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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

(MARK ONE)

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

[ ] 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 1-5442

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

DELAWARE 13-3575653
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

10 MELVILLE PARK ROAD, MELVILLE, NEW YORK 11747
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (631) 847-3000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE

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

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

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $335.1 million as of February 28, 2001 (based
on the closing price of the Common Stock on the New York Stock Exchange on that
date). For purposes of this computation, shares held by affiliates and by
directors and officers of the registrant have been excluded. Such exclusion of
shares to be held by directors and officers is not intended, nor shall it be
deemed, to be an admission that such persons are affiliates of the registrant.

Number of shares of Common Stock, par value $.01 per share, outstanding as
of February 28, 2001: 37,724,558

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Proxy Statement to be used in conjunction with
the Annual Meeting of Stockholders to be held on May 9, 2001 are incorporated by
reference in Part III.

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2

PART I

ITEM I. BUSINESS

On July 28, 1997 General Instrument Corporation spun-off to its
shareholders NextLevel Systems, Inc., its broadband communication business, and
CommScope, Inc., its coaxial and other cable business, as two independent public
companies. At the time of the spin-off, General Instrument Corporation changed
its name to General Semiconductor, Inc. and effected a one-for-four reverse
stock split. After the spin-off, NextLevel Systems, Inc. changed its name to
General Instrument Corporation and was subsequently acquired by Motorola, Inc.
Unless the context otherwise requires, references in this Form 10-K to "General
Semiconductor," the "Company," "we," "us," or "our" are to General
Semiconductor, Inc. and its direct and indirect subsidiaries on a consolidated
basis since the spin-off and to the business conducted by the Power
Semiconductor Division of General Instrument Corporation prior to the spin-off.

This Form 10-K includes statistical data regarding the power management
semiconductor industry and other related industries which was obtained from
industry publications, including reports of Worldwide Semiconductor Trade
Statistics ("WSTS"), which are published by the Semiconductor Industry
Association ("SIA"). These industry publications generally indicate that they
have obtained information from sources believed to be reliable, but do not
guarantee the accuracy and completeness of their information. While we believe
these industry publications to be reliable, we have not independently verified
their data, and we do not guarantee the accuracy or completeness of the
information, nor can we provide any assurance that our future performance will
follow industry projections.

GENERAL

We are a market leader in the power semiconductor components sector of the
semiconductor industry. We design, manufacture and sell a broad array of power
management products, including low-to-medium power rectifiers, transient voltage
suppressors (TVS), small signal transistors, diodes and MOSFETs. Power
management products are semiconductor devices and circuits which facilitate and
optimize the efficient use of energy in wired and wireless electronic systems or
subsystems. We are a world leader in the power rectifier and transient voltage
suppressor markets, which products represented 84% of our 2000 net sales, with
an approximate 14% market share as measured by net sales in 2000. Our products
condition current and voltage, protect electrical circuits from power surges,
amplify and switch small electrical signals and regulate voltage levels in
circuits. Our products are essential components of most electronic devices and
systems and are used throughout a wide range of industries, including the
computer, automotive, telecommunications and consumer electronics industries. We
operate six production facilities located in China, France, Germany, Ireland,
Taiwan and United States, and we produce an average of 42 million units per day.

During our 40 years of operation, we have focused on the design and
manufacture of discrete semiconductors. Our discrete semiconductor products are
different from integrated circuit semiconductor products because discrete
semiconductors are single function products and are generally characterized by:

- longer product life cycles;

- lower research and development investment requirements;

- a less complex and less costly fabrication process; and

- lower capital needs.

Worldwide semiconductor market revenue was $204.4 billion in 2000,
according to WSTS. The discrete segment of this market accounted for $17.6
billion, or approximately 9.0%, of the total semiconductor market and the
sectors in which we compete accounted for $12 billion of this market. The
following charts illustrate the principal sectors of the semiconductor market
and the discrete segment by product category and highlight the areas in which we
compete:

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2000 SEMICONDUCTOR MARKET - $204.4 BILLION

[Pie Chart]

Microcomponents............................................. 30%

Memory...................................................... 24%

Logic IC's.................................................. 17%

Analog IC's................................................. 15%

Discretes................................................... 9%

Optical IC's................................................ 5%

2000 DISCRETE MARKET - $17.6 BILLION

[Pie Chart]

Power Transistors........................................... 22%

Small Signal Transistors.................................... 20%

MOSFETs..................................................... 18%

Diodes...................................................... 15%

Rectifiers.................................................. 14%

Other Discrete.............................................. 6%

Thyristors.................................................. 5%

Source: WSTS (December 2000).

COMPANY STRENGTHS

We believe the characteristics of the power semiconductor market and our
competitive strengths contribute to our stable and consistent operating income.

Long-Standing Relationships with Diverse, Blue Chip Customers. During our
40-year operating history, we have developed long-standing relationships with
many customers. We serve more than 500 customers worldwide, with no single
customer accounting for more than 6% of our net sales in 2000. Each of our ten
largest customers has been our customer for more than 25 years. Customers in our
end-use markets include leading global manufacturers such as Robert Bosch
Corporation, Visteon Corporation, Delphi Automotive Systems, General Motors
Corporation, Lucent Technologies, Matsushita Electric Industrial Co., Ltd.,
Motorola Inc., Nokia Corp., Phillips NV, Siemens AG, Samsung Electronics Co.
Ltd. and Sony Corporation.

Global, Low Cost Operations. We presently operate six production
facilities and 15 sales offices located in North America, Europe and Asia. We
believe that our global operations permit us to maintain our position as a low
cost, high quality manufacturer. All of our facilities have achieved ISO 9001 or
ISO 9002 certification status as to quality and our five facilities that
manufacture products for the automotive industry have received the automotive
industry's QS 9000 certification. QS 9000 certification is a more stringent
quality system developed by Ford, Chrysler and General Motors to recognize the
outstanding overall performance of selected suppliers. Our Macroom, Ireland,
Colmar, France, Freiburg, Germany, Taipei, Taiwan, and Tianjin, China facilities
have each received ISO 14001 certification. ISO 14001 is an international
certification awarded after extensive site audits demonstrate compliance to the
Environmental Management System Standards. We are continuously engaged in cost
reduction programs, primarily through reduced pricing of our raw materials,
improved material utilization, increased use of automation and other
manufacturing efficiencies. All of our assembly sites that produce orders for
the automotive industry have also received AEC A 101, a discrete semiconductor
supplement, awarded by the Automotive Electronic Council, which requires the QS
9000 award as a step in qualification.

High Quality Customer Service. Because we are an independent company
focused on the power management sector of the semiconductor industry, all of our
service and support efforts are tailored to meet our customers' needs. We employ
approximately 250 sales, marketing and field applications engineers in 15
offices throughout North America, Europe and Asia. We target high growth end-use
markets and focus our sales efforts on our customers' design engineers and
purchasing managers in the automotive, computer, consumer, telecommunications
markets. Because we work closely with our original equipment manufacturer
customers in the design of their products, our products are frequently "designed
in" to the specifications of new products. We
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believe these close relationships provide us with a substantial competitive
advantage and further strengthen our long-term customer relationships. Our
customers require a high quality, reliable source of supply, often in high
volumes and with short lead times. They also demand quick responses to technical
questions and seek support in designing new applications which will use our
products.

Diverse End-Use Markets. We have a diversified customer base in terms of
both geography and end-use markets. The following charts illustrate our net
sales in 2000 by geographic area and by end-use market:

2000 NET SALES BY GEOGRAPHIC AREA

[Pie Chart]

Europe 30%

Southeast Asia 22%

North America 28%

China 11%

Japan 9%

2000 NET SALES BY END- USE MARKET(1)

[Pie Chart]

Distributor 30%

Computer/Power Supply 25%

Automotive 16%

Consumer 13%

Industrial/Other 7%

Telecomm 5%

Contract Manufacturers 4%

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(1) Distributors sell our products to diverse end-use markets, including all
those shown in the chart.

We believe that this diversity minimizes the impact of a potential loss of
sales due to an economic slowdown in any geographic area or end-use market.

Experienced, Committed Management Team. Our senior management team
consists of seven individuals who have an average of 15 years of experience with
us and 20 years of experience in the semiconductor industry. Ronald A. Ostertag,
our Chairman, President and Chief Executive Officer, has been with us for 22
years and has 28 years of experience in the semiconductor industry.

BUSINESS STRATEGY

Our objective is to provide our communications, information technology and
automotive customers with semiconductor devices that work together to provide an
end-to-end power management solution. The capability to offer an end-to-end
power management solution is enabled by focusing the Company's resources toward
two major application segments; power conditioning and circuit protection. To
accomplish our objective, the principal elements of our strategy are:

Target Rapid Growth Opportunities with New Product Introductions. We seek
to expand our base of well-established, high quality products by introducing new
MOSFET, analog, Zener and UltraFast semiconductor products that meet our
customers power management needs. We define new products as those products
introduced and sold for a period of three years. New product sales represented
7%, 4% and 2% of total revenues for 2000, 1999 and 1998, respectively. We employ
approximately 70 full-time personnel in our Ireland, Korea, Germany, Taiwan, and
United States research and development laboratories.

To enhance our power conditioning offering, we introduced 29 new MOSFET
products in 2000, encompassing both power and small signal types. Seventy design
wins were achieved in fast growing applications such as graphics cards,
lithium-ion battery packs and switch mode power supplies. MOSFETs, which were
first offered by the company in 1999, are semiconductor devices that switch
and/or amplify current. Our devices are used
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principally by communications, information technology and automotive customers
to improve system efficiency and increase battery life in portable applications.
Our MOSFET manufacturing strategy employs a "fabless" model whereby the company
has ported it's proprietary trench technology at established foundries in Asia.
This approach enabled us to enter the power MOSFET market quickly, utilize a
state of the art 0.5um equipment set at our foundry partner and minimize capital
investment. We are aggressively pursuing the $3.1 billion MOSFET market through
a combination of design engineering resources at our Silicon Valley design
center, leveraging the assets of our foundry partners and utilizing our in-house
high volume, low cost packaging expertise. We anticipate that power MOSFET sales
will be an important contributor to our future growth.

During 2000 the company also committed capital and personnel resources to
extend its power management product portfolio into certain analog products.
End-to-end power conditioning products was the impetus for us to begin design
and development efforts for linear regulators, low drop out regulators, pulse
width modulators and microprocessor supervisory circuits. Our analog product
road maps have been defined and to date we have hired eleven design engineers.
Our fabrication approach is again to use Asian foundries to provide the silicon
for our designs. We expect to realize initial revenues late in 2001 from our
first analog product offerings.

Other new products in 2000, which have significant growth potential in
power conditioning applications, include 100V Schottky rectifiers and "rugged"
UltraFast rectifiers. The fast recovery time of these devices reduce energy
losses in switching power supplies that serve communications and computing
applications. The new UltraFast rectifiers includes a series of high voltage
devices that have been optimized for power factor correction circuits, which are
necessary to meet the energy conservation requirements in many countries.

A low-voltage bi-directional Zener diode, introduced in 1999, has been very
successful and shows significant revenue growth potential in the application of
Christmas tree lights. These diodes prevent the entire string of lights from
going out when a bulb in the string burns out or is missing.

Also in 1999, in the area of circuit protection, we extended the voltage
range of our TRANSZORB(R) transient voltage suppressors to have the widest
avalanche voltage range currently offered in the industry. These higher voltage
TRANSZORB(R) products were specially designed to work in conjunction with newly
developed integrated circuits that provide much greater efficiencies in computer
product applications.

Extend Leadership Position in Rectifier and TVS Diode Products. The
research firm Dataquest ranks us as the world's leading supplier of rectifiers
while IMS ranks us as the world's leading supplier of TVS products. We continue
to make significant investments in surface mount package capacity as our
customers continue their trend away from traditional axial packaging toward
surface mount. We estimate that more than 40% of our overall revenues in 2000
were derived from surface mount products. Throughout 1999 and 2000 the Company
has made significant investments to expand our Taiwan wafer fabrication facility
to meet the demands of two key product lines, Schottky rectifiers and
(automotive) TVS. These two product lines grew approximately 30% in revenue
terms in 2000.

Continue to Achieve Cost Savings. We are committed to being a low-cost
producer of our products. In order to achieve this, we continuously engage in
cost reduction programs. These cost reduction programs are made possible in part
by technological advancements in material sciences, wafer production processes
and packaging techniques. As a result of these advancements and through various
investments, we have been able to reduce costs in a number of ways, including,
but not limited to:

- automating production lines to reduce labor costs and increase product
quality;

- improving production processes to increase production yields;

- modifying product designs to reduce the amount of raw material required
to produce products;

- reducing raw material costs through negotiations with our vendors; and

- outsourcing and moving higher labor cost processes to lower labor cost
locations.

Our ability to reduce our costs has allowed us to maintain our earnings and
competitive position while satisfying our customers' requirements for low-cost,
high-quality products.

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Pursue Selective Acquisitions. We continually evaluate candidates for
strategic acquisitions and joint ventures that add complementary products or
technologies to advance our goal of serving customers with an end-to-end power
management solution. In addition, acquisitions broaden our product offering to
meet the needs of the rapidly growing contract electronic manufacturing segment.
For example, we acquired the small signal products business of ITT Industries,
Inc. in October 1997 for $9.0 million, including direct acquisition costs. This
business contributed $77.3 million to our sales in 2000, representing an
increase of 44% from $53.5 million in 1999. It also provided us entry into the
small signal transistor, zener diode and small signal diode sectors of the
discrete products market, collectively a $4.6 billion market in 2000.
Acquisitions also leverage our existing sales and distribution channels,
including a sales force of more than 1,000 worldwide, comprised of independent
sales representatives, distributors and approximately 250 direct sales and
technical personnel.

PRODUCTS AND CUSTOMERS

The table below identifies our end markets and the percentage of our net
sales in 2000 attributable to each, and the principal products, representative
applications and major customers for those end-use markets.

END-USE COMPUTER/
MARKETS POWER SUPPLY AUTOMOTIVE CONSUMER TELECOMMUNICATIONS DISTRIBUTORS
% OF NET SALES (1) 25% 16% 13% 5% 30%

PRINCIPAL PRODUCTS Bridge Rectifiers Superectifiers Bridge Rectifiers UltraFast All
UltraFast Small Signal UltraFast Rectifiers
Rectifiers Diodes Rectifiers Small Signal
Schottky Small Signal Small Signal Diodes
Rectifiers Transistors Diodes Small Signal
Small Signal Transient Small Signal Transistors
Diodes Voltage Transistors Superectifiers
MOSFETs Suppressors Zener Diodes Transient
Zener Diodes MOSFETs Voltage
MOSFETs Suppressors
MOSFETs

REPRESENTATIVE CD ROM drive ABS Brake Cable Boxes Cordless Phone All
APPLICATIONS Computer System CD Player Internet Line
Battery Active DVD Card
Charger Suspension Entertainment ISDN Board
Disk Drive Airbag Module Center Mobile Phone
Monitor Collision Home Modems
Motherboard Warning/ Appliances/ Pager
PC Scanner Avoidance White Goods Satellite
Printer System Home Satellite Transmission
Switch Mode Cruise Control Dish Switching
Power Supply Module Microwave Systems
Engine Playstation/
Management Nintendo
Entertainment TV
Module
GPS Navigation
Systems

MAJOR SECTOR Acer Bosch BOSE Alcatel Arrow/Spoerle
CUSTOMERS API Delphi Braun Ericsson Array
Astec Ford Daewoo Hughes Avnet
Delta General Motors Motorola Lucent Distrel
LG Hella LG Motorola Eurodis
Phihong Mitsubishi Lite-On Nokia Future
Philips Motorola Matsushita Nortel Nadex
Samsung AIEG Philips Networks Rutronik
SCI Nadex Ryoden Sagem Ryoden
Sony Nippon Denso/ Samsung Siemens Taitron
Denso SONY
Siemans
Valeo
Visteon

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(1) These products do not equal 100% of our net sales because we also sell
miscellaneous products to various other end-use markets equal to
approximately 11% of our net sales.

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PRINCIPAL PRODUCTS

We design, manufacture and sell a broad array of discrete semiconductors,
including:

- power conditioning devices;

- protection devices; and

- a maturing product portfolio.

We manufacture these products in a variety of packages, including axial,
bridge, power and surface mount packages.

POWER CONDITIONING DEVICES

Our power conditioning products are utilized to efficiently switch,
amplify, regulate and convert power into a more usable form needed by today's
sophisticated electronic systems.

Rectifiers. Rectifiers conduct electricity in one direction and block it
in the "reverse" direction. They are used to convert alternating current (AC)
into direct current (DC) which is used to power electronic equipment. The
current carried over power lines and into homes, offices and factories is
alternating current; however, most electronic equipment requires direct current
to operate.

Our Schottky rectifier is designed for use in high-speed applications such
as computer and computer related products. Its design results in nearly zero
reverse recovery times (the speed at which the device can go from a state of
conducting current to a blocking mode) and very low forward voltage drop which
allows for low power losses. Our manufacturing process creates a highly reliable
Schottky product.

UltraFast rectifiers offer even lower reverse recovery times at voltage
levels as high as 1,000 Volts while maintaining the efficiencies of a lower
switching power losses. UltraFast rectifiers are principally used for computer
and computer related applications.

Small Signal Diodes. Small signal diodes perform various functions such as
signal blocking, routing and switching at lower current levels. These components
are used in a variety of products, including telecommunications equipment,
personal computer motherboards, automotive systems, power supplies and consumer
electronics.

Power MOSFETs. Power MOSFETs are manufactured using leading edge trench
technology enabling the Company to offer customers significantly improved and,
more energy efficient device performance versus major competitors. Typically,
these components are used for computing, communication, and automotive power
management applications where energy efficiency is at a premium.

PROTECTION DEVICES

Our protection devices protect today's state-of-the-art integrated circuits
from the damaging effects of electrostatic discharge and other over-voltage
conditions.

Transient Voltage Suppressors. Transient voltage suppressors protect
electronic circuits by limiting voltage at a safe level. Under normal
circumstances they do not have to be reset or replaced. They are silicon-based
semiconductors designed to provide protection against all types of transient
threats, ranging from electrostatic discharge to induced lightning. These
voltage clamping devices absorb large amounts of energy for short periods of
time. We offer a broad range of state-of-the-art transient voltage suppressors
for use in most modern electronic equipment. We also offer a line of patented
transient voltage suppressor devices specifically designed for automotive
applications which include a surface mount high-energy "load dump" transient
voltage suppressor device.

Zener Diodes. Zener products provide a wide variety of specialized
functions for complex electronic circuits. These devices are used as voltage
regulators, voltage reference and voltage suppressors against electrostatic
discharge threats. Zener diodes are also used in most modern electronic systems
and end-use markets.
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MATURE PRODUCT PORTFOLIO

Our mature product portfolio includes devices that were originally
introduced over 20 years ago. As we move forward, we plan on limiting our
research and development and capital spending on these products.

Rectifiers. Bridge rectifiers are essential for the vast majority of
electronic equipment that plugs into an electrical outlet. A bridge rectifier is
comprised of four separate rectifier components configured into a single package
that converts alternating current into full wave direct current. We manufacture
a complete line of bridge rectifiers that meet the power and case style
requirements of most electronic equipment.

The SUPERECTIFIER(R) rectifier is a highly reliable and cost effective
component that incorporates several of our unique technologies. The
SUPERECTIFIER(R) rectifier glass-plastic construction combines the superior
reliability of spherical glass constructed rectifiers with plastic cases that
allow easier mass handling as well as lower costs. The automotive and computer
peripheral markets are the principal markets for this product.

Small Signal Transistors. Small signal transistors deliver amplification
and switching functions that are essential to most modern electronic systems.
These products are sold in both thru-hole and surface mount packages.

MARKETS

Our customer base is diverse, both geographically and by end-use market. We
target our products primarily for use in the automotive, computer, consumer
electronics, telecommunications and lighting industries.

Automotive. Our power management devices are found in critical and
"creature comfort" systems throughout automotive design. Automotive customers
seek highly reliable components. Our components are used in many automotive
applications including airbag modules, global positioning satellite navigation
systems, catalytic converter heaters, climate control modules, engine cooling
systems and ignition modules.

Computer/peripherals. All computers and their associated peripherals
require sophisticated, controlled electrical energy. We provide the power
rectifying element for all computer electronic systems to transform unmanaged,
raw electric power into the controlled energy source modern digital systems
require. Our products also protect computer systems from transient threats, such
as electrostatic discharge and induced lightning. Our products are sold to
computer and computer component manufacturers in numerous applications,
including switch mode power supplies, computer battery chargers, modem cards,
P.C.A. boards, logic boards, laser printers, computer processors and monitors.

Consumer electronics. Traditional consumer appliances that plug into a
wall outlet or modem hand-held digital consumer applications require power
management semiconductors. Our products are placed in a broad range of consumer
products, including refrigerators, garage door openers, home satellite systems,
washers, dryers and microwaves.

Telecommunications. Our products perform various functions for
telecommunications equipment. Because of the often-critical nature of
telecommunications applications and the increasing demand for portability, these
applications require a very high degree of reliability and small size. Also,
device efficiencies are very important in battery operated products to minimize
power drain on batteries and maximize run time. For this reason, customers pay a
premium for components that operate with the least amount of energy loss.
Applications using our products include mobile phones, pagers, cellular base
stations, line cards and modems.

Industrial & Lighting. New electronic ballast systems have been replacing
older magnetic ballast systems and incandescent bulbs by providing greater
efficiency and significantly lowering operating costs. Most light fixtures
require alternating current (AC) to be converted into direct current (DC) in
order to function. Historically, this has been achieved through an array of
twisted copper wires known as a magnetic ballast. Recently, as a result of the
demand for more efficient light fixtures, magnetic ballasts have been replaced
in many applications by electronic ballasts which use discrete semiconductors.
Because the new electronic ballast systems typically are priced at a relative
premium, these systems must be extremely reliable in order to justify the higher
initial cost. In addition to a high degree of reliability, electronic ballast
manufacturers require their components to be

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competitively priced and compact. We sell to all major original equipment
manufacturers (OEMs) within this end-use market.

Distributors. Distributors meet the needs of customers with lower volume
requirements. Distributors serve all of our markets in all of our regions, but
our primary distributor sales are in North America and Europe.

Sales channels. We service our customer base through a combination of
direct personnel, independent sales representatives and distribution. In each of
the years ended December 31, 2000, 1999 and 1998, sales by geographic region
(the Americas, Europe and Asia/Pacific) each represented approximately 1/3 of
our net sales. Our customer base incorporates a wide array of the world's
largest manufacturers. No single customer accounted for 6% or more of our sales
during the years ended December 31, 2000, 1999 or 1998. Distributors meet the
needs of customers with lower volume requirements. They serve all of our markets
in all of our regions, but are especially important in the Americas and Europe.
In the year 2000, distribution accounted for approximately 30% of net sales.

In the last several years, the electronics industry has seen an increase in
the use of sub-contracted manufacturing. These worldwide companies are known as
contract equipment manufacturers or CEMs. In the year 2000, CEMs accounted for
approximately 4% of total sales. This trend is especially prevalent in the
telecommunications sector and is expected to continue so into the foreseeable
future.

We have a worldwide sales force of more than 1,000, comprised of
independent sales representatives, distributors and approximately 250 direct
sales and technical personnel. We maintain 15 sales offices located in Melville,
New York; Carlsbad, California; Arlington Heights, Illinois; Duluth, Georgia;
Austin, Texas; Paris, France; Munich, Germany; Tokyo and Osaka, Japan; Gumi and
Seoul, Korea; Taipei, Taiwan; Singapore; and Shanghai and Hong Kong, China.

Additionally, we use information technology to develop and maintain strong
customer relationships. For example, electronic data interchange (EDI) is used
by many of our major customers to facilitate order entry and acknowledgment. In
addition to EDI, we intend to expand upon the scope of services provided through
the Internet, extranets and other electronic means to provide broader services
to the marketplace. We expect that these services will provide improved
technical support, on-line order access and e-commerce capability. The use of
improved information technology, combined with strong technical marketing and
broad sales channels, has helped us obtain new product approvals and increase
our market share with many of our major customers.

MANUFACTURING

Power semiconductor component manufacturing involves two phases of
production: wafer fabrication and assembly (or packaging). Wafer fabrication
subjects silicon wafers to various thermal, metallurgical and chemical process
steps that change their electrical and physical properties. These process steps
define cells or circuits within numerous individual devices (termed "die" or
"chips") on each wafer. Assembly is the sequence of production steps that divide
the wafer into individual chips and enclose the chips in structures (termed
"packages") that make them usable in a circuit. Both wafer fabrication and
assembly phases incorporate wafer level and device level electrical testing to
ensure that device design integrity has been achieved.

Power management semiconductors generally use process technology and
equipment already proven in the manufacturing of integrated circuits. The cost
of power management semiconductor wafer fabrication facilities varies greatly,
depending upon the number and sophistication of the process steps required to
produce the desired electrical performance and functions. While Schottky and
transistor products require complex and technically sophisticated process flows,
the capital requirements of these products are significantly less than for
integrated circuits. This is due, in part, to the fewer number of process steps
required to manufacture discrete power semiconductor wafers and, therefore, the
requirement for process equipment. Additionally, because the discrete power
semiconductor manufacturing process is based on well-established technology,
less expensive process equipment is required.

The entire manufacturing process has evolved over time, and labor intensive
processes have given way to more reliable automated processes. The change to
automated procedures has, in part, allowed us to reduce our manufacturing costs,
significantly improve product quality and reduce the impact of declining selling
prices.
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We own or lease six production facilities in China, Taiwan, Ireland,
Germany, France and the United States. In addition, we have manufacturing supply
agreements with various companies located in Asia. Our facilities are as
follows:

LOCATION PRODUCTS
- -------- --------

Wafer Fabrication Only:
Freiburg, Germany Small signal products
Westbury, New York Epitaxial wafers

Wafer Fabrication and Assembly:
Taipei, Taiwan Standard rectifiers
Schottky rectifiers
UltraFast rectifiers
Transient voltage suppressors

Macroom, Ireland Transient voltage suppressors
Bridge rectifiers
Standard rectifiers
Assembly Only:
Tianjin, China Rectifiers
Bridge rectifiers
Small signal products

Colmar, France Small signal products

All factories have received the quality certification designations ISO 9001
or ISO 9002 and all factories except the factory located in Westbury, New York,
which does not manufacture end products for the automotive industry, have
received the quality certification designation QS 9000. Our Macroom, Ireland,
Colmar, France, Freiburg, Germany, Taipei, Taiwan and Tianjin, China facilities
have each received ISO 14001 certification. ISO 14001 is an international
certification awarded after extensive site audits demonstrate compliance to the
Environmental Management System Standards.

RESEARCH AND DEVELOPMENT

We employ approximately 70 full-time personnel in our research and
development laboratories in Macroom, Ireland, Taipei, Taiwan, Freiburg, Germany,
Fremont, California, Seoul, Korea and Westbury, New York. Our full-time staff is
complemented by partnerships with universities and research institutions. The
research and development laboratories in Ireland and Taiwan focus primarily on
the development of new chip and packaging technologies for rectifiers and
transient voltage suppressors. Research in Germany concentrates on small signal
products, automation and transient voltage suppressor (TVS) arrays aimed at
telecommunications protection. The development laboratory in Westbury, New York
focuses on applied material sciences.

In 1999, we opened a design center in Fremont, California for power MOSFET
products and staffed it with experienced senior MOSFET engineers. We have also
entered into related manufacturing agreements with established foundries in
China and Taiwan. MOSFETs are semiconductor devices that switch and/or amplify
current through changes in voltage. Our engineering group was recently expanded
in order to initiate the development of analog integrated circuits, which are
used for power management. In February 2001, we began leasing a facility in
Pleasanton, California for this group.

During 2000, we further expanded our product portfolio with the addition of
analog power management IC's. Through February 2001, we have hired 11 design
engineers in our California and Korea design centers to aid in this expansion.
Our strategy for developing this portfolio includes utilizing both in-house
developed technology and partnering with outside design houses. Product
offerings will include pulse-width modulators, DC/DC converters, voltage
references and standard linear and low-dropout regulators. We will use outside
foundries for wafer fabrication, similar to our MOSFET product line. Our
objective is to have our first in-house analog designed product introduced in
the fourth quarter of 2001.

9
11

Research and development expenditures totaled $7.8 million in 2000, $6.9
million in 1999 and $6.1 million in 1998. Research and development expenditures
reflect continued development and the advancement of new product and packaging
technologies targeted for the automotive, telecommunications and computer
end-use market applications.

PATENTS

We actively seek patents for new products and designs. At December 31,
2000, we held 54 U.S. patents. Although we believe our patents provide a
competitive advantage, no single patent is material to our business. We also
rely on our proprietary knowledge and continuing technological innovation to
develop and maintain our competitive position.

BACKLOG

At December 31, 2000 we had an order backlog of approximately $156.6
million compared with $143.7 million at December 31, 1999. Order backlog
includes only orders for products scheduled to be shipped within six months.
Orders may be revised or canceled, either pursuant to their terms or as a result
of negotiations. Therefore, it is impossible to predict accurately the amount of
backlog orders that will result in sales.

Our backlog at any particular date may not be representative of actual
sales for any succeeding period. The lead times for the release of purchase
orders depend upon the scheduling practices of individual customers. The
delivery times of new or non-standard products can be affected by scheduling
factors and other manufacturing considerations. The rate of booking new orders
can also vary significantly and there is the possibility of customer changes in
delivery schedules or order cancellations.

COMPETITION

The power management sector of the semiconductor industry is highly
competitive. We compete with companies worldwide, some of which have greater
financial, marketing and management resources than we do. We believe that our
principal competitors include ON Semiconductor, Philips Electronics N.V., ST
Microelectronics N.V., Fairchild Semiconductor Corporation, Shindengen Electric
Manufacturing Co., Ltd., Sanken Electric Co., Ltd. and a number of Taiwanese and
Japanese manufacturers.

EMPLOYEES

At December 31, 2000 we employed approximately 5,700 people worldwide. We
believe that our relations with both our union and non-union employees are
satisfactory.

RAW MATERIALS

Silicon ingots, molding compound and lead frames typically account for
approximately two-thirds of our raw material expense. We believe that our
relations with our suppliers are good, and we do not anticipate any supply
shortages in the foreseeable future.

We believe that the loss of any supplier would not have a long-term
material negative effect on our business because components and supplies are
generally available from a variety of sources. However, we could have set-up
costs and delays if we change suppliers. In the past, delays in delivery of
components have not had a material negative effect on shipments of our products.

ENVIRONMENT

We are committed to operate worldwide in a manner which respects and
protects the environment. We use hazardous substances and generate solid and
hazardous waste in the ordinary course of our business. As a result, we are
subject to various federal, state, local and foreign laws and regulations
governing environmental matters, including the use, discharge and disposal of
hazardous materials. Because of the nature of our business, we incur costs to
comply with environmental laws. Although we believe our manufacturing facilities
are in substantial compliance with current environmental laws and regulations,
we cannot assure you that our costs to comply with
10
12

environmental requirements will not increase in the future. We cannot predict
the kind of legislation or regulations that may be adopted in the future with
respect to environmental protection and waste disposal. To date, our compliance
with existing legislation and regulations has not had a material negative effect
on us and we do not expect future compliance to have a material negative effect
on our financial position, results of operations or cash flows.

In connection with the spin-off in 1997, we retained the obligations with
respect to environmental matters relating to our discontinued operations and
their status as a "potentially responsible party" with respect to the offsite
disposal of wastes. We are presently engaged in the remediation of seven sites
relating to discontinued operations in five states, and are a "potentially
responsible party" at five hazardous waste sites in four states. Based on
several factors, including capital expenditures and expenses for our remediation
programs, and the proportionate share of the cost of the necessary investigation
and eventual remedial work that may be needed to be performed at the sites for
which we have been named as a "potentially responsible party," these matters are
not expected to have a material adverse effect on our financial position,
results of operations or cash flows.

Our present and past facilities have been in operation for many years, and
over that time in the course of those operations, such facilities have used
substances which are or might be considered hazardous. Additionally, we have
generated and disposed of wastes which are or might be considered hazardous.
Therefore, it is possible that additional environmental issues may arise in the
future which we cannot now predict.

Reference is made to Note 9 to the Consolidated Financial Statements
included in Part II of this Form 10-K and to the cautionary statements contained
in Exhibit 99 to this Form 10-K for further information regarding environmental
matters.

INTERNATIONAL OPERATIONS

We manufacture or assemble most of our products in Taiwan (Republic of
China), the People's Republic of China, Ireland, Germany and France. These
foreign operations are subject to the usual risks inherent in operating
overseas, including risks with respect to fluctuations in currency exchange
rates, economic and political destabilization, restrictive actions by foreign
governments, nationalizations, the laws and policies of the United States
affecting trade, foreign investment and loans and foreign tax laws. Our
cost-competitive status could be negatively affected if, relative to our
competitors, we experience unfavorable movements in foreign currency exchange
rates such as the appreciation of the New Taiwan dollar in relation to the U.S.
dollar.

International sales represent approximately 72% of our sales. Sales to the
Asia/Pacific region accounted for approximately 42% of our worldwide sales in
2000. Approximately 50% of our production is located in Taiwan, the cost of
which increased from the strengthened New Taiwan Dollar in relation to the U.S.
dollar in 2000.

For detailed financial information concerning foreign and domestic
operations and export sales, reference is made to Note 14 to the Consolidated
Financial Statements included in Part II of this Form 10-K.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is certain information with respect to the executive
officers of the Company as of December 31, 2000.

NAME AND TITLE AGE BUSINESS EXPERIENCE
-------------- --- -------------------

Ronald A. Ostertag.................. 60 Ronald A. Ostertag has been our Chairman, President and
Chairman, President and Chief Executive Officer since the spin-off. Previously, he
Chief Executive Officer held the position of Vice President of General Instrument
Corporation since February 1989 and President of General
Instrument Corporation's Power Semiconductor Division since
September 1990.

11
13

NAME AND TITLE AGE BUSINESS EXPERIENCE
-------------- --- -------------------

Robert J. Gange..................... 45 Robert J. Gange has been our Senior Vice President and Chief
Senior Vice President and Financial Officer since March 2000. From the spin-off to
Chief Financial Officer March 2000, he was Vice President and Controller.
Previously, he was Vice President and Controller of General
Instrument Corporation's Power Semiconductor Division since
May 1997. From 1995 to 1997, he was Director of Finance and
from 1993 to 1995, Assistant Controller of General
Instrument Corporation's Power Semiconductor Division.

Vincent M. Guercio.................. 47 Vincent M. Guercio has been our Senior Vice President,
Senior Vice President, e-commerce e-commerce since November 1998. From the spin-off to
November 1998, he was Senior Vice President, Worldwide Sales
and Marketing. Previously, he had been responsible for this
function at General Instrument Corporation's Power
Semiconductor Division since January 1992.

W. John Nelson...................... 46 W. John Nelson has been our Chief Operating Officer since
Chief Operating Officer March 2000. Previously, he was our President, Asia/Pacific
Operations since November 1998. From the spin-off to
November 1998, he was our Senior Vice President,
Asia/Pacific Operations. Previously, he had been responsible
for this function at General Instrument Corporation's Power
Semiconductor Division since March 1994. From 1991 to 1994,
he was President of General Instrument Corporation Taiwan.

Stephen B. Paige.................... 53 Stephen B. Paige has been our Senior Vice President, General
Senior Vice President, General Counsel and Secretary since the spin-off. Previously, he was
Counsel and Secretary Senior Vice President and General Counsel for General
Instrument Corporation's Power Semiconductor Division since
May 1997. From April 1995 to May 1997, he was Vice President
and General Counsel of Monsanto Business Services, Chicago
Region. From January 1992 to April 1995, he was Vice
President, General Counsel and Secretary of The NutraSweet
Company, a wholly-owned subsidiary of Monsanto Company.

Linda S. Perry...................... 50 Linda S. Perry has been our Senior Vice President, Human
Senior Vice President, Human Resources since September 1997 and its Vice President, Human
Resources Resources since the spin-off. Previously, she held the
position of Vice President, Human Resources at General
Instrument Corporation's Power Semiconductor Division and
has had responsibility for this function since 1988.

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14

NAME AND TITLE AGE BUSINESS EXPERIENCE
-------------- --- -------------------

John P. Phillips.................... 55 John P. Phillips has been our Executive Vice President
Executive Vice President responsible for worldwide marketing since April 2000.
Previously, he was our President, Europe and North America
Operations since November 1998. From the spin-off to
November 1998 he was Senior Vice President, European
Operations. Prior to that, he was Senior Vice President of
Worldwide Technology for General Instrument Corporation's
Power Semiconductor Division and had responsibility for this
function since March 1992.

ITEM 2. PROPERTIES

Our principal administrative, production and research and development
facilities are located in the following locations:

LOCATION LEASED OR OWNED SQUARE FEET
-------- ------------------------------ -----------

Melville, New York.......................... Leased, Expires 2004 52,000
Westbury, New York.......................... Leased, Expires 2005 (1) 18,000
Taipei, Taiwan.............................. Owned 350,000
Macroom, Ireland............................ Owned 120,000
Tianjin, China.............................. Ground Lease, Expires 2045 (2) 120,000
Freiburg, Germany........................... Leased, Expires 2007 (3) 55,000
Colmar, France.............................. Owned 63,000
Pleasanton, California...................... Leased, Expires 2006 (4) 10,000

- ---------------
(1) We have an option to extend this lease until 2010.

(2) We own the facility; however, the land upon which it is constructed is
leased.

(3) We have the right to terminate this lease prior to its expiration.

(4) We have an option to extend this lease until 2011.

We believe that our facilities around the world, whether owned or leased,
are well-maintained. Our manufacturing facilities contain sufficient production
capacity to meet our needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any pending legal proceedings other than various
claims and lawsuits arising in the normal course of business and those for which
we are indemnified. We are of the opinion that these litigations or claims will
not have a material negative effect on our consolidated financial position,
results of operations or cash flows.

In connection with the spin-off in 1997, NextLevel Systems, Inc. (which
subsequently changed its name to General Instrument Corporation ("GI") and was
acquired by Motorola Inc. in January 2000) agreed to indemnify us with respect
to certain legal proceedings relating to the business transferred to NextLevel
Systems, Inc., including the obligations, if any, arising out of or relating to
the two securities litigations described below. Therefore, we are of the opinion
that the resolution of these matters will not have an effect on our consolidated
financial position, results of operations or cash flows.

13
15

federal securities laws, namely, Sections 10(b) and 20(a) of the Exchange Act,
by allegedly making false and misleading statements and failing to disclose
material facts about GI's planned shipments in 1995 of its CFT 2200 and
DigiCipher II products. On November 21, 2000, the Court dismissed a derivative
action brought on behalf of General Instrument Corporation under the same
caption.

Also included under the same caption is an action entitled BKP Partners,
L.P. v. General Instrument Corp., brought in February 1996 by certain holders of
preferred stock of Next Level Communications, which was merged into a subsidiary
of General Instrument Corporation in September 1995. The action was originally
filed in the Northern District of California and was later transferred for
pretrial purposes to the Northern District of Illinois. The plaintiffs allege
that the defendants violated federal securities laws by making
misrepresentations and omissions and breached fiduciary duties to Next Level in
connection with the acquisition of Next Level by General Instrument Corporation.
Plaintiff's complaints, seek, among other things, unspecified damages and
attorneys' fees and costs.

Plaintiffs have moved to transfer the class action for trial with the
Eastern District of Pennsylvania and to send the BKP Partners case back to the
Northern District of California for trial. That motion is pending before the
panel on Multidistrict Litigation.

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

None

PART II

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

Our common stock trades on the New York Stock Exchange under the symbol
SEM. The following table sets forth the high and low sale prices as reported by
the New York Stock Exchange for the years ended December 31, 1999 and 2000.

HIGH LOW
------ ------

YEAR ENDING DECEMBER 31, 1999
First Quarter............................................ $ 9.44 $ 5.94
Second Quarter........................................... 9.75 6.38
Third Quarter............................................ 12.63 7.88
Fourth Quarter........................................... 15.13 8.69

HIGH LOW
------ ------

YEAR ENDING DECEMBER 31, 2000
First Quarter............................................ $21.00 $12.75
Second Quarter........................................... 20.63 14.75
Third Quarter............................................ 15.88 12.19
Fourth Quarter........................................... 12.38 6.19

As of February 28, 2001 there were 386 holders of record of our common
stock.

We have not paid any cash dividends since the spin-off. We do not currently
intend to pay dividends in the foreseeable future, but to reinvest earnings in
our business. Our ability to pay cash dividends on our common stock is limited
by certain covenants contained in our credit agreement. See Note 8 to the
Consolidated Financial Statements included in Part II of this Form 10-K.

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16

ITEM 6. SELECTED FINANCIAL DATA

The following table presents our selected historical financial data at the
dates and for each of the periods indicated. The financial data as of December
31, 2000 and 1999 and for each of the three years in the period ended December
31, 2000 has been derived from the audited consolidated financial statements
included elsewhere herein. The financial data as of December 31, 1998, 1997, and
1996 and for the years ended December 31, 1997 and 1996 has been derived from
the previously audited consolidated financial statements not included herein, as
adjusted to give effect to the spin-off by General Instrument Corporation in
1997. This selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes included
elsewhere herein. Historical consolidated financial data may not be indicative
of our future performance.

YEAR ENDED DECEMBER 31,
------------------------------------------------------
2000 1999 1998 1997(a) 1996
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net sales.............................. $493,721 $417,082 $401,144 $380,038 $ 361,891
Cost of sales.......................... 339,538 302,476 283,582 289,313 230,687
Selling, general and administrative.... 57,047 46,567 46,802 44,668 42,594
Research and development............... 7,785 6,903 6,104 5,998 5,838
Restructuring.......................... -- -- 12,324 -- --
Operating income....................... 84,210 55,994 47,187 34,916 77,618
Interest expense -- net................ (18,756) (23,466) (20,026) (14,353) (10,396)
Income from continuing operations...... 46,740 24,389 18,534 8,872 39,764
Net income (loss)...................... 46,740 24,389 18,534 5,933 (1,864)
BASIC EARNINGS (LOSS) PER SHARE:
Income from continuing operations...... $ 1.24 $ 0.66 $ 0.50 $ 0.25 $ 1.20
Net income (loss)...................... 1.24 0.66 0.50 0.17 (0.06)
DILUTED EARNINGS PER SHARE:
Income from continuing operations...... $ 1.08 $ 0.66 $ 0.50 $ 0.25 $ 1.15
Net income............................. 1.08 0.66 0.50 0.17 0.27
CONSOLIDATED BALANCE SHEET DATA:
Accounts receivable.................... $ 66,246 $ 63,246 $ 59,643 $ 54,077 $ 49,629
Inventories............................ 53,698 43,480 39,514 34,309 31,551
Property, plant and equipment.......... 244,889 231,217 223,743 218,752 202,281
Net assets of discontinued
operations........................... -- -- -- -- 1,444,734
Total assets........................... 595,289 576,315 563,447 550,305 2,057,162
Long-term debt, including current
maturities(b)........................ 216,500 276,500 286,000 268,074 692,335

- ---------------
(a) Includes charges of $33.8 million ($25.3 million net of tax), or $0.69 per
share, primarily related to the separation of General Instrument
Corporation's Taiwan operations. These costs include $32.7 million charged
to cost of sales and $1.1 million charged to selling, general and
administrative expense.

(b) In 2000 and 1999 includes $172.5 million of convertible subordinated notes
which were issued in December 1999.

15
17

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

INTRODUCTION

We are a market leader in the design, manufacture and sale of power
semiconductor components. The Company provides customers with a broad array of
power management products including rectifiers, transient voltage suppressors,
small signal transistors, diodes and MOSFETs. We are a world leader in the power
rectifier and transient voltage suppressor markets, which products represented
84% of our 2000 net sales, with an approximate 14% market share as measured by
net sales in 2000. Our products condition current and voltage, protect
electrical circuits from power surges, amplify and switch small electrical
signals and regulate voltage levels in circuits. Our products are essential
components of most electronic devices and systems and are used throughout a wide
range of industries, including the computer, automotive, telecommunications and
consumer electronics industries. We operate six production facilities located in
China, France, Germany, Ireland, Taiwan and the United States, and we produce an
average of 42 million units per day.

COST REDUCTION PROGRAMS

We are engaged in ongoing cost reduction programs. These programs are
designed to make our global manufacturing facilities more efficient and achieve
a reduction in our future operating costs. The principal elements of our cost
reduction programs include reducing the cost of our raw materials, improving the
efficiency of our raw material utilization, automating labor intensive portions
of our manufacturing process and outsourcing.

RESTRUCTURING

We announced a restructuring plan on November 6, 1998, which was designed
to enhance the interface of our operations and customers and improve our cost
structure, efficiency and competitive position. The restructuring included
reducing the workforce by decentralizing certain purchasing, marketing, finance
and research and development functions and providing early retirement to a group
of employees, closing two sales offices and writing off assets related to a
discontinued product. Restructuring charges recorded in the fourth quarter of
1998 included $8.4 million in charges primarily related to employee separation
and related costs and $3.9 million in non-cash charges for asset write-offs.
This program resulted in a reduction of operating expenses by $6.4 million per
year.

On February 8, 2001, the Company announced a restructuring of its
operations. Headcount reductions are planned through a combination of worldwide
programs, including early retirement and workforce reductions. A restructuring
charge of up to $14.0 million is expected to be taken in the first quarter of
2001.

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RESULTS OF OPERATIONS

The following table sets forth certain items included in selected
consolidated financial data as a percentage of sales:

YEAR ENDED DECEMBER 31,
------------------------
2000 1999 1998
------ ------ ------

Net sales................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 68.8 72.5 70.7
----- ----- -----
Gross profit................................................ 31.2 27.5 29.3
Selling, general and administrative......................... 11.6 11.2 11.7
Research and development.................................... 1.6 1.7 1.5
Amortization of excess of cost over fair value of net assets
acquired.................................................. 1.0 1.2 1.3
Restructuring............................................... -- -- 3.1
----- ----- -----
Operating income............................................ 17.0 13.4 11.8
Other income (expense) -- net............................... -- -- --
Interest expense -- net..................................... 3.8 5.6 5.0
----- ----- -----
Income before income taxes.................................. 13.2 7.8 6.8
Provision for income taxes.................................. 3.7 1.9 2.1
----- ----- -----
Net income.................................................. 9.5% 5.9% 4.6%
===== ===== =====

ADJUSTED EBITDA

EBITDA represents earnings before interest, taxes, depreciation and
amortization expense. EDITDA is presented because the Company believes it is
frequently used by securities analysts, investors and other interested parties
in the evaluation of companies in our industry. However, other companies in our
industry may calculate EBITDA differently than we do. EBITDA is not a
measurement of financial performance under accounting principles generally
accepted in the United States of America and should not be considered as an
alternative to cash flow from operating activities or as a measure of liquidity
or as an alternative to net income as an indicator of the Company's operating
performance or any other measures of performance derived in accordance with
accounting principles generally accepted in the United States of America. See
the statements of cash flow included in the Company's Consolidated Financial
Statements, included in Part II of this Form 10-K.

Adjusted EBITDA is calculated by adding to EBITDA certain items of expense
that the Company believes are neither likely to recur nor indicative of future
performance, consisting of pre-tax charges of $12.3 million incurred in 1998 for
the restructuring.

YEAR ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
-------- ------- --------

Net Income............................................. $ 46,740 $24,389 $ 18,534
Interest............................................... 18,756 23,466 20,026
Taxes.................................................. 18,631 8,130 8,556
Depreciation and amortization(1)....................... 28,227 27,240 24,682
-------- ------- --------
EBITDA................................................. 112,354 83,225 71,798
Restructuring.......................................... -- -- 12,324
-------- ------- --------
Adjusted EBITDA........................................ $112,354 $83,225 $ 84,122
======== ======= ========

- ---------------
(1) Amortization of deferred financing fees is excluded from "Depreciation and
amortization" and included in "Interest".

17
19

The Company's Consolidated Financial Statements and related notes included
in Part II of this Form 10-K should be read as an integral part of the following
financial review.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 WITH
THE YEAR ENDED DECEMBER 31, 1999

NET SALES

Net sales of $493.7 million for the year ended December 31, 2000 increased
$76.6 million from $417.1 million for the comparable prior year period. The
18.4% increase is primarily due to a 25% increase in unit volume sales and new
product sales, partly offset by an approximate 3% decline in average selling
prices.

COST OF SALES

Cost of sales for the year ended December 31, 2000 of $339.5 million
increased $37.0 million from $302.5 million for the corresponding prior year
period. The 12.2% increase is principally due to an increase in unit volume
sales and higher variable compensation costs.

Accordingly, gross margin for the year ended December 31, 2000 represents
31.2% of net sales compared with 27.5% for the corresponding prior year period.
The increase relates to improved capacity utilization and factory absorption,
continued cost controls and a change in the mix of products sold, partly offset
by a decline in worldwide average selling prices, higher material and vendor
costs, higher variable compensation and the strengthened New Taiwan Dollar.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses of $57.0 million for the year
ended December 31, 2000 increased $10.4 million from $46.6 million for the
corresponding prior year period. The 22.3% increase is due primarily to higher
variable compensation and increased selling costs corresponding with higher
revenues. The current year also includes the full effect of the Korea sales
office which opened in April, 1999. As a percentage of sales, selling, general
and administrative expenses increased to 11.6% for the year ended December 31,
2000 from 11.2% for the corresponding prior year period.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expense of $7.8 million for the year ended
December 31, 2000 increased $0.9 million from $6.9 million for the comparable
prior year period. The 13% increase is due to costs incurred related to the
introduction of power MOSFETs and the development of power management products
including analog Integrated Circuit ("I/C's"). Research and development spending
reflects the modification of existing products as well as the continued
development of new products. As a percentage of sales, research and development
decreased to 1.6% for the year ended December 31, 2000 from 1.7% for the
corresponding prior year period due to the proportionately higher increase in
net sales.

NET INTEREST EXPENSE

Net interest expense decreased to $18.8 million for the year ended December
31, 2000 from $23.5 million for the corresponding prior year period. The $4.7
million decrease relates to a lower average debt balance outstanding, reduced
borrowing rate on floating rate debt and the issuance of the Convertible Notes
described in Note 8 to the Company's Consolidated Financial Statements included
in Part II of this Form 10-K, partly offset by the amortization of deferred
financing costs related to the Convertible Notes.

INCOME TAXES

The Company's effective tax rate for the year ended December 31, 2000
increased to 28.5% from 25.0% for the year ended December 31, 1999 due primarily
to a decrease in the percentage of the Company's income from foreign
subsidiaries which are taxed at rates lower than the U.S. rate.

18
20

ADJUSTED EBITDA

The $29.1 million increase in adjusted EBITDA for the year ended December
31, 2000 compared with the corresponding prior year period is due primarily to
increased volume and improved factory performance partly offset by lower average
selling prices.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 WITH
THE YEAR ENDED DECEMBER 31, 1998

NET SALES

Net sales of $417.1 million for the year ended December 31, 1999 increased
$16.0 million from $401.1 million for the comparable prior year period. The 4.0%
increase is primarily due to an 18% increase in unit volume sales partly offset
by a 15% decline in average selling prices resulting from the effects of
industry wide excess capacity most notably in the first half of 1999.

COST OF SALES

Cost of sales for the year ended December 31, 1999 of $302.5 million
increased $18.9 million from $283.6 million for the corresponding prior year
period. The 6.7% increase is principally due to an increase in unit volume
sales, partly offset by continued cost control and savings achieved from the
1998 restructuring.

Accordingly, gross margin for the year ended December 31, 1999 represents
27.5% of net sales compared with 29.3% for the corresponding prior year period.
The decrease relates to erosion of average selling prices partially offset by a
change in the mix of products sold, continued cost controls, savings achieved
from the 1998 restructuring and improved factory utilization.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses of $46.6 million for the year
ended December 31, 1999 remained fairly stable compared with $46.8 million in
1998. Higher selling costs to support increased sales were offset by lower
variable compensation expense and savings achieved from the 1998 restructuring.
As a percentage of sales, selling, general and administrative expenses decreased
to 11.2% for the year ended December 31, 1999 from 11.7% for the corresponding
prior year period due to the increase in sales.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expense of $6.9 million for the year ended
December 31, 1999 increased from $6.1 million for the comparable prior year
period due to costs incurred related to the planned introduction of power
MOSFETs partly offset by cost savings achieved from the 1998 restructuring.
Research and development spending reflects the modification of existing products
as well as the continued development of new products.

NET INTEREST EXPENSE

Net interest expense increased to $23.5 million for the year ended December
31, 1999 from $20.0 million for the corresponding prior year period due to
higher borrowing rates and amortization of deferred financing fees associated
with amendments to the credit facility discussed below.

INCOME TAXES

The Company's effective tax rate for the year ended December 31, 1999
decreased to 25.0% from 31.6% for the year ended December 31, 1998 due primarily
to an increased proportion of income of foreign subsidiaries taxed at rates
lower than the U.S. rate.

19
21

ADJUSTED EBITDA

The $0.9 million decrease in adjusted EBITDA for the year ended December
31, 1999 compared with the corresponding prior year period is due primarily to
lower selling prices, partly offset by increased sales volume and operating cost
improvements.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000, working capital was $50.1 million, compared to $64.7
million at December 31, 1999. The working capital decrease of $14.6 million
resulted primarily from increases in accounts payable and accrued expenses
partly offset by increases in accounts receivable and inventories in support of
a higher revenue base. The current ratio at December 31, 2000 is 1.5 to 1
compared with a ratio of 1.9 to 1 at December 31, 1999.

During the year ended December 31, 2000, the Company invested $34.9 million
in property, plant and equipment primarily for capacity expansion and automation
compared with $27.3 million and $26.9 million in 1999 and 1998, respectively.
While the Company does not have any material commitments for capital
expenditures, it does expect to invest $45.0 to $55.0 million in 2001 for new
products, automation, capacity increases (primarily for power management and
conditioning products) and quality and system enhancements.

Long-term debt at December 31, 2000 was $216.5 million compared to $276.5
million at December 31, 1999. The Company's ratio of total debt to EBITDA was
1.9 to 1 at December 31, 2000 compared to 3.3 to 1 at December 31, 1999. The
Company's ratio of senior debt to EBITDA improved from 1.3 to 1 at December 31,
1999 to 0.4 to 1. The improvement of this ratio is due to the repayment of $60.0
million in senior debt in 2000 and the $22.4 million increase in net income.

In December 1999, the Company issued $172.5 million principal amount of
5.75% convertible subordinated notes (the "Convertible Notes") due December 15,
2006. Interest on the Convertible Notes is payable semi-annually on June 15 and
December 15 of each year, commencing in June 2000. The Convertible Notes are
convertible into approximately 11.1 million shares of the Company's common
stock, at the option of the holder, at a conversion price of $15.55 per share.
The Convertible Notes are redeemable at the Company's option, in whole or in
part, at any time on or after December 15, 2002 at a premium of 103.286% of par
value declining annually to 100.821% at December 15, 2005 and thereafter. The
Convertible Notes are subordinated to the Company's existing and future senior
indebtedness ($44.0 million at December 31, 2000) and to certain existing and
future trade payable and other liabilities of certain of our subsidiaries
(approximately $92.9 million at December 31, 2000). The holders of the
Convertible Notes may require the Company to repurchase the notes at par value,
plus interest and liquidated damages, if any, upon a change in control of the
Company. Proceeds from the Convertible Notes were used to repay outstanding
indebtedness under the Company's credit facility described below.

In July 1997, the Company entered into a bank credit agreement, which was
amended in December 1998 and in June 1999 (as amended, the "Credit Agreement")
which provides for a $350.0 million secured revolving credit facility that
matures on December 31, 2002. In December 1999, the commitment amount under the
Credit Agreement was permanently reduced by $86.3 million (50% of the gross
proceeds from issuance of the Convertible Notes) to $263.8 million. The Credit
Agreement requires the Company to pay a facility fee on the total commitment.
The Credit Agreement permits the Company to choose between two interest rate
options: the Adjusted Base Rate (as defined in the Credit Agreement), or a
Eurodollar rate (LIBOR) plus a margin which varies based on the Company's ratio
of indebtedness to earnings before interest, taxes, depreciation and
amortization, as defined in the Credit Agreement. The facility fee also varies
based on that ratio. The Company is also able to set interest rates through a
competitive bid procedure. The Credit Agreement contains financial and operating
covenants, including limitations on guarantee obligations, liens, sale of
assets, indebtedness, investments, capital expenditures, payment of dividends
and leases, and requires the maintenance of certain financial ratios. In
addition, certain changes in control of the Company would cause an event of
default under the Credit Agreement. The December 1998 and June 1999 amendments
revised certain covenant compliance calculations to provide the Company with
greater flexibility. As required by the Credit Agreement, the Company entered
into a guarantee and collateral agreement in August 1999 under which
substantially all of the domestic assets and a

20
22

portion of the capital stock of its foreign subsidiaries were pledged as
security to the lenders. At December 31, 2000 and 1999 the Company was in
compliance with all such amended covenants.

The weighted average interest rate on the Company's long-term debt as of
December 31, 2000 and 1999 was 6.0% and 7.0%, respectively.

At December 31, 2000 there were $11.0 million letters of credit outstanding
that reduce the amount that can be borrowed against the Company's $263.8 million
credit facility.

The Company generated $89.3 million cash flow from operations and also
experienced an overall increase in cash of $2.3 million for the year ended
December 31, 2000. The positive cash flow provided by continuing operations was
used for capital expenditures and a partial repayment of debt outstanding. For
the year ended December 31, 1999 the Company generated $41.8 million cash flow
from continuing operating activities but experienced an overall decrease in cash
of $0.6 million. The positive cash flow provided by continuing operations was
used for capital expenditures, a partial repayment of debt outstanding and
financing fees associated with the issuance of the Convertible Notes.

General Semiconductor's primary cash needs on both a short and long-term
basis are for capital expenditures and other general corporate purposes. The
Company believes that it has adequate liquidity to meet its current and
anticipated cash flow needs from the results of its operations, working capital
and the existing Credit Agreement. The Company intends to repay its remaining
senior indebtedness primarily with cash flow from operations. There can be no
assurance, however, that future industry-specific developments or general
economic trends will not adversely affect the Company's operations or its
ability to meet its cash requirements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

GENERAL

The following discussion and the estimated amounts generated from the
sensitivity analyses referred to below include forward-looking statements of
market risk which assume for analytical purposes that certain adverse market
conditions may occur. Actual future market conditions may differ materially from
such assumptions because the amounts noted below are the result of analyses used
for the purpose of assessing possible risks and the mitigation thereof.
Accordingly, the forward-looking statements should not be considered projections
by General Semiconductor of future events or losses.

Among other factors, the Company's cash flows and earnings are subject to
fluctuations resulting from changes in foreign currency exchange rates and
interest rates. The Company manages its exposure to these market risks through
internally established policies and procedures and, when deemed appropriate,
through the use of derivative financial instruments. The Company's policy does
not allow speculation in derivative instruments for profit or execution of
derivative instrument contracts for which there are no underlying exposures. The
Company does not use financial instruments for trading purposes and is not a
party to any leveraged derivatives. The Company monitors its underlying market
risk exposures on an ongoing basis and believes that it can modify or adapt its
hedging strategies as needed.

The Company measured its market risk, related to its holdings of financial
instruments based on changes in interest and foreign exchange rates, utilizing a
sensitivity analysis. The sensitivity analysis measures the potential loss in
fair values, cash flows or earnings based on a hypothetical 10% change in
interest and foreign exchange rates. The Company used current market rates on
its market risk sensitive assets and liabilities to perform the sensitivity
analysis. Certain items such as obligations for pension and post retirement
benefits were not included in the analysis.

The Company is exposed to credit risk in the event of non-performance by
the counterparties to its foreign exchange-forward contracts. The Company
believes that the various counterparties with which the Company enters into
these agreements consist of only financially sound institutions and,
accordingly, believes that the credit risk for non-performance of these
contracts is not significant.

Additional information regarding the Company's financial instruments is
contained in Notes 8 and 13 to the Consolidated Financial Statements included in
Part II of this Form 10-K.

21
23

FOREIGN CURRENCY RISK

Almost all of General Semiconductor's products are manufactured in
Southeast Asia and Europe and a significant portion are sold internationally.
Therefore, the Company is subject to market risk related to changes in foreign
exchange rates. On a selective basis, the Company enters into forward and
purchased option contracts designed to hedge the currency exposure of
contractual and other firm commitments denominated in foreign currencies and the
currency exposure of anticipated but not yet committed transactions expected to
be denominated in foreign currencies.

The Company's principal foreign currency exposures are in the New Taiwan
Dollar, Japanese Yen, Chinese Renminbi, and the Euro. The Company's committed
exposures relate primarily to trade payables, accounts receivable and employee
compensation. At December 31, 2000 the Company had committed exposures of $32.9
million.

As of December 31, 2000 and 1999 the Company had outstanding forward
contracts in the amounts of $7.3 million and $10.6 million, respectively,
comprised of foreign currencies which were to be sold, and $10.5 million and
$12.7 million, respectively, comprised of foreign currencies which were to be
purchased. All outstanding forward contracts at December 31, 2000 mature within
twelve months and have an aggregate fair value of $0.1 million.

At December 31, 2000 and 1999 the impact of a hypothetical 10% adverse
change in exchange rates on the fair value of foreign exchange forward contracts
is a reduction in fair value of $1.7 million and $2.3 million, respectively.
This impact would be substantially offset by an increase in the fair value of
the Company's underlying exposures.

INTEREST RATE RISK

The Company is exposed to changes in U.S. dollar LIBOR interest rates on
its floating rate revolving credit facility. At December 31, 2000 and 1999 the
outstanding balance under this facility was $44.0 million and $104.0 million,
respectively. On a selective basis, the Company from time to time enters into
interest rate swap or cap agreements to reduce the potential negative impact
increases in interest rates could have on its outstanding variable rate debt.
The impact of interest rate instruments on the Company's results of operations
in each of the three years ended December 31, 2000 was not significant.

A hypothetical 10% increase in interest rates would adversely affect the
Company's pre-tax earnings and cash flow by $0.3 million in 2000 and $0.9
million in 1999, due to the Company's floating rate debt.

At December 31, 2000 and 1999 the fair value of the Convertible Notes was
approximately $115.6 million and $184.6 million, respectively.

INTERNATIONAL MARKETS

Management believes that a significant amount of General Semiconductor's
sales in 2001 will continue to be generated from international markets.

International sales generally represent 72% of the Company's worldwide
sales. Sales to the Asia/Pacific region accounted for approximately 42% of the
Company's worldwide sales for the year ended December 31, 2000. However,
approximately 50% of the Company's production is currently in Taiwan, the cost
of which has increased from the strengthened New Taiwan Dollar in relation to
the U.S. dollar. Extended underutilization of the Company's manufacturing
facilities, resulting in production inefficiency, could result in margin
deterioration. There can be no assurance as to the extent or duration of the
impact of these events on the Company.

RECENT ACCOUNTING PRONOUNCEMENTS

In 1998 the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which was subsequently amended by SFAS Nos.
137 and 138 (collectively "SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivatives
embedded in other contracts, and
22
24

hedging activities and requires that an entity recognize all derivatives as
either assets or liabilities and measure those instruments at fair value. Under
SFAS 133, certain contracts that were not formerly considered derivatives may
now meet the definition of a derivative. SFAS 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The Company will adopt
SFAS 133 effective January 1, 2001. Management does not expect the adoption of
SFAS 133 to have a significant impact on the financial position, results of
operations or cash flows of the Company.

NEW EUROPEAN CURRENCY

A new European currency (Euro) was introduced in January 1999 to replace
the separate currencies of eleven individual countries. The Company will need to
modify its payroll, benefits and pension systems, and internal financial
reporting systems to be able to process transactions in the new currency.
Necessary modifications to contracts with suppliers and customers have been made
to reflect the new Euro currency. A three-year transition period is given during
which transactions may be made in the old currencies. This may require dual
currency processes until the conversion is complete. The Company is identifying
the issues involved and intends to develop and implement solutions. The cost of
this effort is not expected to be material and will be expensed as incurred.
There can be no assurance, however, that all problems will be foreseen and
corrected, or that no material disruption of the Company's business will occur.
Currently, the Company has not experienced any material negative impact to date
as a result of the introduction of the Euro.

EFFECT OF INFLATION

General Semiconductor attempts to minimize the effect of inflation on
earnings by controlling its operating costs and selling prices. In the opinion
of management, the rate of inflation has not had a material impact on the
Company's results of operations.

FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. The Company's Form 10-K for the year
ended December 31, 2000, the Company's 2000 Annual Report to Stockholders, any
Form 10-Q or Form 8-K of the Company, or any oral or written statements made by
or on behalf of the Company, may include forward looking statements which
reflect the Company's current views with respect to future events and financial
performance. These forward looking statements are identified by their use of
such terms and phrases as "intends," "intend," "intended," "goal," "estimate,"
"estimates," "expects," "expect," "expected," "project," "projects,"
"projected," "projections," "plans," "anticipates," "anticipated," "should,"
"designed to," "foreseeable future," "believe," "believes" and "scheduled" and
similar expressions. Readers are cautioned not to place undue reliance on these
forward looking statements, which speak only as of the date the statement was
made. The Company undertakes no obligation to publicly update or revise any
forward looking statements, whether as a result of new information, future
events or otherwise.

Reference is made to the cautionary statements contained in Exhibit 99 to
this Form 10-K for a discussion of the factors that may cause actual results to
differ from the results discussed in these forward looking statements.

23
25

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

PAGE
-------------

Financial Statements of General Semiconductor, Inc.
Management's Responsibility for Financial Statements...... 25
Independent Auditors' Report.............................. 26
Consolidated Financial Statements:
Consolidated Balance Sheets -- as of December 31, 2000
and 1999.............................................. 27
Consolidated Statements of Income -- Years ended
December 31, 2000, 1999 and 1998..................... 28
Consolidated Statements of Stockholders'
Equity -- Years ended
December 31, 2000, 1999 and 1998..................... 29
Consolidated Statements of Cash Flows -- Years ended
December 31, 2000, 1999 and 1998..................... 30
Notes to Consolidated Financial Statements................ 31 through 49

24
26

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

Management is responsible for the preparation and accuracy of the
consolidated financial statements and other information included in this report.
The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America using,
where appropriate, management's best estimates and judgments.

In meeting its responsibility for the reliability of the consolidated
financial statements, management has developed and relies on the Company's
system of internal accounting control. The system is designed to provide
reasonable assurance that assets are safeguarded and that transactions are
executed as authorized and are properly recorded. The system is augmented by
written policies and procedures and an internal audit department.

The Board of Directors reviews the consolidated financial statements and
reporting practices of the Company through its Audit Committee, which is
composed entirely of directors who are not officers or employees of the Company.
The Audit Committee meets with the independent auditors, the internal auditor
and management to discuss audit scopes and results and to consider internal
control and financial reporting matters. Both the independent and internal
auditors have direct unrestricted access to the Audit Committee. The entire
Board of Directors reviews the Company's financial performance and financial
plan.

/s/ Ronald A. Ostertag /s/ Robert J. Gange
Ronald A. Ostertag Robert J. Gange
Chairman, President and Senior Vice President and
Chief Executive Officer Chief Financial Officer

25
27

INDEPENDENT AUDITORS' REPORT

To the Stockholders of
General Semiconductor, Inc.
Melville, New York

We have audited the accompanying consolidated balance sheets of General
Semiconductor, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of General Semiconductor, Inc. and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America.

/s/ Deloitte & Touche LLP
Jericho, New York
February 7, 2001

26
28

GENERAL SEMICONDUCTOR, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT STOCK PAR VALUE)

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

ASSETS
Current Assets:
Cash and cash equivalents................................... $ 4,913 $ 2,586
Accounts receivable, less allowance for doubtful accounts of
$1,014 and
$1,091, respectively...................................... 66,246 63,246
Inventories................................................. 53,698 43,480
Prepaid expenses and other current assets................... 13,803 14,359
Deferred income taxes....................................... 11,348 10,130
-------- --------
Total current assets............................... 150,008 133,801
Property, plant and equipment -- net........................ 244,889 231,217
Excess of cost over fair value of net assets acquired, less
accumulated
amortization of $54,212 and $49,071, respectively......... 152,468 157,609
Deferred income taxes....................................... 26,485 29,894
Intangibles and other assets, less accumulated amortization
of $16,326 and
$13,083, respectively..................................... 21,439 23,794
-------- --------
TOTAL ASSETS................................................ $595,289 $576,315
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................ $ 41,709 $ 34,380
Accrued expenses............................................ 57,026 34,700
Deferred income taxes....................................... 1,142 --
-------- --------
Total current liabilities.......................... 99,877 69,080
Long-term debt.............................................. 216,500 276,500
Deferred income taxes....................................... 26,508 28,608
Other non-current liabilities............................... 64,729 70,745
-------- --------
Total liabilities.................................. 407,614 444,933
-------- --------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $0.01 par value; 20,000 shares authorized;
no shares issued.......................................... -- --
Common Stock, $0.01 par value; 400,000 shares authorized;
37,829 and
37,069 shares issued, respectively........................ 378 371
Additional paid-in capital.................................. 11,697 2,151
Retained earnings........................................... 182,971 136,231
-------- --------
195,046 138,753
Less -- Treasury stock, at cost, 104 shares................. (7,371) (7,371)
-------- --------
Total stockholders' equity......................... 187,675 131,382
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $595,289 $576,315
======== ========

See notes to consolidated financial statements.
27
29

GENERAL SEMICONDUCTOR, INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------

NET SALES.................................................. $493,721 $417,082 $401,144
Cost of sales............................................ 339,538 302,476 283,582
-------- -------- --------
GROSS PROFIT............................................... 154,183 114,606 117,562
-------- -------- --------
Selling, general and administrative...................... 57,047 46,567 46,802
Research and development................................. 7,785 6,903 6,104
Amortization of excess of cost over fair value of net
assets acquired....................................... 5,141 5,142 5,145
Restructuring............................................ -- -- 12,324
-------- -------- --------
Total operating costs and expenses............... 69,973 58,612 70,375
-------- -------- --------
OPERATING INCOME........................................... 84,210 55,994 47,187
Other expense-net.......................................... (83) (9) (71)
Interest expense-net....................................... (18,756) (23,466) (20,026)
-------- -------- --------
INCOME BEFORE INCOME TAXES................................. 65,371 32,519 27,090
Provision for income taxes................................. (18,631) (8,130) (8,556)
-------- -------- --------
NET INCOME................................................. $ 46,740 $ 24,389 $ 18,534
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic.................................................... 37,608 36,832 36,811
Diluted.................................................. 49,562 37,563 36,899
BASIC EARNINGS PER SHARE................................... $ 1.24 $ 0.66 $ 0.50
======== ======== ========
DILUTED EARNINGS PER SHARE................................. $ 1.08 $ 0.66 $ 0.50
======== ======== ========

See notes to consolidated financial statements.
28
30

GENERAL SEMICONDUCTOR, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------ ------ ---------- -------- -------- -------------

BALANCE, JANUARY 1, 1998....................... 36,887 $369 $ 55 $ 93,308 $(7,371) $ 86,361
Exercise of stock options and related tax
benefit...................................... 38 -- 452 -- -- 452
Comprehensive income:
Net income................................... -- -- -- 18,534 -- --
Total comprehensive income..................... 18,534
------ ---- ------- -------- ------- --------
BALANCE, DECEMBER 31, 1998..................... 36,925 369 507 111,842 (7,371) 105,347
Exercise of stock options and related tax
benefit...................................... 144 2 1,644 -- -- 1,646
Comprehensive income:
Net income................................... -- -- -- 24,389 -- --
Total comprehensive income..................... 24,389
------ ---- ------- -------- ------- --------
BALANCE, DECEMBER 31, 1999..................... 37,069 371 2,151 136,231 (7,371) 131,382
Exercise of stock options and related tax
benefit...................................... 760 7 9,546 -- -- 9,553
Comprehensive income:
Net income................................... -- -- -- 46,740 -- --
Total comprehensive income..................... 46,740
------ ---- ------- -------- ------- --------
BALANCE, DECEMBER 31, 2000..................... 37,829 $378 $11,697 $182,971 $(7,371) $187,675
====== ==== ======= ======== ======= ========

See notes to consolidated financial statements.
29
31

GENERAL SEMICONDUCTOR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
--------- -------- ---------

OPERATING ACTIVITIES:
Net income................................................ $ 46,740 $ 24,389 $ 18,534
Adjustments to reconcile net income to net cash provided
by continuing operating activities:
Depreciation and amortization.......................... 29,961 27,806 24,982
Asset write-off in conjunction with restructuring...... -- -- 3,865
Deferred income taxes.................................. 1,233 10,308 (2,662)
Changes in assets and liabilities
Accounts receivable.................................. (3,000) (3,603) (5,565)
Inventories.......................................... (10,218) (3,966) (5,204)
Prepaid expenses and other current assets............ (1,960) 2,683 (2,694)
Other non-current assets............................. (222) 800 (24)
Accounts payable and accrued expenses................ 33,170 (12,215) 5,151
Other non-current liabilities........................ (6,016) (3,538) (3,193)
Other.................................................. (358) (824) (689)
--------- -------- ---------
Net cash provided by continuing operating activities........ 89,330 41,840 32,501
--------- -------- ---------
Cash used in discontinued operations........................ -- -- (25,177)
--------- -------- ---------
INVESTING ACTIVITIES:
Expenditures for property, plant and equipment............ (34,887) (27,328) (26,898)
--------- -------- ---------
Net cash used in investing activities....................... (34,887) (27,328) (26,898)
--------- -------- ---------
FINANCING ACTIVITIES:
Issuance of subordinated convertible notes................ -- 172,500 --
Net proceeds from (repayments of) revolving credit
facilities............................................. (60,000) (182,000) 64,000
Deferred financing fees................................... (668) (7,131) (742)
Proceeds from exercise of stock options................... 8,552 1,480 423
Principal repayment of debt............................... -- -- (46,074)
--------- -------- ---------
Net cash (used in) provided by financing activities......... (52,116) (15,151) 17,607
--------- -------- ---------
Increase (decrease) in cash and cash equivalents............ 2,327 (639) (1,967)
Cash and cash equivalents, beginning of year................ 2,586 3,225 5,192
--------- -------- ---------
Cash and cash equivalents, end of year...................... $ 4,913 $ 2,586 $ 3,225
========= ======== =========

SUPPLEMENTAL CASH FLOW INFORMATION, RELATING TO CONTINUING AND DISCONTINUED OPERATIONS:
Income taxes paid......................................... $ 9,530 $ 6,023 $ 9,776
Interest paid............................................. $ 18,166 $ 24,183 $ 19,677

See notes to consolidated financial statements.
30
32

GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

General Semiconductor, Inc. ("General Semiconductor" or the "Company") is a
market leader in the design, manufacture and distribution of a broad array of
power management products including low-to medium-power rectifiers, transient
voltage suppressors ("TVS"), small signal transistors, diodes and MOSFETs. Power
rectifiers, small signal devices, TVS products and MOSFETs are semiconductors
that are essential components of most electronic devices and systems. Rectifiers
convert alternating current (AC) into direct current (DC) which can be utilized
by electronic equipment. TVS devices provide protection from electrical surges,
ranging from electrostatic discharge to induced lightning. Small signal devices
amplify or switch low level currents. MOSFETs are devices that switch and/or
amplify current. The Company's products are primarily targeted for use in the
computer, automotive, telecommunications, lighting and consumer electronics
industries and are sold primarily to original equipment manufacturers,
electronic distributors and contract equipment manufacturers.

General Instrument Corporation ("GI") (i) transferred all the assets and
liabilities relating to the manufacture and sale of broadband communications
products used in the cable television, satellite, and telecommunications
industries and all rights to the related GI trademarks to its wholly-owned
subsidiary NextLevel Systems, Inc. ("NextLevel"), and all the assets and
liabilities relating to the manufacture and sale of coaxial, fiber optic and
other electric cable used in the cable television, satellite and other
industries to its wholly-owned subsidiary CommScope, Inc. ("CommScope") and (ii)
distributed all of the outstanding shares of capital stock of each of NextLevel
and CommScope to its stockholders on a pro rata basis as a dividend (the
"Distribution") in a transaction that was finalized on July 28, 1997 (the
"Distribution Date"). On the Distribution Date, NextLevel and CommScope began
operating as independent entities with publicly traded common stock. GI retained
no ownership interest in either NextLevel or CommScope. Concurrent with the
Distribution, GI changed its name to General Semiconductor, Inc. and effected a
one for four reverse stock split. On February 2, 1998 NextLevel changed its name
to General Instrument Corporation ("General Instrument"). General Instrument was
acquired by Motorola Inc. in January 2000.

The cash flows of the businesses transferred to General Instrument and
CommScope (the "Discontinued Operations"), have been reported through the
Distribution Date as "Cash used in discontinued operations". For the purpose of
governing certain of the ongoing relationships among General Semiconductor,
General Instrument and CommScope after the Distribution, these entities entered
into various agreements that provided for an orderly transition, the separation
and distribution of the operating assets and liabilities and pension plan assets
and liabilities of GI, as well as tax sharing, and other matters.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of General Semiconductor and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.

Use of Estimates. The preparation of the accompanying consolidated
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting
period. Actual results could differ from those estimates.

Cash Equivalents. The Company considers all highly liquid investments with
a maturity of three months or less at the date of purchase to be cash
equivalents.

Inventories. Inventories are stated at the lower of cost, determined on a
first-in, first-out ("FIFO") basis, or market.
31
33
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Property, Plant and Equipment. Property, plant and equipment are stated at
cost. Provisions for depreciation are based on estimated useful lives of the
assets using the straight-line method. Useful lives are 12 to 40 years for
buildings and improvements; estimated useful lives or lease terms, whichever is
shorter, for leasehold improvements and 3 to 10 years for machinery and
equipment. The cost of maintenance and repairs is charged to operations as
incurred.

Intangible Assets. Intangible assets consist primarily of patents which
are amortized on a straight-line basis over their useful lives not exceeding 20
years.

Excess of Cost Over Fair Value of Net Assets Acquired. The excess of cost
over fair value of net assets acquired is being amortized on a straight-line
basis over 40 years. Whenever events or changes in circumstances create concerns
related to recoverability, management evaluates the appropriateness of both the
carrying values and remaining useful lives of the excess of cost over fair value
of net assets acquired based on forecasted operating cash flows, on an
undiscounted basis, and other factors.

Long-Lived Assets. The Company evaluates its long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying values of such assets may not be recoverable. The Company evaluates the
carrying values of such assets using future undiscounted cash flows.

Revenue Recognition. The Company recognizes revenue when products are
shipped with appropriate provisions for uncollectible accounts and credits for
returns.

Foreign Currency Translation. The Company has determined the U.S. dollar
to be the functional currency of all foreign subsidiaries. Accordingly, gains
and losses recognized as a result of translating foreign subsidiaries' monetary
assets and liabilities from local foreign currencies to U.S. dollars are
reflected in the accompanying consolidated statements of income.

Research and Development. The Company charges research and development
expenses to operations as incurred.

Environmental Liabilities. The Company accounts for environmental
expenditures in accordance with Statement of Position 96-1, "Environmental
Remediation Liabilities". Accordingly, the Company accrues for environmental
expenses resulting from existing conditions that relate to past operations when
the costs are probable and reasonably estimable.

Income Taxes. Deferred income taxes reflect the future tax consequences of
differences between the financial reporting and income tax bases of assets and
liabilities. Deferred income taxes are provided for the income tax liabilities
to be incurred on the repatriation of undistributed earnings of the Company's
foreign subsidiaries, except for locations where the Company has designated
earnings to be permanently reinvested.

Recent Accounting Pronouncements. In 1998 the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities"
which was subsequently amended by SFAS Nos. 137 and 138 (collectively "SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivatives embedded in other contracts, and
hedging activities and requires that an entity recognize all derivatives as
either assets or liabilities and measure those instruments at fair value. Under
SFAS 133, certain contracts that were not formerly considered derivatives may
now meet the definition of a derivative. SFAS 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The Company will adopt
SFAS 133 effective January 1, 2001. Management does not expect the adoption of
SFAS 133 to have a significant impact on the financial position, results of
operations or cash flows of the Company.

Reclassifications. Certain prior year amounts have been reclassified to
conform to the current year presentation.

32
34
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVENTORIES

Inventories consist of:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

Raw materials...................................... $ 7,585 $ 5,657
Work in process.................................... 15,388 13,739
Finished goods..................................... 30,725 24,084
------- -------
Total.............................................. $53,698 $43,480
======= =======

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

Land and land improvements......................... $ 76,317 $ 76,317
Buildings, improvements and leasehold
improvements..................................... 72,130 69,085
Machinery and equipment............................ 274,304 248,809
--------- ---------
422,751 394,211
Accumulated depreciation........................... (177,862) (162,994)
--------- ---------
Property, plant and equipment, net................. $ 244,889 $ 231,217
========= =========

Depreciation expense aggregated $21.6 million, $20.7 million and $18.0
million for 2000, 1999 and 1998, respectively.

5. ACCRUED EXPENSES

Accrued expenses consist of:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

Salaries and compensation liabilities.............. $25,650 $13,012
Benefit plan liabilities........................... 8,706 6,923
Income taxes payable............................... 8,220 --
Other.............................................. 14,450 14,765
------- -------
Total.............................................. $57,026 $34,700
======= =======

On November 6, 1998 the Company announced a restructuring plan designed to
enhance the interface of operations and customers, to improve its cost
structure, efficiency and its competitive position and to accelerate growth. The
restructuring included reducing the workforce by decentralizing certain
purchasing, marketing, finance and research and development functions and
providing early retirement to a group of employees, closing two sales offices
and writing off assets related to an unprofitable product that will no longer be
manufactured.

33
35
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the restructuring reserve is:

YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
------- ------- -------

Restructuring reserve:
Balance, beginning of period............... $ 1,375 $ 7,809 $ --
Provision (benefit)...................... (86) -- 12,324
Asset impairment write-offs.............. (280) -- (3,858)
Severance and early retirement costs..... (1,009) (6,230) (605)
Other costs.............................. -- (204) (52)
------- ------- -------
Balance, end of period..................... $ -- $ 1,375 $ 7,809
======= ======= =======

In 2000, the unused restructuring liabilities of $0.1 million were reversed
against selling, general and administrative expenses.

6. OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consist of:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

Environmental liabilities.......................... $25,400 $27,723
Benefit plan liabilities........................... 33,835 35,682
Other.............................................. 5,494 7,340
------- -------
Total.............................................. $64,729 $70,745
======= =======

7. INCOME TAXES

General Semiconductor, General Instrument and CommScope entered into a tax
sharing agreement (the "Tax Sharing Agreement") that defines the parties' rights
and obligations with respect to federal, state and other income or franchise
taxes related to the businesses of GI for tax periods prior to, including and
following the Distribution and with respect to certain other tax matters.
General Instrument is responsible for consolidated federal income taxes,
consolidated or combined state income taxes and separate state income taxes of
GI and its subsidiaries and preparation and filings of the applicable returns
through July 25, 1997. Such liability was determined assuming a closing of the
books on July 25, 1997. Liability for foreign income taxes and other taxes was
generally allocated to the legal entity on which such taxes were imposed except
that liability for taxes relating to the transferred businesses (as defined in
the Tax Sharing Agreement) were generally allocated to General Instrument.

Notwithstanding the above, each of General Instrument, CommScope and
General Semiconductor is responsible for any such taxes to the extent that such
taxes are attributable to action taken by that entity or its affiliates, after
the Distribution, that is inconsistent with the tax treatment contemplated in
the tax ruling received from the Internal Revenue Service. The Company believes
that the Tax Sharing Agreement is fair to each of the parties and contains terms
which generally are comparable to those which would have been reached at arms-
length negotiations with unaffiliated parties.

34
36
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The domestic and foreign components of income before income taxes is:

YEAR ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
------- ------- -------

Domestic.............................................. $14,333 $ 7,365 $ 8,141
Foreign............................................... 51,038 25,154 18,949
------- ------- -------
Total................................................. $65,371 $32,519 $27,090
======= ======= =======

The components of the provision for income taxes are as follows:

YEAR ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
------- ------- -------

Current:
Federal................................................ $ 6,156 $(4,131) $ 3,848
Foreign................................................ 10,737 2,329 6,539
State.................................................. 505 (376) 831
------- ------- -------
17,398 (2,178) 11,218
------- ------- -------
Deferred:
Federal................................................ 866 7,571 (11)
Foreign................................................ 276 1,950 (2,478)
State.................................................. 91 787 (173)
------- ------- -------
1,233 10,308 (2,662)
------- ------- -------
Provision for income taxes............................. $18,631 $ 8,130 $ 8,556
======= ======= =======

The following table presents the principal reasons for the difference
between the actual income tax provision and the tax provision computed by
applying the U.S. federal statutory income tax rate to income before income
taxes:

YEAR ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
------- ------- -------

Federal income tax provision at 35%.................... $22,880 $11,382 $ 9,482
State income taxes, net of federal benefit............. 507 267 428
Foreign operations..................................... (7,518) (4,578) (2,166)
Non-deductible expenses................................ 2,762 1,059 1,945
Other-net.............................................. -- -- (1,133)
------- ------- -------
Provision for income taxes............................. $18,631 $ 8,130 $ 8,556
======= ======= =======
Effective income tax rate.............................. 28.5% 25.0% 31.6%

Income taxes related to foreign operations in 2000, 1999 and 1998 reflect
the Company's ability to recognize the benefit of foreign tax credits.

35
37
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes recorded in the accompanying consolidated balance
sheets are comprised of:

DECEMBER 31, 2000 DECEMBER 31, 1999
------------------------------- -------------------------------
ASSET LIABILITY NET ASSET LIABILITY NET
-------- --------- -------- -------- --------- --------

Current Deferred Income Taxes:
Accounts receivable and inventory
reserves............................ $ 3,903 $ 1,138 $ 2,765 $ 2,911 $ -- $ 2,911
Product and warranty liabilities...... 101 -- 101 156 -- 156
Employee benefits..................... 4,641 -- 4,641 2,283 -- 2,283
Other current......................... 2,703 4 2,699 4,780 -- 4,780
-------- ------- -------- -------- ------- --------
$ 11,348 $ 1,142 $ 10,206 $ 10,130 $ -- $ 10,130
======== ======= ======== ======== ======= ========
Non-Current Deferred Income Taxes:
Domestic capital loss carryforwards... $ 17,518 $ -- $ 17,518 $ 17,518 $ -- $ 17,518
Fixed and intangible assets........... (4,658) 1,378 (6,036) (6,253) -- (6,253)
Environmental liabilities............. 9,652 -- 9,652 10,535 -- 10,535
Employee benefits..................... 11,353 -- 11,353 12,234 -- 12,234
Other non-current..................... 12,397 25,130 (12,733) 15,637 28,608 (12,971)
Valuation allowance................... (19,777) -- (19,777) (19,777) -- (19,777)
-------- ------- -------- -------- ------- --------
$ 26,485 $26,508 $ (23) $ 29,894 $28,608 $ 1,286
======== ======= ======== ======== ======= ========

Deferred taxes have not been provided on undistributed earnings of certain
foreign operations of $29.8 million and $18.6 million in 2000 and 1999,
respectively, as those earnings are considered to be permanently reinvested.
Determining the tax liability that would arise if these amounts were remitted is
not practicable.

The valuation allowance at December 31, 2000 and 1999 relates principally
to domestic capital loss carryforwards, which expire in 2002. The valuation
allowance will be reduced when and if the Company generates domestic capital
gains.

8. LONG-TERM DEBT

Long-term debt consists of:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

Subordinated debt:
Convertible Notes................................ $172,500 $172,500
Senior bank indebtedness:
Revolving credit facility........................ 44,000 104,000
-------- --------
Total.................................... $216,500 $276,500
======== ========

36
38
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and future trade payables and other liabilities of certain of its subsidiaries
(approximately $92.9 million at December 31, 2000). The holders of the
Convertible Notes may require the Company to repurchase the notes at par value,
plus interest and liquidated damages, if any, upon a change in control of the
Company. Proceeds from the Convertible Notes were used to repay outstanding
indebtedness under the Company's credit facility described below.

In July 1997, the Company entered into a bank credit agreement, which was
amended in December 1998 and in June 1999 (as amended, the "Credit Agreement")
which provide for a $350.0 million secured revolving credit facility that
matures on December 31, 2002. In December 1999, the commitment amount under the
Credit Agreement was permanently reduced by $86.3 million (50% of the gross
proceeds from issuance of the Convertible Notes) to $263.8 million. The Credit
Agreement requires the Company to pay a facility fee on the total commitment.
The Credit Agreement permits the Company to choose between two interest rate
options: the Adjusted Base Rate (as defined in the Credit Agreement), or a
Eurodollar rate (LIBOR) plus a margin which varies based on the Company's ratio
of indebtedness to earnings before interest, taxes, depreciation and
amortization, as defined in the Credit Agreement. The facility fee also varies
based on that ratio. The Company is also able to set interest rates through a
competitive bid procedure. The Credit Agreement contains financial and operating
covenants, including limitations on guarantee obligations, liens, sale of
assets, indebtedness, investments, capital expenditures, payment of dividends
and leases, and requires the maintenance of certain financial ratios. In
addition, certain changes in control of the Company would cause an event of
default under the Credit Agreement. The December 1998 and June 1999 amendments
revised certain covenant compliance calculations to provide the Company with
greater flexibility. As required by the Credit Agreement, the Company entered
into a Guarantee and Collateral Agreement in August 1999 under which
substantially all of the domestic assets and a portion of the capital stock of
its foreign subsidiaries were pledged as security to the lenders. At December
31, 2000 and 1999 the Company was in compliance with all such amended covenants.

The weighted average interest rate on the Company's long-term debt at
December 31, 2000 and 1999 was 6.0% and 7.0%, respectively.

9. COMMITMENTS AND CONTINGENCIES

The Company leases office space, manufacturing facilities and
transportation and other equipment under operating leases which expire at
various dates through the year 2006. Rent expense was $4.5 million, $5.5 million
and $5.4 million in 2000, 1999 and 1998, respectively.

Future minimum lease payments required under operating leases as of
December 31, 2000 are:

2001...................................................... $3,445
2002...................................................... 2,477
2003...................................................... 1,800
2004...................................................... 710
2005...................................................... 511
Thereafter................................................ 59

The Company has approximately $11.0 million in letters of credit
outstanding at December 31, 2000.

Environmental Matters. The Company is subject to various federal, state,
local and foreign laws and regulations governing environmental matters,
including the use, discharge and disposal of hazardous materials. The Company's
manufacturing facilities are believed to be in substantial compliance with
current laws and regulations. Complying with current laws and regulations has
not had a material adverse effect on the Company's financial condition. In
connection with the Distribution, the Company retained the obligations with
respect to environmental matters relating to its discontinued operations and its
status as a "potentially responsible party."

37
39
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company is presently engaged in the remediation of seven sites relating to
discontinued operations in five states, and is a "potentially responsible party"
at five hazardous waste sites in four states.

The Company has engaged independent consultants to assist management in
evaluating potential liabilities related to environmental matters. Management
assesses the input from these independent consultants along with other
information known to the Company in its effort to continually monitor these
potential liabilities. Management assesses its environmental exposure on a
site-by-site basis, including those sites where the Company has been named as a
"potentially responsible party". Such assessments include the Company's share of
remediation costs, information known to the Company concerning the size of the
hazardous waste sites, their years of operation and the number of past users and
their financial viability. The Company has a reserve recorded for environmental
matters of $27.9 million at December 31, 2000 ($30.2 million at December 31,
1999). While the ultimate outcome of these matters cannot be determined,
management does not believe that the final disposition of these matters will
have a material adverse effect on the Company's financial position, results of
operations or cash flows beyond the amounts previously provided for in the
financial statements.

The Company's present and past facilities have been in operation for many
years, and over that time in the course of those operations, such facilities
have used substances which are or might be considered hazardous, and the Company
has generated and disposed of wastes which are or might be considered hazardous.
Therefore, it is possible that additional environmental issues may arise in the
future, which the Company cannot now predict.

Litigation. We are not a party to any pending legal proceedings other than
various claims and lawsuits arising in the normal course of business and those
for which we are indemnified. We are of the opinion that these litigations or
claims will not have a material negative effect on our consolidated financial
position, results of operations or cash flows.

A securities class action is presently pending in the United States
District Court for the Northern District of Illinois, Eastern Division, In Re
General Instrument Corporation Securities Litigation. This action, which
consolidates numerous class action complaints filed in various courts between
October 10 and October 27, 1995, is brought by plaintiffs, on their own behalf
and as representatives of a class of purchasers of GI Common Stock during the
period March 21, 1995 through October 18, 1995. The complaint alleges that,
prior to the spin-off, GI and certain of its officers and directors, as well as
Forstmann Little & Co. and certain related entities, violated the federal
securities laws, namely, Sections 10(b) and 20(a) of the Exchange Act, by
allegedly making false and misleading statements and failing to disclose
material facts about GI's planned shipments in 1995 of its CFT 2200 and
DigiCipher II products. On November 21, 2000, the Court dismissed a derivative
action brought on behalf of General Instrument Corporation under the same
caption.

38
40
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. EMPLOYEE BENEFITS

Pension Plans. In connection with the Distribution, the Company, General
Instrument and CommScope entered into an Employee Benefits Allocation Agreement
(the "Agreement"). The Agreement provides that the Company generally will assume
or retain, as the case may be, all liabilities under employee benefits plans
maintained by GI or any of its subsidiaries with respect to employees of General
Semiconductor or any of its retained subsidiaries and employees of previously
divested operations other than the liabilities related to employees of General
Instrument or CommScope subsequent to the Distribution.

Net periodic pension cost consists of:

YEAR ENDED DECEMBER 31
-----------------------------------------------------------------
2000 1999 1998
------------------- ------------------- -------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- ------- -------- ------- -------- -------

Service cost...................... $ 549 $2,705 $ 577 $2,616 $ 482 $2,513
Interest.......................... 5,064 3,555 5,176 3,285 5,209 3,040
Expected return on plan assets.... (6,605) (1,085) (6,324) (949) (5,979) (853)
Transition (asset) obligation..... -- 168 -- 165 -- 160
Amortization of prior service
costs........................... (12) -- (12) -- (12) --
Recognized actuarial loss......... 10 401 50 455 198 522
------- ------ ------- ------ ------- ------
Net periodic pension cost
(income)........................ $ (994) $5,744 $ (533) $5,572 $ (102) $5,382
======= ====== ======= ====== ======= ======

39
41
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The status of the Company's continuing pension plans and the related
amounts recorded in the accompanying consolidated balance sheets are:

DECEMBER 31, 2000 DECEMBER 31, 1999
-------------------- --------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- -------- -------- --------

Change in Benefit Obligation
Benefit obligation at beginning of year......... $71,660 $ 53,045 $80,285 $ 50,587
Service cost................................. 549 2,705 577 2,616
Interest cost................................ 5,064 3,555 5,176 3,285
Actuarial (gain) or loss..................... (3,914) 4,194 (5,974) (825)
Impact of foreign exchange................... -- (3,238) -- (121)
Benefits paid................................ (4,595) (900) (9,244) (2,497)
Curtailment loss............................. -- -- 840 --
------- -------- ------- --------
Benefit obligation at end of year............... 68,764 59,361 71,660 53,045
------- -------- ------- --------
Change in Plan Assets
Fair value of plan assets at beginning of
year......................................... 81,792 13,820 85,905 12,308
Actual return on plan assets, net of
expenses................................... (1,923) 1,101 5,112 782
Employer contributions....................... -- 3,076 19 3,000
Impact of foreign exchange................... -- (783) -- 227
Benefits paid................................ (4,595) (900) (9,244) (2,497)
------- -------- ------- --------
Fair value of plan assets at end of year........ 75,274 16,314 81,792 13,820
------- -------- ------- --------
Reconciliation of the Funded Status
Funded status................................ 6,510 (43,047) 10,132 (39,225)
Unrecognized transition (asset) or
obligation................................. -- 1,088 -- 1,325
Unrecognized prior service cost.............. (42) -- (54) --
Unrecognized actuarial (gain) or loss........ (3,773) 13,552 (8,377) 10,460
------- -------- ------- --------
Asset (liability) recognized at year-end........ $ 2,695 $(28,407) $ 1,701 $(27,440)
======= ======== ======= ========
Actuarial assumptions:
Discount rate................................ 7.75% 6.50% 7.75% 6.75%
Investment return............................ 9.00% 6.75% 9.00% 7.00%
Compensation increases....................... 4.75% 6.00% 4.75% 6.00%

The domestic pension plans consist principally of a qualified retirement
plan which has satisfied the full funding limitation requirements under the
Employee Retirement Income Security Act of 1974 ("ERISA"). The Company made no
contributions to the plan in 2000, 1999 or 1998. Domestic plan assets consist of
fixed income and equity securities. The Company also has an unfunded
supplemental retirement plan for certain members of management. Net pension cost
and accrued pension obligations for this plan are included in the amounts above.

The foreign pension plans consist principally of a Taiwan and a German
pension plan which are funded in accordance with statutory requirements. Foreign
plan assets principally consist of fixed income securities.

Defined Contribution Plans. The Company maintains defined contribution
plans covering all domestic non-union employees and employees in Ireland and
France. Company contributions were $0.5 million, $0.4 million and $0.7 million
in 2000, 1999 and 1998, respectively.

Postretirement Benefits other than Pensions. The Company maintains an
unfunded contributory group medical plan (the "Plan") for all full-time U.S.
employees not covered by a collective bargaining agreement who

40
42
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

meet defined age and service requirements. The Company recognizes the cost of
providing and maintaining postretirement benefits during employees' active
service periods. The Plan is the primary provider of benefits for retirees up to
age 65. After age 65, Medicare becomes the primary provider. Net periodic
postretirement benefit cost consists of:

YEAR ENDED DECEMBER 31,
-------------------------
2000 1999 1998
------ ------- ------

Service cost................................................ $ 118 $ 141 $ 91
Interest.................................................... 963 965 918
Amortization of prior service costs......................... (194) (194) (383)
Recognized actuarial loss................................... 69 184 135
----- ------ -----
Net periodic postretirement benefit cost.................... $ 956 $1,096 $ 761
===== ====== =====

The status of the Plan and the related amounts recorded in the accompanying
consolidated balance sheets are:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

Change in Benefit Obligation
Benefit obligation at beginning of year.................. $ 13,434 $ 13,927
Service cost.......................................... 118 141
Interest cost......................................... 963 965
Plan amendments....................................... -- 1,879
Actuarial (gain) or loss.............................. (306) (2,050)
Retiree contributions................................. 313 269
Benefits paid......................................... (1,664) (1,697)
-------- --------
Benefit obligation at end of year........................ 12,858 13,434
-------- --------
Change in Plan Assets
Fair value of plan assets at beginning of year........... -- --
Employer contributions................................ 1,351 1,429
Retiree contributions................................. 313 268
Benefits paid......................................... (1,664) (1,697)
-------- --------
Fair value of plan assets at end of year................. -- --
-------- --------
Reconciliation of the Funded Status
Funded status......................................... (12,858) (13,434)
Unrecognized prior service cost....................... (2,568) (2,762)
Unrecognized actuarial (gain) or loss................. 2,345 2,719
-------- --------
Accrued benefit liability at year end.................... $(13,081) $(13,477)
======== ========
Actuarial assumptions:
Discount rate......................................... 7.75% 7.75%
Expected return on plan assets........................ N/A N/A

The assumed rate of future increases in health care costs for 2000 and 1999
was 9.0% and 10.0%, respectively, for pre-age 65 retirees, and 7.0% and 8.0%,
respectively, for post-age 65 retirees, and is expected to decline to 6.0% by
the year 2005 for pre-age 65 retirees and by the year 2003 for post-age 65
retirees, respectively. Under the Plan, the actuarially determined effect of a
one percentage point increase in the assumed

41
43
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

health care cost trend rate on annual net periodic benefit cost and the benefit
obligation would be $1.1 million for each 2000 and 1999.

Postemployment Benefits other than Pensions. The postemployment benefits
obligation relates principally to medical costs for former employees on
long-term disability. As of December 31, 2000 and 1999 $0.7 million and $0.6
million, respectively, was accrued for postemployment benefits.

11. STOCKHOLDERS' EQUITY

Stock Option Plan. Following the Distribution, the Company continued in
effect the 1993 Long-Term Incentive Plan, renamed the Amended and Restated
General Semiconductor, Inc. 1993 Long-Term Incentive Plan (the "1993 LTIP").
Stock options granted generally vest ratably over a three year period beginning
on the first anniversary from the date granted, expire after ten years and have
exercise prices equal to the market value of the Company's Common Stock at the
date of grant.

In May 1998, the stockholders of the Company approved the adoption of the
General Semiconductor, Inc. 1998 Long-Term Incentive Plan (the "1998 LTIP")
which provides for the granting of stock options, stock appreciation rights,
restricted stock, performance units, performance shares and phantom stock to
employees of the Company and its subsidiaries and the granting of stock options
to directors of the Company. On February 7, 2001 the 1998 LTIP was amended to
provide that each non-employee Director will receive a grant of non-qualified
stock options in October of each year rather than on every third anniversary of
his or her election to the board. The 1998 LTIP replaces the Company's 1993
LTIP. No further awards or options were granted pursuant to the 1993 LTIP. All
shares available for future grant under the 1993 LTIP and those shares in
respect of options or awards granted or issued pursuant to the 1993 LTIP which
are subsequently forfeited, expired or otherwise terminate without having been
exercised will be added to the number of shares available for grant under the
1998 LTIP.

The following table summarizes stock option activity relating to the
Company's 1993 LTIP and 1998 LTIP (collectively, the "LTIP Plans"):

NUMBER WEIGHTED-
OF AVERAGE
SHARES EXERCISE PRICE
------ --------------

Options outstanding at January 1, 1998................ 3,016 $11.98
Granted............................................... 1,715 8.96
Exercised............................................. (38) 11.28
Cancelled............................................. (69) 12.03
-----
Options outstanding at December 31, 1998.............. 4,624 $10.86
Granted............................................... 1,347 8.65
Exercised............................................. (144) 10.24
Cancelled............................................. (300) 11.10
-----
Options outstanding at December 31, 1999.............. 5,527 $10.32
Granted............................................... 1,699 11.07
Exercised............................................. (760) 11.26
Cancelled............................................. (184) 10.47
-----
Options outstanding at December 31, 2000.............. 6,282 $10.40
=====

42
44
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
and exercisable under the Company's LTIP Plans:

SHARES UNDER OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- -------------------------
NUMBER WEIGHTED- NUMBER
OUTSTANDING AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
AT REMAINING AVERAGE AT AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 2000 TERM (YEARS) PRICE 2000 PRICE
- --------------- ------------ ------------ --------- ------------ ---------

$1.48 to 8.69......... 2,276 8.0 $ 7.94 1,121 $ 7.72
$8.81 to 12.06........ 2,506 8.1 $10.68 1,104 $11.71
$12.38 to 19.44....... 1,500 6.3 $13.67 1,035 $13.06
----- -----
6,282 7.6 $10.40 3,260 $10.77
===== =====

At December 31, 2000 and 1999 1.4 million shares and 2.7 million shares,
respectively, were reserved for future awards under the Company's LTIP Plans.
The tax benefits arising from stock options exercised during the years ended
December 31, 2000, 1999 and 1998 in the amount of $1.0 million, $0.2 million and
$0.1 million, respectively, were recorded in stockholders' equity as additional
paid-in capital.

In addition, under the provisions of the LTIP Plans, the Company issued one
thousand shares of Common Stock to certain members of its Board of Directors
during the year ended December 31, 1999.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its LTIP Plans. Since the exercise price of all stock options granted under the
LTIP Plans in 2000, 1999 and 1998 was equal to the closing price of the Common
Stock on the date of grant, no compensation expense has been recognized.
Compensation expense would have been $4.9 million, $4.4 million and $5.4 million
in 2000, 1999 and 1998, respectively, had compensation cost for stock options
awarded during these years under the Company's stock option agreements been
determined based upon the fair value at the grant date consistent with the
methodology prescribed under SFAS No. 123, "Accounting for Stock-Based
Compensation". The Company's pro forma net income and diluted earnings per share
would have been $43.7 million and $1.02 per share, respectively, for 2000, $21.7
million and $0.59 per share, respectively, for 1999 and $15.2 million and $0.41
per share, respectively for 1998. The estimated weighted-average per share fair
value of the options granted was $6.19 during 2000, $4.45 during 1999 and $4.18
during 1998, on the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions:

2000 1999 1998
---- ---- ----

Expected life (years)....................................... 4.0 4.0 4.0
Risk-free interest rate..................................... 5.84% 6.08% 4.81%
Expected volatility......................................... 68% 62% 54%
Expected dividend yield..................................... 0% 0% 0%

The pro forma effect on net income and earnings per share for 2000, 1999
and 1998 may not be representative of the pro forma effect in future years
because it includes compensation cost on a straight-line basis over the vesting
periods of the grants and does not take into consideration the pro forma
compensation costs for grants made prior to 1995.

Stockholder Rights Plan. On January 6, 1997 the Board of Directors adopted
a stockholder rights plan designed to protect stockholders from various abusive
takeover tactics, including attempts to acquire control of the Company at an
inadequate price. Under the rights plan, which was amended in March 1999, each
stockholder, subsequent to the distribution date of January 24, 1997, receives a
dividend of one right for each outstanding share of the Company's Common Stock.
The rights are attached to, and presently only trade with, the Common

43
45
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock and currently are not exercisable. Except as specified below, upon
becoming exercisable, all rights holders will be entitled to purchase from the
Company one one-thousandth of a share of Series A Junior Participating Preferred
Stock ("Participating Preferred Stock") at a price of $100.

The rights become exercisable and will begin to trade separately from the
Common Stock upon the earlier of (i) the first date of public announcement that
a person or group (other than an existing 15% stockholder or pursuant to a
Permitted Offer, as defined) has acquired beneficial ownership of 15% or more of
the Company's outstanding Common Stock, or (ii) 10 business days following a
person's or group's commencement of, or announcement of, an intention to
commence a tender or exchange offer, the consummation of which would result in
beneficial ownership of 15% or more of the Company's Common Stock. The rights
will entitle holders to purchase Common Stock having a market value (immediately
prior to such acquisition) of twice the exercise price of the right in lieu of
purchasing the Participating Preferred Stock. If the Company is acquired through
a merger or other business combination transaction (other than a Permitted
Offer, as defined), each right will entitle the holder to purchase common stock
of the surviving company having a market value (immediately prior to such
acquisition) of twice the exercise price of the right. The Company may redeem
the rights for $0.01 each at any time prior to such acquisition. The rights will
expire on January 6, 2007, unless earlier redeemed.

In connection with the stockholder rights plan, the Board of Directors
approved the creation of, out of the authorized but unissued shares of preferred
stock of the Company, the Participating Preferred Stock, consisting of 0.4
million shares with a par value of $0.01 per share. The holders of the
Participating Preferred Stock are entitled to receive dividends, if declared by
the Board of Directors, from funds legally available. Each share of
Participating Preferred Stock is entitled to one thousand votes on all matters
submitted to stockholder vote. The shares of Participating Preferred Stock are
not redeemable by the Company nor convertible into Common Stock or any other
security of the Company.

12. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the
weighted-average number of common shares outstanding during the applicable
periods. In 2000 and 1999, the diluted earnings per share computation is based
on net income adjusted for interest and amortization of debt issuance costs
related to convertible debt, if dilutive, divided by the weighted-average number
of common shares outstanding adjusted for the dilutive effect of stock options
and convertible securities. In 1998, the diluted earnings per share computation
is based on net income divided by the weighted-average number of common shares
outstanding adjusted for the dilutive effect of stock options. The diluted
earnings per share calculation assumes the exercise of stock options using the
treasury stock method.

Set forth below are reconciliations of the numerators and denominators of
the basic and diluted per share computations for each of the years ended
December 31, 2000, 1999 and 1998.

YEAR ENDED DECEMBER 31, 2000
-----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------

BASIC EPS
Net income...................................... $46,740 37,608 $1.24
=====
EFFECT OF DILUTIVE SECURITIES
Options....................................... -- 861
Convertible debt.............................. 6,769 11,093
------- ------
DILUTED EPS
Net income plus assumed conversions............. $53,509 49,562 $1.08
======= ====== =====

44
46
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

YEAR ENDED DECEMBER 31, 1999
-----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------

BASIC EPS
Net income...................................... $24,389 36,832 $0.66
=====
EFFECT OF DILUTIVE SECURITIES
Options....................................... -- 218
Convertible debt.............................. 323 513
------- ------
DILUTED EPS
Net income plus assumed conversions............. $24,712 37,563 $0.66
======= ====== =====

YEAR ENDED DECEMBER 31, 1998
-----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------

BASIC EPS
Net income...................................... $18,534 36,811 $0.50
=====
EFFECT OF DILUTIVE SECURITIES
Options....................................... -- 88
------- ------
DILUTED EPS
Net income...................................... $18,534 36,899 $0.50
======= ====== =====

13. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

Derivative instruments are primarily used by the Company to reduce
financial risk arising from changes in foreign exchange and interest rates. The
Company does not use derivative instruments for trading purposes, nor does it
engage in currency or interest rate speculation. Derivatives used by the Company
consist of foreign exchange, interest rate and other instruments. The Company
believes that the various counterparties with which the Company enters into
these agreements consist of only financially sound institutions and,
accordingly, believes that the credit risk for non-performance of these
contracts is not significant. The Company monitors its underlying market risk
exposures on an ongoing basis and believes that it can modify or adapt its
hedging strategies as needed.

Foreign Exchange Instruments. The Company enters into forward contracts on
a month-to-month basis to minimize the effect of foreign currency fluctuations
with regard to certain monetary assets and liabilities denominated in currencies
other than the U.S. dollar. Gains and losses on these contracts generally
offset, in the same period, gains and losses resulting from the translation of
monetary assets and liabilities to U.S. dollars on a monthly basis, reducing the
risk of exchange rate movements in the Company's results of operations.

On a selective basis, the Company enters into forward contracts and
purchased option contracts designed to hedge the currency exposure of
contractual and other firm commitments denominated in foreign currencies and the
currency exposure of anticipated, but not yet committed, transactions expected
to be denominated in foreign currencies. The purpose of these activities is to
protect the Company from the risk that the eventual net cash flows in U.S.
dollars from foreign receivables and payables will be adversely affected by
changes in exchange rates. Gains and losses on all purchased options and those
forward contracts which hedge contractual and other firm commitments are
deferred and recognized in the Company's results of operations in the same
period as the gain or loss from the underlying transactions. Gains and losses on
forward contracts used to hedge anticipated, but not yet committed, transactions
are recognized in the Company's results of operations as changes in exchange
rates

45
47
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for the applicable foreign currencies occur. Historically, foreign contracts
with respect to contractual and other firm commitments and anticipated, but not
yet committed, transactions have been short-term in nature. In addition,
purchased options have had no intrinsic value at the time of purchase.

The Company settles foreign exchange contracts generally at maturity and at
prevailing market rates. The Company amortizes premiums on purchased options
over the life of the contract. The amortization of these premiums during each of
the three years in the period ended December 31, 2000 was not significant. As of
December 31, 2000 and 1999, the Company had outstanding forward contracts in the
amounts of $7.3 million and $10.6 million, respectively, comprised of foreign
currencies which were to be sold and $10.5 million and $12.7 million,
respectively, comprised of foreign currencies which were to be purchased. All
outstanding forward contracts as of December 31, 2000 mature within twelve
months.

As of December 31, 2000 the Company had no purchased option contracts
outstanding. As of December 31, 2000 the following forward contracts were
outstanding:

FORWARD CONTRACTS:

AVERAGE US DOLLAR (000'S) US DOLLAR (000'S)
CURRENCY RATE PURCHASE/(SELL) FAIR VALUE
- -------- ------- ------------------ ------------------

New Taiwan Dollar.................. 33.21 NTD/US $(10,539) $(32)
Japanese Yen....................... 111.74 JPY/US 6,264 131
British Pounds..................... 1.47 US/BPS 1,029 (15)

As of December 31, 1999 the Company had no purchase option contracts
outstanding. As of December 31, 1999 the following forward contracts were
outstanding:

FORWARD CONTRACTS:

AVERAGE US DOLLAR (000'S) US DOLLAR (000'S)
CURRENCY RATE PURCHASE/(SELL) FAIR VALUE
- -------- ------- ------------------ ------------------

New Taiwan Dollar.................. 31.57 NTD/US $(12,670) $116
Japanese Yen....................... 102.66 JPY/US 9,741 138
British Pounds..................... 1.61 US/BPS 899 (20)

Fair values shown above are based on quoted market prices. Deferred gains
or losses on the above contracts at December 31, 2000 and 1999 were not
significant. Foreign currency transaction gains (losses) included in net income
were $(1.2) million, $0.8 million and $1.6 million in 2000, 1999 and 1998,
respectively.

Interest Rate Derivative Instruments. On a selective basis, the Company
from time to time enters into interest rate cap or swap agreements to reduce the
potential negative impact of increases in interest rates on its outstanding
variable-rate debt under the Credit Agreement. The Company recognizes in its
results of operations over the term of the contract, as interest expense, the
amortization of contract premiums incurred from purchasing interest rate caps.
Net payments or receipts resulting from these agreements are recorded as
adjustments to interest expense. The effect of interest rate instruments on the
Company's results of operations in each of the three years in the period ended
December 31, 2000 was not significant. As of December 31, 2000 and 1999, the
Company had no interest rate derivative instruments outstanding.

The Company entered into two interest rate swap transactions with a term of
one year beginning on January 22, 1998. Pursuant to these agreements it paid a
fixed interest rate averaging 5.96% on a combined notional amount of $100
million and received interest on the combined $100 million notional amount based
on a three month LIBOR rate set quarterly beginning on January 22, 1998. During
February 1998, the Company purchased two interest rate caps each with a notional
amount of $50 million. The caps became effective on

46
48
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

April 27, 1998 and June 29, 1998 with terms of nine months and six months,
respectively. Under the terms of the caps, the Company was paid an amount equal
to the excess, if any, of three month LIBOR above 6% multiplied by the notional
amounts. The premium paid for the caps was not significant.

Other Financial Instruments. As of December 31, 2000 and 1999 the carrying
value of cash and cash equivalents, trade accounts receivable and trade accounts
payable approximates fair value because of the immediate or short-term maturity
of these financial instruments. The carrying amount of the Company's senior bank
indebtedness approximates fair value because the underlying instruments have
variable interest rates that adjust to market on a short-term basis. At December
31, 2000 and 1999 the fair value of the Convertible Notes was approximately
$115.6 million and $184.6 million, respectively.

Concentration of credit risk. The Company's accounts receivable are
generated from sales to customers in a variety of end-use markets that are
geographically and economically dispersed and payment is generally due within 30
days. Accordingly, the Company does not believe it is subject to any significant
concentration of credit risk.

14. GEOGRAPHIC SEGMENT INFORMATION

General Semiconductor is engaged in one industry segment, specifically, the
design, manufacture and sale of power management semiconductors. The Company
manages its business on a geographic basis. Summarized financial information for
the Company's reportable geographic segments is presented in the following
table. The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. Net sales by reportable
geographic segment reflects the originating source of the unaffiliated sale.
Intercompany transfers represent the originating geographic source of the
transfer and principally reflect product assembly which is accounted for at cost
plus a nominal profit. In determining earnings before provision for income taxes
for each geographic segment, sales and purchases between areas have been
accounted for on the basis of internal transfer prices set by the Company.
Corporate assets consist of patents, the excess of cost over fair value of net
assets acquired and deferred financing costs. Long-lived assets in the European
and Far East geographic segments are related primarily to Ireland and Taiwan,
respectively.

UNITED
STATES EUROPE FAR EAST CHINA CORPORATE CONSOLIDATED
-------- -------- -------- ------- --------- ------------

YEAR ENDED DECEMBER 31, 2000:
Net sales(a).................. $264,221 $147,848 $ 81,652 $ -- $ -- $493,721
Intercompany transfers........ 150,858 182,860 169,189 53,413 (556,320) --
-------- -------- -------- ------- --------- --------
Net sales................... 415,079 330,708 250,841 53,413 (556,320) 493,721
======== ======== ======== ======= ========= ========
Interest income............... -- 62 48 20 63 193
Interest expense.............. -- 208 75 -- 18,666 18,949
Depreciation and amortization
expense..................... 10,910 5,651 9,895 3,505 -- 29,961
Income before provision for
income taxes................ 13,682 24,543 20,544 6,602 -- 65,371
Provision for income taxes.... 6,318 6,120 5,549 644 -- 18,631
Long-lived assets............. 97,588 59,404 71,750 29,708 160,346 418,796
Capital expenditures.......... $ 2,020 $ 9,606 $ 20,349 $ 2,912 $ -- $ 34,887

47
49
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

UNITED
STATES EUROPE FAR EAST CHINA CORPORATE CONSOLIDATED
-------- -------- -------- ------- --------- ------------

YEAR ENDED DECEMBER 31, 1999:
Net sales(a)................. $220,602 $130,287 $ 66,193 $ -- $ -- $417,082
Intercompany transfers....... 133,183 143,058 171,609 45,025 (492,875) --
-------- -------- -------- ------- --------- --------
Net sales.................. 353,785 273,345 237,802 45,025 (492,875) 417,082
======== ======== ======== ======= ========= ========
Interest income.............. -- 35 22 12 34 103
Interest expense............. -- 239 46 -- 23,284 23,569
Depreciation and amortization
expense.................... 9,580 5,939 8,953 3,334 -- 27,806
Income before provision for
income taxes............... 2,509 7,621 16,255 6,134 -- 32,519
Provision for income taxes... 2,507 1,200 4,750 (327) -- 8,130
Long-lived assets............ 99,866 55,559 60,090 30,383 166,722 412,620
Capital expenditures......... $ 3,244 $ 7,560 $ 12,862 $ 3,662 $ -- $ 27,328

YEAR ENDED DECEMBER 31, 1998:
Net sales(a)................. $225,711 $135,247 $ 40,186 $ -- $ -- $401,144
Intercompany transfers....... 114,833 136,993 170,568 28,956 (451,350) --
-------- -------- -------- ------- --------- --------
Net sales.................. 340,544 272,240 210,754 28,956 (451,350) 401,144
======== ======== ======== ======= ========= ========
Interest income.............. -- 48 26 29 273 376
Interest expense............. -- 297 588 -- 19,517 20,402
Depreciation and amortization
expense.................... 8,770 4,654 8,913 2,645 -- 24,982
Income before provision for
income taxes(b)............ 6,614 3,802 11,061 5,613 -- 27,090
Provision for income taxes... 3,073 3,364 1,989 130 -- 8,556
Long-lived assets............ 93,691 52,931 57,264 29,049 173,006 405,941
Capital expenditures......... $ 2,731 $ 14,042 $ 7,532 $ 2,593 $ -- $ 26,898

- ---------------
(a) Included in United States net sales are export sales as follows:

2000 1999 1998
-------- -------- --------

Taiwan....................................... $ 70,846 $ 62,494 $ 93,380
China........................................ 54,009 41,607 32,904
-------- -------- --------
$124,855 $104,101 $126,284
======== ======== ========

Net sales, by country, within the European geographic segment are:

2000 1999 1998
-------- -------- --------

France................................... $ 12,858 $ 12,428 $ 12,993
Germany.................................. 62,138 56,405 59,326
Italy.................................... 15,137 12,314 14,272
U.K...................................... 20,199 17,329 15,315
Other.................................... 37,516 31,811 33,341
-------- -------- --------
$147,848 $130,287 $135,247
======== ======== ========

48
50
GENERAL SEMICONDUCTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(b) Earnings before provision for income taxes in 1998 includes restructuring
charges of $12.3 million ($8.5 million net of tax).

No single customer accounted for more than 10% of the Company's sales during the
years ended December 31, 2000, 1999 and 1998.

15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly data for 2000 and 1999 is as follows:

QUARTER ENDED 2000
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------

Net sales......................... $114,970 $128,318 $130,521 $119,912
Gross profit...................... 34,533 39,508 41,144 38,998
Net income........................ 9,534 12,093 13,973 11,140
Earnings per share
Basic:.......................... $ 0.26 $ 0.32 $ 0.37 $ 0.30
Diluted:........................ 0.23 0.28 0.32 0.26

QUARTER ENDED 1999
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------

Net sales......................... $ 96,961 $101,583 $105,756 $112,782
Gross profit...................... 24,484 26,563 28,835 34,724
Net income........................ 4,252 5,108 6,208 8,821
Earnings per share
Basic:.......................... $ 0.12 $ 0.14 $ 0.17 $ 0.24
Diluted:........................ 0.12 0.14 0.17 0.23

16. RELATED PARTY TRANSACTION

Included within intangibles and other assets at December 31, 2000 is a $0.5
million secured, promissory note due from an officer of the Company. This note,
which was issued in connection with the relocation of the officer, bears
interest at an annual rate of 6.23% and is subject to voluntary and mandatory
prepayment. The outstanding principal and all unpaid interest on the note are
due upon maturity of the note on September 1, 2007.

17. SUBSEQUENT EVENT -- BUSINESS RESTRUCTURING (UNAUDITED)

On February 8, 2001 the Company announced a restructuring of its
operations. Worldwide headcount reductions are planned through a combination of
early retirement programs and workforce reductions. A restructuring charge of up
to $14.0 million is expected to be taken in the first quarter of 2001.

49
51

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

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Identification of Directors:
The sections captioned "Election of Directors" and "The Board of
Directors and Committees of the Board" contained in the Company's
2001 Proxy Statement are hereby incorporated by reference.

(b) Identification of Executive Officers:
See Part I of this Form 10-K

(c) Compliance with Section 16(a) of the Securities Exchange Act of 1934,
as amended:
The section captioned "Section 16(a) Beneficial Ownership
Reporting Compliance" contained in the Company's 2001 Proxy
Statement is hereby incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item is contained in the sections captioned
"Compensation of Executive Officers" and "Severance Protection and Other
Agreements" in the Company's 2001 Proxy Statement and is incorporated by
reference herein. The sections captioned "Report of the Compensation Committee",
"Report of the Audit Committee" and "Performance Graph" in the Company's 2001
Proxy Statement are not incorporated by reference herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this item is contained in the sections captioned
"Security Ownership of Certain Beneficial Owners and Management of the Company"
and "Compensation of Executive Officers-Stock Options" in the Company's 2001
Proxy Statement and is incorporated by reference herein.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item is contained in the section captioned
"Certain Related Party Transactions" in the Company's 2001 Proxy Statement and
is incorporated by reference herein.

PART IV

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

(a) Documents filed as part of this report

1. Financial Statements

Independent Auditors' Report

Consolidated Financial Statements:

Consolidated Balance Sheets -- as of December 31, 2000 and
1999

Consolidated Statements of Income -- Years ended December 31,
2000, 1999 and 1998

Consolidated Statements of Stockholders' Equity -- Years ended
December 31, 2000, 1999 and 1998

Consolidated Statements of Cash Flows -- Years ended December
31, 2000, 1999 and 1998
50
52

Notes to Consolidated Financial Statements

See Item 8 of this Form 10-K for Consolidated Financial
Statements

2. Financial Statement Schedules. Schedules are omitted because they
are not applicable or the required information is shown in the
financial statements or notes thereto.

3. Exhibits. The exhibits required by Item 601 of Regulation S-K filed
as part of, or incorporated by reference in, this report are listed
in (c) below.

(b) Reports on Form 8-K

The Company filed a Form 8-K with the SEC, dated October 26, 2000
to report under Item 5 of that Form that a press release was issued
on October 26, 2000 announcing earnings for the three and nine
months ended September 30, 2000. A copy of the press release was
filed as an exhibit to the Form 8-K.

The Company filed a Form 8-K with the SEC, dated December 13, 2000
to report under Item 9 of that Form that a press release was issued
on December 13, 2000 announcing updated earnings estimates for the
year ended December 31, 2000. A copy of the press release was filed
as an exhibit to the Form 8-K.

EXHIBITS
- --------

2.1 Agreement of Merger, dated as of July 25, 1997, between
General Instrument Corporation and General Instrument
Corporation of Delaware. (Incorporated herein by reference
from the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1997 (File No. 1-5442)).
3.1 Restated Certificate of Incorporation of General
Semiconductor, Inc. (including Certificate of Designation,
Preferences and Rights of Series A Junior Participating
Preferred Stock). (Incorporated herein by reference from the
Company's Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1998 (File No. 1-5442)).
3.2 Amended and Restated By-Laws of General Semiconductor, Inc.
(Incorporated herein by reference from the Company's Annual
Report on Form 10-K/A for the fiscal year ended December 31,
1998 (File No. 1-5442)).
4.1 Rights Agreement, dated January 6, 1997, between General
Semiconductor, Inc. and ChaseMellon Shareholder Services,
LLC. (Incorporated herein by reference from the Registration
Statement on Form 8-A filed January 10, 1997 (File No.
1-5442)).
4.2 Amendment No. 1 to the Rights Agreement, dated as of March
10, 1999, between General Semiconductor, Inc. and
ChaseMellon Shareholder Services, LLC. (Incorporated herein
by reference from the Amendment to the Registration
Statement on Form 8-A/A filed March 16, 1999 (File No.
1-5442)).
10.1 Employee Benefits Allocation Agreement, dated as of July 25,
1997, among NextLevel Systems, Inc., CommScope, Inc. and
General Semiconductor, Inc. (Incorporated herein by
reference from the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1997 (File No. 1-5442)).
10.2 Debt and Cash Allocation Agreement, dated as of July 25,
1997, among NextLevel Systems, Inc., CommScope, Inc. and
General Semiconductor, Inc. (Incorporated herein by
reference from the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1997 (File No. 1-5442)).
10.3 Insurance Agreement, dated as of July 25, 1997, among
NextLevel Systems, Inc., CommScope, Inc. and General
Semiconductor, Inc. (Incorporated herein by reference from
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1997 (File No. 1-5442)).
10.4 Tax Sharing Agreement, dated as of July 25, 1997, among
NextLevel Systems, Inc., CommScope, Inc. and General
Semiconductor, Inc. (Incorporated herein by reference from
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1997 (File No. 1-5442)).
10.5 Trademark License Agreement, dated as of July 25, 1997,
among NextLevel Systems, Inc., CommScope, Inc. and General
Semiconductor, Inc. (Incorporated herein by reference from
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1997 (File No. 1-5442)).
10.6 Transition Services Agreement, dated as of July 25, 1997,
among NextLevel Systems, Inc., CommScope, Inc. and General
Semiconductor, Inc. (Incorporated herein by reference from
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1997 (File No. 1-5442)).

51
53

EXHIBITS
- --------

10.7 Credit Agreement, dated as of July 23, 1997, among NextLevel
Systems, Inc., and General Semiconductor, Inc., Certain
Banks, The Chase Manhattan Bank as Administrative Agent and
The Chase Manhattan Bank, Bank of America National Trust and
Savings Association, Bank of Montreal, The Bank of Nova
Scotia, CIBC, Inc. Credit Lyonnais New York Branch, Fleet
National Bank and Wachovia Bank, N.A. as Co-Agents.
(Incorporated herein by reference from the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1997 (File No. 1-5442)).
10.7.1 First Amendment to the Credit Agreement, dated as of
December 31, 1998, among General Semiconductor, Inc., The
Chase Manhattan Bank as Administrative Agent, the Banks from
time to time parties thereto and the financial institutions
named therein as co-agents for the Banks. (Incorporated
herein by reference from the Company's Annual Report on Form
10-K/A for the fiscal year ended December 31, 1998 (File No.
1-5442)).
10.7.2 Second Amendment to the Credit Agreement, dated as of June
22, 1999, among General Semiconductor, Inc., The Chase
Manhattan Bank as Administrative Agent, the Banks from time
to time parties thereto and the financial institutions named
therein as co-agents for the Banks. (Incorporated herein by
reference from the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1999 (File No. 1-5442)).
10.7.3 Guarantee and Collateral Agreement, dated as of August 15,
1999, between General Semiconductor, Inc. and certain of its
subsidiaries in favor of the Chase Manhattan Bank, as
Administrative Agent. (Incorporated herein by reference from
the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1999 (file No. 1-5442)).
10.8+ Amended and Restated General Semiconductor, Inc. 1993
Long-Term Incentive Plan. (Incorporated herein by reference
from the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1997 (File No. 1-5442)).
10.8.1+ First Amendment to the General Semiconductor, Inc. Amended
and Restated 1993 Long-Term Incentive Plan, as amended
February 12, 2001.
10.9+ General Semiconductor, Inc. Amended and Restated 1998
Long-Term Incentive Plan as amended on February 7, 2001.
10.10+ General Semiconductor, Inc. 2001 Annual Incentive Plan
adopted February 7, 2001.
10.11+ First Amendment to General Semiconductor, Inc. Supplemental
Executive Retirement Plan, dated as of October 19, 1999.
(Incorporated herein by reference from the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
2000 (File No. 1-5442)).
10.12+ Form of Indemnification Agreement between General
Semiconductor, Inc. and certain executive officers.
(Incorporated herein by reference from the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1997 (File No. 1-5442)).
10.13+ Amended and Restated Severance Protection Agreement, dated
October 29, 1998, between General Semiconductor, Inc. and
Ronald A. Ostertag. (Incorporated herein by reference from
the Company's Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1998 (File No. 1-5442)).
10.14+ Form of Amended and Restated Severance Protection Agreement
between General Semiconductor, Inc. and certain of its
executive officers (other than the Chief Executive Officer).
(Incorporated herein by reference from the Company's Annual
Report on Form 10-K/A for the fiscal year ended December 31,
1998 (File No. 1-5442)).
10.15 Indenture, dated as of December 14, 1999, between General
Semiconductor, Inc. and The Bank of New York, as Trustee
(Incorporated herein by reference from the Company's
Registration Statement on Form S-3 dated January 12, 2000
(File No. 333-94513)).
10.16 Registration Rights Agreement, dated as of December 14,
1999, between General Semiconductor, Inc. and the Initial
Purchasers named therein (Incorporated herein by reference
from the Company's Registration Statement on Form S-3 dated
January 12, 2000 (File No. 333-94513)).
10.17 Promissory Note, dated as of September 1, 2000, between W.
John Nelson and Paola Nelson ("Borrowers") and General
Semiconductor, Inc. ("Lender"). (Incorporated herein by
reference from the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 2000 (File No. 1-5442)).
10.18+ Supplemental Executive Retirement Agreement between General
Semiconductor, Inc. and John Phillips, dated March 6, 2001.
10.19+ General Semiconductor, Inc. Supplemental Executive
Retirement Plan, dated as of June 30, 1997.

52
54

EXHIBITS
- --------

21. Subsidiaries of the Registrant.
23. Independent Auditors' Consent.
99. Forward-Looking Information.

- ---------------
+ Management compensation.

53
55

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

General Semiconductor, Inc.

/s/ RONALD A. OSTERTAG
--------------------------------------
Ronald A. Ostertag
Chairman of the Board, President
and Chief Executive Officer

Dated: March 14, 2001

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

SIGNATURE TITLE DATE
--------- ----- ----

/s/ RONALD A. OSTERTAG Chairman of the Board, President March 14, 2001
- --------------------------------------------------- and Chief Executive Officer and
Ronald A. Ostertag Director (Principal Executive
Officer)

/s/ ROBERT J. GANGE Senior Vice President and Chief March 14, 2001
- --------------------------------------------------- Financial Officer
Robert J. Gange (Principal Financial Officer)

/s/ LINDA L. GRAMBOW Controller (Principal Accounting March 14, 2001
- --------------------------------------------------- Officer)
Linda L. Grambow

/s/ C. SCOTT KULICKE Director March 14, 2001
- ---------------------------------------------------
C. Scott Kulicke

/s/ RONALD ROSENZWEIG Director March 14, 2001
- ---------------------------------------------------
Ronald Rosenzweig

/s/ PETER A. SCHWARTZ Director March 14, 2001
- ---------------------------------------------------
Peter A. Schwartz

/s/ SAMUEL L. SIMMONS Director March 14, 2001
- ---------------------------------------------------
Samuel L. Simmons

/s/ PROF. GERARD T. WRIXON Director March 14, 2001
- ---------------------------------------------------
Prof. Gerard T. Wrixon