND GENERAL PROVISIONS
                     ------------------------------------

     6.1  Publicity.  Neither party shall except as, to the extent, and in the
          ---------
manner, required by law or regulation, disclose to any third party any of the
specific terms or conditions of this Agreement, without prior written approval
by the other party.

     6.2  Successors and Assigns; No Assignment.
          -------------------------------------

          (a) This Agreement, and rights and obligations herein, shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that except as set forth below neither party
shall assign this Agreement or any of its rights hereunder without the prior
written consent of the other party.

          (b) Notwithstanding any other provision of Agreement, PI may without
the prior consent of MEC/MEI assign all of its rights under this Agreement to a
purchaser of all or substantially all of PI's stock or assets or to a third
party participating in a merger or other corporate reorganization in which PI is
a constituent corporation.  Within 180 days after such assignment, if the
assignee is (i) a competitor of MEC, and (ii) of comparable size to MEC or
larger, then either party may elect to have this Agreement be deemed to have
expired and to have the provisions of Section 5.4 take effect 180 days after
written notice to the other party of such election.  Any terminations by MEC/MEI
in this situation will become effective after a reasonable but significant
transition period for PI to bring up another supplier of wafers.

          (c) As a condition of any assignment of this Agreement or any of the
rights granted hereunder, any successor shall expressly assume in writing the
performance of all terms and conditions of this Agreement to be performed by the
assigning party including such party's obligations hereunder with respect to the
protection of Confidential Information.

     6.3  No Rights to Marks, Etc.  Nothing contained in this Agreement shall
          -----------------------
confer any rights to use in advertising, publicity, or otherwise, any
trademarks, trade names, or any contraction, abbreviation or simulation thereof,
of either party, provided such restriction shall not apply to identification
numbers and descriptions of devices and software which are the subject matter of
this Agreement.

     6.4  No Joint Venture.  Nothing contained in this Agreement shall be
          ----------------
construed as:

          (a) creating any partnership, joint venture or other similar
relationship between PI and MEC/MEI; or

          (b) obligating either party to commercially produce or to continue to
commercially produce, any solid state device of any type whatsoever, or any
parts or components thereof except otherwise explicitly provided in this
Agreement.

     6.5  Force Majeure.  Anything contained in this Agreement to the contrary
          -------------
notwithstanding, the obligations of the parties hereto shall be subject to all
laws, both present and future, of any government having jurisdiction over the
parties hereto, and to orders, regulations, directions or requests of any such
government, or any department, agency or corporation thereof, and to war, acts
of public enemies, strikes
<PAGE>

or other labor disturbances, fires, floods, earthquakes, acts of God, or causes
of like or different kind beyond the control of the parties and the parties
hereto shall be excused from any failure to perform any obligation hereunder to
the extent such failure is caused by any such law, order, regulation, direction,
request or contingency, for the period such cause endures. Notwithstanding the
foregoing, in the event any such cause delays either party's performance of any
of its material obligations under this Agreement, the other party may suspend
its performance hereunder for the period such delay continues and if any such
cause renders impossible or delays for a period of more than six months either
party's performance of any of its material obligations under this Agreement, the
other party may terminate this Agreement pursuant to Section 5.3, as if a
material default had occurred hereunder and shall have the rights and remedies
specified in Article V. The party whose performance is delayed on account of any
such cause shall promptly notify the other party, and shall exert its best
efforts to recommence performance as soon as possible.

     6.6  Entire Agreement.  This Agreement and the  License Agreement set forth
          ----------------
the entire agreement and understanding between the parties as to the subject
matter hereof and thereof and supersede all prior discussions, negotiations and
agreements, written, oral or implied, between them in respect of the subject
matter of this Agreement.  None of the parties shall be bound by any conditions,
definitions, warranties, understandings or representations with respect to such
subject matter other than as expressly provided herein or therein or as duly set
forth on or subsequent to the date hereof or thereof in writing and signed by a
proper and duly authorized officer or representative of the party to be bound
thereby.

     6.7  Remedies.  Upon the breach by any party to this Agreement of any
          --------
provision of this Agreement, the non-breaching party shall have the right to
pursue all available remedies at law or in equity it may elect, in order to
obtain the benefits to have been provided pursuant to this Agreement, or to
obtain adequate recourse or compensation in the event the same are not so
provided.

     6.8  Absence of Waivers.  Failure or delay on the part of a party hereto to
          ------------------
enforce any of the provisions of this Agreement or any rights with respect
thereto, or to exercise any election provided for herein shall in no way be
considered to be a waiver of such provisions, rights or elections or in any way
affect the validity of this Agreement.  Failure or delay on the part of a party
to exercise any of the said provisions, rights or elections shall not preclude
or prejudice such party from later enforcing or exercising the same or any other
provisions, rights or elections which it may have under this Agreement.

     6.9  Notices.  All notices shall be given in writing either by personal
delivery to the party to whom notice is given, or by a commercial overnight
courier service, or by registered or certified mail, return receipt requested.
The date upon which any such notice is so personally delivered, the date of
confirmation of courier delivery, or if the notice is given by registered or
certified mail the date of the return receipt, shall be deemed to be the date of
such notice, irrespective of the date appearing therein.

     If to PI:      POWER INTEGRATIONS, INC.
                    477 N. Mathilda Ave.
                    Sunnyvale, California 94086
                    Attn: President

     If to MEC:     MATSUSHITA ELECTRONICS CORPORATION
                    1 Kotariyakemachi, Nagaokakyo, Kyoto
                    617 JAPAN
                    Attn: Director, Sales & Marketing Division
<PAGE>

     If to MEI:     MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
                    Semiconductor Marketing & Sales Office for Overseas
                    Twin 21 National Tower
                    1-61 Shiromi 2-chome, Chuo-ku
                    Osaka 540-0111 JAPAN

     6.10  Headings.  All paragraph captions are for reference only and shall
not be considered in construing this Agreement.

     6.11  Severability.  Any provision or provisions of this Agreement which in
any way contravenes a law of any state or country in which the Agreement is in
effect shall, in such state or country and to the extent of such contravention
of local law, be deemed separable and shall not affect any other provision or
provisions of this Agreement.

     6.12  Governing Law.  This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed in accordance with, the
laws of the United States and the State of California as applied to agreements
entered into and to be performed entirely within California between California
residents without regard to conflict of laws principles.

     6.13  Arbitration.  Disputes arising out of or in connection with the
validity, interpretation, application, or enforcement of this Agreement or the
performance of either party will be discussed and settled amicably by good faith
negotiations between PI and MEC/MEI.  Any such disputes which cannot be settled
amicably and by such good faith negotiations within sixty (60) days after
written notice by one party to the other of such inability to amicably settle
shall thereafter be settled by binding arbitration.  The arbitration shall be
conducted in English pursuant to the Rules of Arbitration of the International
Chamber of Commerce, which shall be held in San Francisco, California.  Any
judgement or award rendered in these arbitrations may be entered and enforced by
any court of competent jurisdiction and may include, when appropriate, equitable
relief.

     6.14  Time of Essence.  Time is of the essence in the performance of each
and every obligation of the parties under this Agreement.

     6.15  Originals.  This Agreement shall be executed in triplicate, each of
which shall be an original, and shall be kept by PI, MEC and MEI, respectively.

     6.16 Prior Wafer Foundry Agreement. Purchases undertaken under the Prior
Wafer Foundry Agreement shall be governed by the Prior Wafer Foundry Agreement
even though those purchases are to be fulfilled after the expiration or
termination of that agreement and during the term of this Agreement.
<PAGE>

     IN WITNESS WHEREOF, PI, MEC and MEI have caused this Agreement to be
executed in their names by the duly authorized officers or representatives as of
the date first above written.

POWER INTEGRATIONS, INC.            MATSUSHITA ELECTRONICS
                                    CORPORATION

By: /s/                             By: /s/

Name:______________________         Name:__________________________________

                                    MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

                                    By: /s/

                                    Name:__________________________________
<PAGE>

                                   EXHIBIT A

                           WAFER PRICING AND CAPACITY

                                   5" WAFERS

<TABLE>
<CAPTION>
<S>                   <C>         <C>         <C>           <C>           <C>
Agreement Year         2000-2001   2001-2002     2002-2003     2003-2004     2004-2005
July 1-June 30
--------------------------------------------------------------------------------------
***                      ***         ***          ***           ***           ***
--------------------------------------------------------------------------------------
***                      ***         ***          ***           ***           ***
--------------------------------------------------------------------------------------
***                      ***         ***          ***           ***           ***
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</TABLE>

  Lot Size shall be *** Wafers.

  *  The parties agree that for the term ***to ***, more than *** capacity will
     be negotiated in good faith.

  MEC agrees to provide at least the minimum capacity of *** of the previous
     year's wafer purchases to provide for PI's future growth.

  ***  IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST
     FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND
     EXCHANGE COMMISSION.
<PAGE>

                                   EXHIBIT B

                                 EXCHANGE RATE

Base exchange rate ("F/X_BASE") will be set at ***

A new effective F/X_RATE is only established at the time of placing a purchase
order for WAFERSs if the Previous Month's Average daily exchange rate is equal
to or greater than *** from the current F/X_RATE.  The new F/X_RATE will be set
to the Previous Month's Average exchange rate and will remain in effect for at
least the month it was established.

The actual WAFERS PURCHASE_PRICE used at the time of order will be calculated by
the following formula:

Calculation Example
-------------------

Production WAFERS BASE_PRICE = ***

F/X_BASE = ***

Initial F/X_RATE = ***
     PURCHASE_PRICE =
          ***

     Examples:

       1)  Nominal F/X Rate Example: F/X_RATE = ***:

           PURCHASE_PRICE = ***

       2)  Higher F/X Rate Example: New F/X_RATE = ***:

           PURCHASE_PRICE = ***

       3)  Lower F/X Rate Example: New F/X_RATE = ***:

           PURCHASE_PRICE = ***

  ***  IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST
     FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND
     EXCHANGE COMMISSION.<PAGE>

                                                                   EXHIBIT 10.28

***  PORTIONS OF THIS EXHIBIT HAVE BEEN DELETED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.  THE CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.

                         TECHNOLOGY LICENSE AGREEMENT
                         ----------------------------

     This Technology License Agreement ("Agreement") is made on this 29th day of
June, 2000 ("Effective Date") by and between POWER INTEGRATIONS, INC., a
corporation duly organized and existing under the laws of the State of Delaware,
U.S.A., having its principal place of business at 477 North Mathilda Avenue,
Sunnyvale, California 94086 ("PI"), and

     MATSUSHITA ELECTRONICS CORPORATION, a corporation duly organized and
existing under the laws of Japan, by and through its Semiconductor Company
having its principal place of business at 1 Kotariyakemachi, Nagaokakyo, Kyoto,
Japan ("MEC").

                                   RECITALS
                                   --------

     A.   PI is the owner and developer of certain integrated circuit process
technologies required to manufacture high voltage integrated circuits.

     B.   PI has no wafer fabrication facility and desires to obtain a cost
competitive foundry to manufacture wafers for PI, in order to provide a source
for the wafers PI requires, and to assure a long term supply of wafers.

     C.   MEC has wafer fabrication facilities in Japan and elsewhere and
desires full utilization and efficient operation of its wafer fabrication
facilities.

     D.   MEC and PI desire to enhance the types of product available for sale
by each of them through complementary and cooperative product development
activity.

     E.   PI and MEC desire that PI license MEC to manufacture wafers for
certain integrated circuits, designed by either PI or MEC, using PI process
technology, for sale to PI and for sale by MEC as finished products in certain
geographic markets on the terms set forth in this Agreement.

                                   AGREEMENT
                                   ---------

     PI and MEC, intending to be legally bound, hereby agree as follows:

                                   ARTICLE I
                                   ---------

                                  DEFINITIONS
                                  -----------

     For the purposes of this Agreement, the following terms shall have the
following meanings:

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                                       1
<PAGE>

     1.1  "Asian Territory" means the People's Republic of China, Republic of
Korea, Democratic People's Republic of Korea, Republic of China, Hong Kong,
Mongolia, Philippines, Maldives, Malaysia, Singapore, Indonesia, Thailand,
Vietnam, Laos, Kamp, Myanmar (Burma), Nepal, Bhutan, India, Pakistan,
Afghanistan, Bangladesh, Srilanka, Brunei, and former Soviet Union.

     1.2  "Asian Company" means a corporation organized and existing under the
laws of any country in the Asian Territory and operating in such country.

     1.3  "Baseline Process" means (a) the specific n-channel power technology
(nominally 400V) of PI and (b) extensions of the foregoing to higher voltages,
that is more fully described in Appendix A attached to this Agreement, and does
not include PI's p-channel process technology and (c) PI's technology, developed
during the term of the Agreement, necessary to manufacture high voltage n-
channel devices with MOS structure including, but not limited to, MOSFET, IGBT
and MCT.  Reference to the Baseline Process covers the process, manufacturing
method and device structures relevant to (a), (b) and (c) above.

     1.4  "Confidential Information" means information relating to the subject
matter of this Agreement which is regarded as confidential or proprietary by one
party or the other; information received as a consequence of the rendering or
receiving of technical assistance under this Agreement and/or the Prior License
Agreement; information transferred during meetings between the parties relating
to this Agreement and/or the Prior License Agreement which is owned or
controlled by either party and which relates to its past, present or future
activities with respect to the subject matter of this Agreement if such
information is disclosed by one of the parties to the other party in written,
graphic, model or other tangible form or in the form of a computer program or in
a machine readable medium or any derivation thereof and is designated in writing
as confidential by an appropriate legend, together with the name of the party so
disclosing it, or, if such information is disclosed orally, which is identified
at the time of oral disclosure as confidential and which is reduced to written,
graphic, model, or other tangible form, marked as confidential and delivered by
the disclosing party within thirty (30) days after such oral disclosure.

     1.5  "Japanese Company" means a corporation organized and existing under
the laws of Japan and operating in Japan, other than a Subsidiary of a
corporation organized and existing under the laws of any other country.

     1.6  "Mask Work" and "Semiconductor Chip Product" are defined as those
terms are defined in Section 901 of the Semiconductor Chip Protection Act, Title
17, United States Code.

     1.7  "Matsushita Group" means MEC, MEI and their respective wholly owned
subsidiaries and their respective subsidiaries in which MEC or MEI owns,
directly or indirectly, more than fifty percent (50%) of the stock interest, or
the maximum percentage of the stock interest that a foreign investor may own, if
equal to or less than fifty percent (50%), pursuant to local laws and
regulations of any country, as of the Effective Date. (Further, from time to
time during the term of the Agreement, the definition of "Matsushita Group"
shall be extended to include certain corporations or entities, based upon the
request of MEC and the written approval by PI.) It is explicitly understood by
the parties that Matsushita Electric Works ("MEW") and all of its subsidiaries,
in which MEW owns, directly or indirectly, more than fifty percent (50%) of the
stock interest, or the maximum percentage of the stock interest that a foreign

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                                       2
<PAGE>

investor may own, if equal to or less than fifty percent (50%), pursuant to
local laws and regulations of any country, as of the Effective Date, shall be
included in the definition of "Matsushita Group".

     1.8   "MEC Product" means any and every Semiconductor Chip Product designed
and released to production by MEC prior to and during the term of this
Agreement, incorporating or utilizing at least one of (i) the Baseline Process;
(ii) any Update to the Baseline Process made by PI or MEC; and (iii) any PI
Patents; provided, however, that any MEC derivative of a PI Product will be
deemed to be a MEC Product only if it is "substantially different in
functionality" (as defined below) from the PI Product from which it was derived.

     1.9   "PI Product" means any and every Semiconductor Chip Product designed
and released to production by PI prior to and during the term of this Agreement,
utilizing at least one of (i) the Baseline Process; (ii) any Update to the
Baseline Process made by PI or MEC; and (iii) any PI Patents; provided, however,
that any PI derivative of a MEC Product will be deemed to be a PI Product only
if it is "substantially different in functionality" (as defined below) from the
MEC Product from which it was derived.

     1.10  "Substantially different in functionality" means that at least 50% of
the functional blocks of the derivative circuit are different from the
functional blocks of the circuit (the "original circuit") from which the
derivative circuit is derived; provided, however, that derivative circuits with
only some or all of the following changes will be deemed not to be substantially
different in functionality from the original circuits from which they were
derived: changes in values of data sheet parameters such as breakdown voltage,
RDSON, minimum pulsewidth, dynamic current range, frequency, and current limit;
the addition or deletion of features such as latched shutdown and auto restart;
and/or making parameters such as frequency or current limit externally
programmable.

     1.11  "Product" without further qualification means, collectively, PI
Product and/or MEC Product.

     1.12  "Restricted Product" means any Product covered by the Restricted
Patents.

     1.13  "Net Sales" shall have the meaning provided in Section 5.3 below.

     1.14  (a) "Patents" means letters patent, utility models, rights and
privileges to or under letters patent and utility models in existence prior to
the expiration or earlier termination of this Agreement, to the extent they
relate to the Baseline Process or the design or manufacture of Products made on
the Baseline Process or any Updates to the Baseline Process. "Patents" also
means such letters patent, utility models, rights and privileges to or under
letters patent and utility models that come into existence after the expiration
or earlier termination of this Agreement if the same (i) issue on patent
applications filed before the expiration or earlier termination of this
Agreement, (ii) cover a PI Product (if such letters patent or utility model is
owned by MEC) or cover an MEC Product (if such letters patent or utility model
is owned by PI) and, (iii) such PI Product or MEC Product, as the case may be,
incorporates or is made using Baseline Process Confidential Information
disclosed under this Agreement.

          (b)  "PI's Patents" means Patents owned or controlled by PI during the
term of this

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                                       3
<PAGE>

Agreement, with respect to which and to the extent to which, and subject to the
conditions under which, PI shall have the right to grant licenses, rights and
privileges to licensees during the term of this Agreement; it does not include,
however, Patents with respect to which a license cannot be granted excepting
pursuant to an agreement which requires the payment to a third party of
royalties or other consideration measured by the use made of such Patents,
unless MEC requests licenses under such Patents and agrees in writing to assume
its fair share of such royalties or other consideration. PI represents and
warrants that a list of all PI's Patents as of the date of this Agreement is set
forth in Appendix B attached hereto.

           (c)  "Restricted Patents" means all PI Patents relating to
Semiconductor circuit design or system level architectures issued or first
applied for after January 1, 1994, other than PI Patents relating solely to the
Baseline Process and Updates to the Baseline Process such as improvements to
high voltage device structures and improvements to semiconductor processing.

           (d)  "MEC's Patents" means Patents owned or controlled by MEC during
the term of this Agreement, with respect to which and to the extent to which,
and subject to the conditions under which, MEC shall have the right to grant
licenses, rights and privileges to licensees during the term of this Agreement;
it does not include, however, Patents with respect to which a license cannot be
granted excepting pursuant to an agreement which requires the payment to a third
party of royalties or other consideration measured by the use made of such
Patents, unless PI requests licenses under such Patents and agrees in writing to
assume its fair share of such royalties or other consideration. MEC represents
and warrants that a list of all MEC's Patents as of the date of this Agreement
is set forth in Appendix C attached hereto.

     1.15  "Subsidiary" of a company means a corporation or other legal entity
(i) the majority of whose shares or other securities entitled to vote for
election of directors (or other managing authority) is now or hereafter
controlled by such company either directly or indirectly; or (ii) which does not
have outstanding shares or securities but the majority of whose ownership
interest representing the right to manage such corporation or other legal entity
is now or hereafter owned and controlled by such company either directly or
indirectly; but any such corporation or other legal entity shall be deemed to be
a Subsidiary of such company only as long as such control or ownership and
control exists.

     1.16  "Update" shall mean:

           (a) with respect to a Product, a modification or addition made during
the term of this Agreement to effect a cost improvement or to correct the design
or to improve the specific Product to meet the specifications of such Product
or, if no specifications are set forth, to meet data sheet specifications; and

          (b) with respect to the Baseline Process, any modification or change,
during the term of this Agreement, to the Baseline Process, as defined in
Section 1.3 of this Agreement, which improves or increases the efficiency, speed
or yield of the Baseline Process.

     Both parties hereby understand that the Updates shall include any and all
modifications or changes to materials covered by copyrights and to Mask Works,
in connection with the Products or Baseline

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                                       4
<PAGE>

Process.

     1.17  "Wafers" means silicon wafers for Products.

     1.18  "Work" means all works of authorship as defined in Sections 101, 102
and 103 of the Copyright Act, Title 17, United States Code.

     1.19  "Prior License Agreement" means that Technology License Agreement
entered into between MEC and PI, effective as of June 29, 1990, as amended on
June 29, 1995 and as again amended on April 1, 1997.

     1.20  "Foundry Agreement" means the Wafer Foundry Agreement signed by the
parties on the same date this Agreement is signed.

     1.21  MEI means MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD., a corporation
that owns over fifty percent (50%) of the voting stock of MEC and is duly
organized under the laws of Japan, having its principal place of business at
Twin 21 National Tower, 1-61 Shiromi 2 Chome, Chuo-ku, Osaka 540-0001 Japan.

                                  ARTICLE II
                                  ----------

                            TRANSFER OF INFORMATION
                            -----------------------

     2.1  Information Transfer. MEC and PI shall disclose and provide to each
          --------------------
other any and all available and unrestricted information reasonably necessary in
order for the other party to obtain the full benefit of the licenses granted
hereunder.

     2.2  Update Information Transfer. During the term of this Agreement, each
          ---------------------------
party shall disclose and provide to the other any Updates which it develops
regarding a Product or the Baseline Process as soon as practical but not longer
than (2) months after the Update has been qualified for production.

     2.3  Documentation. Documentation furnished hereunder by MEC and PI has
          -------------
been, or will be, prepared and compiled with reasonable care. The liability of
the party providing documentation is limited to replacing such documentation,
free from the error or deficiency in question, with reasonable promptness after
notice thereof from the receiving party, at no additional charge to the
receiving party.

     2.4  Periodic Exchange of Information. Both parties hereby agree that they
          --------------------------------
will have periodic meetings for the exchange of information by and between the
parties' technical representatives with respect to the current and future
product development and application which either party is separately performing
in the field of the Product and Baseline Process. In addition, PI will permit
one employee of MEC to remain onsite at PI's principal facility in Sunnyvale,
California on a full time basis or such other basis as MEC desires and will
provide such MEC employee with office furniture and fixtures, access to
designated PI photocopiers and fax machines and telephone services. All costs
and expenses of such employee, including the salary of such employee and all
telephone toll charges while in the PI facility, will be borne by MEC.

Confidential
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                                       5
<PAGE>

     The parties hereby confirm that any information transferred even by the
informal meetings and other communications by and between the parties' technical
representatives shall fall within the scope of the Confidential Information in
the event such information satisfies the definition thereof as contemplated in
Section 1.4.

                                  ARTICLE III
                                  -----------

                           CONFIDENTIAL INFORMATION
                           ------------------------

     3.1  Confidentiality Obligation.  Each party agrees that the Confidential
          --------------------------
Information of the other party which it receives pursuant to this Agreement or
the Prior License Agreement is received only for its own use and only to the
extent provided in this Agreement and the Prior License Agreement, respectively.
Each party agrees to keep such Confidential Information that is (a) technical
information relating to the Baseline Process and its Updates, and (b) primarily
useful in design or manufacture of Products, confidential for a period extending
for twenty (20) years after the expiration of this Agreement; and to keep all
other Confidential Information confidential for a period extending for ten (10)
years after the expiration of this Agreement.

     3.2  Third Party Services. Either party may disclose Confidential
          --------------------
Information of the other party to one or more third parties for the sole purpose
and to the extent reasonably necessary to have such third parties provide the
disclosing party with foundry, assembly and testing services relating to
Semiconductor Chip Products in accordance with the terms of the licenses set
forth in Sections 4.1 and 4.2; provided that such disclosures shall be made
under written terms and conditions which protect the confidentiality of the
disclosed information upon the terms, and for a period, not less restrictive
than those contained in this Agreement.

     3.3  Confidentiality Exception. Notwithstanding the provisions of Section
          -------------------------
3.1, nothing received by the parties hereunder shall be construed as
Confidential Information which prior hereto, or during the term of this
Agreement, is:

          (a) published or otherwise made available to the public other than by
a breach of this Agreement by such party hereto, or

          (b) rightfully received by one party hereto from an independent third
party without restrictions on disclosure, or

          (c) approved in writing for release by the party designating the
information as Confidential Information, or

          (d) except as otherwise provided in Section 3.5 below, known to or
independently developed by the party receiving the Confidential Information
without reference to such Confidential Information, or

          (e) disclosed within a patent application, the subject matter of which
patent application belongs to the receiving party and only with the prior
written approval of the disclosing party.

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                                       6
<PAGE>

     In the case that the receiving party intends to disclose Confidential
Information under the exceptions (a), (b), or (d) above, the receiving party
must first give the disclosing party notice (30) thirty days prior to such a
disclosure.

     3.4  Other Disclosure.  Neither party shall be liable for disclosure of any
          ----------------
Confidential Information if such disclosure is:

          (a) In response to a valid order of a court or other government body
or any political subdivision thereof; provided, however, that the receiving
party shall first immediately notify the other party of such order so as to
allow the other party sufficient time to oppose the order and to seek to obtain
a protective order requiring that the Confidential Information so disclosed be
used only for the purpose for which such protective order is issued; or

          (b) otherwise required by law.

     3.5  Information Already Known.  If a party receives information that the
          -------------------------
disclosing party is treating as Confidential Information and which is already
known to the receiving party, such information shall nonetheless be Confidential
Information for the purposes of this Agreement unless the receiving party
demonstrates by reasonable evidence within a reasonable time after the
information is disclosed that such information was already known to it before it
was disclosed by the disclosing party.

                                  ARTICLE IV
                                  ----------

                              RIGHTS AND LICENSES
                              -------------------

     4.1  PI Licenses.
          -----------

          (a) Subject to all the terms and conditions of this Agreement, PI
hereby grants to MEC, for the term of this Agreement, a nontransferable, non-
assignable right and license to use PI's Confidential Information transferred
hereunder or under the Prior License Agreement relating to Products, the
Baseline Process and Updates, including all such information designated as
proprietary or confidential:

               (i)   to design MEC Products;

               (ii)  to improve and make derivatives of PI Products;

               (iii) to make Wafers and Products at manufacturing facilities of
MEC or MEC's Subsidiaries;

               (iv)  to have Wafers and/or Products manufactured, assembled or
tested solely for MEC, provided that

                     (1)  the right granted in this Section 4.1(a)(iv) shall not
                          broaden the scope of any license granted to MEC under
                          this Agreement,

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                                       7
<PAGE>

                     (2)  PI gives its written approval in advance for any such
                          manufacture, assembly or test, which approval shall
                          not be unreasonably withheld,

                     (3)  MEC shall pay, for such Wafers and Products, the
                          royalty due under this Agreement for Wafers and
                          Products, respectively,

                     (4)  the party performing such manufacture, assembly or
                          test agrees in writing to all terms and conditions of
                          this Agreement relating to intellectual property
                          rights and licenses, and territorial and Restricted
                          Product restrictions, and;

                     (5)  MEC shall be the insurer and guarantor of such party's
                          full observance of such terms and conditions;

               (v)   to use, sell, lease or otherwise dispose of:

                     (1)  Products to the Matsushita Group worldwide;

                     (2)  Products to any and all companies established or to be
                          established under the laws of Japan;

                     (3)  Products to any and all Subsidiaries of Japanese
                          Companies in the Asian Territory;

                     (4)  Products other than Restricted Products to Asian
                          Companies in the Asian Territory; and

               (vi)  to sell Wafers and Products to PI.

     This license will be exclusive to the extent provided in Section 4.1(e)
below; otherwise it is nonexclusive.

          (b)  Subject to all the terms and conditions of this Agreement, PI
hereby grants to MEC, for the term of this Agreement, a nontransferable, non-
assignable, indivisible right and license under the PI Patents:

               (i)   to design MEC Products;

               (ii)  to improve and make derivatives of PI Products;

               (iii) make Wafers and Products at manufacturing facilities of MEC
or MEC's Subsidiaries;

               (iv)  to have Wafers and/or Products manufactured, assembled or
tested solely for MEC, provided that

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                                       8
<PAGE>

                (1)  the right granted in this Section 4.1(b)(iv) shall not
                     broaden the scope of any license granted to MEC under this
                     Agreement,

                (2)  PI gives its written approval in advance of any such
                     manufacture, assembly or test, which approval shall not be
                     unreasonably withheld,

                (3)  MEC shall pay, for such Wafers and Products, the royalty
                     due under this Agreement for Wafers and Products,
                     respectively,

                (4)  the party performing such manufacture, assembly or test
                     agrees in writing to all terms and conditions of this
                     Agreement relating to intellectual property rights and
                     licenses, and territorial and Restricted Product
                     restrictions, and;

                (5)  MEC shall be the insurer and guarantor of such party's full
                     observance of such terms and conditions;

          (v)   to use, sell, lease or otherwise dispose of:

                (1)  Products to the Matsushita Group worldwide;

                (2)  Products to any and all companies established or to be
                     established under the laws of Japan;

                (3)  Products to any and all Subsidiaries of Japanese Companies
                     in the Asian Territory;

                (4)  Products other than Restricted Products to Asian Companies
                     in the Asian Territory; and

          (vi)  to sell Wafers and Products to PI.

     This license will be exclusive to the extent provided in Section 4.1(e)
below; otherwise it is nonexclusive.

     (c)  MEC will not sell, lease or otherwise dispose of Products to any
companies established under the laws of countries other than Japan, whether
through the international procurement offices of such companies or otherwise
unless, for Products other than Restricted Products, MEC:

          (i)   is advised by the customer that; and

          (ii)  has a reasonable basis to believe that , and

          (iii) does actually believe that

the final destination of such Products is an Asian Company in the Asian
Territory.

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                                       9
<PAGE>

          (d)  Notwithstanding anything to the contrary contained herein, in
case Japanese Companies wish to procure Products from MEC outside the
territories where MEC is allowed to sell Products under this Agreement and PI is
unable to satisfy such customer's Product quality and volume requirements, both
parties shall negotiate the terms and conditions under which MEC shall be
entitled to supply Products other than Restricted Products to such customers.

          (e)  During the term of this Agreement PI will not grant to any
companies established or to be established under the laws of Japan and any
Subsidiaries of Japanese Companies worldwide, other than MEC, a whole or any
part of the rights and licenses which MEC is granted hereunder, including, but
not limited to, the right to use the Baseline Process, except to provide for
production wafers, parts or other services solely for PI. Should MEC fail to
comply with the terms of this Agreement in any material respect, PI will be
entitled, subject to advance written notice to MEC and consultation with MEC, in
case such failure should not be cured within sixty (60) days after PI's written
notice, to grant any such rights and licenses to other companies established or
to be established under the laws of Japan, without any infringement of MEC's
proprietary rights.

          (f) MEC shall not have the right to sell, lease or otherwise dispose
of Wafers or Products as die, wafers or packaged units for purposes of resale by
any third party as Semiconductor Chip Products under any third party's own brand
label or marking.

          (g) MEC and any other licensees under this Agreement shall not have
any rights under this Agreement or the licenses granted herein to use any
Confidential Information of PI or Updates of PI delivered to MEC on or after
June 29, 1995, or any PI Patents first owned or controlled by PI on or after
June 29, 1995, to design, develop, manufacture, use, sell, lease or otherwise
dispose of any products for any application for energizing light.

          (h) Although MEC's Subsidiaries are not otherwise granted licenses
under this Agreement, any MEC Subsidiary outside Japan that has manufactured or
assembled Products as permitted by this Section 4.1 may make, sell, lease or
otherwise dispose of such Products to the same extent MEC is licensed to do so
under Sections 4.1 and 4.3 of this Agreement. MEC shall assure that each MEC
Subsidiary that makes, sells, leases or otherwise disposes of Products pursuant
to this Section 4.1(h) does so in compliance with all applicable provisions of
this Agreement. MEC shall be responsible for any noncompliance by any MEC
Subsidiary to the same extent as if MEC itself were not in compliance.

     4.2  MEC License.
          -----------

          (a) Subject to all the terms and conditions of this Agreement, MEC
hereby grants to PI a perpetual, paid-up, worldwide, nonexclusive, non-
assignable (except as otherwise provided in Section 9.4 below), nontransferable
right and license to use MEC's Confidential Information transferred hereunder or
under the Prior License Agreement relating to Products, the Baseline Process,
and Updates, including all such information designated as proprietary or
confidential, to design, make and have made Products, other than MEC Products,
and to use, sell, lease or otherwise dispose of such Products.

          (b) Subject to all the terms and conditions of this Agreement, MEC
hereby grants to PI a perpetual, paid-up, worldwide, nonexclusive, non-
assignable (except as otherwise provided in Section 9.4

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                                       10
<PAGE>

below), nontransferable, indivisible right and license under the MEC Patents to
make, have made, use, sell, lease or otherwise dispose of Products, other than
MEC Products.

          (c) Subject to all of the terms and conditions of this Agreement, MEC
hereby grants to PI, for the term of this Agreement, a worldwide, nonexclusive,
non-assignable (except as otherwise provided in Section 9.4 below),
nontransferable right and license to use MEC's Confidential Information
transferred hereunder or under the Prior License Agreement relating to Products,
the Baseline Process, and Updates, including all such information designated as
proprietary or confidential, to make and have any companies other than Japanese
Companies make MEC Products and derivatives of MEC Products and to use, sell,
lease or otherwise dispose of such MEC Products and derivatives of MEC Products
worldwide.

          (d) Subject to all of the terms and conditions of this Agreement, MEC
hereby grants to PI, for the term of this Agreement, a worldwide, nonexclusive,
non-assignable (except as otherwise provided in Section 9.4 below),
nontransferable, indivisible right and license under the MEC Patents to make,
have any companies other than Japanese Companies make, use, sell, lease or
otherwise dispose of MEC Products and derivatives of MEC Products.

          (e) PI shall not have any rights under this Agreement or the licenses
granted herein to use any Confidential Information of MEC or Updates of MEC
delivered to PI on or after June 29, 1995, to design, develop, manufacture, use,
sell, lease or otherwise dispose of any products for any application for
energizing light.

          (f) Although PI's Subsidiaries are not otherwise granted licenses
under this Agreement, any PI Subsidiary outside Japan may design, make, sell,
lease or otherwise dispose of Products to the same extent PI is licensed to do
so under Sections 4.2 and 4.3 of this Agreement. PI shall assure that each PI
Subsidiary that designs, makes, sells, leases or otherwise disposes of Products
pursuant to this Section 4.2(f) does so in compliance with all applicable
provisions of this Agreement. PI shall be responsible for any noncompliance by
any PI Subsidiary to the same extent as if PI itself were not in compliance.

     4.3  Copyright and Mask Work Licenses.  Subject to all of the terms and
          --------------------------------
conditions of this Agreement, MEC and PI each grant to the other nonexclusive,
non-assignable (except as otherwise provided in Section 9.4 below),
nontransferable, royalty-free licenses under its copyrights and Mask Works to
make reproductions in copies and to distribute, import, export and sell Products
and to distribute such copies and Products to the extent necessary to
manufacture, use, lease, sell or otherwise dispose of Products as otherwise
permitted by this Article IV; provided, however, that each party shall take the
necessary actions, including but not limited to the affixing of copyright and
Mask Work notices, to protect the copyrights and Mask Works of the other party.

     4.4  Other Rights Reserved.  Anything in this Agreement to the contrary
          ---------------------
notwithstanding, no license is herein granted, and no act or acts hereunder
shall be construed as or result in conveying any license or right to either
party or to any third party expressly or by implication, estoppel or otherwise,
excepting the licenses and rights expressly granted and agreed to be granted
under Article IV of this Agreement.

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     4.5  Ownership. PI and MEC each hereby acknowledges and agrees that any
          ---------
Update made solely by either party under this Agreement shall be owned by the
party making such Update and subject to the licenses granted herein; and that
any Update made jointly by the parties (Joint Update) shall be owned solely by
PI and subject to the licenses granted herein. MEC hereby agrees to assign to
PI, and hereby does assign to PI, all its right, title and interest in and to
all Joint Updates, including all intellectual property rights therein. Upon
reasonable request by PI, MEC will execute all documents appropriate for PI to
perfect its rights in Joint Inventions. Such documents shall include but not be
limited to execution of assignments, patent applications and other documents.
All Updates will be conclusively considered to have been either (a) made solely
by PI or (b) made jointly by PI and MEC and, in either event, owned solely by
PI; unless MEC promptly notifies PI in writing that such Update (i) was made
without use of PI Confidential Information, (ii) has a substantial use other
than for manufacturing, or for incorporation into, Products and (iii) is
considered by MEC to be made solely by MEC.

                                   ARTICLE V
                                   ---------

                                 COMPENSATION
                                 ------------

     5.1  Product Royalties Payable to PI.
          ----------------------------------

          (a)  MEC shall pay PI royalties, in Japanese yen on all units of
Product made by MEC and MEC's Subsidiaries and used, leased, sold or otherwise
disposed of by MEC and MEC's Subsidiaries, other than to PI, at the following
rates based upon the Net Sales of such Products:

                                                                Royalty Rate
                                                                ------------

     During the term of this Agreement                          ***

     For four years after the term of this Agreement.           ***

          (b) Product shall be considered as used, sold, leased or disposed of,
as the case may be, when billed out, delivered, shipped or mailed to a customer
or lessee, or when first used or first set aside for future use by the
Matsushita Group, whichever shall first occur. Product scrapped and destroyed
shall not be considered as Product manufactured under this Agreement.

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     5.2  Product Royalties Payable to MEC.
          --------------------------------

          (a) PI shall pay MEC royalties, in Japanese yen, on all units of MEC
Product used, leased, sold or otherwise disposed of by PI and PI's Subsidiaries,
other than to MEC, at the following rates based upon the Net Sales of such MEC
Products:

                                                             Royalty Rate
                                                             ------------

     During the term of this Agreement                       ***

     For four years after the term of this Agreement.        ***

          (b)  MEC Product shall be considered as used, sold, leased or disposed
of, as the case may be, when billed out, delivered, shipped or mailed to a
customer or lessee, or when first used or first set aside for future use by PI
or any of its Subsidiaries, whichever shall first occur. MEC Product scrapped
and destroyed shall not be considered as Product manufactured under this
Agreement.

     5.3  Determination of "Net Sales".
          ---------------------------

          (a)  "Net Sales" of Product shall be determined as follows:

                    (i)  In respect of Product in the form of packaged, tested
product or as die or wafers sold in normal, arm's length, commercial
transactions between parties which are not in affiliation, the Net Sales shall
be the aggregate of the genuine selling prices at which customers are billed in
the usual course of business for such Product, without any deductions or credits
other than those determined in accordance with Section 5.3(b), if any.

                    (ii) In respect to Product in the form of packaged, tested
product or as die or wafers used, leased or otherwise disposed of, or sold
otherwise than in normal, arm's length, commercial transactions between parties
which are not in affiliation, the Net Sales shall be the aggregate of the
genuine selling prices of the same quantities of similar or substantially
similar Product which are sold in normal, arm's length, commercial transactions
between parties which are not in affiliation, or, if there be no similar or
substantially similar Product so sold, then the fair market value thereof,
without any deductions other than those determined in accordance with Section
5.3(b), if any.

          (b)  In determining its Net Sales, a party may deduct from the genuine
selling price, equivalent thereof or fair market value, as the case may be, of
Product, the amount of any sales, excise or other taxes, as well as any packing,
freight and transportation, payable by the party in respect of any such Product
to the extent that any such amount is included in the genuine selling price,
equivalent thereof or fair market value, as the case may be, of such Product and
is billed separately by the party to its customers. Each party shall be allowed
to take as a credit in determining Net Sales, (i) customary trade and quantity
discounts actually allowed, and (ii) allowances or credits to customers on
account of rejections or returns.

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          (c) MEC warrants that sales of the Products from MEC to any company in
the Matsushita Group shall be priced as though such company was a third party
customer and that the selling prices between MEC and such company will be
determined in normal arm's length transaction.

     5.4  Certification of Royalties; Audit Rights.
          ----------------------------------------

          (a) Within two (2) months after, and as of March 31, June 30,
September 30 and December 31 of each year during the period MEC is obligated to
pay royalties pursuant to this Agreement, MEC shall furnish PI with a written
statement certified by an officer of MEC specifying (i) the number of units of
each kind of Product used, sold, leased, or otherwise disposed of by MEC during
the quarter ending such March 31, June 30, September 30 and December 31, and
with respect to which compensation is payable under this Agreement, (ii) the
aggregate of the Net Sales of each such kind of such Product, (iii) the total
net compensation payable for reach such kind of such Product pursuant to this
Agreement. At the time of furnishing such statements, MEC shall also make the
payments prescribed therefor in Section 5.1.

          (b) Within two (2) months after, and as of, each March 31, June 30,
September 30 and December 31 of each year during the period PI is obligated to
pay royalties pursuant to this Agreement, PI shall furnish MEC with a written
statement certified by an officer of PI specifying (i) the number of units of
each kind of MEC Product under PI Label used, sold, leased, or otherwise
disposed of by PI during the quarter ending such March 31, June 30, September 30
and December 31, and with respect to which compensation is payable under this
Agreement, (ii) the aggregate of the Net Sales of each such kind of such
Product, (iii) the total net compensation payable for each such kind of such
Product pursuant to this Agreement. At the time of furnishing such statements,
PI shall also make the payments prescribed therefor in Section 5.2.

          (c) A similar statement shall be rendered and payment made within two
(2) months after, and as of, the date of any termination of this Agreement
covering the period from the end of that covered by the last preceding statement
to such date of termination. Such statement and payment shall include all
Product manufactured prior to such date of termination but not covered by prior
statements and payments, which Product shall be considered as sold as of such
date of termination.

          (d) In the event that any payments under this Agreement by either
party are taxable by the government of Japan/United States, whichever
applicable, and such tax is required to be withheld from the payment to the
other party, the party to make the payment shall deduct such amount from the
payment to the receiving party to the extent permitted under U.S./Japan Income
Tax Convention and shall pay such tax on behalf of the receiving party. In such
event, the party to make payment shall obtain and transmit to the receiving
party the proper tax receipt evidencing the payment of such tax.

          (e) Each party shall keep, notwithstanding any termination or the
expiration of this Agreement, true and accurate records, files and books of
account containing all the data reasonably required for the full computation and
verification of the amounts to be paid and the information to be given in the
statements provided hereunder. Each party shall, during usual business hours,
permit certified public accountants designated by the other party, at the
requesting party's expense and by prior arrangement, and not more than once a
year, adequately to inspect the same for the sole purpose of

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                                       14
<PAGE>

determining the amounts payable pursuant to this Article V. Such record need not
be retained by each party beyond three (3) years from the date on which the
royalties hereunder becomes due.

          (f) MEC shall keep, notwithstanding any termination or the expiration
of this Agreement, true and accurate records, files and books of account
containing all the data reasonably required for the verification of compliance
of the territorial restrictions of the sale of MEC Products and Restricted
Products by MEC for a period of three (3) years from such sale. MEC guarantees
that MEI shall keep true and accurate records, files and books of account, of
the same nature, under the same conditions, and for the same period, all as set
forth in the foregoing sentence. Upon PI's or MEC's determination that a
violation of said territorial restrictions has taken place, MEC shall provide to
PI the relevant documents, including those of MEI, identifying the likely source
and MEC's plan to immediately cure such violation and prevent further
violations.

     5.5  PI and MEC will each exert reasonable efforts to assert their rights
under law to protect the Baseline Process against infringement by others.

     5.6  Quarterly Fee Payable to PI.  Within ten (10) days after each of the
          ---------------------------
following dates:  July 14, September 30 and December 31 of calendar 2000, March
31, June 30, September 30 and December 31 of calendar of 2001, and March 31 of
calendar 2002, MEC shall pay a non-refundable, non-deductible fee to PI in the
amount of ***.

                                  ARTICLE VI
                                  ----------

                        REPRESENTATIONS AND WARRANTIES
                        ------------------------------

     6.1  Representations and Warranties. PI and MEC each represents that: it
          ------------------------------
has the right to grant the rights and licenses granted under this Agreement, to
transfer the information transferred under this Agreement, and to provide the
technical assistance called for; that its execution, delivery and performance of
this Agreement have been duly authorized by its Board of Directors and any other
necessary corporate action; and that the terms and conditions of this Agreement
do not violate its Articles of Incorporation or Bylaws (or their equivalent) and
do not conflict with any other material agreement to which it is a party or by
which it is bound.

     6.2  Certain Disclaimers.
          -------------------

          (a) Nothing contained in this Agreement shall be construed as (i) a
warranty or representation by either party as to the validity or scope of any
Patents; or (ii) a warranty or representation that any manufacture, sale, lease,
use, or other disposition hereunder will be free from infringement of Patents
other than those under which, and to the extent to which, licenses are granted
hereunder; or (iii) a warranty or representation that any product can be
manufactured without infringing the patents or other proprietary rights of third
parties; or (iv) an agreement to bring or prosecute actions or suits against
third parties for infringement or conferring any right to bring or prosecute
actions or suits against third parties for infringement; or (v) conferring any
right to use in advertising, publicity, or otherwise, any trademark, trade name
or name or any contraction, abbreviation or simulation thereof, of either party
(provided, however, that PI may identify MEC as a foundry and second source for
PI's products); or (vi) conferring

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                                       15
<PAGE>

by implication, estoppel or otherwise upon any party licensed hereunder, any
license or other right under any Patent or other right except the licenses and
rights expressly granted hereunder; or (vii) a warranty that one party shall be
able to make successfully any products using the other party's technical
information; or (viii) that the receiving party will be able to use the
technology without infringing patents or other rights of third parties.

          (b)  EXCEPT AS OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY WARRANTY AS TO THE ACCURACY, SUFFICIENCY OR SUITABILITY FOR THE
OTHER PARTY'S USE OF ANY TECHNICAL INFORMATION OR ASSISTANCE PROVIDED HEREUNDER;
NOR FOR THE QUALITY OF ANY PRODUCT OR PROCESS MADE HEREUNDER..

                                  ARTICLE VII
                                  -----------

                                EXPORT CONTROL
                                --------------

     7.1  Technical Data.
          --------------

          (a)  Each party hereby assures the other that it will not, without
prior authorization, if required, of the Office of Export Administration, U.S.
Department of Commerce, 14th and Constitution Ave., N.W., Washington, D.C.
20230, export or re-export (as defined in Section 779.1 (b)(c) of the Export
Administration Regulations "Regulations" and any amendments thereto) the
technical data covered thereby. PI shall inform MEC in writing of the technical
data restricted under such Regulations as well as its restricted country group
upon PI's disclosure or provision of technical information.

          (b)  Other Restrictions. In exercising its rights under this
               ------------------
Agreement, each party agrees to comply strictly and fully with all export
controls imposed on Products, by any country or organization or nations within
whose jurisdiction each party operates or does business. Each party agrees not
to export or permit export of Products or any related technical data or any
direct product of any related technical data, without complying with the export
control laws in the relevant jurisdiction.

          (c)  Each party shall not export the Product to any country designated
as "Countries against which the sanctions should be taken" by certain
resolutions of the Security Council of the United Nations regarding the
sanctions against certain countries, as long as such resolutions remain valid
and effective. For purposes of this Agreement, any re-export in violation of
such resolutions by a customer of either MEC or PI will not be considered to be
an export in violation of such resolutions by MEC or PI, as the case may be, so
long as MEC or PI, as the case may be, did not knowingly participate in such re-
export.

          (d)  During and after the term of this Agreement, to the extent the
same practically is within its control, each party shall not sell, lease or
otherwise dispose of, directly or indirectly, any Product to customers whom such
party knows intend to make use of the Product for Military Purposes (defined
herein below). For the purpose of this Agreement, "Military Purposes" means the
design, development, manufacture or use of any weapons, including without
limitation nuclear weapons, biological weapons, chemical weapons and missiles.

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          (e)  In the event either party violates the provision of this Section
7, the non-violating party shall have the right to require reasonable written
assurances from the violating party that such violation, whether or not past
incidents of violation can be cured, will not continue in the future, and if the
violating party does not deliver such assurances to the non-violating party
promptly after its request, the non-violating party may suspend the performance
of its obligations under this Agreement until such time as it receives such
assurances, without any prejudice to the rights and remedies which the non-
violating party may have under this Agreement. In the event that such assurance
is not delivered to the non-violating party within three (3) months after
request, the non-violating party shall have the right to terminate forthwith,
without any prejudice to the rights and remedies which it may have hereunder,
this Agreement, by giving a written notice to the violating party.

                                 ARTICLE VIII
                                 ------------

                          EXPIRATION AND TERMINATION
                          --------------------------

     8.1  Term of Agreement.  This Agreement shall become effective as of the
          -----------------
Effective Date and shall continue in full force and effect, unless sooner
terminated as elsewhere provided in this Agreement, until the fifth (5th)
anniversary of the Effective Date, at which time it shall expire.

     8.2  Renewal.
          -------

          If this Agreement has not earlier terminated, the parties agree to
negotiate in good faith, beginning on the fourth (4th) anniversary of the
Effective Date of this Agreement, for the continuation on mutually agreeable
terms of the licenses, royalty arrangements, manufacturing commitments and other
terms and conditions included in this Agreement and the Foundry Agreement.

     8.3  Termination.
          -----------

          (a)  Except as otherwise set forth in this section, if either party
shall at any time default, without any material causative fault on the part of
the other party, by failing to substantially perform any material provision of
this Agreement or the Foundry Agreement, and such default shall not be cured
within sixty (60) days after written notice to it from the other party
specifying the nature of the default, the non-defaulting party shall have the
right to terminate this Agreement and the licenses it has granted under the
Prior License Agreement, at any time thereafter by giving written notice of
termination to the other party, and upon the giving of such notice of
termination this Agreement and such licenses shall terminate immediately.
Subject to Section 8.5(b)(ii), the licenses and rights granted to the non-
defaulting party under this Agreement shall survive such termination.  The party
receiving notice shall have the right to cure any such default up to the date of
termination.  In the event either party defaults by failing to substantially
perform any material provision of this Agreement or the Foundry Agreement, the
other party shall have the right to suspend further transfers of information,
including Updates, by it and shall not be obligated to resume such transfers
until such default has been cured.

          (b)  Each party shall have the right to terminate this Agreement and
the licenses it has granted under the Prior License Agreement, by giving written
notice of termination to the other at any time upon or after, (i) the filing by
the other party of a petition in bankruptcy or insolvency, or (ii) upon or

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after the filing of any voluntary or involuntary petition or answer seeking
reorganization, readjustment or arrangement of the other party's business under
any law relating to bankruptcy or insolvency, or (iii) upon or after the
appointment of a receiver for all or substantially all of its property, or (iv)
upon or after the making by the other party of any assignment or attempted
assignment for the benefit of creditors, or (v) upon or after the institution of
any proceedings for the liquidation or winding up of the other party's business
or for the termination of its corporate charter; and this Agreement and such
licenses shall terminate automatically on the thirtieth (30th) day after such
notice of termination is given, without further notice, demand or opportunity to
cure. Subject to Section 8.5(b)(ii), the licenses and rights granted to the non-
defaulting party under this Agreement shall survive such termination.

          (c)  The following articles and sections shall survive any expiration
or termination of this Agreement:  Articles III, V, VI, VII, and Sections 9.11,
9.12, 9.13 and 9.14.

     8.4  Consequences of Expiration.
          --------------------------

          (a)  Upon expiration of this Agreement, all rights and obligations of
the parties hereunder shall cease and determine, except for rights and
obligations which, by the terms of this Agreement, continue after expiration or
earlier termination of this Agreement and except that the expiration of this
Agreement shall not release either party from any of its obligations accrued
hereunder prior to the time expiration becomes effective.

          (b)  Without limiting the generality of the foregoing, upon expiration
of this Agreement, the rights and licenses granted by the parties to each other
for the term of this Agreement in Article IV hereof shall terminate immediately;
provided, however, that:

               (i)  subject to the continuing payment of royalties set forth in
Section 5.1, MEC shall retain the licenses granted by PI under Article IV; and

               (ii) subject to the continuing payment of royalties set forth in
Section 5.2, PI shall retain the licenses granted by MEC under Article IV.

               If the royalty amounts set forth in this Section 8.4(b) are paid
in full at the end of four (4) years after the expiration of this Agreement
("Additional Term"), all royalty obligations shall be deemed fully paid up.

               Upon the expiration of the Additional Term, so long as a party
has performed its respective obligations hereunder during such Additional Term,
including payment of all royalties, the rights and licenses granted to such
party under Article IV of the Agreement shall be fully paid-up and such party
shall have free right to utilize any information furnished and rights granted
under this Agreement on or before its expiration, without any further payments,
subject to continuing confidentiality obligations as provided in Article III of
this Agreement and compliance with the terms of the rights and licenses granted
under Article IV of the Agreement, including, without limitation, the
territorial and Restricted Product restrictions on such rights and licenses.

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          (c)  Notwithstanding the final paragraph of Section 8.4(b), it is
confirmed by the parties that, after the expiration of this Agreement, neither
party shall be obligated to continue to furnish any information to the other
party.

     8.5  Consequences of Termination.
          ---------------------------

          (a)  Upon termination of this Agreement, all rights and obligations of
the parties hereunder shall cease and determine as from such date of
termination, except for rights and obligations which, by the terms of this
Agreement, continue after such termination and except that no termination of
this Agreement shall release either party from any of its obligations accrued
hereunder but not yet performed prior to the time such termination becomes
effective.

          (b)  Notwithstanding the above Section 8.5(a);

                    (i)  in the event of termination of this Agreement pursuant
to Section 8.3 above, the rights and licenses granted to the defaulting party
under Article IV shall terminate upon such termination, provided, however, that
the defaulting party shall retain the rights to manufacture, use, sell or
otherwise dispose of the units of Products which have been ordered by its
customers or any inventory of the Products at the time of termination subject to
the royalty payment pursuant to Article V hereof.

                    (ii) in the event of termination of this Agreement pursuant
to Section 8.3, above, the rights and licenses granted to the non-defaulting
party under Article IV of the Agreement shall become perpetual, fully paid-up
and irrevocable upon payment of all royalties that would have been owed if such
termination had not occurred.

                                  ARTICLE IX
                                  ----------

                     MISCELLANEOUS AND GENERAL PROVISIONS
                     ------------------------------------

     9.1  Alternate Sources. Subject to the terms of this Agreement, PI and MEC
          -----------------
may act as alternate sources for the Products and advise their customers and
distributors of each other's ability to do so. Except as otherwise expressly set
forth in the Foundry Agreement, if at all, nothing in this Agreement or the
Foundry Agreement shall be interpreted as requiring either party to manufacture
specific products nor as requiring either party to act as an alternate source
for the other.

     9.2  Publicity. PI and MEC shall agree on the content and release of a
          ---------
press announcement relating to the transactions contemplated by this Agreement
and the Foundry Agreement. Neither party shall, however, except as, to the
extent, and in the manner, required by law or regulation, disclose to any third
party any of the specific terms or conditions, including payment terms, under
which the transactions contemplated by this Agreement are to be carried out.

     9.3  Possible Future Cooperation. PI agrees to consider MEC for the license
          ---------------------------
of other technology developed by PI in the future before licensing such future
technology to other parties. However, nothing in this Agreement shall be
interpreted as requiring the parties to enter into any future agreements.

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     9.4  Successors and Assigns; No Assignment.
          -------------------------------------

          (a)  This Agreement, and rights and obligations herein, shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that except as set forth below neither party
shall assign this Agreement or any of its rights hereunder without the prior
written consent of the other Party.

          (b)  Notwithstanding any other provision of the Agreement, PI may
without the prior consent of MEC assign all of its rights under this Agreement
to a purchaser of all or substantially all of PI's stock or assets or to a third
party participating in a merger or other corporate reorganization in which PI is
a constituent corporation. Within 180 days after such assignment, if the
assignee is (i) a competitor of MEC, and (ii) of comparable size to MEC or
larger, then either MEC or PI's assignee may elect to have this Agreement be
deemed to have expired and to have the provisions of Section 8.4(b) take effect
180 days after written notice to the other party of such election.

          (c)  As a condition of any assignment of this Agreement or any of the
rights granted hereunder, any successor shall expressly assume in writing the
performance of all terms and conditions of this Agreement to be performed by the
assigning party including such party's obligations hereunder with respect to the
protection of Confidential Information. The successor's name shall thereafter
automatically be substituted for the name of the assigning party in this
Agreement.

     9.5  No Rights to Marks, Etc. Except as provided in Section 9.2 above,
          -----------------------
nothing contained in this Agreement shall confer any rights to use in
advertising, publicity, or otherwise, any trademarks, trade names, or any
contraction, abbreviation or simulation thereof, of either party, provided such
restriction shall not apply to identification numbers and descriptions of
devices and software which are the subject matter of this Agreement.

     9.6  No Joint Venture. Nothing contained in this Agreement shall be
          ----------------
construed as:

          (a)  creating any partnership, joint venture or other similar
relationship between PI and MEC; or

          (b)  obligating either party to commercially produce or to continue to
commercially produce, any solid state device of any type whatsoever, or any
parts or components thereof (except as provided in the Foundry Agreement).

     9.7  Force Majeure.  Anything contained in this Agreement to the contrary
          -------------
notwithstanding, the obligations of the parties hereto shall be subject to all
laws, both present and future, of any government having jurisdiction over the
parties hereto, and to orders, regulations, directions or requests of any such
government, or any department, agency or corporation thereof, and to war, acts
of public enemies, strikes or other labor disturbances, fires, floods,
earthquakes, acts of God, or causes of like or different kind beyond the control
of the parties and the parties hereto shall be excused from any failure to
perform any obligation hereunder to the extent such failure is caused by any
such law, order, regulation, direction, request or contingency, for the period
such cause endures.  Notwithstanding the foregoing, in the event any such cause
delays either party's performance of any of its material obligations under this
Agreement,

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                                       20
<PAGE>

the other party may suspend its performance hereunder for the period such delay
continues and if any such cause renders impossible or delays for a period of
more than six months either Party's performance of any of its material
obligations under this Agreement, the other party may terminate this Agreement
pursuant to Section 8.3, as if a material default had occurred hereunder and
shall have the rights and remedies specified in Article VIII. The party whose
performance is delayed on account of any such cause shall promptly notify the
other party, and shall exert its best efforts to recommence performance as soon
as possible.

     9.8   Entire Agreement. This Agreement and the Foundry Agreement to be
           ----------------
entered into along with this Agreement set forth the entire agreement and
understanding between the parties as to the subject matter hereof and thereof
and supersede all prior discussions, negotiations and agreements, written, oral
or implied, between them in respect of the subject matter of this Agreement.
None of the parties shall be bound by any conditions, definitions, warranties,
understandings or representations with respect to such subject matter other than
as expressly provided herein or therein or as duly set forth on or subsequent to
the date hereof or thereof in writing and signed by a proper and duly authorized
officer or representative of the party to be bound thereby.

     9.9   Remedies. Upon the breach by any party to this Agreement of any
           --------
provision of this Agreement or the Foundry Agreement, the non-breaching party
shall have the right to pursue all available remedies at law or in equity it may
elect, in order to obtain the benefits to have been provided pursuant to this
Agreement, or to obtain adequate recourse or compensation in the event the same
are not so provided.

     9.10  Absence of Waivers. Failure or delay on the part of a party hereto to
           ------------------
enforce any of the provisions of this Agreement or any rights with respect
thereto, or to exercise any election provided for herein shall in no way be
considered to be a waiver of such provisions, rights or elections or in any way
affect the validity of this Agreement. Failure or delay on the part of a party
to exercise any of the said provisions, rights or elections shall not preclude
or prejudice such party from later enforcing or exercising the same or any other
provisions, rights or elections which it may have under this Agreement.

     9.11  Notices.  All notices shall be given in writing either by personal
           -------
delivery to the party to whom notice is given, or by a commercial overnight
courier service, or by registered or certified mail, return receipt requested.
The date upon which any such notice is so personally delivered, the date of
confirmation of courier delivery, or if the notice is given by registered or
certified mail the date of the return receipt, shall be deemed to be the date of
such notice, irrespective of the date appearing therein.

If to PI:      POWER INTEGRATIONS, INC.
               477 N. Mathilda Ave.
               Sunnyvale, California 94086
               Attn: President

If to MEC:     MATSUSHITA ELECTRONICS CORPORATION
               1 Kotariyakemachi, Nagaokakyo,
               Kyoto 617 JAPAN
               Attn: Director, Discrete Device Division

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                                       21
<PAGE>

     9.12  Injunctive Relief. Each party agrees that its confidentiality
           -----------------
obligations provided in this Agreement are necessary and reasonable in order to
protect the disclosing party and its business, and each party expressly agrees
that monetary damages would be inadequate to compensate the disclosing party for
any breach by the receiving party of its covenants and agreements as to its
confidentiality obligations set forth in this Agreement. Accordingly,
notwithstanding Section 9.17, each party agrees and acknowledges that any such
breach or threatened breach will cause irreparable injury to the disclosing
party and that, in addition to any other remedies that may be available, in law,
in equity or otherwise, the disclosing party shall be entitled to obtain
injunctive relief against any breach, or threatened breach of such
confidentiality obligations, or the continuation of any such breach, by the
receiving party, without the necessity of proving actual damages or of posting
bond.

     9.13  Attorneys' Fees.  In the event of any action, suit or proceeding,
           ---------------
including arbitration, between the parties hereto, the prevailing party shall be
entitled to recover its costs, including those for expert witnesses, and
reasonable attorneys' fees therein.

     9.14  Headings.  All paragraph captions are for reference only and shall
           --------
not be considered in construing this Agreement.

     9.15  Severability.  Any provision or provisions of this Agreement which
           ------------
in any way contravenes a law of any state or country which the Agreement is in
effect shall, in such state or country and to the extent of such contravention
of local law, be deemed separable and shall not affect any other provision or
provisions of this Agreement.

     9.16  Governing Law.  This Agreement and the rights and obligations of the
           -------------
parties hereunder shall be governed by, and construed in accordance with, the
laws of the United States and the State of California as applied to agreements
entered into and to be performed entirely within California between California
residents without regard to conflict of laws principles.

     9.17  Arbitration.  Disputes arising out of or in connection with the
           -----------
validity, interpretation, application, or enforcement of this Agreement or the
performance of either party will be discussed and settled amicably by good faith
negotiations between PI and MEC. Any such disputes which cannot be settled
amicably and by such good faith negotiations within sixty (60) days after
written notice by one party to the other of such inability to amicably settle
shall thereafter be settled by binding arbitration. The arbitration shall be
conducted in English pursuant to the Rules of Arbitration of the International
Chamber of Commerce, which shall be held in San Francisco, California. Any
judgement or award rendered in these arbitrations may be entered and enforced by
any court of competent jurisdiction and may include, when appropriate, equitable
relief.

     9.18  Time of Essence.  Time is of the essence in the performance of each
           ---------------
and every obligation of the parties under this Agreement.

     9.19  Originals.  This Agreement shall be executed in duplicate, each of
           ---------
which shall be an original, and shall be kept by PI and MEC, respectively.

     9.20  Prior License Agreement.  All intellectual property that was licensed
           ------------------------
under the terms and

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                                       22
<PAGE>

conditions of the Prior License Agreement remain licensed under this Agreement.

     IN WITNESS WHEREOF, PI and MEC have caused this Agreement to be executed in
their names by the duly authorized officers or representatives as of the date
first above written.

POWER INTEGRATIONS, INC.                MATSUSHITA ELECTRONICS CORPORATION

By: /s/______________________________   By:  /s/_______________________________

Name: _______________________________   Name: _________________________________

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                                       23
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                                  Appendix A

                               Baseline Process
                               ----------------

  DC PROCESS FLOW CHART:

1.  Material specification
--------------------------

       Crystal type                    :      ***
       Resistivity                     :      ***
       Thickness                       :      ***

       Diffusion                       :      ***
       preclean

       Etch rate                       :      ***

2.  Blocking oxidation
----------------------

       Diffusion
       preclean
       Blocking                               ***
       oxidation
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Ramp to                                ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

3.  N-Well Mask (CD's measured)
-------------------------------

       Microscope inspect

4.  N-Well Etch
---------------

       Resist bake                     :      ***
       Microscope inspect
       Wet etch                        :      ***

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       Plasma resist clean
       Resist clean                    :      ***
       CD's measured

5.  Well oxidation
------------------

       Diffusion preclean
       Well oxidation                         ***
       Step                                   ***
                                              ***
       Push in                                ***
       Ramp to                                ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required  to maintain specified oxide thickness.
       Visual inspect

6.  Phosphorus N-Well implant
-----------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Cleaning                        :      ***

7.  N-Well drive
----------------

       Diffusion
       preclean
       Step                                   ***

       Push in                                ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***

8.  Well oxidation etch
-----------------------

       Wet etch                        :      ***
       Microscope inspect

9.  Implant oxidation
---------------------

       Diffusion preclean
       Implant oxidation                      ***

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                                       25
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       Step                                   ***

       Push in                                ***
       Ramp to                                ***
       Oxidation                              ***
       Oxidation                              ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual  inspect

10.  P-Top Mask (CD's  measured)
--------------------------------

       Microscope
       inspect

11.  Boron P-Top implant
------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Microscope inspect

12.  Oxide strip
----------------

       Oxide strip                     :      ***
       Microscope inspect

13.  Regrow oxidation
---------------------

       Diffusion
       preclean
       Regrow oxidation                       ***
       Step                                   ***

       Push in                                ***
       Ramp to                                ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

14.  Nitride deposition
-----------------------

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       Nitride deposition(LP-                 ***
       CVD)
       Temperature                     :      ***

       NH3                             :      ***
       SiH2Cl2                         :      ***
       *Time adjusted as required to maintain specified Nitride thickness.
       Visual inspect

15.  OD Mask (CD's measured)
----------------------------

       Microscope inspect

16.  Source/Drain(Active Area) etch
-----------------------------------

       Nitride etch (Plasma etcher)
       Microscope inspect
       Plasma resist
       Clean
       Resist clean                    :      ***
       CD's measured

17.  Boron field implant Mask (no CD's measured)
------------------------------------------------

       Microscope inspect

18.  Oxide etch
---------------

       Resist                          :      ***
       bake
       Microscope inspect
       Wet etch                        :      ***
       Resist bake                     :      ***

19.  BF2 field implant
----------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***

20.  Boron Punchthrough implant
-------------------------------

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                                       27
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       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Microscope inspect

21.  Field oxidation
--------------------

       Diffusion preclean
       Field oxidation                        ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual  inspect

22.  Phosphoric Acid Nitride strip
----------------------------------

       Oxide dip                       :      ***
       Phosphoric Acid                 :      ***
       strip
       Microscope inspect
       Oxide dip                       :      ***
       Microscope inspect

23.  Sacrificial oxidation
--------------------------

       Diffusion preclean
       Sacrificial oxidation                  ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***

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                                       28
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       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

24.  P-Buried Mask (CD's measured)
----------------------------------

       Microscope inspect

25.  Boron P-Buried implant
---------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Tilt:                           :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Microscope inspect

26.  Vt implant Mask (no CD's measured)
---------------------------------------

       Microscope inspect

27.  Boron Gate implant
-----------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Oxide dip                       :      ***
       Microscope inspect

28.  Gate oxidation
-------------------

       Diffusion preclean
       Gate oxidation                         ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***

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                                       29
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       Oxidation                              ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

29.  Poly deposition
--------------------

       Polysilicon deposition(LP-CVD)                      ***
       Temperature                     :      ***

       SiH4                            :      ***
       Visual inspect

29A. Backside Etch
------------------

       Photoresist spin
       Resist bake                                         ***
       Backside poly etch        ***
       Backside oxide dip     ***
       Plasma Resist
       Clean
       Resist Clean Sulfuric/peroxide

30.  Poly dope
--------------

       Diffusion preclean
       Poly dope                       ***
       Step                            ***

       Push in                         ***
       Ramp to                         ***
       Doping                          ***
       Ramp to                         ***
       *Time adjusted as required to maintain specified Poly resistivity.
       Visual inspect
       Oxide dip                       ***
       Cleaning                        ***

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                                       30
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       ***
       Microscope inspect

32.  Poly etch
--------------

       Plasma Poly etch                ***
       Microscope inspect
       Plasma resist clean
       Resist clean                    :      ***
       Oxide dip                       :      ***
       Microscope inspect
       CD's measured

33.  Implant oxidation
----------------------

       Diffusion preclean
       Implant oxidation                      ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Anneal                                 ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

34.  N+ Mask (no CD's measured)
-------------------------------

       Microscope inspect

35.  Arsenic Source/Drain implant
---------------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***

36.  P+ Mask (no CD's measured)
-------------------------------

       Microscope inspect

37.  Boron Source/Drain implant
-------------------------------

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       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***

38.  Source/Drain re-oxidation
------------------------------

       Diffusion preclean
       Source/Drain re-oxidation              ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

39.  Glass deposition
---------------------

       LTO deposition(LP-CVD)                 ***
       Temperature                     :      ***

       SiH4                            :      ***
       MIX gas                         :      ***
       O2                              :      ***
       He                              :      ***
       Visual inspect
       Scrubber cleaning

40.  Densify
------------

       Step                                   ***

       Push in                                ***
       Ramp to                                ***
       Densify                                ***
       Ramp to                                ***

41.  Contact Mask (CD's measured)
---------------------------------

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                                       32
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       Microscope inspect

42.  Contact etch
-----------------

       Plasma flush
       Resist
       bake                            :      ***
       Microscope inspect
       Oxide etch                      :      ***
       Resist bake                     :      ***
       Oxide thickness
       measured
       Plasma etch
       (CHF3)
       Oxide thickness
       measured
       Microscope inspect
       Resist                          :      ***
       bake
       Oxide etch                      :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Microscope inspect
       CD's measured

43.  AL/Si/Cu Sputter
---------------------

       Pre-Sputter clean               :      ***
       Wafer bake                      :      ***
       Aluminum                        :      ***
       Visual inspect

44.  Metal Mask (CD's measured)
-------------------------------

       Microscope inspect

45.  Metal etch
---------------

       Resist                          :      ***
       bake
       Plasma metal etch on PE8300 using BCl3
       Microscope inspect

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                                       33
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       Plasma resist clean
       Microscope inspect
       CD's measured

46.  AL sinter
--------------

       Step                 ***

       Push in              ***
       Sinter               ***

47.  Plasma Nitride deposition (VDS-5800)
-----------------------------------------

       Plasma Nitride                         ***
       deposition
       Refractive index                :      ***
       Visual inspect

48.  Pad Mask (no CD's measured)
--------------------------------

       Microscope inspect

49.  Pad etch
-------------

       Plasma etch
       (CF4/O2)
       Microscope inspect
       Plasma resist clean
       Microscope inspect

50.  Nitride sinter
-------------------

       Step                                   ***

       Push in                                ***
       Sinter                                 ***

53.  Backgrind
--------------

       Tape coating                    :      ***
       Backgrind                       :      ***
       Peeling tape off
       Water cleaning
       Visual inspect

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                                       34
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  STANDARD 700V (125ohm) PROCESS FLOW CHART:

1.  Material specification
--------------------------

       Crystal type                           ***
       Resistivity                            ***
       Thickness                              ***

       Diffusion preclean                     ***

       Etch rate                              ***

2.  Blocking oxidation
----------------------

       Diffusion preclean
       Blocking oxidation                     ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Ramp to                                ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

3.  N-Well Mask (CD's measured)
-------------------------------

       Microscope inspect

4.  N-Well Etch
---------------

       Resist
       bake                            :      ***
       Microscope inspect
       Wet etch                        :      ***
       Plasma resist clean

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                                       35
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       Resist clean                    :      ***
       CD's measured

5.  Well oxidation
------------------

       Diffusion preclean
       Well oxidation                         ***
       Step                                   ***

       Push in                                ***
       Ramp to                                ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

6.  Phosphorus N-Well implant
-----------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Cleaning                        :      ***

7.  N-Well drive
----------------

       Diffusion preclean
       Step                                   ***

       Push in                                ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***

8.  Well oxidation etch
-----------------------

       Wet etch                        :      ***
       Microscope inspect

9.  Implant oxidation
---------------------

       Diffusion preclean
       Implant oxidation                      ***
       Step                                   ***

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                                       36
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       Push in                                ***
       Ramp to                                ***
       Oxidation                              ***
       Oxidation                              ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

10.  P-Top Mask (CD's measured)
-------------------------------

       Microscope inspect

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Microscope inspect

12.  P-Top drive
----------------

       Diffusion preclean
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***

13.  Oxide strip
----------------

       Oxide strip                     :      ***
       Microscope inspect

14.  Regrow oxidation
---------------------

       Diffusion preclean
       Regrow oxidation                       ***
       Step                                   ***

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                                       37
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       Push in                                ***
       Ramp to                                ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

15.  Nitride deposition
-----------------------

       Nitride deposition(LP-                 ***
       CVD)
       Temperature                     :      ***

       NH3                             :      ***
       SiH2Cl2                         :      ***
       *Time adjusted as required to maintain specified Nitride thickness.
       Visual inspect

16.  OD Mask (CD's measured)
----------------------------

       Microscope inspect

17.  Source/Drain(Active Area) etch
-----------------------------------

       Nitride etch (Plasma etcher)
       Microscope inspect
       Plasma resist Clean
       Resist clean                    :      ***
       CD's measured

18.  Boron field implant Mask (no CD's measured)
------------------------------------------------

       Microscope inspect

19.  Oxide etch
---------------

       Resist
       bake                            :      ***
       Microscope inspect
       Wet etch                        :      ***
       Resist
       bake                            :      ***

20.  BF2 field implant
----------------------

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                                       38
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       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***

21.  Boron Punchthrough implant
-----

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Microscope inspect

22.  Field oxidation
--------------------

       Diffusion preclean
       Field oxidation                        ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

23.  Phosphoric Acid Nitride strip
----------------------------------

       Oxide dip                       :      ***
       Phosphoric Acid                 :      ***
       strip
       Microscope inspect
       Oxide dip                       :      ***
       Microscope inspect

24.  Sacrificial oxidation
--------------------------

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                                       39
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       Diffusion preclean
       Sacrificial oxidation                  ***
       Step                                   ***

       Push  in                               ***
       Anneal                                 ***
       Oxidation                              ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

25.  Vt implant Mask (no CD's measured)
---------------------------------------

       Microscope inspect

26.  Boron Gate implant
-----------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Oxide dip                       :      ***
       Microscope inspect

27.  Gate oxidation
-------------------

       Diffusion preclean
       Gate oxidation                         ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.

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                                       40
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       Visual inspect

28.  Poly deposition
--------------------

       Polysilicon                            ***
       deposition(LP-CVD)
       Temperature                     :      ***

       SiH4                            :      ***
       Visual inspect

29. Backside Etch
-----------------

       Photoresist spin
       Resist bake                                         ***
       Backside polY                   ***
       Backside oxide                        ***
       Plasma Resist Clean
       Resist Clean                ***

30.  Poly dope
-----

       Diffusion preclean
       Poly dope                       ***

       Step                            ***

       Push in                         ***
       Ramp to                         ***
       Doping                          ***
       Ramp to                         ***
       *Time adjusted as required to maintain specified Poly resistivity.
       Visual inspect
       Oxide dip                       ***
       Cleaning                        ***

31.  Gate Mask (CD's measured)
------------------------------

       Microscope inspect

32.  Poly etch
--------------

       Plasma Poly etch                      ***
       Microscope inspect

Confidential
***IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST FOR
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                                       41
<PAGE>

       Plasma resist clean
       Resist clean                    :      ***
       Oxide dip                       :      ***
       Microscope inspect
       CD's measured

33.  Implant oxidation
----------------------

       Diffusion preclean
       Implant oxidation                      ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Anneal                                 ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

34.  N+ Mask (no CD's measured)
-------------------------------

       Microscope inspect

35.  Arsenic Source/Drain implant
---------------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***

36.  P+ Mask (no CD's measured)
-------------------------------
       Microscope inspect

37.  Boron Source/Drain implant
-------------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***

38.  EP Mask (no CD's measured)
-------------------------------

Confidential
***IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST FOR
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                                       42
<PAGE>

       Microscope inspect

39.  Boron EP implant
---------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***

40.  Source/Drain re-oxidation
------------------------------

       Diffusion preclean
       Source/Drain re-oxidation              ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

41.  Glass deposition
---------------------

       LTO deposition(LP-CVD)                 ***
       Temperature                     :      ***

       SiH4                            :      ***
       MIX gas                         :      ***
       O2                              :      ***
       He                              :      ***
       Visual inspect
       Scrubber cleaning

42.  Densify
------------

       Step                                   ***

       Push in                                ***
       Ramp to                                ***

Confidential
***IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST FOR
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                                       43
<PAGE>

       Densify                ***
       Ramp to                ***

43.  Contact Mask (CD's measured)
---------------------------------

       Microscope inspect

44.  Contact etch
-----------------

       Plasma flush
       Resist
       bake                :  ***
       Microscope inspect
       Oxide etch          :  ***
       Resist
       bake                :  ***
       Oxide thickness
       measured
       Plasma etch
       (CHF3)
       Oxide thickness
       measured
       Microscope inspect
       Resist bake         :  ***
       Oxide etch          :  ***
       Plasma resist clean
       Resist clean        :  ***
       Microscope inspect
       CD's measured

45.  AL/Si/Cu Sputter
---------------------

       Pre-Sputter clean   :  ***
       Wafer bake          :  ***
       Aluminum            :  ***
       Visual inspect

46.  Metal Mask (CD's measured)
-------------------------------

       Microscope inspect

47.  Metal etch
---------------

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                                      44
<PAGE>

       Resist
       bake             :      ***
       Plasma metal etch on PE8300 using BCl3
       Microscope inspect
       Plasma resist clean
       Microscope inspect
       CD's measured

48.  AL sinter
--------------

       Step              ***

       Push in           ***
       Sinter            ***

49.  Plasma Nitride deposition (VDS-5800)
-----------------------------------------

       Plasma Nitride              ***
       deposition
       Refractive index     :      ***
       Visual inspect

50.  Pad Mask (no CD's measured)
--------------------------------

       Microscope inspect

51.  Pad etch
-------------

       Plasma etch
       (CF4/O2)
       Microscope inspect
       Plasma resist clean
       Microscope inspect

52.  Passivation sinter
-----------------------

       Step                        ***

       Push in                     ***
       Sinter                      ***

53.  Passivation sinter
-----------------------

       Step                        ***

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                                      45
<PAGE>

       Push in                     ***
       Sinter                      ***

54.  Backgrind
--------------

       Tape coating             :  ***
       Backgrind                :  ***
       Peeling tape off
       Water cleaning

  STANDARD 400V (125ohm) PROCESS FLOW CHART:

1.  Material specification
--------------------------

       Crystal type             :  ***
       Resistivity              :  ***
       Thickness                :  ***

       Diffusion preclean       :  ***

       Etch rate                :  ***

2.  Blocking oxidation
----------------------

       Diffusion preclean
       Blocking oxidation          ***
       Step                        ***

       Push in                     ***
       Anneal                      ***
       Ramp to                     ***
       Oxidation                   ***
       Oxidation                   ***
       Ramp to                     ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

3.  N-Well Mask (CD's measured)
-------------------------------

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                                      46
<PAGE>

       Microscope inspect

4.  N-Well Etch
---------------

       Resist bake             :  ***
       Microscope inspect
       Wet etch                :  ***
       Plasma resist clean
       Resist clean            :  ***
       CD's measured

5.  Well oxidation
------------------

       Diffusion preclean
       Well oxidation             ***
       Step                       ***

       Push in                    ***
       Ramp to                    ***
       Oxidation                  ***
       Ramp to                    ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

6.  Phosphorus N-Well implant
-----------------------------

       Dose                    :  ***
       Energy                  :  ***
       Specie                  :  ***
       Cleaning                :  ***

7.  N-Well drive
----------------

       Diffusion preclean
       Step                       ***

       Push in                    ***
       Ramp to                    ***
       Anneal                     ***
       Ramp to                    ***

8.  Well oxidation etch
-----------------------

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                                      47
<PAGE>

       Wet etch                  :  ***
       Microscope inspect

9.  Implant oxidation
---------------------

       Diffusion preclean
       Implant oxidation            ***
       Step                         ***

       Push in                      ***
       Ramp to                      ***
       Oxidation                    ***
       Oxidation                    ***
       Anneal                       ***
       Ramp to                      ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

10.  P-Top Mask (CD's measured)
-------------------------------

       Microscope inspect

11.  Boron P-Top implant
------------------------

       Dose                      :  ***
       Energy                    :  ***
       Specie                    :  ***
       Plasma resist clean
       Resist clean              :  ***
       Microscope inspect

12.  P-Top drive
----------------

       Diffusion preclean
       Step                         ***

       Push in                      ***
       Anneal                       ***
       Ramp to                      ***
       Anneal                       ***
       Ramp to                      ***

13.  Oxide strip
----------------

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                                      48
<PAGE>

       Oxide strip               :  ***
       Microscope inspect

14.  Regrow oxidation
---------------------

       Diffusion preclean
       Regrow oxidation             ***
       Step                         ***

       Push in                      ***
       Ramp to                      ***
       Oxidation                    ***
       Ramp to                      ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

15.  Nitride deposition
-----------------------

       Nitride                      ***
       deposition(LP-
       CVD)
       Temperature               :  ***

       NH3                       :  ***
       SiH2Cl2                   :  ***
       *Time adjusted as required to maintain specified Nitride thickness.
       Visual inspect

16.  OD Mask (CD's measured)
----------------------------

       Microscope inspect

17.  Source/Drain(Active Area) etch
-----------------------------------

       Nitride etch (Plasma etcher)
       Microscope inspect
       Plasma resist Clean
       Resist clean              :  ***
       CD's measured

18.  Boron field implant Mask (no CD's measured)
------------------------------------------------

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                                      49
<PAGE>

       Microscope inspect

19.  Oxide etch
---------------

       Resist bake             :  ***
       Microscope inspect
       Wet etch                :  ***
       Resist bake             :  ***

20.  BF2 field implant
----------------------

       Dose                    :  ***
       Energy                  :  ***
       Specie                  :  ***

 21.  Boron Punchthrough implant
-------------------------------

       Dose                    :  ***
       Energy                  :  ***
       Specie                  :  ***
       Plasma resist clean
       Resist clean            :  ***
       Microscope inspect

22.  Field oxidation
--------------------

       Diffusion preclean
       Field oxidation            ***
       Step                       ***

       Push in                    ***
       Anneal                     ***
       Oxidation                  ***
       Ramp to                    ***
       Anneal                     ***
       Ramp to                    ***
       Oxidation                  ***
       Oxidation                  ***
       Ramp to                    ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

23.  Phosphoric Acid Nitride strip
----------------------------------

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                                      50
<PAGE>

       Oxide dip                   :   ***
       Phosphoric Acid             :   ***
       strip
       Microscope inspect
       Oxide dip                   :   ***
       Microscope inspect

24.  Sacrificial oxidation
--------------------------

       Diffusion preclean
       Sacrificial oxidation           ***
       Step                            ***

       Push in                         ***
       Anneal                          ***
       Oxidation                       ***
       Oxidation                       ***
       Oxidation                       ***
       Ramp to                         ***
       Anneal                          ***
       Ramp to                         ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

25.  Vt implant Mask (no CD's measured)
---------------------------------------

       Microscope inspect

26.  Boron Gate implant
-----------------------

       Dose                        :   ***
       Energy                      :   ***
       Specie                      :   ***
       Plasma resist clean
       Resist clean                :   ***
       Oxide dip                   :   ***
       Microscope inspect

27.  Gate oxidation
-------------------

       Diffusion preclean
       Gate oxidation                  ***
       Step                            ***

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                                      51
<PAGE>

       Push in                      ***
       Anneal                       ***
       Oxidation                    ***
       Oxidation                    ***
       Oxidation                    ***
       Ramp to                      ***
       Anneal                       ***
       Ramp to                      ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

28.  Poly deposition
--------------------

       Polysilicon                  ***
       deposition(LP-CVD)
       Temperature               :  ***

       SiH4                      :  ***
       Visual inspect

29. Backside Etch
-----------------

       Photoresist spin
       Resist bake                  ***
       Backside poly                ***
       Backside oxide               ***
       Plasma Resist Clean
       Resist Clean                 ***

30.  Poly dope
--------------

       Diffusion preclean
       Poly dope                    ***
       Step                         ***

       Push in                      ***
       Ramp to                      ***
       Doping                       ***
       Ramp to                      ***
       *Time adjusted as required to maintain specified Poly resistivity.
       Visual inspect
       Oxide dip                 :  ***

Confidential
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                                      52
<PAGE>

       Cleaning                      :  ***

31.  Gate Mask (CD's measured)
------------------------------

       Microscope inspect

32.  Poly etch
--------------

       Plasma Poly etch                 ***
       Microscope inspect
       Plasma resist clean
       Resist clean                  :  ***
       Oxide dip                     :  ***
       Microscope inspect
       CD's measured

33.  Implant oxidation
----------------------

       Diffusion preclean
       Implant oxidation                ***
       Step                             ***

       Push in                          ***
       Anneal                           ***
       Oxidation                        ***
       Anneal                           ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual  inspect

34.  N+ Mask (no CD's measured)
-------------------------------

       Microscope inspect

35.  Arsenic Source/Drain implant
---------------------------------

       Dose                          :  ***
       Energy                        :  ***
       Specie                        :  ***
       Plasma resist clean
       Resist clean                  :  ***

36.  P+ Mask (no CD's measured)
-------------------------------

       Microscope inspect

Confidential
*** INDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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                                      53
<PAGE>

37.  Boron Source/Drain implant
-------------------------------

       Dose                       :   ***
       Energy                     :   ***
       Specie                     :   ***
       Plasma resist
       clean
       Resist clean               :   ***

38.  EP Mask (no CD's measured)
------------------------------

       Microscope inspect

39.  Boron EP implant
---------------------

       Dose                       :   ***
       Energy                     :   ***
       Specie                     :   ***
       Plasma resist clean
       Resist clean               :   ***

40.  Source/Drain re-oxidation
------------------------------

       Diffusion preclean
       Source/Drain re-oxidation      ***
       Step                           ***

       Push in                        ***
       Anneal                         ***
       Oxidation                      ***
       Ramp to                        ***
       Anneal                         ***
       Ramp to                        ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

41.  Glass deposition
---------------------

       LTO deposition(LP-CVD)         ***
       Temperature                :   ***

       SiH4                       :   ***
       MIX gas                    :   ***
       O2                         :   ***

Confidential
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                                      54
<PAGE>

       He                              :      ***
       Visual inspect
       Scrubber cleaning

42.  Densify
------------

       Step                                   ***

       Push in                                ***
       Ramp to                                ***
       Densify                                ***
       Ramp to                                ***

43.  Contact Mask (CD's  measured)
----------------------------------

       Microscope inspect

44.  Contact etch
------------------

       Plasma flush
       Resist bake                     :      ***
       Microscope inspect
       Oxide etch                      :      ***
       Resist bake                     :      ***
       Oxide thickness measured
       Plasma etch (CHF3)
       Oxide thickness measured
       Microscope inspect
       Resist bake                     :      ***
       Oxide etch                      :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Microscope inspect
       CD's measured

45.  AL/Si/Cu Sputter
---------------------

       Pre-Sputter clean               :      ***
       Wafer bake                      :      ***
       Aluminum                        :      ***
       Visual inspect

46.  Metal Mask (CD's measured)
-------------------------------

Confidential
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                                      55
<PAGE>

     Microscope Inspect

47.  Metal etch
---------------

       Resist bake                           ***
       Plasma metal ***
       Microscope inspect
       Plasma resist clean
       Microscope inspect
       CD's measured

48.  AL sinter
--------------

       Step                 ***

       Push in              ***
       Sinter               ***

49.  Glass deposition
---------------------

       LTO                                    ***
       deposition(LP-CVD)
       Temperature                     :      ***

       SiH4                            :      ***
       MIX gas                         :      ***
       O2                              :      ***
       He                              :      ***
       Visual inspect

50.  Pad Mask (no CD's measured)
--------------------------------

       Microscope inspect

51.  Pad etch
-------------

       Plasma etch (CF4/O2)
       Microscope inspect
       Plasma resist clean
       Microscope inspect

52.  Passivation sinter
-----------------------

       Step                 ***

Confidential
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                                      56
<PAGE>

       Push in             ***
       Sinter               ***

53.  PIX coating
----------------

       PIX-1400                        :      ***
       Bake                            :      ***

54.  PIX Mask (no CD's measured)
--------------------------------

       Microscope inspect

55.  PIX sinter
---------------

       Step                 ***

       Push in              ***
       Sinter               ***

56.  Backgrind
--------------

       Tape coating                    :      ***
       Backgrind                       :      ***
       Peeling tape off
       Water cleaning

  STANDARD 400V (50ohm) PROCESS FLOW CHART:

1.  Material specification
--------------------------

       Crystal type                    :      ***
       Resistivity                     :      ***
       Thickness                       :      ***

       Diffusion                       :      ***
       preclean

       Etch rate                       :      ***

Confidential
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                                      57
<PAGE>

2.  Blocking  oxidation
-----------------------

       Diffusion
       preclean
       Blocking                               ***
       oxidation
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Ramp to                                ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

3.  N-Well Mask (CD's measured)
-------------------------------

       Microscope inspect

4.  N-Well Etch
---------------

       Resist bake                    :      ***
       Microscope inspect
       Wet etch                       :      ***
       Plasma resist clean
       Resist clean                   :      ***
       CD's measured

5.  Well oxidation
------------------

       Diffusion preclean
       Well oxidation                        ***
       Step                                  ***

       Push in                               ***
       Ramp to                               ***
       Oxidation                             ***
       Ramp to                               ***
       *Time adjusted as required to maintain specified oxide thickness.
        Visual inspect

6.  Phosphorus N-Well implant
-----------------------------

       Dose                            :      ***

Confidential
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                                      58
<PAGE>

       Energy                          :      ***
       Specie                          :      ***
       Cleaning                        :      ***

7.  N-Well drive
----------------

       Diffusion
       preclean
       Step                                  ***

       Push in                               ***
       Ramp to                               ***
       Anneal                                ***
       Ramp to                               ***

8.  Well oxidation etch
-----------------------

       Wet etch                       :      ***
       Microscope inspect

9.  Implant oxidation
---------------------

       Diffusion preclean
       Implant oxidation                     ***
       Step                                  ***

       Push in                               ***
       Ramp to                               ***
       Oxidation                             ***
       Oxidation                             ***
       Anneal                                ***
       Ramp to                               ***
       *Time adjusted as required to maintain specified oxide thickness.
        Visual inspect

10.  P-Top Mask (CD's measured)
------------------------------

       Microscope inspect

11.  Boron P-Top implant
------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean

Confidential
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                                      59
<PAGE>

       Resist clean                    :      ***
       Microscope inspect

12.  P-Top drive
----------------

       Diffusion preclean
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***

13.  Oxide strip
----------------

       Oxide strip                     :      ***
       Microscope inspect

14.  Regrow oxidation
---------------------

       Diffusion preclean
       Regrow oxidation                       ***
       Step                                   ***

       Push in                                ***
       Ramp to                                ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
        Visual inspect

15.  Nitride deposition
-----------------------

       Nitride                                ***
       deposition(LP-CVD)
       Temperature                     :      ***

       NH3                             :      ***
       SiH2Cl2                         :      ***
       *Time adjusted as required to maintain specified Nitride thickness.
       Visual inspect

16.  OD Mask (CD's measured)
-----

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                                   60
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       Microscope inspect

17.  Source/Drain(Active Area) etch
------------------------------------

       Nitride etch (Plasma etcher)
       Microscope inspect
       Plasma resist Clean
       Resist clean                    :      ***
       CD's measured

18.  Boron field implant Mask (no CD's measured)
------------------------------------------------

       Microscope inspect

19.  Oxide etch
---------------

       Resist bake                     :      ***
       Microscope inspect
       Wet etch                        :      ***
       Resist bake                     :      ***

20.  BF2 field implant
----------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***

21.  Boron Punchthrough implant
-------------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Microscope inspect

22.  Field oxidation
--------------------

       Diffusion preclean
       Field oxidation                        ***
       Step                                   ***

       Push in                                ***

Confidential
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                                      61
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       Anneal                                 ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
        Visual inspect

23.  Phosphoric Acid Nitride strip
----------------------------------

       Oxide dip                       :      ***
       Phosphoric Acid                 :      ***
       strip
       Microscope inspect
       Oxide dip                       :      ***
       Microscope inspect

24.  Sacrificial oxidation
--------------------------

       Diffusion preclean
       Sacrificial                            ***
       oxidation
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
        Visual inspect

25.  Vt implant Mask (no CD's measured)
----------------------------------------

       Microscope inspect

26.  Boron Gate implant
-----------------------

Confidential
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                                      62
<PAGE>

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***
       Oxide dip                       :      ***
       Microscope inspect

27.  Gate oxidation
-------------------

       Diffusion
       preclean
       Gate oxidation                         ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Oxidation                              ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
        Visual  inspect

28.  Poly deposition
--------------------

       Polysilicon                            ***
       deposition(LP-CVD)
       Temperature                     :      ***

       SiH4                            :      ***
       Visual inspect

29. Backside Etch
-----------------

       Photoresist spin
       Resist bake                                     ***
       Backside poly                          ***
       Backside oxide                         ***
       Plasma Resist Clean
       Resist Clean                           ***

Confidential
*** IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST
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                                      63
<PAGE>

30.  Poly dope
--------------

       Diffusion
       preclean
       Poly dope                              ***
       Step                                   ***

       Push in                                ***
       Ramp to                                ***
       Doping                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified Poly resistivity.
       Visual inspect

       Oxide dip                       :      ***
       Cleaning                        :      ***

31.  Gate Mask (CD's measured)
-----------------------------

       Microscope inspect

32.  Poly etch
--------------

       Plasma Poly etch                       ***
       Microscope inspect
       Plasma resist clean
       Resist clean                    :      ***
       Oxide dip                       :      ***
       Microscope inspect
       CD's measured

33.  Implant oxidation
----------------------

       Diffusion preclean
       Implant oxidation                      ***
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Anneal                                 ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual inspect

34.  N+ Mask (no CD's measured)
-------------------------------

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                                      64
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       Microscope inspect

35.  Arsenic Source/Drain implant
---------------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***

36.  P+ Mask (no CD's measured)
-------------------------------

       Microscope inspect

37.  Boron Source/Drain implant
-------------------------------

       Dose                            :      ***
       Energy                          :      ***
       Specie                          :      ***
       Plasma resist clean
       Resist clean                    :      ***

38.  Source/Drain  re-oxidation
-------------------------------

       Diffusion
       preclean
       Source/Drain                           ***
       re-oxidation
       Step                                   ***

       Push in                                ***
       Anneal                                 ***
       Oxidation                              ***
       Ramp to                                ***
       Anneal                                 ***
       Ramp to                                ***
       *Time adjusted as required to maintain specified oxide thickness.
       Visual  inspect

39.  Glass deposition
---------------------

       LTO                                    ***
       deposition(LP-CVD)
       Temperature                     :      ***

       SiH4                            :      ***
       MIX gas                         :      ***

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                                      65
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     O2                      :      ***
     He                      :      ***
     Visual inspect
     Scrubber cleaning

40.  Densify
------------

     Step        ***

     Push in     ***
     Ramp to     ***
     Densify     ***
     Ramp to     ***

41.  Contact Mask (CD's measured)
----------------------------------

     Microscope inspect

42.  Contact etch
------------------

     Plasma flush
     Resist bake                    :      ***
     Microscope inspect
     Oxide etch                     :      ***
     Resist bake                    :      ***
     Oxide thickness measured
     Plasma etch (CHF3)
     Oxide thickness measured
     Microscope inspect
     Resist bake                    :      ***
     Oxide etch                     :      ***
     Plasma resist clean
     Resist clean                   :      ***
     Microscope inspect
     CD's measured

43.  AL/Si/Cu Sputter
----------------------

     Pre-Sputter clean              :      ***
     Wafer bake                     :      ***
     Aluminum                       :      ***
     Visual inspect

44.  Metal Mask (CD's measured)
--------------------------------

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                                      66
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     Microscope inspect

45.  Metal etch
---------------

     Resist bake                    :      ***
     Plasma metal
     etch on PE8300 using BCl3
     Microscope inspect
     Plasma resist clean
     Microscope inspect
     CD's measured

46.  AL sinter
--------------

     Step                ***

     Push in             ***
     Sinter              ***

47.  Glass deposition
----------------------

     LTO deposition(LP-CVD     ***
       Temperature      :      ***

       SiH4             :      ***
       MIX gas         :      ***
       O2               :      ***
       He               :      ***
       Visual inspect

48.  Pad Mask (no CD's measured)
----------------------------------

     Microscope inspect

49.  Pad etch
-------------

     Plasma etch (CF4/O2)
     Microscope inspect
     Plasma resist clean
     Microscope inspect

50.  Passivation sinter
-----------------------

     Step      ***

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                                      67
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     Push in      ***
     Sinter       ***

51.  PIX coating
----------------

     PIX-1400           :      ***
     Bake               :      ***

52.  PIX Mask (no CD's measured)
----------------------------------

     Microscope inspect

53.  PIX sinter
----------------

       Step             ***

       Push  in         ***
       Sinter           ***

54.  Backgrind
--------------

       Tape coating     :      ***
       Backgrind        :      ***
       Peeling tape off
       Water cleaning

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                                      68
<PAGE>

                                   Appendix B

                                  PI's Patents
                                  ------------

<TABLE>
<S>                                                        <C>                             <C>
High Voltage MOS transistors                               USA                                   4,811,075

                                                           European (designated France,            0295391
                                                           Germany, Great Britain,
                                                           Italy, Netherlands, Sweden)

Regulated Flyback Converter with Spike Suppressing         USA                                   5,008,794
Coupled Inductors

Self Powering Technique for Integrated Switched Mode       USA                                   5,014,178
Power Supply
                                                           Japan                                   2044690

Temperature-Compensated Integrated Circuit for Uniform     USA                                   5,038,053
Current Generation

Pulse Width Modulator Control Circuit                      USA                                   5,045,800

MOS Grated Bipolar Transistor                              USA                                   5,072,268

                                                           Japan                                   1937954

High Frequency Switched Mode Converter                     USA                                   5,161,098

     Low Cost High Frequency Switched Mode Converter
     & Method For Making Same                              Taiwan                                    56268

Low Noise Voltage Regulator Using A Gated Single Ended     USA                                   5,164,891
Oscillator

Below Ground Current Sensing with Current Input to         USA                                   5,245,526
Control Threshold

Semiconductor Device w/ Improved Breakdown Voltage         USA                                   5,258,636
Characteristics

Dual Threshold Differential Discriminator                  USA                                   5,274,274
</TABLE>

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FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

                                      69
<PAGE>

<TABLE>
<S>                                                      <C>                                     <C>
                                                           European (designated France,            0562397
                                                           Germany, Great Britain,
                                                           Italy, Netherlands, Sweden)

High Voltage Transistor                                    USA                                   5,274,259

Power MOSFET Safe Operating Area Current Limiting Device   USA                                   5,282,107

                                                           European (designated France,            0585847
                                                           Germany, Great Britain,
                                                           Italy, Netherlands, Sweden)

Linear Load Circuit to Control Switching Power Supplies    USA                                   5,285,367
Under Minimum Load Conditions

Switched Mode Power Supply Integrated Circuit with         USA                                   5,285,369
Start-up Self-Biasing
                                                           European (designated France,            0585788
                                                           Germany, Italy,
                                                           Netherlands, Sweden, UK)

High Voltage MOS Transistor With A Low On-Resistance       USA                                   5,313,082

Three Terminal Switched Mode Power Supply Integrated       USA                                   5,313,381
Circuit
                                                           European (designated France,            0585789
                                                           Germany, Italy,
                                                           Netherlands, Sweden, UK)

Bi- Directional MOSFET Switch                              USA                                   5,323,044

Method of Making High Voltage Transistor                   USA                                   5,411,901

Power Factor Correction Pre-compensation Circuit           USA                                   5,461,303
</TABLE>

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COMMISSION.

                                      70
<PAGE>

<TABLE>
<S>                                                      <C>                                  <C>
Plastic Quad Packaged Switch with Mode Integrated          USA                                   5,469,334
Circuit Transformer Winding and Moldings for
Transformer Core Pieces

Low-Cost High-Voltage Flyback Power Supply                 USA                                   5,602,724

Coupled inductor power supply with reflected feedback      USA                                   5,973,945
regulation circuitry

Two switch off-line switching converter                    USA                                   5,982,639

Two switch off-line switching converter                    USA                                   6,005,781
</TABLE>

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***  IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

                                      71
<PAGE>

                                   Appendix C

                                 MEC's Patents
                                 -------------

<TABLE>
<CAPTION>
     -------------------------------------------------------------------------------------------------
     Title                                     Open No              Patent No            Patent No
                                               (Japan)               (Japan)               (USA)
     -------------------------------------------------------------------------------------------------
     <S>                                 <C>                   <C>                  <C>
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus and igniter With it
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus and Manufacturing method
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                   ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Constant Current Circuit            ***                   ***
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                                        ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Semiconductor                       ***                                        ***
     Apparatus
     -------------------------------------------------------------------------------------------------
     Electro Luminescence                ***                                        ***
     Drive Apparatus
     -------------------------------------------------------------------------------------------------
</TABLE>

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                                      72
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Confidential
***  IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST
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COMMISSION.

                                      73

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