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                                                                    EXHIBIT 10.3

                       APPLIED MICRO CIRCUITS CORPORATION
                             1992 STOCK OPTION PLAN

                            Amended April 18, 2001

     1.   Purposes of the Plan. The purposes of this 1992 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.

     2.   Definitions.  As used herein, the following definitions shall apply:

          (a)  "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

          (b)  "Board" means the Board of Directors of the Company.

          (c)  "Code" means the Internal Revenue Code of 1986, as amended.

          (d)  "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.

          (e)  "Common Stock" means the Common Stock of the Company.

          (f)  "Company" means Applied Micro Circuits Corporation, a Delaware
corporation.

          (g)  "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.

          (h)  "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered in the case of: (i) sick leave; (ii) military leave; (iii) any other
leave of absence approved by the Board, provided that such leave is for a period
of not more than ninety (90) days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries or its successor.

          (i)  "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

                                       1.
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          (j)  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

          (k)  "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:

               (i)   If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock, for the last market trading day prior to the time of
determination as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;

               (ii)  If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock or;

               (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (l)  "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.

          (m)  "Named Executive" means any individual who, on the last day of
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four highest compensated officers of the
Company (other than the chief executive officer). Such officer status shall be
determined pursuant to the executive compensation disclosure rules under the
Exchange Act.

          (n)  "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

          (o)  "Option" means a stock option granted pursuant to the Plan.

          (p)  "Optioned Stock" means the Common Stock subject to an Option.

          (q)  "Optionee" means an Employee or Consultant who receives an
Option.

          (r)  "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.

          (s)  "Plan" means this 1992 Stock Option Plan.

          (t)  "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.

                                       2.
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          (u)  "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.

     3.  Stock Subject to the Plan. Subject to the provisions of Section 14 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is Seventy-Eight Million Six Hundred Eighteen Thousand Four
Hundred Thirty-Two (78,618,432) shares of Common Stock (on a post-split basis).
The shares may be authorized, but unissued, or reacquired Common Stock.

     If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.

     4.   Administration of the Plan.

               (i)  Administration With Respect to Directors and Officers. With
respect to grants of Options to Employees or Consultants who are also officers
or directors of the Company, grants under the Plan shall be made by (A) the
Board if the Board may make grants under the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") and
Section 162(m) of the Code as it applies so as to qualify grants or Options to
Named Executives as performance-based compensation, or (B) a Committee
designated by the Board to make grants under the Plan, which Committee shall be
constituted in such a manner as to permit grants under the Plan to comply with
Rule 16b-3, to qualify grants of options to Named Executives as performance-
based compensation under Section 162(m) of the Code and otherwise so as to
satisfy legal requirements relating to the administration of incentive stock
option plans, if any, of California corporate and securities laws and of the
Code (the "Applicable Laws"). Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Rule 16b-3 and to the extent required under Section
162(m) of the Code to qualify grants of Options to Named Executives as
performance-based compensation.

               (ii)  Multiple Administrative Bodies. If permitted by Rule 16b-3,
the Plan may be administered by different bodies with respect to directors, non-
director officers and Employees who are neither directors nor officers.

               (iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or Consultants who are
neither directors nor officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove members

                                       3.
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(with or without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.

          (b)  Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:

               (i)   to determine the Fair Market Value of the Common Stock, in
accordance wit Section 2(k) of the Plan;

               (ii)  to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;

               (iii) to determine whether and to what extent Options are granted
hereunder;

               (iv)  to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

               (v)   to approve forms of agreement for use under the Plan; and

               (vi)  to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder.

          (c)  Repricings. The Administrator shall not have the authority to
reduce the of any Option to the then current Fair Market Value if the Fair
Market Value of the Common Stock covered by such Option shall have declined
since the date the Option was granted.

          (d)  Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options

     5.    Eligibility.

          (a)  Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if such Optionee is
otherwise eligible, be granted an additional Option or Options.

          (b)  Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.

                                       4.
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          (c)  For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

          (d)  The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate such Optionee's employment or consulting
relationship at any time, with or without cause.


     6.   Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect until July 1, 2012 unless sooner terminated under Section 15
of the Plan.

     7.   Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement

     8.   Limitation on Grants to Employees. Subject to adjustment as provided
in this Plan, the maximum number of Shares which may be subject to options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be 8,000,000. This Section 8 shall not apply prior to the date upon which
the Company becomes subject to the Exchange Act and following such date, shall
not apply until the (i) earliest of: (A) the first material modification of the
Plan (including any increase to the number of shares reserved for issuance under
the Plan in accordance with Section 3); (B) the issuance of all of the shares of
common stock reserved for issuance under the Plan; (C) the expiration of the
Plan; or (D) the first meeting of shareholders at which directors are to be
elected that occurs after the close of the third calendar year following the
calendar year in which occurred the first registration of any equity security
under Section 12 of the Exchange Act; or (ii) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated thereunder.

     9.   Option Exercise Price and Consideration.

          (a)  The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:

               (i)  In the case of an Incentive Stock Option

                    (A)  granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

                                       5.
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                    (B)  granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.

               (ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be no less than 100% of the Fair Market Value on the date
of grant.

          (b)  The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price (6) by delivering an irrevocable subscription agreement for the
Shares which irrevocably obligates the option holder to take and pay for the
Shares not more than twelve months after the date of delivery of the
subscription agreement, (7) any combination of the foregoing methods of payment,
(8) or such other consideration and method of payment for the issuance of Shares
to the extent permitted under Applicable Laws. In making its determination as to
the type of consideration to accept, the Board shall consider if acceptance of
such consideration may be reasonably expected to benefit the Company.

     10.  Exercise of Option.

          (a)  Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.

     An Option may not be exercised for a fraction of a Share.

     An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company.  Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option.

     Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

          (b)  Termination of Employment. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant with the Company (as
the case may be), such Optionee may, but only within thirty (30) days (or such
other period of time as is

                                       6.
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determined by the Board, which, in the case of an Incentive Stock Option shall
not exceed three (3) months after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise such Optionee's Option to the extent that Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.

          (c)  Disability of Optionee.  Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's or Continuous
Status as an Employee or Consultant as a result of such Optionee's total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may,
but only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.

          (d)  Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent the Optionee was entitled to exercise the Option at the
date of death. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate.

          (e)  Rule 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

     11.  Non-Transferability of Options.  The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

     12.  Stock Withholding to Satisfy Withholding Tax Obligations.  At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph.  When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (i) by cash payment, or (ii) out of Optionee's current
compensation, or (iii) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares which (a) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (b) have a fair market value on the date of

                                       7.
<PAGE>

surrender equal to or less than the applicable withholding taxes, (iv) by
electing to have the Company withhold from the Shares to be issued upon exercise
of the Option that number of Shares having a fair market value equal to the
amount required to be withheld.  For this purpose, the fair market value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined (the "Tax Date").

     If the Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").

     All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:

          (a)  the election must be made on or prior to the applicable Tax Date;

          (b)  once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and

          (c)  all elections shall be subject to the consent or disapproval of
the Administrator.

     In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.

     13.  Adjustments Upon Changes in Capitalization; Corporate Transactions.

          (a)  Changes in Capitalization.  Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.

                                       8.
<PAGE>

          (b) Corporate Transactions. In the event of the proposed dissolution
or liquidation of the Company, the Option will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Administrator. The Administrator may, in the exercise of its sole discretion in
such instances, declare that any Option shall terminate as of a date fixed by
the Administrator and give each Optionee the right to exercise his or her Option
as to all or any part of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. In the event of a sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, in which the Company is not the surviving
corporation the Option shall vest and become immediately exercisable for the
number of Shares that would otherwise be vested and exercisable under the terms
of the Option one (1) year after the date of the Corporate Transaction.
Thereafter, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Administrator determines, in the exercise of
its sole discretion and in lieu of such assumption or substitution, that the
Option shall vest and the Optionee shall have the right to exercise the Option
as to some or all of the Optioned Stock, including Shares as to which the Option
would not otherwise be vested and exercisable. If the Administrator makes an
Option vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee that
the Option shall be vested and exercisable for a period of fifteen (15) days
from the date of such notice, and the Option will terminate upon the expiration
of such period.

     14.  Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.

     15.  Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without such Optionee's consent. In addition,
to the extent necessary and desirable to comply with Rule 16b-3 under the
Exchange Act or with Sections 162(m) and 422 of the Code (or any other
applicable law or regulation, including the requirements of the NASD or an
established stock exchange), the Company shall obtain stockholder approval of
any Plan amendment in such a manner and to such a degree as required.

          (b)  Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

     16.  Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of

                                       9.
<PAGE>

such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.

     As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

     17.  Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

     18.  Agreements. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.

     19.  Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law.

     20.  Information to Optionees.  The Company shall provide to each Optionee,
during the period such Optionee has one or more Options outstanding, and to each
individual who acquired shares pursuant to the exercise of an option, with
copies of all annual reports and other information which are provided to all
stockholders of the Company.  The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.

                                      10.
<PAGE>

                       APPLIED MICRO CIRCUITS CORPORATION

                      NONQUALIFIED STOCK OPTION AGREEMENT



     Applied Micro Circuits Corporation, a Delaware corporation (the "Company"),
has granted to ______________ (the "Optionee"), an option (the "Option") to
purchase the total number of shares of Common Stock of the Company (the
"Shares") set forth in the attached Notice of Grant effective _____________ (the
"Notice of Grant"), at the price as set forth in the Notice of Grant (the
"Exercise Price"), subject in all respects to the terms, definitions and
provisions of the 1992 Stock Option Plan (the "Plan") adopted by the Company,
which is incorporated herein by reference. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings herein.

     1.    Nature of the Option.  This Option is intended by the Company and the
           --------------------
Optionee to be Nonqualified Stock Option, and does not qualify for any special
tax benefits to the Optionee.  This Option is not an Incentive Stock Option and
is not subject to Section 5(b) of the Plan.
   ---

     2.    Exercise Price.  The exercise price for each share of Common Stock
           --------------
is set forth in the Notice of Grant and is not less than the fair market value
per share of the Common Stock on the date of grant.

     3.    Exercise of Option.  This Option shall be exercisable during its
           ------------------
term in accordance with the Exercise Schedule set out in the Notice of Grant and
with the provisions of Section 9 of the Plan as follows:

           (i)    Right to Exercise.
                  -----------------

                  (a) The Vesting Schedule set forth in the Notice of Grant
shall temporarily cease during any period of time that Optionee's employment is
subject to an approved leave of absence as set forth in Section 2(g) of the Plan
and shall recommence upon Optionee's return to the employ of the Company.

                  (b) This Option may not be exercised for a fraction of a share
or for an amount less than 100 shares.

                  (c) In the event of Optionee's death, disability or other
termination of employment or consultancy, the exercisability of the Option is
governed by Sections 7, 8 and 9 below, subject to the limitations contained in
subsection 3(i)(d).

                  (d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 11 below.

           (ii) Method of Exercise.  This Option shall be exercisable by
                ------------------
executing the Stock Option Notice of Exercise in the form attached hereto as
Exhibit A (the "Exercise Notice ") which shall state Optionee's election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such Shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company or
<PAGE>

the Secretary's designee. The Exercise Notice shall be accompanied by payment of
the exercise price. This Option shall be deemed to be exercised upon receipt by
the Company of such Exercise Notice accompanied by the exercise price.

     No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.

     4.    Optionee's Representations.  In the event this Option and the Shares
           --------------------------
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company concurrently with the
exercise of all or any portion of this Option, deliver to the Company an
investment representation statement in the customary form, a copy of which is
available for Optionee's review from the Company upon request.

     5.    Method of Payment.  Payment of the exercise price shall be by any of
           -----------------
the following, or a combination thereof, at the election of the Board, in its
sole discretion:

           (i)  cash;

           (ii)  check;

           (iii) surrender of other shares of Common Stock of the Company at a
value equal to the exercise price of the Shares as to which the Option is being
exercised; or

           (iv)  delivery of a property executed Exercise Notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price.

     6.    Restrictions on Exercise.  This Option may not be exercised until
           ------------------------
such time as the Plan has been approved by the stockholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.

      7.    Termination of Status as an Employee or Consultant.  In the event of
            --------------------------------------------------
termination of Optionee's Continuous Status as an Employee or Consultant, the
Optionee may, but only within thirty (30) days after the date of such
termination (but in no event later than the date of expiration of the term of
this Option as set forth in Section 11 below), exercise this Option to the
extent exercisable at the date of such termination.  If an employee of the
Company, optionee's employment shall be deemed terminated on such date, if any,
as Optionee becomes a part-time employee, as defined in the Company's then
current employment guidelines.  To the extent this Option was not exercisable at
the date of such termination, or if the Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.

                                       2
<PAGE>

      8.    Disability of Optionee.  Notwithstanding the provisions of Section 7
            ----------------------
above, in the event of termination of Optionee's Continuous Status as an
Employee or Consultant as a result of such Optionee's total and permanent
disability (as defined in Section 22(e)(3) of the Code), the Optionee may, but
only within twelve (12) months from the date of such termination (but in no
event later than the date of expiration of the term of this Option as set forth
in Section 11 below), exercise this Option to the extent exercisable at the date
of such termination.  To the extent that the Option was not exercisable at the
date of termination, or if the Optionee does not exercise such Option within the
time specified herein, the Option shall terminate.

      9.    Death of Optionee.  In the event of the death of Optionee during
            -----------------
the term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent exercisable at the date of
death.

     10.    Non-Transferability of Option.  This Option may not be transferred
            -----------------------------
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

     11.    Term of Option.  This Option may be exercised on or before the
            --------------
Expiration Date set forth in the Notice of Exercise and may be exercised during
such term only in accordance with the Plan and the terms of this Option.

     12.    Withholding and Employment Taxes Upon Exercise of Option.  Optionee
            --------------------------------------------------------
understands that, upon exercise of this Option, such Optionee will recognize
income for tax purposes in an amount equal to the excess of the then fair market
value of the shares over the exercise price.  The Company will be required to
withhold tax from Optionee's current compensation with respect to such income;
to the extent that Optionee's current compensation is insufficient to satisfy
the withholding tax liability, the Company may require the Optionee to make a
cash payment to cover such liability as a condition of exercise of this Option.
To the extent authorized by the Board in its sole discretion, Optionee may make
an election, by means of a form of election to be prescribed by the Board, to
have shares of Common Stock or other securities of the Company that are acquired
upon exercise of the Option withheld by the Company or to tender other shares of
Common Stock or other securities of the Company owned by Optionee to the Company
at the time of exercise of the Option to pay the amount of tax that would
otherwise be required by law to be withheld by the Company as a result of any
exercise of the Option from amounts payable to such person, subject to the
following limitations:

            (i)  such election shall be irrevocable;

            (ii) such election shall be subject to the disapproval of the Board
at any time;

            (iii) such election may not be made within six months of the grant
date of the Option (except that this limitation shall not apply in the event of
death or disability of such person occurring prior to the expiration of the six-
month period); and

                                       3
<PAGE>

            (iv) such election must be made either (A) six months prior to the
date that the amount of tax to be withheld upon such exercise is determined or
(B) in any ten-day period beginning on the third business day following the date
of release by the Company for publication of quarterly or annual summary
statements of sales or earnings of the Company.

  Any securities so withheld or tendered will be valued by the Company as of the
date of exercise.

                         APPLIED MICRO CIRCUITS CORPORATION
                         a Delaware corporation


                         By:
                              _____________________________________________
                                       David M. Rickey

                         Title:  President and CEO



                           THIS SPACE INTENTIONALLY
                           LEFT BLANK - SIGNATURE OF
                          OPTIONEE ON FOLLOWING PAGE

                                       4
<PAGE>

        OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE NOTICE OF GRANT AND SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS
AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF
BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE
COMPANY'S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL
CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR
CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH SUCH
OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE SUCH OPTIONEE'S EMPLOYMENT
OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.

        Optionee acknowledges receipt of a copy of the Plan and certain related
information and represents that Optionee is familiar with the terms and
provisions of these documents, and hereby accepts this Option subject to all of
those terms and provisions. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.

Dated: _________________

                              _______________________________
                              [Name]

                                    Residence Address:



                                       5
<PAGE>

                        STOCK OPTION NOTICE OF EXERCISE

To:       Applied Micro Circuits Corporation
Attn:     Stock Option Administrator
Subject:  Notice of Intention to Exercise Stock Option
          --------------------------------------------

     This is official notice that the undersigned ("Optionee") intends to
exercise Optionee's option to purchase Shares of Applied Micro Circuits
Corporation Common Stock, all of which are vested, as follows:

<TABLE>
<CAPTION>
                      Type of      Number of
 Option     Option    Option      Shares Being      Option Price         Tax Due*          Total Amount
 Number      Date     ISO/NQ       Purchased         (Per Share)      (if applicable)        Due AMCC
-----------------------------------------------------------------------------------------------------------
<S>         <C>        <C>         <C>               <C>              <C>               <C>
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
</TABLE>

     *AMCC is required to withhold taxes when employees exercise an NQ.  Under
current law, U.S. income tax withholding is not required when exercising an ISO.

     I am paying the cost to exercise as specified below by method a, b or c
(circle one below)

     a.  Cash Payment:  Enclosed is my check # __________ in the amount of
$__________.

     b.   Cashless Exercise and Same-Day Sale:  I will call my stockbroker
(complete broker info below) to authorize them to issue a check payable to AMCC
from my account # ___________________.

               Broker Name and Contact:
                                       _________________________

               Broker Telephone No.:
                                    ____________________________

     c.   Surrender or Swap Shares Owned:  (Shares must have been held for at
least six months.)

I certify that the stock purchased through the exercise of these options will
not be sold in a manner that would violate the Company's policy on Insider
Trading.

Optionee's Signature:__________________________________________

Print Name:____________________________________________________

Social Security Number:________________________________________

Send shares to:________________________________________________

               Broker Name___________________________

                           Account No._________________

               My home address ________________________


                                       6