Cypress to Acquire CMOS Image Sensor Leader.

SAN JOSE, Calif. -- Belgium-based FillFactory NV's Leading-Edge Products to Help Advance Cypress's Goal to Double Its Cell Phone Business and Expand in Other Growing Markets

Cypress Semiconductor Corp. (NYSE:CY) today announced that it has signed a definitive agreement to acquire FillFactory NV, a Belgium-based leader in active pixel CMOS image sensor technology. FillFactory offers a variety of high-performance custom and standard products for some of the industry's most advanced digital photography, high-speed imaging, machine vision and automotive applications.

FillFactory's products, which are based on a proprietary pixel architecture, include a 13.85-megapixel sensor for Kodak's new DCS line of professional digital cameras; a 100 x 135 mm sensor for mammography applications that takes up an entire eight-inch wafer and is one of the world's largest sensors; radiation-tolerant sensors for aerospace applications such as star trackers and sun sensors; and active-pixel sensors that combine a true snapshot synchronous shutter with very high readout rates for use in high-speed scientific image analysis.

Under the terms of the acquisition, Cypress agreed to pay $100 million in cash for FillFactory. The transaction, which is targeted to close in the 2004 third quarter, is expected to be accretive to Cypress's proforma earnings. Cypress expects the acquisition to be accretive in 2004, excluding the cost of acquisition-related intangibles. FillFactory posted sales of $6.0 million and profit before tax of $1.3 million in the quarter ended March 31, 2004.

The demand for CMOS image sensors -- essentially cameras on a chip made with standard CMOS process technology -- is growing rapidly, driven by a swift expansion of the market for digital still cameras (DSCs) and cell phone cameras. According to a Q204 report by the El Segundo, CA-based semiconductor research firm iSuppli, the 78-million-unit market for CMOS sensors in 2003 is projected to expand at an annual rate of more than 40% through 2008.

"The market for image sensors is exploding and FillFactory's products are among the highest-performance in the business," said Tony Alvarez, executive vice president of Cypress's Memory Products Division, which will add FillFactory as a product line when the acquisition is complete.

"FillFactory image sensors will enable us to effectively double our sales into the cell phone market, where we are already a leading supplier of low-power memories," Alvarez added. "They will expand our market in DSCs, where we currently sell a broad array of timing solutions. They will augment our growing automotive business, where we sell configurable microcontrollers and memories, and they will also enable us to penetrate new customers and markets, including those in Japan and the Asia-Pacific.

"The CMOS manufacturing process used to make image sensors is highly similar to that used to manufacture memories," Alvarez said. "That also makes FillFactory a great fit with Cypress's core manufacturing capabilities."

"Cypress's low-cost, high-volume CMOS manufacturing capabilities and extensive worldwide sales and marketing channels will enable us to quickly expand our business in new areas and to strengthen our ability to meet our existing customers' needs," said Luc De Mey, FillFactory co-founder, president and chief executive officer. "We are pleased to join a company that will accelerate our growth in the future."

"As a spin-off of IMEC, Europe's leading independent research center for the development of state-of-the art microelectronic technologies, FillFactory provides us with an experienced, first-rate development team in a highly technical, fast-growing market," said T.J. Rodgers, Cypress president and CEO. "Longer-term, we aim to combine FillFactory intellectual property with existing Cypress IP -- such as the optical microelectromechanical systems (MEMS) and image-processing capabilities of our Silicon Light Machines subsidiary -- to lay the groundwork for new, integrated, value-added solutions."

FillFactory focuses on high-performance image sensors characterized by large numbers of pixels, as in the Kodak digital camera application; large areas, as in its mammography sensor; high frame rates, which make it easier to capture images in motion; and high dynamic range, improving their ability to distinguish dark objects against light backgrounds. Its proprietary pixel architecture has a high "fill factor," meaning that the entire area of a pixel is photosensitive, even with the three or four transistors that are required to reset and sense an image. As a result, FillFactory products have no need for the microlenses required by competitive products.

High fill factors translate into smaller CMOS sensor chips and/or sensor chips with better resolution without making concessions to sensitivity. FillFactory's 13.85-megapixel CMOS image sensor with a 24 x 36 mm(squared) light-sensitive area is currently shipping into Kodak's new DCS Pro SLR/n and DCS Pro SLR/c 35-mm professional digital cameras.

The shareholders of FillFactory were advised by Xavier Moreels and Nigel Daly, directors at ING Investment Banking, London.

About FillFactory

FillFactory develops, produces and markets innovative and high-performance CMOS image sensors, based on patented technologies and know-how built up over more than 15 years. FillFactory NV was established in December 1999 as a spin-off of IMEC, the Interuniversity MicroElectronics Center. All relevant IMEC patents were assigned to FillFactory. FillFactory's staff includes many former IMEC employees, many with years of experience in CMOS image sensor development and innovative approaches, which also resulted in many scientific publications and patents. FillFactory was funded by IT-Partners, Prelude Ventures, Capricorn Venture Partners, Partners @ Venture, Dow Ventures, Fidimec, and MCC Sofipa.

About Cypress

Cypress Semiconductor Corporation (NYSE:CY) is Connecting from Last Mile to First Mile(TM) with high-performance solutions for personal, network access, enterprise, metro switch and core communications-system applications. Cypress Connects(TM) using wireless, wireline, digital, and optical transmission standards, including USB, Fibre Channel, SONET/SDH, Gigabit Ethernet and DWDM. Leveraging its process and system-level expertise, Cypress makes industry-leading physical layer devices, framers, and network search engines, along with a broad portfolio of high-bandwidth memories, timing technology solutions and reconfigurable mixed-signal arrays. More information about Cypress is accessible online at www.cypress.com.

Safe Harbor Provision

The above news release contains forward-looking statements that involve risks and uncertainties. These forward looking statements relate to the expected impact of the acquisition on Cypress's operating results, future market demand and acceptance of Cypress's and FillFactory's products, and the development of new business and products of the combined company. Cypress's actual results may vary materially from the results discussed in the forward-looking statements.

Factors that may cause such a difference include those risks surrounding the closing of the acquisition, timely development, production, and the continued and increased market acceptance of the combined companies' products, Cypress's ability to successfully combine the operation of the two companies, the ability of the combined company to compete in the highly competitive and rapidly changing marketplace, and the other risks detailed from time to time in Cypress's periodic reports with the Securities and Exchange Commission.

Cypress and the Cypress logo are registered trademarks of Cypress Semiconductor Corporation. "Connecting from Last Mile to First Mile" and "Cypress Connects" are trademarks of Cypress. All other trademarks are the property of their respective owners.