Lattice Semiconductor Reports Fourth Quarter and 2003 Year End Financial Results and Restatement of First, Second and Third Quarter 2003 Financial Statements

Company reiterates first quarter 2004 business outlook

HILLSBORO, Ore. - March 24, 2004 - Lattice Semiconductor Corporation (NASDAQ: LSCC) today announced financial results for the fourth quarter and year ended December 2003.

In addition, the Company announced that it has completed a review of its deferred income accounting. Deferred income is the balance sheet account which represents the estimated future gross margin, including credits that may be due, related to inventory held by the Company's distributors that is expected to be either resold to end users or returned to the Company for a credit. As the Company's distributors have price protection and limited return rights, the Company's policy is to defer recognition of revenue for sales through distribution until the distributor resells the Company's products to an end customer. However, upon shipment of product to distributors, the Company records a receivable and credits deferred income while also relieving its inventory account and offsetting the cost of inventory shipped against deferred income. The receivable and deferred income accounts are also adjusted for estimated credits that may be due distributors.

As previously disclosed, the Company has concluded that its deferred income account became overdepleted during 2003. After review by the Audit Committee and the Company's independent auditor, the Company has determined restatement of the March, June and September quarter 2003 financial statements is necessary to correct errors and a failure to record a change in accounting estimate related to deferred income. The restatement resulted from inappropriate accounting entries made by an individual in the Company's finance department and deficiencies in the design and operation of internal accounting controls related to the deferred income account.

For the September 2003 quarter, the restatement:

• reduces revenue, originally reported as $51.0 million, by $8.0 million to $43.0 million;
• reduces cost of sales, originally reported as $20.7 million, by $1.2 million to $19.4 million;
• increases net loss, originally reported as $21.9 million ($0.20 per share), by $6.8 million ($0.06 per share) to $28.7 million ($0.26 per share);
• increases the originally reported deferred income balance sheet account by $3.4 million to $9.8 million
• increases the originally reported accounts payable and other accrued liabilities balance sheet account by $5.5 million to $34.4 million; and
• reduces the originally reported retained earnings balance sheet account by $8.9 million to $28.6 million.

For the June 2003 quarter, the restatement:

• reduces revenue, originally reported as $58.2 million, by $1.6 million to $56.6 million;
• reduces cost of sales, originally reported as $23.3 million, by $0.3 million to $23.0 million;
• increases net loss, originally reported as $16.9 million ($0.15 per share), by $1.3 million ($0.01 per share) to $18.2 million ($0.16 per share);
• increases the originally reported deferred income balance sheet account by $0.8 million to $9.6 million;
• increases the originally reported accounts payable and other accrued liabilities balance sheet account by $1.3 million to $32.5 million; and
• reduces the originally reported retained earnings balance sheet account by $2.1 million to $57.3 million.

For the March 2003 quarter, the restatement:

• reduces revenue, originally reported as $58.3 million, by $1.0 million to $57.3 million;
• reduces cost of sales, originally reported as $23.2 million, by $0.2 million to $23.0 million;
• increases net loss, originally reported as $18.8 million ($0.17 per share), by $0.8 million ($0.01 per share) to $19.7 million ($0.18 per share);
• increases the originally reported deferred income balance sheet account by $0.8 million to $13.9 million; and
• reduces the originally reported retained earnings balance sheet account by $0.8 million to $75.5 million.

Revenue for the fourth quarter was $52.8 million. Quarterly revenue from FPGA products was $10.4 million, or 20 percent of total revenue, while revenue from high density CPLD products was $35.6 million. New product revenue accounted for 14 percent of total quarterly revenue.

Net loss for the fourth quarter was $25.2 million ($0.22 per share). This loss includes an $18.7 million charge for amortization of intangible assets. Excluding these charges, the net loss for the quarter was $6.6 million ($0.06 per share). These non-cash charges have been highlighted here as they are not expected to continue at these levels beyond June 2004 and are currently expected to be eliminated in 2007. The Company believes exclusion of these charges more closely approximate its cash earnings performance. A reconciliation of non-GAAP to GAAP loss accompanies the financial tables in this earnings release.

For the year 2003, revenue was $209.7 million, a decrease of eight percent from the $229.1 million reported for 2002. Net loss for 2003 was $91.8 million ($0.82 per share), as compared to the net loss of $175.2 million ($1.59 per share) reported for 2002. Net loss for 2003, adjusted for amortization of intangibles assets of $77.1 million, was $14.7 million ($0.13 per share) compared to adjusted earnings of $24.0 million ($0.21 per share) reported for 2002.

The Company currently anticipates filing amended Quarterly Reports on Form 10-Q for the first, second and third quarters of 2003, which will contain the restated financial results discussed above, and its 2003 Annual Report on Form 10-K by April 2, 2004.

"We are disappointed with the restatement of our 2003 quarterly financial results", stated Cyrus Y. Tsui, chairman and chief executive officer. "However, we have performed an accounting review, made improvements in our method of accounting for Deferred Income and are pursuing improvements in our internal controls under the guidance of our Audit Committee."

Separately, the Company reiterated its business outlook for the March 2004 quarter:

• Revenue is expected to be grow 10 to 13 percent on a sequential basis.
• Gross margins are expected to be approximately 57 to 58 percent of revenue.
• Total operating expenses are expected to be approximately $35 million.
• Other income is expected to be approximately $2.5 to $3.0 million, including a gain on the sale of foundry investments.
• No tax provision is anticipated.

On March 24, 2004, Lattice will hold a telephone conference call at 2:30 pm (Pacific Time) with financial analysts. Investors may listen to our conference call live via the web at www.lscc.com. Replays of the call will also be available at www.lscc.com.

• Consolidated Financial Statements & Supplemental Historical Financial Information

The foregoing paragraphs contain forward-looking statements within the meaning of the federal securities laws including statements about the anticipated filing date of the Company's 10-K and amended 10-Q, future quarterly financial results, revenues, customers, product offerings and the Company's ability to compete. Investors are cautioned that actual events and results could differ materially from these statements as a result of a number of factors, including the Company's ability to file its 10-K and amended 10-Q reports by April 2, 2004, the possibility that further accounting adjustments may be required and the effectiveness of changes to the Company's internal controls, as well as overall semiconductor market conditions, market acceptance and demand for the Company's new products, the Company's dependencies on our silicon wafer suppliers, the impact of competitive products and pricing, technological and product development risks. The Company does not intend to update or revise any forward looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Lattice Semiconductor Corporation, the inventor of in-system programmable^TM (ISP^TM) logic products, designs, develops and markets the broadest range of Field Programmable Gate Arrays(FPGA), Field Programmable System Chips(FPSC) and high-performance ISP Programmable Logic Devices(PLD), including Complex Programmable Logic Devices(CPLD), Programmable Analog Chips(PAC), and Programmable Digital Interconnect(GDX). Lattice also offers industry leading SERDES products. Lattice provides total solutions for today's system designs by delivering innovative programmable silicon products that embody leading-edge system expertise.

Lattice products are sold worldwide through an extensive network of independent sales representatives and distributors, primarily to OEM customers in the communications, computing, industrial and military end markets. Company headquarters are located at 5555 N.E. Moore Court, Hillsboro, Oregon 97124 USA. For more information access our web site at http://www.latticesemi.com.

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Lattice Semiconductor Corporation, L (& design), Lattice (& design) ISP and specific product designations are either registered trademarks or trademarks of Lattice Semiconductor Corporation or its subsidiaries in the United States and/or other countries.

For more information contact:

Roddy Sloss
Vice President, Finance
Lattice Semiconductor Corporation
(503) 268-8000