<PAGE>

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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 MARCH 31, 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, March 31,1998: 22,831,462.  Total number of 
pages in document: 15.  Index to Exhibits is on page 14.

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<PAGE>

SILICON STORAGE TECHNOLOGY, INC.
                                          
                      FORM 10-Q: QUARTER ENDED MARCH 31, 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 ......................................... 13

     Item 6.   Exhibits and Reports on Form 8-K........................... 14


                                       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 March 31,
                                                   ----------------------------
                                                      1997              1998
                                                   ---------          ---------
                                                            (unaudited)
<S>                                                <C>                <C>
Revenues:
  Product                                            $16,854            $15,754
  License                                                238                611
                                                   ---------          ---------
     Net revenues                                     17,092             16,365
                                                   ---------          ---------
                                                                               
Costs and expenses:
  Cost of revenues                                    16,533             14,390
  Research and development                             1,978              3,055
  Sales and marketing                                  1,265              1,619
  General and administrative                           1,244              1,167
                                                   ---------          ---------
                                                      21,020             20,231
                                                   ---------          ---------

     Income (loss) from operations                    (3,928)            (3,866)
                                                                               
Interest and other income (expense), net                 365                541
                                                   ---------          ---------
     Income (loss) before provision                                            
       for (benefit from) income taxes                (3,563)            (3,325)
                                                                               
Provision for (benefit from) income taxes             (1,044)            (1,000)
                                                   ---------          ---------
                                                                                
     Net income (loss)                               ($2,519)           ($2,325)
                                                   ---------          ---------
                                                   ---------          ---------
                                                                                
Net income (loss) per share - basic and diluted       ($0.11)            ($0.10)
                                                   ---------          ---------
                                                   ---------          ---------
                                                                                
Shares used in per share calculations                 23,269             22,960 
                                                   ---------          ---------
                                                   ---------          ---------
</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,       March 31,
                                                     1997              1998
                                                  ------------      -----------
                                                                    (unaudited)
<S>                                               <C>               <C>
Current assets:
  Cash and cash equivalents                            $26,743           $3,163
  Short-term investments                                20,476           24,570
  Accounts receivable, net                               8,318            8,270
  Accounts receivable from related parties               2,124            3,032
  Inventories                                           11,909           19,410
  Current deferred tax asset                             3,716            4,279
  Other current assets                                   1,011              645
                                                  ------------      -----------
     Total current assets                               74,297           63,369
                                                                               
Furniture, fixtures, and equipment, net                  7,224            7,117
Other assets                                             1,018            1,487
                                                  ------------      -----------
     Total assets                                      $82,539          $71,973
                                                  ------------      -----------
                                                  ------------      -----------
                                                                               
               LIABILITIES
                                                                               
Trade accounts payable                                  18,957           12,661
Accrued expenses and other liabilities                   6,393            5,026
Deferred revenue                                         1,300            1,706
                                                  ------------      -----------
     Total liabilities                                  26,650           19,393
                                                  ------------      -----------
                                                                               
          SHAREHOLDERS' EQUITY
Common stock and deferred stock compensation            53,290           52,856
Retained earnings                                        2,599             (276)
                                                  ------------      -----------
  Total shareholders' equity                            55,889           52,580
                                                  ------------      -----------
     Total liabilities and shareholders' equity        $82,539          $71,973
                                                  ------------      -----------
                                                  ------------      -----------
</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>
                                                   Three months ended March 31,
                                                   ----------------------------
                                                      1997              1998
                                                   ---------          ---------
                                                            (unaudited)
<S>                                                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                  ($2,519)           ($2,325)
  Adjustments to reconcile net income                                           
  (loss) to net cash provided by (used in) 
     operating activities:
  Depreciation                                         1,132              1,000 
  Provision for doubtful accounts receivable             200                250 
  Provision for excess and obsolete inventories        2,063              2,521 
  Deferred income taxes                                    0               (563)
  Changes in operating assets and liabilities:                                  
     Accounts receivable                              (1,640)              (202)
     Accounts receivable from related parties          1,511               (908)
     Inventories                                        (250)           (10,022)
     Other current and noncurrent assets                 401                397 
     Trade accounts payable                            5,327             (6,296)
     Accrued expenses and other liabilities           (2,030)            (1,017)
     Deferred revenue                                   (235)               406 
                                                   ---------          ---------
       Net cash provided by (used in) operating                                 
       activities                                      3,960            (16,759)
                                                   ---------          ---------
                                                                                
CASH FLOWS FROM INVESTING ACTIVITIES:                                           
  Acquisition of furniture, fixtures and equipment      (441)              (893)
  Proceeds from sale of equipment                      1,537                  0 
  Purchases of available-for-sale investments         (5,426)           (23,328)
  Sales and maturities of available-for-sale                                    
     investments                                       4,847             19,234 
  Other                                                   (5)              (500)
                                                   ---------          ---------
       Net cash provided by (used in)                                           
       investing activities                              512             (5,487)
                                                   ---------          ---------
                                                                                
CASH FLOWS FROM FINANCING ACTIVITIES:                                           
  Issuance of shares of common stock                     221                250 
  Repurchase of common stock                            (507)            (1,584)
                                                   ---------          ---------
       Net cash provided by (used in)                                           
       financing activities                             (286)            (1,334)
                                                   ---------          ---------
         Net increase (decrease) in cash and                                    
         cash equivalents                              4,186            (23,580)
Cash and cash equivalents at beginning of period      24,755             26,743 
                                                   ---------          ---------
Cash and cash equivalents at end of period           $28,941             $3,163 
                                                   ---------          ---------
                                                   ---------          ---------
</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 March 31, 1998 and the 
results of operations and cash flows for the three months ended March 31, 
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>
                                                        March 31,     March 31,
                                                          1997          1998
                                                       ----------     ---------
<S>                                                    <C>            <C>
Numerator - Basic and Diluted:
  Net income (loss)                                     ($2,519)       ($2,325)
                                                        -------        -------
                                                        -------        -------
Denominator - Basic and Diluted:
  Weighted average common stock outstanding              23,269         22,960
                                                        -------        -------
                                                        -------        -------

Net income (loss) per share - Basic and Diluted          ($0.11)        ($0.10)
                                                        -------        -------
                                                        -------        -------
</TABLE>

Stock options to purchase 1,720,000 and 1,132,000 shares of common stock were 
outstanding as of March 31, 1997 and March 31, 1998, respectively, but were 
not included in the computation of diluted loss per share because the Company 
had net losses for the three months ended March 31, 1997 and March 31, 1998.


                                       6

<PAGE>

3. INVENTORIES (IN THOUSANDS):

<TABLE>
<CAPTION>
                                      December 31,   March 31,
                                          1997         1998   
                                      ------------   ---------
<S>                                   <C>            <C>
Raw materials                                $ 118     $     0
Work in process                              9,249      13,353
Finished goods                               2,542       6,057
                                      ------------   ---------
                                           $11,909     $19,410
                                      ------------   ---------
                                      ------------   ---------
</TABLE>

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. 

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 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 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 judgement 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 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.  The ITC has 45 days to order a review of all or part 
of that determination.  Atmel has requested such a review, and the Company 
has opposed such a review.  Trial in the District Court action is currently 
scheduled for November 16, 1998.

On November 14, 1997, Intel Corporation ("Intel") sued the Company in the 
U.S. District Court for the District of Delaware.  Intel's complaint alleges 
that the Company, by making, using and selling devices, is willfully 
infringing four U.S. patents owned by Intel.  Regarding each of these four 
patents, Intel seeks a judgment that the Company has 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 has moved that the Delaware action be dismissed for lack of 
jurisdiction or in the alternative be transferred to California.  The 
District Court has yet to rule on this motion.  The Company believes that the 
allegations in the Intel complaint are without merit and intends to 
vigorously defend itself against such 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, the 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 is expected to continue until June 1998, unless extended 
or shortened by the Board of Directors. Approximately 449,000 shares were 
repurchased under this program during the three months ended March 31, 1998 
for an aggregate purchase price of $1.6 million.  Purchase prices ranged from 
$3.19 to $3.78 per share.

6. 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 its systems (such as general ledger, 
accounts payable and payroll modules), customer services, infrastructure, 
embedded computer chips, networks and telecommunications equipment and end 
products. 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 for accurate exchange 
of data and indirectly. The Company's current estimate is that the costs 
associated with the Year 2000 issue, 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. 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 affected through disruption in the 
operation of the enterprises with which the Company interacts.

                                       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 has continued the expansion of 
the Company's technology licensing strategy with respect to the Company's 
technology for embedded applications.

During the first quarter of 1998, the Company derived approximately 27%, 25% 
and 20% of its product revenues from sales to Taiwan, Japan, and China 
respectively. The Company intends 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 91% of total product 
revenues during the first 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 quarter 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 may negatively impact the Company's ability to 
collect payments from these 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 the foreseeable 
future.  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 that 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 regulatory, 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 ENDED MARCH 31, 1998

The following discussion relates to the financial statements of the Company 
for the three months ended March 31, 1998 (current quarter) of the fiscal 
year ending December 31, 1998, in comparison to the three months ended March 
31, 1997 (comparable quarter of the prior year).

NET REVENUES. Net revenues decreased to $16.4 million in the current quarter 
from $17.1 million for the comparable quarter of the prior year due to a 32% 
decline in average selling prices weighted across all product lines.  

Product revenues decreased to $15.8 million in the current quarter from $16.9 
million for the comparable quarter of the prior year due to declining average 
selling prices.  Although units shipped increased by approximately 2.7 
million units between these two periods, average selling prices declined by 
approximately 30% on the 512Kbit product line, 42% on the 1Mbit product line, 
44% on the 2Mbit product line, and 42% on the 4Mbit product line. 
License, royalty and development revenues were $0.6 million for the current 
quarter as compared to $0.2 million in the comparable quarter for the prior 
year, a 157% increase.  License revenues increased due to royalties received 
from an increased number of licensees and due to license fees paid by two new 
licensees. Such royalty payments may or may not recur in future quarters.
    
During the first quarter of 1998, the Company derived approximately 27% of 
product revenues from sales to Taiwan as compared to 38% 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 91% of product revenues during the current 
quarter, as compared to 80% for the comparable quarter of the prior year.  
International sales are anticipated to account for a substantial majority of 
all product revenues for the foreseeable future.

COST OF REVENUES. Gross margin was $2.0 million or 12% of net revenues in the 
first quarter of 1998 as compared to $0.6 million or 3% of net revenues for 
the comparable quarter in 1997. The increase in gross margin is due to a 
charge of approximately $3.2 million taken in the first quarter of 1997, to 
reduce the carrying value of inventory to its approximate replacement cost.


                                       10

<PAGE>

Future fluctuations in gross margins may occur as a result of 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 $3.1 million 
or 19% of net revenues during the first quarter of 1998 as compared to $2.0 
million or 12% of net revenues during the first 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.

SALES AND MARKETING. Sales and marketing expenses were $1.6 million or 10% of 
net revenues during the first quarter of 1998 and compared to $1.3 million or 
7% of net revenues during the first 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 
product literature expenses. The increase in expense from the first quarter 
of 1997 to the first quarter of 1998 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 first quarter of 1998.

GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1.2 
million or 7% of net revenues during the first quarter of 1998 as compared to 
$1.2 million or 7% of net revenues during the first quarter of 1997.  
Decreased costs in the first quarter of 1998 due to lower headcount in these 
departments were offset by accruals for certain legal expenses which resulted 
in approximately no change in overall expenses from the first quarter in 1997 
to the first quarter in 1998.

INTEREST AND OTHER INCOME (EXPENSE), NET. Interest and other income was $0.5 
million or 3% of net revenues during the first quarter of 1998 as compared to 
$0.4 million or 2% of net revenues during the first quarter of 1997. Interest 
income increased from the comparable quarter of the prior year due to higher 
returns from investments in taxable funds during the first quarter of 1998 as 
compared to the same quarter in 1997.
 
PROVISION FOR (BENEFIT FROM) INCOME TAXES. The benefit from income taxes was 
$1.0 million during the first quarters of both 1998 and 1997.  The benefit in 
both quarters relates to the Company's loss position in the quarters.  The 
Company's effective income tax rate was approximately 30% for both quarters.

NET INCOME (LOSS) PER SHARE. The Company's net income (loss) per share for 
the current quarter was $(0.10), compared to a net loss per share of $(0.11) 
in the comparable quarter of the prior year.  The lower net loss per share 
for the first quarter of 1998 as compared to the first quarter of 1997 is a 
result of lower cost of revenues than experienced in the comparable quarter 
of the prior year.


                                       11

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Principal sources of liquidity at March 31, 1998 consisted of $27.7 million 
of cash, cash equivalents, and short-term investments.  As of March 31, 1998, 
the Company had no open lines of credit or non-trade debt. However, the 
Company may endeavor to open lines of credit in the future to secure 
additional working capital and 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.

Year-to-date, the Company's operating activities used cash of $16.8 million, 
which consisted primarily of increases in inventory of $10.0 million, 
decreases of accounts payable and accrued expenses of $7.3 million, increases 
of accounts receivable and accounts receivable from related parties of $1.1 
million and net loss of $2.3 million offset by changes in provision in 
reserves and depreciation.  In comparison, the Company's operating activities 
for the same period in the prior year provided cash of $4.0 million, 
primarily related to increases in accounts payable of $5.3 million offset by 
the loss for that quarter.

Cash flows used in investing activities totaled $5.5 million year-to-date and 
related primarily to the net purchase of short-term investments for cash 
management purposes.  In addition, the Company acquired capital assets of 
approximately $0.9 million during the current quarter as compared to $0.4 
million during the comparable quarter 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.  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. 

The Company's financing activities used cash of approximately $1.3 million 
during the current quarter, primarily for the repurchase of stock on the open 
market. During the quarter, 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 
and employee stock purchase plans of $0.3 million during the quarter.  In 
comparison, financing activities during the same period of the prior year 
used $0.3 million and consisted of proceeds from stock option exercises of 
$0.2 million offset by stock repurchases of $0.5 million. 

In January 1998, the Company entered into an agreement to purchase a 14 acre 
plot of land located in San Jose, California for $9.2 million including 
closing costs.  The Company plans to build its corporate headquarters on this 
site, schedule for completion in 1999.  In connection with the purchase of 
the land, the construction of the building or other activities of the 
Company, the Company may open lines of credit or seek loans to finance either 
or both the land purchase and/or the scheduled construction.

                                       12

<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 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 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.  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 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 judgement 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 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.  The ITC has 45 days to order a review of all or part 
of that determination.  Atmel has requested such a review, and the Company 
has opposed such a review.  Trial in the District Court action is currently 
scheduled for November 16, 1998.

On November 14, 1997, Intel Corporation ("Intel") sued the Company in the 
U.S. District Court for the District of Delaware.  Intel's complaint alleges 
that the Company, by making, using and selling devices, is willfully 
infringing four U.S. patents owned by Intel.  Regarding each of these four 
patents, Intel seeks a judgment that the Company has 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 has moved that the Delaware action be dismissed for lack of 
jurisdiction or in the alternative be transferred to California.  The 
District Court has yet to rule on this motion.  The Company believes that the 
allegations in the Intel complaint are without merit and intends to 
vigorously defend itself against such 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, the 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.

                                 13

<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.

EXHIBIT 
NUMBER             DESCRIPTION
27                 Financial Data Schedule

(b)  Reports on Form 8-K filed during the quarter ended March 31, 1998: None.


                                       14

<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 28th day of April, 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)


                                       15