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

FORM 10-K

COMMISSION FILE NUMBER 001-14165

IXYS CORPORATION

3540 Bassett Street
Santa Clara, California 95054-2704
(Address of principal executive offices and zip code)

(408) 982-0700
(Registrant’s telephone number, including area code))

Securities registered pursuant to Section 12(b) of the Act:

None
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act:

Common stock, par value $.01 per share
(Title of Class)

     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 Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Annual Report on Form 10-K or any amendments to this Annual Report on Form 10-K. Yes [X] No [   ]

     The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 19, 2002, was approximately $80,037,356.* The number of shares of the Registrant’s Common Stock outstanding as of June 19, 2002 is 26,298,578.

      * Based on a closing price of $6.35 per share of the Registrant’s Common Stock on June 19, 2002 held by executive officers and directors and stockholders whose ownership exceeds 5% of the Common Stock outstanding at June 19, 2002. Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Registrant or that such person is controlled by or under common control with the Registrant.

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IXYS CORPORATION

ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2002

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     This Annual Report on Form 10-K contains forward-looking statements that include, but are not limited to, statements concerning projected revenues, expenses, gross profit and income, the need for additional capital, the outcome of pending litigation and the acquisition of Clare, Inc., a Massachusetts corporation (“Clare”). These forward-looking statements are based on IXYS’ current expectations, estimates and projections about IXYS’ industry, management’s beliefs, and certain assumptions made by IXYS. In some cases, these statements may be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of such terms and other comparable expressions. These statements involve known and unknown risks and uncertainties that may cause our results, levels of activity, performance or achievements or our industry to be materially different than those expressed or implied by the forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, our ability to compete successfully in our industry, to continue to develop new products on a timely basis, cancellation of customer orders, successful integration of the Clare business and other factors discussed below and under the caption “Risk Factors.” IXYS disclaims any obligation to update any of the forward-looking statements contained in this report to reflect any future events or developments.

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PART I

ITEM 1.  IXYS BUSINESS

     We are a leading company in the design, development, manufacture and marketing of high power, high performance power semiconductors. Our power semiconductors improve system efficiency and reliability by converting electricity at relatively high voltage and current levels into the finely regulated power required by electronic products. We focus on the market for power semiconductors that are capable of processing greater than 500 watts of power.

     We were founded in 1983. In 1989, we acquired from ABB our semiconductor operation in Lampertheim, Germany, now called IXYS Semiconductor GmbH.

     In 1995, we reincorporated in Delaware. Also in 1995, ABB converted approximately $10.5 million in debt owed to it by us into our capital stock. In January 1998, we purchased the Lampertheim facility, which had previously been leased from ABB.

     In September 1998, we merged with Paradigm Technology, a Delaware corporation that designed and marketed SRAM products, in a transaction accounted for as a reverse merger. In the merger, Paradigm issued us common stock in exchange for all outstanding shares of our capital stock. At the conclusion of the merger, our stockholders held approximately 96% of the combined company, and the historical accounting records of IXYS became those of the combined company. Accordingly, Paradigm formally changed its name to “IXYS Corporation.”

     In May 2000, we acquired Directed Energy, which gave us added scientific expertise and additional products related to laser diode drives, high voltage pulse generators and modulators. In connection with this acquisition, we issued 250,370 shares of our common stock to the former shareholders of Directed Energy in a transaction that was accounted for under the purchase method.

     On January 22, 2002, we acquired Westcode Semiconductors Limited, a UK-based power semiconductor manufacturer, for approximately $9.0 million in cash.

     On June 10, 2002, we completed the acquisition of Clare, Inc., a provider of high-voltage analog and mixed-signal semiconductor integrated packages and discrete components for use in electronic communications, computer, and industrial equipment. In connection with this acquisition, we issued approximately 4.89 million shares of IXYS common stock to the holders of outstanding shares of Clare common stock and assumed options to purchase approximately 1.0 million shares of IXYS common stock.

     Our power semiconductor products have historically been divided into two primary categories, power metal oxide semiconductor, or MOS, transistors and bipolar products. Our power semiconductors are sold as individual units and are also packaged in high power modules that frequently consist of multiple semiconductor dies. In fiscal year 2002, power semiconductors constituted approximately 93% of our revenues, which included 39% from power MOS transistors and 54% from bipolar products. We also sell gallium arsenide products, which has become a primary product category. In addition to power semiconductors, we manufacture our proprietary direct copper bond, or DCB, substrate for use in our own power semiconductors as well as for sale to other power semiconductor manufacturers. We also sell integrated circuits, or ICs, that have applications associated with power management, and high speed, high density static random access memory, or SRAM, products.

     IXYS’ products are used primarily to control electricity in:

	•		power conversion systems, including uninterruptible power supplies, or UPS, and switch mode power supplies, or SMPS, for communications infrastructure applications such as wireless base stations, network servers and telecommunication switching stations;
	•		motor drives for industrial applications such as industrial transportation, robotics and process control equipment; and

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•

medical electronics for sophisticated applications, such as defibrillators and medical imaging.

     We design our products primarily for industrial and business applications, rather than for use in personal computers, mobile phones or other household appliances. In fiscal year 2002, we sold our products to over 2,000 customers worldwide. Our major customers include ASCOM, Still, Siemens, Guidant, Medtronics, Tyco, Aztec, Delta Electronics and Huawei. In many cases, our customers incorporate our products into systems sold to their own customers, which include Ericsson, General Electric, General Motors, Hewlett-Packard, IBM, Motorola and Nokia.

Industry Background

     Demand for electricity in the 21st century is forecasted to increase faster than demand for other forms of energy. The worldwide demand for electrical energy is currently increasing due to:

	•		proliferation of technology driven products that require electricity, including computers, telecommunications equipment and the infrastructure to support portable electronics;
	•		increased use of electronic content in traditional products such as airplanes, automobiles and home appliances;
	•		increased use of automation and electrical processes in industry and mass transit systems; and
	•		penetration of technology into developing countries.

     Not only is demand increasing, but the requirements for electricity are also changing. Electronic products in all markets are becoming increasingly sophisticated, offering more “intelligence” through the use of microprocessors and additional components. For example, the Information Technology Industry Council reported that computers represented 13% of U.S. electrical consumption in 1998, versus only 6% in 1994. The increasing complexity of such products requires more precisely regulated power quality and greater power reliability. In addition, the increasing costs of electricity, coupled with governmental regulations and environmental concerns, have caused an increased demand for energy efficiency.

     Power semiconductors are used to provide the precisely regulated power required by sophisticated electronic products and equipment and address the growing demand for energy efficiency. In most cases, power semiconductors:

	•		convert or “rectify” alternating current, or AC, power delivered by electrical utilities to direct current, or DC, power which is required by most electronic equipment;
	•		convert DC power at a certain voltage level to DC power at a different voltage level to meet the specific voltage requirement for an application;
	•		invert DC power to high frequency AC power to permit the processing of power using substantially smaller electronic components; or
	•		rectify high frequency AC power from switch-mode power supplies to meet the specific DC voltage required by an application.

     The more sophisticated the end product, the greater the need for specially formatted, finely regulated power, and the greater the need for a high performance power semiconductor. According to the Digital Power Report, less than 15% of the world’s electricity is currently switched by power semiconductors, but this percentage is expected to grow significantly to meet the need for higher quality power.

     Power semiconductors improve system efficiency and reliability by processing and converting electrical energy into more usable, higher quality power. Specifically, power semiconductors are used primarily in controlling energy in power conversion systems, including switch mode power supplies, or SMPS, and uninterruptible power

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supplies, or UPS, and motor drive controls. Switch mode power supplies efficiently convert power to meet the specific voltage requirements of an application, such as communications equipment. Uninterruptible power supplies provide a short term backup of electricity in the event of power failure. Motor drive controls regulate the voltage, current and frequency of power to a motor.

Market Size And Trends

     The primary markets we serve are characterized by complex technological development and higher power level requirements. We believe the following key trends are driving the demand for our products:

     Growth in communications devices and infrastructure. The worldwide communications industry has experienced rapid growth in recent years, fueled largely by growth in the Internet, deregulation, competition, privatization and other technological advances, including the convergence of voice, video and data communication. The proliferation of electronic devices and the infrastructure to support them is resulting in increasing power level requirements and the demand for greater power reliability.

     Increased demand for energy efficiency in motor drives. Electronic motors consume approximately one-half of the world’s electricity. Due to costs and complexity, motor controls that permit variable speed operation, which in turn reduce energy consumption, have been predominantly used only in higher end applications. However, recent advancements in power management enable more cost effective, variable speed motor controls, which enhance energy efficiency and improve performance in a wide range of industrial and commercial applications, such as heating, ventilation and air conditioning systems.

     Emergence of new applications in medical electronics. Continued advancements in medical technologies are resulting in more sophisticated medical electronic devices. Power semiconductors can greatly reduce the size of equipment and improve the precision of medical measurements and functionality. For example, power semiconductors have enabled cardiac defibrillators to become much smaller and more portable, improving the ability to install these devices in more non-medical establishments, such as airplanes and office buildings.

     Development of new technologies for power management. New technologies such as the use of radio frequency, or RF, for nontraditional power applications are opening new markets for power semiconductors. For example, RF based semiconductor production equipment is migrating to high frequency power MOS transistors from traditional RF tubes. Additionally, material science developments, such as gallium arsenide, are enabling the production of higher power density power management products, such as those required for wireless base stations.

     Demand for increasing power density. The need for higher levels of power in end use applications is causing purchasers of power semiconductors to demand more power for their applications from the same physical space. In the communications industry, the growth in bandwidth demands is requiring communications equipment providers to add more equipment or more powerful equipment to confined spaces in highly populated areas. As a result, power semiconductor manufacturers are being required to design and produce products that enable their customers to expand power levels without expanding product footprints, or maintaining levels of power while shrinking product footprints.

IXYS’ Strategy

     Since our inception, we have focused on meeting the needs of the high power, high performance segment of the power semiconductor market. We intend to continue building a leading position within our targeted segment of this market by pursuing the following strategies:

     Maintain technological focus on high power, high performance market. Our technological expertise enable us to focus on the high power, high performance power semiconductor market. Due to technological complexities, fewer industry players compete in this market, resulting in a more favorable competitive environment for us. We believe our technological expertise differentiates us from most of our competitors. This expertise encompasses a wide range of scientific disciplines and technical capabilities, including physics, mechanical engineering, chemistry, circuit design, material science and packaging. Using our technological expertise, we continually strive to introduce

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innovative products. For example, we have recently brought to market a gallium arsenide rectifier, one use of which will permit increased power density in wireless base stations, as well as higher current gallium arsenide products for surface mount packages.

     Target rapid growth opportunities within the high power, high performance market. We select the specific markets where we intend to compete by evaluating their potential growth, our ability to establish an advantage based upon our technological capabilities and the performance of competing products. For example, to capitalize on the power density and switching speed of our products, we have entered the telecommunications and data communications segments of the communications infrastructure market. These segments include applications for wireless base stations, internet servers for co-location facilities and storage area networks.

     Continue to diversify markets, customers and products. We believe that diversifying the markets and customers we serve and the products we produce enables us to minimize the traditional cyclical effects of the semiconductor industry on our business. We have a significant market presence in Europe, North America and Asia, the three principal geographic markets for high performance power semiconductors. Moreover, our products are used in a broad range of applications, from communications infrastructure to industrial automation to medical electronics, thereby reducing our reliance on customers from any particular industry. Our product line spans a broad range of functionality and price, which allows us to provide an appropriate solution to most of our customers’ power semiconductor needs. This product diversity permits our customers to reduce the number of their suppliers by enabling them to purchase a substantial portion of their power semiconductor needs from us.

     Pursue selective acquisition and investment strategy. We seek to access additional technological capabilities and complementary product lines through selective acquisitions and strategic investments. For example, through the acquisition of Directed Energy, Inc. in May 2000, we added scientific expertise and additional products related to laser diode drivers, high voltage pulse generators and modulators. Through the acquisition of Westcode Semiconductors Limited, a UK-based power semiconductor manufacturer, in January 2002, we added a portfolio of very high power semiconductor products that will supplement our existing product line. Westcode’s products are used in a variety of applications including induction heating, welding, motion controls (AC and DC drives), traction, electric vehicles and HVDC. Through the acquisition of Clare we expect to expand our product offerings into the semiconductor segment of the market for small signal relays. Clare’s semiconductor products are capable of integrating a number of functions previously provided by discrete components into one package and including product applications such as 56K PCMCIA modems, modem interfaces to the Internet, cable set top boxes, and other computer telephony uses such as voice mail systems. We also believe there are significant opportunities to capitalize on our extensive distribution system and market additional Clare products to many of our 2,000 customers.

     Collaborate with select companies on product development. We seek to enter into collaborative arrangements with existing and potential customers in attractive end user markets in order to optimize our products for their use. We believe that our ability to provide technical assistance to these companies in the design of their hardware and software systems encourages the incorporation of our products in their devices. For example, we partnered with manufacturers of portable defibrillators at an early stage in the development of this market, and we have become a leading supplier of power semiconductors for these devices. In addition, we have had over 300 design wins in each of the last three years.

     Optimize mix between internal and external manufacturing. We intend to continue using both internal wafer fabrication facilities and our external foundry relationships. We also seek to balance our product assembly through multiple sourcing relationships. We believe these strategies enable us to maximize our manufacturing efficiency and flexibility. We also believe that our internal manufacturing capabilities enable us to lower our manufacturing cost with respect to certain products, bring products to market more quickly than would be possible if we were required to rely exclusively on external foundries, retain certain proprietary aspects of our process technology and more quickly introduce new process and product innovations through close collaboration between our design and process engineers. Our alliances with external foundries and assembly subcontractors allow us to substantially reduce capital spending and manufacturing overhead expenses, obtain competitive pricing and technologies and expand manufacturing capacity more rapidly than could be achieved with internal facilities alone.

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Products

     Our power semiconductor products have historically been divided into two primary categories, power MOS transistors and bipolar products. Our power semiconductors are sold separately and are also packaged in high power modules that frequently consist of multiple semiconductor dies. In fiscal year 2002, power semiconductors constituted approximately 93% of our revenues, which included 39% from power MOS transistors and 54% from bipolar products. In fiscal year 2001, power semiconductors constituted approximately 92% of our revenues, which included 49% from power MOS transistors and 43% from bipolar products. In fiscal year 2000, power semiconductors constituted approximately 92% of our revenues, which included 45% from power MOS transistors and 47% from bipolar products. We also sell gallium arsenide products, which has become a primary product category. In addition to power semiconductors, we manufacture our proprietary Direct Copper Bond (“DCB”) substrate for use in our own power semiconductors as well as for sale to other power semiconductor manufacturers. We also sell ICs that have applications associated with power management, and high speed, high density SRAM products.

     Power MOS Transistors.

     Power MOS transistors offer significant price/performance benefits over traditional bipolar transistors. Power MOS transistors operate at much greater switching speeds, allowing the design of smaller and less costly end products, primarily due to the smaller and less expensive peripheral components required at higher switching frequencies. Power MOS transistors are activated by voltage rather than current, so they require less external circuitry to operate, making them more compatible with ICs controls. Power MOS transistors also offer more reliable long term performance and are more rugged than traditional bipolar transistors, permitting them to better withstand adverse operating conditions. Our power MOS transistors consist of power MOSFETs and IGBTs.

     Power MOSFETs.

     A power MOSFET, or metal oxide semiconductor field effect transistor, is a switch controlled by voltage at our gate. Power MOSFETs are used in combination with passive components to vary the amperage and frequency of electricity by switching on and off at high frequency.

     Our power MOSFETs are used primarily in power conversion systems and are focused on higher voltage applications ranging from 60 to 1,100 volts. Our power MOSFETs have on state resistance among the lowest available for a given die size and voltage. Lower on state resistance results in increased efficiency of a power semiconductor device. We believe that as the power requirements of workstations, servers and other computers increase as the result of larger and more powerful microprocessors, disk drives and CD/ROMs, the designers of power supplies will increasingly demand higher power density. MOSFETs accommodate this need by providing higher power without increasing the physical size of the power supply incorporated into the equipment.

     IGBTs.

     IGBTs, or insulated gate bipolar transistors, also are used as switches. IGBTs have achieved many of the advantages of power MOSFETs and of traditional bipolar technology by combining the voltage controlled switching features of power MOSFETs with the superior conductivity and energy efficiency of bipolar transistors. For a given semiconductor die size, IGBTs can operate at higher currents and voltages, making them a more cost effective device compared to power MOSFETs for high energy applications. The principal tradeoff of IGBTs compared to power MOSFETs is the switching speed of IGBTs, which is slower than that of power MOSFETs. IGBTs are seldom used in applications where very fast switching is required, including SMPS operating at speeds over 150 kilohertz.

     Since inception, we have been a leader in the development of IGBTs for high voltage applications. In 1986, we introduced the first 800 volt, 50 amp device into the market. Our current products are focused on voltage applications ranging from 300 volts to 2,000 volts. Our IGBTs are used principally in AC motor drives and defibrillators.

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     Bipolar Products

     Bipolar products are also used to process electricity, but are activated by current rather than voltage. Bipolar products are capable of switching electricity at substantially higher power levels than power MOS transistors. However, switching speeds of bipolar products are slower than those of power MOS transistors, and as a result, bipolar products are preferred where very high power is required. Our bipolar products consist of rectifiers and thyristors.

     Rectifiers

     Rectifiers convert AC power to DC power and are used primarily in input and output rectification and inverters. Our rectifiers are used in DC and AC motor drives, power supplies, lighting and heating controls and welding equipment.

     A subset of our rectifier product group is a very fast switching device known as a FRED, or fast recovery epitaxial diode. FREDs limit spikes in voltage across the power switch to reduce power dissipation and electromagnetic interference. Our FREDs are used principally in AC motor drives and power supplies.

     Thyristors

     Thyristors are switches that can be turned on by a controlled signal and turned off only when the output current is reduced to zero, which occurs in the flow of AC power. Thyristors are preferred over power MOSFETs and IGBTs in high voltage, low frequency AC applications because their on state resistance is lower than the on state resistance of power MOSFETs and IGBTs. Our thyristors are used in motor drives, defibrillators, power supplies, lighting and heating controls and welding.

     Gallium Arsenide Products

     IXYS began to sell gallium arsenide products in fiscal year 2000. Our first gallium arsenide product was a Schottky rectifier, useful for high power density applications, such as power supplies for wireless communications base stations. Gallium arsenide offers higher frequency and higher temperature operation, enabling substantially greater power density than silicon-based solutions.

     Other Products

     We manufacture our proprietary DCB substrates for use in our own semiconductor products as well as for sale to a variety of customers, including those in the power semiconductor industry. DCB technology cost effectively provides excellent thermal transfer while maintaining high electrical isolation. This technology addresses thermal fatigue and die cracking problems encountered by manufacturers of power semiconductor modules utilizing traditional copper base plates.

     We also markets ICs that have applications associated with power semiconductors, such as high voltage current regulators, motion controllers, digital pulse width modulators and power MOSFET/IGBT drivers. Additionally, we manufacture and sell laser diode drivers, high voltage pulse generators and modulators and sell synchronous and asynchronous SRAMs, a legacy product from the Paradigm merger. Our SRAMs are available in a variety of configurations and commercial and industrial temperature range versions.

Customers and Applications

     Our power semiconductors are used primarily to control electricity in power conversion systems, motor drives and medical electronics. The following table summarizes the primary categories of uses for power semiconductors, our products used in each category, the end user applications served by these products and our representative customers for each category.

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     We also sell our power semiconductor chips and DCB substrates to other power semiconductor companies for use in their modules. These customers include Infineon, International Rectifier, Powersem and Tyco.

Sales and Marketing

     We sell our products through a worldwide selling organization that includes direct sales personnel, independent representatives and distributors managed through our Santa Clara, California, Lampertheim, Germany and Chippenham, UK offices. As of March 31, 2002, we employed 37 people in sales and marketing and customer support and service and used 15 sales representative organizations and six distributors in North America and 38 sales representative organizations and distributors in the rest of the world. Sales to distributors accounted for approximately 42% of net revenues in fiscal year 2000, 43% of net revenues in fiscal year 2001 and 41% of net revenues in fiscal year 2002.

     In fiscal year 2002, North American sales represented approximately 32.9%, and international sales represented approximately 67.1%, of our net revenues. Of our international sales in fiscal year 2002, approximately 77.9% were derived from sales in Europe and the Middle East and approximately 22.1% were derived from sales in Asia. No single end customer accounted for more than 10% of our net revenues in fiscal year 2002. For financial information about geographic areas for each of our last three fiscal years, see our Audited Consolidated Financial Statements, Note 13, Segment and Geographic Information provided elsewhere in this Annual Report on Form 10-K. We market our products through advertisements, technical articles and press releases that appear regularly in a variety of trade publications, as well as through the dissemination of brochures, data sheets and technical manuals. Additionally, we participate in industry trade shows on a regular basis. We also have a presence on the Internet through a worldwide web page that enables engineers to access and download technical information and data sheets.

Research and Development

     We believe that we successfully compete in the power semiconductor market because of our ability to design, develop and introduce to the market on a timely basis new products offering technological improvements. We are a pioneer in technology with respect to higher power IGBTs, IGBT modules and DCB substrates. While the time from initiation of design to volume production of new power semiconductors products often takes 18 months or longer, our power semiconductors have a product lifetime exceeding an average of 10 years. Our research and development expenses were approximately $4.7 million in fiscal year 2000, $6.1 million in fiscal year 2001 and $5.7 million in fiscal year 2002. As of March 31, 2002, we employed 73 people in engineering and research and development activities.

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     We are engaged in ongoing research and development efforts focused on enhancements to existing products and the development of new products. Currently, we are pursuing research and development projects with respect to:

	•		increasing the voltage operating range of our MOS and bipolar products;
	•		developing new gallium arsenide products;
	•		developing higher power IGBT modules;
	•		developing a complete range of high voltage, bipolar MOS products;
	•		improving our multiple die module assembly technology; and
	•		expanding our line of power management ICs products.

     Research and development activities are conducted in collaboration with manufacturing activities to help expedite new products from the development phase to manufacturing and to more quickly implement new process technologies.

     Our research and development efforts also include participation in technology collaborations with universities and research institutions. These technology collaborations allow research and development activities that would otherwise require potentially cost prohibitive capital expenditures since the necessary capital equipment is often available at research institutes and universities. Through these technology collaborations, we believe we are able to maximize our range of research and development activities without diffusing the focus of our internal research and development work.

Patents

     As of March 31, 2002, we held 72 issued patents, of which 42 that were issued in the U.S. and 30 were issued in international jurisdictions. As of March 31, 2002, we also held 61 pending patents, of which 28 were pending in the U.S. and 33 were pending in international jurisdictions. We rely on a combination of patent rights, copyrights and trade secrets to protect the proprietary elements of our products. Our policy is to file patent applications to protect technology, inventions and improvements that are important to our business. We also seek to protect our trade secrets and proprietary technology, in part, through confidentiality agreements with employees, consultants and other parties.

     While we believe that our intellectual property rights are valuable, we also believe that other factors, such as innovative skills, technical expertise, the ability to adapt quickly to new technologies and evolving customer requirements, product support and customer relations, are of greater competitive significance.

Manufacturing and Facilities

     The production of our products is a highly complex and precise process. We manufacture our products in our own manufacturing facilities and by utilizing external wafer foundries and subcontract assembly facilities. We divide our manufacturing operations into three key areas, wafer fabrication, assembly and test.

     Wafer Fabrication.

     We own an approximately 170,000 square foot manufacturing facility in Lampertheim, Germany at which we fabricate all of our bipolar products, and an approximately 100,000 square foot manufacturing facility in Chippenham, England where we fabricate the majority of our very high power devices. We also fabricate our 1,600 volt and higher power MOS devices in Lampertheim, Germany in order to protect our process technologies. We believe that our internal fabrication capabilities enable us to lower our manufacturing cost with respect to certain products, bring products to the market more quickly than would be possible if we were required to rely exclusively

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on external foundries, retain certain proprietary aspects of our process technology and more quickly introduce new process innovations.

     In addition to maintaining our own fabrication facilities, we have established alliances with selected foundries for wafer fabrication. This approach allows us to reduce substantial capital spending and manufacturing overhead expenses, obtain competitive pricing and technologies and expand manufacturing capacity more rapidly than could be achieved with internal foundries alone. We retain the flexibility to shift the production of our products to different or additional foundries for cost or performance reasons. Our product designs enable the production of our devices at multiple foundries using well established and cost effective processes.

     We relied on external foundries for approximately 44% of our wafer fabrication requirements in fiscal year 2002, and our utilization of external foundries is expected to grow. We have arrangements with four external wafer foundries, two of which provide substantially all of the wafers provided to us by external foundries. Our principal external foundry is Samsung Electronics’ facility located in Kiheung, South Korea. Our relationship with Samsung Electronics extends over 17 years. We provide our foundries forecasts for wafer fabrication six months in advance and makes firm purchase commitments one to two months in advance of delivery. Other than these firm commitments, we do not have any obligations to order any minimum quantities.

     Wafer fabrication of power semiconductors generally employs process technology and equipment already proven in ICs manufacturing. Power semiconductors are manufactured using fabrication equipment that is one or more generations behind the equipment used to fabricate leading edge ICs. Used fabrication equipment can be obtained at prices substantially less than the original cost of such equipment or than the cost of current equipment applying the latest technology. Consequently, the fabrication of power semiconductors is less capital intensive than the fabrication of ICs.

     Assembly.

     Packaging or assembly is the sequence of production steps that divide the wafer into individual chips and enclose the chips in external structures, termed packages, that make them useable in a circuit. Discrete manufacturing involves the assembly and packaging of single die devices. Module manufacturing involves the assembly of multiple devices within a single package. The resulting packages vary in configuration, but all have leads that are used to mount the package through holes in the customer’s printed circuit boards.

     Most of our wafers are sent to independent subcontract assembly facilities. We have equipment at, or manufacturing supply arrangements with, assembly subcontractors located in Asia and Europe in order to take advantage of low assembly costs. Approximately 61% of our products are assembled at external assembly facilities, and the remainder are assembled in our Lampertheim facility.

     Test.

     Generally, each die on our wafers is electrically tested for performance after wafer fabrication. Following assembly, our products are returned to Santa Clara, California or Lampertheim, Germany for testing and final inspection prior to shipment to customers. We lease an approximately 20,000 square foot facility in Santa Clara, which also houses our corporate offices. We test substantially all of our IGBTs, power MOSFETs and ICs in Santa Clara and tests our bipolar and custom MOS modules in Lampertheim.

Competition

     The power semiconductor industry is intensely competitive and is characterized by price competition, technological change, limited fabrication capacity, international competition and manufacturing yield problems. The competitive factors in the market for our products include:

     •   product quality, reliability and performance;

     •   product features;

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     •   timely delivery of products;

     •   price;

     •   breadth of product line;

     •   design and introduction of new products; and

     •   technical support and service.

     We believe that we are one of a limited group of companies focused on the development and marketing of high power, high performance semiconductors capable of performing all of the basic functions of power semiconductor design and manufacture. Our primary competitors include Advanced Power Technology, Fuji, International Rectifier, Infineon, On Semiconductor, Semikron International, Powerex, STMicroelectronics, Siemens and Toshiba.

Backlog

     At March 31, 2002, our backlog of orders was approximately $31.1 million, as compared with $49.5 million at March 31, 2001. We reasonably expect our backlog of orders at March 31, 2002 to be filled within the current fiscal year. Backlog represents firm orders anticipated to be shipped within the next 12 months. Our business and, to a large extent, that of the entire semiconductor industry is characterized by short term order and shipment schedules. Because orders constituting our current backlog are subject to changes in delivery schedules or to cancellation at the option of the purchaser without significant penalty, backlog is not necessarily an indication of future revenues.

Employees

     At March 31, 2002, we employed 626 employees, of whom 73 were primarily engaged in engineering and research and development activities, 37 in marketing, sales and customer support, 476 in manufacturing and 40 in administration and finance. Of these employees, 70 hold engineering or science degrees, including 16 Ph.D.s. Certain employees at our Lampertheim facility and our Chippenham facility are subject to collective bargaining agreements. There have been no work stoppages at any of our facilities to date. We believe that our employee relations are good.

Acquisition of Clare, Inc.

     On June 10, 2002, we completed our acquisition of Clare, Inc. In connection with the acquisition, (a) each outstanding share of Clare common stock was converted into the right to receive 0.49147 of a share of our common stock, resulting in the issuance of approximately 4.89 million shares of our common stock, and (b) each option to purchase Clare common stock outstanding immediately prior to the consummation of the acquisition was converted into an option to purchase 0.49147 of a share of our common stock. The acquisition was intended to qualify as a tax-free reorganization.

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RISK FACTORS

     In addition to the other information in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating us and our business. You should carefully consider the risks described below before making an investment decision. Additional risks not presently known to us or that we currently believe are not serious may also impair our business and its financial condition. The trading price of our common stock could decline at any time due to any of these risks, and you could lose all or part of your investment. References to “the combined organization” in this section entitled “Risk Factors” refer to IXYS and Clare, Inc. as a combined entity following the proposed merger between the two companies, as more fully described under “Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations-Recent Events.”

     Our operating results fluctuate significantly because of a number of factors, many of which are beyond our control.

     Our operating results may fluctuate significantly. Some of the factors that may affect our quarterly and annual results are:

	•		the reduction, rescheduling or cancellation of orders by customers;
	•		fluctuations in timing and amount of customer requests for product shipments;
	•		the cyclical nature of the semiconductor industry;
	•		fluctuations in our manufacturing yields and significant yield losses;
	•		availability of production capacity;
	•		changes in the mix of products that our customers purchase;
	•		competitive pressures on selling prices;
	•		the amount and timing of costs associated with product warranties and returns;
	•		the amount and timing of investments in research and development;
	•		market acceptance of our products;
	•		changes in our product distribution channels and the timeliness of receipt of distributor resale information;
	•		the impact of vacation schedules and holidays, largely during the second and third fiscal quarters of our fiscal year; and
	•		difficulties in forecasting demand for our products and the planning and managing of inventory levels.

     As a result of these factors, many of which are difficult to control or predict, as well as the other risk factors discussed in this Annual Report on Form 10-K, we may experience material adverse fluctuations in our future operating results on a quarterly or annual basis.

The semiconductor industry is cyclical, and an industry downturn could adversely affect our operating results.

     Business conditions in the semiconductor industry have rapidly changed from periods of strong demand. The industry is characterized by:

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	•		periods of overcapacity and production shortages;
	•		cyclical demand for semiconductors;
	•		changes in product mix in response to changes in demand;
	•		variations in manufacturing costs and yields;
	•		rapid technological change and the introduction of new products;
	•		significant price erosion; and
	•		significant expenditures for capital equipment and product development.

     These factors could harm our business and cause our operating results to suffer.

Our ability to grow and sustain growth levels may be adversely affected by the recent slowdown in the U.S. economy.

     Due to the recent decrease in corporate profits, capital spending and consumer confidence, we have experienced weakness in certain of our end markets. We market our products to several commercial markets, including telecommunications infrastructure, medical electronics and industrial motor drives, which have been affected by the recent slowdown in the U.S. economy. If the economic slowdown continues, our business, financial condition and results of operations may be adversely affected.

We may not be able to acquire additional production capacity to meet the present or future demand for our products.

     The semiconductor industry has been characterized by periodic limitations on production capacity. Our current customer demand exceeds our ability to manufacture internally or externally products to meet this demand. If we are unable to increase our production capacity to meet demand, some of our customers may seek other sources of supply or our future growth may be limited.

We may not be successful in our acquisitions.

     We have in the past made, and may in the future make, acquisitions. These acquisitions involve numerous risks, including:

	•		diversion of management’s attention during the acquisition process;
	•		disruption of IXYS’ ongoing business;
	•		the potential strain on our financial and managerial controls and reporting systems and procedures;
	•		unanticipated expenses and potential delays related to integration of an acquired business;
	•		failure to successfully integrate the research and development, sales and marketing efforts of an acquired company with our own;
	•		failure to retain key personnel of the acquired business;
	•		the challenges inherent in managing an increased number of employees and facilities and the need to implement appropriate systems, policies, benefits and compliance programs;
	•		customer dissatisfaction or performance problems with an acquired company;

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	•		the cost associated with acquisitions and the integration of acquired operations; and
	•		assumption of known or unknown liabilities or other unanticipated events or circumstances.

     We cannot assure you that we will be able to successfully acquire other businesses or product lines or integrate them into our operations without substantial expense, delay in implementation or other operational or financial problems.

IXYS could be harmed by litigation involving patents and other intellectual property rights.

     As a general matter, the semiconductor industry is characterized by substantial litigation regarding patent and other intellectual property rights. Although none of our patents or other intellectual property rights has been successfully challenged to date, we have been sued on occasion for purported patent infringement. For example, we have recently been sued by International Rectifier for purportedly infringing some of its patents covering power MOSFETs. International Rectifier has asked the court to enjoin us from continuing infringement and to award treble damages against us for the infringement of International Rectifier’s patents. We have denied infringement of International Rectifier’s patents and have asserted affirmative defenses to our claims. The U.S. District Court has dismissed our affirmative defenses and granted International Rectifier’s motion for summary adjudication on the issue of infringement of three International Rectifier patents. Trial on the remaining issues is scheduled to commence on July 30, 2002. In addition, the U.S. District Court has issued a permanent injunction against IXYS, effectively barring us from selling or distributing the allegedly-infringing products. IXYS has appealed the injunction, and the United States Court of Appeals for the Federal Circuit has stayed the injunction pending further review. We intend to appeal the U.S. District Court’s rulings, and to contest International Rectifier’s claims vigorously but the outcome of this litigation remains uncertain. See “IXYS Business — Legal Proceedings” provided elsewhere in this Item 1 to the Annual Report on Form 10-K.

     Additionally, in the future, we could be accused of infringing the intellectual property rights of other third parties. We also have certain indemnification obligations to customers with respect to the infringement of third party intellectual property rights by our products. No assurance can be provided that any future infringement claims by third parties or claims for indemnification by customers or end users of our products resulting from infringement claims will not be asserted or that assertions of infringement, if proven to be true, will not harm our business.

     In the event of any adverse ruling in any intellectual property litigation, including the pending litigation with International Rectifier, we could be required to pay substantial damages, cease the manufacturing, use and sale of infringing products, discontinue the use of certain processes or obtain a license from the third party claiming infringement with royalty payment obligations by us. An adverse decision in the International Rectifier litigation or any other infringement could materially and adversely affect our financial condition and results of operations.

     Any litigation relating to the intellectual property rights of third parties, whether or not determined in our favor or settled by us, is costly and may divert the efforts and attention of our management and technical personnel.

We depend on external foundries to manufacture many of our products.

     Forty-four percent of our revenues in fiscal year 2002 came from wafers manufactured for us by external foundries. Our dependence on external foundries may grow. We have arrangements with four wafer foundries, two of which produce substantially all of the wafers that we purchase from external foundries. Samsung Electronics’ facility in Kiheung, South Korea is our principal external foundry.

     Our relationships with our external foundries do not guarantee prices, delivery or lead times, or wafer or product quantities sufficient to satisfy current or expected demand. These foundries manufacture our products on a purchase order basis. We provide these foundries with rolling forecasts of our production requirements; however, the ability of each foundry to provide wafers to us is limited by the foundry’s available capacity. At any given time, these foundries could choose to prioritize capacity for their own use or other customers or reduce or eliminate deliveries to us on short notice. Accordingly, we cannot be certain that these foundries will allocate sufficient capacity to satisfy our requirements. In addition, we cannot be certain that we will continue to do business with these or other foundries on terms as favorable as our current terms. If we are not able to obtain additional foundry capacity

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as required, our relationships with our customers could be harmed and our revenues would likely be reduced. Moreover, even if we are able to secure additional foundry capacity, we may be obligated to utilize all of that capacity or incur penalties. These penalties could be expensive and could harm our operating results. Other risks associated with our reliance on external foundries include:

	•		the lack of control over delivery schedules;
	•		the unavailability of, or delays in obtaining access to, key process technologies;
	•		limited control over quality assurance, manufacturing yields and production costs; and
	•		potential misappropriation of our intellectual property.

     Our requirements typically represent a small portion of the total production of the external foundries that manufacture our wafers and products. We cannot be certain these external foundries will continue to devote resources to the production of our wafers and products or continue to advance the process design technologies on which the manufacturing of our products is based. These circumstances could harm our ability to deliver our products on time or increase our costs.

Our success depends on our ability to manufacture our products efficiently.

     We manufacture our products in facilities that are owned and operated by us, as well as in external wafer foundries and independent subcontract assembly facilities. The fabrication of semiconductors is a highly complex and precise process, and a substantial percentage of wafers could be rejected or numerous die on each wafer could be nonfunctional as a result of, among other factors:

	•		minute levels of contaminants in the manufacturing environment;
	•		defects in the masks used to print circuits on a wafer;
	•		manufacturing equipment failure; or
	•		wafer breakage.

     For these and other reasons, we could experience a decrease in manufacturing yields. Additionally, as we increase our manufacturing output, we may also experience a decrease in manufacturing yields. As a result, we may not be able to cost effectively expand our production capacity in a timely manner.

We may not be able to protect our intellectual property rights adequately.

     Our ability to compete is affected by our ability to protect our intellectual property rights. We rely on a combination of patents, trademarks, copyrights, trade secrets, confidentiality procedures and non-disclosure and licensing arrangements to protect our intellectual property rights. Despite these efforts, we cannot be certain that the steps we take to protect our proprietary information will be adequate to prevent misappropriation of our technology, or that our competitors will not independently develop technology that is substantially similar or superior to our technology. More specifically, we cannot assure you that our pending patent applications or any future applications will be approved, or that any issued patents will provide us with competitive advantages or will not be challenged by third parties. Nor can we assure you that, if challenged, our patents will be found to be valid or enforceable, or that the patents of others will not have an adverse effect on our ability to do business. Furthermore, others may independently develop similar products or processes, duplicate our products or processes or design their products around any patents that may be issued to us.

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Our international operations expose us to material risks.

     During fiscal year 2002, our product sales by region were approximately 32.9% in North America, approximately 52.3% in Europe and the Middle East and approximately 14.8% in Asia. We expect revenues from foreign markets to continue to represent a significant portion of total revenues. IXYS maintains significant operations in Germany and the United Kingdom and contracts with suppliers and manufacturers in South Korea, Japan and elsewhere in Europe and Asia. Some of the risks inherent in doing business internationally are:

	•		foreign currency fluctuations;
	•		changes in the laws, regulations or policies of the countries in which we manufacture or sell our products;
	•		trade restrictions;
	•		transportation delays; work stoppages; and
	•		economic or political instability.

     Our sales of products manufactured in our Lampertheim, Germany facility and our costs at that facility are denominated in Euros, and sales of products manufactured in our Chippenham, U.K. facility and our costs at that facility are primarily denominated in British pounds and Euros. Fluctuations in the value of the Euro and the British pound against the U.S. dollar could have a significant impact on our balance sheet and results of operations, including our net income. We currently do not enter into foreign currency hedging transactions to control or minimize these risks. Fluctuations in currency exchange rates could cause our products to become more expensive to customers in a particular country, leading to a reduction in sales or profitability in that country. If we expand our international operations or change our pricing practices to denominate prices in other foreign currencies, we could be exposed to even greater risks of currency fluctuations.

     In addition, the laws of certain foreign countries may not protect our products or intellectual property rights to the same extent as do U.S. laws regarding the manufacture and sale of our products in the U.S. Therefore, the risk of piracy of our technology and products may be greater when we manufacture or sell our products in these foreign countries.

Our revenues are dependent upon our products being designed into our customers’ products.

     Some of our new products are incorporated into customers’ products or systems at the design stage. The value of any design win largely depends upon the commercial success of the customer’s product and on the extent to which the design of the customer’s electronic system also accommodates incorporation of components manufactured by our competitors. In addition, our customers could subsequently redesign their products or systems so that they no longer require our products. We may not achieve design wins or our design wins may not result in future revenues.

Because our products typically have lengthy sales cycles, we may experience substantial delays between incurring expenses related to research and development and the generation of revenues.

     The time from initiation of design to volume production of new power semiconductor products often takes 18 months or longer. We first work with customers to achieve a design win, which may take nine months or longer. Our customers then complete the design, testing and evaluation process and begin to ramp up production, a period which may last an additional nine months or longer. As a result, a significant period of time may elapse between our research and development efforts and our realization of revenues, if any, from volume purchasing of our products by our customers.

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Our backlog may not result in future revenues.

     Our business is characterized by short term orders and shipment schedules. Customer orders typically can be cancelled or rescheduled without penalty to the customer. As a result, our backlog at any particular date is not necessarily indicative of actual revenues for any succeeding period. A reduction of backlog during any particular period, or the failure of our backlog to result in future revenues, could harm our results of operations.

     The markets in which we participate are intensely competitive.

     Certain of our target markets are intensely competitive. Our ability to compete successfully in our target markets depends on the following factors:

	•		product quality, reliability and performance;
	•		product features;
	•		timely delivery of products;
	•		price;
	•		breadth of product line;
	•		design and introduction of new products; and
	•		technical support and service.

     In addition, our competitors or customers may offer new products based on new technologies, industry standards or end user or customer requirements, including products that have the potential to replace, or provide lower cost or higher performance alternatives to, our products. The introduction of new products by our competitors or customers could render our existing and future products obsolete or unmarketable.

     Our primary competitors include Advanced Power Technology, Fuji, International Rectifier, Infineon, On Semiconductor, Semikron International, Powerex, STMicroelectronics, Siemens and Toshiba. Many of our competitors have greater financial, technical, marketing and management resources than we have. Some of these competitors may be able to sell their products at prices below which it would be profitable for us to sell our products or benefit from established customer relationships that provide them with a competitive advantage.

We rely on our distributors and sales representatives to sell many of our products.

     A substantial majority of our products are sold through distributors and sales representatives. Our distributors and sales representatives could reduce or discontinue sales of our products. They may not devote the resources necessary to sell our products in the volumes and within the time frames that we expect. In addition, we depend upon the continued viability and financial resources of these distributors and sales representatives, some of which are small organizations with limited working capital. These distributors and sales representatives, in turn, depend substantially on general economic conditions and conditions within the semiconductor industry. We believe that our success will continue to depend upon these distributors and sales representatives.

     At March 31, 2002, no distributor accounted for greater than 10% of our outstanding receivables. If this or any other distributor or sales representative experiences financial difficulties, or otherwise becomes unable or unwilling to promote and sell our products, our business could be harmed.

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Our future success depends on the continued service of management and key engineering personnel and our ability to identify, hire and retain additional personnel.

     Our success depends, to a significant extent, upon the efforts and abilities of Nathan Zommer, Ph.D., our president and chief executive officer, and other members of senior management. The loss of the services of one or more of our senior management or other key employees could adversely affect our business. We do not maintain key person life insurance on any of our officers, employees or consultants. There is intense competition for qualified employees in the semiconductor industry, particularly for highly skilled design, applications and test engineers. Competition is especially intense in the Silicon Valley, where our U.S. design facility is located. We may not be able to continue to attract and retain engineers or other qualified personnel necessary for the development of our business or to replace engineers or other qualified individuals who could leave us at any time in the future. Our anticipated growth is expected to place increased demands on our resources, and will likely require the addition of new management and engineering staff as well as the development of additional expertise by existing management employees. If we lose the services of or fail to recruit key engineers or other technical and management personnel, our business could be harmed.

Periods of rapid growth and expansion could continue to place a significant strain on our resources, including our employee base.

     To manage our possible future growth effectively, we will be required to continue to improve our operational, financial and management systems. In doing so, we will periodically implement new software and other systems that will affect our internal operations regionally or globally. Presently, we are upgrading our enterprise resource planning software to integrate our operations worldwide. The conversion process is complex and requires, among other things, that data from our existing system be made compatible with the upgraded system. During the transition to this upgrade, we could experience delays in ordering materials, inventory tracking problems and other inefficiencies, which could cause delays in shipments of products to our customers.

     Future growth will also require us to successfully hire, train, motivate and manage our employees. In addition, our continued growth and the evolution of our business plan will require significant additional management, technical and administrative resources. We may not be able to effectively manage the growth and evolution of our current business.

Our stock price is volatile.

     The market price of our common stock has fluctuated significantly to date. See “Item 5 — Market for Registrant’s Common Equity and Related Stockholders Matters” provided elsewhere in this Annual Report on Form 10-K. The future market price of our common stock may also fluctuate significantly due to:

	•		variations in our actual or expected quarterly operating results;
	•		announcements or introductions of new products;
	•		technological innovations by our competitors or development setbacks by us;
	•		conditions in the communications and semiconductor markets;
	•		the commencement or adverse outcome of litigation;
	•		changes in analysts’ estimates of our performance or changes in analysts’ forecasts regarding our industry, competitors or customers;
	•		announcements of merger or acquisition transactions or a failure to achieve the expected benefits of an acquisition as rapidly or to the extent anticipated by financial or analysts; or
	•		general economic and market conditions.

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     In addition, the stock market in recent years has experienced extreme price and volume fluctuations that have affected the market prices of many high technology companies, including semiconductor companies. These fluctuations have often been unrelated or disproportionate to the operating performance of companies in our industry, and could harm the market price of our common stock.

Our dependence on independent subcontractors to assemble and test our products subject us to a number of risks, including an inadequate supply of products and higher materials costs.

     We depend on independent subcontractors for the assembly and testing of our products. During fiscal year 2002, the majority of our products were assembled by independent subcontractors. Our reliance on these subcontractors involves the following significant risks:

	•		reduced control over delivery schedules and quality;
	•		the potential lack of adequate capacity during periods of excess demand;
	•		difficulties selecting and integrating new subcontractors;
	•		limited warranties by subcontractors or other vendors on products supplied to us;
	•		potential increases in prices due to capacity shortages and other factors; and
	•		potential misappropriation of our intellectual property.

     These risks may lead to delayed product delivery or increased costs, which would harm our profitability and customer relationships.

     In addition, we use a limited number of subcontractors to assemble a significant portion of our products. If one or more of these subcontractors experiences financial, operational, production or quality assurance difficulties, we could experience a reduction or interruption in supply. Although we believe alternative subcontractors are available, our operating results could temporarily suffer until our engages one or more of those alternative subcontractors.

Our markets are subject to technological change and our success depends on our ability to develop and introduce new products.

     The markets for our products are characterized by:

	•		changing technologies;
	•		changing customer needs;
	•		frequent new product introductions and enhancements;
	•		increased integration with other functions; and
	•		product obsolescence.

     To develop new products for our target markets, we must develop, gain access to and use leading technologies in a cost effective and timely manner and continue to expand our technical and design expertise. Failure to do so could cause us to lose our competitive position and seriously impact our future revenues.

Our operating expenses are relatively fixed, and we may order materials in advance of anticipated customer demand. Therefore, we have limited ability to reduce expenses quickly in response to any revenue shortfalls.

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     Our operating expenses are relatively fixed, and, therefore, we have limited ability to reduce expenses quickly in response to any revenue shortfalls. Consequently, our operating results will be harmed if our revenues do not meet our revenue projections.

     We also typically plan our production and inventory levels based on internal forecasts of customer demand, which are highly unpredictable and can fluctuate substantially. From time to time, in response to anticipated long lead times to obtain inventory and materials from our external suppliers and foundries, we may order materials or production in advance of anticipated customer demand. This advance ordering may result in excess inventory levels or unanticipated inventory write downs if expected orders fail to materialize.

Regulations may adversely affect our ability to sell our products.

     Power semiconductors with operating voltages above 40 volts are subject to regulations intended to address the safety, reliability and quality of the products. These regulations relate to processes, design, materials and assembly. For example, in the United States some high voltage products are required to pass Underwriters Laboratory recognition for voltage isolation and fire hazard tests. Sales of power semiconductors outside of the United States are subject to international regulatory requirements that vary from country to country. The process of obtaining and maintaining required regulatory clearances can be lengthy, expensive and uncertain. The time required to obtain approval for sale internationally may be longer than that required for U.S. approval, and the requirements may differ.

     In addition, approximately 15% of our revenues in fiscal year 2002 were derived from the sale of products included in medical devices that are subject to extensive regulation by numerous governmental authorities in the United States and internationally, including the U.S. Food and Drug Administration, or FDA. The FDA and certain foreign regulatory authorities impose numerous requirements for medical device manufacturers to meet, including adherence to Good Manufacturing Practices, or GMP, regulations and similar regulations in other countries, which include testing, control and documentation requirements. Ongoing compliance with GMP and other applicable regulatory requirements is monitored through periodic inspections by federal and state agencies, including the FDA, and by comparable agencies in other countries. Our failure to comply with applicable regulatory requirements could prevent our products from being included in approved medical devices.

     Our business could also be harmed by delays in receiving or the failure to receive required approvals or clearances, the loss of previously obtained approvals or clearances or the failure to comply with existing or future regulatory requirements.

Business interruptions may damage our facilities or those of our suppliers.

     Our operations are vulnerable to interruption by fire, earthquake and other natural disasters, as well as power loss, telecommunications failure and other events beyond our control. We do not have a detailed disaster recovery plan and does not have backup generators. Our corporate headquarters in California is located near major earthquake fault lines and has experienced earthquakes in the past. California also has recently been subject to shortages of electrical power and is subject to power outages. If power outages occur, our ability to conduct administrative matters and test our products could be seriously impaired, which could harm our business, financial condition and results of operations. We cannot be sure that the insurance we maintain against general business interruptions will be adequate to cover all our losses.

     In addition, some of our suppliers are located in California and are subject to the same earthquake and power outage risks. A fire, major earthquake or other natural disaster near one or more of our facilities or those of our major suppliers could disrupt our operations and those of our suppliers, which could in turn limit the supply of our products and harm our business.

We may be affected by environmental laws and regulations.

     We are subject to a variety of laws, rules and regulations in the United States and in Germany related to the use, storage, handling, discharge and disposal of certain chemicals and gases used in our manufacturing process.

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Any of those regulations could require us to acquire expensive equipment or to incur substantial other expenses to comply with them. If we incur substantial additional expenses, product costs could significantly increase. Our failure to comply with present or future environmental laws, rules and regulations could result in fines, suspension of production or cessation of operations.

We face the risk of financial exposure to product liability claims alleging that the use of devices that incorporate our products resulted in adverse effects.

     Approximately 15% of our net revenues in fiscal year 2002 were derived from sales of products used in medical devices such as defibrillators. Product liability risks may exist even for those medical devices that have received regulatory approval for commercial sale. We do not currently carry product liability insurance, and any defects in our products used in these devices could result in significant recall or product liability costs to us.

ABB AG and Nathan Zommer, Ph.D. own a controlling interest in our common stock.

     ABB AG and Nathan Zommer, Ph.D., our president and chief executive officer, collectively beneficially own, as of June 19, 2002, and assuming the issuance of the approximately 4.89 million shares of IXYS common stock to be issued in connection with our acquisition of Clare, Inc., approximately 42.4% of the outstanding shares of our common stock. As a result, ABB AG and Dr. Zommer, acting together, could exercise significant control over all matters requiring stockholder approval, including the election of the board of directors. These concentrated holdings could result in a delay of, or serve as a deterrent to, possible changes in control of IXYS, which may reduce the market price of our common stock. See “Item 12 — Security Ownership of Certain Beneficial Owners and Management” provided elsewhere in this Annual Report on Form 10-K.

The anti-takeover provisions of our amended and restated certificate of incorporation and of the Delaware General Corporation Law may delay, defer or prevent a change of control.

     Our board of directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences and privileges and restrictions, including voting rights, of those shares without any further vote or action by our stockholders. The rights of the holders of common stock will be subject to, and may be harmed by, the rights of the holders of any shares of preferred stock that may be issued in the future. The issuance of preferred stock may delay, defer or prevent a change in control because the terms of any issued preferred stock could potentially prohibit our consummation of any merger, reorganization, sale of substantially all of our assets, liquidation or other extraordinary corporate transaction, without the approval of the holders of the outstanding shares of preferred stock. In addition, the issuance of preferred stock could have a dilutive effect on our stockholders.

     Our stockholders must give substantial advance notice prior to the relevant meeting to nominate a candidate for director or present a proposal to our stockholders at a meeting. These notice requirements could inhibit a takeover by delaying stockholder action. The Delaware anti-takeover law restricts business combinations with some stockholders once the stockholder acquires 15% or more of our common stock. The Delaware statute makes it more difficult for us to be acquired without the consent of our board of directors and management.

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ITEM 2.  PROPERTIES

     IXYS’ administrative, marketing, development and manufacturing facilities are located in Santa Clara, California, Lampertheim, Germany and Chippenham, England. The Santa Clara facility consists of approximately 20,000 square feet under a lease that expires January 31, 2004. We have an option to extend the lease for five years. The base rent under this lease is approximately $330,000 per year. The Lampertheim facility, which we own, consists of approximately 170,000 square feet. The Chippenham facility consists of approximately 100,000 square feet under a lease that expires December 19, 2022. The base rent under this lease is approximately $327,000 per year. We believe that our current facilities will be adequate through at least fiscal year 2003 and that suitable additional space will be available in the future as needed on commercially reasonably terms.

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ITEM 3.  LEGAL PROCEEDINGS

     On June 22, 2000, International Rectifier Corporation filed an action for patent infringement against us in the United States District Court for the Central District of California, alleging that certain of our products sold in the United States infringe U.S. patents owned by International Rectifier. International Rectifier’s complaint against us contend that our alleged infringement of International Rectifier’s patents has been and continues to be willful and deliberate. The complaint seeks to enjoin us from further infringement and requests an award of actual monetary damages on sales of products that are claimed to infringe International Rectifier’s patents. International Rectifier also seeks to have the damages trebled.

     We answered the complaint, denying any infringement and asserting that the International Rectifier patents are invalid and unenforceable for, among other reasons, failure of International Rectifier to properly disclose known prior art during its prosecution of the patents in suit. We also contended that International Rectifier’s claims are barred by reason of the doctrines of estoppel and laches. Trial in this case had been originally scheduled for June 12, 2001; however, the U.S. District Court has repeatedly continued the trial date, which is currently set for July 30, 2002.

     The U.S. District Court has also granted motions for summary adjudication dismissing all of our affirmative defenses and decided that certain of our power MOSFETs and IGBTs infringe certain claims of each of International Rectifier’s U.S. patents 4,959,699, 5,008,725 and/or 5,130,767. Furthermore, on May 21, 2002, the U.S. District Court entered a permanent injunction, which became effective June 5, 2002, barring us from making, using, offering to sell or selling in, or importing into, the United States, MOSFETs (including IGBTs) covered by the subject patents. On motion by us, the United States Court of Appeals for the Federal Circuit stayed the injunction, pending further review.

     International Rectifier also contends that our importation into the United States of certain IXYS-designed MOSFET products manufactured for us by Samsung Electronics Co., Ltd. (“Samsung”) is in violation of a consent decree and injunction entered against Samsung in another lawsuit to which we were not a party (the “Samsung Injunction”). In February 2001, International Rectifier served Samsung and us with a Post-Judgment Ex Parte Application for Order to Show Cause Re Contempt seeking, among other things, an enforcement of the Samsung Injunction enjoining our importation into the United States of the allegedly-infringing products, and an appropriate fine. We responded by filing a motion requesting clarification of the Samsung Injunction, or if the Samsung Injunction is construed to cover our products, modification of the Samsung Injunction to exclude IXYS devices. Argument concerning the Order to Show Cause was held in May 2001, at which time the U.S. District Court remarked that we were bound by the Samsung Injunction, and that we and Samsung were attempting to subvert the Samsung Injunction by having us take delivery outside the United States of the allegedly-infringing products. At that time, the U.S. District Court deferred a decision as to whether we and Samsung were in contempt. In March 2002, no decision having been reached on its earlier motion, we renewed and amended our motion to clarify, modify or vacate the Samsung Injunction as to IXYS devices. On March 19, 2002, the U.S. District Court adopted and entered Interim Findings of Fact and Conclusions of Law that decided, among other things, that we were bound by, and IXYS devices are not excepted from, the Samsung Injunction. On April 1, 2002, the U.S. District Court denied our renewed motion to clarify, modify or vacate the Samsung Injunction. We immediately appealed each of these rulings to the Court of Appeals for the Federal Circuit and requested a stay of the Samsung Injunction as to IXYS devices pending outcome of these appeals. The Court of Appeals for the Federal Circuit granted the motion to stay the Samsung Injunction pending further review, and on June 12, 2002, entered a ruling on the merits of the request for stay of injunction, granting our motion to stay pending appeal.

     It remains our intent to continue to contest the claims of International Rectifier vigorously. Furthermore, we expect to appeal any ruling of contempt. While we believe our defenses to the various claims and our arguments on appeal are meritorious, there can be no assurance of a favorable outcome. In the event of an adverse outcome, damages or injunctions awarded by the U.S. District Court could be materially adverse to our financial condition and results of operations.

     In response to International Rectifier’s claims, Samsung contends that we are contractually obligated under the terms of our wafer supply agreement with Samsung to defend it against the contempt claims made by International Rectifier and indemnify and hold Samsung harmless in connection with such claims. We are

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considering Samsung’s request in light of the terms of the wafer supply agreement between us and Samsung. While we believe that neither IXYS nor Samsung is or could be in violation of the injunction for various reasons we believe to be meritorious, including an express reservation as to our designed parts in the consent decree, there can be no assurance of a favorable outcome. In the event of an adverse ruling against us on the ultimate issue of contempt, or if we are obligated to defend and indemnify Samsung, any damages awarded or injunction entered by the U.S. District Court could be materially adverse to our financial condition and results of operations.

     In November 2000, we filed a lawsuit for patent infringement against International Rectifier GmbH in the County Court of Mannheim, Germany. The lawsuit charged International Rectifier with infringing at least two of our German patents. These patents cover key design features of our proprietary integrated power module technology, which the lawsuit alleged International Rectifier had been infringing in products sold in Germany. The lawsuit sought damages and an injunction prohibiting the continued infringement by International Rectifier.

     On March 23, 2001, a public hearing took place in Mannheim, Germany, and International Rectifier did not deny making use of the above patents. On April 27, 2001, the County Court of Mannheim rendered a judgment in our favor that enjoined International Rectifier from marketing, utilizing, importing or possessing two of our German patents, and imposed a fine of up to (EUR) 256,000 to the state or imprisonment of International Rectifier’s managing director for each violation of the injunction. In addition, International Rectifier was ordered to disclose to us information about its previous sales activity, offers of sales, advertisements, production costs and profits concerning the infringed patents. International Rectifier was also ordered to pay attorney fees and past and future damages and unjustified enrichment resulting from International Rectifier’s infringing practices, as calculated by the information to be provided to us by International Rectifier. International Rectifier appealed the judgment to the Court of Appeals in Karlsruhe. Subsequent to a hearing on this appeal in March, the Court of Appeals in Karlsruhe ruled in our favor and the judgment entered by the County Court of Mannheim is now final. Notwithstanding this appeal, IXYS had begun enforcing the judgment of the County Court of Mannheim; in order to do so IXYS was required to pay (EUR) 532,000 as a form of bond to be held by the County Court of Mannheim. In lieu of the bond, the court accepted a bank guarantee. Although International Rectifier has a right to appeal the ruling of the Appeals Court in Karlsruhe, the bond may be returned to IXYS and IXYS may continue to enforce the judgment of the County Court of Mannheim. International Rectifier has also begun to disclose information to IXYS pursuant to the judgment for purposes of calculating our damages award.

     On February 8, 2001, we filed a lawsuit against International Rectifier Italia S.p.A. in the Civil Court of Monza, Italy, for patent infringement of at least two of our European patents, which correspond to the German patents involved in the above-described legal proceeding in Germany. The lawsuit seeks the seizure of semiconductor modules produced by International Rectifier that infringe on our patents and an injunction against further production of such modules by International Rectifier in Italy. At a hearing on March 8, 2001, the judge rejected International Rectifier’s arguments that the Monza tribunal was not competent to hear the case and nominated an expert to comment on the technical details of the alleged patent infringement. Following the scheduled submission of technical writs by the parties in May 2001, the expert submitted written comments in June 2001. On June 27, 2001, the Civil Court of Monza rendered a preliminary injunction in our favor with respect to certain claims of infringement by International Rectifier S.p.A. Under the terms of this preliminary injunction, we are permitted to seize, and International Rectifier S.p.A. is prohibited from distributing, certain of the allegedly infringing semiconductor modules. The injunction is an interlocutory measure that remains in effect until there has been a judgment on the merits. Hearings on the merits of the law suit were held on December 12, 2001, January 24 2002 and February 21, 2002. It could be as long as several years before a judgment on the merits is rendered.

     While we believe our claims against International Rectifier in the Civil Court of Monza, Italy are meritorious, there can be no assurance of a favorable outcome. We do not believe that an adverse ruling by the Civil Court of Monza would have a significant negative impact on our results of operations, financial performance or liquidity.

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

     None.

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PART  II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

     IXYS’ common stock has been trading on The Nasdaq National Market under the symbol “SYXI” since August 21, 2000. Prior to August 21, 2000, our common stock traded on The Nasdaq SmallCap Market. The following table presents, for the periods indicated, the high and low sale prices per share of our common stock as reported by The Nasdaq National Market since August 21, 2000, and for all periods prior to that date the high and low sale prices per share of our common stock as reported by The Nasdaq SmallCap Market:

     IXYS completed a two-for-one stock split of its common stock on August 10, 2000. Share prices have been adjusted to give effect to the stock split.

Dividends

     To date, IXYS has never declared or paid cash dividends.

Securities Authorized for Issuance under IXYS Equity Compensation Plans

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ITEM 6.  SELECTED FINANCIAL DATA

     The following selected consolidated financial information should be read in conjunction with our Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K. The consolidated statements of operations data for the years ended March 31, 2002, 2001 and 2000 and the balance sheet data as of March 31, 2002 and 2001 are derived from our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The statements of operations data for the years ended March 31, 1999 and 1998 and the balance sheet data as of March 31, 2000, 1999 and 1998 are derived from our consolidated financial statements that are not included in this Annual Report on Form 10-K. Historical results are not necessarily indicative of results to be expected in any future period.

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

Overview

     We are a leading company in the design, development, manufacture and marketing of high power, high performance power semiconductors. Our power semiconductors improve system efficiency and reliability by converting electricity at relatively high voltage and current levels into the finely regulated power required by electronic products. We focus on the market for power semiconductors that are capable of processing greater than 500 watts of power.

     We were founded in 1983. In 1989, we acquired from ABB our semiconductor operation in Lampertheim, Germany, now called IXYS Semiconductor GmbH. This acquisition provided us with a strong foothold in Europe.

     In 1995, we reincorporated in Delaware. Also in 1995, ABB converted approximately $10.5 million in debt owed to it by us into our capital stock. In January 1998, we purchased the Lampertheim facility, which had previously been leased from ABB.

     In September 1998, IXYS Corporation merged with Paradigm Technology, a Delaware corporation that designed and marketed SRAM products, in a transaction accounted for as a reverse merger. In the merger, Paradigm issued its common stock in exchange for all outstanding shares of our capital stock. At the conclusion of the merger, IXYS stockholders held approximately 96% of the combined company, and the historic accounting records of IXYS became those of the combined company. Accordingly, Paradigm formally changed its name to “IXYS Corporation.”

     In May 2000, we acquired Directed Energy, which gave us added scientific expertise and additional products related to laser diode drives, high voltage pulse generators and modulators. In connection with this acquisition, we issued 250,370 shares of our common stock to the former shareholders of Directed Energy.

     On June 10, 2002, we completed the acquisition of Clare, Inc., a provider of high-voltage analog and mixed-signal semiconductor integrated packages and discrete components for use in electronic communications, computer, and industrial equipment. In connection with this acquisition, we issued approximately 4.89 million shares of IXYS common stock to the holders of outstanding shares of Clare common stock and assumed options to purchase approximately 1.0 million shares of IXYS common stock. The acquisition will be accounted for under the purchase method of accounting.

     The semiconductor industry is cyclical and has from time to time experienced depressed business conditions. The semiconductor industry has historically experienced a decrease in average selling prices of products over time. From 1996 through 1998, the semiconductor industry experienced worldwide overcapacity, which caused prices to erode and was accompanied by a slowdown in the demand for semiconductors. Additionally, a number of factors can result in quarter to quarter fluctuations in operating results, including: the reduction, rescheduling or cancellation of orders by customers; fluctuations in the timing and amount of customer requests for product shipments; fluctuations in the manufacturing yields and significant yield losses; and availability of production capacity.

     In fiscal year 2002, North American sales represented approximately 32.9%, and international sales represented approximately 67.1%, of our net revenues. Of our international sales, approximately 77.9% were derived from sales in Europe and the Middle East and approximately 22.1% were derived from sales in Asia. No single end customer accounted for more than 10% of our net revenues in fiscal year 2002. We do not hedge our foreign currency transactions. Accordingly, although many of our sales and expenses occur in the same currency, translation of foreign currencies into U.S. dollars may negatively impact us.

     We relied on external foundries for approximately 44% of our wafer fabrication requirements in fiscal year 2002, and our utilization of external foundries is expected to grow. We have arrangements with four external wafer foundries, two of which produce substantially all of the wafers provided to us by external foundries. Our principal external foundry is Samsung Electronics’ facility located in Kiheung, South Korea. Our relationship with Samsung Electronics extends over 18 years. We provide our foundries forecasts for wafer fabrication six months in advance and make firm purchase commitments one to two months in advance of delivery. Other than these firm commitments, we do not have any obligations to order any minimum quantities.

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Critical Accounting Policies

     Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies for IXYS include inventories, valuation of plant, equipment and intangible assets, revenue recognition and other independent subcontractors, accounting for legal contingencies, and accounting for income taxes.

     Inventories. Inventories are recorded at the lower of standard cost, which approximates actual cost on a first-in-first-out basis, or market value. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast and demand requirements for the next twelve to eighteen months. Actual demand and market conditions may be different from those projected by our management. This could have a material effect on our operating results and financial position.

     Valuation of Plant, Equipment, and Intangible Assets. We evaluate the recoverability of our plant and equipment and intangible assets in accordance with Statement of Financial Accounting Standards No. 121, or SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of When Certain Events or Circumstances Indicate that the Carrying Amount Might Not be Recoverable.” This standard requires recognition of impairment of long-lived assets other than goodwill in the event the carrying value of such assets exceeds the future undiscounted cash flows attributable to such assets. Impairment evaluations involve management estimates of the useful lives of assets and future cash flows from such assets. Actual useful lives and cash flows could be different from those estimated by our management. This could have a material effect on our operating results and financial position.

     Revenue Recognition. We recognize revenue from product sales upon shipment provided that we have received a customer executed purchase order, the price is fixed, title has transferred, collection of resulting receivables is reasonably assured, there are no customer acceptance requirements, and there are no remaining significant obligations. Reserves for sales returns and allowances are recorded at the time of shipment. Specifically, our management must make estimates of potential future product returns and allowance for so called “ship and debit” transactions related to current period product revenue. Our management analyzes historical returns discounts and ship and debit transactions, current economic trends and changes in customer demand and acceptance of our products when evaluating the adequacy of the sales returns and other allowances. Significant management judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period. Material differences may result in the amount and timing of our revenue for any period if management made different judgments or utilized different estimates. Our warranty reserve is established based on our best estimate, based on historical experience, of the amounts necessary to repair or replace our product during the warrant period, which is generally one year. While we believe that our warranty reserve is adequate and the judgment applied is appropriate, such amounts estimated to repair or replace our product could differ materially from what will actually transpire in the future.

     Legal Contingencies. We are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. SFAS 5, “Accounting for Contingencies,” requires that an estimated loss from a loss contingency should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred. We evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our financial position or our results of operations.

     Income Taxes. As part of the process of preparing our consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our actual current exposure together with assessing temporary differences resulting from differing treatment of items, such as pensions or capital leases, for tax and accounting purposes. These differences result in differed tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations.

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     Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. In the event that actual results differ from these estimates or we adjust these estimates in future periods we may need to establish an additional valuation allowance which could materially impact our financial position and results of operations.

Results of Operations

     Net Revenues. Net revenues for fiscal year 2002 were $82.8 million, a 25.6% decrease from net revenues of $111.4 million in fiscal year 2001. International net revenues were $55.6 million for fiscal year 2002, or 67.1% of net revenues, as compared to $66.8 million for fiscal year 2001, or 60.0% of net revenues.

     The decrease in net revenues for fiscal year 2002 from fiscal year 2001 is primarily related to an approximately 18.1% decrease in units shipped in fiscal year 2002 as compared to fiscal year 2001 and an approximately 14.9% decrease in average selling prices across our product lines. We believe that the decrease in unit sales volume was largely attributable to decreased demand for power conversion systems for communications infrastructure applications.

     Net revenues for fiscal year 2001 were $111.4 million, a 45.4% increase from net revenues of $76.6 million in fiscal year 2000. International net revenues were $66.8 million for fiscal year 2001, or 60.0% of net revenues, as compared to $47.6 million for fiscal year 2000, or 62.2% of net revenues.

     The increase in net revenues for fiscal year 2001 from fiscal year 2000 is primarily related to an approximately 60.1% increase in units shipped in fiscal year 2001 as compared to fiscal year 2000, offset by approximately 9.2% decrease in average selling prices across our product line. We believe that the increase in unit sales volume was largely attributable to increased demand for power conversion systems for communications infrastructure applications.

     Gross Profit. Gross profit was $25.9 million, or 31.3% of net revenues in fiscal year 2002, as compared to $41.4 million, or 37.2% of net revenues, in fiscal year 2001. The decrease in margins was primarily due to a 14.9% decrease in average selling price as well as a change in the mix of product sold.

     Gross profit was $41.4 million, or 37.2% of net revenues in fiscal year 2001, as compared to $27.3 million, or 35.7% of net revenues, in fiscal year 2000. The increase in margins was primarily due to increases in manufacturing efficiencies.

     Research, Development and Engineering. During fiscal year 2002, research, development and engineering (“R&D”) expense was $5.7 million, or 6.9% of net revenues, as compared to $6.1 million, or 5.5% of net revenues, in fiscal year 2001. The dollar decrease was due to a fewer number of research and development projects. As a percentage of revenues, R&D expense increased as a result of such expenses decreasing at a relatively slower rate than revenues.

     During fiscal year 2001, research, development and engineering (“R&D”) expense was $6.1 million, or 5.5% of net revenues, as compared to $4.7 million, or 6.1% of net revenues, in fiscal year 2000. The dollar increase was due to higher engineering headcount in fiscal year 2001, as well as an increase in the number of R&D projects. As a percentage of revenues, R&D expense decreased as a result of such expense increasing at a relatively slower rate than revenues

     Selling, General and Administrative. During fiscal year 2002, selling, general and administrative (“SG&A”) expense was $12.9 million, or 15.6% of net revenues, as compared to $14.0 million, or 12.5% of net revenues, in fiscal year 2001. The dollar amount decrease, which included a $150,000 reversal of accruals for contingencies that were resolved, reflects a decrease in expenses to support a lower revenue level.

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     During fiscal year 2001, selling, general and administrative (“SG&A”) expense was $14.0 million, or 12.6% of net revenues, as compared to $11.5 million, or 15.0% of net revenues, in fiscal year 2000. The dollar amount increase reflects an increase in expenses to support a higher revenue level.

     Interest Income (Expense). During fiscal year 2002, interest income was $1.4 million, as compared to of $1.0 million in fiscal year 2001. The increase is mainly due to interest received from the investment of the net proceeds from our secondary public offering during the whole fiscal year 2002.

     During fiscal year 2001, interest income was $1.0 million, as compared to interest expense of $(417,000) in fiscal year 2000. The increase is mainly due to interest received from the investment since October 2000 of the net proceeds from our secondary public offering.

     Other Income (Expense), Net. Other income (expense), net, including gain on foreign currency transactions, in fiscal year 2002 was $(5.5 million) as compared to $(504,000) in fiscal year 2001. The increase in other expense is mainly due to litigation defense costs of $4.6 million.

     Other income (expense), net, including gain on foreign currency transactions, in fiscal year 2001 was $(504,000), as compared to $(15,000) in fiscal year 2000 and included net litigation settlements of $2.5 million offset by litigation defense costs of $3.2 million.

     Provision For Income Taxes. The fiscal year 2002 provision for income taxes reflects an effective tax rate of 38% in fiscal year 2002, which remained unchanged from fiscal 2001.

     The fiscal year 2001 provision for income taxes reflects an effective tax rate of 38% in fiscal year 2001, as compared to the fiscal year 2000 provision of 36%.

Liquidity and Capital Resources

     Cash and Cash Equivalents. As of March 31, 2002, cash and cash equivalents were $32.1 million, a decrease of $12.7 million from cash and cash equivalents of $44.8 million at March 31, 2001, which was an increase of $35.3 million from cash and cash equivalents of $9.5 million at March 31, 2000. The decrease in cash and cash equivalents from fiscal years 2001 to 2002 was related to the acquisition of additional manufacturing equipment and cash used in the acquisition of Westcode. The increase in cash and cash equivalents from fiscal years 2000 to 2001 was primarily due to the $45.3 million in net proceeds received from the sale of our common stock in connection with an underwritten follow-on public offering in October 2000.

     Cash flows from operating activities. Net cash provided by operating activities in fiscal year 2002 was $1.2 million, which represents an increase of $12,000 from $1.2 million in fiscal year 2001. The increase in net cash provided by operating activities was primarily attributable to the liquidation of receivables, in the normal course of business, offset by decreases in accounts payable and accrued liabilities.

     Cash flows from investing activities. Net cash used in investing activities in fiscal year 2002 was $16.0 million. We invested $7.5 million for plant and equipment purchases to increase capacity in order to meet increased demand. In addition, we invested $8.6 million in the acquisition of Westcode Semiconductors Limited.

     Cash flows from financing activities. During fiscal year 2002, net cash provided by financing activities was $4.0 million, which was mainly due to proceeds from capital lease obligations.

     There are three lines of credit facilities available to us. We have one line of credit with a U.S. bank that consists of a $5.0 million commitment amount which is available through September 2002. The line bears interest at the bank’s prime rate (4.5% at March 31, 2002). The line is collateralized by certain assets and contains certain general and financial covenants. At March 31, 2002, we had drawn $700,000 against such line of credit.

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     We have another line of credit with a U.S. bank that consists of a $100,000 commitment, which is available through September 2002. The line bears interest at a fixed rate of 9.5%. The line is collateralized by a $100,000 certificate of deposit that we have with the bank. At March 31, 2002, there were no amounts being drawn against such line of credit.

     In Germany, at March 31, 2002, we had a $5.0 million line of credit with a German bank with no outstanding balance. This line supports a letter of credit facility.

     In July 2000, a German bank issued to us a commitment letter for a (EUR) 3.8 million equipment lease facility. Our existing equipment leases, (EUR) 5.9 million at March 31, 2002, were charged against the facility. The equipment leases provide financing at varying pricing for periods up to 48 months. In addition to the rights to the equipment, the bank holds a security interest in other assets and up to $512,000 deposited with the bank.

     In July 2000, in the same commitment letter discussed above, the bank also committed to issue a credit line to us up to (EUR) 5.1 million for a wafer fabrication facility in Germany, including leasehold improvements, clean room construction and fabrication, computer and office equipment. At March 31, 2002, we had drawn $542,000 under this commitment. The security interest of the bank under the equipment lease facility also collateralizes this line.

     In December 2001, IXYS entered into a term loan with a Swiss bank in the amount of SFR 200,000. The loan bears interest of 5.25% and is due in November 2006. Our accounts receivable at March 31, 2002 were $16.7 million, a decrease of 36.5% as compared to $26.3 million at March 31, 2001. Our inventories at March 31, 2002 were $46.3 million, an increase of 36.0% as compared to $34.0 million at March 31, 2001. Net plant and equipment at March 31, 2002 were $19.2 million, an increase of 37.8% as compared to $14.0 million at March 31, 2001.

     As of March 31, 2002, we had $32.1 million in cash and cash equivalents. We believe that these balances, including interest to be earned thereon, and borrowings available under our credit facilities will be sufficient to fund our working and other capital requirements, including potential investments in other companies and other assets to support the strategic growth of our business, over the next twelve months. In the ordinary course of business, we evaluate opportunities to acquire businesses, products and technologies and we expect to use our cash to fund these types of activities in the future. In the event additional needs for cash arise, we may raise additional funds from a combination of sources including the potential issuance of debt or equity securities. Additional financing might not be available on terms favorable to us, or at all, particularly in light of the recent decline in the capital markets. If adequate funds were not available or were not available on acceptable terms, our ability to take advantage of unanticipated opportunities or respond to competitive pressures could be limited.

Disclosures about Contractual Obligations and Commercial Commitments

     Details of IXYS’ contractual obligations and commitments as of March 31, 2002 to make future payments under contracts are set forth below:

On September 22, 2000, IXYS Corporation entered into a guaranty for $5.0 million in favor of Commerzbank AG to obtain a line of credit granted by Commerzbank AG to IXYS Semiconductor GmbH. At March 2002, the line of credit was $5.0 million.

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     New Accounting Standards

     In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 141, “Business Combinations” (SFAS No. 141) and Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142). SFAS No. 141 requires the purchase method of accounting to be used for all business combinations initiated after June 30, 2001. SFAS No. 141 also specifies criteria that intangible assets acquired must meet to be recognized and reported separately from goodwill. The adoption of SFAS No. 141 will not have a material effect on our results of operations or financial position.

     SFAS No. 142 requires that goodwill and intangible assets with indefinite lives no longer be amortized but instead be measured for impairment at least annually, or when events indicate that an impairment exists. Our adoption date for SFAS No. 142 was April 1, 2002. As of that date, amortization of goodwill and other indefinite-lived intangible assets, including those recorded in past business combinations, ceased. As a result of the elimination of this amortization, other expense will decrease by approximately $232,000 annually for goodwill currently recognized.

     As required by SFAS No. 142, we will perform impairment tests on goodwill and other indefinite-lived intangible assets as of the adoption date. We will perform impairment tests annually and whenever events or circumstances indicate that the value of goodwill or other indefinite-lived intangible assets might be impaired. In connection with the SFAS No. 142 transitional goodwill impairment test, we will utilize the required two-step method for determining goodwill impairment as of the adoption date. To accomplish this, we will identify our reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the adoption date. We will then have up to six months from the adoption date to determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit. To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit, we will then perform the second step of the transitional impairment test. If necessary, in the second step, we will compare the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit goodwill, both of which would be measured as of the adoption date. The implied fair value of goodwill will be determined by allocating the fair value of the reporting unit to all of the assets (recognized and unrecognized) and liabilities of the reporting unit in a manner similar to a purchase price allocation, in accordance with SFAS No. 141. The residual fair value after this allocation will be the implied fair value of the reporting unit goodwill. We will record a transitional impairment loss for the excess of the carrying value of goodwill allocated to the reporting unit over the implied fair value. SFAS No. 142 requires that this second step be completed as soon as possible, but no later than the end of the year of adoption.

     In connection with the SFAS No. 142 indefinite-lived intangible asset impairment test, we will utilize the required one-step method to determine whether an impairment exists as of the adoption date. The test will consist of a comparison of the fair values of indefinite-lived intangible assets with the carrying amounts. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, we will recognize an impairment loss in an amount equal to that excess.

     We have not yet determined the impact of the provisions of the impairment test under SFAS No. 142 on our results of operations and financial position; however, the possibility exists that we will incur a significant transitional impairment loss. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in our income statement during the quarter ending September 30, 2002.

     In October 2001, FASB issued SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” which is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal periods. SFAS No. 144 addresses financial accounting and reporting for the impairment of certain long-lived assets and for the disposition of long-lived assets. SFAS No. 144 supersedes SFAS No. 121 and APB Opinion No. 30; however, SFAS No. 144 retains the requirement of APB Opinion No. 30 to report discontinued operations separately from continuing operations and extends that reporting to a component of an entity that has either been disposed of (by sale, abandonment or in a distribution to owners) or is classified as held for sale. We do not expect the adoption of SFAS No. 144 to have a material impact on our financial position and results of operations.

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Selected Quarterly Financial Data (unaudited)

     The following supplemental financial information should be read in conjunction with IXYS’ financial statements and the related notes thereto, as well as IXYS Corporation Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K. The information regarding the quarters within the fiscal year ended March 31, 2002 and 2001 has been derived from IXYS’ unaudited financial statements incorporated by reference into this Annual Report on Form 10-K and, in the opinion of the management of IXYS, reflects all adjustments necessary for a fair presentation of the financial condition at such date and the results of operations for such periods. Historical results are not necessarily indicative of the results to be obtained in the future.

FISCAL YEAR ENDED MARCH 31, 2002

FISCAL YEAR ENDED MARCH 31, 2001

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ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to the impact of interest rate changes, foreign currency fluctuations, and change in the market values of our investments.

     Interest Rate Risk.

     Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We have not used derivative financial instruments in our investment portfolio. We invest our excess cash in debt instruments of the U.S. Government and its agencies, and in high-quality corporate issuers and, by policy, limit the amount of credit exposure to any one issuer. We protect and preserve our invested funds by limiting default, market and reinvestment risk.

     Investments in both fixed rate and floating rate interest-earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates.

     We are exposed to short-term fluctuations in interest rates as our line of credit in the US has a variable interest rate. An increase in interest rates would have an adverse impact on our interest expense. For example, under the current drawing on the line of credit, a 10% increase in interest rates would increase interest expense by $70,000.

     Foreign Currency Risk.

     International revenues from our foreign subsidiaries were approximately 52.7% of total revenues in fiscal year 2002. International sales are made mostly from our German subsidiary and are typically denominated in the euro. Our German subsidiary also incurs most of its expenses in the local currency. Our foreign subsidiaries use their respective local currencies as their functional currency.

     Our international business is subject to risks typical of an international business including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, our future results could be materially adversely impacted by changes in these or other factors.

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ITEM 8.  FINANCIAL STATEMENTS

     Our financial statements and supplementary data required by this Item are set forth at the pages indicated in the accompanying index. The Selected Quarterly Financial Data has been included at Item 7— Management’s Discussion and Analysis of Financial Condition and Results of Operations.

IXYS CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors IXYS Corporation

     In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of IXYS Corporation and its subsidiaries at March 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years ended March 31, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of IXYS’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Jose, California
May 20, 2002, except for Note 14 as to which the date is June 12, 2002

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Table of Contents

IXYS CORPORATION

CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)