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

                                    FORM 10-Q

X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the quarterly period ended August 24, 2003

                                       or

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from _________ to _________.

Commission File Number: 1-6453

                       NATIONAL SEMICONDUCTOR CORPORATION
             (Exact name of registrant as specified in its charter)

         DELAWARE                             95-2095071
         --------                             ----------
 (State of incorporation)     (I.R.S. Employer Identification Number)

                    2900 Semiconductor Drive, P.O. Box 58090
                       Santa Clara, California 95052-8090
                    (Address of principal executive offices)

Registrant's telephone number, including area code:  (408) 721-5000

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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X
 No__.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

         Title of Each Class                 Outstanding at August 24, 2003
         -------------------                 ------------------------------

Common stock, par value $0.50 per share              185,383,175





NATIONAL SEMICONDUCTOR CORPORATION

INDEX

                                                                     Page No.
                                                                     --------
Part I. Financial Information

Item 1. Financial Statements

Condensed Consolidated Statements of Operations (Unaudited) for
  the Three Months Ended August 24, 2003 and August 25, 2002             3

Condensed Consolidated Statements of Comprehensive Income (Loss)
  (Unaudited)for the Three Months Ended August 24, 2003 and
  August 25, 2002                                                        4

Condensed Consolidated Balance Sheets (Unaudited) as of
   August 24, 2003 and May 25, 2003                                      5

Condensed Consolidated Statements of Cash Flows (Unaudited)
  for the Three Months Ended August 24, 2003 and August 25, 2002         6

Notes to Condensed Consolidated Financial Statements (Unaudited)      7-15

Item 2. Management's  Discussion and Analysis of Financial
        Condition and Results of Operations                          16-23

Item 3. Quantitative and Qualitative Disclosures About Market Risk      24

Item 4. Controls and Procedures                                         24

Part II. Other Information

Item 1. Legal Proceedings                                               25

Item 6. Exhibits and Reports on Form 8-K                             25-26

Signature                                                               27




PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


                                                                                      Three Months Ended
                                                                                Aug. 24, 2003   Aug. 25, 2002
  (In Millions, Except Per Share Amounts)
                                                                                --------------- ---------------
                                                                                              

  Net sales                                                                        $ 424.8         $ 420.6
  Operating costs and expenses:
    Cost of sales                                                                    224.4           238.3
    Research and development                                                          92.1           110.7
    Selling, general and administrative                                               68.4            69.9
    Special items                                                                     12.6             -
                                                                                --------------- ---------------

  Total operating costs and expenses                                                 397.5           418.9
                                                                                --------------- ---------------

  Operating income                                                                    27.3             1.7
  Interest income, net                                                                 3.1             4.1
  Other income (expense), net                                                          5.5            (1.5)
                                                                                --------------- ---------------

  Income before income taxes and cumulative effect of a change
    in accounting principle                                                           35.9             4.3
  Income tax expense                                                                   4.3             3.0
                                                                                --------------- ---------------

  Income before cumulative effect of a change in accounting
    principle                                                                         31.6             1.3
  Cumulative effect of a change in accounting principle                               (1.9)            -
                                                                                --------------- ---------------

  Net income                                                                     $    29.7        $    1.3
                                                                                =============== ===============

  Earnings per share:
    Income before cumulative effect of a change in accounting
      principle:
        Basic                                                                       $  0.17         $  0.01
        Diluted                                                                     $  0.16         $  0.01
    Net income:
        Basic                                                                       $  0.16         $  0.01
        Diluted                                                                     $  0.15         $  0.01
    Weighted-average shares used to calculate earnings per share:
        Basic                                                                        184.5           180.7
        Diluted                                                                      191.9           187.1

  Pro forma amounts assuming the change in accounting
    principle is applied retroactively:
      Net income                                                                 $    31.6        $    1.2
      Earnings per share:
        Basic                                                                    $     0.17       $    0.01
        Diluted                                                                  $     0.16       $    0.01

See accompanying Notes to Condensed Consolidated Financial Statements



NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) (Unaudited)





                                                                          Three Months Ended
                                                                       Aug. 24,        Aug. 25,
(In Millions)                                                            2003            2002
                                                                     -------------- ---------------
                                                                                

Net income                                                              $  29.7          $ 1.3

Other comprehensive income (loss), net of tax:
  Reclassification adjustment for net realized gain on available-
    for-sale securities included in net income                              -             (0.7)
  Unrealized loss on available-for-sale securities                         (3.1)         (28.1)
  Derivative instruments:
    Unrealized gain on cash flow hedges                                     0.1            0.4
                                                                     -------------- ---------------

Comprehensive income (loss)                                             $  26.7         $(27.1)
                                                                     ============== ===============



See accompanying Notes to Condensed Consolidated Financial Statements




NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS  (Unaudited)


                                                                     Aug. 24,                 May 25,
   (In Millions)                                                      2003                     2003
                                                             ------------------------ -----------------------
                                                                                    
   ASSETS
   Current assets:
     Cash and cash equivalents                                            $   721.4                 $  802.2
     Short-term marketable investments                                        193.9                    113.2
     Receivables, less allowances of $23.3 in fiscal 2004
       and $38.2 in fiscal 2003                                               156.5                    137.1
     Inventories                                                              155.1                    142.2
     Deferred tax assets                                                       66.0                     66.0
     Other current assets                                                      37.4                     20.5
                                                             ------------------------ -----------------------

     Total current assets                                                   1,330.3                  1,281.2

   Net property, plant and equipment                                          660.9                    680.7
   Goodwill                                                                   173.3                    173.3
   Other assets                                                               100.5                    109.4
                                                             ------------------------ -----------------------

   Total assets                                                            $2,265.0                 $2,244.6
                                                             ======================== =======================

   LIABILITIES AND SHAREHOLDERS' EQUITY
   Current liabilities:
     Current portion of long-term debt                                  $       1.4              $       2.3
     Accounts payable                                                          97.1                    107.0
     Accrued expenses                                                         185.1                    208.5
     Income taxes payable                                                      46.5                     49.6
                                                             ------------------------ -----------------------

     Total current liabilities                                                330.1                    367.4

   Long-term debt                                                              20.6                     19.9
   Other noncurrent liabilities                                               159.4                    151.3
                                                             ------------------------ -----------------------

     Total liabilities                                                        510.1                    538.6
                                                             ------------------------ -----------------------

   Commitments and contingencies

   Shareholders' equity:
     Common stock                                                              92.7                     91.8
     Additional paid-in capital                                             1,472.6                  1,451.3
     Retained earnings                                                        306.9                    277.2
     Accumulated other comprehensive loss                                    (117.3)                  (114.3)
                                                             ------------------------ -----------------------

     Total shareholders' equity                                             1,754.9                  1,706.0
                                                             ------------------------ -----------------------

   Total liabilities and shareholders' equity                              $2,265.0                 $2,244.6
                                                             ======================== =======================


See accompanying Notes to Condensed Consolidated Financial Statements



NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


                                                                                  Three Months Ended
                                                                             Aug. 24,           Aug. 25,
(In Millions)                                                                  2003               2002
                                                                  ------------------------ --------------------
                                                                                          
      Cash flows from operating activities:
      Net income                                                                 $  29.7               $  1.3
      Adjustments to reconcile net income with net cash
        provided by operating activities:
         Cumulative effect of a change in accounting principle                       1.9                  -
         Depreciation and amortization                                              55.2                 55.5
         Gain on investments                                                        (2.3)                (0.7)
         Share in net losses of equity-method investments                            4.8                  3.6
         Loss on disposal of equipment                                               2.2                  1.2
         Noncash special items                                                       3.9                  -
         Other, net                                                                  0.7                  2.4
         Changes in certain assets and liabilities, net:
            Receivables                                                            (11.8)               (12.1)
            Inventories                                                            (17.5)               (13.6)
            Other current assets                                                   (10.3)               (13.6)
            Accounts payable and accrued expenses                                  (34.2)               (11.5)
            Income taxes payable                                                    (3.1)                (1.6)
            Other noncurrent liabilities                                             6.0                  4.5
                                                                  ------------------------ --------------------

      Net cash provided by operating activities                                     25.2                 15.4
                                                                  ------------------------ --------------------

      Cash flows from investing activities:
      Purchase of property, plant and equipment                                    (41.5)               (60.9)
      Sale and maturity of available-for-sale securities                           244.8                130.8
      Purchase of available-for-sale securities                                   (327.6)               (47.5)
      Sale of investments                                                            -                    1.1
      Investment in nonpublicly traded companies                                     -                   (7.2)
      Funding of benefit plan                                                       (2.7)                (2.5)
      Other, net                                                                     1.3                 (0.3)
                                                                  ------------------------ --------------------

      Net cash provided by (used by) investing activities                         (125.7)                13.5
                                                                  ------------------------ --------------------

      Cash flows from financing activities:
      Repayment of debt                                                             (0.9)                (2.1)
      Issuance of common stock                                                      20.6                 10.9
                                                                  ------------------------ --------------------

      Net cash provided by financing activities                                     19.7                  8.8
                                                                  ------------------------ --------------------

      Net change in cash and cash equivalents                                      (80.8)                37.7
      Cash and cash equivalents at beginning of period                             802.2                681.3
                                                                  ------------------------ --------------------

      Cash and cash equivalents at end of period                                  $721.4               $719.0
                                                                  ======================== ====================


See accompanying Notes to Condensed Consolidated Financial Statements



NATIONAL SEMICONDUCTOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  Summary of Significant Accounting Policies

In  the  opinion  of  our  management,   the  accompanying  unaudited  condensed
consolidated  financial statements contain all adjustments  necessary to present
fairly  the   financial   position  and  results  of   operations   of  National
Semiconductor  Corporation and our majority-owned  subsidiaries.  You should not
expect interim results of operations to necessarily be indicative of the results
for the full fiscal year.  This report  should be read in  conjunction  with the
consolidated  financial  statements and the  accompanying  notes included in our
annual report on Form 10-K for the fiscal year ended May 25, 2003.

Earnings Per Share:

A  reconciliation  of the shares  used in the  computation  of basic and diluted
earnings per share follows:

                                                         Three Months Ended
                                                       Aug. 24,      Aug. 25,
(In Millions)                                            2003          2002
                                                   ------------- -------------
Numerator:
  Income before cumulative effect of a change in
    accounting principle                                 $31.6          $1.3
                                                   ============= =============

  Net income                                             $29.7          $1.3
                                                   ============= ==============

Denominator:
  Weighted-average common shares outstanding used
    for basic earnings per share                         184.5         180.7

  Effect of dilutive securities:
    Stock options                                          7.4           6.4
                                                   ------------- --------------

Weighted-average common and potential common
  shares outstanding used for diluted earnings
  per share                                              191.9         187.1
                                                   ============= ==============


     For  the  first  quarter  of  fiscal  2004,  we  did  not  include  options
outstanding   to  purchase   28.0   million   shares  of  common  stock  with  a
weighted-average  exercise  price of $36.24 in diluted  earnings per share since
their effect was antidilutive  because their exercise price exceeded the average
market price during the quarter. These shares could, however, potentially dilute
basic earnings per share in the future. For the first quarter of fiscal 2003, we
did not include  options  outstanding  to purchase 26.1 million shares of common
stock with a  weighted-average  exercise price of $37.90 in diluted earnings per
share since their effect was antidilutive  because their exercise price exceeded
the average market price during the quarter.

Employee Stock Plans

We account for our employee  stock option and stock purchase plans in accordance
with the  intrinsic  method of  Accounting  Principles  Board  Opinion  No.  25,
"Accounting for Stock Issued to Employees." For more complete information on our
stock-based  compensation  plans,  see  Note  10 to the  Consolidated  Financial
Statements included in our annual report on Form 10-K for the year ended May 25,
2003.

     Pro forma  information  regarding  net  income  and  earnings  per share is
required by SFAS No. 123, "Accounting for Stock-Based  Compensation," as amended
by  SFAS  No.  148,  "Accounting  for  Stock-Based  Compensation-Transition  and
Disclosure." This information  illustrates the effect on net income and earnings
per share as if we had accounted for  stock-based  awards to employees under the
fair value method specified by SFAS No. 123. The weighted-average  fair value of
stock  options  granted  during the first  quarter  of fiscal  2004 and 2003 was
$20.14 and $17.50 per share,  respectively.  The weighted-average  fair value of
rights  granted under the stock purchase plans was $4.28 and $7.58 per share for
the first quarter of fiscal 2004 and 2003,  respectively.  We estimated the fair
value of these employee  stock-based awards using a Black-Scholes option pricing
model that assumes no expected dividends and uses the following weighted-average
assumptions:

                                                   Three Months Ended
                                               Aug. 24,          Aug. 25,
                                                 2003              2002
                                        ------------------- ------------------
Stock Option Plans
     Expected life (in years)                    5.1               5.0
     Expected volatility                         76%               77%
     Risk-free interest rate                     3.3%              2.7%

Stock Purchase Plans
     Expected life (in years)                    0.3               0.3
     Expected volatility                         51%               54%
     Risk-free interest rate                     1.0%              1.1%

     For pro forma  purposes,  the estimated fair value of employee  stock-based
awards is amortized on a  straight-line  basis over the options'  vesting period
for options and the  three-month  purchase  period for stock purchases under the
stock purchase plans. The pro forma information follows:


                                                                                  Three Months Ended
                                                                           Aug. 24,              Aug. 25,
(In Millions,  Except Per Share Amounts)                                     2003                  2002
                                                                      -------------------- ------------------
                                                                                             
Net income - as reported                                                 $   29.7            $     1.3
Add back:  Stock compensation charge included in the
  net income determined under the intrinsic value method,
  net of tax                                                                  0.7                  0.8
Deduct:  Total stock-based employee compensation
  expense determined under the fair value method,
  net of tax                                                                (45.3)               (46.8)
                                                                      -------------------- ------------------
Net loss - pro forma                                                     $  (14.9)            $  (44.7)
                                                                      ==================== ==================

Basic earnings per share - as reported                                   $   0.16             $   0.01
Basic loss per share - pro forma                                         $  (0.08)            $  (0.25)
Diluted earnings per share - as reported                                 $   0.15             $   0.01
Diluted loss per share - pro forma                                       $  (0.08)            $  (0.25)


New Accounting Pronouncements:

At the beginning of fiscal 2004, we adopted SFAS No. 143,  "Accounting for Asset
Retirement  Obligations."  SFAS  No.  143  addresses  financial  accounting  and
reporting for obligations  associated with the retirement of tangible long-lived
assets and the associated asset  retirement  costs. The impact from the adoption
of this statement is discussed in Note 5 to the condensed consolidated financial
statements.

Reclassifications:

Certain amounts reported in fiscal 2003 have been reclassified to conform to the
fiscal 2004  presentation.  Net operating  results have not been affected by the
reclassification.


Note 2.  Consolidated Financial Statements Detail

Balance sheets:
                                          Aug. 24,             May 25,
(In Millions)                              2003                 2003
                                 ---------------------- ---------------------
Inventories:
  Raw materials                          $  9.0                $  8.1
  Work in process                          94.4                  89.2
  Finished goods                           51.7                  44.9
                                 ---------------------- ---------------------

Total inventories                        $155.1                $142.2
                                 ====================== =====================

Statements of operations:
                                                            Three Months Ended
                                                           Aug. 24,    Aug. 25,
(In Millions)                                                2003        2002
                                                         ----------- -----------
Special items (See Note 4):
  Cost reduction charges                                   $  8.6        $ -
  Net charges associated with the exit and sale of
    the information appliance business                        4.0         -
                                                         ----------- -----------

Total special items                                         $12.6        $ -
                                                         =========== ===========

Interest income, net:
  Interest income                                           $ 3.2       $ 4.5
  Interest expense                                           (0.1)       (0.4)
                                                         ----------- -----------

Interest income, net                                        $ 3.1       $ 4.1
                                                         =========== ===========

Other income (expense), net:
  Net intellectual property income                          $ 8.0       $ 1.6
  Net gain on investments                                     2.3         0.7
  Share of loss from equity-method investments               (4.8)       (3.6)
  Other                                                       -          (0.2)
                                                          ---------- -----------

Total other income (expense), net                           $ 5.5       $(1.5)
                                                          ========== ===========



Note 3.  Statement of Cash Flows Information


                                                                               Three Months Ended
                                                                          Aug. 24,              Aug. 25,
(In Millions)                                                               2003                  2002
                                                                   ----------------------- -------------------
                                                                                          
Supplemental Disclosure of Cash Flow Information:
  Cash paid for:                                                          $   0.1               $    0.5
    Interest                                                              $   8.4               $    5.6
    Income taxes

Supplemental Schedule of Non-cash Investing and
  Financing Activities:
    Issuance of stock for employee benefit plans                         $    0.9               $    0.8
    Unearned compensation relating to restricted stock issuance          $    1.0               $    0.2
    Change in unrealized gain on cash flow hedges                        $    0.1               $    0.4
    Change in unrealized gain on available-for-sale securities           $   (3.1)              $  (28.8)


Note 4.  Cost Reduction Programs and Restructuring of Operations

In late August 2003, we completed the exit and sale of our information appliance
business as part of a series of strategic  profit-improvement  actions that were
initially  launched in February 2003.  This action included the sale to Advanced
Micro  Devices,  Inc.  of  certain  intellectual  property  and  assets  of  the
information appliance business. As part of the transaction, AMD hired 125 former
National  employees  who were mostly  located in  Longmont,  Colorado.  However,
certain  assets and employees  that were  directly  supporting  the  information
appliance business were not included in this sale transaction. The corresponding
severance and asset  impairments  that were incurred  resulted in net charges of
$4.0  million  for the  exit  and sale of the  information  appliance  business.
Included  in this net  amount are  proceeds  of $10.1  million  from the sale of
assets that had a carrying value of $7.5 million less transaction  costs of $1.3
million.   We  also  recorded  an  additional  $8.6  million  charge  for  other
supplemental   profit-improvement   actions,   primarily  related  to  workforce
reductions in various  manufacturing,  product  development  and support  areas.
Included in the charge are  severance  costs,  as well as asset  write-offs  and
lease  obligations  we incurred when we vacated  certain  design  centers in the
quarter as planned with the closure of the cellular baseband  business.  A total
of 142  employees  were  terminated  as a  combined  result  of the  information
appliance business exit and the supplemental  actions.  Total charges related to
cost  reduction  actions,  including  the  exit  of  the  information  appliance
business, are presented in the following table:


                                      Information    Enterprise       Enhanced
                         Analog        Appliance     Networking      Solutions
(In Millions)            Segment        Segment        Segment        Segment       All Others       Total
                      -------------- -------------- -------------- --------------- ------------- --------------
                                                                                    
Severance                   $ 1.7          $ 1.1          $ -            $ -            $ 3.6          $ 6.4
Exit related costs            2.2            0.1            -              -               -             2.3
Asset write-off               1.1            4.1            -              -               -             5.2
                      -------------- -------------- -------------- --------------- ------------- --------------
                            $ 5.0          $ 5.3          $ -            $ -             $ 3.6         $13.9
                      ============== ============== ============== =============== ============= ==============

     Noncash  charges  included in the table above  relate to the  write-off  of
assets,  primarily equipment and a technology license that were dedicated to the
information  appliance  and cellular  baseband  businesses.  As part of the sale
transaction  to AMD  discussed  above,  we also entered  into a separate  supply
agreement where we will  manufacture  product for AMD at prices specified by the
terms of the  agreement.  This  agreement  is  effective  for three years unless
terminated earlier as permitted under the terms of the agreement.


     The following  table  provides a summary of the  activities  related to our
cost reduction and restructuring actions included in accrued liabilities for the
three months ended August 24, 2003:

(In Millions)                       Severance     Other Exit Costs     Total
                                   ------------- ----------------- -------------

Balance at beginning of fiscal year    $ 17.5          $ 7.8          $ 25.3
Cash payments                           (10.9)          (1.8)          (12.7)
August 2003 cost reduction charge         6.4            2.3             8.7
                                   ------------- ----------------- -------------
Ending Balance                         $ 13.0          $ 8.3          $ 21.3
                                   ============= ================= =============

     During the first quarter of fiscal 2004 we paid  severance to 210 employees
in connection with workforce  reductions announced in fiscal 2003, as well as in
the recent fiscal 2004 first quarter.  Amounts paid for other exit-related costs
during the first quarter of fiscal 2004 were  primarily for payments under lease
obligations associated with previous restructuring and cost reduction actions.

Note 5.  Accounting for Asset Retirement Obligations

We adopted SFAS No. 143,  "Accounting for Asset Retirement  Obligations," at the
beginning of fiscal 2004. This statement requires that the fair value of a legal
liability for an asset retirement  obligation be recorded in the period in which
it is  incurred  if a  reasonable  estimate  of fair  value  can be  made.  Upon
recognition of a liability, the asset retirement cost is recorded as an increase
in the carrying value of the related  long-lived asset and then depreciated over
the life of the asset.  Our asset  retirement  obligations  arise primarily from
contractual  commitments  to  decontaminate  machinery and equipment used at our
manufacturing  facilities  at the time we dispose or replace  them. We also have
some  leased  facilities  where  we  have  asset  retirement   obligations  from
contractual commitments to remove leasehold improvements and return the property
to a certain specified  condition when the lease terminates.  We recorded a $2.1
million noncurrent  liability for these asset retirement  obligations and a $0.4
million  increase  in the  carrying  value of the  related  assets,  net of $1.0
million of accumulated depreciation. The cumulative effect upon adoption of this
accounting  standard was a charge of $1.9 million including a tax effect of $0.2
million.

     We were unable to recognize  any asset  retirement  obligations  associated
with the  closure or  abandonment  of the  manufacturing  facilities  we own. We
currently  intend to operate  these  facilities  indefinitely  and are therefore
unable to  reasonably  estimate the fair value of any legal  obligations  we may
have because of the indeterminate closure dates.

     The  following  table  presents  the  activity  for  the  asset  retirement
obligations for the three months ended August 24, 2004:

(In Millions)
Balance at beginning of fiscal 2004                          $ 2.1
Accretion expense                                              0.1
                                                    -----------------------
Ending balance                                               $ 2.2
                                                    =======================



     The  following  table  presents  net income and  earnings per share for the
first quarter of fiscal 2004 and 2003, as if the  provisions of SFAS No. 143 had
been applicable in fiscal 2003:


                                                                               Three Months Ended
                                                                          Aug. 24,              Aug. 25,
(In Millions, Except Per Share Amounts)                                     2003                  2002
                                                                   ----------------------- -------------------
                                                                                          

Net income, as reported                                                   $  29.7                  $   1.3
Add back:
  Cumulative effect of a change in accounting principle
    including tax effect of $0.2 million                                      1.9                      -
Deduct:
  Accretion and depreciation, net of tax                                      -                        0.1
                                                                   ----------------------- -------------------
                                                                   ----------------------- -------------------
Net income, as adjusted                                                   $  31.6                 $    1.2
                                                                   ======================= ===================
                                                                   ======================= ===================

Net income per share, as adjusted:                                                                     -
  Basic                                                                  $    0.17                $    0.01
  Diluted                                                                $    0.16                $    0.01



Note 6.  Segment Information

The following table presents information related to our reportable segments:


                                                      Information  Enterprise  Enhanced
                                              Analog   Appliance   Networking  Solutions
(In Millions)                                 Segment   Segment     Segment     Segment   All Others  Eliminations    Total
                                             --------- ---------    --------   --------    -------    ------------ -------------
                                                                                                   
Three months ended August 24, 2003:
   Sales to unaffiliated customers             $334.1   $ 55.9       $  5.3      $11.0      $18.5                     $ 424.8
                                             ========= =========    ========   ========    =======    ============ =============

  Segment income (loss) before income
  taxes and cumulative effect of a change
  in accounting principle:                     $ 54.3   $(14.8)      $ (3.9)     $ 4.6      $(4.3)          -         $  35.9
                                             ========= =========    ========   ========    =======    ============ =============

Three months ended August 25, 2002:
   Sales to unaffiliated customers             $327.1   $ 55.8       $  5.5      $11.4      $20.8                     $ 420.6
                                             ========= =========    ========   ========    =======    ============ =============

  Segment income (loss) before income taxes:   $ 13.9   $(12.4)      $(10.4)     $ 2.9      $10.3           -         $   4.3
                                             ========= =========    ========   ========    =======    ============ =============





Note 7.  Contingencies - Legal Proceedings

We have  been  named  to the  National  Priorities  List  for our  Santa  Clara,
California, site and have completed a remedial  investigation/feasibility  study
with the  Regional  Water  Quality  Control  Board,  acting  as an agent for the
Federal  Environmental  Protection  Agency. We have agreed in principle with the
RWQCB to a site remediation plan. In addition to the Santa Clara site, from time
to time we have been  designated  as a  potentially  responsible  party (PRP) by
federal and state  agencies  for certain  environmental  sites with which we may
have had direct or indirect involvement.  These designations are made regardless
of the  extent  of our  involvement.  These  claims  are in  various  stages  of
administrative or judicial  proceedings and include demands for recovery of past
governmental costs and for future  investigations and remedial actions.  In many
cases, the dollar amounts of the claims have not been specified, and in the case
of the PRP cases,  claims have been asserted  against a number of other entities
for the same cost recovery or other relief as is sought from us. We accrue costs
associated  with  environmental  matters  when they become  probable  and can be
reasonably  estimated.  The amount of all  environmental  charges  to  earnings,
including  charges for the Santa  Clara site  remediation  (excluding  potential
reimbursements  from  insurance  coverage),  were not material  during the first
quarter of fiscal 2004.
     As part of the  disposition  in fiscal  1996 of the  Dynacraft  assets  and
business,  we retained  responsibility  for environmental  claims connected with
Dynacraft's  Santa Clara,  California,  operations  and for other  environmental
claims  arising  from  our  conduct  of  the  Dynacraft  business  prior  to the
disposition. As part of the Fairchild disposition in fiscal 1997, we also agreed
to retain liability for remediation  projects and environmental  matters arising
from our prior operation of Fairchild's  plants in South Portland,  Maine;  West
Jordan, Utah; Cebu, Philippines;  and Penang,  Malaysia; and Fairchild agreed to
arrange for and perform the remediation and cleanup. We prepaid to Fairchild the
estimated costs of the remediation and cleanup and remain  responsible for costs
and expenses  incurred by Fairchild in excess of the prepaid  amounts.  To date,
our liability for these excess costs has not been material.
     In January  1999, a class action suit was filed against us and our chemical
suppliers  by  former  and  present  employees  claiming  damages  for  personal
injuries. The complaint alleges that cancer and reproductive harm were caused to
employees  exposed to  chemicals  in the  workplace.  Plaintiffs  are  presently
seeking to certify a medical monitoring class, which we are opposing.  Discovery
in the case is proceeding.
     In November  2000,  a  derivative  action was brought  against us and other
defendants  by a  shareholder  of Fairchild  Semiconductor  International,  Inc.
Plaintiff seeks recovery of alleged "short-swing" profits under section 16(b) of
the  Securities  Exchange Act of 1934 from the sale by the defendants in January
2000  of  Fairchild  common  stock.  The  complaint   alleges  that  Fairchild's
conversion of preferred  stock held by the defendants at the time of Fairchild's
initial  public  offering in August 1999  constitutes a "purchase"  that must be
matched with the January 2000 sale for purposes of computing  the  "short-swing"
profits.  Plaintiff  seeks from National  alleged  recoverable  profits of $14.1
million.  In February  2002, the judge in the case granted the motion to dismiss
filed by us and our  co-defendants  and  dismissed  the  case,  ruling  that the
conversion  was done  pursuant  to a  reclassification  which is exempt from the
scope of Section  16(b).  Plaintiff  appealed the dismissal of the case and upon
appeal, the appeals court reversed the lower court's dismissal. Our petition for
a panel  rehearing  and/or  rehearing en banc was denied by the appeals court in
April 2003.  Our motion to stay the issuance of the appeals court mandate to the
district court pending our petition to the U.S.  Supreme Court was denied in May
2003.  We have filed a petition for a writ of certiorari  with the U.S.  Supreme
Court and we intend to continue to contest the case through all available means.
     Our tax returns for certain years are under  examination in the U.S. by the
IRS and in other countries by local authorities. The IRS has completed examining
our tax returns for fiscal years 1997 through 2000 and on July 29, 2003 issued a
notice of proposed  adjustment  seeking  additional taxes of  approximately  $19
million  (exclusive of interest) for those years. The issues giving rise to most
of the proposed  adjustments  relate to R&D credits,  inventory and depreciation
deductions. We intend to contest the adjustments administratively. We believe we
have made adequate tax payments and/or accrued adequate amounts in our financial
statements  to  cover  the  amounts  sought  by the  IRS,  as well as any  other
deficiencies that other governmental agencies may find in their audits.
     In addition to the foregoing, we are a party to other suits and claims that
arise in the normal course of business. Based on current information,  we do not
believe  that  it is  probable  that  losses  associated  with  the  proceedings
discussed  above that  exceed  amounts  already  recognized  will be incurred in
amounts that would be material to our consolidated financial position or results
of operations.


Contingencies -- Other

In connection  with  divestitures  we have done in the past,  we have  routinely
provided  indemnities  to  cover  the  indemnified  party  for  matters  such as
environmental,  tax, product and employee liabilities. We also routinely include
intellectual  property   indemnification   provisions  in  our  terms  of  sale,
development agreements and technology licenses with third parties. Since maximum
obligations are not explicitly stated in these indemnification  provisions,  the
potential amount of future maximum payments cannot be reasonably  estimated.  To
date we have  incurred  minimal  losses  associated  with these  indemnification
obligations  and  as a  result,  we  have  not  recorded  any  liability  in our
consolidated financial statements.

Note 8.  Subsequent Event

In September  2003, we completed the  repurchase  of  approximately  7.5 million
shares of our common stock for $202.2  million.  This share  repurchase was made
pursuant to the $400 million  stock  buy-back  program that we announced in July
2003. We completed the  repurchase  through a privately  negotiated  transaction
with a major financial institution. All of the shares were immediately retired.



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


This Quarterly Report on Form-10-Q  contains  forward-looking  statements within
the meaning of Section-27A of the Securities Act of 1933 and  Section-21E of the
Securities Exchange Act of 1934. These statements relate to, among other things,
sales, gross margins, operating expenses, capital expenditures, and acquisitions
and investments in other companies and are indicated by words or phrases such as
"expect," "outlook,"  "foresee," "we believe," "we intend," and similar words or
phrases.  These  statements are based on our current plans and  expectations and
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from  expectations.  These  forward-looking  statements should not be
relied upon as  predictions  of future  events as we cannot  assure you that the
events or  circumstances  reflected in these statements will be achieved or will
occur.  The following  are among the  principal  factors that could cause actual
results  to  differ  materially  from the  forward-looking  statements:  general
business and economic  conditions in the  semiconductor  industry and the growth
rate in the wireless, PC and communications  infrastructure industries;  pricing
pressures and competitive factors; delays in the introduction of new products or
lack  of  market  acceptance  for  new  products;  our  success  in  integrating
acquisitions and achieving  operating  improvements with acquisitions;  risks of
international  operations;  legislative and regulatory  changes;  the outcome of
legal, administrative and other proceedings that we are involved in; the results
of  our  programs  to  control  or  reduce  costs;  and  the  general  worldwide
geopolitical situation. For a discussion of some of the factors that could cause
actual results to differ materially from our forward-looking statements, see the
discussion on Risk Factors that appears below and other risks and  uncertainties
detailed  in this and our other  reports  and filings  with the  Securities  and
Exchange  Commission.  We  undertake  no  obligation  to update  forward-looking
statements to reflect developments or information obtained after the date hereof
and disclaim any obligation to do so.

     This  discussion  should  be  read in  conjunction  with  the  consolidated
financial  statements and the accompanying  notes included in this Form 10-Q and
in our annual report on Form 10-K for the fiscal year ended May 25, 2003.

o    Critical Accounting Policies
- ---------------------------------
We believe the following  critical  accounting  policies are those policies that
have a significant  effect on the  determination  of our financial  position and
results of operations. These policies also require us to make our most difficult
and subjective judgments:

1.   Revenue Recognition
     We recognize revenue from the sale of semiconductor products upon shipment,
     provided title and risk of loss have passed to the customer,  the amount is
     fixed or determinable and collection of the revenue is reasonably  assured.
     Service  revenues  are  recognized  as  the  services  are  provided  or as
     milestones  are  achieved,  depending on the terms of the  arrangement.  We
     record a provision  for estimated  future  returns at the time of shipment.
     Approximately 53 percent of our  semiconductor  product sales are currently
     made through  distributors.  We have agreements with our distributors  that
     cover various  programs,  including  pricing  adjustments based on resales,
     scrap  allowances  and volume  incentives.  The revenue we record for these
     distribution sales is net of estimated provisions for these programs.  When
     determining  this  net  distribution  revenue,  we  must  make  significant
     judgments and estimates. Our estimates are based upon historical experience
     rates,  inventory  levels in the  distribution  channel,  current  economic
     trends, and other related factors. To date, the actual distributor activity
     has been  materially  consistent  with the provisions we have made based on
     our estimates.  However, because of the inherent nature of estimates, there
     is always a risk that there could be significant differences between actual
     amounts and our estimates.  Our financial  condition and operating  results
     are dependent on our ability to make reliable estimates and we believe that
     our estimates are  reasonable.  However,  different  judgments or estimates
     could result in variances that might be  significant to reported  operating
     results.
          Intellectual property income is not classified as revenue. This income
     is classified as non-operating income and is recognized when the license is
     delivered,  the fee is  fixed  or  determinable,  collection  of the fee is
     reasonably assured and no further obligations to the other party exist.



2.   Inventories
     Inventories  are stated at the lower of standard cost,  which  approximates
     actual  cost on a  first-in,  first-out  basis,  or  market.  We reduce the
     carrying  value of inventory for  estimated  obsolescence  or  unmarketable
     inventory  by an amount  that is the  difference  between  its cost and the
     estimated  market  value based upon  assumptions  about  future  demand and
     market conditions.  Our products are classified as either custom, which are
     those   products   manufactured   with   customer-specified   features   or
     characteristics,  or non-custom,  which are those products that do not have
     customer-specified features or characteristics. We evaluate obsolescence by
     analyzing the inventory aging,  order backlog and future customer demand on
     an individual  product  basis.  If actual  demand were to be  substantially
     lower  than  what we have  estimated,  we may be  required  to  write  down
     inventory below the current carrying value.  While our estimates require us
     to make  significant  judgments and  assumptions  about future  events,  we
     believe  our   relationships   with  our   customers,   combined  with  our
     understanding  of the end-markets we serve,  provide us with the ability to
     make  reliable  estimates.  To  date  the  actual  amount  of  obsolete  or
     unmarketable  inventory  has been  materially  consistent  with  previously
     estimated write-downs we have recorded. We also evaluate the carrying value
     of inventory for  lower-of-cost-or-market  on an individual  product basis,
     and these  evaluations are intended to identify any difference  between net
     realizable  value and standard cost. Net realizable  value is determined as
     the selling price of the product less the estimated cost of disposal.  When
     necessary,  we reduce the carrying  value of  inventory  to net  realizable
     value. If actual market  conditions and resulting  product sales were to be
     less  favorable  than  what  we  have   projected,   additional   inventory
     write-downs may be required.

3.   Impairment of Goodwill, Intangible Assets and Other Long-lived Assets
     We assess the impairment of long-lived assets whenever events or changes in
     circumstances  indicate that their  carrying  value may not be  recoverable
     from the estimated  future cash flows expected to result from their use and
     eventual  disposition.  Our long-lived  assets  subject to this  evaluation
     include property, plant and equipment and amortizable intangible assets. We
     assess the impairment of goodwill annually in our fourth fiscal quarter and
     whenever events or changes in circumstances indicate that it is more likely
     than not that an impairment loss has been incurred. Intangible assets other
     than  goodwill are reviewed for  impairment  whenever  events or changes in
     circumstances   indicate   that  the  carrying   value  may  not  be  fully
     recoverable.  Other  intangible  assets subject to this evaluation  include
     developed technology we have acquired,  patents and technology licenses. We
     are required to make judgments and assumptions in identifying  those events
     or  changes  in  circumstances  that may  trigger  impairment.  Some of the
     factors we consider include:

     o    Significant decrease in the market value of an asset
     o    Significant  changes  in the  extent or manner  for which the asset is
          being used or in its physical condition
     o    A  significant  change,  delay or departure  in our business  strategy
          related to the asset
     o    Significant  negative  changes in the  business  climate,  industry or
          economic conditions
     o    Current period  operating losses or negative cash flow combined with a
          history of  similar  losses or a forecast  that  indicates  continuing
          losses associated with the use of an asset

          Our evaluation  includes an analysis of estimated future  undiscounted
     net cash flows expected to be generated by the assets over their  remaining
     estimated useful lives. If the estimated future undiscounted net cash flows
     are  insufficient  to recover  the  carrying  value of the assets  over the
     remaining  estimated useful lives, we will record an impairment loss in the
     amount by which the carrying value of the assets exceeds the fair value. We
     determine  fair value based on discounted  cash flows using a discount rate
     commensurate with the risk inherent in our current business model. If, as a
     result of our analysis, we determine that our amortizable intangible assets
     or other  long-lived  assets  have  been  impaired,  we will  recognize  an
     impairment  loss in the period in which the impairment is  determined.  Any
     such  impairment  charge  could be  significant  and could  have a material
     adverse effect on our financial  position and results of operations.  Major
     factors that  influence our cash flow analysis are our estimates for future
     revenue  and  expenses  associated  with  the use of the  asset.  Different
     estimates could have a significant impact on the results of our evaluation.

          We perform  an annual  review for  goodwill  impairment  in our fiscal
     fourth quarter or whenever  potential  indicators of impairment  exist. Our
     impairment  review is based on  comparing  the fair  value to the  carrying
     value of the reporting  units with goodwill.  The fair value of a reporting
     unit is measured at the business  unit level using a  discounted  cash flow
     approach that  incorporates  our estimates of future revenues and costs for
     those business units.  Reporting units with goodwill  include our wireless,
     displays,  power management and data conversion  business units,  which are
     operating segments within our Analog reportable segment, and our Enterprise
     Networking  reporting unit,  which is a separate  reportable  segment.  Our
     estimates are consistent  with the plans and estimates that we are using to
     manage the  underlying  businesses.  If we fail to deliver new products for
     these  business  units,  or if the products  fail to gain  expected  market
     acceptance,  or market conditions for these businesses fail to improve, our
     revenue and cost forecasts may not be achieved and we may incur charges for
     goodwill  impairment,  which could be significant and could have a material
     adverse effect on our net equity and results of operations.

4.   Deferred Income Taxes
     We determine  deferred tax  liabilities  and assets based on the future tax
     consequences  that can be  attributed  to net  operating  loss  and  credit
     carryovers and differences between the financial statement carrying amounts
     of existing assets and liabilities  and their  respective tax bases,  using
     the tax rate  expected to be in effect when the taxes are actually  paid or
     recovered. The recognition of deferred tax assets is reduced by a valuation
     allowance if it is more likely than not that the tax  benefits  will not be
     realized.  The ultimate realization of deferred tax assets depends upon the
     generation  of future  taxable  income  during the  periods in which  those
     temporary  differences  become  deductible.  We consider past  performance,
     expected  future  taxable  income and prudent  and  feasible  tax  planning
     strategies in assessing the amount of the valuation allowance. Our forecast
     of expected future taxable income is based over such future periods that we
     believe can be  reasonably  estimated.  Changes in market  conditions  that
     differ  materially from our current  expectations and changes in future tax
     laws in the U.S. and international jurisdictions may cause us to change our
     judgments of future taxable income.  These changes,  if any, may require us
     to adjust our existing  tax  valuation  allowance  higher or lower than the
     amount we have recorded.

o    Overview
- -------------
During the first quarter of fiscal 2004,  we continued to take steps  consistent
with the objectives of the strategic  profit-improvement actions that were first
announced in February  2003. We completed  the exit and sale of our  information
appliance  business,  consisting  primarily of the GeodeTM  family of integrated
processor products (See Note 4). This included the sale of certain assets of the
business to Advanced  Micro Devices,  Inc. In addition,  AMD hired a majority of
the  employees  in that  business  unit.  With  this sale now  complete,  we are
concentrating  our R&D  investments  on analog  capabilities  and  focusing  our
efforts towards growing our analog sales and increasing our profitability.
     Net sales for the first  quarter of fiscal 2004 were $424.8  million.  This
represents a slight  increase over sales of $420.6 million for the first quarter
of fiscal 2003.  The increase came from higher  demand,  particularly  for power
management products, as business conditions for the semiconductor  industry have
gradually improved from a year ago.
     For the  first  quarter  of fiscal  2004,  we  earned  net  income of $29.7
million,  compared to net income of $1.3 million for the first quarter of fiscal
2003.  This  improvement  in our  operating  results for fiscal 2004 compared to
fiscal  2003  was  driven  by  reduced  operating  expenses  achieved  from  the
implementation of the strategic  profit-improvement actions launched in February
2003, as well as higher gross margins.
     Net income for the first quarter of fiscal 2004  included  $12.6 million of
special items for net charges related to cost reduction actions and the exit and
sale of the  information  appliance  business  (See Note 4).  Net income for the
first  quarter of fiscal 2004 also included a $1.9 million  charge  (including a
tax  effect  of $0.2  million)  for the  cumulative  effective  of a  change  in
accounting  principle as a result of the  adoption of SFAS No. 143,  "Accounting
for Asset Retirement  Obligations"  (See Note 5). No special items were included
in net income for the first quarter of fiscal 2003.



o    Sales
- ----------
The following discussion is based on our operating segments described in Note 13
to the consolidated  financial  statements included in our Annual Report on Form
10-K for the year ended May 25, 2003.
     The  Analog  segment,  which  represents  79  percent  of our total  sales,
recorded a slight increase in sales of 2 percent for the first quarter of fiscal
2004 compared to the first quarter of fiscal 2003.  The increase came  primarily
from higher  volume as unit  shipments  increased 5 percent from the same period
last year. At the same time,  average selling prices declined 2 percent from the
first  quarter of fiscal 2003,  which came from a shift in unit mix toward lower
priced  products and some modest  price  declines.  These lower priced  products
included a variety of high  performance  analog  products  offered in very small
form factors, made possible by our advanced chip-packaging technologies.  Within
the Analog segment, sales of power management and amplifier products contributed
to the growth in sales for the first quarter of fiscal 2004 with increases of 37
percent and 13 percent, respectively,  over sales in the first quarter of fiscal
2003.  Products for wireless  handsets  largely  drove the sales growth in power
management   products.   Sales  for  the  first   quarter  of  fiscal   2004  of
application-specific  wireless  products,  primarily  radio  frequency  building
blocks,  remained flat while sales of remaining analog product areas declined in
general compared to last year's first quarter.
     Sales for the first  quarter of fiscal 2004 for the  Information  Appliance
segment were flat compared to the first quarter of fiscal 2003.  Higher  average
selling  prices on flat unit volume for GeodeTM  integrated  processor  products
were offset by lower average  selling  prices on lower unit volume of integrated
DVD  products.  The  GeodeTM  product  family is the  primary  component  of the
information  appliance segment that was sold to Advanced Micro Devices,  Inc. in
late August 2003 (See Note 4).

o    Gross Margin
- -----------------
Gross  margin as a percentage  of sales was 47 percent for the first  quarter of
fiscal 2004  compared to 43 percent in the first  quarter of fiscal  2003.  This
increase was primarily  driven by higher factory  utilization,  as well as a net
improvement in product mix and pricing.  Wafer fabrication  capacity utilization
during the first quarter of fiscal 2004, based on wafer starts,  was 87 percent,
compared  to 74 percent  for the first  quarter of fiscal  2003 when  production
activity was lower due to weaker business conditions.

o    Research and Development
- -----------------------------
Our research and development  expenses for the first quarter of fiscal 2004 were
$92.1 million, or 22 percent of sales, compared to $110.7 million, or 26 percent
of sales,  for the first quarter of fiscal 2003.  Lower R&D expenses reflect the
impact of actions we launched in February 2003 to reduce our R&D as a percent of
sales.  These actions  included  exits of businesses,  headcount  reductions and
restructuring  of a  licensing  agreement  with TSMC.  Ongoing  R&D  spending is
heavily focused on anlog products and underlying analog capabilities. Because we
made  significant  reductions  in total R&D  spending  compared to fiscal  2003,
spending for the first  quarter of fiscal 2004 for new product  development  was
down by 11  percent  and for  process  and  support  technology  was  down by 38
percent. We continue to invest in the development of new analog and mixed-signal
technology-based products for applications such as wireless handsets,  displays,
notebook PCs, other portable devices and other applications that require analog.

o    Selling, General and Administrative
- ----------------------------------------
Our selling,  general and administrative expenses in the first quarter of fiscal
2004 were $68.4 million,  or 16 percent of sales,  compared to $69.9 million, or
17 percent of sales,  in the first quarter of fiscal 2003. The overall  decrease
in SG&A  expenses  was  mainly  due to the  cost  reduction  actions  that  were
implemented  in fiscal 2003 as part of our  strategic  profit-improvement  plan.
These  actions  reduced SG&A  headcount,  as well as  discretionary  selling and
marketing program expenses.


o    Interest Income and Interest Expense
- -----------------------------------------
For the first  quarter of fiscal  2004,  we earned net  interest  income of $3.1
million  compared  to $4.1  million in the first  quarter of fiscal  2003.  This
decrease  in net  interest  income  was due to  lower  average  interest  rates,
although  average cash balances  were higher.  Offsetting  interest  expense was
slightly lower during the quarter as we continued to reduce our outstanding debt
balances.

o     Other Income (Expense), Net
- ---------------------------------
We recorded  other income,  net, of $5.5 million for the first quarter of fiscal
2004  compared to other  expense,  net, of $1.5 million for the first quarter of
fiscal 2003.  The components of other income,  net,  include $8.0 million of net
intellectual  property  income  and a $2.3  million  gain  from  the  sale of an
investment,  which  were  offset by a $4.8  million  charge for our share in net
losses of equity-method  investments.  The components of other expense, net, for
the first  quarter of fiscal  2003  included  $1.6  million of net  intellectual
property  income,  a $0.7  million gain from the sale of an  investment,  a $3.6
million charge for our share in net losses of equity-method investments and $0.2
million of other miscellaneous losses.

o        Income Tax Expense
- ---------------------------
We  recorded  income tax  expense  before the  cumulative  effect of a change in
accounting  principle  of $4.3  million  in the first  quarter  of fiscal  2004,
compared to $3.0 million in the first quarter of fiscal 2003.  The effective tax
rate was 12  percent  for the first  quarter  of fiscal  2004.  Fiscal  2004 tax
expense  consists  primarily of U.S.  alternative  minimum tax, net of operating
loss  carryforwards,  and  non-U.S.  income  taxes.  The fiscal 2003 tax expense
represents non-U.S.  income taxes on international income. We did not incur U.S.
income taxes in fiscal 2003.

o        Liquidity and Capital Resources
- ----------------------------------------
During the first  quarter of fiscal 2004,  cash and cash  equivalents  decreased
$80.8  million  compared to an increase of $37.7 million in the first quarter of
fiscal 2003.  The primary  factors  contributing  to these changes are described
below:
     We generated cash from  operating  activities of $25.2 million in the first
quarter of fiscal 2004 compared to $15.4 million in the first quarter of fiscal
2003.  Cash was generated from operating  activities  because net income,  after
adjusting for noncash  items  (primarily  depreciation  and  amortization),  was
greater  than the  negative  impact  that came from  changes in working  capital
components.  The negative changes from working capital  components for the first
quarter of fiscal 2004 came  primarily  from  decreases in accounts  payable and
accrued expenses  combined with increases in receivables,  inventories and other
current  assets.  Cash from operating  activities in the first quarter of fiscal
2003 was also generated  because net income,  after  adjusting for noncash items
(primarily depreciation and amortization),  was greater than the negative impact
that came from changes in working capital components.
     Our investing  activities  used cash of $125.7 million in the first quarter
of fiscal 2004,  while  generating cash of $13.5 million in the first quarter of
fiscal  2003.  Major  uses of cash in fiscal  2004  included  net  purchases  of
available-for-sale  securities  of $82.8  million  combined  with  investment in
property,  plant and  equipment of $41.5  million,  primarily  for machinery and
equipment.  Cash provided by investing activities in the first quarter of fiscal
2003 came from the net sale and  maturity of  available-for-sale  securities  of
$83.3 million,  which was partially offset by investment in property,  plant and
equipment of $60.9 million.
     Our  financing  activities  generated  cash of $19.7  million  in the first
quarter of fiscal 2004  compared to $8.8 million in the first  quarter of fiscal
2003.  The primary  source of cash in the first quarter of fiscal 2004 came from
the issuance of common stock under employee benefit plans in the amount of $20.6
million,  which  was  slightly  offset  by  a  $0.9  million  repayment  of  our
outstanding  debt  balances.  The primary source of cash in the first quarter of
fiscal 2003 came from the issuance of common stock under employee  benefit plans
of $10.9 million,  which was slightly offset by a $2.1 million  repayment of our
outstanding debt balances.
     After the end of the  first  quarter  of  fiscal  2004,  we  completed  the
repurchase of  approximately  7.5 million  shares of our common stock for $202.2
million in September  2003 pursuant to the $400 million stock  buy-back  program
authorized by the board of directors in July 2003.

     We foresee  continuing cash outlays for plant and equipment in fiscal 2004,
with our primary focus on developing  new  capabilities  that support our target
growth markets and improve our manufacturing efficiency and productivity. We are
continuing with the  construction of an assembly and test facility in China that
was begun in fiscal  2003 as part of our effort to  increase  assembly  and test
capacity,  as well as expand our business presence in Asia markets. We currently
expect our fiscal 2004 capital  expenditure  amount to be higher than the fiscal
2003 amount.  However, we will continue to manage capital  expenditures in light
of  business  conditions.  We  expect  existing  cash and  investment  balances,
together with  existing  lines of credit,  to be  sufficient to finance  planned
capital investments in fiscal 2004.

     Our cash and investment  balances are dependent on continued  collection of
customer  receivables and the ability to sell inventories.  Although we have not
experienced major problems with our customer  receivables,  significant declines
in overall  economic  conditions  could lead to  deterioration in the quality of
customer  receivables.  In addition,  major declines in financial  markets would
likely cause reductions in our cash equivalents and marketable investments.

     The following  table provides a summary of the effect on liquidity and cash
flows from our contractual obligations as of August 24, 2003:


                                 Fiscal Year:                                            2009 and
(In Millions)                    2004            2005       2006      2007      2008     thereafter    Total
                                 --------------- ---------- --------- --------- -------- ------------- ----------
                                                                                   
Contractual obligations:
  Debt obligations                   $  1.4        $20.6    $   -     $   -     $   -       $   -       $ 22.0
  Noncancellable
    operating leases                   16.1         15.7       10.6       8.7       6.5         6.3       63.9
Purchase obligations under:
  CAD software licensing
     Agreements                        18.5         20.2        9.0       7.7       -           -         55.4
  Fairchild manufacturing
     Agreement                          4.3          -          -         -         -           -          4.3
  Other                                 1.1          1.5        0.8       -         -           -          3.4
                                 --------------- ---------- --------- --------- -------- ------------- ----------
Total                                 $41.4        $58.0      $20.4     $16.4      $6.5        $6.3     $149.0
                                 =============== ========== ========= ========= ======== ============= ============

Commercial Commitments:
Standby letters of credit
  under bank multicurrency
  agreement                        $ 8.6             -          -         -          -          -        $ 8.6
                                 =============== ========== ========= ========= ======== ============= ============


     In addition, as of August 24, 2003, capital purchase commitments were $32.2
million.

o    Outlook
- ------------
Although  overall  economic  conditions  continue to be somewhat  uncertain  and
difficult to predict,  demand  levels for the first  quarter of fiscal 2004 were
slightly better as we have seen market conditions in the semiconductor  industry
gradually  improve from a year ago. New orders in the fiscal 2004 first  quarter
showed a slight seasonal  decline from the preceding fiscal 2003 fourth quarter,
but order rates improved as the quarter progressed.  Despite the overall decline
in new orders, our Analog segment experienced sequential quarterly growth in new
orders in the first quarter of fiscal 2004,  as new orders for power  management
and wireless products grew substantially.  As a result of the recent improvement
in the weekly run rate of total orders, including turns orders, which are orders
received  with  delivery  requested  in the same  quarter,  our opening  13-week
backlog  entering  the  second  quarter of fiscal  2004 was  higher  than it was
entering the first quarter of fiscal 2004. We also usually experience sequential
quarterly sales growth in our second fiscal quarter, as our customers prepare to
meet the upcoming  holiday  demand.  Based on these factors,  we anticipate that
sales for the second  quarter of fiscal  2004 will grow 4 to 7 percent  from the
fiscal 2004 first quarter.  If,  however,  a normal level of turns orders is not
achieved or the rate of new orders declines,  we may not be able to achieve this
increase.  Dependent  upon the level of revenue  achieved,  we also expect gross
margin  percentage in the second quarter of fiscal 2004 to be higher by 1 to 1.5
percentage  points from gross margin  achieved in the fiscal 2004 first quarter,
as wafer fabrication  utilization is expected to continue running at high levels
during the  second  quarter  based on  expected  demand.  We believe we have the
ability  to  adjust  the  level  of  production  activity  in our  manufacturing
facilities to align with changes in order levels and economic  conditions during
the quarter, if necessary. However, the mix of available product may not exactly
match the mix of product requested on a short-term basis.

     In late August  2003,  we  completed  the exit and sale of our  information
appliance  business,  representing a key step in a series of  profit-improvement
actions  launched in February  2003 designed to improve our return on investment
and streamline our cost  structure.  Accordingly,  we expect R&D expenses in the
second quarter of fiscal 2004 to be in the range of $86-$88  million,  with SG&A
expenses  in the  range of  $66-$68  million.  As noted  above,  we  expect  our
investment  in  property,  plant and  equipment  in total for fiscal  2004 to be
higher than fiscal 2003.


o    Risk Factors
- -----------------
CONDITIONS INHERENT IN THE SEMICONDUCTOR INDUSTRY CAUSE PERIODIC FLUCTUATIONS IN
OUR OPERATING RESULTS.  Rapid technological change and frequent  introduction of
new technology leading to more complex and integrated products  characterize the
semiconductor  industry. The result is a cyclical environment with short product
life cycles,  price erosion and high  sensitivity to the overall business cycle.
Substantial capital and R&D investment are also required to support products and
manufacturing  processes.  As a result  of these  industry  conditions,  we have
experienced  in the  past  and  expect  to  experience  in the  future  periodic
fluctuations  in our operating  results.  Shifts in product mix toward,  or away
from, higher margin products can also have a significant impact on our operating
results.  As a result of these and other  factors,  our  financial  results  can
fluctuate significantly from period to period.

OUR  BUSINESS  WILL BE HARMED IF WE ARE  UNABLE TO COMPETE  SUCCESSFULLY  IN OUR
MARKETS. Competition in the semiconductor industry is intense. We compete with a
number of major corporations in the high-volume  segment of the industry.  These
include several multinational companies whose semiconductor business may be only
part  of  their  overall   operations,   such  as  Koninklijke  (Royal)  Philips
Electronics,  Matsushita,  Motorola,  NEC, Samsung and Toshiba.  We also compete
with  a  large   number  of   corporations   such  as  Texas   Instruments,   ST
Microelectronics,   Maxim,  Analog  Devices  and  Linear  Technology  that  sell
competing products into some of the same markets that we target.  Competition is
based on design and quality of products, product performance, price and service,
with the  relative  importance  of these  factors  varying  among  products  and
markets.
     We cannot  assure you that we will be able to compete  successfully  in the
future against  existing or new  competitors or that our operating  results will
not be adversely  affected by increased price  competition.  We may also compete
with several of our  customers,  particularly  customers in the  networking  and
personal systems markets.
     The wireless  handset market continues to be important to our future growth
plans.   New  products   are  being   developed  to  address  new  features  and
functionality  in handsets,  such as color displays,  advanced  audio,  lighting
features  and  image  capture.  Due to high  levels of  competition,  as well as
complex  technological  requirements,   there  is  no  assurance  that  we  will
ultimately be successful in this targeted market. Although the worldwide handset
market is large,  near-term growth trends are uncertain and difficult to predict
with accuracy.  Delayed  introduction of next-generation  wireless base stations
also negatively impacts potential growth in the wireless handset market.

IF  DEVELOPMENT  OF NEW  PRODUCTS  IS  DELAYED  OR  MARKET  ACCEPTANCE  IS BELOW
EXPECTATIONS,  FUTURE OPERATING RESULTS MAY BE UNFAVORABLY  AFFECTED. We believe
that continued  focused  investment in research and development,  especially the
timely development and market acceptance of new analog products, is a key factor
to  our  successful   growth  and  our  ability  to  achieve  strong   financial
performance.  Successful  development  and  introduction  of  new  products  are
critical to our ability to maintain a competitive  position in the  marketplace.
We will continue to invest resources to develop more highly integrated solutions
and building block products,  both primarily  based on our analog  capabilities.
These  products  will  continue  to be  targeted  towards  applications  such as
wireless  handsets,  displays,  notebook PCs, other  portable  devices and other
applications that require analog.

INVESTMENTS AND ACQUISITIONS.  We have made and will continue to consider making
strategic business investments and alliances and acquisitions,  if necessary, to
gain access to key technologies  that we believe augment our existing  technical
capability  or enable us to  achieve  faster  time to market.  These  activities
involve risks and uncertainties that may unfavorably impact our future financial
performance.  We may not be able to integrate  and develop the  technologies  we
acquire as expected.  If the technology is not developed in a timely manner,  we
may be  unsuccessful  in  penetrating  target  markets.  In  addition,  with any
acquisition  there are risks that future  operating  results may be  unfavorably
affected by  acquisition  related  costs,  including  in-process R&D charges and
incremental R&D spending.


EXPANSION OF OUR BUSINESS IN THE ASIA  MARKETS.  As noted in our  discussion  of
planned  capital  expenditures,  as part of our  efforts to expand our  business
presence in the Asia  markets,  we began  construction  of an assembly  and test
facility in China's  Suzhou  Industrial  Park in the  Jiangsu  Province of China
during the second  quarter of fiscal  2003.  We expect the  facility  to provide
analog products  quickly and cost  effectively to our customers in Asia, as well
as other  regions as  necessary.  The  facility  will also  increase our overall
assembly and test capacity to support  increasing  product volume.  Increases in
product  volume are  dependent  upon  demand  from our  customers.  If we do not
increase product volume, lower than expected factory utilization,  which results
in  higher  manufacturing  cost per  unit,  will  unfavorably  impact  operating
results. In addition, unexpected start-up expenses, inefficiencies and delays in
the start of  production  in the facility  may reduce our expected  future gross
margin.

WE FACE  RISKS  FROM OUR  INTERNATIONAL  OPERATIONS.  We  conduct a  substantial
portion of our operations outside the United States, and our business is subject
to risks associated with many factors beyond our control. These factors include:

- -    fluctuations in foreign currency rates;
- -    instability of foreign economies;
- -    emerging infrastructures in foreign markets;
- -    support required abroad for demanding manufacturing requirements;
- -    foreign government instability and changes; and
- -    U.S. and foreign laws and policies affecting trade and investment.

     Although we did not  experience  any  materially  adverse  effects from our
foreign operations as a result of these factors in the last year, one or more of
these  factors  has had an  adverse  effect  on us in the past  and  they  could
adversely  affect us in the future.  In addition,  although we seek to hedge our
exposure  to currency  exchange  rate  fluctuations,  our  competitive  position
relative to non-U.S.  suppliers can be affected by the exchange rate of the U.S.
dollar against other currencies, particularly the Japanese yen and euro.

TAXES.  From time to time,  we have  received  notices of tax  assessments  from
certain governments of countries in which we operate. These governments or other
government  entities  may serve  future  notices  of  assessments  on us and the
amounts  of  these   assessments  or  our  failure  to  favorably  resolve  such
assessments  may have a material  adverse  effect on our financial  condition or
results of operations.

CURRENT WORLD EVENTS. Recent unrest in the many parts of the world including the
continuing  hostilities in Iraq and terrorist activities worldwide have resulted
in additional uncertainty on the overall state of the world economy. There is no
assurance  that  the  consequences  from  these  events  will  not  disrupt  our
operations  either  in the U.S.  or other  regions  of the  world  where we have
operations.  Although the SARS illness appears to have been contained,  if it or
another such illness emerges,  our business in Asia could be adversely affected.
The spread of such  illnesses  beyond Asia could also  negatively  impact  other
aspects of our operations.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market
Risk,  in our Annual  Report on Form 10-K for the year ended May 25, 2003 and to
the  subheading   "Financial  Market  Risks"  under  the  heading  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  on
page 26 of our Annual Report on Form 10-K for the year ended May 25, 2003 and in
Note 1, "Summary of Significant  Accounting  Policies,"  and Note 2,  "Financial
Instruments," in the Notes to the Consolidated  Financial Statements included in
Item 8 of our 2003 Form 10-K. There have been no material changes in market risk
from the information reported in these sections.

ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures.

     We maintain  disclosure controls and procedures that are intended to ensure
     that the  information  required to be disclosed in our Exchange Act filings
     is properly and timely  recorded,  processed,  summarized and reported.  In
     designing  and  evaluating  our  disclosure  controls and  procedures,  our
     management recognizes that any controls and procedures,  no matter how well
     designed and operated,  can provide only reasonable  assurance of achieving
     the desired control objectives, and that management necessarily is required
     to apply its  judgment  in  evaluating  the  cost-benefit  relationship  of
     possible  controls and  procedures.  Since we have  investments  in certain
     unconsolidated  entities which we do not control or manage,  our disclosure
     controls  and  procedures  with respect to such  entities  are  necessarily
     substantially  more  limited  than those we maintain  for our  consolidated
     subsidiaries.
          We have a disclosure  controls committee  comprised of key individuals
     from a variety of  disciplines  in the  company  that are  involved  in the
     disclosure and reporting  process.  The committee meets regularly to ensure
     the timeliness, accuracy and completeness of the information required to be
     disclosed in our filings.  The  committee  reviewed this Form 10-Q and also
     met with the Chief  Executive  Officer and the Chief  Financial  Officer to
     review this Form 10-Q and the required disclosures and the effectiveness of
     the design and  operation of our  disclosure  controls and  procedures.  As
     required by SEC Rule  13a-15(b),  the  committee  performed an  evaluation,
     under the supervision and with the  participation of management,  including
     our  Chief  Executive   Officer  and  Chief  Financial   Officer,   of  the
     effectiveness  of the design and operation of our  disclosure  controls and
     procedures  as of the end of the quarter  covered by this report.  Based on
     that evaluation and their  supervision of and participation in the process,
     our Chief Executive Officer and Chief Financial Officer have concluded that
     our  disclosure  controls and  procedures  were effective at the reasonable
     assurance level.

(b)  Changes in internal controls.

     There has been no change in our internal controls over financial  reporting
     during our most recent fiscal quarter that has materially  affected,  or is
     reasonably  likely  to  materially   affect,  our  internal  controls  over
     financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

o    Tax Matters
The IRS has  completed  examining  our tax returns for fiscal years 1997 through
2000  and on July  29,  2003  issued a notice  of  proposed  adjustment  seeking
additional taxes of approximately $19 million  (exclusive of interest) for those
years. The issues giving rise to most of the proposed  adjustments relate to R&D
credits,  inventory  and  depreciation  deductions.  We  intend to  contest  the
adjustments  administratively.  We are also in the process of  undergoing  a tax
audit in the  Netherlands  and from time to time our tax  returns are audited in
the  U.S.  by  state  agencies  and at  international  locations  by  local  tax
authorities.  We believe  we have made  adequate  tax  payments  and/or  accrued
adequate amounts in our financial  statements to cover the amounts sought by the
IRS, as well as any other deficiencies that other governmental agencies may find
in their audits.

o    Other
In November  2000, a derivative  action was filed in the U.S.  District Court in
Delaware against us, Fairchild  Semiconductor  International,  Inc. and Sterling
Holding  Company,  LLC, by Mark Levy,  a Fairchild  stockholder.  The action was
brought under Section 16(b) of the Securities Exchange Act of 1934 and the rules
issued under that Act by the Securities and Exchange  Commission.  The plaintiff
seeks  disgorgement  of alleged  short-swing  insider  trading  profits.  We had
originally  acquired  Fairchild  common and preferred stock in March 1997 at the
time we disposed of the Fairchild business. Prior to its initial public offering
in August  1999,  Fairchild  had amended its  certificate  of  incorporation  to
provide that all Fairchild preferred stock would convert automatically to common
stock upon completion of the initial public offering. As a result, our shares of
preferred stock converted to common stock in August 1999.  Plaintiff has alleged
that the  acquisition  of common stock  through the  conversion  constituted  an
acquisition  that  should  be  "matched"  against  our sale in  January  2000 of
Fairchild  common stock for purposes of computing  short-swing  trading profits.
The action seeks to recover from us on behalf of Fairchild  alleged  recoverable
profits of  approximately  $14 million.  In February 2002, the judge in the case
granted the motion to dismiss  filed by us and our  co-defendants  and dismissed
the case,  ruling that the  conversion  was done pursuant to a  reclassification
which is  exempt  from the  scope  of  Section  16(b).  Plaintiff  appealed  the
dismissal of the case and upon appeal,  the U.S.  Court of Appeals for the third
circuit  reversed  the  District  Court's  dismissal.  Our  petition for a panel
rehearing  and/or  rehearing  en banc was denied by the  Appeals  Court in April
2003.  Our  motion to stay the  issuance  of the  Appeals  Court  mandate to the
District Court pending our petition to the U.S.  Supreme Court was denied in May
2003.  We have filed a petition for a writ of certiorari  with the U.S.  Supreme
Court and we intend to continue to contest the case through all available means.
     You should also refer to the Legal Proceedings section in our Form 10-K for
the fiscal  year  ended May 25,  2003 for a  complete  description  of our other
existing material legal proceedings.


Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

3.1  Second  Restated  Certificate  of  Incorporation  of the Company as amended
     (incorporated by reference from the Exhibits to our Registration  Statement
     on Form S-3  Registration  No.  33-52775,  which became effective March 22,
     1994);  Certificate  of Amendment of  Certificate  of  Incorporation  dated
     September  30, 1994  (incorporated  by  reference  from the Exhibits to our
     Registration Statement on Form S-8 Registration No. 333-09957, which became
     effective  August 12, 1996);  Certificate  of Amendment of  Certificate  of
     Incorporation  dated September 22, 2000 (incorporated by reference from the
     Exhibits  to our  Registration  Statement  on  Form  S-8  Registration  No.
     333-48424, which became effective October 23, 2000).


3.2  By  Laws  of  the  Company,   as  amended   effective   October  30,  2001.
     (incorporated  by reference from the Exhibits to our Form 10-K for the year
     ended May 26, 2002 filed August 16, 2002).

4.1  Form of  Common  Stock  Certificate  (incorporated  by  reference  from the
     Exhibits  to our  Registration  Statement  on  Form  S-3  Registration  No.
     33-48935, which became effective October 5, 1992).

4.2  Rights  Agreement  (incorporated  by  reference  from the  Exhibits  to our
     Registration  Statement on Form 8-A filed August 10, 1988); First Amendment
     to the Rights  Agreement  dated as of October  31,  1995  (incorporated  by
     reference  from the  Exhibits to our  Amendment  No. 1 to the  Registration
     Statement on Form 8-A filed  December 11,  1995);  Second  Amendment to the
     Rights  Agreement dated as of December 17, 1996  (incorporated by reference
     from the Exhibits to our Amendment No. 2 to the  Registration  Statement on
     Form 8-A filed January 17, 1997).

10.1 Agreement  with  Ralph  V.  Whitworth;   Relational  Investors,  L.P.;  and
     Relational  Investors  LLC dated July 21, 2003  (incorporated  by reference
     from the Exhibits to our Form 8-K filed July 23, 2003.)

10.2 Management  Contract or Compensatory Plan or Arrangement:  Fiscal Year 2004
     Executive Officer Incentive Plan Agreement

10.3 Management Contract or Compensatory Plan or Agreement: Fiscal year 2004 Key
     Employee Incentive Plan

31.  Rule 13a - 14(a)/15d - 14(a) Certifications

32.  Section 1350 Certifications

(b)  Reports on Form 8-K

     During the quarter ended August 24, 2003, we filed the following reports on
     Form 8-K:

     1.   A report  on Form  8-K was  filed on June 5,  2003  furnishing  to the
          Securities and Exchange Commission as part of Regulation FD disclosure
          our press release  issued on June 5, 2003  announcing our earnings for
          the quarter ended May 25, 2003. The news release  contained  financial
          statements   consisting  of  Condensed   Consolidated   Statements  of
          Operations,  Balance  Sheets and  Statements of Cash Flows prepared in
          accordance with GAAP. Certain  reconciliations which were not prepared
          in accordance with GAAP were also included in the press release.

     2.   A  report  on Form  8-K  was  filed  on July  23,  2003  reporting  as
          Regulation  FD  disclosure  our  agreement  with  Ralph V.  Whitworth,
          Relational Investors,  L.P., Relational Investors, LLC and other funds
          and  partnerships   controlled  by  Relational  Investors,   L.P.  and
          Relational Investors, LLC (collectively,  "Relational"). The agreement
          provides, inter alia, for the withdrawal of Relational's nomination of
          its  candidates  for  election  to  National's  board  and  access  to
          National's  management  being made available to Relational.  A copy of
          the  agreement  was included in the Form 8-K. No financial  statements
          were included in the Form 8-K.

     3.   A  report  on Form  8-K  was  filed  on July  31,  2003  reporting  as
          Regulation FD disclosure  that our board of directors had authorized a
          program to  repurchase  up to $400  million  of our  stock.  The press
          release  announcing  the  program  was  included  in the Form 8-K.  No
          financial statements were included in the Form 8-K.

     4.   A report  on Form  8-K was  filed  on  August  7,  2003  reporting  as
          Regulation FD disclosure that we had signed a definitive  agreement to
          sell  our  Information  Appliance  business  unit  to  Advanced  Micro
          Devices,  Inc.  The  press  release  announcing  the  signing  of  the
          agreement was included in the Form 8-K. No financial  statements  were
          included in the Form 8-K.

SIGNATURE
- ---------

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

NATIONAL SEMICONDUCTOR CORPORATION



Date:  October 2, 2003                       \s\Robert E. DeBarr
                                             -------------------
                                             Robert E. DeBarr
                                             Controller
                                             Signing on behalf of the registrant
                                             and as principal accounting officer