<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 SEPTEMBER 30, 1998.

OR

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

                                          
                           COMMISSION FILE NUMBER 0-26944
                                          
                                          
                          SILICON STORAGE TECHNOLOGY, INC.
                (Exact name of Company as specified in its charter)
                                          

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

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

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

                                     __________
                                          


Indicate by check mark whether the Company (1) has filed all reports required 
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 
during the preceding 12 months (or for such shorter period that the Company 
was required to file such reports), and (2) has been subject to such filing 
requirements for the past 90 days.  Yes X   No _.

Number of shares outstanding of the Company's Common Stock, no par value, as 
of the latest practicable date, October 31, 1998: 23,015,318.  Total number 
of pages in document: 18.  Index to Exhibits is on page 17.

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<PAGE>

                          SILICON STORAGE TECHNOLOGY, INC.
                                          
                    FORM 10-Q: QUARTER ENDED SEPTEMBER 30, 1998
                                          
                                 TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION


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


   Item 2.   Management's Discussion and Analysis of Financial Condition and
               Results of Operations..........................................10


   Item 3.   Quantitative and Qualitative Disclosures About Market Risk.......16



PART II - OTHER INFORMATION


   Item 1.   Legal Proceedings................................................16

   Item 6.   Exhibits and Reports on Form 8-K.................................17


                                     2

<PAGE>

                                PART I

ITEM 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


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

<TABLE>
<CAPTION>
                                                Three months ended September 30,   Nine months ended September 30,
                                                -------------------------------    -------------------------------
                                                   1997           1998               1997           1998
                                                   ----           ----               ----           ----
                                                        (unaudited)                     (unaudited)
<S>                                              <C>            <C>                <C>             <C>
Revenues:
     Product                                     $ 19,669       $ 17,333           $ 54,250       $ 49,509
     License                                          346            806                913          1,819
                                                 --------       --------           --------       --------
          Net revenues                             20,015         18,139             55,163         51,328
                                                 --------       --------           --------       --------
 Costs and expenses:
     Cost of revenues                              15,430         16,237             46,837         44,033
     Research and development                       2,029          4,303              6,235         10,805
     Sales and marketing                            1,865          1,869              4,719          5,204
     General and administrative                       856          1,103              3,299          4,038
                                                 --------       --------           --------       --------
                                                   20,180         23,512             61,090         64,080
                                                 --------       --------           --------       --------
          Income (loss) from operations              (165)        (5,373)            (5,927)       (12,752)

Interest and other income (expense), net              595            289              1,436          1,298
                                                 --------       --------           --------       --------
          Income (loss) before provision for
           (benefit from) income taxes                430         (5,084)            (4,491)       (11,454)

Provision for (benefit from) income taxes              35          2,189             (1,348)          (613)
                                                 --------       --------           --------       --------
          Net income (loss)                          $395        ($7,273)           ($3,143)      ($10,841)
                                                 --------       --------           --------       --------
                                                 --------       --------           --------       --------
Net income (loss) per share - basic and diluted     $0.02         ($0.32)            ($0.14)        ($0.47)
                                                 --------       --------           --------       --------
                                                 --------       --------           --------       --------
</TABLE>


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


                                     3

<PAGE>

                  SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARY
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (IN THOUSANDS)
                                          
                                          
<TABLE>
<CAPTION>
                     ASSETS
                                                     December 31,   September 30,
                                                         1997           1998
                                                     ------------    -------------
                                                             (unaudited)
<S>                                                  <C>            <C>
Current assets:
     Cash and cash equivalents                            $26,743        $17,177
     Short-term investments                                20,476          4,156
     Accounts receivable, net                               8,318          9,256
     Accounts receivable from related parties               2,124          3,883
     Inventories                                           11,909         16,117
     Current deferred tax asset                             3,716              -
     Other current assets                                   1,011          2,593
                                                     ------------    -------------
          Total current assets                             74,297         53,182

Furniture, fixtures, and equipment, net                     7,224          8,513
Other assets                                                1,018          2,190
                                                     ------------    -------------
          Total assets                                    $82,539        $63,885
                                                     ------------    -------------
                                                     ------------    -------------
                        LIABILITIES

Trade accounts payable                                     18,957         10,038
Accrued expenses and other current liabilities              6,327          6,117
Deferred revenue                                            1,300          2,178
                                                     ------------    -------------
          Total current liabilities                        26,584         18,333
Other liabilities                                              66            761
                                                     ------------    -------------
          Total liabilities                                26,650         19,094
                                                     ------------    -------------
                     SHAREHOLDERS' EQUITY

Common stock and deferred stock compensation               53,290         53,582
Retained earnings (accumulated deficit)                     2,599         (8,791)
                                                     ------------    -------------
     Total shareholders' equity                            55,889         44,791
                                                     ------------    -------------
          Total liabilities and shareholders' equity      $82,539        $63,885
                                                     ------------    -------------
                                                     ------------    -------------
</TABLE>

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

                                     4

<PAGE>

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

<TABLE>
<CAPTION>
                                                                      Nine months ended September 30,
                                                                      -------------------------------
                                                                          1997             1998
                                                                       -----------     -------------
                                                                                (unaudited)
<S>                                                                     <C>            <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                   ($3,143)      ($10,841)
     Adjustments to reconcile net income (loss) to net cash
       provided by (used in) operating activities:
     Depreciation /amortization                                            3,314          3,416
     Provision for doubtful accounts receivable                              170           (255)
     Provision for excess and obsolete inventories                         3,511          3,290
     Deferred income taxes                                                     -          3,716
     Loss (gain) on disposal of fixed assets                                   7             (2)
     Changes in operating assets and liabilities:
          Accounts receivable                                              2,427           (683)
          Accounts receivable from related parties                             -         (1,759)
          Inventories                                                      7,166         (7,498)
          Other current and noncurrent assets                                536         (1,674)
          Trade accounts payable                                           3,743         (8,919)
          Accrued expenses and other liabilities                             403            324
          Deferred revenue                                                  (114)           878
                                                                         -------      ---------
          Net cash provided by (used in) operating activities             18,020        (20,007)
                                                                         -------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of furniture, fixtures and equipment                     (1,022)        (4,349)
     Proceeds from sale of equipment                                       2,538              -
     Purchases of available-for-sale investments                         (25,701)       (25,167)
     Sales and maturities of available-for-sale investments               33,331         41,487
     Other                                                                     -           (500)
                                                                         -------      ---------
          Net cash provided by (used in) investing activities              9,146         11,471
                                                                         -------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Payments on intellectual properties                                       -            (37)
     Issuance of shares of common stock                                      529            591
     Repurchase of common stock                                           (1,930)        (1,584)
                                                                         -------      ---------
          Net cash provided by (used in) financing activities             (1,401)        (1,030)
                                                                         -------      ---------
            Net increase (decrease) in cash and cash equivalents          25,765         (9,566)
Cash and cash equivalents at beginning of period                          24,755         26,743
                                                                         -------      ---------
Cash and cash equivalents at end of period                               $50,520        $17,177
                                                                         -------      ---------
                                                                         -------      ---------
</TABLE>

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

                                     5

<PAGE>

                          SILICON STORAGE TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION

The accompanying unaudited condensed interim consolidated financial 
statements include all adjustments, consisting only of normal recurring 
adjustments and accruals, that in the opinion of the management of Silicon 
Storage Technology, Inc. (the "Company" or "SST") are necessary for a fair 
presentation of the Company's financial position as of September 30, 1998 and 
the results of operations for the three months and nine months ended 
September 30, 1997 and 1998 and cash flows for the nine months ended 
September 30, 1997 and 1998.  The unaudited interim consolidated financial 
statements should be read in conjunction with the audited consolidated 
financial statements of the Company and the notes thereto included in the 
Company's Annual Report on Form 10-K for the year ended December 31, 1997, 
filed with the Securities and Exchange Commission.

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

RECENT ACCOUNTING PRONOUNCEMENTS:

In June 1997, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive 
Income", which specifies the computation, presentation and disclosure 
requirements for comprehensive income.  The Company implemented SFAS No. 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 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 September 30,   Nine months ended September 30,
                                                            1997           1998              1997           1998
                                                            ----           ----              ----           ----
<S>                                                       <C>            <C>                <C>           <C>
Numerator - Basic and Diluted:
   Net income (loss)                                         $395        ($7,273)           ($3,143)      ($10,841)
                                                          -------        -------             ------        -------
                                                          -------        -------             ------        -------
Denominator - Basic:
   Weighted average common stock outstanding               25,308         22,972             23,231         22,932
                                                          -------        -------             ------        -------
                                                          -------        -------             ------        -------
Denominator - Diluted:
   Weighted average common stock outstanding               25,077         22,972             23,231         22,932
                                                          -------        -------             ------        -------
                                                          -------        -------             ------        -------
</TABLE>

Stock options to purchase 1,214,000 shares of common stock were outstanding 
as of September 30, 1998 but were not included in the computation of diluted 
loss per share because the Company had net losses for the nine months ended 
September 30, 1998.


                                     6

<PAGE>

3. INVENTORIES (IN THOUSANDS):

Inventories are stated at the lower of cost or market value.  No adjustments 
were made to inventory during the quarter ended September 30, 1998.  During 
the quarter ended June 30, 1998, the Company recorded a charge of 
approximately $4 million to reduce the carrying value of inventories to 
replacement cost.  During the quarter ended March 31, 1997, the Company 
recorded a charge of approximately $3.2 million to reduce the carrying value 
of inventories to replacement cost.

<TABLE>
<CAPTION>
                                                     December 31,  September 30,
                                                         1997          1998
                                                      -----------   ------------
<S>                                                    <C>           <C>
Raw materials                                              $  118       $  1,092
Work in process                                             9,249         10,336
Finished goods                                              2,542          4,689
                                                      -----------   ------------
                                                        $  11,909      $  16,117
                                                      -----------   ------------
                                                      -----------   ------------
</TABLE>


4. CONTINGENCIES

On January 3, 1996, Atmel Corporation ("Atmel") sued the Company in the U.S. 
District Court for the Northern District of California. Atmel's complaint 
alleges that the Company, by making, using and selling devices, is willfully 
infringing 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 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 judgement that the Company 
could not pursue its unfair competition claims against Atmel. On August 5, 
1998, the District Court granted a summary judgement 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 indicated that they will appeal the 
decision. On October 26, 1998, the Company filed for a motion of summary 
judgement that it does not infringe on the '673' patent. The trial for the 
remaining issues has been postponed until Atmel's appeal is heard.

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

On November 14, 1997, Intel Corporation ("Intel") sued the Company in the 
U.S. District Court for the District of Delaware.  Intel's complaint alleged 
that the Company, by making, using and selling devices, was willfully 
infringing four U.S. patents owned by Intel.  Regarding each of these four 
patents, Intel sought a judgment that the Company had infringed on the 
patent, an injunction prohibiting further infringement, an accounting of all 
damages caused by the alleged infringement, treble the amount of damages 
caused by the alleged infringement and attorney's fees, costs and expenses.  
The Company moved that the Delaware action be dismissed for lack of 
jurisdiction or in the alternative be transferred to California.  On August 
5, 1998, the District Court granted the Company's motion and dismissed the 
complaint on the grounds that the 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.  The Federal Trade Commission has initiated contact with the Company 
to gather information about the case.

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; and 
that the Company has committed acts of common law unfair competition.  The 
Company has replied by denying these charges.

While the Company has accrued certain amounts for the estimated costs 
associated with 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 accounts 
receivable.  Interest is payable at one-half of one percent above the bank's 
base rate (8.75% at September 30, 1998).  At September 30, 1998, the Company 
had no borrowings against this agreement.

6. INCOME TAXES

SFAS No. 109 requires that deferred tax assets be reduced by a valuation 
allowance if it is more likely than not that some portion of the deferred tax 
assets will not be realized.  The assessment of "more likely than not" 
strongly weights historical performance in cases of net operating losses 
extending over one year.  During the quarter ended September 30, 1998, the 
Company's cumulative net operating losses incurred by the Company exceeded 
the amount of tax carry back available.  For this reason, the Company has 
recorded a full valuation allowance against the deferred tax asset of $4.4 
million. From this point forward, the Company's policy will be to continue to 
reserve the full amount of the deferred tax asset accrued until such time as 
historical evidence shows that the deferred tax asset is recoverable.

7. 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. 
Approximately 449,000 shares were repurchased under this program during the 
three month period ended March 31, 1998 for an aggregate purchase price of 
$1.6 million.  Purchase prices ranged from $3.19 to $3.78 per share.  No 
shares were repurchased during the three month period ended June 30, 1998.  
The repurchase program expired on June 16, 1998.


                                     8

<PAGE>

8. OTHER EVENTS

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


                            9

<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, 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, 1997 for 
additional 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, PCs, CD-ROM, DVD and hard disk
drives, video games, modems, and set-top boxes.

During the third quarter of 1998, the Company shipped two new products.  The 
SST27SF010 is the first in the new 27 series family of Many-Time Programmable 
(MTP) flash memory products.  The easy erasability and rapid reprogramability 
of the MTP device provides time and cost advantages during the manufacturing 
process. The SST39SF020 is the first in the new 39 series, Multi-Purpose 
Flash (MPF) family, to ship. The MPF family has been cost and feature 
optimized to address a host of program-storage and in-system programmable 
applications.  The new architecture created addresses the industry's 
mainstream applications more cost-effectively. The MPF family products are 
designed for cost-sensitive applications where small sector size of 128 Byte 
is not required.

                                     10

<PAGE>

The Company is continuing to develop higher density flash memory products to 
address emerging markets such as digital cameras, voice recorders, memory 
cards, networking systems, digital cellular phones, telecommunications and 
printer font storage.  The Company is also developing flash embedded 
controller products to address the emerging application of in-system 
programmable (ISP) embedded controllers and system-on-a-chip applications and 
has continued the expansion of the Company's technology licensing strategy 
with respect to the Company's technology for embedded applications.

During the third quarter of 1998, the Company derived approximately 32%, 20%, 
and 17% of its product revenues from sales to Taiwan, China and Japan, 
respectively.  The Company intends to continue to diversify its customer base 
by seeking to increase sales in other geographic areas and to continue 
targeting additional high volume applications such as the cellular telephone, 
cordless telephone, DVD drive, video game, electronic organizer and set-top 
box markets. International product revenues accounted for 97% of total 
product revenues during the third 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.

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

RESULTS OF OPERATIONS: QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1998

The following discussion relates to the financial statements of the Company 
for the three months ended September 30, 1998 (current quarter) of the fiscal 
year ending December 31, 1998, in comparison to the three months ended 
September 30, 1997 (comparable quarter of the prior year).  Operating results 
for the nine months ended September 30, 1998 are not necessarily indicative 
of the results to be achieved for the full fiscal year ending December 31, 
1998.

NET REVENUES. Net revenues were $51.3 million for the nine months ended 
September 30,1998 as compared to $55.2 million for the nine months ended 
September 30, 1997.  Net revenues decreased to $18.1 million in the current 
quarter from $20.0 million for the comparable quarter of the prior year.  The 
decrease in net revenues is primarily due to declining average selling prices.


                                     11

<PAGE>

Product revenues decreased to $17.3 million in the current quarter from $19.7 
million for the comparable quarter of the prior year due primarily to 
declining average selling prices.  Net units shipped increased from the 
previous quarter by 3.9 million units to a record 14.7 million units in a 
single quarter. Although units shipped increased by approximately 36% between 
these two periods, average selling prices declined by approximately 23% on a 
weighted average basis.

License, royalty and development revenues were $0.8 million for the current 
quarter as compared to $0.3 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 third quarter of 1998, business in Japan decreased to 
approximately 17% of world-wide product revenues from 22% for the comparable 
quarter of the prior year while business in Taiwan increased to 32% from 30%. 
Business in China comprised 20% of world-wide revenues in both the current 
quarter and the comparable quarter of the prior year. International sales 
accounted for approximately 97% of world-wide product revenues during the 
current quarter, compared to 89% for the comparable quarter of the prior 
year.  For the nine months ended September 30, 1998, 26% of shipment dollars 
were from Taiwan, 22% from China and 19% from Japan.  International sales 
comprised approximately 94% of shipment dollars for the nine months ended 
September 30, 1998.  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 32% of total product revenue, 
respectively, from 41% and 34% for the comparable quarter of the prior year. 
Product shipments for consumer products, such as toys, video games and 
electronic organizers, increased to 20% of total product revenue from 16% for 
the comparable quarter of the prior year.  While the Company intends to 
continue to diversify both the product applications and customer base, there 
can be no assurance that such diversification will be successful.

GROSS MARGIN. Gross margin was $7.3 million or 14% of net revenues for the 
nine months ended September 30, 1998 as compared to $8.3 million or 15% of 
net revenues for the comparable nine month period of the prior year. The 
decrease in gross margin is primarily due to declining average selling 
prices, somewhat offset by reductions in die prices, favorable spending and 
yield variances, and favorable warranty-related adjustments.

Future fluctuations in gross margins may occur as a result of, among other 
factors, declining average selling prices which could lead to additional 
charges to cost of revenues to reduce inventories to replacement costs; cost 
reduction efforts that do not reduce costs faster than average selling price 
declines; price changes in the costs of raw materials; changes in the mix 
between license revenues and product revenues or the impact of changes in the 
product mix.

The Company's agreement with Sanyo Electric Co. Ltd. ("Sanyo") provides for 
wafer price adjustments based on dollar/yen exchange rate fluctuations.  As a 
result, a strengthening yen could result in higher cost of revenues.  Gross 
margins may also be affected by cost reductions, yield fluctuations, wafer 
costs, changes in the mix of sales through distribution channels and 
competitive pricing pressures.

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

RESEARCH AND DEVELOPMENT. Research and development expenses were $10.8 
million for the nine months ended September 30, 1998 as compared to $6.2 
million for the comparable nine month period of the prior year.  Research and 
development expenses were $4.3 million or 24% of net revenues during the 
third quarter of 1998 as compared to $2.0 million or 10% 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 future product introductions. Such increases may continue in both absolute 
dollars and as a percentage of revenue for the foreseeable future.


                                     12

<PAGE>

SALES AND MARKETING. Sales and marketing expenses were $5.2 million for the 
nine months ended September 30, 1998 as compared to $4.7 million for the 
comparable nine month period of the prior year.  Sales and marketing expenses 
were $1.9 million or 10% of net revenues during the third quarter of 1998 as 
compared to $1.9 million or 9% 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 same nine month period in the 
prior year corresponds primarily to increased personnel costs and 
advertising/collateral related spending.  For the comparable three month 
period during 1997 and 1998, the flat spending is due to higher personnel 
costs offset by lower commissions expense related to lower product revenues 
for the third quarter of 1998.  Sales and marketing expense may fluctuate 
over time primarily as a function of product revenue.

GENERAL AND ADMINISTRATIVE. General and administrative expenses were $4.0 
million for the nine months ended September 30, 1998 as compared to $3.3 
million for the comparable nine month period of the prior year. The increase 
in general and administrative expenses between the periods related almost 
entirely to a nonrecurring charge of $0.5 million taken in connection with 
the termination of a land purchase agreement, as described in the Company's 
Report on Form 8-K, filed May 1, 1998.  General and administrative expenses 
were $1.1 million or 6% of net revenues during the third quarter of 1998 as 
compared to $0.9 million or 4% of net revenues during the comparable quarter 
of the prior year.

INTEREST AND OTHER INCOME (EXPENSE), NET. Interest and other income was $1.3 
million for the nine months ended September 30, 1998 as compared to $1.4 
million for the comparable nine month period of the prior year.  Interest and 
other income was $0.3 million or 2% of net revenues during the third quarter 
of 1998 as compared to $0.6 million or 3% of net revenues during the 
comparable quarter of the prior year.

PROVISION FOR (BENEFIT FROM) INCOME TAXES. The benefit from income taxes was 
$0.6 million for the nine months ended September 30, 1998 as compared to a 
benefit of $1.3 million for the comparable nine month period of the prior 
year. The provision for income taxes was $2.2 million during the third 
quarter as compared to $35 thousand for the comparable quarter of the prior 
year.  The increase was a result of a valuation allowance taken against the 
deferred tax asset of $4.4 million, offset by tax benefits recognized through 
June 30, 1998 at a 44% rate.

NET INCOME (LOSS) PER SHARE. The Company's net loss per share for the nine 
months ended September 30, 1998 was $0.47 as compared to a net loss per share 
of $0.14 for the comparable nine month period of the prior year.  The 
increase in net loss is largely due to the valuation allowance taken in the 
current quarter, as well as the declining average selling prices.  The 
Company's net loss per share for the current quarter was $0.32 as compared to 
net income per share of $0.02 in the comparable quarter of the prior year.

LIQUIDITY AND CAPITAL RESOURCES

Principal sources of liquidity at September 30, 1998 consisted of $21.3 
million of cash, cash equivalents, and short-term investments.  On September 
22, 1998, the Company signed a line of credit to secure additional working 
capital of up to $25 million, limited to 80% of eligible accounts receivable, 
to finance operational growth (see Note 5 of Notes to Condensed Consolidated 
Financial Statements).  The Company believes that the cash and short-term 
investment balances, together with funds expected to be generated from 
operations and the line of credit, will be sufficient to meet its projected 
working capital and other cash requirements through at least the next twelve 
months. However, there can be no assurance that events in the future will not 
require the Company to seek additional capital sooner or, if so required, 
that it will be available on terms acceptable to the Company, if at all.

For the nine month period ended September 30, 1998, the Company's operating 
activities used cash of $20.0 million, which consisted primarily of increases 
in net inventory of $4.2 million, decreases in accounts payable of $8.9 
million, increases in accounts receivable and accounts receivable from 
related parties of $2.4 million and the net loss of $10.8 million, offset by 
depreciation and a decrease to the deferred tax asset.  In comparison, the 
Company's operating activities for the comparable nine month period in the 
prior year provided cash of $18.0 million, primarily related to a net 
decrease in inventory of $10.7 million, a decrease in accounts receivable of 
$2.4 million, and an increase in accounts payable of $3.7 million, offset by 
a net loss of $3.1 million.


                                     13

<PAGE>

Cash flows provided by investing activities totaled $11.5 million for the 
nine month period ended September 30, 1998 and related primarily to the net 
sale of short-term investments for cash management purposes.  In addition, 
the Company acquired capital assets of approximately $4.3 million during the 
current nine month period as compared to $1.0 million during the comparable 
nine months of the prior year. These expenditures were primarily for the 
purchase of design and engineering tools and computer equipment.  Similar 
levels of capital spending are expected to continue, and may increase, during 
the rest of 1998.

The Company's financing activities used cash of approximately $1.0 million 
during the current nine month period, primarily for the repurchase of stock 
on the open market.  During the current nine month period, the Company used 
funds of $1.6 million to purchase 449,000 shares of its common stock.  Funds 
used were offset by $0.6 million of proceeds from the issuance of common 
shares under the Company's stock option program during the current nine 
months.  In comparison, financing activities during the comparable nine month 
period of the prior year used $1.4 million and consisted of stock repurchases 
of $1.9 million offset by proceeds from stock option exercises of $0.5 
million.  The repurchase program expired on June 16, 1998.

READINESS FOR YEAR 2000

GENERAL
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 Year 2000 Project
The Company's Year 2000 Project ("the Project") informally began in 1997 
within the information technology 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 plans 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 remediated 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 information 
technology-supported functions internal to the Company and 75% complete 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 is 
being incorporated into the 1999 planning and budgeting process.  The 
awareness stage is expected to be completed by the end of the fourth quarter 
of 1998.

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 75% complete as they relate to information technology-supported
functions, such as management information systems and accounting hardware and
software, and approximately 40% complete as they relate to non-information
technology supported functions, such as manufacturing test equipment and other
Company operations.   The inventory and assessment stages are expected to be
completed by the end of the first quarter of 1999.


                                    14
<PAGE>

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 also plans to contact its major customers, major 
vendors and other trading partners to assess Year 2000 compliance. 
Approximately 10% of the Company's significant third party vendors have been 
contacted thus far.  The survey is expected to be complete by the end of the 
first quarter of 1999.  The Company plans to hire a specialized consultant to 
assist with and to review the survey.

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 information-related systems as new versions 
are released by vendors and is considered to be a normal cost of doing 
business.  In this respect, the Company has already upgraded all of its 
personal computer hardware and operating systems, its network switches, and 
its primary management information and accounting systems to Year 2000 
complaint versions.  The cost incurred for this effort was approximately 
$250,000.

The planning and remediation stages are approximately 50% complete as they 
relate to information technology-supported functions and approximately 30% as 
they relate to non-information technology-supported functions.  The planning 
and remediation stages are expected to be completed by the end of the second 
quarter of 1999.

TESTING AND INTEGRATION
The testing and integration stages are approximately 50% complete for items 
related to information technology-supported functions and 20% complete for 
items related to non-information technology supported functions.  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 has recently begun and will be performed in 
conjunction with the planning and remediation stages.  This stage is expected 
to be complete by the end of the second quarter of 1999.

RISKS
Despite the Company's efforts to address the Year 2000 impact on its internal 
systems, the Company is not sure that it has fully identified such impact and 
that it can resolve it without disruption of its business and without 
incurring significant expense.  In addition, even if the internal systems of 
the Company are not materially affected by the Year 2000 issue, the Company 
could be materially affected through disruption in the operation of the 
enterprises, financial institutions, or governmental entities with which the 
Company interacts.  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.  There is also a risk that the Company's plans for 
achieving Year 2000 compliance may not be completed on time.

THE ESTIMATES AND CONCLUSIONS HEREIN CONTAIN FORWARD-LOOKING STATEMENTS AND 
ARE BASED ON MANAGEMENT'S BEST ESTIMATES OF FUTURE EVENTS.  RISKS TO 
COMPLETING THE PROJECT INCLUDE THE AVAILABILITY OF RESOURCES, THE COMPANY'S 
ABILITY TO DISCOVER AND CORRECT THE POTENTIAL YEAR 2000 SENSITIVE PROBLEMS 
WHICH COULD HAVE A SERIOUS IMPACT ON SPECIFIC SYSTEMS AND FACILITIES, THE 
ABILITY OF THE COMPANY TO FULLY COMPLETE ALL STAGES OF ITS PROJECT, AND THE 
ABILITY OF SUPPLIERS AND CUSTOMERS TO BRING THEIR SYSTEMS INTO YEAR 2000 
COMPLIANCE.

                                      15
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.


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 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 judgement that the Company 
could not pursue its unfair competition claims against Atmel. On August 5, 
1998, the District Court granted a summary judgement 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 indicated that they wil appeal the 
decision. On October 26, 1998, the Company filed for a motion of summary 
judgement that it does not infringe on the '673' patent. The trial on the 
remaining issues has been postponed until Atmel's appeal has been heard.

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

On November 14, 1997, Intel Corporation ("Intel") sued the Company in the 
U.S. District Court for the District of Delaware.  Intel's complaint alleged 
that the Company, by making, using and selling devices, was willfully 
infringing four U.S. patents owned by Intel.  Regarding each of these four 
patents, Intel sought a judgment that the Company had infringed on the 
patent, an injunction prohibiting further infringement, an accounting of all 
damages caused by the alleged infringement, treble the amount of damages 
caused by the alleged infringement and attorney's fees, costs and expenses.  
The Company moved that the Delaware action be dismissed for lack of 
jurisdiction or in the alternative be transferred to California.  On August 
5, 1998, the District Court granted the Company's motion and dismissed the 
complaint on the grounds that the District Court could not exercise personal 
jurisdiction over the Company.

                                      16
<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. 
The Federal Trade Commission has initiated contact with the Company to 
gather information about the case.

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; and 
that the Company has committed acts of common law unfair competition.  The 
Company has replied by denying these charges.

While the Company has accrued certain amounts for the estimated costs 
associated with 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, 1997.

<TABLE>
<CAPTION>

EXHIBIT
NUMBER                 DESCRIPTION
-------        -----------------------
<S>            <C>
27             Financial Data Schedule

</TABLE>

(b)  Reports on Form 8-K filed during the quarter ended September 30, 1998: 
Filed September 15, 1998, Intel Corporation filed suit against the Company 
alleging infringement of four patents. 

                                      17
<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 16th day of November, 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)