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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                  ___________

                                   FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES 
EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996.

                                      OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM ________ TO _________. 

                         COMMISSION FILE NUMBER 0-26944



                        SILICON STORAGE TECHNOLOGY, INC.
               (Exact name of Company as specified in its charter)


                    CALIFORNIA                             77-0225590
          (State or other jurisdiction of                (I.R.S. Employer
           incorporation or organization)              Identification Number)

        1171 SONORA COURT, SUNNYVALE, CA                        94086
     (Address of principal executive offices)                 (Zip code)

Company's telephone number, including area code:           (408) 735-9110

                                  __________




Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes X   No _.

Number of shares outstanding of the Company's Common Stock, no par value, as 
of the latest practicable date, October 31,1996: 23,292,648.  Total number of 
pages in document: 13.  Index to Exhibits is on page 11.

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                                       1
<PAGE>


                           SILICON STORAGE TECHNOLOGY, INC.

                     FORM 10-Q: QUARTER ENDED SEPTEMBER 30, 1996

                                  TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION


          Item 1.   Condensed Consolidated Financial Statements:
                         Condensed Consolidated Statements of Operations...... 3
                         Condensed Consolidated Balance Sheets................ 4
                         Condensed Consolidated Statements of Cash Flows...... 5
                         Notes to Condensed Consolidated Financial Statements. 6

          Item 2.   Management's Discussion and Analysis of Financial
                    Condition and Results of Operation........................ 8



PART II - OTHER INFORMATION


          Item 1.   Legal Proceedings........................................ 11

          Item 5.   Other Information........................................ 11

          Item 6.   Exhibits and Reports on Form 8-K......................... 11











                                       2
<PAGE>



                                     PART I
                                     ------

ITEM 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                   SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARY
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                     THREE MONTHS ENDED SEPTEMBER 30,   NINE MONTHS ENDED SEPTEMBER 30,
                                     --------------------------------   -------------------------------
                                          1995          1996                   1995         1996
                                          ----          ----                   ----         -----
                                              (unaudited)                         (unaudited)
<S>                                    <C>            <C>                   <C>            <C>
Revenues:
    Product                             $12,472        $23,046                $21,721       $67,566
    License                                 436            359                  1,157         2,233
                                        -------        -------                -------       -------
        Net revenues                     12,908         23,405                 22,878        69,799

 Costs and expenses:
    Cost of revenues                      8,453         14,339                15,942         41,532
    Research and development                974          1,713                  2,536         4,986
    Sales and marketing                     751          1,129                  1,584         3,584
    General and administrative              440            722                    887         2,356
                                        -------        -------                -------       -------
                                         10,618         17,903                 20,949        52,458
                                        -------        -------                -------       -------
        Income from operations            2,290          5,502                  1,929        17,341

Interest income (expense), net               19            306                    (52)        1,228
Other income                                  -              -                      -           179
                                        -------        -------                -------       -------
Income before provision for income
 taxes                                    2,309          5,808                  1,877        18,748

Provision for income taxes                    -          2,115                      1         7,134
                                        -------        -------                -------       -------
        Net income                       $2,309         $3,693                 $1,876       $11,614
                                        -------        -------                -------       -------
                                        -------        -------                -------       -------
Net income per share                      $0.12          $0.15                  $0.10         $0.46
                                        -------        -------                -------       -------
                                        -------        -------                -------       -------
Shares used in per share calculation     19,269         24,999                 19,072        25,158
                                        -------        -------                -------       -------
                                        -------        -------                -------       -------

</TABLE>

              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.

                                       3


<PAGE>



                   SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARY
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (IN THOUSANDS)


<TABLE>
<CAPTION>
                     ASSETS
                                                        DECEMBER 31,    SEPTEMBER 30,
                                                           1995             1996
                                                        ------------    -------------
                                                                         (unaudited)
<S>                                                     <C>              <C>
Current Assets:
     Cash and cash equivalents                            $48,405          $18,508
     Short-term investments                                     -           13,611
     Accounts receivable, net                               7,480           12,411
     Accounts receivable from related parties                   -            3,577
     Inventories                                            2,483           18,860
     Current deferred tax asset                             1,930            3,423
     Other current assets                                     605              906
                                                        ------------    -------------
           Total current assets                            60,903           71,296

Long-term investments                                           -            1,504
Furniture, fixtures, and equipment, net                     5,178           10,347
Other assets                                                  322            1,415
                                                        ------------    -------------
           Total assets                                   $66,403          $84,562
                                                        ------------    -------------
                                                        ------------    -------------

                    LIABILITIES
Current liabilities:
     Trade accounts payable                                 3,559            6,932
     Account payable to related party                       4,581            7,921
     Accrued expenses and other liabilities                 4,754            4,316
     Deferred revenue                                       1,337            1,661
                                                        ------------    -------------
           Total current liabilities                       14,231           20,830
                                                        ------------    -------------

                    SHAREHOLDERS' EQUITY
Common stock and deferred stock compensation               53,457           53,320
Retained earnings (accumulated deficit)                    (1,285)          10,412
                                                        ------------    -------------
     Total shareholders' equity                            52,172           63,732
                                                        ------------    -------------
           Total liabilities and shareholders' equity     $66,403          $84,562
                                                        ------------    -------------
                                                        ------------    -------------

</TABLE>

              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.

                                       4


<PAGE>

                   SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARY
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                     NINE MONTHS ENDED SEPTEMBER 30,
                                                                     -------------------------------
                                                                           1995          1996
                                                                           ----          ----
                                                                              (UNAUDITED)
<S>                                                                      <C>            <C>
Cash flows from operating activities:
     Net income                                                           $1,876        $11,614
     Adjustments to reconcile net income to net cash
       provided by (used in) operating activities:
     Depreciation and amortization                                         1,202          1,832
     Provision for doubtful accounts receivable                              136            (19)
     Provisions for excess and obsolete inventories                          125          2,211
     Amortization of deferred stock compensation                               9             27
     Deferred income taxes                                                     -         (1,943)
     Changes in operating assets and liabilities:
           Accounts receivable                                            (4,044)        (4,912)
           Accounts receivable from related parties                            -         (3,577)
           Inventories                                                    (2,002)       (18,359)
           Prepaid expenses and other current and noncurrent assets         (255)           312
           Trade accounts payable and accounts payable to related party    4,392          6,713
           Accrued expenses and other liabilities                          1,740           (438)
           Deferred revenue                                                  (93)           324
                                                                          ------        -------
                 Net cash provided by (used in) operating activities       3,086         (6,215)
                                                                          ------        -------

Cash flows from investing activities:
     Acquisition of furniture, fixtures and equipment                     (2,698)        (7,001)
     Purchases of available-for-sale investments                               -        (71,261)
     Sales and maturities of available-for-sale investments                    -         56,146
     Other                                                                    (6)          (939)
                                                                          ------        -------
                 Net cash provided by (used in) investing activities      (2,704)       (23,055)
                                                                          ------        -------
Cash flows from financing activities:
     Proceeds from loan from corporate partner                             3,776              -
     Issuance of shares of common stock and other                            139             96
     Change in restricted cash balance                                       800              -
     Repayment of notes payable to bank                                     (800)             -
     Repurchase of stock                                                       -           (723)
                                                                          ------        -------
                 Net cash provided by (used in) financing activities       3,915           (627)
                                                                          ------        -------
        
                     Net increase (decrease) in cash and cash equivalents  4,297        (29,897)
        
Cash and cash equivalents at beginning of period                           2,751         48,405
                                                                          ------        -------
Cash and cash equivalents at end of period                                $7,048        $18,508
                                                                          ------        -------
                                                                          ------        -------
</TABLE>

             The accompanying notes are an integral part of these
                condensed consolidated financial statements.

                                       5


<PAGE>

                         SILICON STORAGE TECHNOLOGY, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.  BASIS OF PRESENTATION

The accompanying unaudited condensed interim consolidated financial 
statements include all adjustments, consisting only of normal recurring 
adjustments and accruals, that in the opinion of the management of Silicon 
Storage Technology, Inc. (the "Company" or "SST") are necessary for a fair 
presentation of the Company's financial position as of September 30, 1996 and 
the results of operations and cash flows for the nine months ended September 
30, 1995 and 1996. The unaudited interim consolidated financial statements 
should be read in conjunction with the audited consolidated financial 
statements of the Company and the notes thereto included in the Company's 
Annual Report on Form 10-K for the year ended December 31, 1995, filed with 
the Securities and Exchange Commission.

The year-end balance sheet at December 31, 1995 was derived from audited 
financial statements, but does not include all disclosures required by 
generally accepted accounting principles.

2. COMPUTATION OF NET INCOME PER SHARE

Net income per share is computed using the weighted average number of common 
and common equivalent shares outstanding during the period.  Pursuant to 
Securities and Exchange Commission Staff Accounting Bulletin No. 83, all 
common and common equivalent shares issued during the twelve months preceding 
the filing date of the Company's initial public offering have been included 
in the calculation of the number of shares used to determine net income per 
share as if the shares had been outstanding for all periods presented using 
the treasury stock method.

3. INVENTORIES (IN THOUSANDS):

                                  DECEMBER 31,   SEPTEMBER 30,
                                  ------------   -------------
                                     1995            1996
                                  ------------   -------------
                                                  (unaudited)

Raw materials                        $133           $3,221
Work in process                     1,831           13,340
Finished goods                        519            2,299
                                  ------------   -------------
                                   $2,483          $18,860
                                  ------------   -------------
                                  ------------   -------------


4. LEGAL PROCEEDINGS

On January 3, 1996, Atmel Corporation ("Atmel") sued the Company in the U.S. 
District Court for the Northern District of California.  Atmel's complaint 
alleges that the Company, by making, using and selling devices, is willfully 
infringing five U.S. patents owned by, or exclusively licensed to, Atmel. 
Regarding each of these five patents, Atmel seeks a judgment that the Company 
has infringed the patent, an injunction prohibiting further infringement, 
treble the amount of damages caused by the alleged infringement and 
attorney's fees, costs and expenses.  On February 13, 1996 the Company filed 
an answer denying Atmel's allegations and asserting affirmative defenses and 
counterclaims.  There can be no assurance that the Atmel complaint or other 
third party assertions will be resolved without costly litigation or in a 
manner that is not adverse to the Company.  Accordingly, while the Company 
has accrued certain amounts for costs associated with this matter, it is 
reasonably possible that the ultimate resolution could result in payments in 
excess of the amounts accrued in the accompanying financial statements and/or 
require royalty payments in the future which could adversely impact gross 
margins.  No estimate of these possible payments can be made.

                                       6


<PAGE>

5. STOCK REPURCHASE PROGRAM

In July, 1996 the Board of Directors authorized the purchase of up to 500,000 
shares of the Company's stock in the open market.  Approximately 100,000 
shares were repurchased under this authorization during August and September 
1996 for an aggregate purchase price of $722,500.

6. STOCK OPTION REPRICING PROGRAM

On September 11, 1996 the Board of Directors authorized employees the right 
to convert certain outstanding stock options into option grants with an 
exercise price of $7.125 per share (the fair market value as of the date of 
the Board's authorization).  The converted option grants vest on a date that 
is six months after the date such installment would have vested had the 
option not been amended by the employee exercising this conversion right.   
Approximately 276,500 stock options were repriced pursuant to this program.



                                       7


<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATION.

The following discussion may be understood more fully by reference to the 
condensed consolidated financial statements, notes to the condensed 
consolidated financial statements, and management's discussion and analysis 
contained in the Company's Annual Report on Form 10-K for the year ended 
December 31, 1995, as filed with the Securities and Exchange Commission.

Except for the historical information contained herein, the following 
discussion may contain forward-looking statements that involve risks and 
uncertainties. The Company's actual results could differ materially from 
those discussed here. Factors that could cause or contribute to the Company's 
actual results to differ materially from expected results include: the 
availability, deliverability and cost of wafers from the Company's suppliers, 
competitive pricing pressures, fluctuations in manufacturing yields, new 
product announcements and introductions by the Company or its competitors, 
changes in demand for, or in the mix of, the Company's products, changes in 
average selling prices, the gain or loss of significant customers, market 
acceptance of products utilizing the Company's SuperFlash technology, changes 
in the channels through which the Company's products are distributed, foreign 
currency fluctuations, unanticipated research and development expenses 
associated with new product introductions and the timing of significant 
orders.  Operating results could also be adversely affected by general 
economic conditions and a downturn in the market for consumer products which 
incorporate the Company's products, such as personal computers and cellular 
telephones.  All of these factors, and other factors, are difficult to 
forecast and can materially affect the Company's quarterly or annual 
operating results.  Fluctuations in revenues and operating results may cause 
volatility in the Company's stock price.  Please also refer to the Company's 
Form 10-K for the year ended December 31, 1995 in the Risk Factors section 
for a discussion of such risk factors.

GENERAL

SST ("Silicon Storage Technology, Inc." or the "Company") was incorporated in 
California in 1989.  The Company is a supplier of flash memory devices, 
addressing the requirements of high volume applications. Currently, the Company 
offers medium density flash memory devices ranging from 512Kbit to 4Mbit that 
target a broad range of existing and emerging applications in the personal 
computer, PC peripheral, communications, multimedia, set-top box, and video 
game markets. End products currently sold with the Company's products include, 
but are not necessarily limited to, personal computers, CD-ROMs and hard disk 
drives, electronic organizers/personal digital assistants, cellular telephones, 
and pagers.  For fiscal year 1996 to date, a majority of the Company's product 
revenues have been derived from the sale of 1Mbit flash memory devices, with 
the balance of the Company's product revenues have been derived from the sales 
of 512Kbit, 2Mbit, and 4Mbit flash memory devices.  The Company is developing 
higher density flash memory products to address emerging markets such as 
digital cameras, voice recorders, video telephones, memory cards, network 
adaptor cards, digital cellular phones and printer font storage.  

During the third quarter of 1996, the Company derived approximately 35% of 
its product revenues from sales to Taiwan-based PC manufacturers.  The 
Company intends to diversify its customer base by increasing sales in other 
geographic areas and to continue targeting additional high volume 
applications such as the cellular telephone, CD-ROM drive, hard disk drive, 
video game, electronic organizer and set-top box markets.  The Company is 
increasing the scope of its international sales efforts and expects that 
international sales will continue to account for a significant portion of its 
product revenues although the percentage may fluctuate from period to period. 
Although the Company's international sales are primarily denominated in U.S. 
dollars, these sales are subject to a number of risks associated generally 
with international sales, including the effect of geo-political 
uncertainties, currency fluctuations, state-imposed restrictions on the 
repatriation of funds, import and export duties and restrictions.

RESULTS OF OPERATION: QUARTER ENDED SEPTEMBER 30,  1996

The following discussion relates to the financial statements of the Company 
for the three months ended September 30, 1996 (current quarter) of the fiscal 
year ending December 31, 1996, in comparison to the three months ended 
September 30, 1995 (comparable quarter of the prior year) and for the nine 
months ended September 30, 1996 as compared to the nine months ended 
September 30, 1995. Operating results for the nine months ended September 30, 
1996 are not necessarily indicative of the results to be achieved for the 
full fiscal year ending December 31, 1996.


                                       8


<PAGE>

NET REVENUES. Net revenues increased from $23.4 million in the current 
quarter as compared to $12.9 million for the comparable quarter of the prior 
year due to increased shipment volumes.  Net revenues were $69.8 million for 
the nine months ended September 30, 1996 as compared to $22.9 million for the 
nine months ended September 30, 1995.  Net revenues increased year-to-year 
due primarily to increased unit shipments across all product lines.

Product revenues were $23.0 million in the current quarter as compared to 
$12.5 million for the comparable quarter of the prior year, again due the 
increased shipments of 1Mbit and 512Kbit products.  Product revenues were 
$67.6 million for the first nine months ended September 30, 1996 as compared 
to $21.7 million for the same period ended 1995, due to increased shipment 
volumes for all product lines.  License, royalty and development revenues 
were $0.4 million for the current quarter as compared to $0.4 million in the 
comparable quarter for the prior year, and $2.2 million for the nine months 
ended September 30, 1996 as compared to $1.2 million for the same period in 
the prior year.  License revenues increased during these comparable nine 
months periods due to the receipt of royalty payments from a related party. 
Current quarter license revenues consist primarily of one nonrefundable 
upfront license and development fee from a third party and a royalty payment 
from a related party.  Such upfront license fees and royalty payments may or 
may not recur in future quarters.
    
During the third quarter of 1996, the Company derived approximately 35% of 
product revenues from sales to Taiwan-based PC manufacturers, as compared to 
68% for the comparable quarter of the prior year.  While the Company intends 
to diversify both the market application of its products and its customer 
base, there can be no assurance that such diversification will occur.  
International sales accounted for approximately 85% of product revenues 
during the current quarter, as compared to 87% for the comparable quarter of 
the prior year.  For the nine months ended September 30, 1996, 42% of product 
revenues were from Taiwan and, over the same period,  88% of product revenues 
were from international sales.  International sales are anticipated to 
account for a substantial majority of all product revenues for the 
foreseeable future.

COST OF REVENUES. Gross margin was $9.1 million or 39% of net revenues in the 
third quarter of 1996 as compared to $4.5 million or 35% of net revenues for 
the comparable quarter in 1995 and increased due to increased shipment 
volumes. Gross margin was $28.3 million for the nine months ended September 
30, 1996 as compared to $6.9 million for the nine months ended September 30, 
1995, also increasing due to higher shipment volumes. Future fluctuations in 
gross margins may occur as a result of changes in the mix between license 
revenues and product revenues or the impact of changes in the product mix.

The Company's agreement with Sanyo provides for wafer price adjustments based 
on dollar/yen exchange rate fluctuations.  As a result, a strengthening yen 
could result in higher cost of revenues.

Average selling prices of Flash memory product are subject to significant 
fluctuation due to periodic changes in supply and demand.  Declining average 
selling prices will adversely affect gross margins unless the Company is able 
to offset such declines with reductions in per unit costs or changes in 
product mix.  

RESEARCH AND DEVELOPMENT. Research and development expenses were $1.7 million 
or 7% of net revenues during the third quarter of 1996 as compared to $1.0 
million or 8% of net revenues during the comparable quarter of 1995. The 
increase in research and development expenses since last year is primarily a 
result of hiring additional personnel, depreciation related to purchases of 
additional engineering test equipment, and increased prototyping and product 
qualification costs associated with the Company's process and development 
efforts.  Research and development expenses were $5.0 million for the nine 
months ended September 30, 1996 as compared to $2.5 million for the nine 
months ended September 30, 1995.  Research and development expenses increased 
year-to-year for this period due to increases in personnel, depreciation, and 
project related expenses.

SALES AND MARKETING. Sales and marketing expenses were $1.1 million or 5% of 
net revenues during the third quarter of 1996, as compared to $0.8 million or 
6% of net revenues for the comparable quarter in 1995.  Sales and marketing 
expenses consist primarily of sales commissions to manufacturer's 
representatives, salaries of the Company's sales and marketing personnel and 
product literature expenses. The increase in expense from the third quarter 
of 1996 as compared to the third quarter of 1995 corresponds primarily to 
increased commissions resulting from higher product revenue levels.  Sales 
and marketing expenses were $3.6 million for the nine months ended September 
30, 1996 as compared to $1.6 million for the nine months ended September 30, 
1995.  Sales and marketing expenses increased year-to-year for this period 
due to increases in personnel and increased commissions related to higher 
revenue levels.


                                       9


<PAGE>


GENERAL AND ADMINISTRATIVE. General and administrative expenses were $0.7 
million or 3% of net revenues during the quarter ended September 30, 1996, 
and $0.4 million or 3% of net revenues during the comparable quarter ended 
September 30, 1995.  The increase is primarily due to the higher headcount, 
higher facilities-related expenses and costs necessary to meet public company 
reporting requirements.  General and administrative expenses were $2.5 
million for the nine months ended September 30, 1996 as compared to $0.9 
million for the nine months ended September 30, 1995.  General and 
administrative expenses increased year-to-year for this period due to 
increases in personnel, facility-related expenses and public company expenses.

INTEREST INCOME (EXPENSE). Interest income was $0.3 million or 1% of net 
revenues during the third quarter of 1996 compared to $19 thousand during the 
comparable quarter of 1995. Net interest income was $1.2 million for the nine 
months ended September 30, 1996 as compared to $52 thousand of interest 
expense for the nine months ended September 30, 1995. Interest income 
increased over both comparable periods due to higher interest earned on 
increased cash proceeds from the Company's initial public offering in 
November, 1995.
 
PROVISION FOR INCOME TAXES. The provision for income taxes was $2.0 million 
during the third quarter of 1996 as compared to $2.4 million for the previous 
quarter of 1996.  The Company's effective income tax rate was 36% in the 
current quarter and 38% for the first nine months of 1996, which resulted in 
a $7.1 million provision for income taxes as of September 30, 1996, as 
compared to a provision of $1 thousand for the first nine months of 1995. The 
decrease in the effective tax rate in the third quarter of 1996 was primarily 
due to the impact of the reinstatement of the Research and Experimentation 
Tax Credit effective July 1, 1996, on the Company's anticipated income taxes 
payable.  During the first nine months of 1995, the Company utilized federal 
and state net operating losses incurred in previous years, and therefore no 
provision for income was made.

NET INCOME PER SHARE. The Company's net income per share for the current 
quarter was $0.15, compared to a net income per share of $0.12 in the 
comparable quarter of the prior year.  Net income per share increased from 
the comparable quarter of the prior year due to higher sales volumes, 
improved gross margins, lower operating expenses as a percentage of revenues, 
and higher interest income offset by higher provision for taxes. The 
Company's net income per share for the nine months ended September 30, 1996 
was $0.46, as compared to net income per share of $0.10 for the same period 
in the prior year.  The Company's increase in net income per share was 
primarily due to higher shipment volumes, improved gross margins, lower 
operating expenses as a percentage of revenues, and higher interest income 
offset by a higher provision for income taxes.  This increase in net income 
per share occurred despite addition of over 6 million shares to the 
calculation of net income per share related to the Company's initial public 
offering and related activities since September 30, 1995. 

LIQUIDITY AND CAPITAL RESOURCES

Principal sources of liquidity at September 30, 1996 consisted of $32.1 
million of cash, cash equivalents, and short-term investments and $1.5 
million of long-term investments.  As of September 30, 1996, the Company had 
no open lines of credit or non-trade debt. However, the Company may endeavor 
to open a line of credit in the future to secure additional working capital 
to finance operational growth.  The Company believes that the cash balances, 
together with funds expected to be generated from operations will be 
sufficient to meet its projected working capital and other cash requirements 
through at least the next twelve months. However, there can be no assurance 
that events in the future will not require the Company to seek additional 
capital sooner or, if so required, that it will be available on terms 
acceptable to the Company.

Year-to-date, the Company's operating activities used cash of $6.2 million, 
which consisted primarily of net increases in net income $11.6 million and 
accounts payable of $6.7 million offset by increases to inventory and 
accounts receivable of $18.4 million and $8.5 million, respectively.  
Increases in inventory in general and, more specifically, work in process, 
were primarily the result of responding to shorter customer order cycles.  
Accounts receivable increases were primarily due to higher monthly sales 
volumes.

                                       10



<PAGE>


The Company made capital expenditures of approximately $2.9 million during 
the current quarter as compared to $0.6 million during the comparable quarter 
of the prior year and $3.4 in the previous quarter. Capital expenditures were 
$7.0 million for the first nine months of 1996 as compared to expenditures of 
$2.7 million for the first nine months of 1995. These expenditures were 
primarily for the purchase of manufacturing test equipment, design and 
engineering tools, and computer equipment.  Similar levels of capital 
spending are expected to continue, and may even increase, during the rest of 
1996.  In addition, the Company may use its working capital to secure 
additional foundry capacity. These expenditures may be in the form of 
deposits, equipment purchases, loans or equity investments or joint ventures 
in or with wafer fabrication or other companies.

Year-to-date, the Company's financing activities used cash of approximately 
$0.7 million, primarily for the repurchase of stock on the open market.  In 
comparison, financing activities during the same period of the prior year 
provided $3.9 million and consisted primarily from proceeds from a loan from 
a corporate partner.

PART II

ITEM 1.  LEGAL PROCEEDINGS

Except for the historical information contained herein, the following 
discussion contains forward-looking statements that involve risks and 
uncertainties.  The Company's actual results could differ materially from 
those discussed herein. Factors that could cause or contribute to such 
differences include, but are not limited to, those discussed in this section. 

On January 3, 1996, Atmel sued the Company in the U.S. District Court for the 
Northern District of California.  Atmel's complaint alleges that the Company, 
by making, using and selling devices, is willfully infringing five U.S. 
patents owned by or exclusively licensed to Atmel.  Regarding each of these 
five patents, Atmel seeks a judgment that the Company has infringed the 
patent, an injunction prohibiting further infringement, treble the amount of 
damages caused by the alleged infringement and attorney's fees, costs and 
expenses.  On February 13, 1996 the Company filed an answer denying Atmel's 
allegations and asserting affirmative defenses and counterclaims.

At the present time, there is no other pending litigation or proceeding 
involving a director, officer, employee or other agent of the Company in 
which indemnification would be required or permitted. The Company is not 
aware of any threatened litigation or proceeding which may result in a claim 
for such indemnification.

ITEM 5. OTHER INFORMATION.

On October 23, 1996, Mr. Michael Hsu resigned from the Board of Directors for 
personal reasons.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  EXHIBITS. The Company hereby incorporates by reference all exhibits 
filed in connection with Form 10-K for the year ended December 31, 1995 and 
Form 10-Q filed for the quarters ended March 31, 1996 and June 30, 1996.

EXHIBIT NUMBER                        DESCRIPTION
11.1               Statement Regarding Computation of Net Income Per Share

(b)  Reports on Form 8-K filed during the quarter ended September 30, 1996:
       None.


                                       11



<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1934, the Company 
has caused this report to be signed on its behalf by the undersigned, 
thereunto duly authorized, in the City of Sunnyvale, County of Santa Clara, 
State of California, on the 13th day of November, 1996.

                                  SILICON STORAGE TECHNOLOGY, INC.


                                  By:  /S/ BING YEH
                                       ---------------------------------------
                                       Bing Yeh
                                       President, Chief Executive Officer
                                        and Director (Principal Executive
                                        Officer)

                                       /S/ MICHAEL J. PRAISNER
                                       ---------------------------------------
                                       Michael J. Praisner
                                       Vice President Finance & Administration,
                                        Chief Financial Officer and Secretary
                                        (Principal Financial and Accounting
                                        Officer)



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