UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                   FORM 10-Q


Mark One:

  [X]  Quarterly report under Section 13 or 15(d) of the Securities Exchange
       Act of 1934 for the quarterly period ended March 28, 1997.
                                                  ---------------

                                      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 0-11879

                             VLSI TECHNOLOGY, INC.
            (Exact name of registrant as specified in its charter)


                 Delaware                               94-2597282
       ------------------------------               -------------------
       (State or other jurisdiction of              (I.R.S. Employer
        incorporation or organization)               Identification No.)

                1109 McKay Drive, San Jose, California, 95131 
       -----------------------------------------------------------------
              (Address of principal executive offices) (Zip Code)

                                (408) 434-3100
       -----------------------------------------------------------------
               (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (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 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.

                            Yes  (X)       No  (  )

Shares outstanding of the Registrant's Common Stock as of March 28, 1997:

                                                                  45,866,436



<PAGE>
                         PART 1.  FINANCIAL INFORMATION



Item 1.  Financial Statements


<TABLE>
                            VLSI TECHNOLOGY, INC.

          CONSOLIDATED CONDENSED STATEMENTS OF INCOME - unaudited
                     (thousands, except per share amounts)

<CAPTION>
                                                     Quarter Ended
                                               ------------------------- 
                                               March 28,       March 29,
                                                 1997            1996
                                               ---------       ---------

<S>                                             <C>             <C>
Net revenues                                    $177,684        $167,712

Cost of sales                                    100,905         104,979
                                                --------        --------

Gross profit                                      76,779          62,733
                                                --------        --------

Operating expenses:
   Research and development                       27,431          24,371
   Marketing, general and administrative          34,630          34,997
                                                --------        --------
Operating income                                  14,718           3,365

Interest income and other expenses, net            2,952           3,995
Interest expense                                  (4,464)         (2,480)
                                                --------        --------

Income before provision for taxes on income       13,206           4,880
 
Provision for taxes on income                      4,220           1,710
                                                --------        --------

Net income                                      $  8,986        $  3,170
                                                ========        ========

Net income per share                            $    .19        $    .07
                                                ========        ========

Weighted average common and common 
   equivalent shares outstanding                  48,182          46,405
                                                ========        ========


See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>



<PAGE>
<TABLE>
                             VLSI TECHNOLOGY, INC.

               CONSOLIDATED CONDENSED BALANCE SHEETS - unaudited
                                 (thousands) 

<CAPTION>
                                                 March 28,    December 27,
                                                   1997           1996
                                                 ---------    ------------
<S>                                               <C>             <C>
ASSETS

Current assets:
   Cash and cash equivalents                      $ 90,634        $139,074
   Liquid investments                              117,408          66,685
   Accounts receivable, net of allowance
      for doubtful accounts and customer
      returns of $2,000
      ($2,200 at December 27, 1996)                102,767         112,508
   Inventories:
      Raw materials                                  2,858           3,095
      Work-in-process                               40,672          42,947
      Finished goods                                13,524          10,319
                                                  --------        --------
Total inventories                                   57,054          56,361

Deferred and refundable income taxes                64,451          68,638
Prepaid expenses and other current assets            6,605           5,240
                                                  --------        --------
      Total current assets                         438,919         448,506

Property, plant and equipment, at cost             794,269         772,565
Accumulated depreciation and amortization         (369,267)       (345,301)
                                                  --------        --------
   Net property, plant and equipment               425,002         427,264

Deferred income taxes                                7,621           7,621

Other assets                                        10,867           7,551
                                                  --------        --------
TOTAL ASSETS                                      $882,409        $890,942
                                                  ========        ========


See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>




<PAGE>
<TABLE>
                            VLSI TECHNOLOGY, INC.

         CONSOLIDATED CONDENSED BALANCE SHEETS - unaudited (Continued)
                      (thousands, except per share amounts)


<CAPTION>
                                                March 28,    December 27,
                                                  1997           1996
                                                ---------    ------------

<S>                                              <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                              $ 62,504        $ 61,586
   Accrued compensation and benefits               23,103          23,762
   Deferred income                                  9,128           8,930
   Patent matters                                  21,137          22,028
   Reserve for special charges                     50,328          50,990
   Other accrued liabilities                       35,597          34,313
   Current capital lease obligations                1,146           1,118
   Current portion of long-term debt                7,804           7,763
                                                 --------        --------
      Total current liabilities                   210,747         210,490

Non-current capital lease obligations               2,049           2,346

Long-term debt                                    205,709         207,627

Stockholders' equity:
   Preferred Shares, $.01 par value                     -               -
   Common Shares, $.01 par value                      472             472
   Treasury Common Shares, at cost                (22,527)         (8,349)
   Additional paid-in capital                     457,390         458,774
   Retained earnings                               28,569          19,582
                                                 --------        --------
        Total stockholders' equity                463,904         470,479
                                                 --------        --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $882,409        $890,942
                                                 ========        ========


See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
<TABLE>
                              VLSI TECHNOLOGY, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - unaudited
                                        (thousands)
<CAPTION>
                                                            Quarter Ended
                                                     ---------------------------
                                                     March 28,         March 29,
                                                       1997              1996
                                                     ---------      ------------
                                                     Increase (decrease) in
                                                     cash and cash equivalents
<S>                                                   <C>              <C>
Operating activities: 
 Net income                                           $  8,986         $  3,170
 Adjustments to reconcile net income
  to cash generated by operations:
   Depreciation and amortization                        26,763           23,579
   Deferred income taxes                                 4,511                -
   Changes in operating assets and liabilities:
    Accounts receivable                                  9,741           13,470
    Inventories                                           (693)          (3,315)
    Accounts payable, accrued liabilities      
     and deferred income                                   984           (9,830)
    Other                                               (5,616)            (428)
                                                      --------         --------
 Cash generated by operations                           44,676           26,646
                                                      --------         --------
Investing activities:
 Purchases of liquid investments                       (98,350)         (80,348)
 Proceeds from maturities of liquid investments         47,512          132,362
 Purchases of property, plant and equipment            (25,150)        (100,399)
 Other                                                       -             (150)
                                                      --------         --------
  Net cash flow used for investing activities          (75,988)         (48,535)
                                                      --------         --------
Financing activities:
 Payments on debt and capital lease obligations         (2,146)          (2,679)
 Repurchase Treasury Common Shares                     (15,838)         (27,182)
 Issuance of Common Shares, net                            856              118
                                                      --------         --------
  Net cash flow used for financing activities          (17,128)         (29,743)
                                                      --------         --------

Net decrease in cash and cash equivalents              (48,440)         (51,632)
Cash and cash equivalents, beginning of period         139,074          183,165
                                                      --------         -------- 
Cash and cash equivalents, end of period              $ 90,634         $131,533
                                                      ========         ========
Supplemental disclosures:
  Cash outflows for property, plant and equipment     $ 25,150         $100,399
   Less: Decrease in accrual for property, plant
         and equipment additions                        (1,024)            (687)
                                                      --------         --------
   Property, plant and equipment additions            $ 24,126         $ 99,712
                                                      ========         ========
Interest paid                                         $  2,038         $  1,534
                                                      ========         ========
Income taxes paid, net                                $  1,344         $    145
                                                      ========         ========

See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
                             VLSI  TECHNOLOGY, INC.

             NOTES  TO  CONSOLIDATED  CONDENSED  FINANCIAL  STATEMENTS

1. The accompanying interim consolidated condensed financial statements have 
been prepared in conformance with generally accepted accounting principles, 
consistent with those applied in the VLSI Technology, Inc. Annual Report on 
Form 10-K for the fiscal year ended December 27, 1996 (the 1996 Annual 
Report).  This Quarterly Report on Form 10-Q (Form 10-Q) should be read in 
conjunction with the 1996 Annual Report.  The interim financial statements 
are unaudited, but reflect all normal recurring adjustments that are, in 
the opinion of management, necessary to a fair statement of results for the 
interim periods presented.  The results for the quarter ended March 28, 
1997 are not necessarily indicative of the results that may be expected for 
the fiscal year ending December 26, 1997.

2. The Company's tax rate was 32% and 35% in the first quarters of 1997 and 
1996, respectively. The decrease is the result of more pre-tax income 
flowing through lower tax jurisdictions.

3. Periodically, the Company is made aware that technology used by the Company 
in the manufacture of some or all of its products may infringe on product 
or process technology rights held by others. Resolution of whether the 
Company's manufacture of products has infringed on valid rights held by 
others could have a material adverse effect on the Company's financial 
position or results of operations, and may require material changes in 
production processes and products. Several companies, including Motorola, 
have individually contacted the Company concerning its alleged use of 
intellectual property belonging to them.

   VLSI has entered into licensing agreements and technology exchange 
agreements with various strategic partners and other third parties in order 
to allow VLSI access to third party technology, or to allow third parties 
access to VLSI's technology. The Company is unable to predict whether 
license agreements can be obtained or renewed on terms acceptable to the 
Company or the magnitude of the costs associated with such terms. Failure 
to obtain or renew such licenses could have a material adverse effect on 
the Company's financial position or results of operations.

   The Company continually evaluates the adequacy of its reserve for asserted 
and unasserted patent matters. There are many companies which may have 
product and process technology rights that VLSI may have infringed. The 
reserve for patent matters is based on the best available information at 
the time that the reserve is established or re-evaluated, and it is 
reasonably possible that the Company's estimate of the exposure for patent 
matters could materially change in the near term as additional information 
becomes available.

   Texas Instruments, Inc. (TI) filed a lawsuit in 1990 claiming process 
patent infringement by the Company of now expired U.S. patents. In May 
1995, a jury found against the Company in the amount of $19.4 million. 
Although contesting the jury verdict, the Company recorded a charge to 
earnings of $19.4 million in the second quarter of 1995. The trial judge 
subsequently set aside the jury verdict and TI appealed. In July 1996, the 
Court of Appeals for the Federal Circuit affirmed the trial judge's order. 
TI has appealed the ruling to the U.S. Supreme Court. In the event that TI 
is successful on the appeal, there can be no assurance that the amount of 
the reserve will be sufficient if the Supreme Court were to award enhanced 
damages (which by statute may be as high as treble damages), pre-judgment 
interest and/or attorneys' fees. There can be no assurance that TI will not 
prevail on its appeal or that, should TI ultimately lose on its appeal, 
there would not be other claims asserted by TI against VLSI for patent 
infringement.

4. In January 1996, the Board of Directors (Board) authorized the Company to 
repurchase shares of the Company's Common Stock on the open market or in 
privately negotiated transactions.  The Board authorized the Company to re-
issue these shares at any later date through certain of its employee stock 
plans and/or to fund stock or asset acquisitions authorized by the Board. 
By the end of 1996, the Company had repurchased 1.8 million shares at an 
average price of $15.10 and had re-issued 1.2 million of these shares under 
employee stock plans.  During the first quarter of 1997 the Company 
repurchased 930,000 shares at an average per share price of $17.03.  The 
Company may, from time to time, continue to repurchase additional shares.

5. The Company has established a reserve for special charges primarily based 
on management's  estimated costs associated with the decision to close the 
San Jose facility.  This estimate is based on the best information 
available when the decision was made to close the facility.  Although the 
Company believes its estimates to be reasonable, actual costs associated 
with these plans may differ materially. Particularly, the costs associated 
with estimating losses on sales commitments and accommodating customers are 
difficult to ascertain. Therefore, the Company may, in future periods, need 
to change its estimated costs associated with the special charges as more 
information becomes available.

6. In February 1997, the Financial Accounting Standards Board issued Statement 
No. 128, "Earnings per Share", which is required to be adopted on December 
26, 1997.  At that time, the Company will be required to change the method 
currently used to compute net income per share and to restate all prior 
periods.  Under the new requirements, the currently presented primary net 
income per share will be replaced by basic net income per share.  The 
fundamental difference is that basic net income per share excludes the 
dilutive effect of stock options.  The computed basic net income per share 
is not different from primary net income per share for the first quarters 
ended March 28, 1997 and March 29, 1996.  Additionally, fully diluted 
income per share will be replaced by diluted income per share and will 
always be required to be presented on the income statement.  The computed 
diluted income per share is not expected to be different from fully diluted 
income per share for the first quarters ended March 28, 1997 and March 29, 
1996.

<PAGE>
Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.

RESULTS OF OPERATIONS - FIRST QUARTER OF 1997 COMPARED TO THE FIRST QUARTER OF 
1996
--------------------------------------------------------------------------------

This Management's Discussion and Analysis of Financial Condition and Results 
of Operations (MDA) should be read in conjunction with the MDA in the 1996 
Annual Report.

This Form 10-Q contains forward-looking statements within the meaning of 
Section 27A of the Securities Act of 1933 and Section 21E of the Securities 
Exchange Act of 1934.  Actual results could differ materially from those 
projected in the forward-looking statements as a result of the risk factors 
set forth herein and in the 1996 Annual Report.  Statements made herein are as 
of the date of filing of this Form 10-Q with the Securities and Exchange 
Commission.  The Company disclaims any obligation to update the contents of 
those statements subsequent to the filing of this Form 10-Q.

The following table summarizes the Company's operating results for the three-
month period ended March 28, 1997 as compared to the three-month period ended 
March 29, 1996 (dollars in thousands):
                                              
                                           First Quarter
                         ---------------------------------------------------
                                     1997                       1996
                         ------------------------------- -------------------
                                    Percent    Percemt              Percent
                                    of Net      Change               of Net
                         Amounts   Revenues   From 1996   Amounts   Revenues
                         -------   --------   ---------   -------   --------
Net revenues            $177,684     100.0%      5.9%    $167,712    100.0%
Cost of sales            100,905      56.8      (3.9)     104,979     62.6
                        --------     -----               --------    -----
Gross profit              76,779      43.2      22.4       62,733     37.4
Research & development    27,431      15.4      12.6       24,371     14.5
Marketing, general and
   administrative         34,630      19.5      (1.0)      34,997     20.9
                        --------     -----               --------    -----
Operating income          14,718       8.3         *        3,365      2.0
Interest income
   (expense), net         (1,512)     (0.8)        *        1,515      0.9
Income taxes               4,220       2.4         *        1,710      1.0
                        --------     -----               --------    -----
Net income              $  8,986       5.1         *     $  3,170      1.9
                        ========     =====               ========    =====

* Not meaningful

The Company earned net income of $9.0 million in the first quarter of 1997, 
compared to net income of $3.2 million in the first quarter of 1996.  This 
change primarily reflects increased gross profit in dollars and as a 
percentage of net revenues (gross margin).

Net revenues in the first quarter of 1997 increased 5.9% from the comparable 
1996 period and decreased 3.2% from the fourth quarter of 1996.  The increase 
over the first quarter of 1996 reflects strong demand for communications 
products.  This increase was offset in part by decreased demand for personal 
computer (PC) products.  The lower net revenues in the first quarter of 1997 
from the fourth quarter of 1996 reflects decreased demand for PC products and 
customer efforts to manage inventories due to seasonality in the set-top box 
business.  Software net revenues decreased significantly in the first quarter 
of 1997 compared to the first quarter of 1996 and were comparable to the 
fourth quarter 1996 net revenues.  The decline reflects difficulties 
developing new products and increased competition and consolidation among EDA 
providers.

International net revenues (including export sales) increased, accounting for 
54.5% of net revenues in the first quarter of 1997 compared to 48.4% of net 
revenues in the first quarter of 1996, primarily due to increases in sales to 
the European region.  The growth in European net revenues reflects the 
location of the major customers for VLSI's communications devices and the 
success of GSM as the leading digital wireless standard in Europe.  Export 
sales to the Asia-Pacific area in the first quarter of 1997 decreased over the 
first quarter of 1996, due to a decrease in shipments of devices for the PC 
market.

Gross margins increased to 43.2% in the first quarter of 1997 from 37.4% in 
the first quarter of 1996 and 41.5% in the fourth quarter of 1996, reflecting 
improved product mix, expense controls and improved manufacturing yields.  
First quarter 1996 gross margin reflected inventory charges taken for personal 
computer devices and certain manufacturing inefficiencies as a result of 
changes in the business mix from the higher 1995 concentration in PC products 
to communications and consumer digital entertainment products.

R&D expenditures increased by $3.1 million in the first quarter of 1997 over 
expenditures in the same 1996 period and increased as a percentage of net 
revenues from 14.5% to 15.4%, reflecting continuing investment in new products 
and package and process technologies.  R&D expenditures in the first quarter 
of 1997 focused on design environment, process development and development of 
products for the consumer digital entertainment and communications markets.

Marketing, general and administrative expenses for the first quarter of 1997 
decreased by $0.4 million from the the first quarter of the prior year and 
decreased as a percentage of net revenues from 20.9% to 19.5%.  The decrease 
is due to a decrease in marketing expenses and tighter expense controls.

Interest income (expense), net shows expense of $1.5 million in the current 
quarter as compared to income of $1.5 million in the same period a year ago, 
reflecting lower interest income on lower average cash balances than in the 
first quarter of 1996. Interest expense increased in the first quarter of 1997 
over the first quarter of 1996 due to a lower level of capitalized interest.

The Company's tax rate was 32% and 35% in the first quarters of 1997 and 1996, 
respectively. The decrease is the result of more pre-tax income flowing 
through lower tax jurisdictions.



FACTORS AFFECTING FUTURE RESULTS

The Company's stock price, like that of other technology companies, is subject 
to significant volatility. If revenue or earnings in any quarter fail to meet 
the investment community's expectations, there could be an immediate impact on 
the Company's stock price. The stock price may also be affected by broader 
market trends unrelated to the Company's performance. Past financial 
performance should not be considered a reliable indicator of future 
performance, and investors should not use historical trends to anticipate 
results or trends in future periods.

During each of the years 1996, 1995 and 1994, VLSI's top 20 customers 
represented approximately two thirds of the Company's net revenues. As a 
result of the concentration of the Company's customer base, loss of business 
or cancellation of orders from any of these customers, significant changes in 
scheduled deliveries to any of these customers or decreases in the prices of 
products sold to any of these customers could have a material adverse effect 
on the Company's results of operations.

Due to the decline in the Company's X86 chip set business, the Company 
experienced a shift in its business in 1996 away from the previously high 
concentration of sales to the personal computer industry that was seen in 1995 
to a concentration of sales to the communications and consumer digital 
entertainment markets.  The communications and consumer digital entertainment 
markets are rapidly evolving and are characterized by intense competition of 
suppliers, many of whom have substantially greater experience and resources 
than the Company.  If the Company, due to competition or other factors, is 
unable to capture and maintain significant market share in these areas, there 
could be a material adverse effect on the Company's results of operations.

The Company's success depends on its ability to continue to develop and 
introduce new products that compete effectively on the basis of price and 
performance and that satisfy customer requirements. New product development 
often requires long-term forecasting of markets, market trends, development 
and implementation of new processes and technologies and substantial capital 
commitments. If the Company is unable to design, develop, manufacture and 
market new products successfully in a timely manner, its operating results 
could be adversely affected. No assurance can be given that the Company's 
product and process development efforts will be successful, that new product 
introductions will achieve market acceptance or that the markets in question 
will develop.

The Company's products are susceptible to severe pricing pressures and the 
Company continually attempts to pursue cost reductions, including process 
enhancements, in order to maintain acceptable gross margins. Gross margins 
also vary with the general condition of the economy, capacity utilization 
levels in the semiconductor industry, customer acceptance of new technologies 
and products, product functionality and capabilities, shifts in product mix, 
manufacturing yields and the effect of ongoing manufacturing cost reduction 
activities.

Software net revenues, primarily through COMPASS, are subject to various 
factors, including pricing pressure, customers' capital budget approval cycles 
and limited backlog, which create a high degree of variability from quarter to 
quarter. Due to the high gross margin content of software net revenues and the 
size of certain transactions, which are often concluded late in the quarter, 
such variability can lead to unpredictability of financial and operating 
results of the Company for any given period. Results in the first quarter of 
1997 and from fiscal year 1996 operations for COMPASS were not satisfactory 
and adversely affected VLSI's overall results of operations. Management is 
considering strategic alternatives to deal with this issue. Until this issue 
is resolved, COMPASS may continue to have a negative impact on VLSI's results 
of operations.

The Company sells its products under terms and conditions customarily found in 
the semiconductor industry. Sales of these products are subject to customer 
cancellation with limited advance notice to the Company prior to scheduled 
shipment. Due to the Company's relatively narrow customer base for certain 
devices and the short product life cycles of such products, such cancellations 
can leave the Company with significant inventory exposure, which could have a 
material adverse effect on the Company's operating results.

The semiconductor industry has a history of cyclicality and is characterized 
by short product life cycles, continuous evolution of process technology, high 
fixed costs, additions of manufacturing capacity in large increments and wide 
fluctuations in product supply and demand. These product supply and demand 
fluctuations have historically been characterized by periods of manufacturing 
capacity shortages immediately followed by periods of overcapacity, which are 
caused by the previously mentioned additions of manufacturing capacity in 
large increments. The industry has moved from a period of capacity shortages 
in 1995 to what appears to be a current period of excess capacity for the 
immediate future. During a period of industry overcapacity, profitability can 
drop sharply as factory utilization drops and high fixed costs of operating a 
wafer fabrication facility are spread over a lower net revenue base. This risk 
is increased due to the fact that the Company has shifted an even greater 
percentage of its manufacturing to its own facilities (in the first quarter of 
1997, VLSI produced more than 95% of its wafer requirements internally versus 
approximately 95% and 80% in 1996 and 1995, respectively).

In November 1996, the Company announced its intention to close its San Jose 
wafer manufacturing facility. The closure of the facility subjects the 
Company's results of operations to numerous risks and uncertainties, including 
uncertainty as to the exact timing, cost and effects of the proposed shutdown 
of the facility; loss of business from the Company's customers whose devices 
are currently manufactured at the San Jose plant and who choose to substitute 
products from other manufacturers; unanticipated employee costs relating to 
the shutdown; inability to retain employees during the phase-out period; 
success in implementing cost reduction programs; and lower factory utilization 
and excess capacity.

While the Company operates and maintains its own wafer manufacturing 
facilities, the Company relies on three suppliers for the bulk of its assembly 
and test operations. Allocations by these suppliers of assembly and test 
capacity to the Company depend on VLSI's needs, supply availability during 
periods of capacity shortages and excesses and pricing. The Company has no 
long-term contractual commitments from these suppliers.  Any reduction in 
allocation from these suppliers could adversely affect the Company's 
operations.

Periodically, the Company is made aware that technology used by the Company in 
the manufacture of some or all of its products may infringe on product or 
process technology rights held by others. Resolution of whether the Company's 
manufacture of products has infringed on valid rights held by others could 
have a material adverse effect on the Company's financial position or results 
of operations, and may require material changes in production processes and 
products. Several companies, including Motorola, have individually contacted 
the Company concerning its alleged use of intellectual property belonging to 
them.

VLSI has entered into licensing agreements and technology exchange agreements 
with various strategic partners and other third parties in order to allow VLSI 
access to third party technology, or to allow third parties access to VLSI's 
technology. The Company is unable to predict whether license agreements can be 
obtained or renewed on terms acceptable to the Company or the magnitude of the 
costs associated with such terms. Failure to obtain or renew such licenses 
could have a material adverse effect on the Company's financial position or 
results of operations.

The Company continually evaluates the adequacy of its reserve for asserted and 
unasserted patent matters. There are many companies which may have product and 
process technology rights that VLSI may have infringed. The reserve for patent 
matters is based on the best available information at the time that the 
reserve is established or re-evaluated, and it is reasonably possible that the 
Company's estimate of the exposure for patent matters could materially change 
in the near term as additional information becomes available.

TI filed a lawsuit in 1990 claiming process patent infringement by the Company 
of now expired U.S. patents. In May 1995, a jury found against the Company in 
the amount of $19.4 million. Although contesting the jury verdict, the Company 
recorded a charge to earnings of $19.4 million in the second quarter of 1995. 
The trial judge subsequently set aside the jury verdict and TI appealed. In 
July 1996, the Court of Appeals for the Federal Circuit affirmed the trial 
judge's order. TI has appealed the ruling to the U.S. Supreme Court. In the 
event that TI is successful on the appeal, there can be no assurance that the 
amount of the reserve will be sufficient if the Supreme Court were to award 
enhanced damages (which by statute may be as high as treble damages), pre-
judgment interest and/or attorneys' fees. There can be no assurance that TI 
will not prevail on its appeal or that, should TI ultimately lose on its 
appeal, there would be no other claims asserted by TI against VLSI for patent 
infringement.

Other factors that may adversely affect VLSI's future results include 
earthquakes, environmental and other governmental regulations and the ability 
to attract and retain key employees.  See "Management's Discussion and 
Analysis of Financial Condition and Results of Operations - Factors Affecting 
Future Results" in Item 7 of Part II in the 1996 Annual Report.

LIQUIDITY AND CAPITAL RESOURCES

VLSI generates cash from operations, debt and equipment financings and sales 
of its securities.  Principal uses of cash include purchases of capital 
equipment needed for semiconductor manufacturing and engineering and payments 
of debt and lease obligations.  Additionally, in 1997 and 1996, VLSI used cash 
to reacquire shares of its common stock.

At March 28, 1997, total cash, cash equivalents and liquid investments 
increased $2.3 million from the 1996 fiscal year-end balance due primarily to 
a reduction in accounts receivable and to net income.  Working capital 
decreased to $228.2 million at March 28, 1997 compared to $238.0 million at 
December 27, 1996.

During the three-month period ended March 28, 1997, the Company generated 
$44.7 million of cash from operations, a 67.7% increase from the $26.6 million 
of cash generated for the three-month period ended March 29, 1996. Accounts 
receivable were $9.7 million lower at March 28, 1997 than at December 27, 
1996, reflecting proportionately higher sales volumes in the latter part of 
the fourth quarter of 1996. Accounts payable, accrued liabilities and deferred 
income at March 28, 1997 increased by $1.0 million from December 26, 1996. 
There were no significant net changes in the primary components of these 
items.

Cash used for investing activities was $76.0 million for the three-month 
period ended March 28, 1997, as compared to $48.5 million for the three-month 
period ended March 29, 1996.  The increase is primarily a result of net 
purchases of liquid investments in the first quarter of 1997 compared to net 
proceeds from maturities of liquid investments in the first quarter of 1996.  
VLSI invested $24.1 million in property, plant and equipment during the first 
three months of 1997 compared to $99.7 million in the comparable 1996 period.  
VLSI currently estimates that total capital expenditures for 1997 could 
approximate $140 million, which are anticipated to be used primarily for 
equipment upgrades and for 0.35-micron wafer fabrication capability.  The 
Company expects to primarily utilize cash from operations for its 1997 capital 
expenditures.

Cash used for financing activities was $17.1 million in the first three months 
of 1997 compared to $29.7 million in the same 1996 period.  The decrease is a 
result of a decrease in the Company's repurchase of common stock.  During the 
first quarter of 1996, 1.8 million shares were repurchased for $27.2 million 
compared to 0.9 million shares repurchased during the first quarter of 1997 
for $15.8 million.

The Company currently does not have a committed credit agreement in place.  
While the Company believes that its current capital resources are sufficient 
to meet its near-term needs, in order to meet its longer-term needs, VLSI 
continues to investigate the possibility of generating financial resources 
through committed credit agreements, technology or manufacturing partnerships, 
additional equipment financings and offerings of debt or equity securities.


<PAGE>
                           PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

Reference is made to Item 3 of Part I of the Company's Annual Report on Form 
10-K for the fiscal year ended December 27, 1996 (the 1996 Annual Report) for 
a discussion of certain pending legal proceedings.  There have been no 
material developments in any of such matters since the filing of the Company's 
1996 Annual Report.


Item 6.  Exhibits and Reports on form 8-K.

     (a) Exhibits - See Index to Exhibits on Page 16.

     (b) Reports on Form 8-K - None.



                                   
                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the 
Registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.





                                          VLSI TECHNOLOGY, INC.


                                               (Registrant)


Date:      May 7, 1997                    By:  /s/ Balakrishnan S. Iyer
      --------------------------               -------------------------------
                                               Balakrishnan S. Iyer
                                               Vice President, Finance,  
                                               Chief Financial Officer and
                                               Controller 
                                               (Principal Financial and  
                                                Accounting Officer)



<PAGE>

                             VLSI TECHNOLOGY, INC.

                               INDEX TO EXHIBITS


EXHIBIT
   NO.             DESCRIPTION
-------            -----------

  11.1       Calculation of Earnings Per Share

  27.1       Financial Data Schedule