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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 JUNE 30, 1998.

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, June 30,1998: 22,880,294.  Total number of 
pages in document: 17.  Index to Exhibits is on page 16.

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                          SILICON STORAGE TECHNOLOGY, INC.
                                          
                       FORM 10-Q: QUARTER ENDED JUNE 30, 1998
                                          
                                 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 Operations . . . . . . . . . . . .9

PART II - OTHER INFORMATION

     Item 1.   Legal Proceedings . . . . . . . . . . . . . . . . . . . . 14

     Item 4.   Submission of Matters to a Vote of Security Holders . . . 15

     Item 5.   Other Information . . . . . . . . . . . . . . . . . . . . 15

     Item 6.   Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 16


                                      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 June 30,   Six  months ended June 30,
                                                    ---------------------------   --------------------------
                                                        1997            1998         1997          1998
                                                    ----------        -------      -------       -----------
                                                             (unaudited)               (unaudited)
<S>                                                    <C>            <C>          <C>           <C>
Revenues:
   Product                                             $17,727        $16,422      $34,581       $32,176 
   License                                                 329            402          567         1,013 
                                                       -------        -------      -------       -------
                 Net revenues                           18,056         16,824       35,148        33,189 
                                                       -------        -------      -------       -------
 Costs and expenses:
   Cost of revenues                                     14,874         13,406       31,407        27,796 
   Research and development                              2,228          3,447        4,206         6,502 
   Sales and marketing                                   1,589          1,716        2,854         3,335 
   General and administrative                            1,199          1,768        2,443         2,935 
                                                       -------        -------      -------       -------
                                                        19,890         20,337       40,910        40,568 
                                                       -------        -------      -------       -------
                 Income (loss) from operations          (1,834)        (3,513)      (5,762)       (7,379)

Interest and other income (expense), net                   476            468          841         1,009 
                                                       -------        -------      -------       -------
                 Income (loss) before provision for 
                   (benefit from) income taxes          (1,358)        (3,045)      (4,921)       (6,370)

Provision for (benefit from) income taxes                 (339)        (1,803)      (1,383)       (2,803)
                                                       -------        -------      -------       -------
                 Net income (loss)                     ($1,019)       ($1,242)     ($3,538)      ($3,567)
                                                       -------        -------      -------       -------
                                                       -------        -------      -------       -------
Net income (loss) per share - basic and diluted         ($0.04)        ($0.05)      ($0.15)       ($0.16)
                                                       -------        -------      -------       -------
                                                       -------        -------      -------       -------
Shares used in per share calculations                   23,112         22,863       23,191        22,912 
                                                       -------        -------      -------       -------
                                                       -------        -------      -------       -------
</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,         June 30,
                                                                         1997               1998
                                                                     ------------         --------
                                                                               (unaudited)
<S>                                                                       <C>              <C>
Current assets:                                                   
      Cash and cash equivalents                                           $26,743          $16,344 
      Short-term investments                                               20,476            7,629 
      Accounts receivable, net                                              8,318           11,994 
      Accounts receivable from related parties                              2,124            4,137 
      Inventories                                                          11,909           20,356 
      Current deferred tax asset                                            3,716            4,437 
      Other current assets                                                  1,011            1,061 
                                                                          -------          -------
             Total current assets                                          74,297           65,958 

Furniture, fixtures, and equipment, net                                     7,224            7,377 
Other assets                                                                1,018            1,302 
                                                                          -------          -------
             Total assets                                                 $82,539          $74,637 
                                                                          -------          -------
                                                                          -------          -------
                                    LIABILITIES

Trade accounts payable                                                     18,957           14,098 
Accrued expenses and other liabilities                                      6,393            6,736 
Deferred revenue                                                            1,300            2,026 
                                                                          -------          -------
             Total liabilities                                             26,650           22,860 
                                                                          -------          -------
                                SHAREHOLDERS' EQUITY 
Common stock and deferred stock compensation                               53,290           53,295 
Retained earnings (accumulated deficit)                                     2,599           (1,518)
                                                                          -------          -------
           Total shareholders' equity                                      55,889           51,777 
                                                                          -------          -------
                Total liabilities and shareholders' equity                $82,539          $74,637 
                                                                          -------          -------
                                                                          -------          -------
</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>
                                                                               Six months ended June 30,
                                                                               -------------------------
                                                                                 1997             1998
                                                                               -------          --------
                                                                                     (unaudited)
<S>                                                                            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                         ($3,538)         ($3,567)
     Adjustments to reconcile net income (loss) to net cash 
      provided by (used in) operating activities:
     Depreciation and amortization                                               2,267            2,193 
     Provision for doubtful accounts receivable                                   (704)            (475)
     Provision for excess and obsolete inventories                                (334)            (807)
     Deferred income taxes                                                           -                6
     Loss on disposal of fixed assets                                                7                -
     Changes in operating assets and liabilities:
            Accounts receivable                                                 (1,598)          (3,201)
            Accounts receivable from related parties                             3,124           (2,013)
            Inventories                                                         11,332           (7,640)
            Other current and noncurrent assets                                    675               (6)
            Trade accounts payable                                              (5,902)          (4,859)
            Accrued expenses and other liabilities                              (1,465)             343 
            Deferred revenue                                                      (284)             726 
                                                                               -------          --------
                 Net cash provided by (used in) operating activities             3,580          (19,300)
                                                                               -------          --------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of furniture, fixtures and equipment                             (659)          (2,174)
     Proceeds from sale of equipment                                             1,600                -  
     Purchases of available-for-sale investments                                21,176          (24,313) 
     Sales and maturities of available-for-sale investments                    (15,381)          37,160 
     Other                                                                           -             (500)
                                                                               -------          --------
                 Net cash provided by (used in) investing activities             6,736           10,173
                                                                               -------          --------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Issuance of shares of common stock                                            235              312
     Repurchase of common stock                                                 (1,866)          (1,584)
                                                                               -------          --------
                 Net cash provided by (used in) financing activities            (1,631)          (1,272)
                                                                               -------          --------
                      Net increase (decrease) in cash and cash equivalents       8,685          (10,399)
Cash and cash equivalents at beginning of period                                24,755           26,743 
                                                                               -------          --------
Cash and cash equivalents at end of period                                     $33,440          $16,344 
                                                                               -------          --------
                                                                               -------          --------
</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 June 30, 1998 and the 
results of operations and cash flows for the six months ended June 30, 1997 
and 1998.  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, 1997, filed with the Securities and 
Exchange Commission.

The year-end balance sheet at December 31, 1997 was derived from audited 
financial statements, but does not include all disclosures required by 
generally accepted accounting principles.

RECENT ACCOUNTING PRONOUNCEMENTS:

In June 1997, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 130, (SFAS 130), "Reporting Comprehensive 
Income", which specifies the computation, presentation and disclosure 
requirements for comprehensive income.  The Company implemented SFAS 130 
during the first quarter of 1998.  There was no impact on the Company's 
financial position, results of operations or cash flows as comprehensive 
income and net income are the same.

2. COMPUTATION OF NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing income (loss) 
available to common shareholders by the weighted average number of common 
shares outstanding for the period.  Diluted net income (loss) per share is 
computed by dividing income (loss) available to common shareholders, adjusted 
for convertible preferred dividends and after-tax interest expense on 
convertible debt, if any, by the sum of the weighted average number of common 
shares outstanding and potential common shares (when dilutive).  A 
reconciliation of the numerator and the denominator of basic and diluted 
income (loss) per share is as follows:

<TABLE>
<CAPTION>
                                               Three months ended June 30,  Six months ended June 30,
                                               ---------------------------  -------------------------
                                                   1997          1998          1997        1998
                                               ---------       -------       -------      -----------
<S>                                              <C>           <C>           <C>          <C>
Numerator - Basic and Diluted:
  Net income (loss)                              ($1,019)      ($1,242)      ($3,538)     ($3,567)
                                               ---------       -------       -------      -----------
                                               ---------       -------       -------      -----------
Denominator - Basic and Diluted:
  Weighted average common stock outstanding       23,112        22,863        23,191       22,912 
                                               ---------       -------       -------      -----------
                                               ---------       -------       -------      -----------
</TABLE>

Stock options to purchase 2,154,000 and 1,292,000 shares of common stock were 
outstanding as of June 30, 1997 and June 30, 1998, respectively, but were not 
included in the computation of diluted loss per share because the Company had 
net losses for the six months ended June 30, 1997 and June 30, 1998.


                                       6

<PAGE>

3. INVENTORIES (IN THOUSANDS):

Inventories are stated at the lower of cost or market value.  During the 
quarter ended March 31, 1997, the Company recorded a charge of approximately 
$3.2 million to reduce the carrying value of inventories to replacement cost.

<TABLE>
<CAPTION>
                                December 31,            December 30,
                                    1997                    1998
                                ------------            ------------
<S>                              <C>                     <C>
Raw materials                    $     118               $       -
Work in process                      9,249                  14,000 
Finished goods                       2,542                   6,356 
                                ------------            ------------
                                 $  11,909               $  20,356 
                                ------------            ------------
                                ------------            ------------
</TABLE>

4. CONTINGENCIES

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. Atmel 
later amended its complaint to allege infringement of a sixth patent.  
Regarding each of these six patents, Atmel seeks a judgment that the Company 
has infringed the patent, an injunction prohibiting future 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.  On June 25, 1997, a U.S. District Court Judge denied Atmel's 
motions for summary judgment for certain patents mentioned in the above 
lawsuit.  The basis for the denial was that not all elements of the claims of 
the patents were infringed as required for a favorable ruling.  On September 
22, 1997 the District Court granted the Company's motion for summary judgment 
and found that one of the patents is not infringed.  The Court later denied 
Atmel's motion for reconsideration of the ruling.  That patent was also 
subsequently dismissed from the ITC action.  On November 24, 1997 and January 
20, 1998 the District Court denied the Company's motions for summary judgment 
of invalidity for two of the patents.  On January 6, 1998 the District Court 
denied the Company's motion for summary judgment that it does not infringe 
two other patents and also denied Atmel's cross motion that the Company 
infringed.  On July 7, 1998, the District Court granted Atmel a motion for 
summary judgment that SST could not pursue its unfair competition claims 
against Atmel.  On August 5, 1998, the court granted a summary judgment in 
SST's favor invalidating the '811 patent' and the '829 patent'.  The 
remaining issues are scheduled to be tried on November 16, 1998.

On February 17, 1997, Atmel filed an action with the International Trade 
Commission ("ITC") against two suppliers of the Company's parts.  On March 
18, 1997, the ITC instituted an investigation against two suppliers of the 
Company's parts based upon a complaint filed by Atmel.  This action involves 
certain of the patents that Atmel has alleged the Company infringes.  The 
Company intervened as a party to that investigation.  Pursuant to 
indemnification agreements with these suppliers, the Company has agreed to 
indemnify both to the extent that it is required to do so under the 
agreements.  A hearing was held on December 8, 1997 regarding this matter.  
On March 19, 1998, the ITC issued its initial determination, finding that the 
Company's products do not infringe the three patents remaining in that 
investigation and that Atmel has no legal right to enforce one of those 
patents.  On July 9, 1998, the commission entered its opinion of finding no 
violation by SST.  Atmel has publicly stated its intention to appeal the 
decision. 

On November 14, 1997, Intel Corporation ("Intel") sued the Company in the 
U.S. District Court for the District of Delaware.  Intel's complaint alleged 
that the Company, by making, using and selling devices, was willfully 
infringing four U.S. patents owned by Intel.  Regarding each of these four 
patents, Intel sought a judgment that the Company had infringed on the 
patent, an injunction prohibiting further infringement, an accounting of all 
damages caused by the alleged infringement, treble the amount of damages 
caused by the alleged infringement and attorney's fees, costs and expenses.  
The Company moved that the Delaware action be dismissed for lack of 
jurisdiction or in the alternative be transferred to California.  On August 
5, 1998, the District Court granted the Company's motion and dismissed the 
complaint on the grounds that the court could not exercise personal 
jurisdiction over the company.  It is not known whether Intel will pursue its 
claims in another jurisdiction.  The Company believes that the substantive 
allegations in the dismissed Intel complaint are without merit and intends to 
vigorously defend itself against any future action.  The Federal Trade 
Commission has initiated contact with the Company to gather information about 
the case.


                                       7
<PAGE>

While the Company has accrued certain amounts for the estimated costs 
associated with defending these matters, there can be no assurance that the 
Atmel complaint, any future action by Intel relating to the dismissed 
Intel complaint, or other third party assertions will be resolved without 
costly litigation, in a manner that is not adverse to the Company's financial 
position, results of operations, or cash flows, or without requiring royalty 
payments in the future which may adversely impact gross margins.  No estimate 
can be made of the possible loss or possible range of loss associated with 
the resolution of these contingencies.

5. STOCK REPURCHASE PROGRAM

In January 1998, the Board of Directors approved a stock repurchase program 
whereby up to an aggregate of 1,000,000 shares of the Company's common stock 
may be repurchased on the open market at prevailing market prices.  The 
repurchase program expired on June 16, 1998.  Approximately 449,000 shares 
were repurchased under this program during the three month period ended March 
31, 1998 for an aggregate purchase price of $1.6 million.  Purchase prices 
ranged from $3.19 to $3.78 per share.  No shares were repurchased during the 
three month period ended June 30, 1998.

6. OTHER EVENTS

As noted in Form 8-K, filed by the Company on May 1, 1998, the Company 
elected to withdraw from an agreement to purchase a 14 acre parcel of 
property.  The costs associated with the termination of the agreement were 
approximately $500,000 and are included in general and administrative 
expenses.


                                       8
<PAGE>

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

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 
of financial condition and results of operations contained in the Company's 
Annual Report on Form 10-K for the year ended December 31, 1997, 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 the Company's actual results 
to differ materially from expected results include: changes in average 
selling prices, competitive pricing pressures, competitive terms extended to 
customers, economic changes in the Far East, the availability, deliverability 
and cost of raw materials, such as wafers or die, from the Company's 
suppliers, 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, the gain or loss of significant 
customers, market acceptance of products utilizing the Company's 
SuperFlash-Registered Trademark- 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, 
1997 in the Risk Factors section for a discussion of such risk factors.

GENERAL

Silicon Storage Technology, Inc. ("SST" or 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"), PC peripheral, 
communications, consumer and industrial markets. Consumer products currently 
sold with the Company's products include, but are not necessarily limited to, 
personal computers, CD-ROM, DVD and hard disk drives, video games, modems, 
and set-top boxes.  The Company's product revenues have been derived from 
four product families: the 512Kbit, 1Mbit, 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, memory 
cards, networking systems, digital cellular phones, telecommunications and 
printer font storage.   The Company is also developing flash embedded 
controller products to address the emerging application of in-system 
programmable (ISP) embedded controllers and system-on-a-chip applications and 
has continued the expansion of the Company's technology licensing strategy 
with respect to the Company's technology for embedded applications.

During the second quarter of 1998, the Company derived approximately 25%, 19% 
and 16% of its product revenues from sales to China/Hong Kong, Taiwan, and 
Japan respectively.  The Company intends to continue to diversify its 
customer base by seeking to increase sales in other geographic areas and to 
continue targeting additional high volume applications such as the cellular 
telephone, cordless telephone, DVD drive, video game, electronic organizer 
and set-top box markets. International product revenues accounted for 90% of 
total product revenues during the second quarter of 1998.  The Company 
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. 

Due to its level of international sales, the Company is subject to the risks 
of conducting business internationally. These risks include unexpected 
changes in regulatory requirements, delays resulting from difficulty in 
obtaining export licenses of certain technology, tariffs and other barriers 
and restrictions, and the burdens of complying with a variety of foreign 
laws. The Company is also subject to general geopolitical risks in connection 
with its international operations, such as political and economic instability 
and changes in diplomatic and trade relationships. 


                                      9
<PAGE>

In particular, during the second half of 1997 and the first half of 1998, 
currency depreciation and economic deflation was experienced in several Asian 
economies in which the Company does business, such as Japan, Korea, and 
Taiwan. Economic problems in this region can have an adverse impact on the 
Company's total revenues and financial performance, and may negatively impact 
the Company's ability to collect payments from its customers.  Furthermore, 
the lack of capital in the finance sector of these countries may impact the 
customers' ability to open letters of credit or other financial instruments 
which are guaranteed by foreign banks.  Additionally, the Company's major 
wafer suppliers, and assembly and packaging subcontractors are located in the 
Far East.  Major disruptions in their businesses due to these economic 
problems can have an adverse impact on their business which, in turn, may 
negatively impact their ability to adequately supply the Company.  Finally, 
the current economic situation in the Far East has impaired the Company's 
ability to compete on the basis of price.  This situation has exacerbated the 
current decline in the average selling prices for the Company's products far 
more than originally anticipated as the Company's competitors reduce product 
prices to generate needed cash.  Also, to maintain market share at the 
present time in this region may require the Company to extend credit terms 
which will negatively impact days sales outstanding in the future. Continued 
economic and/or political instability of any kind in this region will 
continue to have a material adverse effect on the Company's operating results 
due to the large concentration of the Company's activities in this region.  
In addition, because the Company's international sales are denominated in 
U.S. dollars, fluctuations in the U.S. dollar could increase the price in 
local currencies of the Company's products in foreign markets and make the 
Company's products relatively more expensive than competitors' products which 
are denominated in local currencies.  The Company has experienced, and may 
continue to experience, material adverse effects on its operations as a 
result of such economic, geopolitical and other factors.  These events may 
adversely impact the Company's operations or may require the Company to 
modify its current business practices. 

RESULTS OF OPERATIONS: QUARTER AND SIX MONTHS ENDED JUNE 30, 1998

The following discussion relates to the financial statements of the Company 
for the three months ended June 30, 1998 (current quarter) of the fiscal year 
ending December 31, 1998, in comparison to the three months ended June 30, 
1997 (comparable quarter of the prior year).  In addition, certain 
comparisons with the three months ended March 31, 1998 (previous quarter) are 
provided where management believes it is useful to the understanding of 
continuing trends. Operating results for the six months ended June 30, 1998 
are not necessarily indicative of the results to be achieved for the full 
fiscal year ending December 31, 1998.

NET REVENUES. Net revenues were $33.2 million for the six months ended June 
30,1998 as compared to $35.1 million for the six months ended June 30, 1997. 
The decrease in net revenues is primarily due to declining average selling 
prices.  Net revenues decreased to $16.8 million in the current quarter from 
$18.1 million for the comparable quarter of the prior year.

Product revenues decreased to $16.4 million in the current quarter from $17.7 
million for the comparable quarter of the prior year due primarily to 
declining average selling prices.  Net units shipped increased by more than 
1.8 million units from the comparable quarter of the prior year to 10.8 
million units shipped, the largest number of units shipped by the Company in 
a single quarter. Although units shipped increased by approximately 21% 
between these two periods, average selling prices declined by approximately 
23% on a weighted average basis. 

License, royalty and development revenues were $0.4 million for the current 
quarter as compared to $0.3 million in the comparable quarter for the prior 
year.  Current quarter license revenues consisted primarily of royalty 
payments for the use of the Company's technology.  Such royalty payments may 
or may not recur in future quarters.

During the second quarter of 1998, business in Taiwan and Japan decreased to 
approximately 19% and 16% of world-wide product revenues, respectively,  from 
28% and 25% for the comparable quarter of the prior year.  Business in China 
increased to 25% during the second quarter of 1998 from 15% for the 
comparable quarter of the prior year. International sales accounted for 
approximately 90% of world-wide product revenues during the current quarter, 
compared to 84% for the comparable quarter of the prior year.  For the six 
months ended June 30, 1998, 23% of shipment dollars were from Taiwan, 23% 
from China and 20% from Japan.  International sales comprised approximately 
92% of shipment dollars for the six months ended June 30, 1998.  
International sales are anticipated to account for a substantial majority of 
all product revenues for the foreseeable future, although percentages may 
vary.

                                       10
<PAGE>

For the current quarter, product shipments for PC peripheral applications
decreased to approximately 29% of total product revenues from 42% for the 
comparable quarter of the prior year, and product shipments for consumer 
products increased to 32% of total product revenues from 16% for the 
comparable quarter of the prior year. While the Company intends to continue 
to diversify both the product applications and customer base, there can be no 
assurance that such diversification will be successful.

GROSS MARGIN. Gross margin was $5.4 million or 16% of net revenues for 
the six months ended June 30, 1998 as compared to $3.7 million or 11% of net 
revenues for the comparable six month period of the prior year. The increase 
in gross margin is primarily due to reductions in die prices, favorable 
spending variances, and favorable yen share adjustments. 

Future fluctuations in gross margins may occur as a result of, among other 
factors, declining average selling prices which could lead to additional 
charges to cost of revenues to reduce inventories to replacement costs; cost 
reduction efforts that do not reduce costs faster than average selling price 
declines; price changes in the costs of raw materials; 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 Electric Co. Ltd. ("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.  Gross 
margins may also be affected by cost reductions, yield fluctuations, wafer 
costs, changes in the mix of sales through distribution channels and 
competitive pricing pressures.

Average selling prices of flash memory products 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, changes in product 
mix or new product introductions.  

RESEARCH AND DEVELOPMENT. Research and development expenses were $6.5 million 
for the six months ended June 30, 1998 as compared to $4.2 million for the 
six months ended June 30, 1997.  Research and development expenses were $3.4 
million or 20% of net revenues during the second quarter of 1998 as compared 
to $2.2 million or 12% of net revenues during the comparable quarter of 1997. 
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, new product development and product qualification costs 
associated with the Company's product, process and development efforts 
related to future product introductions.  Such increases may continue in both 
absolute dollars and as a percentage of revenue for the foreseeable future.

SALES AND MARKETING. Sales and marketing expenses were $3.3 million for the 
six months ended June 30, 1998 as compared to $2.9 million for the six months 
ended June 30, 1997.  Sales and marketing expenses were $1.7 million or 10% 
of net revenues during the second quarter of 1998 and compared to $1.6 
million or 9% of net revenues during the comparable quarter of 1997.  Sales 
and marketing expenses consist primarily of sales commissions to 
manufacturer's representatives, salaries of the Company's sales and marketing 
personnel and advertising and product literature expenses. The increase in 
expense from the prior year corresponds primarily to increased personnel 
costs and advertising/collateral related spending.  The increase due to 
higher personnel costs was somewhat offset by lower commissions expense 
related to lower product revenues for the second quarter of 1998.  Sales and 
marketing expense may fluctuate over time primarily as a function of product 
revenue.

GENERAL AND ADMINISTRATIVE. General and administrative expenses were $2.9 
million for the six months ended June 30, 1998 as compared to $2.4 million 
for the six months ended June 30, 1997.  General and administrative expenses 
were $1.8 million or 11% of net revenues during the second quarter of 1998 as 
compared to $1.2 million or 7% of net revenues during the comparable quarter 
of 1997.  The increase in general and administrative expenses related almost 
entirely to a nonrecurring charge of $0.5 million taken in connection with 
the termination of a land purchase agreement, as described in Form 8-K, filed 
May 1, 1998.


                                       11
<PAGE>

INTEREST AND OTHER INCOME (EXPENSE), NET. Interest and other income was $1.0 
million for the six months ended June 30, 1998 as compared to $0.8 million 
for the six months ended June 30, 1997.  Interest and other income was $0.5 
million or 3% of net revenues during the second quarter of 1998 as compared 
to $0.5 million or 3% of net revenues during the comparable quarter of the 
prior year.

PROVISION FOR (BENEFIT FROM) INCOME TAXES. The benefit from income taxes was 
$2.8 million for the six months ended June 30, 1998 as compared to a benefit 
of $1.4 million for the six months ended June 30, 1997.  The benefit from 
income taxes was $1.8 million during the second quarter as compared to a 
benefit from income taxes of $0.3 million for the comparable quarter of the 
prior year.  The benefit in both quarters relates to the Company's loss 
position in the respective quarters.  The increase in benefit from income 
taxes in the quarter ended June 30, 1998 is a result of a one time adjustment 
in the effective tax rate from a 30% benefit to a 44% benefit and relates to 
the Company's overall tax loss position anticipated for 1998.  The 44% 
benefit rate is expected to continue for the remainder of 1998.

NET INCOME (LOSS) PER SHARE. The Company's net loss per share for the six 
months ended June 30, 1998 was $0.16 as compared to a net loss per share of 
$0.15 for the six months end June 30, 1997.  The Company's net loss per share 
for the current quarter was $0.05 as compared to a net loss per share of 
$0.04 in the comparable quarter of the prior year.

LIQUIDITY AND CAPITAL RESOURCES

Principal sources of liquidity at June 30, 1998 consisted of $24.0 million of 
cash, cash equivalents, and short-term investments.  As of June 30, 1998, the 
Company had no open lines of credit or non-trade debt. However, on July 9, 
1998, the Company signed a letter of intent for a line of credit to secure 
additional working capital of up to $25 million to finance operational 
growth. Such lines of credit may be secured by the assets of the Company.  
The Company believes that the cash and short-term investment 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, if at all.

For the six month period ended June 30, 1998, the Company's operating 
activities used cash of $19.3 million, which consisted primarily of increases 
in inventory of $7.6 million, decreases of accounts payable and accrued 
expenses of $4.5 million, increases of accounts receivable and accounts 
receivable from related parties of $5.2 million and the net loss of $3.6 
million, offset by depreciation.  In comparison, the Company's operating 
activities for the same six month period in the prior year provided cash of 
$3.6 million, primarily related to a decrease in inventory of $11.3 million 
and a decrease in accounts receivable and accounts receivable from related 
parties of $1.5 million, offset by a decrease in accounts payable of $5.9 
million and a net loss of $3.5 million.

Cash flows provided by investing activities totaled $10.2 million for the six 
month period ended June 30, 1998 and related primarily to the net sale of 
short-term investments for cash management purposes.  In addition, the 
Company acquired capital assets of approximately $2.2 million during the 
current six month period as compared to $0.7 million during the comparable 
six months of the prior year. These expenditures were primarily for the 
purchase of design and engineering tools and computer equipment.  Similar 
levels of capital spending are expected to continue, and may increase, during 
the rest of 1998.  

The Company's financing activities used cash of approximately $1.3 million 
during the current six month period, primarily for the repurchase of stock on 
the open market.  During the current six month period, the Company used funds 
of $1.6 million to purchase 449,000 shares of its common stock.  Funds used 
were offset by proceeds from the issuance of common shares under the 
Company's stock option program of $0.3 million during the current six months. 
In comparison, financing activities during the same six month period of the 
prior year used $1.6 million and consisted of stock repurchases of $1.8 
million offset by proceeds from stock option exercises of $0.2 million.  The 
repurchase program expired on June 16, 1998. 

                                       12
<PAGE>

READINESS FOR YEAR 2000

Many existing computer systems and applications, and other control devices, 
use only two digits to identify a year in the date field, without considering 
the impact of the upcoming change in the century.  They could fail or create 
erroneous results unless corrected so that they can process data related to 
the year 2000.  The Company relies on primary management information and 
accounting systems (such as integrated general ledger, accounts payable, 
sales order entry and purchasing modules), ancillary information systems 
(such as payroll, human resource and fixed asset tracking software), customer 
services infrastructure, embedded computer chips, networks and 
telecommunications equipment, manufacturing test equipment, research and 
development software tools and end products, electronic security systems and 
other systems whose operational ability may be adversely impacted by the year 
2000.  The Company also relies on external systems of business enterprises 
such as customers, suppliers, creditors, financial organizations, and of 
governments, both domestically and globally, directly and indirectly, for the 
accurate exchange of data.  

Because the Company is relatively young and does not use many proprietary 
systems, much of the cost of upgrading the Company's systems to ensure year 
2000 compliance is a part of the Company's practice of routinely upgrading 
information-related systems as new versions are released by vendors and is 
considered to be a normal cost of doing business.  In this respect, the 
Company has already upgraded all of its personal computer hardware and 
operating systems, its network switches, and its primary management 
information and accounting systems to year 2000 complaint versions.  The cost 
incurred for this effort was approximately $250,000.

Currently, the Company is conducting a survey of both its internal systems 
and equipment and systems supported by third party providers to assess year 
2000 compliance.  The survey is expected to be completed by the end of the 
fourth quarter of 1998.  The Company plans to hire a specialized consultant 
to assist with and to review the survey.  The Company's current estimate is 
that the costs associated with the Year 2000 compliance, and the consequences 
of incomplete or untimely resolution of the Year 2000 issue, will not have a 
material adverse affect on the results of operations or financial position of 
the Company in any given year.  Based upon the information available at this 
time, the future costs related to year 2000 compliance are not expected to 
exceed $500,000.  The cost estimate is based on the Company's current 
assessment of the projects identified and is subject to change as the 
projects progress.  The estimate does not include potential costs related to 
any customer or other claims.

However, despite the Company's efforts to address the Year 2000 impact on its 
internal systems, the Company is not sure that it has fully identified such 
impact and that it can resolve it without disruption of its business and 
without incurring significant expense.  In addition, even if the internal 
systems of the Company are not materially affected by the Year 2000 issue, 
the Company could be materially affected through disruption in the operation 
of the enterprises, financial institutions, or governmental entities with 
which the Company interacts.


                                      13
<PAGE>

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 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. Atmel 
later amended its complaint to allege infringement of a sixth patent.  
Regarding each of these six patents, Atmel seeks a judgment that the Company 
has infringed the patent, an injunction prohibiting future 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.  On June 25, 1997, a U.S. District Court Judge denied Atmel's 
motions for summary judgment for certain patents mentioned in the above 
lawsuit.  The basis for the denial was that not all elements of the claims of 
the patents were infringed as required for a favorable ruling.  On September 
22, 1997 the District Court granted the Company's motion for summary judgment 
and found that one of the patents is not infringed.  The Court later denied 
Atmel's motion for reconsideration of the ruling.  That patent was also 
subsequently dismissed from the ITC action.  On November 24, 1997 and January 
20, 1998 the District Court denied the Company's motions for summary judgment 
of invalidity for two of the patents.  On January 6, 1998 the District Court 
denied the Company's motion for summary judgment that it does not infringe 
two other patents and also denied Atmel's cross motion that the Company 
infringed.  On July 7, 1998, the District Court granted Atmel a motion for 
summary judgment that SST could not pursue its unfair competition claims 
against Atmel.  On August 5, 1998, the court granted a summary judgment in 
SST's favor invalidating the '811 patent' and the '829 patent'.  The 
remaining issues are scheduled to be tried on November 16, 1998.

On February 17, 1997, Atmel filed an action with the International Trade 
Commission ("ITC") against two suppliers of the Company's parts.  On March 
18, 1997, the ITC instituted an investigation against two suppliers of the 
Company's parts based upon a complaint filed by Atmel.  This action involves 
certain of the patents that Atmel has alleged the Company infringes.  The 
Company intervened as a party to that investigation.  Pursuant to 
indemnification agreements with these suppliers, the Company has agreed to 
indemnify both to the extent that it is required to do so under the 
agreements.  A hearing was held on December 8, 1997 regarding this matter.  
On March 19, 1998, the ITC issued its initial determination, finding that the 
Company's products do not infringe the three patents remaining in that 
investigation and that Atmel has no legal right to enforce one of those 
patents.  On July 9, 1998, the commission entered its opinion of finding no 
violation by SST.  Atmel has publicly stated its intention to appeal the 
decision. 

On November 14, 1997, Intel Corporation ("Intel") sued the Company in the 
U.S. District Court for the District of Delaware.  Intel's complaint alleged 
that the Company, by making, using and selling devices, was willfully 
infringing four U.S. patents owned by Intel.  Regarding each of these four 
patents, Intel sought a judgment that the Company had infringed on the 
patent, an injunction prohibiting further infringement, an accounting of all 
damages caused by the alleged infringement, treble the amount of damages 
caused by the alleged infringement and attorney's fees, costs and expenses.  
The Company moved that the Delaware action be dismissed for lack of 
jurisdiction or in the alternative be transferred to California.  On August 
5, 1998, the District Court granted the Company's motion and dismissed the 
complaint on the grounds that the court could not  exercise personal 
jurisdiction over the company.  It is not known whether Intel will pursue its 
claims in another jurisdiction.  The Company believes that the substantive 
allegations in the dismissed Intel complaint are without merit and intends to 
vigorously defend itself against any future action.  The Federal Trade 
Commission has initiated contact with the Company to gather information about 
the case.

While the Company has accrued certain amounts for the estimated costs 
associated with defending these matters, there can be no assurance that the 
Atmel complaint, any future action by the Intel relating to the dismissed 
Intel complaint, or other third party assertions will be resolved without 
costly litigation, in a manner that is not adverse to the Company's financial 
position, results of operations, or cash flows, or without requiring royalty 
payments in the future which may adversely impact gross margins.  No estimate 
can be made of the possible loss or possible range of loss associated with 
the resolution of these contingencies.

                                     14
<PAGE>

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

The Registrant's Annual Meeting of Shareholders (Annual Meeting) was held on 
July 17, 1998.  At the Annual Meeting, the shareholders of the Registrant (i) 
elected each of the persons listed below to serve as a director of the 
Registrant for the ensuing year and until his successor is elected; (ii) 
approved the Company's 1995 Equity Incentive Plan, as amended; and (iii) 
ratified the selection of Coopers & Lybrand L.L.P. as Registant's Independent 
Accountants for the fiscal year ending December 31, 1998.  Effective July 1, 
1998, Coopers & Lybrand L.L.P. merged with Price Waterhouse LLP and 
henceforth will be referred to as PricewaterhouseCoopers LLP.

The Registrant had 22,877,585 shares outstanding as of May 26, 1998, the 
record date of the Annual Meeting.  At the Annual Meeting, holders of 
20,013,615 shares of Common Stock were present in person or represented by 
proxy.  The following sets forth information regarding the results of the 
voting at the Annual Meeting.

PROPOSAL 1 - ELECTION OF DIRECTORS

<TABLE>
<CAPTION>
DIRECTOR               VOTES IN FAVOR      VOTES AGAINST  ABSTENTIONS
--------               --------------      -------------  -----------
<S>                      <C>                     <C>        <C>
Bing Yeh                 19,341,765              0          671,850
Yaw Wen Hu               19,342,065              0          671,550
Tsuyoshi Taira           19,466,765              0          546,850
Yasushi Chikagami        19,466,765              0          546,850
Ronald Chwang            19,466,765              0          546,850
</TABLE>

PROPOSAL 2 - APPROVAL OF THE COMPANY'S 1995 EQUITY INCENTIVE PLAN, AS AMENDED

<TABLE>
          <S>                                          <C>
          Votes in Favor                               18,621,565
          Votes Against                                 1,095,257
          Abstentions                                      20,169
</TABLE>

PROPOSAL 3 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS

<TABLE>
          <S>                                          <C>
          Votes in Favor                               19,933,342
          Votes Against                                    53,099
          Abstentions                                      27,174
</TABLE>

ITEM 5.  OTHER INFORMATION.

Proposals of shareholders that are intended to be presented at the Company's 
1999 Annual Meeting of Shareholders must be received by the Company no later 
than February 12, 1999.  Pursuant to the Company's bylaws, shareholders who 
wish to bring matters or propose nominees for director at the Company's 1999 
Annual Meeting of Shareholders must provide specified information to the 
Company between February 17, 1999 and March 19, 1999.


                                      15
<PAGE>

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, 1997.

<TABLE>
<CAPTION>
EXHIBIT 
NUMBER                 DESCRIPTION
-------                -----------
<C>            <C>
10.17          Lease amendment dated March 4, 1998 between Silicon Storage
               Technology, Inc. and Sonora Court Properties.

10.18          Lease amendment dated March 4, 1998 between Silicon Storage
               Technology, Inc. and Coast Properties.

27             Financial Data Schedule
</TABLE>

(b)  Reports on Form 8-K filed during the quarter ended June 30, 1998:
     May 1, 1998


                                       16
<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 14th day of August, 1998.

                          SILICON STORAGE TECHNOLOGY, INC.


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

                             /S/ JEFFREY L. GARON
                             ----------------------------------------
                             Jeffrey L. Garon
                             Vice President Finance & Administration,
                                Chief Financial Officer and Secretary
                             (Principal Financial and Accounting Officer)


                                       17