<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, 1999.

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, 1999: 23,261,387.  Total number of pages
in document: 17.  Index to Exhibits is on page 16.

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                                       1
<PAGE>

                        SILICON STORAGE TECHNOLOGY, INC.

                     FORM 10-Q: QUARTER ENDED MARCH 31, 1999
                                TABLE OF CONTENTS

<TABLE>
PART I - FINANCIAL INFORMATION
         <S>                                                                               <C>
         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


         Item 3.  Quantitative and Qualitative Disclosures About Market Risk...............14



PART II - OTHER INFORMATION


         Item 1.  Legal Proceedings .......................................................15

         Item 6.  Exhibits and Reports on Form 8-K.........................................16
</TABLE>


                                        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,
                                                                                 1999                1998
                                                                           ------------------ --------------------
                                                                                        (unaudited)
<S>                                                                        <C>                <C>
Net Revenues:
      Product revenues                                                               $17,793              $15,754
      License revenues                                                                   535                  611
                                                                           ------------------ --------------------
           Total net revenues                                                         18,328               16,365
                                                                           ------------------ --------------------

 Costs and expenses:
      Cost of revenues                                                                16,979               14,390
      Research and development                                                         4,734                3,055
      Sales and marketing                                                              2,197                1,619
      General and administrative                                                       1,206                1,167
                                                                           ------------------ --------------------
                                                                                      25,116               20,231
                                                                           ------------------ --------------------

           Income (loss) from operations                                             (6,788)              (3,866)

Interest and other income (expense), net                                                 251                  541
                                                                           ------------------ --------------------
           Income (loss) before provision for (benefit from) income taxes            (6,537)              (3,325)


Provision for (benefit from) income taxes                                                 40              (1,000)
                                                                           ------------------ --------------------

           Net income (loss)                                                        ($6,577)             ($2,325)
                                                                           ------------------ --------------------
                                                                           ------------------ --------------------

Net income (loss) per share - basic and diluted                                      ($0.28)              ($0.10)
                                                                           ------------------ --------------------
                                                                           ------------------ --------------------

Shares used in per share calculations                                                 23,193               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
                                                                           March 31,          December 31,
                                                                             1999                 1998
                                                                      ------------------   -----------------
                                                                                    (unaudited)
<S>                                                                   <C>                  <C>
Current assets:
      Cash and cash equivalents                                                 $22,494             $23,007
      Short-term investments                                                          -                 851
      Accounts receivable, net                                                   11,246               9,249
      Accounts receivable from related parties                                    2,109               2,838
      Inventories, net                                                            8,078               8,297
      Other current assets                                                        2,871               2,615
                                                                      ------------------   -----------------
           Total current assets                                                  46,798              46,857

Furniture, fixtures, and equipment, net                                           6,361               6,847
Other assets                                                                      2,224               2,434
                                                                      ------------------   -----------------
           Total assets                                                         $55,383             $56,138
                                                                      ------------------   -----------------
                                                                      ------------------   -----------------

                               LIABILITIES

Current liabilities:
      Trade accounts payable                                                     14,789              10,309
      Accrued expenses and other current liabilities                              6,227               5,309
      Deferred revenue                                                            1,913               1,827
                                                                      ------------------   -----------------
           Total current liabilities                                             22,929              17,445

Other liabilities                                                                   625                 663
                                                                      ------------------   -----------------
           Total liabilities                                                     18,108              18,108
                                                                      ------------------   -----------------

                           SHAREHOLDERS' EQUITY
Common stock and deferred stock compensation                                     53,945              53,569
Retained earnings (accumulated deficit)                                        (22,116)            (15,539)
                                                                      ------------------   -----------------
      Total shareholders' equity                                                 31,829              38,030
                                                                      ------------------   -----------------
           Total liabilities and shareholders' equity                           $55,383             $56,138
                                                                      ------------------   -----------------
                                                                      ------------------   -----------------
</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,
                                                                            --------------------------------------
                                                                                  1999                 1998
                                                                            -----------------    -----------------
                                                                                          (unaudited)
<S>                                                                         <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                              ($6,577)             ($2,325)
     Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
     Depreciation /amortization                                                        1,112                1,000
     Provision for doubtful accounts receivable                                           42                  250
     Provision for excess and obsolete inventories                                       224                2,521
     (Gain) loss on sale of equipment                                                      1                    -
     Deferred income taxes                                                                 -                (563)
     Changes in operating assets and liabilities:
        Accounts receivable                                                          (2,039)                (202)
        Accounts receivable from related parties                                         729                (908)
        Inventories                                                                      (5)             (10,022)
        Other current and noncurrent assets                                            (107)                  397
        Trade accounts payable                                                         4,480              (6,296)
        Accrued expenses and other liabilities                                           926              (1,017)
        Deferred revenue                                                                  86                  406
                                                                            -----------------    -----------------
           Net cash provided by (used in) operating activities                       (1,128)             (16,759)
                                                                            -----------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of furniture, fixtures and equipment                                  (566)                (893)
     Purchases of available-for-sale investments                                           -             (23,328)
     Sales and maturities of available-for-sale investments                              851               19,234
     Other                                                                                 -                (500)
                                                                            -----------------    -----------------
           Net cash provided by (used in) investing activities                           285              (5,487)
                                                                            -----------------    -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payments on intellectual properties                                                (37)                    -
     Issuance of shares of common stock                                                  367                  250
     Repurchase of common stock                                                            -              (1,584)
                                                                            -----------------    -----------------
           Net cash provided by (used in) financing activities                           330              (1,334)
                                                                            -----------------    -----------------
                Net increase (decrease) in cash and cash equivalents                   (513)             (23,580)
Cash and cash equivalents at beginning of period                                      23,007               26,743
                                                                            -----------------    -----------------
Cash and cash equivalents at end of period                                           $22,494               $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, 1999 and the results of operations
for the three months ended March 31, 1999 and 1998 and cash flows for the three
months ended March 31, 1999 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, 1998, filed
with the Securities and Exchange Commission.

The year-end balance sheet at December 31, 1998 was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.

RECENT ACCOUNTING PRONOUNCEMENTS:

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133 establishes a new model for
accounting for derivatives and hedging activities and is effective for the
Company's fiscal year 1999. The impact of the implementation of SFAS 133 on the
consolidated financial statements of the Company has not yet been determined.

In March 1998, the Accounting Standards Executive Committee ("AcSEC"), released
Statement of Position 98-1, "Accounting for Costs of Computer Software Developed
or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 requires certain costs of
computer software developed or obtained for internal use to be capitalized,
provided that those costs are not research and development. SOP 98-1 is
effective for the Company's fiscal year 1999, and there is no material impact on
the Company's consolidated financial statements.

In April 1998, AcSEC released Statement of Position 98-5, "Accounting for Costs
of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires the costs of start-up
activities to be expensed as incurred. Start-up activities are defined as those
one-time activities related to opening a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer, initiating a new process in an existing facility, or
commencing some new operation. SOP 98-5 is effective for the Company's fiscal
year 1999, and there is no material impact on the Company's consolidated
financial statements.

2. COMPUTATION OF NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding for the period. Diluted
net income (loss) per share is computed by dividing net income (loss) 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 March 31,
                                                                 1999                 1998
                                                           -----------------    -----------------
<S>                                                        <C>                  <C>
Numerator - Basic and Diluted:
     Net income (loss)                                             ($6,577)             ($2,325)
                                                           -----------------    -----------------
                                                           -----------------    -----------------
Denominator - Basic & Diluted:
     Weighted average common stock outstanding                       23,193               22,960
                                                           -----------------    -----------------
                                                           -----------------    -----------------

Net income (loss) per share - Basic and Diluted                     ($0.28)              ($0.10)
                                                           -----------------    -----------------
                                                           -----------------    -----------------
</TABLE>

Stock options to purchase 914,000 and 1,132,000 shares of common stock were
outstanding as of March 31, 1999 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, 1999 and March 31, 1998.


                                       6
<PAGE>

3. INVENTORIES (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                              March 31,           December 31,
                                                                1999                  1998
                                                          ------------------    ------------------
<S>                                                       <C>                   <C>
Raw Material                                                 $          185        $          311
Work in process                                                       4,742                 4,717
Finished goods                                                        3,151                 3,269
                                                          ------------------    ------------------
                                                             $        8,078        $        8,297
                                                          ------------------    ------------------
                                                          ------------------    ------------------
</TABLE>


Inventories are stated at the lower of cost or market value.

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 on 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 ruling in Atmel's favor. 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 International Trade 
Commission ("ITC") action, as described below. 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 the Company could not pursue its unfair competition 
claims against Atmel. On August 5, 1998, the District Court granted a summary 
judgment in the Company's favor on the basis that the '811 patent' and the 
'829 patent' were found to be invalid by another court. Atmel has appealed 
the decision. No date has been set for oral argument. On October 26, 1998, 
the Company filed for a motion of summary judgment that it does not infringe 
on the '673' patent. On April 13, 1999, the District Court granted the 
Company's motion and entered a judgment that the Company does not infringe 
the claims of the '673 patent' The trial on the remaining issues has been 
postponed until Atmel's appeal is heard.

On February 17, 1997, Atmel filed an action with the 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 ITC entered its opinion of 
finding no violation by the Company. Atmel has appealed the decision. The 
Federal Circuit has ordered the ITC to reconsider its decision on the '903 
patent'. No schedule has been set for the new hearing.

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 District
Court could not exercise personal jurisdiction over the Company.


                                       7
<PAGE>

On September 14, 1998, Intel sued the Company in the U.S. District Court for the
Northern District of California, San Jose Division. 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 is
seeking 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 denied
infringement of any of the Intel patents and has counter-claimed for invalidity
and non-infringement of the Intel patents. The Company believes that the
substantive allegations in the Intel complaint are without merit and intends to
vigorously defend itself against the action.

On July 31, 1998, the Company filed suit against Winbond Electronics of 
Taiwan ("Winbond") in the U.S. District Court for the Northern District of 
California, San Jose Division. The Company is suing for breach of contract 
and breach of covenant of good faith and fair dealing. The Company seeks 
damages and an injunction prohibiting Winbond from using any of the 
technology licensed to Winbond by the Company and a return of technical 
material transferred to Winbond under the original license agreement. Winbond 
has answered the complaint and has counter-claimed for a declaration that it 
is not in material breach of the agreement; that the Company has breached the 
agreement; that the Company has breached the covenant of good faith and fair 
dealing; that the Company has interfered with prospective economic advantage; 
that the Company has engaged in unlawful business practice in violation of 
the California Business and Profession Code; that the Company has committed 
acts of common law unfair competition; and that it is not obligated to pay 
the Company under the agreement and/or it owns or jointly owns the technology 
embodied in its products, and it seeks restitution of the payments made. The 
Company has replied by denying these charges. The Company believes that the 
substantive allegations in the Winbond counter-complaint are without merit 
and intends to vigorously defend itself against the action.

Also, from time to time, the Company is involved in other legal actions arising
in the ordinary course of business. While the Company has accrued certain
amounts for the estimated legal costs associated with defending these matters,
there can be no assurance that the Atmel complaint, the Intel complaint, the
Winbond 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. LINE OF CREDIT

On September 22, 1998, the Company signed a credit agreement with Foothill 
Capital Corporation, which provides for up to $25.0 million of borrowings 
through September 22, 2001. The Company must pay an unused line fee at the 
annual rate of one-quarter of one percent on the unused portion of the first 
$5 million and the Company is required to maintain a minimum level of 
tangible net worth. The line of credit is secured by the Company's assets and 
availability under the line is limited to 80% of eligible world-wide accounts 
receivable. Interest is payable at one-half of one percent above the bank's 
base prime rate (8.75% at March 31, 1999). At March 31, 1999, the Company had 
no borrowings against this agreement.

6. SUBSEQUENT EVENTS

As noted in Form 8-K, filed by the Company on April 14, 1999, the U.S. District
Court granted the Company summary judgement in an action filed by Atmel
Corporation v. the Company in January 1996, that it does not infringe the claims
of U.S. patent 4,233,673.




                                       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, 1998, as filed with the Securities and
Exchange Commission.

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING 
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND 
UNCERTAINTIES. THE STATEMENTS CONTAINED IN THIS REPORT ON FORM 10-Q THAT ARE 
NOT PURELY HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF 
SECTION 27A OF THE SECURITIES EXCHANGE ACT OF 1933, AS AMENDED, AND SECTION 
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING STATEMENTS 
REGARDING OUR EXPECTATIONS, BELIEFS, INTENTIONS OR STRATEGIES REGARDING THE 
FUTURE. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE BASED ON 
INFORMATION AVAILABLE TO THE COMPANY ON THE DATE HEREOF, AND WE ASSUME NO 
OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. OUR ACTUAL RESULTS 
COULD DIFFER MATERIALLY FROM THOSE DISCUSSED. FACTORS THAT COULD CAUSE OR 
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO:

        -    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;
        -    exchange rate fluctuations of foreign currencies;
        -    unanticipated research and development expenses associated with new
             product introductions;
        -    the timing of significant orders;
        -    general economic conditions; and
        -    a downturn in the market for consumer products which incorporate
             the Company's products.

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 SECTION ENTITLED "RISK FACTORS"
IN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 FOR ADDITIONAL
DISCUSSION.

RESULTS OF OPERATIONS: QUARTER ENDED MARCH 31, 1999

OVERVIEW. 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 small sector, medium density 
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. The Company also has 
developed higher density memory products to address broader markets such as 
digital cameras, voice recorders, memory cards, networking systems, digital 
cellular phones, telecommunications and printer font storage. The Company has 
also entered the 8-bit flash microcontroller market with products to address 
emerging application of in-system programmable ("ISP") flash microcontrollers 
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 1999, the Company introduced three new Many-Time 
Programmable ("MTP") flash memory devices: the SST27SF020, the SST27SF512, 
and the SST27SF256. The easy erasability and rapid reprogramability of the 
MTP devices provide time and cost advantages during the manufacturing process.

During the first quarter of 1999, the Company derived approximately 30%, 23%,
and 14% of its product revenues from sales to Taiwan, China and Japan,
respectively. The Company intends to continue to diversify its customer base by
increasing sales in other geographic areas and to continue targeting additional
high volume applications such as the


                                       9
<PAGE>

cellular telephone, pager, modem, hard disk drive, cordless telephone, DVD 
drive, electronic organizer and set-top box markets. International product 
revenues accounted for 89% of total product revenues during the first quarter 
of 1999. The Company is in the process of increasing the scope of its 
international operations and expects that international sales will continue 
to account for a significant portion of its product revenues although the 
percentage may fluctuate from period to period.

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 economic and political instability and changes in diplomatic
and trade relationships.

In particular, during 1997 and 1998, currency devaluation and economic 
deflation were experienced in several Asian economies in which the Company 
does business, such as Japan, Korea, and Taiwan. During the first quarter of 
1999, the Company derived 80% of its total product revenues from the Far 
East. Economic problems in this region may 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 sectors of these countries may impact the customers' ability to 
open letters of credit or other financial instruments that are guaranteed by 
foreign banks. Additionally, the Company's major wafer suppliers, 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 may reinvigorate declines in the average selling prices for 
the Company's products as the Company's competitors reduce product prices to 
generate needed cash. Continued economic and/or political instability of any 
kind in this region may continue to have a material adverse effect on the 
Company's operating results due to the anticipated concentration of the 
Company's activities in this region for the foreseeable future. In addition, 
because the Company's international sales are denominated in U.S. dollars, 
fluctuations in the exchange rate of currencies may increase the price in 
local currencies of the Company's products in foreign markets and make the 
Company's products relatively more expensive when compared to 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 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.

The following discussion relates to the financial statements of the Company for
the three months ended March 31, 1999 (current quarter) of the fiscal year
ending December 31, 1999, in comparison to the three months ended March 31, 1998
(comparable quarter of the prior year). Operating results for the three months
ended March 31, 1999 are not necessarily indicative of the results to be
achieved for the full fiscal year ending December 31, 1999.

NET REVENUES. Net revenues were $18.3 million for the three months ended March
31, 1999 as compared to $16.4 million for the three months ended March 31, 1998.

Product revenues increased to $17.8 million in the current quarter from $15.8
million for the comparable quarter of the prior year. While the weighted average
selling price across all products declined 30% between these two periods, unit
shipments increased 62% to a record 15.9 million units in a single quarter.

License, royalty and development revenues were $0.5 million for the current
quarter as compared to $0.6 million in the comparable quarter of the prior year.
Current quarter license revenues include royalty payments for the use of the
Company's technology. Such royalty payments may or may not recur in future
quarters.

During the first quarter of 1999, business in Japan decreased to approximately
14% of world-wide product revenues from 25% for the comparable quarter of the
prior year while business in Taiwan and China increased to 30% and 23%,
respectively, from 27% and 20%. International sales accounted for approximately
89% of world-wide product revenues during the current quarter, compared to 93%
for the comparable quarter of the prior year. The Company anticipates that
international sales will account for substantially all of the product revenues
for the foreseeable future, although percentages may vary.

For the current quarter, product shipments for PC BIOS and PC peripheral
applications decreased to approximately 33% and 31% of total product revenue,
respectively, from 37% and 40% for the comparable quarter of the prior year.
While product shipments for consumer products, such as toys, video games and
electronic organizers,


                                       10
<PAGE>

decreased to 15% of total product revenue from 16% for the comparable quarter of
the prior year, shipment revenue increased 8% to $2.8 million for the first
quarter of 1999 from $2.5 million for the comparable quarter of the prior year.
Product shipment revenues in the first quarter of 1999 for communication
products, such as modems and cordless phones, increased 341% to $1.8 million for
the first quarter of 1999 from $407 thousand for the comparable quarter of the
prior year. Communication shipments accounted for approximately 10% of total
product revenue as compared to 3% 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 profit was $1.3 million or gross margin of 7% of net
revenues for the three months ended March 31, 1999 as compared to $2.0 million
or 12% of net revenues for the comparable period of the prior year. The decrease
in gross profit and gross margin is primarily due to the decline in average
selling prices, somewhat offset by favorable yield, overhead and other inventory
variances during the current quarter.

Future fluctuations in gross profits and/or 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 $4.7 million or
26% of net revenues during the first quarter of 1999 as compared to $3.0 million
or 19% of net revenues during the comparable quarter of the prior year. 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, increased prototyping, new product
development and product qualification costs and process and development efforts
related to new and future product introductions. The Company has introduced
thirteen new products since the comparable quarter of the prior year. Research
and development expenses are expected to increase in absolute dollars but not
necessarily as a percentage of revenue over time.

SALES AND MARKETING. Sales and marketing expenses were $2.2 million or 12% of
net revenues during the first quarter of 1999 as compared to $1.6 million or 10%
of net revenues during the comparable quarter of the prior year. 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
comparable quarter of the prior year corresponds primarily to increased
personnel costs, advertising/collateral related spending and increased
commission expense as a result of higher revenues. Sales and marketing expense
may fluctuate over time primarily as a function of product revenue.

GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1.2
million or 7% of net revenues during the first quarter of 1999 and the
comparable quarter of the prior year. General and administrative expense
primarily consists of personnel and legal costs.

INTEREST AND OTHER INCOME (EXPENSE), NET. Interest and other income was $0.3
million or 1% of net revenues during the first quarter of 1999 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 provision for income taxes was
$40 thousand during the first quarter of 1999 as compared to a benefit from
income taxes of $1.0 million for the comparable quarter of the prior year. The
current quarter's provision relates to foreign tax expense withheld on royalty
revenue. During 1998, the Company determined that its cumulative net operating
losses incurred exceeded the amount of tax carry back


                                       11
<PAGE>

available. For this reason, in the third quarter of 1998, the Company recorded a
full valuation allowance against the deferred tax asset. The tax effect of the
net operating loss incurred during the first quarter of 1999 was accrued as a
deferred tax asset, offset by a valuation allowance.

NET INCOME (LOSS) PER SHARE. The Company's net loss per share for the current
quarter was ($0.28) as compared to ($0.10) in the comparable quarter of the
prior year. The increase in net loss is due to the increase in operating
expenses related largely to new product introduction and development, as well as
the declining average selling prices.

LIQUIDITY AND CAPITAL RESOURCES

Principal sources of liquidity at March 31, 1999 consisted of $22.5 million 
of cash and cash equivalents. The Company had an open line of credit of up to 
$25 million, limited to 80% of eligible world-wide accounts receivable, to 
secure sufficient working capital to finance growth in operations and new 
product development efforts. At March 31, 1999, there were no borrowings 
against the line. The Company believes that the cash and cash equivalents, 
together with funds expected to be generated from operations and the line of 
credit availability 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 borrowing or capital, and, if so required, that 
such borrowings or capital will be available on terms acceptable to the 
Company, if at all.

For the three month period ended March 31, 1999, the Company's operating 
activities used cash of $1.1 million, which consisted primarily of increases 
in accounts receivable and accounts receivable from related parties of $1.3 
million and the net loss of $6.6 million, offset by increases in accounts 
payable of $4.5 million, increases in accrued and other liabilities of $0.9 
million and depreciation and amortization expense of $1.1 million. In 
comparison, the Company's operating activities for the comparable three month 
period in the prior year used cash of $16.7 million, primarily related to a 
increase in net inventory of $7.5 million, a decrease in accounts payable of 
$6.3 million, a decrease in accrued liabilities of $1.0 million and a net 
loss of $2.3 million, partially offset by depreciation.

Cash flows provided by investing activities totaled $285 thousand for the 
three month period ended March 31, 1999 and related to the sale or maturity 
of short-term investments for cash management purposes, partially offset by 
capital acquisitions. In comparison, the Company's investing activities for 
the comparable three month period in the prior year used cash of $5.5 million 
and related primarily to the net purchase of short-term investments for cash 
management purposes.

The Company's financing activities provided cash of approximately $330 
thousand during the three month period ended March 31, 1999, primarily from 
the proceeds of the employee stock purchase plan. In comparison, financing 
activities during the comparable three month period of the prior year used 
$1.3 million and consisted of stock repurchases of $1.6 million partially 
offset by proceeds from stock option and employee purchase plans of $0.3 
million.

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 receivable, 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 institutions and organizations,
and of governments, both domestically and globally, directly and indirectly, for
the accurate exchange of data and other business-critical resources.

The Company's assessment of potential Year 2000 problems in its current and
previously sold products is that, to the best of its knowledge and belief, at
the time of shipment the Company's products do not contain date sensitive data
or real time clocks; thus, they are neither affected by nor will they directly
cause "Year 2000" problems.


                                       12
<PAGE>

For the Company, Year 2000 compliant means the technology (including but not
limited to hardware, software, firmware, microchips, or other electronic
components, equipment, processes, or systems) shall provide the following
functions in a correct and consistent manner: (1) handle date information,
including 9/9/99, before, during, and after the 1st of January 2000, including
but not limited to: accepting date input, providing date output, and performing
calculations on dates, or portions of dates; (2) performance and functionality
are not affected by dates prior to, during, and after the 1st of January 2000;
(3) respond to two-digit year date input in a way that resolves the ambiguity of
which century in a disclosed, defined, and predetermined manner, i.e., a date
ending in 00 must return 2000; (4) store and provide output of date information
in ways that are unambiguous as to which century; and (5) Year 2000 is
recognized as a leap year.

THE YEAR 2000 PROJECT. The Company's Year 2000 Project ("the Project")
informally began in 1997 within the information technology ("IT") department.
The department began to upgrade the Company's management information systems and
personal computer hardware and software to be Year 2000 compliant. The Project's
mission and strategy became formalized in August 1998. The Company has and plans
to continue to dedicate the equivalent of two full-time resources to the Project
from the end of the fourth quarter of 1998 through the year 2000. The Project
consists of an eight step approach; (1) awareness that no system is safe from
Year 2000 problems, (2) inventorying SST internal and external resources and
activities with potential Year 2000 issues, (3) assessment of every item in the
inventory for Year 2000 compliance to determine where the problems lie, (4)
planning a strategy for fixing the problems encountered, focussing first on the
most business-critical functions, (5) remediation of business-critical processes
followed by other processes, (6) testing of remedied processes, (7) integration
back into other functions within and outside of the Company, and (8) contingency
planning to keep the Company functional in case Year 2000 compliance failures
occur.

AWARENESS. The awareness stage is 100% complete as it relates to both IT
supported functions internal to the Company and as it relates to all other
internal and external operations of the Company. The Project has full executive
and Board-level sponsorship and support at the appropriate levels of the
Company. Project funding has been discussed and incorporated into the 1999
planning and budgeting process. An internal cross-functional Task Force has been
established to develop strategies to assess the Year 2000 compliance of
customers, vendors and other significant corporate partners as well as to
inventory and to assess compliance of the systems and equipment within the
Company. The awareness stage has been completed.

INVENTORY AND ASSESSMENT. The Company is actively inventorying Company resources
and assessing Year 2000 compliance of these resources. The inventory and
assessment stages are both approximately 100% complete as they relate to IT
supported functions, such as management information systems and accounting
hardware and software, approximately 99% complete as they relate to non-IT
supported equipment, such as manufacturing test equipment and approximately 80%
complete as they relate to other Company operations and non-IT supported
functions. The inventory and assessment stages are expected to be completed by
the end of the second quarter of 1999.

Currently, the Company is conducting a survey of both its internal systems and
the equipment and systems supported by third party providers to assess Year 2000
compliance. The Company is surveying its active customers with sales activity
over $1 million in the past eighteen months, significant vendors and other
trading partners to assess Year 2000 compliance. All significant vendors have
been asked to complete a survey questionnaire and to certify Year 2000
compliance. All of the Company's significant third party vendors have been
contacted thus far and the Company awaits their responses. The survey responses
will be reviewed and evaluated during the second quarter of 1999.

PLANNING AND REMEDIATION. The Company has already begun to strategize on how to
best fix the problems encountered. Decisions are made on a case by case basis,
and approximately 70% of the problems can be fixed by the replacement or
purchase of additional parts or software upgrades. The remaining 30% of the
problems require replacement of the entire system. 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 IT supported 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 compliant versions. The cost
incurred for this effort was approximately $250,000.

The planning and remediation stages are approximately 80% complete as they
relate to IT supported functions and approximately 50% as they relate to non-IT
supported functions. The planning and remediation stages are expected to be
completed by the end of the second quarter of 1999.


                                       13
<PAGE>

TESTING AND INTEGRATION. The testing and integration stages are approximately
65% complete for items related to IT supported functions and 20% complete for
items related to non-IT supported functions. Testing of vendor supplied survey
data may include follow-up discussions of survey data, site visits, and review
of Year 2000 compliance project timelines. These stages are expected to be
completed by the end of the third quarter of 1999.

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.

CONTINGENCY PLANNING. The contingency planning stage will be performed in
conjunction with the planning and remediation stages and the testing and
integration stages. For each mission critical vendor or trading partner that has
not responded on Year 2000 compliance to the Company's satisfaction by June 30,
1999, a contingency plan which includes an alternative vendor source will be
developed. If, during a follow-up survey scheduled for the third quarter of
1999, it appears that compliance is behind schedule or problematic, the
contingency plan will be implemented and an alternative vendor will be qualified
to provide service from late 1999 through the early part of year 2000. This
stage is expected to be complete by the middle of the fourth quarter of 1999.

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 such impact 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. A failure to identify and or correct a material Year 2000 problem
could result in an interruption in, or a failure of, certain normal business
activities or operations. Such failures could materially and adversely affect
the Company's results of operations, liquidity and financial condition.
Specifically, if the Company does not adequately identify and correct Year 2000
problems in its information systems it could experience interruptions in its
operations, including manufacturing, order processing, receivables collections
and accounting, such that there would be delays in product shipments, lost data
and a consequential impact on revenues, expenditures and financial reporting. If
the Company does not adequately identify and correct Year 2000 problems in its
non-IT supported systems it could experience interruptions in its manufacturing
and related operations, such that there would be delays in product shipments and
a consequential impact on revenues. If the Company does not adequately identify
and correct Year 2000 problems with its significant third parties it could
experience interruptions in the supply of key components or services from those
parties, such that there would be delays in product shipments or services and a
consequential impact on revenues. In addition, given the inherent complexity of
the Year 2000 problem, there can be no assurance that actual costs will not be
higher than currently anticipated or that corrective actions will not take
longer than currently anticipated to complete. There is also a risk that the
Company's plans for achieving Year 2000 compliance may not be completed on time.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Due to its international sales and manufacturing, the Company is exposed to 
risks associated with foreign exchange rate fluctuations. These exposures may 
change over time as business practices evolve and could have a material 
adverse effect on the Company's operating results and financial condition. 
All of the Company's sales are denominated in U.S. dollars. An increase in 
the value of the U.S. dollar relative to foreign currencies could make the 
Company's products more expensive, reducing the demand for the Company's 
products. A decline in the demand for the Company's products could have a 
material adverse effect on the Company's operating results and financial 
position. In addition, a downturn in the Japanese economy could impair the 
value of the Company's investment in its Japanese affiliate.

The Company maintains an investment portfolio of various issuers, types and
maturities. The Company's portfolio consists of municipal securities and
commercial papers, which are classified as available-for-sale and recorded on
the balance sheet at their fair market value. The securities all mature within
120 days. At any time, fluctuations in interest rates could effect interest
earnings on the Company's cash, cash equivalents and short-term investments.
Currently, the Company does not hedge these interest rate exposures.


                                       14
<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 on 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 ruling in Atmel's favor. 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 International Trade 
Commission ("ITC") action, as described below. 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 the Company could not pursue its unfair competition 
claims against Atmel. On August 5, 1998, the District Court granted a summary 
judgment in the Company's favor on the basis that the '811 patent' and the 
'829 patent' were found to be invalid by another court. Atmel has appealed 
the decision. No date has been set for oral argument. On October 26, 1998, 
the Company filed for a motion of summary judgment that it does not infringe 
on the '673' patent. On April 13, 1999, the District Court granted the 
Company's motion and entered a judgment that the Company does not infringe 
the claims of the '673 patent' The trial on the remaining issues has been 
postponed until Atmel's appeal is heard.

On February 17, 1997, Atmel filed an action with the 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 ITC entered its opinion of 
finding no violation by the Company. Atmel has appealed the decision. The 
Federal Circuit has ordered the ITC to reconsider its decision on the '903 
patent'. No schedule has been set for the new hearing.

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 District
Court could not exercise personal jurisdiction over the Company.

On September 14, 1998, Intel sued the Company in the U.S. District Court for the
Northern District of California, San Jose Division. 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 is
seeking 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 denied
infringement of any of the Intel patents and has counter-claimed for invalidity
and non-infringement of the Intel patents. The Company believes that the
substantive allegations in the Intel


                                       15
<PAGE>

complaint are without merit and intends to vigorously defend itself against the
action.

On July 31, 1998, the Company filed suit against Winbond Electronics of Taiwan
("Winbond") in the U.S. District Court for the Northern District of California,
San Jose Division. The Company is suing for breach of contract and breach of
covenant of good faith and fair dealing. The Company seeks damages and an
injunction prohibiting Winbond from using any of the technology licensed to
Winbond by the Company and a return of technical material transferred to Winbond
under the original license agreement. Winbond has answered the complaint and has
counter-claimed for a declaration that it is not in material breach of the
agreement; that the Company has breached the agreement; that the Company has
breached the covenant of good faith and fair dealing; that the Company has
interfered with prospective economic advantage; that the Company has engaged in
unlawful business practice in violation of the California Business and
Profession Code; that the Company has committed acts of common law unfair
competition; and that it is not obligated to pay the Company under the agreement
and/or it owns or jointly owns the technology embodied in its products, and it
seeks restitution of the payments made. The Company has replied by denying these
charges. The Company believes that the substantive allegations in the Winbond 
counter-complaint are without merit and intends to vigorously defend itself 
against the action.

Also, from time to time, the Company is involved in other legal actions arising
in the ordinary course of business. While the Company has accrued certain
amounts for the estimated legal costs associated with defending these matters,
there can be no assurance that the Atmel complaint, the Intel complaint, the
Winbond 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.


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, 1998.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                         DESCRIPTION
<S>                        <C>
27                         Financial Data Schedule
</TABLE>


(b)      Reports on Form 8-K filed during the quarter ended March 31, 1999:
None.



                                       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 23rd day of April, 1999.

                              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