SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.
                         ______________________

                               FORM 10-K
             ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE 
                     SECURITIES EXCHANGE ACT OF 1934        
             ______________________________________________
Mark One
[x] Annual report pursuant to section 13 or 15(d) of the Securities   
    Exchange Act of 1934 [Fee Required] 
    For the Fiscal Year Ended August 28, 1998, 
or

[ ] Transition report pursuant to section 13 or 15(d) of the Securities   
    Exchange Act of 1934 [No Fee Required] 
    For the Transition Period From ____________ to ____________

Commission File Number 1-11098

                          SOLECTRON CORPORATION
         (Exact name of registrant as specified in its charter)

            Delaware                             94-2447045
 (State or other jurisdiction of              (I.R.S. Employer
  incorporation or organization)           Identification Number)

            777 Gibraltar Drive, Milpitas, California  95035
         (Address of principal executive offices and Zip Code)
  Registrant's telephone number, including area code:  (408) 957-8500

Securities registered pursuant to Section 12(b) of the Act:
Common Stock traded on New York Stock Exchange

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

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 report(s), 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 
Form 10-K or any amendment to this Form 10-K.  [  ]

The aggregate market value of the Registrant's Common Stock held by non-
affiliates on October 31, 1998 (based upon the last reported price of 
the Common Stock on the New York Stock Exchange on such date) was 
approximately $4,220 million.

As of October 31, 1998, there were approximately 118,587,395 shares of 
the Registrant's Common Stock outstanding.
                                    
                                     1

<PAGE>
                  DOCUMENTS INCORPORATED BY REFERENCE

The Registrant's definitive Proxy Statement for the Annual Meeting of 
Stockholders to be held on January 12, 1999, which the Company will file 
with the Securities and Exchange Commission within 120 days after the 
end of the fiscal year covered by this report, is incorporated by 
reference in Part III of this Form 10-K to the extent stated herein.















































                                      2


<PAGE>      
                         SOLECTRON CORPORATION
                     1998 FORM 10-K ANNUAL REPORT
                           TABLE OF CONTENTS

                                                          Page
                                Part I

Item 1.   Business                                          4

Item 2.   Properties                                       13

Item 3.   Legal Proceedings                                14

Item 4.   Submission of Matters to a Vote of 
          Security Holders                                 14

                                Part II

Item 5.   Market for the Registrant's Common Equity 
          and Related Stockholder Matters                  15

Item 6.   Selected Financial Data                          16

Item 7.   Management's Discussion and Analysis of 
          Financial Condition and Results of Operations    17

Item 7A.  Quantitative and Qualitative Disclosures 
          About Market Risk                                33

Item 8.   Financial Statements and Supplementary Data      34

Item 9.   Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosure           58

                                Part III

Item 10.  Directors and Executive Officers of the 
          Registrant                                       59

Item 11.  Executive Compensation                           62

Item 12.  Security Ownership of Certain Beneficial 
          Owners and Management                            62

Item 13.  Certain Relationships and Related Transactions   62

                                Part IV

Item 14.  Exhibits, Financial Statement Schedules and 
          Reports on Form 8-K                              63

          Signatures                                       64

Solectron and the Solectron logo are registered trademarks of Solectron 
Corporation. All other names are trademarks and/or registered trademarks 
of their respective owners.

                                      3

<PAGE>
                                 PART I

ITEM 1:   SOLECTRON BUSINESS

Solectron Corporation (the Company or Solectron) is an independent 
provider of customized manufacturing services to electronics original 
equipment manufacturers (OEMs). Solectron provides a wide variety of 
pre-manufacturing, manufacturing and post-manufacturing services. 
Solectron's goal is to offer its customers the significant competitive 
advantages that can be obtained from manufacturing outsourcing such as 
access to advanced manufacturing technologies, shortened product time-
to-market, reduced cost of production and more effective asset 
utilization. Solectron has manufacturing operations in locations 
throughout the world, including North America, Europe, the Asia/Pacific 
region and Brazil. Solectron believes that the geographically diverse 
locations of its facilities enable it to build closer regional 
relationships with its customers and to better meet its customers' cost 
and local market content requirements.

Solectron Corporation was originally incorporated in California in 
August 1977 and reincorporated in Delaware in February 1997. Solectron's 
corporate headquarters are located at 777 Gibraltar Drive, Milpitas, 
California 95035. Its telephone number is (408) 957-8500 and its 
Internet address is www.Solectron.com.

The information contained within this overview of the business is 
qualified in its entirety by, and is subject to, the detailed 
information, consolidated financial statements and notes thereto 
contained elsewhere within this document under "Management's Discussion 
and Analysis of Financial Condition and Results of Operations" and 
"Financial Statements and Supplementary Data".

Industry Overview

Solectron is benefiting from increased worldwide market acceptance of, 
and reliance upon, the use of manufacturing specialists by many 
electronics OEMs. Solectron believes the trend towards outsourcing 
manufacturing will continue. OEMs utilize manufacturing specialists for 
many reasons including the following:

Reduce Time to Market.  Due to intense competitive pressures in the 
electronics industry, OEMs are faced with increasingly shorter product 
life-cycles and therefore have a growing need to reduce the time 
required to bring a product to market. OEMs can reduce their time to 
market by using a manufacturing specialist's manufacturing expertise and 
infrastructure.

Reduce Investment.  As electronic products have become more 
technologically advanced and are shipped in greater unit volumes, the 
necessary investment required for internal manufacturing has increased 
significantly for working capital, capital equipment, labor, systems and 
infrastructure. Use of manufacturing specialists enables OEMs to gain 
access to advanced manufacturing capabilities while substantially 
reducing overall resource requirements.

Focus Resources.  Because the electronics industry is experiencing 
greater levels of competition and more rapid technological change, many 
OEMs increasingly are seeking to focus their resources on activities and 
technologies in which they add the greatest value. By offering 
comprehensive electronics assembly and related manufacturing services, 

                                     4
<PAGE>
manufacturing specialists allow OEMs to focus on their own core 
competencies such as product development and marketing.

Access Leading Manufacturing Technology.  Electronic products and 
electronics manufacturing technology have become increasingly 
sophisticated and complex, making it difficult for OEMs to maintain the 
necessary technological expertise to manufacture products internally. 
OEMs are motivated to work with a manufacturing specialist in order to 
gain access to the specialist's expertise in interconnect, test and 
process technologies.

Improve Inventory Management and Purchasing Power.  Electronics industry 
OEMs are faced with increasing difficulties in planning, procuring and 
managing their inventories efficiently due to frequent design changes, 
short product life-cycles, large investments in electronic components, 
component price fluctuations and the need to achieve economies of scale 
in materials procurement. OEMs can reduce production costs by using a 
manufacturing specialist's volume procurement capabilities. In addition, 
a manufacturing specialist's expertise in inventory management can 
provide better control over inventory levels and increase the OEM's 
return on assets.

Access Worldwide Manufacturing Capabilities.  OEMs are increasing their 
international activities in an effort to lower costs and access foreign 
markets. Manufacturing specialists with worldwide capabilities are able 
to offer such OEMs a variety of manufacturing location options to better 
address their objectives regarding cost, shipping location, frequency of 
interaction with manufacturing specialists and local content 
requirements of end-market countries.

Strategy

Solectron's goal is to offer its customers the significant competitive 
advantages of manufacturing outsourcing, such as access to advanced 
manufacturing technologies, shortened product time-to-market, lowest 
landed cost and more effective asset utilization. To achieve this goal 
Solectron's strategy emphasizes the following key elements:

Quality.  Solectron believes that product quality is a critical success 
factor in the electronics manufacturing market. Solectron strives for 
continuous improvement of its processes and has adopted a number of 
quality improvement and measurement techniques to monitor its 
performance. Solectron has received numerous superior service and 
quality awards, including the Malcolm Baldrige National Quality Award in 
1991 and again in 1997, the Best Manufacturing Plant in North America 
Award from Industry Week in 1998, the North Carolina Quality Leadership 
Award in 1996, Malaysian Quality Management Excellence Award in 1996 as 
well as the Malaysian Prime Minister's Quality Award in 1997, the Texas 
Quality Award in 1996 and numerous awards from its customers. All of 
Solectron's manufacturing facilities, except for Fine Pitch Technology, 
Inc. and the recently-established facility in Romania, are certified 
under ISO-9000 standards, which are international quality standards for 
design, manufacturing and distribution management systems. 

Manufacturing Partnerships.  An important element of Solectron's 
strategy is to establish partnerships with major and emerging OEM 
leaders in diverse segments across the electronics industry. Solectron's 
customer base consists of leaders in industry segments such as 
networking, telecommunications, workstations, personal computers, 
computer peripherals, instrumentation, semiconductor equipment and 
avionics. Due to the costs inherent in supporting customer 

                                     5
<PAGE>
relationships, Solectron focuses its efforts on customers with which the 
opportunity exists to develop long-term business partnerships. 
Solectron's goal is to provide its customers with total manufacturing 
solutions for both new and more mature products, as well as across 
product generations. Solectron's manufacturing services range from 
providing design and New Product Introduction services, to just-in-time 
delivery on low to medium volume turnkey and consignment projects and 
projects that require more value-added services, to servicing OEMs that 
require price-sensitive, high-volume production.

Turnkey Capabilities.  Another element of Solectron's strategy is to 
provide a complete range of manufacturing management and value-added 
services, including materials management, board design, concurrent 
engineering, assembly of complex printed circuit boards and other 
electronic assemblies, test engineering, software manufacturing, 
accessory packaging and post-manufacturing services. Solectron believes 
that as manufacturing technologies become more complex and as product 
life-cycles shorten, OEMs will increasingly contract for manufacturing 
on a turnkey basis as they seek to reduce their time to market and 
capital asset and inventory costs. A substantial portion of Solectron's 
revenue is from its turnkey business. Solectron believes that the 
ability to manage and support large turnkey projects is a critical 
success factor and a significant barrier to entry for the market it 
serves. In addition, Solectron believes that due to the difficulty and 
long lead-time required to change manufacturers, turnkey projects 
generally increase an OEM's dependence on its manufacturing specialist, 
resulting in greater stability of Solectron's customer base and in 
closer working relationships. Solectron has been successful in 
establishing sole source positions with many of its customers for 
certain of their products.

Advanced Manufacturing Process Technology.  Solectron intends to 
continue to offer its customers the most advanced manufacturing process 
technologies, including surface mount technology (SMT) and ball-grid 
array (BGA) assembly and testing and emerging interconnect technologies. 
Solectron has developed substantial SMT expertise including advanced, 
vision-based component placement equipment. Solectron believes that the 
cost of SMT assembly facilities and the technical capability required to 
operate a high-yield SMT operation are significant competitive factors 
in the market for electronic assembly. Solectron also has the capability 
to manufacture using tape-automated-bonding, chip-on-substrate and other 
more advanced manufacturing processes.

Diverse Geographic Operations.  An important element of Solectron's 
strategy is to establish production facilities in areas of high customer 
density or where manufacturing efficiencies can be achieved. Solectron 
currently has operations throughout the United States and in Mexico, 
Brazil, Europe and Asia. Solectron believes that its facilities in these 
diverse geographic locations enable Solectron to better address its 
customers' objectives regarding cost, shipping location, frequency of 
interaction with manufacturing specialists and local content 
requirements of endmarket countries. In addition, Solectron has its 
Asia/Pacific headquarters office in Taipei, Taiwan, and program offices 
in Japan and Israel. Solectron intends to continue to expand its 
operations as necessary to continue to serve its existing customers and 
to develop new business.

                                    6
<PAGE>
International Manufacturing Capability

Western United States.  Solectron's headquarters and largest 
manufacturing operations are located in Silicon Valley, principally in 
Milpitas, California, in the midst of one of the largest concentrations 
of OEM electronics manufacturers. This facility offers a full range of 
services that span the product life cycle, including printed circuit 
board and systems design and prototyping; printed circuit board 
assembly; build-to-order, configure-to-order and complex systems 
assembly; end-of-life manufacturing; and depot repair. In addition, 
Solectron has a smaller site strategically located in Everett, 
Washington to help serve Solectron's customers in the Pacific Northwest 
and elsewhere.

The Company's subsidiary, Force Computers, Inc. (Force), is a leading 
designer and supplier of open, scalable system- and board-level embedded 
computer platforms for the telecomunications, industrial and command and 
control markets. Unlike general purpose computers, embedded computers 
are incorporated into systems and equipment to perform a single or 
limited number of critical control functions and are generally 
integrated into larger automated systems. A processor independent 
company, Force delivers products based on SPARC, Pentium, PowerPC and 
68K technologies and has expertise in system design, board design, 
system integration and manufacturing. Force also provides support 
services, such as system configurations, application consulting and 
training to its customers. Force further enhances the Company's array of 
services, particularly in pre-manufacturing areas. Force's corporate 
headquarters are located in San Jose, California.  Its European 
headquarters are located in Munich, Germany.  In addition to its 
headquarters locations, Force has sales support offices located 
throughout the United States and in various international locations.

Another of the Company's subsidiaries, Fine Pitch Technology, Inc. (Fine 
Pitch), is also headquartered in San Jose, California. Fine Pitch 
provides extensive prototype services for electronics OEMs, further 
enhancing Solectron's ability to address the needs of design teams who 
require almost immediate availability of highly complex prototype 
assemblies.

Southwestern United States. Solectron believes that its facility in 
Austin, Texas is situated in a geographic region with strong growth of 
electronics OEMs that will allow Solectron to better service its 
existing customers and to attract new ones. This facility, which has 
recently completed a major expansion, offers a full range of integrated 
solutions that span the product life cycle, from complex ASIC circuit 
design to printed circuit board and systems assembly and fulfillment to 
end-of-life services.

Eastern United States. The Company's Eastern United States facility is 
located in Westborough, Massachusetts, near Boston, in the center of a 
geographic region with a large concentration of electronics OEMs. This 
facility offers circuit design services, printed circuit board and 
complex systems assembly and end-of-life manufacturing. The facility is 
located adjacent to a Fine Pitch site that specializes in quick-turn 
prototype services. The two groups work together to shorten customers' 
product development and manufacturing cycles, ultimately reducing their 
products' time-to-market.

Southeastern United States. Solectron's Southeastern United States 
operations are located in Charlotte, North Carolina, Columbia, South 
Carolina and Duluth and Braselton, Georgia. The Company's operations in 

                                      7
<PAGE>
Charlotte, North Carolina, which were recently augmented by the 
acquisition of International Business Machine Corporation's (IBM) 
Electronic Card Assembly and Test (ECAT) manufacturing assets, 
specializes in low- to medium-volume, highly complex printed circuit 
board assembly. This site also provides printed circuit boards to the 
Columbia, South Carolina site, which specializes in customized systems 
design services and complex computer systems assembly. The facility in 
Duluth, Georgia is Solectron's East Coast center for build-to-order and 
configure-to-order systems assembly. The facility in Braselton, Georgia 
was acquired from Mitsubishi Consumer Electronics America, Inc. (MCEA), 
a subsidiary of Mitsubishi Electric Corporation, in October 1998 and 
will provide a full range of manufacturing services to MCEA's Cellular 
Mobile Telephone division. The Company expects to merge the two Georgia 
locations into a new facility in Suwanee, Georgia during fiscal 1999. 
The locations in Columbia, South Carolina and Duluth, Georgia were 
recently acquired from NCR Corporation. Solectron believes that these 
facilities allow it to better pursue new business opportunities with new 
and existing customers having Southeastern United States operations, in 
particular because of Charlotte's status as a transportation hub and its 
relative proximity to major Southeastern United States electronics 
markets. 

Mexico.  Solectron's site in Guadalajara, Mexico began providing a full 
range of printed circuit board assembly and systems build manufacturing 
services in the first quarter of fiscal 1998. This site was established 
to offer customers a low-cost, high volume manufacturing facility in 
North America.

Brazil.  Solectron's manufacturing operation in Sao Paulo, Brazil was 
acquired from Ericsson Telecom AB's Business Area Infocom Systems 
(Ericsson) in October 1997. This site provides full systems build 
capabilities, engineering, printed circuit board and flex assembly, 
custom packaging and distribution services, primarily to multinational 
customers seeking access to the Latin American market.

Europe.  Solectron has manufacturing operations in Bordeaux, France, 
Herrenberg, Germany, Dublin, Ireland, Timisoara, Romania and 
Dunfermline, Scotland. Each of these sites provides a full range of 
manufacturing capabilities to a multinational customer base. In 
addition, each site is developing an area of specific expertise to offer 
to all customers. The facility in France is the site of choice for depot 
repair in Europe, partly because of its centralized location, and also 
serves as a New Product Introduction Center. Germany offers design 
support, prototype services and low-volume, high-mix manufacturing 
services. In addition, Force's European headquarters are located in 
Munich, Germany. The Ireland facility provides systems design, build-to-
order, configure-to-order and complex systems assembly. Romania provides 
a low-cost, high-volume manufacturing center for the European region. 
Scotland specializes in building printed circuit board assemblies, 
subassemblies and systems for multinational customers seeking entry into 
the European market. The Company also has a New Product Introduction 
Center in Sweden, which offers a full range of electronics product 
development services, including design and layout, concurrent 
engineering, test development and prototype engineering.

Asia.  Solectron's Southeast Asia manufacturing operations are located 
in Penang and Johor, Malaysia. The operations were established to better 
serve the needs of OEMs requiring price-sensitive, high-volume 
production capabilities and to provide more efficient manufacturing 
services to customers located in Southeast Asia. The facilities 
currently provide electronics assembly, materials management and other 

                                     8
<PAGE>
services to customers located in Malaysia, Singapore, Japan, the United 
States and other locations. Solectron's facility in Suzhou, China began 
operations in fiscal 1997. This facility currently provides a full range 
of low-cost high volume manufacturing services.

New Product Introduction Center. The Company's New Product Introduction 
(NPI) Center, is located in Sweden. The NPI Center offers a full range 
of electronics product development services, including design and 
layout, concurrent engineering, test development and prototype 
engineering. 

Alliance with Ingram Micro Inc. In October 1998, the Company announced 
that it had signed a definitive agreement with Ingram Micro Inc. under 
which the two companies will enter into a strategic alliance to provide 
global build-to-order and configure-to-order assembly services for 
personal computers, servers and related products in the United States, 
Canada, Europe, Asia and Latin America. The alliance will be managed by 
both companies under a joint management matrix that will include a sales 
and marketing staff, program management, information technology 
resources and test and process engineers and will, in most part, utilize 
existing facilities, systems and personnel. The companies expect that 
shipments to customers will begin in early calendar 1999.

As Solectron manages the existing operations and expands geographically, 
it may experience certain inefficiencies from the management of 
geographically dispersed operations. In addition, Solectron's results of 
operations will be adversely affected if these new facilities do not 
achieve revenue growth sufficient to offset increased expenditures 
associated with geographic expansion.

In fiscal 1998, approximately 33.8% of Solectron's sales were from 
operations outside of the United States. As a result of continuous 
customer demand overseas, Solectron expects foreign sales to increase. 
Solectron's foreign sales and operations are subject to risks of doing 
business abroad, including fluctuations in the value of currency, export 
duties, import controls and trade barriers (including quotas), 
restrictions on the transfer of funds, associate turnover, work 
stoppages, longer payment cycles, greater difficulty in accounts 
receivable collection, burdens of complying with a wide variety of 
foreign laws and, in certain parts of the world, political instability. 
While to date these factors have not had an adverse material impact on 
Solectron's results of operations, there can be no assurance that there 
will not be such an impact in the future.

Manufacturing

Solectron's Approach

To achieve excellence in manufacturing, Solectron combines advanced 
manufacturing technology, such as computer-aided manufacturing and 
testing, with manufacturing techniques including just-in-time 
manufacturing, total quality management, statistical process control and 
continuous flow manufacturing. Just-in-time manufacturing is a 
production technique which minimizes work-in-process inventory and 
manufacturing cycle time while enabling Solectron to deliver products to 
customers in the quantities and time frame required. Total quality 
management is a management philosophy which seeks to impart high levels 
of quality in every operation of Solectron and is accomplished by the 
setting of quality objectives for every operation, tracking performance 
against those objectives, identifying work flow and policy changes 
required to achieve higher quality levels and a commitment by executive 

                                     9
<PAGE>
management to support changes required to deliver higher quality. 
Statistical process control is a set of analytical and problem-solving 
techniques based on statistics and process capability measurements 
through which Solectron can track process inputs and resulting quality 
and determine whether a process is operating within specified limits. 
The goal is to reduce variability in the process, as well as eliminate 
aberrations that contribute to quality below the acceptable range of 
each process performance standard.

In order to successfully implement these management techniques, 
Solectron has developed the ability to collect and utilize large amounts 
of data in a timely manner. Solectron believes this ability is critical 
to a successful assembly operation and represents a significant 
competitive factor, especially in large turnkey projects. To manage this 
data, Solectron uses sophisticated computer systems for material 
resource planning, shop floor control, work-in-process tracking, 
statistical process control and activity-based product costing.

Electronics Assembly and Other Services

Solectron's electronics assembly activities consist primarily of the 
placement and attachment of electronic and mechanical components on 
printed circuit boards and flexible cables. Solectron also assembles 
higher-level sub-systems and systems incorporating printed circuit 
boards and complex electromechanical components, in some cases 
manufacturing and packaging products for shipment directly to its 
customers' distributors. In addition, Solectron provides other 
manufacturing services including refurbishment and remanufacturing. 
Solectron manufactures on a turnkey basis, directly procuring some or 
all of the components necessary for production and on a consignment 
basis, where the OEM customer supplies all or some components for 
assembly.

In conjunction with its assembly activities, Solectron also provides 
computer-aided testing of printed circuit boards, sub-systems and 
systems, which contributes significantly to Solectron's ability to 
deliver high quality products on a consistent basis. Solectron has 
developed specific strategies and routines to test board and system 
level assemblies. In-circuit tests verify that all components have been 
properly inserted and that the electrical circuits are complete. 
Functional tests determine if the board or system assembly is performing 
to customer specifications. Solectron either designs and procures test 
fixtures and develops its own test software or utilizes its customers' 
existing test fixtures and test software. In addition, Solectron 
provides environmental stress tests of the board or system assembly.

Solectron provides turnkey manufacturing management to meet its 
customers' requirements, including procurement and materials management 
and consultation on board design and manufacturability. Individual 
customers may select various services from among Solectron's full range 
of turnkey capabilities.

Procurement and materials management consists of the planning, 
purchasing, expediting, warehousing, preparing and financing of the 
components and materials required to assemble a printed circuit board or 
electronic system. OEMs have increasingly utilized electronic 
manufacturing specialists to purchase all or some components directly 
from component manufacturers or distributors and to finance and 
warehouse the components.

                                     10
<PAGE>
Solectron also assists its customers in evaluating board designs for 
manufacturability. Solectron evaluates the board design for ease and 
quality of manufacture and, when appropriate, recommends design changes 
to reduce manufacturing costs or lead times or to increase the quality 
of finished assemblies. Board design services consist of the engineering 
and design associated with the arrangement and interconnection of 
specified components on printed circuit boards to achieve an OEM's 
desired level of functionality. Solectron also offers ASIC design 
services and its subsidiary, Force Computers, offers product design 
services for the embedded computer market.

Sales and Marketing

Sales and marketing at Solectron is an integrated process involving 
direct salespersons and project managers, as well as Solectron's senior 
executives. Solectron's sales resources are directed at multiple 
management and staff levels within targeted accounts. Solectron also 
uses independent sales representatives in certain geographic areas. 
Solectron receives unsolicited inquiries resulting from advertising and 
public relations activities, as well as referrals from current 
customers. These opportunities are evaluated against Solectron's 
customer selection criteria and are assigned to direct salespersons or 
independent sales representatives, as appropriate. Historically, 
Solectron has had substantial recurring sales from existing customers.

Over 92% of Solectron's net sales during fiscal 1998 were derived from 
customers which were also customers during fiscal 1997. Although 
Solectron seeks to diversify its customer base, a small number of 
customers currently are responsible for a significant portion of 
Solectron's net sales. During fiscal 1998, 1997 and 1996, Solectron's 
ten largest customers accounted for 68.7%, 65.5% and 64.0% of 
consolidated net sales, respectively. Several customers each accounted 
for more than 10% of net sales during these years. Hewlett-Packard 
Company represented 13.9%, 13.5% and 10.7% of net sales in fiscal 1998, 
1997 and 1996, respectively. Cisco Systems, Inc. and Sun Microsystems, 
Inc. accounted for 10.7% and 10.5%, respectively, of consolidated net 
sales in fiscal 1998. Nortel Networks, Inc., formerly Bay Networks, 
Inc., accounted for 10.4% of net sales in fiscal 1997. No other 
individual customer accounted for more than 10% of Solectron's net sales 
in any of these years.

Backlog

Backlog consists of contracts or purchase orders with delivery dates 
scheduled within the next twelve months. At August 31, 1998, Solectron's 
backlog was approximately $1.3 billion. The backlog was approximately 
$875 million at August 31, 1997. Because customers may cancel or 
reschedule deliveries, backlog is not a meaningful indicator of future 
financial results.

Competition

The electronic manufacturing services industry is comprised of a large 
number of companies, several of which have achieved substantial market 
share. Solectron also faces competition from current and prospective 
customers that evaluate Solectron's capabilities against the merits of 
manufacturing products internally. Solectron competes with different 
companies depending on the type of service or geographic area. Certain 
of Solectron's competitors may have greater manufacturing, financial, 
research and development and marketing resources than Solectron. 
Solectron believes that the primary basis of competition in its targeted 

                                     11
<PAGE>
markets is manufacturing technology, quality, responsiveness, the 
provision of value-added services and price. To remain competitive, 
Solectron must continue to provide technologically advanced 
manufacturing services, maintain quality levels, offer flexible delivery 
schedules, deliver finished products on a reliable basis and compete 
favorably on the basis of price. Solectron currently may be at a 
competitive disadvantage as to price when compared to manufacturers with 
lower cost structures, particularly with respect to manufacturers with 
established facilities where labor costs are lower.

Associates

As of August 31, 1998, Solectron employed 24,857 associates worldwide, 
including 4,857 temporary associates. Solectron's international 
operations employed 11,888 associates.

Patents and Trademarks

Solectron has obtained a limited number of U.S. patents related to the 
process and equipment used in its surface mount technology. The 
Company's subsidiary, Force Computers, holds a number of patents related 
to VME technology. In addition, as part of its recent acquisition of the 
IBM-ECAT manufacturing assets, the Company has access to a number of IBM 
patents. The Company also has registered trademarks in the United States 
and many countries throughout the world. These patents and trademarks 
are considered valuable to Solectron.

Although Solectron does not believe that its trademarks, manufacturing 
process, Force's technology or the IBM patents to which it has access 
infringe on the intellectual property rights of third parties, there can 
be no assurance that third parties will not assert infringement claims 
against Solectron in the future. If such an assertion were to be made, 
it may become necessary or useful for Solectron to enter into licensing 
arrangements or to resolve such an issue through litigation. However, 
there can be no assurance that such license rights would be available to 
Solectron on commercially acceptable terms or that any such litigation 
could be resolved favorably. Additionally, such litigation could be 
lengthy and costly and could have an adverse material effect on 
Solectron's financial condition regardless of the outcome of such 
litigation.

                                     12

<PAGE>
ITEM 2:   PROPERTIES

The Company's manufacturing facilities are located throughout North 
America, Europe and Asia. The table below lists the locations and square 
feet owned or leased for the Company's major operations.
<TABLE>
<CAPTION>
                                   Square Feet           Lease
                             ----------------------   Termination
     Location                  Owned       Leased        Dates  
--------------------         ----------  ----------   -----------
<S>                          <C>         <C>          <C>
Americas:
  Milpitas, California (1)         --     1,385,000   1998 - 2005
  San Jose, California             --        95,000   1999 - 2001
  Duluth, Georgia                  --       146,000   1999
  Westborough, Massachusetts       --       100,000   2002
  Charlotte, North Carolina     620,000      75,000   2001
  Columbia, South Carolina         --       208,000   2000
  Austin, Texas                    --       783,000   2002
  Everett, Washington              --       254,000   2003
  Guadalajara, Mexico  (2)      500,000         --    
  Sao Paulo, Brazil (3)            --       124,000   1999

Europe:
  Bordeaux, France              319,000        --
  Herrenberg, Germany           181,000        --
  Munich, Germany                  --       210,000   1999 - 2001
  Dublin, Ireland                41,000      71,000   1999
  Timisoara, Romania (3)           --        18,000   1999
  Dunfermline, Scotland         212,000        --
  Norkopping, Sweden               --        32,000   2002

Asia:
  Suzhou, China                 340,000        --
  Johor, Malaysia                  --       173,000   2001
  Penang, Malaysia              190,000     179,000   2002
</TABLE>
(1) Includes facilities located nearby in Fremont and Newark, 
California. 

(2) Includes approximately 37,000 square feet leased to a third party on 
    a short-term lease.

(3) Facilities owned by the Company are currently under construction at 
    these locations. 

Around the world, the Company is subject to a variety of environmental 
regulations relating to the use, storage, discharge and disposal of 
hazardous chemicals used during its manufacturing process.  Any failure 
by the Company to comply with present and future regulations could 
subject it to future liabilities or the suspension of production.  In 
addition, such regulations could restrict the Company's ability to 
expand its facilities or could require the Company to acquire costly 
equipment or to incur other significant expenses to comply with 
environmental regulations.
 
                                     13

<PAGE>
ITEM 3:   LEGAL PROCEEDINGS

Not applicable.


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

No matters were submitted to a vote of security holders during the 
fourth quarter of the fiscal year covered by this report.










































                                     14

<PAGE>
                               PART II

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

Common Stock Information
The following table sets forth the quarterly high and low per share 
sales prices of Solectron's Common Stock for the two-year period ended 
August 31, 1998, as quoted on the New York Stock Exchange under the 
symbol SLR. 
<TABLE>
<CAPTION>
                                                 High         Low
                                               --------     --------
<S>                                            <C>          <C>
Fiscal 1997
      First Quarter                            29 15/16     17 1/8
      Second Quarter                           30 11/16     25 3/4
      Third Quarter                            32 1/2       23 9/16
      Fourth Quarter                           45 9/16      29 9/16

Fiscal 1998
      First Quarter                            47 7/16      33 15/16
      Second Quarter                           49 5/8       28 7/8
      Third Quarter                            48 9/16      36 7/16
      Fourth Quarter                           53 1/8       35 7/16
</TABLE>

Solectron has not paid any dividends since its inception and does not 
intend to pay any dividends in the foreseeable future. Additionally, the 
covenants to the Company's financing agreements prohibit the payment of 
cash dividends. As of August 31, 1998, there were approximately 1,011 
stockholders of record based on data obtained from the Company's 
transfer agent.






















                                     15

<PAGE>
ITEM 6:   SELECTED FINANCIAL DATA

The following selected historical financial information of Solectron has 
been derived from the historical consolidated financial statements and 
should be read in conjunction with the consolidated financial statements 
and the notes included therein. 

                    Five Year Selected Financial Highlights
                     (in thousands, except per share data)

Consolidated Statements of Income Data:
<TABLE>
<CAPTION>
                                      Years Ended August 31,
                         -----------------------------------------------------
                            1998       1997       1996       1995       1994
                         ---------- ---------- ---------- ---------- ---------
<S>                      <C>        <C>        <C>        <C>        <C>
Net sales                $5,288,294 $3,694,385 $2,817,191 $2,065,559 $1,456,779 
Operating income            298,989    236,422    175,425    123,434     88,350
Income before 
  income taxes              298,983    238,407    173,077    120,494     84,159  
Net income                  198,824    158,059    114,232     79,526     55,545
Basic net income
 per share (1)                $1.72      $1.42      $1.12      $0.93      $0.68
Diluted net income 
 per share (1)                $1.65      $1.37      $1.08      $0.82      $0.59
</TABLE>

Consolidated Balance Sheet Data:
<TABLE>
<CAPTION>
                                            As of August 31,
                         ------------------------------------------------------
                           1998       1997        1996       1995       1994
                         ---------- ---------- ---------- ---------- ----------
<S>                      <C>        <C>        <C>        <C>        <C>
Working capital          $1,046,724 $  931,690 $  786,355 $  355,603 $  309,203
Total assets              2,410,568  1,876,419  1,452,198    940,855    766,395
Long-term debt              385,519    385,850    386,927     30,043    140,709
Stockholders' equity      1,181,326    919,069    700,569    538,141    330,789
</TABLE>
(1) All net income per share amounts have been restated to conform to the 
requirements of Statement of Financial Accounting Standards No. 128, "Earnings 
per Share."




















                                      16


<PAGE>
ITEM 7:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
          AND RESULTS OF OPERATIONS

Certain statements contained in the following Management's Discussion 
and Analysis of Financial Condition and Results of Operations, 
including, without limitation, statements containing the words 
"believes," "anticipates," "estimates," "expects," and words of similar 
import, constitute forward-looking statements which involve risks and 
uncertainties. Solectron's actual results could differ materially from 
those anticipated in these forward looking statements as a result of 
certain factors, including those factors set forth under "Trends and 
Uncertainties" below.

General

Solectron's net sales are derived from sales to electronics systems 
original equipment manufacturers (OEMs). The majority of Solectron's 
customers compete in the networking, data and voice communications, 
workstation, personal computer and computer peripheral segments of the 
electronics industry. The Company provides integrated solutions that 
span the entire product life cycle - from pre-production planning and 
design, to manufacturing, distribution and end-of-life product service 
and support. Solectron offers its customers competitive outsourcing 
advantages such as access to advanced manufacturing technologies, 
shortened time-to-market, reduced cost of production and more effective 
asset utilization. A discussion of some of the potential fluctuations in 
operating results is included under "Trends and Uncertainties".

The Company has manufacturing operations in locations throughout the 
world, including North America, Europe, Asia/Pacific and Latin America. 
Solectron also has its Asia/Pacific headquarters office in Taipei, 
Taiwan and program offices located in Japan and Israel. The Company's 
subsidiaries, Force Computers and Fine Pitch Technologies, are both 
headquartered in San Jose, California. Force's European headquarters and 
a significant portion of its operations are located in Munich, Germany. 
In addition to its headquarters' locations, Force has sales support 
offices in various locations in the United States and internationally.

During 1997, the Company established a strategic, global manufacturing 
partnership with Ericsson Telecom AB's Business Area Infocom Systems 
(Ericsson). The Company established a New Product Introduction center in 
Sweden, and production from certain Ericsson plants worldwide was 
transferred to Solectron manufacturing sites around the world. In 
October 1997, Solectron acquired certain assets, primarily equipment and 
inventory, of Ericsson's printed circuit board assembly operation 
located in Sao Paulo, Brazil. In addition, Solectron's subsidiary, 
Solectron Brasil Ltda., hired approximately 370 associates formerly 
employed by Ericsson Telecomunicacoes S.A. in Brazil.

In April 1998, the Company acquired NCR Corporation's (NCR) 
manufacturing assets in three cities for a purchase price of 
approximately $79.5 million, subject to adjustment. The acquisition was 
accounted for as a purchase of assets and the purchase price was 
allocated to the assets acquired based on the relative fair values of 
the assets at the date of acquisition. Under the terms of the agreement, 
NCR will outsource the manufacturing of certain computer components to 
Solectron for at least five years and Solectron hired approximately 
1,200 NCR manufacturing and related support associates.

                                     17 
<PAGE>
In June 1998, the Company acquired International Business Machines 
Corporation's (IBM) Electronic Card Assembly and Test (ECAT) 
manufacturing assets in Charlotte, North Carolina and non-exclusive 
rights to certain IBM intellectual property for a purchase price of 
approximately $95.4 million, subject to adjustment. The acquisition was 
accounted for as a purchase of assets and the purchase price was 
allocated to the assets acquired, including the intellectual property 
rights, based on their relative fair values at the date of acquisition. 
Under the terms of the agreement, Solectron hired approximately 700 IBM 
manufacturing and related support associates and the Company will 
provide printed circuit board assembly services to IBM in North America 
for the next three years. In addition, IBM has made available to 
Solectron 115 patents and 51 disclosures (collectively the intellectual 
property rights) covering a wide spectrum of technologies and 
capabilities. IBM will also provide to Solectron failure analysis and 
characterization tools for process development and manufacturing, 
including fault detection and isolation.

In October 1998, the Company acquired the wireless telephone 
manufacturing assets of Mitsubishi Consumer Electronics America, Inc.'s 
(MCEA) Cellular Mobile Telephone (CMT) division in Braselton, Georgia. 
MCEA is a subsidiary of Mitsubishi Electric Corporation (Mitsubishi). 
The acquisition is expected to be accounted for as a purchase of assets 
and the purchase price will be allocated to the assets acquired based on 
the relative fair values of the assets at the date of acquisition. Under 
the terms of the agreement, the Company will provide MCEA-CMT with a 
full range of manufacturing services for five years, including New 
Product Introduction management, printed circuit board assembly and full 
systems assembly for MCEA's branded and private-label cellular products 
sold within North America. In addition, Solectron has hired 
approximately 400 MCEA-CMT manufacturing and support associates. 

Also in October 1998, the Company announced that it had signed a 
definitive agreement with Ingram Micro Inc. under which the two 
companies will enter into a strategic alliance to provide global build-
to-order and configure-to-order assembly services for personal 
computers, servers and related products in the United States, Canada, 
Europe, Asia and Latin America. The alliance will be managed by both 
companies under a joint management matrix that will include a sales and 
marketing staff, program management, information technology resources 
and test and process engineers and will, in most part, utilize existing 
facilities, systems and personnel. The companies expect that shipments 
to customers will begin in early calendar 1999.

Results of Operations

The electronics industry is subject to rapid technological change, 
product obsolescence and price competition. These and other factors 
affecting the electronics industry, or any of Solectron's major 
customers in particular, could have an adverse material effect on 
Solectron's results of operations. See "Trends and Uncertainties -- 
Potential Fluctuations in Operating Results" and "-- Competition" for 
further discussion of potential fluctuations in operating results.

The following table sets forth, for the periods indicated, certain items 
in the Consolidated Statements of Income as a percentage of net sales. 
The financial information and the discussion below should be read in 
conjunction with the Consolidated Financial Statements and Notes 
thereto.
                                     18
<PAGE>
<TABLE>
<CAPTION>
                                               Years Ended August 31,
                                         -----------------------------
                                          1998        1997        1996
                                         -----       -----       -----
<S>                                      <C>         <C>         <C>
Net sales                                100.0%      100.0%      100.0%
Cost of sales                             89.8        88.4        90.0
                                         -----       -----       -----
   Gross profit                           10.2        11.6        10.0
Operating expenses:
  Selling, general and administrative      4.1         4.7         3.6
  Research and development                 0.4         0.4         0.2
  Acquisition costs                         --         0.1          --
                                         -----       -----       -----
   Operating income                        5.7         6.4         6.2
Net interest income (expense)              0.0         0.1        (0.1)
                                         -----       -----       -----
   Income before income taxes              5.7         6.5         6.1
Income taxes                               1.9         2.2         2.1
                                         -----       -----       -----
Net income                                 3.8%        4.3%        4.0%
                                         =====       =====       =====
</TABLE>

Net Sales

The Company's net sales have increased significantly in each of the past 
several years, reflecting the growing trend toward outsourcing within 
the electronics industry. For the year ended August 31, 1998, net sales 
grew to $5.3 billion, an increase of 43.1% over fiscal 1997 net sales. 
Fiscal 1997 net sales of $3.7 billion were 31.1% greater than net sales 
in fiscal 1996. The sales growth in fiscal 1998 was attributable to 
significant increases in sales volume from both existing and new 
customers worldwide, including the completion of the transfer of 
production from certain Ericsson plants to various Solectron locations 
around the world. The new locations in Mexico, Brazil and Sweden and the 
ramp up of the Massachusetts location to full production also 
contributed to the increase in net sales. In addition, the acquisition 
of the three NCR sites and the IBM-ECAT manufacturing assets contributed 
four months and three months of sales, respectively, totaling $367 
million to the 1998 period. The fiscal 1997 sales growth was due to 
significant increases in sales volume from both existing and new 
customers in North America, higher international sales, the acquisition 
of Force Computers in November 1996 and a full twelve months of sales 
from the Custom Manufacturing Services (CMS) business, located in 
Austin, Texas, which was acquired from Texas Instruments in March 1996. 

Within the Americas, the sites that benefited most from start-up and 
major new programs had substantial increases in net sales in fiscal 1998 
over fiscal 1997. Sales growth at the Texas and Massachusetts sites was 
particularly strong as a result of these factors. In addition, the new 
sites in Mexico and Brazil, as well as the newly-acquired sites from NCR 
and IBM, contributed incremental net sales to fiscal 1998. The growth in 
fiscal 1997 sales over fiscal 1996 reflected increases in sales at all 
locations to existing and new customers. The overall increase in sales 
in fiscal 1997 over fiscal 1996 was partially offset by the effect of 
several ongoing programs reaching end of life and management actions to 
improve global load balancing and transitioning specific product 
programs. 

Sales in all of the Company's European and Asian manufacturing locations 
increased in fiscal 1998 over fiscal 1997 primarily as a result of core 
business growth and new accounts. Sales growth in the Company's location 

                                     19
<PAGE>
in Scotland was particularly strong due to the ramp up of major 
customers' printed circuit board assembly activities in that location. 
Fiscal 1997 sales in most of the Company's European and Asian operations 
increased over fiscal 1996 sales as a result of the global load 
balancing efforts noted above, as well as higher sales to existing and 
new customers. These increases were partially offset by declines in 
sales during fiscal 1997 at the facility in France and some Asian 
locations related to older programs as these programs reached end of 
life. Although the Company does not currently anticipate any future 
decline in sales, to lessen the potential impact of any possible future 
declines to customers within any particular region or market segment, 
the Company is committed to seeking diversification of its customer base 
among many countries, market segments and product lines within market 
segments.

Several major customers accounted for more than 10% of the Company's net 
sales in fiscal 1998, 1997 and 1996. The following table lists these 
customers and the percentage of net sales attributed to them.
<TABLE>
<CAPTION>
                                             Years Ended August 31, 
                                       ---------------------------------
                                         1998         1997        1996
                                       --------     --------    --------
<S>                                    <C>          <C>         <C>
Hewlett-Packard Company (HP)             13.9%        13.5%       10.7%
Cisco Systems, Inc. (Cisco)              10.7%          *           *
Sun Microsystems, Inc. (Sun)             10.5%          *           *
Nortel Networks, Inc. (formerly 
  Bay Networks, Inc.)                      *          10.4%         *
-------------
* Less than 10%
</TABLE>
No other customers accounted for more than 10% of net sales during any 
of the years presented.

Solectron's top ten customers accounted for 68.7%, 65.5% and 64.0% of 
consolidated net sales in fiscal 1998, 1997 and 1996, respectively. 
Solectron is still dependent upon continued revenues from HP, Cisco, Sun 
and its other top ten customers and there can be no guarantee that these 
or any other customers will not increase or decrease as a percentage of 
consolidated net sales either individually or as a group. Consequently, 
any material decrease in sales to these or other customers could have an 
adverse material effect on Solectron's results of operations.

Net sales at Solectron's international sites, as a percentage of 
consolidated net sales, have varied over the last three fiscal years. 
International locations contributed 33.8% of consolidated net sales in 
fiscal 1998, compared to 26.8% and 30.9% in fiscal 1997 and 1996, 
respectively. In addition to the sales growth factors for Europe and 
Asia noted above, the Company's fiscal 1998 international sales also 
benefited from the addition in fiscal 1998 of new sites in Mexico and 
Brazil and the acquisition of the site in Ireland from NCR in April 
1998. In fiscal 1997, international sales decreased as a percentage of 
consolidated sales due to strong growth in domestic sales, aided by the 
acquisition of the CMS business in Austin, Texas, which is substantially 
comprised of domestic sales, as well as the end-of-life issues described 
above.

As a result of Solectron's international sales and facilities, 
Solectron's operations are subject to risks of doing business abroad. 
While to date these dynamics have not had an adverse material effect on 

                                     20
<PAGE>
Solectron's results of operations, there can be no assurance that there 
will not be such an impact in the future. See "Trends and Uncertainties 
-- International Operations," "-- Foreign Exchange Rate Sensitivity" and 
"-- Euro Conversion Issues" for further discussion of potential 
fluctuations in operating results associated with the risks of doing 
business abroad.

Solectron's operations in Milpitas, California contributed a substantial 
portion of Solectron's net sales and operating income during fiscal 
1998, 1997 and 1996. In recent quarters, management has undertaken 
deliberate actions to achieve improved global load balancing by 
transferring certain projects from the Milpitas site to other sites 
worldwide. However, the performance of the Milpitas operation is 
expected to continue to be a significant factor in the overall financial 
performance of Solectron. Any adverse material change to the customer 
base, product mix, efficiency or other attributes of this site could 
have an adverse material effect on Solectron's consolidated results of 
operations.

Solectron believes that its ability to continue achieving growth will 
depend upon growth in sales to existing customers for their current and 
future product generations, successful marketing to new customers and 
future geographic expansion. Customer contracts can be canceled and 
volume levels can be changed or delayed. The timely replacement of 
delayed, canceled or reduced orders with new business cannot be assured. 
In addition, there can be no assurance that any of Solectron's current 
customers will continue to utilize Solectron's services. Because of 
these factors, there can be no assurance that Solectron's historical 
revenue growth rate will continue. See "Trends and Uncertainties" for a 
discussion of certain factors affecting the management of growth, 
geographic expansion and potential fluctuations in sales and results of 
operations.

Gross Profit

The gross margin percentage was 10.2%, 11.6% and 10.0% for fiscal 1998, 
1997 and 1996, respectively. The decrease in fiscal 1998 from fiscal 
1997 was due primarily to a shift toward higher volume projects and 
systems build projects that typically have lower margins, as well as 
start-up costs associated with the Company's operations in China and 
Mexico. In addition, gross margins of the newly acquired NCR operations 
are lower than the overall average margins of the rest of the Company 
primarily due to the fact that the majority of its net sales are derived 
from systems integration activities, which normally generate lower gross 
margins than printed circuit board assembly, as well as current 
underutilization of these facilities. The improvement in fiscal 1997 
over fiscal 1996 was primarily due to the inclusion of Force since its 
acquisition in November 1996. Gross profit margins on Force's products 
are significantly higher than those of the rest of the Company.  Without 
Force's contribution, gross margins for fiscal 1997 would have been 
10.4%. In addition to the impact of Force, the improved gross margin 
percentage in fiscal 1997 reflects a shift in product mix toward the 
higher margin market segments, projects with a higher than normal 
consignment content and increased manufacturing efficiencies at the 
Dunfermline, Scotland and Austin, Texas sites.

For the foreseeable future, Solectron's gross margin is expected to 
depend primarily on product mix, production efficiencies, utilization of 
manufacturing capacity, start-up and integration costs of new and 
acquired businesses, the percentage of sales derived from systems build 
projects, pricing within the electronics industry and the cost structure 

                                     21
<PAGE>
at individual sites. Over time, gross margins at the individual sites 
and for the Company as a whole may continue to fluctuate. The Company 
anticipates that a larger percentage of its sales may be derived from 
systems build projects in future periods. Systems build projects 
typically have lower gross margin percentages than printed circuit board 
assembly projects. Increases in systems build business, additional costs 
associated with new projects and price erosion within the electronics 
industry could adversely affect the Company's gross margin.  
Additionally, changes in product mix could cause the Company's gross 
margin to fluctuate. Also, while the availability of raw materials 
appears adequate to meet the Company's current revenue projections for 
the foreseeable future, component availability is still subject to lead 
time and other constraints that could possibly limit the Company's 
revenue growth. Because of these factors and others discussed under 
"Trends and Uncertainties" below, there can be no assurance that the 
Company's gross margin will not fluctuate or decrease in future periods.

Selling, General and Administrative Expenses

In absolute dollars, selling, general and administrative (SG&A) expenses 
increased 26.3% in fiscal 1998 over fiscal 1997 and 72.4% in fiscal 1997 
over fiscal 1996. The fiscal 1998 increase and a portion of the fiscal 
1997 increase was due to investment in infrastructure such as personnel 
and related departmental expenses at all manufacturing locations as well 
as continuing investment in information systems to support the increased 
size and complexity of the Company's business. The inclusion of Force 
since its acquisition in November 1996 and the Austin, Texas site for 
the full year of fiscal 1997 accounted for approximately half of the 
fiscal 1997 increase. The addition in fiscal 1998 and 1997 of new sites 
in China, Massachusetts, Mexico, Brazil and Sweden and the NCR and IBM 
sites also contributed to the growth in SG&A expenses.  As a percentage 
of net sales, SG&A expenses were 4.1%, 4.7% and 3.6% in fiscal 1998, 
1997 and 1996, respectively. The Company anticipates SG&A expenses will 
continue to increase in terms of absolute dollars in the future, and may 
possibly increase as a percentage of net sales, as the Company continues 
to build the infrastructure necessary to support its current and 
prospective business.

Research and Development Expenses

With the exception of its Force Computers operation, the Company's 
research and development (R&D) activities have been focused primarily on 
the development of prototype and engineering design capabilities, fine 
pitch interconnecting technologies (which include ball-grid array, tape-
automated bonding, multichip modules, chip-on-flex, chip-on-board and 
flip chip), high reliability environmental stress test technology and 
the implementation of environmentally friendly assembly processes, such 
as VOC-free and no-clean.  Force's R&D efforts are concentrated on new 
product development and improvement of product designs through 
improvements in functionality and the use of microprocessors in embedded 
applications.  Research and development expenses, in absolute dollars 
and as a percentage of net sales, respectively, were $20.9 million and 
0.4% in fiscal 1998, $15.0 million and 0.4% in fiscal 1997 and $6.7 
million and 0.2% in fiscal 1996. The increase in R&D expenses in fiscal 
1998 compared to fiscal 1997 was due to increased R&D efforts at Force. 
The fiscal 1997 increase over fiscal 1996 was a result of the 
acquisition of Force in November 1996. The Company expects that R&D 
expenses will increase in absolute dollars in the future and may 
increase as a percentage of net sales as Force and the newly acquired 
NCR and IBM sites continue to invest in their R&D efforts. In addition, 
certain new R&D projects will be undertaken at some of the Company's 

                                     22
<PAGE>
Asian sites, particularly at the Malaysia sites in connection with the 
tax holiday. (See "Income Taxes.")

Acquisition Costs

A one-time charge for acquisition costs of approximately $4.0 million 
was incurred in fiscal 1997 as a result of the acquisition of Force 
Computers in November 1996.  

Net Interest Income (Expense)

Net interest income was zero in fiscal 1998 and $2.0 million in fiscal 
1997 compared to net interest expense of $2.3 million in fiscal 1996. 
The Company issued convertible subordinated notes in February 1996 and 
senior notes in March 1996. Interest expense on the debt is 
approximately $24.9 million annually and in fiscal 1998 and 1997 was 
offset by interest earned on undeployed cash and investments. In fiscal 
1998, the Company capitalized approximately $1.7 million of interest 
expense related to construction of its new facilities in China and 
Mexico. The Company used a portion of its cash and short-term 
investments to fund its acquisitions from NCR and IBM. Solectron expects 
to utilize more of the undeployed cash during future periods in order to 
fund anticipated future growth. See "Trends and Uncertainties -- 
Management of Growth" and "Potential Fluctuations in Operating Results."

Income Taxes

Income taxes increased to $100.2 million in 1998 from $80.3 million in 
fiscal 1997 and $58.8 million in fiscal 1996, primarily due to increased 
income before income taxes. Solectron's effective income tax rate 
decreased slightly to 33.5% in fiscal 1998 from 33.7% in fiscal 1997 and 
34.0% in fiscal 1996. 

In general, the effective income tax rate is largely a function of the 
balance between income from domestic and international operations. 
Solectron's international operations, taken as a whole, have been taxed 
at a lower rate than in the United States, primarily due to the tax 
holiday granted to the Company's Malaysia sites. The Malaysian tax 
holiday is effective through January 31, 2002, subject to certain 
conditions, including certain levels of research and development 
expenditures. The Company has also been granted various tax holidays in 
China, which are effective for various terms and are subject to certain 
conditions.

Liquidity and Capital Resources

Working capital was $1.0 billion at August 31, 1998 compared to $932 
million at the end of fiscal 1997. A major component of working capital 
at August 31, 1998 continued to be undeployed cash from the proceeds of 
the two debt offerings during fiscal 1996. In the third and fourth 
quarters of fiscal 1998, the Company used approximately $175 million of 
its cash and short-term investments to fund its acquisitions of the NCR 
and IBM-ECAT manufacturing assets. In the first quarter of fiscal 1999, 
the Company used additional funds for its acquisition of the wireless 
telephone manufacturing assets of MCEA's CMT division. As Solectron 
continues to grow, it is expected that the Company will require greater 
amounts of working capital to support its operations. The Company 
believes that its current level of working capital, together with cash 
generated from operations and the Company's available credit facilities, 
will provide adequate working capital for the foreseeable future. 
However, the Company may need to raise additional funds to finance more 

                                     23 
<PAGE>
rapid expansion, including establishing new locations or financing 
additional acquisitions. There can be no assurance that such funds, if 
needed, will be available on terms acceptable to the Company or at all.

Inventory levels fluctuate directly with the volume of the Company's 
manufacturing.  Changes or significant fluctuations in product market 
demands can cause fluctuations in inventory levels that may result in 
changes in levels of inventory turns and liquidity.  Historically, the 
Company has been able to manage its inventory levels with regard to 
these fluctuations.  However, should material fluctuations occur in 
product demand, the Company could experience slower turns and reduced 
liquidity. The increase in inventory levels at year end 1998 from year 
end 1997 is substantially a result of overall growth and the greater 
number of manufacturing locations at August 31, 1998 compared to August 
31, 1997, as each location must maintain a level of inventory adequate 
to allow the location to respond to customer manufacturing requirements.

Cash provided by operating activities was $150 million, $202 million and 
$102 million in fiscal 1998, 1997 and 1996, respectively. The decrease 
in fiscal 1998 from fiscal 1997 was primarily due to increased levels of 
accounts receivable and inventory partially offset by increases in net 
income, depreciation and amortization and current liabilities. The 
increase in fiscal 1997 from fiscal 1996 reflects increased net income, 
depreciation and amortization and current liabilities balances, 
partially offset by increases in accounts receivable and inventory 
balances.

During fiscal 1998, the Company invested approximately $244 million in 
capital expenditures. A large portion of these expenditures related to 
the purchase of new equipment, primarily surface mount assembly and test 
equipment, to meet current and expected production levels, as well as to 
replace or upgrade older equipment that was retired or sold. Significant 
expenditures were also made for the acquisition of land and buildings 
for the Company's new manufacturing sites, principally in China, Mexico 
and Brazil. The Company expects capital expenditures in fiscal 1999 to 
be in the range of $225 million to $275 million. During fiscal 1998, the 
Company entered into an arrangement with a third-party leasing company 
under which certain of the Company's fixed assets have been sold to the 
leasing company and leased back. The Company is accounting for these 
transactions as operating leases.

In addition to working capital as of August 31, 1998, which included 
cash and cash equivalents of $225 million and short-term investments of 
$84 million, the Company has available a $100 million unsecured 
multicurrency revolving credit facility that expires in April 2002 and a 
$120 million asset securitization arrangement that expires in August 
1999. Both of these facilities are subject to financial covenants. The 
Company also has approximately $92 million in available foreign credit 
facilities.

                                     24

<PAGE>
"Year 2000" Issues

The Company is aware of and is addressing the issues associated with the 
programming code in existing computer systems as the year 2000 
approaches. The Year 2000 problem is pervasive and complex, as many 
computer systems, manufacturing equipment and industrial control systems 
will be affected in some way by the rollover of the two-digit year value 
to 00. Systems that do not properly recognize such dates could generate 
erroneous information or cause a system to fail. The Year 2000 issue 
creates risk for the Company from unforeseen problems in its own systems 
and from third parties with whom the Company deals on business 
transactions worldwide. Failures of the Company's and/or third parties' 
computer systems, manufacturing equipment and industrial control systems 
would have an adverse material impact on the Company's ability to 
conduct its business. 

The Company has formed a worldwide task force and has implemented a 
comprehensive program to analyze the Company's internal systems as well 
as all external systems (such as vendor, customer, banking systems, 
etc.) upon which the Company is dependent, to identify and evaluate any 
potential Year 2000 issues. This task force meets regularly and tracks 
progress against the program, modifying it as needed to help ensure 
timely completion. The Company is committed to achieving Year 2000 
compliance; however, because a significant portion of the problem is 
external to the Company and therefore outside of its direct control, 
there can be no assurances that the Company will be fully or even 
significantly Year 2000 compliant at the critical juncture. In addition, 
as full testing of Year 2000 functionality must occur in a simulated 
environment, the Company will not be able to test full system Year 2000 
interfaces and capabilities prior to the Year 2000.  

As of the end of fiscal 1998, the Company had completed an inventory of 
internal systems, hardware, software, manufacturing equipment and 
embedded chips in industrial control instruments. Each of these items 
was identified as mission critical, mission essential, mission impaired 
or mission non-critical. The Company is in the process of prioritizing 
and evaluating mission critical and mission essential items, identifying 
fixes and resources as appropriate, and performing and testing 
corrective measures. While the Company believes that its evaluation has 
been comprehensive, there can be no assurance that all systems critical 
to Year 2000 compliance have been identified, or that the corrective 
actions identified will be completed on time. 

As of the end of fiscal 1998, the Company had inventoried every key 
supplier of goods and services to the Company, and considered the 
potential impact on the Company and its customers of Year 2000 
compliance by these suppliers. The Company also mailed surveys to many 
of these key suppliers, and is in the process of evaluating responses 
and sending follow-up letters. The Company plans to disqualify 
potentially non-compliant sources, look for alternative sources and re-
qualify new suppliers to help mediate potential business disruptions. 
The Company is also involved with various geographic Year 2000 
consortiums worldwide, with the intent to leverage contacts and 
information for commonly used suppliers and services such as utility 
companies. In addition, the Company is in the process of reviewing EDI 
linkages and data transmission for its customers and suppliers. While 
the Company believes that it will be able to qualify alternative 
suppliers as needed, until all supplier and customer survey responses 
have been received and evaluated, the Company can not fully evaluate the 
extent of potential problems and the costs associated with corrective 
actions.

                                     25    
<PAGE>
The Company estimates the cost to complete its current compliance 
program to be in the range of $28 million to $42 million. Of this 
amount, approximately $7 million is associated with the replacement of 
capital equipment, of which approximately half is being purchased to 
replace non-compliant systems that would not otherwise have been 
replaced at this time. The variability in these estimates depends 
largely on the response from the Company's suppliers and the extent to 
which supplier re-qualification is needed. Cost estimates will also be 
re-evaluated as the status of the overall compliance program is updated. 
There can be no assurance that actual costs will not be materially 
higher than currently anticipated. A significant portion of these costs 
is not likely to be incremental costs to the Company, but rather will 
represent the redeployment of existing information technology resources. 
Certain other information technology projects have been delayed due to 
the focus on Year 2000 issues. The potential costs of the redeployment 
of personnel and delays in implementing other projects is not known but 
could be substantial.

Although the Company has identified general contingency plans, such as 
the replacement and re-qualification of suppliers, the stockpiling of 
supplies and purchase of generators, a formal contingency plan will not 
be established until at least the third quarter of fiscal 1999 when the 
evaluation of suppliers is expected to be completed. The Company is 
unable to determine what effect the failure of systems because of Year 
2000 issues by the Company or its suppliers or customers will have, but 
any significant failures could have an adverse material effect on the 
Company's results of operations and financial condition.

Trends and Uncertainties

Customer Concentration; Dependence on the Electronics Industry

In fiscal 1998, 1997 and 1996, the Company's ten largest customers 
accounted for as much as 68.7% of consolidated net sales.  The Company 
is dependent upon continued revenues from its top ten customers.  Any 
material delay, cancellation or reduction of orders from these or other 
significant customers could have an adverse material effect on the 
Company's results of operations. During fiscal 1998, HP, Cisco and Sun 
accounted for 13.9%, 10.7% and 10.5%, respectively, of net sales, 
compared to 13.5% for HP and less than 10% for each of Cisco and Sun 
during fiscal 1997.  There can be no assurance that the Company will 
continue to do business with HP, Cisco, Sun or any other customer.

The percentage of the Company's sales to its major customers may 
fluctuate from period to period. Significant reductions in sales to any 
of these customers would have an adverse material effect on the 
Company's results of operations. The Company has long-term contracts 
(generally for terms of three to five years) with Ericsson, NCR, IBM and 
Mitsubishi under which these customers have committed to source 
production of certain products and components from the Company. However, 
these commitments to source production do not include firm volume 
purchase commitments. In addition, the Company has no firm long-term 
volume purchase commitments from its other customers, and over the past 
few years has experienced reduced lead times in customer orders.  Also, 
customer contracts can be canceled and volume levels can be changed or 
delayed.  The timely replacement of canceled, delayed or reduced 
contracts with new business cannot be assured.  These risks are 
increased because a majority of the Company's sales are to customers in 
the electronics industry, which is subject to rapid technological change 
and product obsolescence.  The factors affecting the electronics 

                                     26
<PAGE>
industry in general, or any of the Company's major customers in 
particular, could have an adverse material effect on the Company's 
results of operations.

There can be no assurance that sales to customers within any particular 
market segment will not experience decreases that could have an adverse 
effect on the Company's sales.

Management of Growth; Geographic Expansion

The Company has experienced substantial growth over the last five fiscal 
years, with net sales increasing from $1.5 billion in fiscal 1994 to 
$5.3 billion in fiscal year 1998.  In recent years, the Company has 
acquired or established facilities in many locations. In the first 
quarter of fiscal 1998, the Company announced the opening of its 
Asia/Pacific headquarters office in Taipei, Taiwan, began operations in 
Guadalajara, Mexico, and as further discussed in "Partnership with 
Ericsson and Related Transactions," established a manufacturing facility 
near Sao Paulo, Brazil and opened a New Product Introduction center in 
Sweden. In April 1998, the Company announced plans to open a 
manufacturing facility in Timisoara, Romania, and in May 1998, announced 
the establishment of a program office in Israel. In addition, in April, 
June and October 1998, the Company completed its acquisitions of certain 
manufacturing facilities and associates from NCR, IBM and Mitsubishi, 
respectively. (See "Acquisition of NCR, IBM and Mitsubishi Assets.") In 
October 1998, the Company signed a definitive agreement with Ingram 
Micro, Inc. under which the two companies will enter into a strategic 
alliance. (See "Alliance with Ingram Micro.") During fiscal 1997, the 
Company announced the establishment of new manufacturing facilities in 
Suzhou, China; began operations at its manufacturing facility near 
Boston, Massachusetts; and in November 1996, acquired Force Computers 
Inc., which has operations in California and Germany. The Company 
continually evaluates growth and acquisition opportunities and may 
pursue additional opportunities over time.  There can be no assurance 
that the Company's historical revenue growth will continue or that the 
Company will successfully manage the facilities in China, Mexico, Brazil 
and Romania, the partnership with and acquisitions from Ericsson, the 
acquisitions from NCR, IBM and Mitsubishi, the alliance with Ingram 
Micro or any other businesses or assets it may acquire in the future.  
As the Company manages its existing operations and expands 
geographically, it may experience certain inefficiencies as it 
integrates new operations and manages geographically dispersed 
operations.  In addition, the Company's results of operations could be 
adversely affected if its new facilities do not achieve growth 
sufficient to offset increased expenditures associated with geographic 
expansion. The Company's expenses and working capital requirements will 
continue to increase as the new facilities become fully operational and 
the transaction with Mitsubishi is completed.  Should the Company 
increase its expenditures in anticipation of a future level of sales 
that does not materialize, its profitability would be adversely 
affected.  On occasion, customers may require rapid increases in 
production that can place an excessive burden on the Company's 
resources.  

Partnership with Ericsson and Related Transactions

During 1997, the Company established a strategic, global manufacturing 
partnership with Ericsson Telecom AB's Business Area Infocom Systems. 
The Company established a New Product Introduction center in Sweden, and 
production from certain Ericsson plants worldwide was transferred to 
Solectron manufacturing sites around the world. In October 1997, 

                                     27
<PAGE>
Solectron acquired certain assets, primarily equipment and inventory, of 
Ericsson's printed circuit board assembly operation located in Brazil. 
In addition, Solectron's subsidiary, Solectron Brasil Ltda., hired 
approximately 370 associates formerly employed by Ericsson 
Telecomunicacoes S.A. in Brazil. Under the terms of the agreement, 
Ericsson contracted for Solectron's services from Solectron Brasil Ltda. 
through September 1999. Thereafter, Solectron will bear the risk of 
filling the manufacturing capacity at the site with renewed business 
from Ericsson and new business from other customers.

The transactions with Ericsson entail a number of risks, including 
successfully managing the integration of the operations, retention of 
key associates, integrating purchasing operations and information 
systems, managing an increasingly larger and more geographically 
disparate business and renewing the Ericsson business or replacing it 
with new business after expiration of the Ericsson commitment.  In 
addition, the completion of the transactions with Ericsson has increased 
Solectron's expenses and working capital requirements and there is no 
assurance that Solectron will achieve sufficient revenue to offset the 
increased expenses.  There can be no assurance that Solectron will 
successfully manage the risks of these transactions.

Acquisitions of NCR, IBM and Mitsubishi Assets 

On April 27, 1998, the Company acquired NCR's manufacturing assets in 
three cities, two in the United States and one in Ireland, for a 
purchase price of approximately $79.5 million, subject to adjustment. As 
part of the transaction, Solectron hired approximately 1,200 NCR 
manufacturing and related support associates currently employed at these 
locations. Under the terms of the agreement, NCR will outsource the 
manufacturing of certain computer, computer peripheral and server 
components to Solectron for at least five years. Thereafter, Solectron 
will bear the risk of filling the manufacturing capacity at the sites 
with renewed business from NCR and new business from other customers. 

On June 1, 1998, the Company acquired IBM's ECAT manufacturing assets in 
Charlotte, North Carolina and non-exclusive rights to certain IBM 
intellectual property for a purchase price of approximately $95.4 
million, subject to adjustment. Under the terms of the agreement, 
Solectron hired approximately 700 IBM manufacturing and related support 
associates and the Company will provide printed circuit board assembly 
services to IBM in North America for the next three years. In addition, 
IBM has made available to Solectron 115 patents and 51 disclosures 
(collectively the intellectual property rights) covering a wide spectrum 
of technologies and capabilities. IBM will also provide to Solectron 
failure analysis and characterization tools for process development and 
manufacturing, including fault detection and isolation. 

On October 1, 1998, the Company acquired the wireless telephone 
manufacturing assets of Mitsubishi Consumer Electronics America, Inc.'s 
(MCEA) Cellular Mobile Telephone (CMT) division in Braselton, Georgia. 
MCEA is a subsidiary of Mitsubishi Electric Corporation (Mitsubishi). 
Under the terms of the agreement, the Company will provide MCEA-CMT with 
a full range of manufacturing services for five years, including New 
Product Introduction management, printed circuit board assembly and full 
systems assembly for MCEA'
s branded and private-label cellular products 
sold within North America. In addition, Solectron has hired 
approximately 400 MCEA-CMT manufacturing and support associates. 

The transactions with NCR, IBM and Mitsubishi entail a number of risks, 
including successfully managing the integration of the operations, 

                                     28
<PAGE>
retention of key associates, integrating purchasing operations and 
information systems, managing an increasingly larger and more 
geographically disparate business, obtaining customers other than NCR, 
IBM and Mitsubishi for these facilities and renewing each of the NCR, 
IBM and Mitsubishi business or replacing it with new business after 
expiration of NCR's, IBM's and Mitsubishi's respective commitments.  In 
addition, the transactions with NCR, IBM and Mitsubishi will increase 
Solectron's expenses and working capital requirements and there is no 
assurance that Solectron will achieve sufficient revenue to offset the 
increased expenses.  There can be no assurance that Solectron will 
successfully manage the risks of these transactions.

Alliance with Ingram Micro

On October 1, 1998, the Company announced that it had signed a 
definitive agreement with Ingram Micro Inc. under which the two 
companies will enter into a strategic alliance to provide global build-
to-order and configure-to-order assembly services for personal 
computers, servers and related products in the United States, Canada, 
Europe, Asia and Latin America. The alliance will be managed by both 
companies under a joint management matrix that will include a sales and 
marketing staff, program management, information technology resources 
and test and process engineers and will, in most part, utilize existing 
facilities, systems and personnel. 

The alliance with Ingram Micro entails a number of risks, including 
successfully establishing the joint management matrix for the alliance, 
retention of key associates, integrating purchasing operations and 
information systems and obtaining customers for the services to be 
provided by the alliance.  In addition, the alliance with Ingram Micro 
will increase Solectron's expenses and working capital requirements and 
there is no assurance that Solectron will achieve sufficient revenue to 
offset the increased expenses.  There can be no assurance that Solectron 
will successfully manage the risks of this alliance or that the terms of 
the alliance will be finalized.

International Operations

As a result of its international sales and facilities, the Company's 
operations are subject to risks of doing business abroad, including but 
not limited to, fluctuations in the value of currency, export duties, 
changes to import and export regulations (including quotas), possible 
restrictions on the transfer of funds, associate turnover, labor unrest, 
longer payment cycles, greater difficulty in collecting accounts 
receivable, the burdens and costs of compliance with a variety of 
foreign laws and in certain parts of the world, political instability. 
In addition, the Company has operations in several locations that are 
considered to have highly inflationary economies or volatile currencies, 
including Mexico, Brazil, China and Romania. While to date these factors 
have not had an adverse material impact on the Company's results of 
operations, there can be no assurance that there will not be such an 
impact in the future.

Southeast Asia and Latin America are currently experiencing currency, 
economic and political instability. To date, the Company's operations 
have not experienced significant adverse effects from this instability. 
However, to the extent the Company's worldwide customers sell the 
products manufactured by Solectron into the Southeast Asia and Latin 
America markets, the customers' sales may be adversely affected, which 
could decrease demand for the Company's manufacturing services. The 
Company cannot predict whether such a decrease in demand will 

                                     29
<PAGE>
materialize and if it does, whether it will have an adverse material 
effect on the Company's results of operations.

The Malaysian government recently adopted currency exchange controls, 
including controls on ringgit held outside Malaysia, and established a 
fixed exchange rate for the ringgit against the U.S. dollar. The Company 
does not hold ringgit outside of Malaysia and therefore will not be 
affected by these controls. The fixed exchange rate, when applied to 
local expenses denominated in ringgit, will result in higher expenses 
when translated to U.S. dollars. However, such local expenses represent 
a small percentage of the Company's total costs and therefore the 
Company's results of operations will not be significantly affected in 
the near future. The long term impact of such controls is not 
predictable due to dynamic economic conditions that also affect or are 
affected by other regional or global economies. 

The Company has been granted a tax holiday for its Malaysia sites which 
is effective through January 31, 2002, subject to certain conditions.  
The Company has also been granted various tax holidays in China.  These 
tax holidays are effective for various terms and are subject to certain 
conditions.  There is no assurance that the current tax holidays will 
not be terminated or modified or that any future tax holidays that the 
Company may seek will be granted.  If the current tax holidays are 
terminated or modified or if additional tax holidays are not granted in 
the future, the Company's effective income tax rate would likely 
increase.

Foreign Exchange Rate Sensitivity 

The Company does not use derivative financial instruments for 
speculative purposes. The Company's policy is to hedge its foreign 
currency denominated transactions in a manner that substantially offsets 
the effects of changes in foreign currency exchange rates. The Company 
uses foreign currency borrowings and foreign currency forward contracts 
to hedge the currency risks of transactions denominated in foreign 
currencies. Gains and losses on these foreign currency hedges are 
generally offset by corresponding losses and gains on the underlying 
transaction. There were no material deferred gains or losses at August 
31, 1998, and the Company does not hold or issue foreign exchange 
contracts for trading purposes. In addition, the Company's international 
operations in some instances act as a natural hedge because both 
operating expenses and a portion of sales are denominated in local 
currency. In these instances, although an unfavorable change in the 
exchange rate of a foreign currency against the U.S. dollar will result 
in lower sales when translated to U.S. dollars, operating expenses will 
also be lower in these circumstances. However, because less than 10% of 
net sales are denominated in currencies other than the U.S. dollar, the 
Company does not believe its total exposure to be significant. See Note 
7 of Notes to Consolidated Financial Statements.

Euro Conversion Issues

On January 1, 1999, 11 of the 15 member countries of the European Union 
(the participating countries) are scheduled to establish fixed 
conversion rates between their existing sovereign currencies and the 
euro. For three years after the introduction of the euro, the 
participating countries can perform financial transactions in either the 
euro or their original local currencies. This will result in a fixed 
exchange rate among the participating countries, whereas the euro (and 
the participating countries' currencies in tandem) will continue to 

                                     30
<PAGE>
float freely against the U.S. dollar and other currencies of non-
participating countries.

The Company has established a task force that is evaluating the effects 
of the euro conversion on the Company and monitoring its readiness for 
the conversion. The Company does not believe that significant 
modifications of its information technology systems will be needed in 
order to handle euro transactions and reporting, and the Company is in 
the process of evaluating its tax positions and all outstanding 
contracts in currencies of the participating countries to determine the 
effects, if any, of the euro conversion. The Company does not expect the 
euro conversion to have a significant impact on its derivatives (see 
Note 7 of Notes to Consolidated Financial Statements) as the Company has 
already modified its hedging policies to take the euro conversion into 
account, and approximately 84% of its derivative instruments at August 
31, 1998, mature in three months or less. While the Company believes 
that it will be ready for the euro conversion by the end of calendar 
1998, and that the effects of the conversion will not have a significant 
adverse material effect on the Company's business and operations, there 
can be no assurances that such conversion will not have an adverse 
material effect on the Company's results of operations and financial 
position due to competitive and other factors that may be affected by 
the conversion that cannot be predicted by the Company.

Availability of Components

A substantial portion of the Company's net sales is derived from turnkey 
manufacturing in which the Company provides both materials procurement 
and assembly.  In turnkey manufacturing, the Company potentially bears 
the risk of component price increases, which could adversely affect the 
Company's gross profit margins.  At various times there have been 
shortages of components in the electronics industry.  If significant 
shortages of components should occur, the Company may be forced to delay 
manufacturing and shipments, which could have an adverse material effect 
on the Company's results of operations.

Potential Fluctuations in Operating Results

The Company's operating results are affected by a number of factors, 
including the mix of turnkey and consignment projects, the mix of 
printed circuit board assembly and systems build projects, capacity 
utilization, price competition, the degree of automation that can be 
used in the assembly process, the efficiencies that can be achieved by 
the Company in managing inventories and fixed assets, the timing of 
orders from major customers, fluctuations in demand for customer 
products, the timing of expenditures in anticipation of increased sales, 
customer product delivery requirements, and increased costs and 
shortages of components or labor. Turnkey manufacturing currently 
represents a substantial portion of Solectron's sales. Turnkey projects, 
in which Solectron procures some or all of the components necessary for 
production, typically generate higher net sales and higher gross profits 
with lower gross margin percentages than consignment projects due to the 
inclusion in Solectron's operating results of sales and costs associated 
with the purchase and sale of components. Solectron assembles products 
with varying degrees of material content, which may cause Solectron's 
gross margin to fluctuate. In addition, the degree of start-up costs and 
inefficiencies associated with new sites and new customer projects may 
affect Solectron's gross margin. All of these factors can cause 
fluctuations in the Company's operating results.

                                     31
<PAGE>
Interest Rate Sensitivity

The primary objective of the Company's investment activities is to 
preserve principal while at the same time maximizing yields without 
significantly increasing risk. To achieve this objective, the Company 
maintains its portfolio of cash equivalents and short-term investments 
in a variety of securities, including both government and corporate 
obligations, certificates of deposit and money market funds. As of 
August 31, 1998, approximately 93% of the Company's total portfolio 
matures in one year or less, with the remainder maturing in less than 
two years.  See Note 2 of Notes to Consolidated Financial Statements.

The following table presents the amounts of the Company's cash 
equivalents and short-term investments that are subject to interest rate 
risk by year of expected maturity and average interest rates as of 
August 31, 1998:
<TABLE>
<CAPTION>
                                   1999     2000      Total   Fair Value
                                 -------- --------  --------  ----------
<S>                              <C>      <C>       <C>       <C>
                                        (dollars in thousands)
Cash equivalents and short-
   term investments              $110,382  $21,275  $131,657    $131,657   
Average interest rates              5.50%    5.78%       
</TABLE>
The Company's debt instruments are subject to fixed interest rates and, 
in the case of the convertible notes, to fixed conversion ratios into 
the Company's common stock. In addition, the amount of principal to be 
repaid at maturity is also fixed. Therefore, the Company is not subject 
to market risk from its debt instruments. See Note 6 of Notes to 
Consolidated Financial Statements.

Competition

The electronics manufacturing services industry is comprised of a large 
number of companies, several of which have achieved substantial market 
share.  The Company also faces competition from current and prospective 
customers that evaluate Solectron's capabilities against the merits of 
manufacturing products internally.  Solectron competes with different 
companies depending on the type of service or geographic area.  Certain 
competitors may have greater manufacturing, financial, research and 
development and marketing resources than the Company.  The Company 
believes that the primary bases of competition in its targeted markets 
are manufacturing technology, quality, responsiveness, the provision of 
value-added services and price.  To be competitive, the Company must 
provide technologically advanced manufacturing services, high product 
quality levels, flexible delivery schedules and reliable delivery of 
finished products on a timely and price competitive basis.  The Company 
currently may be at a competitive disadvantage as to price when compared 
to manufacturers with lower cost structures, particularly with respect 
to manufacturers with established facilities where labor costs are 
lower.

Intellectual Property Protection

The Company's ability to compete may be affected by its ability to 
protect its proprietary information.  The Company holds a limited number 
of U.S. patents related to the process and equipment used in its surface 
mount technology. The Company's subsidiary, Force Computers, also holds 
a number of patents related to VME technology. The Company believes 
these patents are valuable. However, there can be no assurance that 
these patents will provide meaningful protection for the Company's 
manufacturing process and equipment innovations or Force's technology.

                                     32
<PAGE>
There can be no assurance that third parties will not assert 
infringement claims against the Company or its customers in the future, 
either against the patents the Company holds itself or against the IBM 
patents that the Company has access to. In the event a third party does 
assert an infringement claim, the Company may be required to expend 
significant resources to develop a non-infringing manufacturing process 
or technology or to obtain licenses to the manufacturing process or 
technology that is the subject of litigation. There can be no assurance 
that the Company would be successful in such development or that any 
such licenses would be available on commercially acceptable terms, if at 
all. In addition, such litigation could be lengthy and costly and could 
have an adverse material effect on the Company's financial condition 
regardless of the outcome of such litigation.

Environmental Compliance 

The Company is subject to a variety of environmental regulations 
relating to the use, storage, discharge and disposal of hazardous 
chemicals used during its manufacturing process.  Any failure by the 
Company to comply with present and future regulations could subject it 
to future liabilities or the suspension of production.  In addition, 
such regulations could restrict the Company's ability to expand its 
facilities or could require the Company to acquire costly equipment or 
to incur other significant expenses to comply with environmental 
regulations.

Dependence on Key Personnel and Skilled Associates

The Company's continued success depends to a large extent upon the 
efforts and abilities of key managerial and technical associates.  The 
loss of services of certain key personnel could have an adverse material 
effect on the Company.  The Company's business also depends upon its 
ability to continue to attract and retain senior managers and skilled 
associates.  Failure to do so could adversely affect the Company's 
operations.

Possible Volatility of Market Price of Common Stock

The trading price of the common stock is subject to significant 
fluctuations in response to variations in quarterly operating results, 
general conditions in the electronics industry and other factors.  In 
addition, the stock market is subject to price and volume fluctuations 
that affect the market price for many high technology companies in 
particular, and that often are unrelated to operating performance.


ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Management's Discussion and Analysis of Financial Condition and 
Results of Operations "Trend and Uncertainties -- Interest Rate 
Sensitivity" and "-- Foreign Exchange Rate Sensitivity."
 
                                     33

<PAGE>
ITEM 8:   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by item 8 of form 10-K is presented here in the 
following order:
                                                        Page
                                                      --------
Unaudited Quarterly Financial Information                34

Consolidated Balance Sheets                              35
Consolidated Statements of Income                        36
Consolidated Statements of Stockholders' Equity          37
Consolidated Statements of Cash Flows                  38-39
Notes to Consolidated Financial Statements             40-56

Independent Auditors' Report                             57


Unaudited Quarterly Financial Information

For each fiscal quarter during the two fiscal years ended August 31, 
1998 (in thousands, except percentages and per share data):                   
<TABLE>
<CAPTION>
                            First      Second       Third      Fourth
1998                       Quarter     Quarter     Quarter     Quarter
----------------------   ----------  ----------  ----------  ----------
<S>                      <C>         <C>         <C>         <C>
Net sales                $1,136,820  $1,186,831  $1,278,167  $1,686,476
Gross profit             $  123,759  $  126,162  $  133,123  $  155,262
Gross margin                   10.9%       10.6%       10.4%        9.2%
Operating income         $   67,438  $   73,232  $   72,371  $   85,948
Operating margin                5.9%        6.2%        5.7%        5.1%
Net income               $   44,888  $   48,843  $   49,178  $   55,915
Basic net income 
  per share              $     0.39  $     0.42  $     0.42  $     0.48
Diluted net income
  per share              $     0.38  $     0.41  $     0.41  $     0.46


                            First      Second       Third      Fourth
1997                       Quarter     Quarter     Quarter     Quarter
----------------------   ----------  ----------  ----------  ----------

Net sales                $  807,725  $  858,698  $  983,222  $1,044,740 
Gross profit             $   86,148  $  102,198  $  115,877  $  124,056
Gross margin                   10.7%       11.9%       11.8%       11.9% 
Operating income         $   48,286  $   55,563  $   62,619  $   69,954 
Operating margin                6.0%        6.5%        6.4%        6.7%
Net income               $   31,475  $   37,565  $   41,537  $   47,482
Basic net income 
  per share (1)          $     0.30  $     0.33  $     0.37  $     0.42
Diluted net income
 per share (1)           $     0.29  $     0.32  $     0.36  $     0.40   
</TABLE>

(1) All net income per share amounts have been restated to conform with 
the requirements of Statement of Financial Accounting Standards No. 128, 
"Earnings per Share."

                                     34

<PAGE>
<TABLE> 
                  SOLECTRON CORPORATION AND SUBSIDIARIES 
                      CONSOLIDATED BALANCE SHEETS
                         (In thousands, except
                            per share data)
<CAPTION>
                                                 As of August 31,
                                             ------------------------
                                                1998          1997
                                             ----------    ----------
<S>                                          <C>           <C>
ASSETS                                       
Current assets:
  Cash and cash equivalents                  $  225,228    $  225,073
  Short-term investments                         83,576       257,829
  Accounts receivable, less allowances of 
   $3,999 and $4,049, respectively              670,194       418,682
  Inventories                                   788,519       494,622
  Prepaid expenses and other current assets     120,041       103,426
                                             ----------    ----------
      Total current assets                    1,887,558     1,499,632
Net property and equipment                      448,039       326,361
Other assets                                     74,971        50,426
                                             ----------    ----------
      Total assets                           $2,410,568    $1,876,419
                                             ==========    ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                           $  666,557    $  415,896
  Accrued employee compensation                  72,053        56,218
  Accrued expenses                               34,906        48,787
  Other current liabilities                      67,318        47,041
                                             ----------    ----------
     Total current liabilities                  840,834       567,942
Long-term debt                                  385,519       385,850
Other long-term liabilities                       2,889         3,558
                                             ----------    ----------
     Total liabilities                        1,229,242       957,350
                                             ----------    ----------
Commitments

Stockholders' equity:
  Preferred stock, $.001 par value; 1,200
   shares authorized; no shares issued              --            --
  Common stock, $.001 par value; 200,000
   shares authorized; 117,667 and 114,546
   shares issued and outstanding,
   respectively                                     117           115
  Additional paid-in capital                    510,757       451,093
  Retained earnings                             677,436       478,612
  Cumulative translation adjustment              (6,984)      (10,751)
                                             ----------    ----------
     Total stockholders' equity               1,181,326       919,069
                                             ----------    ----------
Total liabilities and stockholders'
      equity                                 $2,410,568    $1,876,419
                                             ==========    ==========
</TABLE>
 See accompanying notes to consolidated financial statements.

                                     35

<PAGE>
<TABLE>
                 SOLECTRON CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF INCOME
                  (In thousands, except per share data)

<CAPTION>
                                           Years Ended August 31,
                                     ----------------------------------
                                        1998        1997        1996
                                     ----------  ----------  ----------
<S>                                  <C>         <C>         <C>
Net sales                            $5,288,294  $3,694,385  $2,817,191
Cost of sales                         4,749,988   3,266,106   2,534,813
                                     ----------  ----------  ----------
Gross profit                            538,306     428,279     282,378

Operating expenses:
  Selling, general and 
   administrative                       218,377     172,872     100,260
  Research and development               20,940      14,985       6,693
  Acquisition costs                         --        4,000         -- 
                                     ----------  ----------  ----------
Operating income                        298,989     236,422     175,425
Interest income                          24,753      28,536      13,302
Interest expense                        (24,759)    (26,551)    (15,650)                                                      
                                     ----------  ----------  ----------
Income before income taxes              298,983     238,407     173,077
Income taxes                            100,159      80,348      58,845
                                     ----------  ----------  ----------
Net income                           $  198,824  $  158,059  $  114,232
                                     ==========  ==========  ==========
Net income per share:
  Basic                              $     1.72  $     1.42  $     1.12
  Diluted                            $     1.65  $     1.37  $     1.08
Weighted average number of shares:
  Basic                                 115,833     111,502     101,676
  Diluted                               126,567     115,321     106,718
</TABLE>
See accompanying notes to consolidated financial statements.


      














                                     36       

<PAGE>
<TABLE>
                             SOLECTRON CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                        (In thousands)

<CAPTION>
                                    Common Stock    Additional            Cumulative      Total
                                  ----------------   Paid-In    Retained  Translation  Stockholders'
                                   Shares   Amount   Capital    Earnings  Adjustment      Equity
                                  -------  -------  ----------  --------  -----------  ------------
<S>                               <C>      <C>      <C>         <C>       <C>          <C>
Balances as of August 31, 1995     99,168  $    99  $  329,166  $206,321  $     2,555  $    538,141
Options exercised                   1,238        1      10,163       --           --         10,164
Stock issued under employee
  purchase plan                       278      --        4,339       --           --          4,339
Conversion of long-term debt        3,946        4      30,398       --           --         30,402
Stock issued in business
  combination                         392        1       1,667       --           --          1,668
Tax benefit associated with
  exercise of stock options           --       --        2,481       --           --          2,481
Net income                            --       --          --    114,232          --        114,232
Translation adjustment                --       --          --        --          (858)         (858)
                                  -------  -------  ----------  --------  -----------  ------------
Balances as of August 31, 1996    105,022      105     378,214   320,553        1,697       700,569
Options exercised                   3,008        3      31,316       --           --         31,319
Stock issued under employee
  purchase plan                       325        1       6,758       --           --          6,759
Stock issued in business
  combination                       6,191        6      24,012       --           --         24,018 
Tax benefit associated with
  exercise of stock options           --       --       10,793       --           --         10,793
Net income                            --       --          --    158,059          --        158,059
Translation adjustment                --       --          --        --       (12,448)      (12,448)               
                                  -------  -------  ----------  --------  -----------  ------------
Balances as of August 31, 1997    114,546      115     451,093   478,612      (10,751)      919,069 
Options exercised                   2,809        2      39,000       --           --         39,002
Stock issued under employee
  purchase plan                       312      --       11,326       --           --         11,326
Tax benefit associated with
  exercise of stock options           --       --        9,338       --           --          9,338
Net income                            --       --          --    198,824          --        198,824
Translation adjustment                --       --          --        --         3,767         3,767               
                                  -------  -------  ----------  --------  -----------  ------------
Balances as of August 31, 1998    117,667  $   117  $  510,757  $677,436  $    (6,984) $  1,181,326     
                                  =======  =======  ==========  ========  ===========  ============
</TABLE>                                      
See accompanying notes to consolidated financial statements.













                                     37

<PAGE>
<TABLE>
                 SOLECTRON CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
<CAPTION>
                                            Years Ended August 31,
                                      ---------------------------------
                                         1998        1997        1996
                                      ---------   ---------   ---------
<S>                                   <C>         <C>         <C>
Cash flows from operating activities:
  Net income                          $ 198,824   $ 158,059   $ 114,232
  Adjustments to reconcile net 
   income to net cash provided 
   by operating activities:
    Depreciation and amortization       124,200     104,590      84,804
    Interest accretion on zero-
     coupon subordinated notes              --          --        1,173
    Interest accrual on
     long-term debt                          27          19      12,507
    Tax benefit associated with the
     exercise of stock options            9,338      10,793       2,481
    Gain on disposal of fixed assets     (2,277)        --          --
    Other                                (1,326)     (7,135)     (3,065)
    Changes in operating assets   
     and liabilities:
      Accounts receivable              (250,575)    (66,293)    (32,379)
      Inventories                      (164,058)   (115,560)    (27,053)
      Prepaid expenses and other 
       current assets                   (40,424)    (48,947)       (234)
      Accounts payable                  235,765     135,287     (56,784)
      Accrued expenses and other 
       current liabilities               40,291      31,124       6,272
                                      ---------   ---------   ---------
Net cash provided by 
  operating activities                  149,785     201,937     101,954
                                      ---------   ---------   ---------
Cash flows from investing activities:
  Purchases of short-term investments  (150,518)   (274,160)   (781,266)
  Sales and maturities of short-term
   investments                          324,772     197,851     658,436
  Acquisition of manufacturing 
   locations                           (174,885)        --     (131,893)
  Capital expenditures                 (244,375)   (188,171)   (115,446)
  Proceeds from leasing transactions     25,528         --          --
  Proceeds from disposal of fixed 
   assets                                34,692      10,639       8,694
  Other                                 (14,394)     16,637       9,806
                                      ---------   ---------   ---------
Net cash used in investing activities  (199,180)   (237,204)   (351,669)
                                      ---------   ---------   ---------
Cash flows from financing activities:
  Proceeds from bank lines of credit        --          --        6,340
  Proceeds from long-term debt              --          --      380,000
  Debt acquisition costs                    --          --       (7,808)
  Repayments of long-term debt           (1,205)     (3,079)     (4,796)
  Net proceeds from sale of 
   common stock                          50,328      38,078      14,503
  Other                                  (2,184)        --          --
                                      ---------   ---------   ---------
Net cash provided by financing 
  activities                             46,939      34,999     388,239
                                      ---------   ---------   --------- 
</TABLE>
                                                            (continued)
                                     38 

<PAGE>
<TABLE>
                  SOLECTRON CORPORATION AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                              (In thousands)
 <CAPTION>
                                            Years Ended August 31,
                                      ---------------------------------
                                         1998        1997        1996
                                      ---------   ---------   ---------
<S>                                   <C>         <C>         <C>
Effect of exchange rate changes on
  cash and cash equivalents               2,611      (3,489)        347
                                      ---------  ----------   ---------
Net increase (decrease) in cash 
  and cash equivalents                      155      (3,757)    138,871
Cash and cash equivalents at 
  beginning of year                     225,073     228,830      89,959
                                      ---------   ---------   ---------
Cash and cash equivalents at 
  end of year                         $ 225,228   $ 225,073   $ 228,830
                                      =========   =========   =========
Cash paid:
  Interest                            $  24,999  $   38,306   $     517
  Income taxes                        $  75,817  $   93,420   $  54,937
Non-cash investing and financing 
 activities:
  Issuance of common stock upon 
   conversion of long-term debt       $     --   $      --    $  30,402
  Issuance of common stock for 
   business combination               $     --   $   24,018   $   1,668
</TABLE>
See accompanying notes to consolidated financial statements.

      






















                                     39          

<PAGE>
                 SOLECTRON CORPORATION AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        August 31, 1998 and 1997

Note 1:  Summary of Significant Accounting Policies

(a) Description of Operations and Principles of Consolidation:  
Solectron Corporation (the Company) is an independent provider of 
customized manufacturing services to original equipment manufacturers in 
the electronics industry and operates in this one industry segment. The 
Company's primary services include the manufacture and testing of 
printed circuit board assemblies as well as system level assembly and 
testing. The Company also provides materials procurement and materials 
management in support of its manufacturing, assembly and testing 
services. In addition, the Company provides consultation on board design 
and manufacturability and performs refurbishment, packaging and 
remanufacturing services. Manufacturing and assembly services include 
turnkey services, where the Company procures certain or all of the 
materials required for product assembly, and consignment services, where 
the customer supplies the materials necessary for product assembly. 
Turnkey services include material procurement and warehousing in 
addition to manufacturing and involve greater resource investment than 
consignment services. The Company has manufacturing operations located 
in North America, Europe, Asia and Latin America.

The accompanying consolidated financial statements include the accounts 
of the Company and its subsidiaries after elimination of intercompany 
accounts and transactions.

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

(b) Cash Equivalents and Short-Term Investments:  Cash equivalents are 
highly liquid investments purchased with an original maturity of less 
than three months. Short-term investments are investment grade short-
term debt instruments with original maturities greater than three 
months.

Investments in debt securities are classified as "available-for-sale." 
Such investments are recorded at fair value, as determined from quoted 
market prices, and the cost of securities sold is determined based on 
the specific identification method. If material, unrealized gains and 
losses are reported as a component of stockholders' equity. 

(c) Inventories:  Inventories are stated at the lower of weighted 
average cost or market. 




                                     40

<PAGE>
(d) Property and Equipment:  Property and equipment are recorded at 
cost. Depreciation and amortization are computed based on the shorter of 
the estimated useful lives or the related lease terms, using the 
straight-line method. Estimated useful lives are presented below. 

     Machinery and equipment                           2 - 5 years
     Furniture and fixtures                            3 - 5 years
     Leasehold improvements                            Lease term
     Buildings                                         6 -50 years

(e) Other Assets:  Other assets consist of intangible assets, including 
intellectual property rights and goodwill, and debt issuance costs. 
Intangible assets are amortized using the straight-line method over the 
expected life of the asset -- ten years for intellectual property rights 
and ten years for goodwill. Debt issuance costs are amortized using the 
straight-line method, which does not differ materially from the interest 
method, over the debt term (ten years). 

(f) Impairment of Long-Lived Assets:  The Company reviews property and 
equipment for impairment whenever events or changes in circumstances 
indicate that the carrying amount of an asset may not be recoverable. 
Recoverability of property and equipment is measured by comparison of 
its carrying amount, including the unamortized portion of goodwill 
allocated to the property and equipment, to future net cash flows the 
property and equipment are expected to generate. If such assets are 
considered to be impaired, the impairment to be recognized is measured  
by the amount by which the carrying amount of the property and 
equipment, including the allocated goodwill, if any, exceeds its fair 
market value. The Company assesses the recoverability of enterprise 
level goodwill by determining whether the unamortized goodwill balance 
can be recovered through undiscounted future cash flows of the acquired 
operation. The amount of enterprise level goodwill impairment, if any, 
is measured based on projected discounted future cash flows using a 
discount rate reflecting the Company's average cost of funds. To date, 
no adjustments to the carrying value of the Company's long-lived assets 
have been required.

(g) Income Taxes:  The Company uses the asset and liability method of 
accounting for income taxes. Deferred tax assets and liabilities are 
recognized for the future consequences attributable to differences 
between the financial statement carrying amounts of existing assets and 
liabilities and their respective tax bases. When necessary, a valuation 
allowance is recorded to reduce tax assets to an amount whose 
realization is more likely than not. The effect of changes in tax rates 
is recognized in the period in which the rate change occurs. 

(h) Net Income Per Share:  Basic and diluted net income per share 
amounts for all periods presented have been calculated, and where 
necessary restated, to conform to the requirements of Statement of 
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." 
Basic net income per share is calculated using the weighted average 
number of common shares outstanding during the period. Diluted net 
income per share is calculated using the weighted average number of 
common shares plus dilutive common equivalent shares outstanding during 
the period. Common equivalent shares consist of stock options that are 
computed using the treasury stock method and shares issuable upon 
conversion of the Company's outstanding convertible notes computed using 
the as-if converted method. 

(i) Revenue Recognition:  The Company recognizes revenue upon shipment 
of product to its customers.

                                     41
<PAGE>
(j) Employee Stock Plans:  The Company accounts for its stock option 
plans and its Employee Stock Purchase Plan using the intrinsic value 
method. 

(k) Foreign Currency:  Assets and liabilities of foreign subsidiaries 
where the local currency is the functional currency are translated at 
year-end exchange rates. The effects of these translation adjustments 
are reported as a separate component of stockholders' equity. Exchange 
gains and losses arising from transactions denominated in a currency 
other than the functional currency of the entity involved and 
remeasurement adjustments for foreign operations where the United States 
dollar is the functional currency are included in income. To date, the 
effect of such amounts on net income has not been material.

(l) Derivatives:  Gains and losses on foreign currency forward exchange 
contracts designated as hedges of assets and liabilities are included in 
income concurrently with the offsetting losses and gains on the related 
balance sheet item. Gains and losses on hedges of firm commitments and 
anticipated transactions are deferred and included in the basis of the 
transaction when it occurs. 

(m) Year-End:  The Company's financial reporting year consists of either 
52-week or 53-week periods ending on the last Friday in August. Fiscal 
years 1998 and 1997 each contained 52 weeks, and fiscal year 1996 
contained 53 weeks. For purposes of presentation in the accompanying 
financial statements and notes thereto, the Company has indicated its 
accounting years as ending on August 31.

The Company's subsidiaries, Solectron Texas, Inc. (Texas) and Solectron 
Brasil, Ltda. (Brazil) report their results one month in arrears. The 
Company's consolidated financial position as of August 31, 1998 includes 
the financial position of the Texas and Brazil operations as of July 31, 
1998 and the Company's consolidated financial position as of August 31, 
1997 includes the financial position of the Texas operation as of July 
31, 1997. Similarly, the Company's consolidated results of operations 
and cash flows for the year ended August 31, 1998 include the results of 
operations and cash flows of the Texas and Brazil operations for the 
twelve months ended July 31, 1998. The Company's consolidated results of 
operations and cash flows for the years ended August 31, 1997 and 1996 
include the results of operations and cash flows of the Texas operation 
for the twelve months ended July 31, 1997 and the four-month period 
since its acquisition ended July 31, 1996, respectively.

(n) Recent Accounting Pronouncements:  In June 1998, the Financial 
Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for 
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes 
methods of accounting for derivative financial instruments and hedging 
activities related to those instruments as well as other hedging 
activities. The Company expects that the adoption of SFAS No. 133 will 
have no material impact on its financial position, results of operations 
or cash flows. The Company will be required to implement SFAS No. 133 
for its fiscal year ending August 31, 2000.

                                     42

<PAGE>
In March 1998, the American Institute of Certified Public Accountants 
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the 
Costs of Computer Software Developed or Obtained for Internal Use." SOP 
98-1 requires that entities capitalize certain costs related to 
internal-use software once certain criteria have been met. The Company 
has not yet determined the impact of SOP 98-1 on its financial position, 
results of operations and cash flows. The Company will be required to 
implement SOP 98-1 for its fiscal year ending August 31, 2000.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of 
Start-Up Activities." SOP 98-5 requires that all start-up costs related 
to new operations must be expensed as incurred. In addition, all start-
up costs that were capitalized in the past must be written off when SOP 
98-5 is adopted. The Company expects that the adoption of SOP 98-5 will 
have no material impact on its financial position, results of operations 
or cash flows. The Company will be required to implement SOP 98-5 for 
its fiscal year ending August 31, 2000.

(o) Reclassifications:  Certain prior year amounts have been 
reclassified to conform to the 1998 presentation.

Note 2: Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments consisted of the 
following at August 31:
<TABLE>
<CAPTION>                                       
                                        Cash and Cash       Short-Term
                                         Equivalents        Investments
                                        -------------       -----------
                                                 (in thousands)
<S>                                     <C>                 <C>
1998
-------
Cash                                       $ 91,527         $      --
Money market funds                           74,225                --
Certificates of deposit                          42             11,353
Municipal market auction securities             800                --
U.S. government securities                   27,778             47,118
Corporate obligations                         6,026             17,509
Municipal obligations                         5,424                --
Other                                        19,406              7,596
                                           --------           --------
                                           $225,228           $ 83,576
                                           ========           ========
1997
-------
Cash                                       $ 39,725           $    --
Money market funds                           81,350                --
Certificates of deposit                       9,822             23,249
Municipal market auction securities           7,723                -- 
Corporate market auction securities          14,206                --
U.S. government securities                    6,685            173,304
Corporate obligations                        58,422             51,542
Municipal obligations                         7,140                --
Other                                           --               9,734
                                           --------           --------
                                           $225,073           $257,829
                                           ========           ========
</TABLE>
                                     43

<PAGE>
Short-term investments are carried at fair market value, which 
approximates cost. As of August 31, 1998 and 1997, unrealized gains and 
losses were not material. Realized gains and losses for the years ended 
August 31, 1998, 1997 and 1996 were not material. As of August 31, 1998, 
all of the Company's short-term investments mature within two years.

Note 3:  Inventories

Inventories as of August 31, 1998 and 1997 consisted of:
<TABLE>
<CAPTION>
                               1998              1997
                             --------          --------
                                   (in thousands)
     <S>                     <C>               <C>
     Raw materials           $577,764          $365,630
     Work-in-process          210,755           128,992
                             --------          --------
                             $788,519          $494,622
                             ========          ========
</TABLE>
Note 4:  Property and Equipment

Property and equipment as of August 31, 1998 and 1997 consisted of:
<TABLE>
<CAPTION>
                                           1998            1997
                                         --------        --------
                                               (in thousands)
     <S>                                 <C>             <C>
     Land                                $ 23,074        $ 18,070
     Buildings and improvements            94,012          46,441
     Machinery and equipment              531,310         432,963
     Furniture and fixtures               106,353          76,485
     Leasehold improvements                46,653          41,647
     Construction-in-progress              58,429          33,171
                                         --------        --------
                                          859,831         648,777
     Less accumulated depreciation
      and amortization                    411,792         322,416
                                         --------        --------
     Net property and equipment          $448,039        $326,361
                                         ========        ========
</TABLE>
Note 5:  Lines of Credit

The Company has available a $100 million unsecured multicurrency 
revolving line of credit that expires April 30, 2002. Borrowings under 
the credit facility bear interest, at the Company's option, at either 
the bank's prime rate, the London interbank offering rate (LIBOR) plus a 
margin, or the bank's certificate of deposit (CD) rate plus a margin. 
The margin under the LIBOR or CD rate options will vary depending on the 
Company's Standard & Poor's Corporation and/or Moody's Investor 
Services, Inc. rating for its long-term senior unsecured debt and was 
0.4% at August 31, 1998. Under the agreement, the Company must meet 
certain financial covenants. As of August 31, 1998 and 1997, there were 
no borrowings outstanding under this line of credit. 

The Company also has $114.9 million in foreign lines of credit and other 
bank facilities. Borrowings are payable on demand. The interest rates 
range from the bank's prime lending rate to the bank's prime rate plus 
2.0%. As of August 31, 1998, borrowings and guaranteed amounts under 
these lines of credit were $22.7 million, which had a weighted-average 
interest rate of 4.9% per annum.

                                     44
<PAGE>
The Company has entered into an asset securitization arrangement with a 
bank under which it may sell up to $120 million of eligible accounts 
receivable. The arrangement is subject to certain financial covenants 
and management representations. The arrangement expires in August 1999. 
No transaction has occurred under this arrangement. 

Note 6:  Long-Term Debt

Long-term debt at August 31, 1998 and 1997 consisted of:
<TABLE>
<CAPTION>
                                                   1998         1997
                                                 --------     --------
                                                    (in thousands)
<S>                                              <C>          <C>
6% subordinated notes due 2006, face value
  $230,000, fair value of $333,500 in 1998 
  and $318,274 in 1997. Convertible into 
  6,804 shares of common stock                   $230,000     $230,000
7 3/8% senior notes due 2006, face value
  $150,000, fair value of $157,680 in 1998
  and $149,300 in 1997                            149,771      149,745
Other, fair value of $5,748 in 1998 and 
  $6,105 in 1997                                    5,748        6,105
                                                 --------     --------
 Total long-term debt                            $385,519     $385,850
                                                 ========     ========
</TABLE>
In February 1996, the Company issued convertible, subordinated notes for 
an aggregate principal amount of $230 million. These notes are in 
denominations of and have a maturity value of $1,000 each, payable on 
March 1, 2006. Interest is payable semi-annually at a rate of 6% per 
annum. The notes are subordinated to all existing and future senior 
indebtedness of the Company. Each note is convertible at any time by the 
holder into shares of common stock at a conversion price of $33.81 per 
share. Beginning on March 3, 1999, the notes are redeemable for cash at 
the option of the Company, in whole or in part, at redemption prices 
ranging from 104.2% of the principal amount in 1999 to 100% of the 
principal amount in 2006. Upon a change in control of the Company, each 
holder of the notes has the right to require the Company to repurchase 
the notes for 100% of the principal amount.

In March 1996, the Company issued $150 million aggregate principal 
amount of senior notes. The notes are in denominations of and have a 
maturity value of $1,000 each and are due on March 1, 2006. Interest is 
payable semi-annually at a rate of 7 3/8% per annum. The notes may not 
be redeemed prior to maturity.

Note 7:  Financial Instruments

Fair Value of Financial Instruments

The fair value of the Company's cash, cash equivalents, accounts 
receivable and accounts payable approximates the carrying amount due to 
the relatively short maturity of these items. The fair value of the 
Company's short-term investments (see Note 2) is determined based on 
quoted market prices. The fair value of the Company's long-term debt 
(see Note 6) is determined based on broker trading prices.

                                     45                              
<PAGE>
Derivatives

The Company enters into forward exchange contracts to hedge foreign 
currency exposures on a continuing basis for periods consistent with its 
committed exposures. These transactions generally do not subject the 
Company to risk of accounting loss because gains and losses on these 
contracts offset losses and gains on the assets, liabilities and 
transactions being hedged. The Company is exposed to credit-related 
losses in the event of non-performance by the parties in these 
contracts. The counterparties to these contracts are substantial and 
credit-worthy multinational commercial banks. The risk of counterparty 
non-performance associated with these contracts is remote. Because these 
contracts have maturities of less than six months, the amounts of 
unrealized gains and losses are immaterial. The Company had $31.3 
million and $75.6 million of aggregate foreign currency forward exchange 
contracts outstanding at the end of fiscal years 1998 and 1997, 
respectively, primarily for the purchase and sale of European 
currencies, the Japanese yen, the Malaysian ringgit and the U.S. dollar 
by the Company's international subsidiaries.
 
Business and Credit Concentrations

Financial instruments that potentially subject the Company to 
concentrations of credit risk consist of cash, cash equivalents, short-
term investments and trade accounts receivable. The Company's cash, cash 
equivalents and short-term investments are managed by recognized 
financial institutions that follow the Company's investment policy. The 
Company's investments are comprised of investment grade short-term debt 
instruments, and the Company's investment policy limits the amount of 
credit exposure in any one issue. Concentrations of credit risk in 
accounts receivable resulting from sales to major customers are 
discussed in Note 13. The Company generally does not require collateral 
for sales on credit. The Company closely monitors extensions of credit 
and has not experienced significant credit losses in the past.

Note 8:  Commitments

The Company leases various facilities under operating lease agreements. 
The facility leases expire at various dates through 2006. Substantially 
all leases require the Company to pay property taxes, insurance and 
normal maintenance costs. Payments under certain leases are periodically 
adjusted based on LIBOR rates. The leases for certain of the Company's 
facilities in Milpitas and San Jose, California, and Everett, 
Washington, provide the Company with the option at the end of each of 
the leases of either acquiring the property at its original cost or 
arranging for the property to be acquired. The Company is contingently 
liable under a first loss clause for a decline in market value of these 
leased facilities totaling up to $93.1 million in the event the Company 
does not purchase the properties at the ends of the lease terms. The 
Company must also maintain compliance with financial covenants similar 
to its credit facilities.

During fiscal 1998, the Company entered into an arrangement with a 
third-party leasing company under which certain of the Company's fixed 
assets with a carrying value of approximately $31.3 million were sold to 
the leasing company and leased back. The Company is accounting for these 
transactions as operating leases.

                                     46
<PAGE>
Future minimum payments related to lease obligations, including the 
$93.1 million contingent liability discussed above, are $39.5 million,  
$29.8 million, $20.9 million, $65.1 million and $44.9 million in each of 
the years in the five-year period ending August 31, 2003 and an 
aggregate $2.6 million for periods after that date. Rent expense was 
$33.3 million, $22.9 million and $17.0 million for the years ended 
August 31, 1998, 1997 and 1996, respectively.

Note 9:  Retirement Plans

The Company has various retirement plans that cover a significant number 
of its associates. The major pension plans are defined contribution 
plans, which provide pension benefits in return for services rendered, 
provide an individual account for each participant, and have terms that 
specify how contributions to the participant's account are to be 
determined rather than the amount of pension benefits the participant is 
to receive. Contributions to these plans are based on varying 
percentages of each participant's base salary. The Company's expense for 
the defined contribution plans totaled $4.5 million, $3.0 million and 
$2.3 million, in 1998, 1997 and 1996, respectively.

Note 10:  Income Taxes

The components of income taxes for the years ended August 31, 1998, 1997 
and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
                                       1998         1997         1996
                                     --------     --------     --------
     <S>                             <C>          <C>          <C>
     Current:
        Federal                      $ 74,123     $ 62,618     $ 48,817
        State                          15,319       10,923        7,151
        Foreign                        14,611        5,944        4,204
                                     --------     --------     --------
                                      104,053       79,485       60,172
                                     --------     --------     --------
     Deferred:
        Federal                        (7,819)      (8,808)      (2,579)
        State                          (1,586)      (1,067)        (233)
        Foreign                        (3,827)         (55)        (996)
                                     --------     --------     --------
                                      (13,232)      (9,330)      (3,808)
                                     --------     --------     --------
     Charge in lieu of taxes
        attributable to employee
        stock plans                     9,338       10,793        2,481
                                     --------     --------     --------
           Total                     $100,159     $ 80,348     $ 58,845
                                     ========     ========     ========
</TABLE>
                                     47

<PAGE>
The overall effective income tax rate (expressed as a percentage of 
financial statement income before income taxes) differed from the 
expected U.S. income tax rate for the years ended August 31, 1998, 1997 
and 1996 as follows:
<TABLE>
<CAPTION>
                                          1998         1997        1996
                                        -------      -------     -------
     <S>                                <C>          <C>         <C>
     Federal tax rate                     35.0%        35.0%       35.0%
     State income tax, net of federal 
      tax benefit                          3.2          3.1         2.8
     Tax exempt interest                    --           --        (0.1)
     Income of international subsidiaries
      taxed at different rates            (0.9)         0.2         0.5
     Tax holiday                          (7.1)        (3.8)       (5.0) 
     Other                                 3.3         (0.8)        0.8
                                          ----         ----        ----
     Effective income tax rate            33.5%        33.7%       34.0%
                                          ====         ====        ====
</TABLE>
The tax effects of temporary differences that give rise to significant 
portions of deferred tax assets and liabilities as of August 31, 1998 
and 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
                                            1998           1997
                                          --------       --------
     <S>                                  <C>            <C>
     Deferred tax assets:
      Accruals, allowances and reserves   $ 18,696       $ 14,240
      State income tax                       6,137          3,054
      Pre-operating costs                       14             15
      Acquired intangible assets             1,926          2,039
      Net undistributed profits of
       subsidiaries                          2,220          1,635
      Plant and equipment                    5,839          1,778
      Other                                  3,413          2,976
                                          --------       --------
     Total deferred tax assets              38,245         25,737
                                          --------       --------
     Deferred tax liabilities:
      Other                                   (359)        (1,083)
                                          --------       --------
     Total deferred tax liabilities           (359)        (1,083)
                                          --------       --------
     Net deferred tax assets              $ 37,886       $ 24,654
                                          ========       ========
</TABLE>
Based on the Company's historical operating income, management believes 
it is more likely than not that the Company will realize the benefit of 
the deferred tax assets recorded and, accordingly, has established no 
valuation allowance.

Worldwide income before income taxes for the years ended August 31, 
1998, 1997 and 1996 consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                        1998        1997        1996
                                      --------    --------    --------
     <S>                              <C>         <C>         <C>
     U.S.                             $216,979    $198,029    $140,900
     Non-U.S.                           82,004      40,378      32,177
                                      --------    --------    --------
        Total                         $298,983    $238,407    $173,077
                                      ========    ========    ========

                                     48
<PAGE>
During the fiscal year ended August 31, 1997, the Company adopted a 
change regarding undistributed earnings of its German subsidiaries, 
which previously were deemed to be permanently reinvested. The effect of 
this change was the recognition of net deferred tax assets for foreign 
tax credit utilization of approximately $0.6 million and $1.6 million 
for the years ended August 31, 1998 and 1997, respectively.  

Cumulative undistributed earnings of the international subsidiaries 
amounted to $210.6 million as of August 31, 1998, of which approximately 
$195.6 million is intended to be permanently reinvested. The amount of 
income tax liability that would result had such earnings been 
repatriated is estimated to be approximately $46.3 million.

The Company has been granted a tax holiday for its Malaysia sites which 
is effective through January 31, 2002, subject to certain conditions. 
The Company has also been granted various tax holidays in China, which 
are effective for various terms and are subject to certain conditions.

Note 11:  Stockholders' Equity

Pro Forma Fair Value Disclosures

The Company accounts for its employee stock plans, consisting of fixed 
stock option plans and an employee stock purchase plan, using the 
intrinsic value method. Accordingly, no compensation expense related to 
these plans has been recognized in the Company's financial statements. 
The table below sets out the pro forma amounts of net income and net 
income per share that would have resulted for the years ended August 31, 
1998, 1997 and 1996 if the Company accounted for its employee stock 
plans under the fair value recognition provisions of SFAS No. 123, 
"Accounting for Stock-Based Compensation."

</TABLE>
<TABLE>
<CAPTION>
                                      1998          1997          1996
                                    --------      --------      --------
                                   (in thousands, except per share data)
     <S>                            <C>           <C>           <C>
     Net income      As reported    $198,824      $158,059      $114,232
                     Pro forma      $173,559      $144,786      $108,905

     Net income per share:
     Basic           As reported    $   1.72      $   1.42      $   1.12
                     Pro forma      $   1.50      $   1.30      $   1.07

     Diluted         As reported    $   1.65      $   1.37      $   1.08
                     Pro forma      $   1.46      $   1.27      $   1.03








                                     49

<PAGE>
For purposes of computing pro forma net income, the fair value of each 
option grant and Employee Stock Purchase Plan purchase right is 
estimated on the date of grant using the Black-Scholes option pricing 
model. The assumptions used to value the option grants and purchase 
rights are stated below.

</TABLE>
<TABLE>
<CAPTION>
                          1998              1997              1996
                    ----------------  ----------------  ----------------
<S>                 <C>               <C>               <C>
Expected life of
 options                 4 years          4.3 years     4.3 to 4.7 years
Expected life of 
 purchase rights        3 months          3 months          3 months
Volatility                 44%               40%               40%
Risk-free interest 
 rate                 5.1% to 5.9%      5.2% to 6.5%      5.1% to 6.7%
Dividend yield            zero              zero              zero 
</TABLE>
Options vest over several years and new option grants are generally made 
each year.  Because of this and because the provisions of SFAS No. 123 
are effective only for fiscal years 1998, 1997 and 1996, the pro forma 
amounts shown above may not be representative of the pro forma effect on 
reported net income in future years.

Stock Option Plans

The Company's stock option plans provide for grants of options to 
associates to purchase common stock at the fair market value of such 
shares on the grant date. The options vest over a four-year period 
beginning generally on the grant date. The term of the options is five 
years for options granted prior to November 17, 1993 and seven years for 
options granted thereafter. In connection with the acquisition of Force 
Computers, Inc. (see Note 15), the Company assumed all options 
outstanding under the Force option plan, after the application of the 
exchange ratio.  Options under the Force plan generally vest over a 
four-year period beginning on the grant date and have a ten-year term. 
No further options may be granted under the Force plan.


















                                     50

<PAGE>
A summary of stock option activity under the plans for the years ended 
August 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
                       1998               1997               1996
                ------------------ ------------------ ------------------
                          Weighted           Weighted           Weighted
                  Number   Average   Number   Average   Number   Average
                    of    Exercise     of    Exercise     of    Exercise
                  Shares    Price    Shares    Price    Shares    Price
                --------- -------- --------- -------- --------- -------- 
<S>             <C>       <C>      <C>       <C>      <C>       <C>
Outstanding, 
 beg. of year  10,229,510  $18.99  9,431,576  $14.82  7,983,680  $11.69
Granted         2,676,682  $44.86  3,403,074  $26.82  3,173,878  $20.10
Assumed from
 Force plan           --      --     839,264  $ 2.20        --      --
Exercised      (2,809,115) $14.82 (3,007,754) $ 9.76 (1,237,774) $ 8.22
Canceled         (630,743) $28.16   (436,650) $21.03   (488,208) $15.07
               ----------         ----------         ----------
Outstanding,
 end of year    9,466,334  $26.93 10,229,510  $18.99  9,431,576  $14.82
               ==========         ==========         ==========
Exercisable
 at year-end    4,735,145  $20.72  5,181,725  $15.85  5,023,686  $12.48
               ==========         ==========         ==========
Weighted-average
 fair value of
 options granted
 during the year           $18.61             $11.23             $ 8.47
</TABLE>
Information regarding the stock options outstanding at August 31, 1998 
is summarized in the table below.
<TABLE>
<CAPTION>
                          Outstanding                   Exercisable
               ----------------------------------  ---------------------
                             Weighted
                              Average    Weighted               Weighted
   Range of                  Remaining   Average                Average
   Exercise     Number of   Contractual  Exercise   Number of   Exercise
    Prices       Shares        Life       Price      Shares      Price
-------------  -----------  -----------  --------  -----------  --------
<S>            <C>          <C>          <C>       <C>          <C>
$ 1.32-$ 5.14*    163,929    7.23 years   $ 3.73       48,089    $ 3.20
$13.31-$19.00   3,292,447    2.94 years   $16.08    2,786,199    $15.71     
$20.38-$23.94   2,180,878    4.37 years   $23.04    1,087,925    $22.91
$24.50-$29.63   1,140,920    5.30 years   $27.85      383,793    $28.40
$37.16-$39.94     478,119    6.04 years   $38.38      103,604    $38.04
$41.38-$50.75   2,210,041    6.38 years   $45.70      325,535    $44.25
               ----------                           ---------
$ 1.32-$50.75   9,466,334    4.59 years   $26.93    4,735,145    $20.72
               ==========                           =========
</TABLE>
*Options in this range of exercise prices represent the options assumed 
in connection with the acquisition of Force.

A total of 12,576,596 shares of common stock remain reserved for 
issuance under the plans as of August 31, 1998.

On December 1 of each year, each independent member of the Company's 
Board of Directors is granted an option to purchase 6,000 shares of 
common stock at the then current fair market value. Such options vest 
over one year.

                                     51
<PAGE>
Employee Stock Purchase Plan

Under the Company's Employee Stock Purchase Plan (the Purchase Plan), 
associates meeting specific employment qualifications are eligible to 
participate and can purchase shares quarterly through payroll deductions 
at the lower of 85% of the fair market value of the stock at the 
commencement or end of the offering period. The Purchase Plan permits 
eligible associates to purchase common stock through payroll deductions 
for up to 10% of qualified compensation. As of August 31, 1998, 
2,155,194 shares remain available for issuance under the Purchase Plan.

The weighted-average fair value of the purchase rights granted in fiscal 
1998, 1997 and 1996 was $9.98, $5.92 and $4.72, respectively.

Note 12:  Geographic Information

Information about the Company's operations in different geographic 
regions is presented in the table below:
<TABLE>
<CAPTION>
                                              Operating   Identifiable
                                Net Sales       Income       Assets
                               ----------     ---------   ------------
                                            (in thousands)
     <S>                       <C>            <C>         <C>
     Fiscal 1998:
       North America           $3,857,545     $247,791     $1,562,667
       Europe                   1,067,231       37,142        461,639
       Asia and other             363,518       14,056        386,262
                               ----------     --------     ----------
                               $5,288,294     $298,989     $2,410,568
                               ==========     ========     ==========
     Fiscal 1997:
       North America           $2,862,941     $200,664     $1,357,189
       Europe                     580,486       22,157        312,552
       Asia and other             250,958       13,601        206,678
                               ----------     --------     ----------
                               $3,694,385     $236,422     $1,876,419
                               ==========     ========     ==========
     Fiscal 1996:
       North America           $1,981,788     $142,470     $1,117,875
       Europe                     490,606        7,775        224,172
       Asia and other             344,797       25,180        110,151
                               ----------     --------     ----------
                               $2,817,191     $175,425     $1,452,198
                               ==========     ========     ==========
</TABLE>
Net sales and operating income reflect the destination of the product 
shipped.






                                     52

<PAGE>
Note 13:  Major Customers

Net sales to major customers as a percentage of consolidated net sales 
for the years ended August 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
                                        1998      1997      1996
                                       ------    ------    ------
    <S>                                <C>       <C>       <C>
    Hewlett-Packard Corporation          14%       14%       11%       
    Cisco Systems, Inc.                  11%        *         * 
    Sun Microsystems, Inc.               11%        *         *
    Nortel Networks, Inc. (formerly
     Bay Networks, Inc.)                  *        10%        * 
    ---------------------------
    * net sales less than 10%        
</TABLE>
The Company has concentrations of credit risk as a result of sales to 
these and other of the Company's significant customers. In particular, 
Hewlett-Packard Corporation accounts for approximately 13% of total 
accounts receivable at August 31, 1998. The concentration of credit risk 
is intensified due to the fact that the majority of the Company's 
customers are in the same industry. The Company has considered its 
concentrations of credit risk in establishing its reserves for bad debt 
and considers such reserves to be adequate.

Note 14: Purchase of Assets

In October 1997, the Company acquired certain assets, primarily 
equipment and inventory, of Ericsson Telecom AB's Business Area Infocom 
Systems' (Ericsson) printed circuit board assembly operation located in 
Sao Paulo, Brazil. The acquisition was accounted for as a purchase of 
assets and the purchase price was allocated to the assets acquired based 
on the relative fair values of the assets at the date of acquisition. 
Under the terms of the agreement, Ericsson will contract for the 
Company's services through its subsidiary, Solectron Brasil Ltda. 
through September 1999. In addition Solectron Brasil Ltda. hired 
approximately 370 associates formerly employed by Ericsson.

In April 1998, the Company acquired NCR Corporation's (NCR) 
manufacturing assets in three cities for a purchase price of 
approximately $79.5 million, subject to adjustment. The acquisition was 
accounted for as a purchase of assets and the purchase price was 
allocated to the assets acquired based on the relative fair values of 
the assets at the date of acquisition. Under the terms of the agreement, 
NCR will outsource the manufacturing of certain of its computer, 
computer peripheral and server components to Solectron for at least five 
years and Solectron hired approximately 1,200 NCR manufacturing and 
related support associates.

In June 1998, the Company acquired International Business Machines 
Corporation's (IBM) Electronic Card Assembly and Test (ECAT) 
manufacturing assets in Charlotte, North Carolina. In addition, the 
Company acquired non-exclusive rights to certain IBM intellectual 
property. The total purchase price for the manufacturing assets and the 
intellectual property rights was approximately $95.4 million, subject to 
adjustment. The transaction was accounted for as a purchase of assets, 
and the purchase price was allocated to the assets acquired based on the 
relative fair values of the assets at the date of acquisition. 
Approximately $17.0 million of the purchase price was allocated to the 
intellectual property rights, which will be amortized on a straight-line 
basis over ten years.

                                     53
<PAGE>
Under the terms of the agreement, Solectron hired approximately 700 IBM 
manufacturing and related support associates and the Company will 
provide printed circuit board assembly services to IBM in North America 
for the next three years. In addition, IBM has made available to 
Solectron 115 patents and 51 disclosures (collectively the intellectual 
property rights) covering a wide spectrum of technologies and 
capabilities. IBM will also provide to Solectron failure analysis and 
characterization tools for process development and manufacturing, 
including fault detection and isolation.

Note 15: Business Combinations

Poolings of Interests

In November 1996, the Company exchanged approximately 6.2 million shares 
of common stock for all of the outstanding stock of Force Computers, 
Inc. (Force) and assumed all of the outstanding options of Force after 
giving effect to the exchange ratio. Force is a designer and provider of 
computer platforms for the embedded market. This transaction was 
accounted for under the pooling of interests method. The results of 
operations of Force prior to its acquisition were not material to the 
Company's consolidated results of operations. Accordingly, the Company's 
historical financial statements have not been restated to reflect the 
financial position and results of operations of Force, and pro forma 
financial information has not been disclosed. The Company incurred 
transaction expenses of $4.0 million directly related to the acquisition 
of Force.

In March 1996, the Company exchanged common stock and common stock 
options for all of the outstanding stock and options of Fine Pitch 
Technology, Inc. (Fine Pitch), a provider of prototype services. This 
transaction was accounted for under the pooling of interests method. The 
results of operations of Fine Pitch prior to its acquisition were not 
material to the Company's consolidated results of operations. 
Accordingly, the Company's historical financial statements have not been 
restated to reflect the financial position and results of operations of 
Fine Pitch, and pro forma financial information has not been disclosed.

Purchases

In March 1996, the Company completed its purchase of Texas Instruments 
Incorporated's Custom Manufacturing Services (CMS) business. This 
business, principally located in Austin, Texas, was acquired for 
approximately $132 million. Under the terms of the agreement, Solectron 
purchased the CMS business in Austin, Texas and certain assets of the 
CMS business in Kuala Lumpur, Malaysia (collectively the CMS 
operations). The Company subsequently has moved the CMS business in 
Kuala Lumpur to Solectron's Penang, Malaysia operations. This 
transaction was accounted for under the purchase method of accounting. 
The acquisition resulted in goodwill of approximately $38 million, which 
is being amortized on a straight-line basis over 10 years.


                                     54

<PAGE>
The following pro forma financial information gives effect to the 
acquisition of the CMS operations on a purchase accounting basis for the 
year ended August 31, 1996, as if the CMS operations had been acquired 
at the beginning of that period. The preparation of this financial 
information requires the use of management's estimates. This pro forma 
financial information includes certain adjustments for goodwill 
amortization, increased depreciation expense, a decrease in interest 
income (related to the assumed liquidation of certain current 
investments for the purchase of the CMS operations) and the related 
income tax effects.

This pro forma combined information is not purported to be indicative of 
the results that would have actually been obtained if the combination 
had been in effect during the periods indicated, or that may be obtained 
in the future. In addition, it does not reflect the effects of any 
synergy that might be achieved from the newly combined operations.

Pro forma financial information:

                                         Year Ended 
                                         August 31,               
                                            1996         
                                         ----------   
                                        (in thousands, 
                                         except per
                                         share data)

Net sales                                $3,152,962   
Net income                               $  115,085   
Net income per share:
  Basic                                  $     1.13   
  Diluted                                $     1.09   






















                                     55

<PAGE>
16. Net Income per Share

The following table sets forth the computation of basic and diluted net 
income per share for the years ended August 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
                                            1998       1997       1996
                                          --------   --------   --------
                                                  (in thousands, 
                                              except per share data)
<S>                                       <C>        <C>        <C>
Net income - basic                        $198,824   $158,059   $114,232

 Interest expense from convertible 
  subordinated notes, net of taxes           9,593        --         739
                                          --------   --------   --------
Net income - diluted                      $208,417   $158,059   $114,971
                                          ========   ========   ========

Weighted average shares - basic            115,833    111,502    101,676                                              

  Common stock equivalents-stock options     3,930      3,819      2,578
  Common shares issuable upon assumed
   conversion of convertible subordinated
   notes                                     6,804        --       2,464
                                          --------   --------   --------
Weighted average shares - diluted          126,567    115,321    106,718
                                          ========   ========   ========

Net income per share - basic              $   1.72   $   1.42   $   1.12
                                          ========   ========   ========

Net income per share - diluted            $   1.65   $   1.37   $   1.08
                                          ========   ========   ========
</TABLE>
For the years ended August 31, 1998, 1997 and 1996 options to purchase 
2.1 million, 0.5 million and 1.3 million shares, respectively, of common 
stock with exercise prices greater than the average fair market value of 
the Company's stock for the period of $42.52, $29.59 and $20.22, 
respectively, were not included in the calculation because the effect 
would have been antidilutive. In addition, the calculations for the 
years ended August 31, 1997 and 1996 did not include the 6.8 million 
common shares issuable upon conversion of the convertible subordinated 
notes as they would also have been antidilutive.











                                     56

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Solectron Corporation:

We have audited the accompanying consolidated balance sheets of 
Solectron Corporation and subsidiaries as of August 31, 1998 and 1997, 
and the related consolidated statements of income, stockholders' equity 
and cash flows for each of the years in the three-year period ended 
August 31, 1998. In connection with our audits of the consolidated 
financial statements, we also have audited the financial statement 
schedule as listed in the Index at Item 14(a)(2). These consolidated 
financial statements and financial statement schedule are the 
responsibility of the Company's management. Our responsibility is to 
express an opinion on these consolidated financial statements and 
financial statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of 
Solectron Corporation and subsidiaries as of August 31, 1998 and 1997, 
and the results of their operations and their cash flows for each of the 
years in the three-year period ended August 31, 1998, in conformity with 
generally accepted accounting principles. Also in our opinion, the 
related financial statement schedule, when considered in relation to the 
basic consolidated financial statements taken as a whole, presents 
fairly, in all material respects, the information set forth therein.

                                                 KPMG PEAT MARWICK LLP

Mountain View, California
September 14, 1998













                                     57

<PAGE>
ITEM 9:   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING  
          AND FINANCIAL DISCLOSURE

Not applicable


















































                                     58

<PAGE>
PART III

ITEM 10:   DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Solectron's executive officers and directors and their ages as of August 
31, 1998 are as follows:

             Name               Age            Position
----------------------------  ------   -------------------------------
Koichi Nishimura, Ph.D.         60     President, Chief Executive
                                       Officer and Chairman of the Board  

David Kynaston                  57     Vice President and President
                                       Solectron Europe

Stephen T. Ng                   43     Senior Vice President and 
                                       Chief Materials Officer

Leslie T. Nishimura *           54     Senior Vice President and
                                       President Solectron  
                                       Washington, Inc.

Ken Tsai                        55     Senior Vice President and
                                       President Solectron Asia

Susan S. Wang                   47     Senior Vice President, Chief
                                       Financial Officer and Secretary      

Walter W. Wilson                54     Senior Vice President and 
                                       President Solectron Americas 

Saeed Zohouri, Ph.D.            47     Senior Vice President, Chief
                                       Technology Officer and  
                                       President Solectron North America 

Winston H. Chen, Ph.D. (4)      57     Director

Richard A. D'Amore (4)          45     Director

Charles A. Dickinson (3)(4)(5)  74     Director

Heinz Fridrich (1)(2)(5)        65     Director

Philip V. Gerdine, Ph.D. (2)    59     Director

William A. Hasler (3)(5)        56     Director

Kenneth E. Haughton, Ph.D. (3)  70     Director

Paul R. Low, Ph.D. (1)(2)       65     Director

Osamu Yamada (4)                69     Director
---------------
* Resigned from the Company in September 1998.
(1) Member of the Audit Committee, which was replaced by the Audit and 
Finance Committee effective September 1, 1998.
(2) Member of the Audit and Finance Committee.
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
(5) Member of Information Technology Committee

                                     59

<PAGE>
Dr. Koichi Nishimura has served as a director since 1991, Chairman of 
the Board since September 1996, Chief Executive Officer since 1992 and 
President since 1990. He was Co-Chief Executive Officer from 1991 to 
1992 and Chief Operating Officer from 1988 to 1991. From 1964 to 1988, 
Dr. Nishimura was employed by International Business Machines 
Corporation (IBM) in various technology and management positions. He 
also serves as a director of Merix Corporation.

Mr. David Kynaston joined Solectron in February 1996 as Vice President 
and President of Solectron Europe. Mr. Kynaston worked for Philips 
Electronics for the previous 15 years in various capacities, including 
Managing Director of Philips Mullard Ltd. subsidiary, Managing Director 
of the Business Communications Systems Division and most recently, 
Managing Director of the Private Mobile Radio Division. Mr. Kynaston has 
also held senior technical management positions at EMI Medical Ltd. and 
Cambridge Scientific Instruments Ltd.

Mr. Stephen T. Ng joined Solectron in September 1989 as Vice President, 
Worldwide Material Purchasing and is currently Senior Vice President and 
Chief Materials Officer of Solectron. Prior to joining Solectron, Mr. Ng 
had 11 years experience in materials management in various capacities 
with Xerox Corporation. His last position prior to joining Solectron was 
Manager, Material Operations at Xerox Corporation.

Mr. Leslie T. Nishimura, a founder of the Company, resigned from the 
Company in September 1998. He had served as Senior Vice President of 
Solectron since 1989, President of Solectron Asia from 1991 to 1993, 
Secretary of Solectron from 1989 to 1992 and Vice President, 
Manufacturing Technology of Solectron from 1978 to 1989. Mr. Nishimura's 
prior experience includes various materials, production control and 
inventory control supervisory positions at Ritter Co., Burndy 
Corporation and the Norden Division of United Technologies, Inc.

Mr. Ken Tsai is President of Solectron Asia and has served as Senior 
Vice President of Solectron since May 1995. Mr. Tsai was Vice President 
of Solectron from 1990 to 1995. He served as Director of Manufacturing 
for Solectron from 1989 to 1990 and in various manufacturing and other 
positions from 1984 to 1989. Prior to joining Solectron, Mr. Tsai served 
in various management and business planning positions at American 
Cyanamid Company from 1968 to 1984.

Ms. Susan S. Wang has served as Senior Vice President and Chief 
Financial Officer of Solectron since 1990 and as Secretary since 1992. 
She was Vice President, Finance and Chief Financial Officer of Solectron 
from 1986 to 1990 and Director of Finance of Solectron from 1984 to 
1986. Prior to joining Solectron, Ms. Wang held various accounting and 
finance positions with Xerox Corporation. Ms. Wang also held accounting 
and auditing positions with Westvaco Corp. and Price Waterhouse & Co. 
She is a Certified Public Accountant.

Mr. Walter W. Wilson has served as President, Solectron Americas since 
April 1997, President, Solectron North America from September 1995 to 
March 1997, President Solectron California Corporation from March 1992 
to February 1996 and Senior Vice President of Solectron since 1990. From 
1989 to 1990 he served as an operational Vice President of Solectron. 
From 1965 to 1989 Mr. Wilson was employed by IBM in manufacturing and 
product development. During his IBM tenure, he held management positions 
in the United States, West Germany and Japan.

                                     60

<PAGE>
Dr. Saeed Zohouri has served as Senior Vice President and Chief 
Technology Officer since 1994, President Solectron California 
Corporation from March 1996 to August 1998 and President, Solectron 
North America since August 1998. Dr. Zohouri joined Solectron in 1980; 
he has held various management positions and has also served as Director 
of Technology. His prior experience includes teaching chemistry at a 
major international university.

Dr. Winston H. Chen is a founder of the Company and has served as a 
director of Solectron since 1978, Chairman of the Board from 1990 to 
1994, President from 1979 to 1990, Chief Executive Officer from 1984 to 
1991 and as Co-Chief Executive Officer from 1991 through 1992. Dr. Chen 
is currently Chairman of the Paramitas Foundation. From 1970 to 1978, 
Dr. Chen served as Process Technology and Development Manager of IBM. He 
also serves as a director of Intel Corporation and Edison International.

Mr. Richard A. D'Amore has served as a director of Solectron since 1985. 
Mr. D'Amore has been a general partner of North Bridge Venture Partners 
since 1992. He also serves as a director of Math Soft, Inc., VEECO 
Instruments, Inc. and Xionics Document Technologies, Inc.

Mr. Charles A. Dickinson has served as a director of Solectron since 
1984, and as Chairman of the Board of Directors from 1986 to 1990 and 
from 1994 to September 1996. He served as an independent consultant to 
Solectron from 1991 to 1993. He served as President, Solectron Europe 
from September 1993 to February 1996. From 1986 to 1990, he was Chairman 
of the Board of Directors, President and Chief Executive Officer of 
Vermont Micro Systems, Inc. He also serves as a director of Trident 
Microsystems, Inc., Aavid Thermal Technologies, Inc., Lecroy Corporation 
and Dense Pac Microsystems, Inc.

Mr. Heinz Fridrich has served as a director of the Company since April 
1996. Mr. Fridrich is currently a member of the faculty of the 
University of Florida. From 1950 to 1993, Mr. Fridrich held a number of 
manufacturing and operations management positions in Europe and the 
United States with IBM. He currently serves as a director of Central 
Hudson Gas & Electric Company and VEECO Instruments, Inc.

Dr. Philip V. Gerdine has served as a director of the Company since May 
1998. Dr. Gerdine served as Executive Director, Siemens AG and as 
managing director of The Plessey Company from September 1989 to 
September 1998 and previously was Vice President-Corporate Development 
of Siemens Corporation. Prior to joining Siemens in July 1988, Dr. 
Gerdine held senior management positions with General Electric Co., 
Price Waterhouse, and The Boston Consulting Group. He currently serves 
as a director of Applied Materials, Inc.

Mr. William A. Hasler has served as a director of the Company since May 
1998. Mr. Hasler is currently co-chief executive officer of Aphton 
Corporation, an international biotechnology firm. Prior to joining 
Aphton, he was Dean and Department Chair of the Haas School of Business 
at the University of California, Berkeley. He currently serves as a 
director of Quickturn Design Systems Inc., Walker Interactive Systems 
Inc., TCSI Corporation and Tenera, Inc.

Dr. Kenneth E. Haughton has served as a director of Solectron since 
1985. Dr. Haughton is currently an independent consultant. From 1990 to 
1991, he was Vice President of Engineering at Da Vinci Graphics, a 
computer graphics firm. From 1989 to 1990, Dr. Haughton was an 
independent consultant and from 1982 to 1989, he served as Dean of 
Engineering at Santa Clara University. He also serves as a director of 
Seagate Technology.

                                    61
<PAGE>
Dr. Paul R. Low has served as a director of Solectron since 1993 and is 
currently the President of PRL Associates. Prior to founding PRL 
Associates, Dr. Low worked for IBM from 1957 to 1992. Dr. Low held 
senior management and executive positions with successively increasing 
responsibility, including President, General Technology Division and IBM 
Corporate Vice President; President of General Products Division; and 
General Manager, Technology Products business line, also serving on 
IBM's corporate management board. He also serves as a director of 
Applied Materials, Inc., VEECO, NCD and XION.

Mr. Osamu Yamada has served as a director of Solectron since 1994. From 
1990 to 1991, he was Chairman and Chief Executive Officer of BankCal 
Tri-State Corporation, a wholly owned subsidiary of The Mitsubishi Bank, 
Limited. From 1987 to 1990, he was Senior Managing Director of The 
Mitsubishi Bank, Limited, and in an overlapping period from 1985 to 
1990, he was also Chairman, President and Chief Executive Officer of 
Bank of California. Prior to that, he held a number of key management 
positions with The Mitsubishi Bank, Limited organization. Mr. Yamada 
currently serves on a number of boards of major universities and 
cultural centers. 

There is no family relationship among any of the foregoing individuals.


ITEM 11:   EXECUTIVE COMPENSATION

The information required by item 11 of Form 10-K is incorporated by 
reference to the information contained in the section captioned 
"Executive Officer Compensation" of the Registrant's definitive Proxy 
Statement (Notice of Annual Meeting of Stockholders) for the fiscal year 
ended August 31, 1998 to be held on January 12, 1999 which the Company 
will file with the Securities and Exchange Commission within 120 days 
after the end of the fiscal year covered by this report.


ITEM 12:   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT

Information regarding this item is incorporated herein by reference from 
the section entitled "Security Ownership of Certain Beneficial Owners 
and Management" of the Registrant's definitive Proxy Statement (Annual 
Meeting of Stockholders) for the fiscal year ended August 31, 1998.


ITEM 13:   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to this item is incorporated herein by 
reference from the section entitled "Certain Transactions" of the 
Registrant's definitive Proxy Statement (Annual Meeting of Stockholders) 
for the fiscal year ended August 31, 1998.


                                     62

<PAGE>
PART IV

ITEM 14:   EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
           FORM 8-K

(a) 1.   Financial Statements. The financial statements listed in
         Item 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, above are
         filed as part of this Annual Report on Form 10-K, beginning on 
         page 34.

    2.   Financial Statement Schedule.  The financial statement
         Schedule II - VALUATION AND QUALIFYING ACCOUNTS is filed as  
         part of this annual report on Form 10-K, at page 65.

    3.   Exhibits.  The exhibits listed in the accompanying Index to 
         Exhibits are filed as part of this Annual Report on Form 10-K.

(b)      Reports on Form 8-K.  During the fiscal quarter ended
         August 31, 1998 no current reports on Form 8-K were filed.



































                                     63

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized.

                                           SOLECTRON CORPORATION
                                           (Registrant)

Date: November 12, 1998                     By  /s/  Koichi Nishimura
                                           (Koichi Nishimura, President,
                                           Chief Executive Officer and
                                           Chairman of the Board)

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

Name                         Title                   Date
--------------------------   ---------------------   -----------------
              
 /s/ Koichi Nishimura        President, Chief        
 Koichi Nishimura, Ph.D.     Executive Officer, 
                             and Chairman of the         
                             Board                    November 12, 1998     
                                                   
 /s/ Susan Wang              Chief Financial         
 Susan S. Wang               Officer (Principal      
                             Financial and           
                             Accounting Officer),   
                             Senior Vice President
                             and Secretary            November 12, 1998

/s/ Winston H. Chen          Director                 November 12, 1998
Winston H. Chen, Ph.D.                                                      

/s/ Richard A. D'Amore       Director                 November 12, 1998
Richard A. D'Amore                                 
                                                                        
/s/ Charles A. Dickinson     Director                 November 12, 1998
Charles A. Dickinson      

/s/ Heinz Fridrich           Director                 November 12, 1998
Heinz Fridrich

/s/ Philip V. Gerdine        Director                 November 12, 1998
Philip V. Gerdine, Ph.D.

/s/ William A. Hasler        Director                 November 12, 1998
William A. Hasler

/s/ Kenneth E. Haughton      Director                 November 12, 1998     
Kenneth E. Haughton, Ph.D.
                     
/s/ Paul R. Low              Director                 November 12, 1998
Paul R. Low, Ph.D.                                                              

/s/ Osamu Yamada              Director                November 12, 1998
Osamu Yamada

                                     64

<PAGE>

<TABLE>
                     SOLECTRON CORPORATION AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)

<CAPTION>
                                    Amounts
                        Balance at  Charged                  Balance at
                        Beginning      To                       End
Description             of Period  Operations  (Deductions)  Of Period
----------------------  ---------  ----------  ------------  ----------
<S>                     <C>        <C>         <C>           <C>
Year ended August 31, 1996:
Allowance for doubtful
  accounts receivable     $3,501      $1,651      $(2,160)      $2,992

Year ended August 31, 1997:
Allowance for doubtful
  accounts receivable     $2,992      $2,319      $(1,262)      $4,049      

Year ended August 31, 1998:
Allowance for doubtful
  accounts receivable     $4,049      $2,254      $(2,304)      $3,999

</TABLE>

  



























                                     65

<PAGE>
                          INDEX TO EXHIBITS


Exhibit
Number       Description
-----------  ----------------------------------------------------------
2.1   [B]    Agreement and Plan of Reorganization, by and among the  
             Company, Force Acq. Corp. and Force Computers, Inc. as 
             amended.
3.1   [I]    Certificate of Incorporation of the Company.
3.2   [I]    Bylaws of the Company.
10.1  [A]    Preferred Stock Purchase Agreement dated September 29, 
             1983, together with amendments thereto dated February 28, 
             1984 and June 23, 1988.
10.2  [I]    Form of Indemnification Agreement between the Company and 
             its officers, directors and certain other key employees.
10.3  [D]    1983 Incentive Stock Option Plan, as amended August 13, 
             1991.
10.4  [E]    1988 Employee Stock Purchase Plan, as amended October 1992.
10.5  [H]    Amended and Restated 1992 Stock Option Plan.
10.6  [C]+   Asset Purchase Agreement dated as of January 29, 1996, as 
             amended and restated as of March 29, 1996 by and among       
             Solectron Texas, L.P., the Company and Texas Instruments, 
             Incorporated.
10.7  [F]    Stock Acquisition Agreement dated August 28, 1993, between
             the Company and Solectron California Corporation.
10.8  [G]    Lease Agreement between BNP Leasing Corporation, as             
             Landlord, and the Company, as Tenant, Effective September 
             6, 1994.
10.9  [G]    Purchase Agreement, by and between the Company and BNP 
             Leasing Corporation, dated September 6, 1994.
10.10 [G]    Pledge and Security Agreement, by and between the Company, 
             as Debtor, and BNP Leasing Corporation, as Secured Party, 
             dated September 6, 1994.
10.11 [G]    Assignment and Assumption Agreement between the Company and 
             Solectron California Corporation, dated November 9, 1994.
10.12 [G]    Custodial Agreement by and between the Company, Banque 
             Nationale De Paris and BNP Leasing Corporation, dated 
             September 6, 1994.
10.13 [I]    Modification Agreement (First Amendment to Purchase 
             Agreement and Second Amendment to Lease Agreement) by and  
             between the Company and BNP Leasing Corporation, dated 
             May 1, 1997.
10.14 [I]    Credit Agreement between the Company and Bank of America 
             National Trust and Savings Association, as Agent and 
             Issuing Bank, dated April 30, 1997.
10.15a [I]   Purchase and Sale Agreement among Solectron Corporation, as 
             Originator, Servicer and Guarantor, Solectron California 
             Corporation, as Originator, and Solectron Funding 
             Corporation, as the Initial Purchaser, dated September 17, 
             1997 
10.15b [I]   Receivables Purchase Agreement, among Solectron Funding 
             Corporation, as Seller, Solectron Corporation, individually 
             and as Servicer, Receivables Capital Corporation, as Issuer 
             and Bank of America National Trust and Savings Association,    
             as Administrator, dated September 17, 1997.
21.1         Subsidiaries of the Registrant.
23.1         Consent of Independent Auditors.
27.1 Financial Data Schedule.

                                     66
<PAGE>
                       INDEX TO EXHIBITS (Continued)

Footnotes   Description


[A]         Incorporated by reference to the Exhibits to the Company's
            Registration Statement on Form S-1 (File No. 33-22840).
[B]         Incorporated by reference to the Exhibits to the Company's
            Registration Statement on Form S-4 as amended, filed 
            November 20, 1996.  (File No. 333-15983).
[C]         Incorporated by reference to the Exhibits of the Company's 
            Form 10-Q for the quarter ended February 29, 1996.
[D]         Incorporated by reference to the Exhibits to Company's
            Registration Statement on Form S-8 (File No. 33-46686).
[E]         Incorporated by reference to the Exhibits to Company's Form 
            10-K for the year ended August 31, 1992.
[F]         Incorporated by reference to the Exhibits to Company's Form 
            10-K for the year ended August 31, 1993.
[G]         Incorporated by reference to the Exhibits to Company's Form  
            10-K for the year ended August 31, 1994.
[H]         Incorporated by reference to the Exhibits to Company's
            Registration Statement on Form S-8 filed March 31, 1997 
            (File No. 333-24293).
[I]         Incorporated by reference to the Exhibits to Company's Form  
            10-K for the year ended August 31, 1997.



+  Confidential treatment has been granted for certain portions
of these documents.























                                     67