791915--3/3/2008--CYPRESS_SEMICONDUCTOR_CORP

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WE ARE A MAJORITY SHAREHOLDER OF SUNPOWER. UNDER THIS SECTION, WE HAVE INCLUDED CERTAIN IMPORTANT RISK FACTORS THAT SPECIFICALLY IMPACT SUNPOWER'S BUSINESS, OPERATIONS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FOR MORE DISCUSSION OF SUNPOWER AND THE RISKS AFFECTING SUNPOWER, INVESTORS SHOULD REFER TO SUNPOWER'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 30, 2007. THE CONTENTS OF SUCH ANNUAL REPORT ON FORM 10-K ARE EXPRESSLY NOT INCORPORATED BY REFERENCE HEREIN. The trading price for Cypress's common stock has been and may continue to be volatile and can be affected by the trading price of SunPower's class A common stock and/or speculation about the possibility of future actions we might take in connection with our SunPower holdings. The solar power industry is currently experiencing an industry-wide shortage of polysilicon. This shortage poses several risks to SunPower's business, including possible constraints on revenue growth and possible decreases in SunPower's and Cypress's gross margins and profitability. We face significant volatility in supply and demand conditions for our products, and this volatility, as well as any failure by us to accurately forecast future supply and demand conditions, could materially and negatively impact our business. Our business, financial condition and results of operations will be seriously harmed if we fail to compete successfully in our highly competitive industry and markets. Our financial results could be adversely impacted if we fail to develop, introduce and sell new products or fail to develop and implement new technologies. The complex nature of our manufacturing activities makes us highly susceptible to manufacturing problems and these problems can have a substantial negative impact on us when they occur. We are increasingly dependent upon third-parties to manufacture, distribute and transport our products and problems in the performance or availability of these companies could seriously harm our financial performance. If the software products that accompany our hardware contain unknown defects, it could result in loss of future revenue, decreased market acceptance, injury to our reputation and product liability claims. SunPower will continue to be dependent on a limited number of third-party suppliers for key components for its solar systems products during the near-term, which could prevent SunPower from delivering products to its customers within required timeframes, which could result in installation delays, cancellations, liquidated damages and loss of market share. A limited number of SunPower's customers are expected to continue to comprise a significant portion of SunPower's total revenues and any decrease in revenue from these customers could have a material adverse effect on SunPower and Cypress. If the market for solar power products takes longer to develop than SunPower anticipates or does not develop at all, or if SunPower fails to compete successfully in the solar power market, its revenue and profitability could be adversely affected. SunPower recognizes most of its revenues generated from SP Systems on a "percentage of completion" basis and upon the achievement of contractual milestone, so any delay or cancellation of a project could adversely affect SunPower's and Cypress's business and results of operations. The reduction or elimination of government and economic incentives could cause SunPower's revenue to decline and harm SunPower's and Cypress's financial results. The execution of SunPower's growth strategy for its systems business is dependent upon the continued availability of third-party financing arrangements for its customers. Third parties may seek to hold Cypress responsible for liabilities of SunPower. Any guidance that we may provide about our business or expected future results may differ from actual results. We may be unable to protect our intellectual property rights adequately and may face significant expenses as a result of ongoing or future litigation. Unfavorable outcome of litigation or investigations pending against us could materially impact our business. Unfavorable outcome of examinations of our tax returns by tax authorities could have a material impact on our results of operations and financial position. We face additional problems and uncertainties associated with international operations that could seriously harm us. We compete with others to attract and retain key personnel, and any loss of, or inability to attract, such personnel would harm us. We are subject to many different environmental, health and safety laws, regulations and directives, and compliance with them may be costly. Our operations and financial results could be severely harmed by certain natural disasters. The failure to integrate our business and technologies with those of companies that we or SunPower may acquire could adversely affect our financial results. We maintain self-insurance for certain indemnities we have made to our officers and directors. Actions taken by activist stockholders may consume our Board of Directors and management's time and attention. We have significant amounts of debt and our substantial indebtedness could adversely affect our business, financial condition, results of operations, earnings per share and our ability to meet our payment obligations. We may not have the ability to repurchase the convertible notes in cash upon the occurrence of a fundamental change, or to pay cash upon the conversion of notes, as required by the indenture governing the notes. The proposed FASB Staff Position on convertible debt could result in higher reported interest expense related to our convertible debt, which could materially impact our results of operations and earnings per share. If the recent worsening of credit market conditions continues or increases, it could have a material adverse impact on our investment portfolio.

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791915--3/3/2008--CYPRESS_SEMICONDUCTOR_CORP_/DE/