<PAGE>


================================================================================
                                  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 Quarter ended March 30, 2002

[ ]    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: 0-19299

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

                        Integrated Circuit Systems, Inc.
             (Exact name of registrant as specified in its charter)


        Pennsylvania                                     23-2000174
(State or other jurisdiction of                         (IRS Employer
incorporation or organization)                         Identification No.)


                         2435 Boulevard of the Generals
                         Norristown, Pennsylvania 19403
                    (Address of principal executive offices)

                                 (610) 630-5300
               (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
                                       ---   ---
As of May 10, 2002, there were 66,698,490 shares of Common Stock; $0.01 par
value, outstanding.

================================================================================



<PAGE>

                        INTEGRATED CIRCUIT SYSTEMS, INC.
                        --------------------------------
                                      INDEX
                                      -----
                                                                           Page
                                                                          Number
                                                                          ------

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements:

                Consolidated Balance Sheets:
                March 30, 2002 (Unaudited) and June 30, 2001                  3

                Consolidated Statements of Operations (Unaudited):
                Three and Nine Months Ended March 30, 2002
                and March 31, 2001                                            4

                Consolidated Statements of Cash Flows (Unaudited):
                Nine Months Ended March 30, 2002 and
                March 31, 2001                                                5

                Notes to Consolidated Financial Statements                    6


Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                                  12

Item 3. Quantitative and Qualitative Disclosures About Market Risk           18


PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K








                                       2

<PAGE>

Item 1. Consolidated Financial Statements

                INTEGRATED CIRCUIT SYSTEMS, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                 (In thousands)
<TABLE>
<CAPTION>
                                                          March 30,    June 30,
                                                           2002         2001
                                                         ---------    ---------
                                                             (Unaudited)
<S>                                                      <C>          <C>
ASSETS
Current Assets:
   Cash and cash equivalents .........................   $  66,748    $  91,400
   Marketable securities .............................      27,199        3,000
   Accounts receivable, net ..........................      29,410       27,359
   Inventory, net ....................................      18,429       10,097
   Prepaid income taxes ..............................       2,621         --
   Deferred taxes ....................................       6,390        4,053
   Prepaid assets ....................................       6,707        5,411
   Current portion of deposit on purchase contracts ..        --            596
                                                         ---------    ---------
      Total current assets ...........................     157,504      141,916
                                                         ---------    ---------
Property and equipment, net ..........................      19,614       11,215
Intangibles ..........................................      32,900         --
Goodwill .............................................      34,324          626
Other assets .........................................       4,486          360
                                                         ---------    ---------
      Total assets ...................................   $ 248,828    $ 154,117
                                                         =========    =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Current portion of long-term obligations ..........   $  12,373    $     429
   Accounts payable ..................................      12,111        8,579
   Accrued expenses and other current liabilities ....       8,960        3,566
   Income tax payable ................................        --          1,306
                                                         ---------    ---------
      Total current liabilities ......................      33,444       13,880
                                                         ---------    ---------

Long-term debt, less current portion .................      34,018          280
Deferred taxes .......................................      13,616          200
Other liabilities ....................................         625          704
                                                         ---------    ---------
      Total liabilities ..............................      81,703       15,064
                                                         ---------    ---------

Shareholders' equity:
  Common stock, $0.01 par, authorized 300,000; Issued
    and outstanding 67,253 and 66,128 shares as of
    March 30, 2002 and June 30, 2001, respectively ...         672          661
  Additional paid in capital .........................     223,029      211,524
  Accumulated deficit ................................     (44,183)     (70,229)
  Deferred compensation ..............................      (4,460)      (2,722)
  Notes receivable ...................................        --           (181)
  Treasury stock, at cost, 655 shares ................      (7,799)        --
  Accumulated other comprehensive income .............        (134)        --
                                                         ---------    ---------
      Total shareholders' equity .....................     167,125      139,053
                                                         ---------    ---------
      Total liabilities and shareholders' equity .....   $ 248,828    $ 154,117
                                                         =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.



                                       3

<PAGE>

                INTEGRATED CIRCUIT SYSTEMS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                 Three Months Ended       Nine Months Ended
                                                --------------------    --------------------
                                                March 30,   March 31,   March 30,   March 31,
                                                  2002        2001        2002        2001
                                                --------    --------    --------    --------
<S>                                             <C>         <C>         <C>         <C>
Revenue: ....................................   $ 53,262    $ 45,320    $127,529    $153,155

Cost and expenses:
   Cost of sales ............................     23,200      17,109      54,360      57,940
   Research and development .................      8,083       7,237      20,577      21,880
   Selling, general and administrative ......     10,614       6,434      20,588      16,852
   Amortization of intangibles ..............        500          59         500         176
   In process research and development ......      2,900          --       2,900          --
                                                --------    --------    --------    --------
      Operating income ......................      7,965      14,481      28,604      56,307
                                                ========    ========    ========    ========

Interest and other income ...................      1,144       1,140       2,735       2,606
Interest expense ............................       (508)        (22)       (553)       (197)
                                                --------    --------    --------    --------
      Income before income taxes ............      8,601      15,599      30,786      58,716

Income taxes ................................      1,554       2,604       4,740      11,288
                                                --------    --------    --------    --------
      Net income ............................   $  7,047    $ 12,995    $ 26,046    $ 47,428
                                                ========    ========    ========    ========

Basic income per share:
    Net income ..............................   $   0.11    $   0.20    $   0.39    $   0.73

Diluted income per share:
    Net income ..............................   $   0.10    $   0.19    $   0.37    $   0.68

Weighted average shares outstanding - basic .     66,533      64,746      66,380      64,573
Weighted average shares outstanding - diluted     70,230      69,577      70,125      69,507
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       4

<PAGE>

                INTEGRATED CIRCUIT SYSTEMS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                              Nine Months Ended
                                                                           ------------------------
                                                                            March 30,     March 31,
                                                                              2002         2001
                                                                           ---------      ---------
<S>                                                                        <C>            <C>
Cash flows from operating activities:
   Net income ........................................................     $  26,046      $  47,428
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and amortization ..................................         4,845          3,850
      Amortization of deferred compensation ..........................           961            783
      Gain on sale of assets .........................................          (239)          (106)
      Write-off of in process research and development ...............         2,900             --
      Tax benefit of stock options ...................................         6,852          4,791
      Deferred income taxes ..........................................           136           (466)
   Changes in assets and liabilities:
      Accounts receivable ............................................         4,797        (10,811)
      Inventory ......................................................         3,674           (901)
      Other assets, net ..............................................        (4,077)          (370)
      Accounts payable, accrued expenses and other current liabilities        (1,189)          (531)
      Income taxes ...................................................        (4,916)         7,731
      Other ..........................................................           426           (730)
                                                                           ---------      ---------
         Net cash provided by operating activities ...................        40,216         50,668
                                                                           ---------      ---------

Cash flows from investing activities:
   Cash paid for acquired business, net of cash acquired .............       (75,202)            --
   Purchase of marketable securities .................................       (47,918)       (20,218)
   Sales/maturities of marketable securities .........................        24,062         10,158
   Capital expenditures ..............................................        (2,748)        (2,734)
   Refunds of deposits on purchase contracts .........................            --          9,877
   Other .............................................................            48            135
                                                                           ---------      ---------
         Net cash used in investing activities .......................      (101,758)        (2,782)
                                                                           ---------      ---------

Cash flows from financing activities:
   Net repayments under line of credit agreement .....................            --        (10,000)
   Exercise of stock options .........................................         1,494            402
   Shares purchased through stock purchase plan ......................           471            511
   Initial public offering expenses ..................................            --           (194)
   Deferred financing charges ........................................          (330)            --
   Purchase of treasury stock ........................................        (7,799)            --
   Proceeds from long-term debt ......................................        45,000             --
   Repayments of long-term debt ......................................        (1,946)          (445)
                                                                           ---------      ---------
         Net cash provided by (used in) financing activities .........        36,890         (9,726)
                                                                           ---------      ---------

Net (decrease) increase in cash and cash equivalents .................       (24,652)        38,160
Cash and cash equivalents:
   Beginning of period ...............................................        91,400         28,940
                                                                           ---------      ---------
   End of period .....................................................     $  66,748      $  67,100
                                                                           =========      =========
</TABLE>
See accompanying notes to consolidated financial statements.


                                       5

<PAGE>

               INTEGRATED CIRCUIT SYSTEMS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(1) INTERIM ACCOUNTING POLICY
The accompanying financial statements have not been audited. In the opinion of
our management, the accompanying consolidated financial statements reflect all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly our financial position at March 30, 2002 and results of operations and
cash flows for the interim periods presented. Certain items have been
reclassified to conform to current period presentation.

Certain footnote information has been condensed or omitted from these financial
statements. Therefore, these financial statements should be read in conjunction
with the consolidated financial statements and related notes included in our
Annual Report on Form 10-K for the year ended June 30, 2001. Results of
operations for the nine months ended March 30, 2002 are not necessarily
indicative of results to be expected for the full year.

In response to the SEC's Release No. 33-8040, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies," we have identified below some of
the accounting principles critical to our business and results of operations. We
determined the critical principles by considering accounting policies that
involve the most complex or subjective decisions or assessments. We state these
accounting policies in Management's Discussion and Analysis of Financial
Condition and Results of Operations and in the Notes to the consolidated
financial statements contained in our Annual Report on Form 10-K for our fiscal
year ended June 30, 2001. In addition, we believe our most critical accounting
policies include, but are not limited to, the following:

Consolidation Policy
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany balances
and transactions have been eliminated.

Goodwill and Intangible Assets
Goodwill represents the excess of cost over the fair value of net assets
acquired from business acquisitions. Prior to July 1, 2001, all goodwill was
amortized using the straight-line method over periods ranging from five to
thirty years. Statement of Financial Accounting Standards Number 142, "Goodwill
and Other Intangible Assets" (SFAS 142), addresses, among other things, how
goodwill and other intangible assets should be accounted for after they have
been initially recorded in the financial statements. Under SFAS 142, goodwill
and other indefinite lived intangible assets are no longer amortized. Beginning
July 1, 2001, we ceased the amortization of goodwill. Instead, we will, at least
annually, review the recoverability of goodwill and other indefinite lived
intangible assets. In assessing recoverability, many factors are considered,
including historical and forecasted operating results and cash flows of the
acquired businesses. After consideration of these factors, we will determine
whether or not there is an impairment to goodwill and other indefinite lived
intangible assets.

At March 30, 2002, we have $34.3 million of goodwill and $21.4 million of
indefinite lived intangible assets. We believe that no impairment of goodwill or
other indefinite lived intangible assets existed at March 30, 2002. Goodwill
amortization was not material to the results of operations in the previous
periods. We had no indefinite lived intangible assets prior to the acquisition
of MNC.

Revenue Recognition
Revenues from product sales are recognized as revenue upon shipment to the
customer. We offer a right of return to certain customers. Allowances are
established to provide for estimated returns at the time of sale. We recognize
sales to these customers, in accordance with the criteria of Statement of
Financial Accounting Standards ("SFAS") No. 48, "Revenue Recognition When Right
of Return Exists", at the time of the sale based on the following: the selling
price is

                                        6

<PAGE>

fixed at the date of sale, the buyer is obligated to pay for the products, title
of the products has transferred, the buyer has economic substance apart from us,
we do not have further obligations to assist the buyer in the resale of the
product and the returns can be reasonably estimated at the time of sale.

Income Taxes

Income tax expense includes U.S., state and international income taxes and are
computed in accordance with SFAS No. 109, "Accounting for Income Taxes". Certain
items of income and expense are not reported in income tax returns and financial
statements in the same year. The income tax effects of these differences are
reported as deferred income taxes. Income tax credits are accounted for as a
reduction of income tax expense in the year in which the credits reduce income
taxes payable. Valuation allowances are provided against deferred income tax
assets which are not likely to be realized. We currently provide income taxes on
the earnings of foreign subsidiaries to the extent those earnings are taxable in
the local jurisdictions. We do not provide for United States income tax on
foreign earnings because, in management's opinion, such earnings have been
indefinitely reinvested in foreign operations.

Estimates

Our preparation of this Quarterly Report on Form 10-Q requires us to make
estimates and assumptions that affect amounts reported in the consolidated
financial statements and notes. Actual results could differ from those estimates
and assumptions. Had our estimates been based on a different set of assumptions,
then estimates may have resulting in a significant impact of the financial
statements.

(2)  ACQUISITION

On January 4, 2002, we acquired Micro Networks Corporation ("MNC") for $75.2
million, net of cash acquired and subject to arbitration relating to taxes and
other matters. We believe that by acquiring MNC we now have access to
technology, that will enhance the performance of our silicon timing products in
order to strengthen our position within existing strategic markets such as
servers and storage systems. The purchase price includes $2.9 million in
purchase accounting liabilities related to our preliminary plan to restructure
the activities of the acquired entity. The results of MNC have been included in
the consolidated financial statements since the acquisition date.

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition. We are in the process of
obtaining third-party valuations of certain tangible and intangible assets; thus
the allocation of the purchase price is subject to refinement.

                                                                      January 4,
                                                                         2002
                                                                      ---------
Accounts receivable ...............................................   $   6,849
Inventory .........................................................      12,005
Other current assets, net of cash acquired ........................       3,503
Property, plant and equipment .....................................       9,980
Intangible assets .................................................      36,300
Goodwill ..........................................................      33,697
                                                                      ---------
  Total assets acquired ...........................................     102,334
                                                                      ---------
Current liabilities ...............................................     (10,735)
Long-term debt ....................................................      (2,530)
Deferred tax liabilities ..........................................     (13,867)
                                                                      ---------
  Total liabilities acquired ......................................     (27,132)
                                                                      ---------
  Net assets acquired .............................................   $  75,202
                                                                      =========


Of the $36.3 million of acquired intangible assets, $2.9 million was assigned to
research and development assets that were written off at the date of
acquisition. The remaining $33.4 million of intangible assets include a customer
base valued at

                                       7

<PAGE>

$12.0 million (6 year weighted-average useful life), a tradename valued at $3.0
million (indefinite useful life) and developed technology valued at $18.4
million (indefinite useful life).

The following unaudited pro forma combined results of operation is provided for
illustrative purposes only and assumes this acquisition occurred as of the
beginning of each of the periods presented. The following unaudited pro forma
information (in thousands, except per share amounts) should not be relied upon
as necessarily being indicative of the historical results that would have been
obtained if this acquisition had actually occurred during those periods, nor the
result that may be obtained in the future.
<TABLE>
<CAPTION>

                                                       Three Months Ended              Nine Months Ended
                                                    March 30,       March 31,      March 30,       March 31,
                                                      2002            2001            2002            2001
                                                   -----------     ----------     -----------     -----------
<S>                                                <C>             <C>            <C>             <C>
Pro forma revenue ...............................  $    53,262     $   59,195     $   151,255     $   199,742
Pro forma net income ............................        7,047         14,016          27,133          50,324
Diluted net income per common share as reported..         0.10           0.19            0.37            0.68
Pro forma diluted net income per common share ...         0.10           0.20            0.39            0.72
</TABLE>

The net income for the three and nine months ended March 30, 2002 includes
one-time charges of $2.9 million for the write off of in process research and
development and $1.3 million related to the fair value adjustment to inventory
that was acquired from MNC and sold during the quarter ended March 30, 2002.

(3) INVENTORY
Inventory is valued at the lower of cost or market. Cost is determined by the
first in, first out (FIFO) method. The components of inventories are as follows
(in thousands):
<TABLE>
<CAPTION>
                                                    March 30,           June 30,
                                                      2002               2001
                                                    --------           --------
<S>                                                 <C>                <C>
Work-in-process ..........................          $ 16,484           $  6,513
Finished parts ...........................            10,031              7,178
Less: Obsolescence reserve ...............            (8,086)            (3,594)
                                                    --------           --------
                                                    $ 18,429           $ 10,097
                                                    ========           ========
</TABLE>

(4) DEBT
In connection with the acquisition of Micro Networks, we entered into a
revolving credit and term loan facility dated December 31, 2001, which will
expire December 31, 2004. The new facility enables us to draw down $45.0 million
under the term loan and $10.0 million under the revolving credit facility. At
our option, the interest rates under the term loan will be either (1) a base
rate, which is the higher of (i) a rate of interest announced from time to time
by the lenders' administrative agent as the base rate ("Base Rate") or (ii) the
sum of 0.5% per annum plus the federal funds rate or (2) London Interbank Offer
Rate ("LIBOR") plus 1.75%. At our option, the interest rates under the Revolving
Credit Loan, will be either (1) the Base Rate or (2) the LIBOR Rate plus a
pre-formulated margin. Currently we have selected LIBOR plus 1.75% as the
interest rate on our term loan. During the third quarter of fiscal year 2002, we
paid down $1.5 million of the term loan. As of March 30, 2002, $43.5 million was
outstanding on our term loan.

In connection with our bank agreement, we entered into an 18-month interest rate
swap agreement with the same financial institution. The interest rate swap
agreement essentially enables us to manage the exposure to fluctuations in
interest rates on a portion of our term loan.

Our term loan requires us to pay interest based on a variable rate. Under the
interest rate swap agreement, we are exchanging the variable rate interest on a
portion of our term loan, equal to a notional amount of $22.5 million, with a

                                        8

<PAGE>

fixed rate of 3.25%. The interest rate swap agreement is in effect until June
2003, with the notional amount decreasing to $14.8 million over the effective
period.

The interest rate swap agreement has been designated as a cash flow hedge and,
therefore, changes in the fair value of the agreement will be recorded in
comprehensive loss. To date there has not been a significant change in fair
value.

Certain of our loan agreements require the maintenance of specified financial
ratios and impose financial limitations. At March 30, 2002, we were in
compliance with the covenants.

(5) CAPITAL STOCK
In September 2001, we announced a stock repurchase program, which authorized the
purchase, from time to time, of 2.0 million shares of our common stock on the
market. As of March 30, 2002, we had purchased 655,000 shares for $7.8 million.

(6) NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business
Combinations", which supersedes Accounting Principles Board Opinion No. 16 ("APB
No. 16"), "Business Combinations". The most significant changes made by SFAS No.
141 is the requirement of the usage of the purchase method of accounting for all
business combinations initiated after June 30, 2001 and established specific
criteria for the recognition of intangible assets separately from goodwill. We
adopted this statement during the first quarter of fiscal year 2002.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which supercedes APB No. 17, "Intangible Assets". SFAS No. 142 provides
guidance on accounting for goodwill and other intangible assets subsequent to
acquisition. These provisions are effective for fiscal years beginning after
December 15, 2001. We adopted this statement during the first quarter of fiscal
year 2002.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", which amends SFAS No. 19, "Financial Accounting and Reporting by
Oil and Gas Producing Companies". SFAS No. 143 provides guidance on accounting
for the retirement of tangible long-lived assets and the associated asset
retirement costs. These provisions are effective for fiscal year beginning after
June 15, 2002. We do not believe that adoption of this statement will have a
material impact on our operating results.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", which supercedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". SFAS No. 144 established a single accounting model for the disposition of
long-lived assets by sale. These provisions are effective for fiscal years
beginning after December 15, 2001. We do not believe that adoption of this
statement will have a material impact on our operating results.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB No. 13, and Technical Corrections." SFAS No.
145 updates, clarifies and simplifies existing accounting pronouncements. We do
not believe that adoption of this statement will have a material impact on our
operating results.

(7) NET INCOME PER SHARE
Basic net income per share is based on the weighted average number of common
shares outstanding excluding contingently issuable or returnable shares that
contingently convert into Common Stock upon certain events. Diluted net income
per share is based on the weighted average number of common shares outstanding
and diluted potential common shares outstanding.

                                       9

<PAGE>

The following table set forth the computation of net income (numerator) and
shares (denominator) for earnings per share:
<TABLE>
<CAPTION>
                                                          Three Months Ended      Nine Months Ended
                                                         March 30,   March 31,   March 30,   March 31,
                                                           2002        2001        2002        2001
                                                         -------     -------     -------     -------
<S>                                                      <C>         <C>         <C>         <C>
Numerator (in thousands):
Net income .........................................     $ 7,047     $12,995     $26,046     $47,428
                                                         -------     -------     -------     -------
Denominator (in thousands):
Weighted average shares outstanding used for basic
  income per share .................................      66,533      64,746      66,380      64,573
Common stock options ...............................       3,697       4,831       3,745       4,934
                                                         -------     -------     -------     -------
Weighted average shares outstanding used for diluted
  income per share .................................      70,230      69,577      70,125      69,507
                                                         =======     =======     =======     =======
</TABLE>

(8) INCOME TAXES
Our effective income tax rate was 15.4% for the first nine months of fiscal year
2002 as compared to 19.2% in the prior year period. The effective tax rate for
fiscal years 2002 and 2001 reflects the tax-exempt status of our Singapore
operation, which has been given pioneer status, or exemption of taxes on
non-passive income for five years. We do not currently calculate deferred taxes
on our investment in our Singapore operations, as all undistributed earnings are
permanently reinvested back into the Singapore facility. If we were to record
deferred taxes on our investment, the amount would be a $34.2 million liability
as of March 30, 2002.

(9) COMPREHENSIVE INCOME
Total comprehensive income represents net income plus the results of certain
equity changes not reflected in the condensed consolidated and combined
statements of operations. The components of other comprehensive income are shown
below.
<TABLE>
<CAPTION>
                                       Three Months Ended         Nine Months Ended
                                     March 30,     March 31,    March 30,     March 31,
                                       2002          2001         2002          2001
                                     --------      --------     --------      --------
<S>                                  <C>           <C>          <C>           <C>
Net income ........................  $  7,047      $ 12,995     $ 26,046      $ 47,428
                                     --------      --------     --------      --------

Other comprehensive income:
  Unrealized loss on investments...      (378)           --         (134)           --
                                     --------      --------     --------      --------
Total comprehensive income ........  $  6,669      $ 12,995     $ 25,912      $ 47,428
                                     ========      ========     ========      ========
</TABLE>

(10) LEGAL PROCEEDINGS
From time to time, various inquiries, potential claims, charges and litigation
are made, asserted or commenced by or against us, principally arising from or
related to contractual relations and possible patent infringement. We believe
that any of these claims currently pending, individually and in the aggregate,
have been adequately reserved and will not have any material adverse effect on
our consolidated financial position or results of operations, although no
assurance can be made in this regard.

On or about March 28, 2001, Cypress Semiconductor Corporation, ("Cypress"), and
International Microcircuits Inc. filed a suit against us in the U.S. District
Court in Delaware, alleging that we infringed on three patents and induced
others to infringe on them as well. Plaintiffs seek injunctive relief,
unspecified damages and enhanced damages for willful infringement. We denied the
allegations and filed a counterclaim seeking to invalidate the patents. We filed
a patent infringement lawsuit in the U.S. District Court, Northern District of
California against Cypress, alleging that Cypress

                                       10

<PAGE>

infringes upon one of our patents, and we seek injunctive relief and damages
against Cypress. Cypress denied the allegations and filed a counterclaim seeking
to invalidate our patent. On or about July 20, 2001, Cypress filed a complaint
with the U.S. International Trade Commission, ("ITC"), to commence an
investigation of us for patent infringement. A notice of investigation was
issued, and we denied the allegations of Cypress in this ITC complaint.
Litigation in the Delaware lawsuit about a patent that is subject of Cypress'
ITC complaint is stayed, until the ITC's determination under the Cypress
complaint becomes final. On or about November 5, 2001, we filed a complaint with
the ITC to commence an investigation of Cypress for patent infringement. A
notice of investigation was issued, and Cypress denied the allegations in our
complaint. On or about January 22, 2002, the presiding judge in the two ITC
investigations involving Cypress and us ordered the investigations consolidated.
We will continue to vigorously pursue our rights and defenses in all litigation
with Cypress. Although we believe that the resolution of this litigation will
not have a material adverse effect on our results of operations and financial
condition, no assurance can be made in this regard. These expenses are included
in our selling, general and administrative expenses in our consolidated
statement of operations.

(11) CUSTOMERS
In fiscal year 2001, we entered into an Investment and Stock Trade Agreement
(the "agreement") with Maxtek Technology Co. Ltd ("Maxtek"), a distributor in
Taiwan. We invested $4.0 million and own approximately 10% of Maxtek. The
agreement states that if Maxtek fails to successfully complete a public offering
by December 5, 2005, we, at our sole option, have the right to demand immediate
repurchase of all 4.0 million shares, at the original purchase price plus
accrued annual interest (commercial rate set by the Central Bank of China)
during the said period. Maxtek, our distributor for our PC business in Taiwan
and China, represented approximately 19% of our sales for the first nine months
of fiscal year 2002, and 13% in the prior year period. Additionally, sales to
Maxtech Corporation Limited ("Maxtech"), a Maxtek subsidiary, were 19% of our
sales in the first nine months of fiscal year 2002 and 9% in the prior year
period.

                                       11

<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements

Except for the historical statements and discussions contained herein,
statements contained in this Report on Form 10-Q constitute "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, such as when we describe
what we believe, expect or anticipate will occur, and other similar statements,
you must remember that our expectations may not be correct. While we believe
these expectations and projections are reasonable, such forward-looking
statements are inherently subject to risks, uncertainties and assumptions about
us, including, among other things:

o  Our dependence on continuous introduction of new products based on the latest
   technology
o  The intensely competitive semiconductor and personal computer component
   industries
o  The importance of frequency timing generator products to total revenue
o  Our dependence on the personal computer industry and third-party silicon
   wafer fabricators and assemblers of semiconductors
o  Risks associated with international business activities and acquisitions and
   integration of acquired companies or product lines
o  Our dependence on proprietary information and technology and on key personnel
o  Our product liability exposure and the potential unavailability of insurance
o  General economic conditions, including economic conditions related to the
   semiconductor and personal computer industries

We do not guarantee that the transactions and events described in this Form 10-Q
will happen as described or that they will happen at all. You should read this
Form 10-Q completely and with the understanding that actual future results may
be materially different from what we expect. We disclaim any intention or
obligation to update these forward-looking statements, even though our situation
will change in the future.

Results of Operations

The following table sets forth, for the periods indicated, the percentage
relationship to revenue of certain cost, expense and income items. The table and
the subsequent discussion should be read in conjunction with the financial
statements and the notes thereto:
<TABLE>
<CAPTION>
                                             Three Months Ended       Nine Months Ended
                                            --------------------    --------------------
                                            March 30,   March 31,   March 30,   March 31,
                                              2002        2001        2002       2001
                                            --------    --------    --------    --------
<S>                                          <C>         <C>         <C>         <C>
Revenues ................................    100.0%      100.0%      100.0%      100.0%

Gross margin ............................     56.4        62.2        57.4        62.2

   Research and development .............     15.2        16.0        16.1        14.3
   Selling, general and administrative...     19.9        14.1        16.2        11.0
   In process research and development...      5.4          --         2.3          --
   Amortization of intangibles ..........      0.9         0.1         0.4         0.1
                                            --------    --------    --------    --------
Operating income ........................     15.0        32.0        22.4        36.8
                                            --------    --------    --------    --------
Interest and other income ...............      2.1         2.5         2.1         1.7
Interest expense ........................     (1.0)       (0.0)       (0.4)       (0.1)
                                            --------    --------    --------    --------
      Income before income taxes ........     16.1        34.5        24.1        38.4
Income taxes ............................      2.9         5.8         3.7         7.4
                                            --------    --------    --------    --------
      Net income ........................     13.2%       28.7%       20.4%       31.0%
                                            ========    ========    ========    ========
</TABLE>

                                       12

<PAGE>

THIRD QUARTER FISCAL YEAR 2002 AS COMPARED TO THIRD QUARTER FISCAL YEAR 2001

Revenue. Revenue increased by $8.0 million to $53.3 million for the third
quarter ended March 30, 2002 as compared to the prior year quarter. The 17.7%
increase is primarily due to the acquisition of Micro Networks Corporation
("MNC"), offset by macroeconomic factors over the past year. The average selling
price of our products increased 7.9% from the prior year quarter, while the
volume increased 9.0%.

Foreign revenue (which includes shipments of integrated circuits ("ICs") to
foreign companies as well as offshore subsidiaries of US multinational
companies) was 79.6% of total revenue for the third quarter of fiscal year 2002
as compared to 76.8% of total revenue in the prior year quarter. This increase
is attributable to strong demand in the Asian PC market. While the percentage
increase reflected growing sales to the Pacific Rim markets, certain of our
international sales were to customers in the Pacific Rim, which in turn sold
some of their products to North America, Europe and other non-Asian markets. Our
sales are denominated in U.S. dollars and minimize foreign currency risk.

Gross Margin. Cost of sales increased $6.1 million to $23.2 million for the
third quarter of fiscal year 2002, as compared to the prior year quarter. Cost
of sales as a percentage of total revenue was 43.6% for the third quarter of
fiscal year 2002 as compared to 37.8% in the prior year quarter. The overall
decrease in gross margin as a percentage of revenue is due to product mix as
well as a non-recurring charge of $1.3 million related to the fair value
adjustment to inventory that was acquired from MNC and sold during the three
months ended March 30, 2002 in connection with the acquisition of MNC.

Research and Development Expense. Research and development ("R&D") expense
increased $0.9 million to $8.1 million for the third quarter of fiscal year 2002
from $7.2 million in the prior year quarter. As a percentage of revenue,
research and development was 15.2% in the third quarter of fiscal year 2002 as
compared to 16.0% in the prior year period. The increase in research and
development dollars is the result of the acquisition of MNC, offset slightly by
the impact of company wide cost saving initiatives.

Selling, General, Administrative and Other. Selling, general, administrative and
other expense increased $4.6 million to $11.1 million for the third quarter of
fiscal year 2002 as compared to the prior year quarter. As a percentage of total
revenue, selling, general, administrative and other expenses increased to 20.8%
in the third quarter of fiscal year 2002 as compared to 14.2% in the prior year
period. This increase is attributable to the acquisition of MNC and increased
legal fees associated with defending our patents.

In Process Research and Development. In relation to the acquisition of Micro
Networks, we incurred a one-time charge of $2.9 million for the write-off of in
process research and development during the third quarter of fiscal year 2002.

Operating Income. In dollar terms, operating income was $8.0 million in the
third quarter of fiscal year 2002 compared to $14.5 million in the third quarter
of fiscal year 2001. Expressed as a percentage of revenue, operating income was
15.0% and 32.0% in the third quarter of fiscal year 2002 and the prior year
period, respectively.

Interest Expense. Interest expense was $0.5 million in the third quarter of
fiscal year 2002 and $22,000 in the third quarter of fiscal year 2001. The
increase in interest expense is due to the debt incurred in order to purchase
Micro Networks.

Interest and Other Income. Interest and other income remained flat at $1.1
million for the quarter ended March 30, 2002 and in the prior year quarter.
Although we have a greater cash balance available for investing, the overall
decrease in federal rates over the past year has affected our investment income.

Income Tax Expense. Our effective income tax rate was 18.1% for the third
quarter of fiscal year 2002 as compared to 16.7% in the prior year period. The
effective tax rate for fiscal years 2002 and 2001 reflects the tax-exempt status
of our Singapore operation, which has been given pioneer status, or exemption of
taxes on non-passive income for five years. The increase in our overall tax rate
is due to the inclusion of MNC and non-deductible charges from the acquisition.
We

                                       13

<PAGE>

do not currently calculate deferred taxes on our investment in our Singapore
operations, as all undistributed earnings are permanently reinvested back into
the Singapore facility. If we were to record deferred taxes on our investment,
the amount would be a $34.2 million liability as of March 30, 2002.

NINE MONTHS ENDED MARCH 30, 2002 AS COMPARED TO NINE MONTHS ENDED MARCH 31, 2001

Revenue. Consolidated revenue for the nine months of fiscal year 2002 decreased
by $25.7 million to $127.5 million, compared to the corresponding prior year
period. The 16.8% decrease is primarily due to macroeconomic factors, which
affected overall revenue. Strength in the personal computer and gaming machines
markets and the acquisition of MNC has offset some of this decrease. The average
selling price declined 11.2%, while the volume decreased 6.2%.

Foreign revenue (which includes shipments of integrated circuits ("ICs") to
foreign companies as well as offshore subsidiaries of US multinational
companies) was 79.0% of total revenue for the first nine months of fiscal year
2002 as compared to 70.9% of total revenue in the prior year period. This
increase is attributable to strong demand in the Asian PC market. While the
percentage increase reflected growing sales to the Pacific Rim markets, certain
of our international sales were to customers in the Pacific Rim, which in turn
sold some of their products to North America, Europe and other non-Asian
markets. Our sales are denominated in U.S. dollars and minimize foreign currency
risk.

Gross Margin. Cost of sales for the first nine months of fiscal year 2002
decreased $3.5 million to $54.4 million, compared to the corresponding prior
year period. Cost of sales as a percentage of total revenue was 42.6% for the
first nine months of fiscal year 2002 as compared to 37.8% in the prior year
period. The overall decrease in margin is due to product mix as well as a
decline in average selling prices.

Research and Development Expense. Research and development expense for the first
nine months of fiscal year 2002 decreased $1.3 million to $20.6 million,
compared to the corresponding prior year period. As a percentage of revenue,
research and development increased to 16.1% in the first nine months of fiscal
year 2002 as compared to 14.3% in the prior year period. Our continued emphasis
on R&D includes greater spending in research and development of our silicon
timing business. The decreased expense represented a greater percentage of
revenue due to the significant decrease in sales during the first nine months of
fiscal year 2002.

Selling, General, Administrative and Other. Selling, general, administrative and
other expense for the first nine months of fiscal year 2002 increased by $4.1
million to $21.1 million, compared to the corresponding prior year period. As a
percentage of total revenue, selling, general, administrative and other expenses
increased to 16.6% in the first nine months of fiscal year 2002, compared to
11.1% in the prior year period. This increase is largely due to increased legal
fees associated with defending our patents. The increase is also partly
attributable to the inclusion in the selling, general, administrative and other
expense for the first nine months of fiscal year 2001 of $2.0 million in
insurance proceeds received in relation to litigation.

In Process Research and Development. In relation to the acquisition of Micro
Networks, we incurred a one-time charge of $2.9 million for the write-off of in
process research and development during the first nine months of fiscal year
2002.

Operating Income. Operating income decreased by $27.7 million to $28.6 million,
compared to the corresponding prior year period. Expressed as a percentage of
revenue, operating income was 22.4% and 36.8% in the first nine months of fiscal
year 2002 and the prior year period, respectively.

Interest Expense. Interest expense increased by $0.4 million to $0.6 million,
compared to the corresponding prior year period, as a result of the debt
incurred to purchase MNC.

Interest and Other Income. Interest and other income was $2.7 million in the
first nine months of fiscal year 2002 and $2.6 million in the prior year period.
Although an increase in cash flows from operations has contributed to greater
cash

                                       14

<PAGE>

balance available for investing, reductions by the Federal Reserve over the past
year have impacted rates available for investing.

Income Tax Expense. Our effective income tax rate for the first nine months of
fiscal year 2002 was 15.4% as compared to 19.2% in the corresponding prior year
period. The effective tax rate for fiscal years 2002 and 2001 reflects the
tax-exempt status of our Singapore operation, which has been given pioneer
status, or exemption of taxes on non-passive income for five years. The decrease
in overall tax rate was directly attributable to increased revenue and income in
our Singapore operations relative to our domestic operations. We do not
currently calculate deferred taxes on our investment in our Singapore
operations, as all undistributed earnings are permanently reinvested back into
the Singapore facility. If we were to record deferred taxes on our investment,
the amount would be a $34.2 million liability as of March 30, 2002.

INDUSTRY FACTORS

Our strategy has been to develop new products and introduce them ahead of the
competition in order to have them selected for design into products of leading
OEMs. Our newer components, which include advanced motherboard frequency timing
generator components, and silicon timing devices for digital consumer and
communication applications, are examples of this strategy. However, there can be
no assurance that we will continue to be successful in these efforts or that
further competitive pressures would not have a material impact on revenue growth
or profitability.

We include customer released orders in our backlog, which may be canceled
generally with 30 days advance notice without significant penalty to the
customers. Accordingly, we believe that our backlog, at any time, should not be
used as a measure of future revenues.

The semiconductor, personal computer and communication industries, in which we
participate, are generally characterized by rapid technological change, intense
competitive pressure, and, as a result, products price erosion. Our operating
results can be impacted significantly by the introduction of new products, new
manufacturing technologies, rapid changes in the demand for products, decreases
in the average selling price over the life of a product and our dependence on
third-party wafer suppliers. Our operating results are subject to quarterly
fluctuations as a result of a number of factors, including competitive pressures
on selling prices, availability of wafer supply, fluctuation in yields, changes
in the mix of products sold, the timing and success of new product introductions
and the scheduling of orders by customers. We believe that our future quarterly
operating results may also fluctuate as a result of Company-specific factors,
including pricing pressures on our more mature FTG components as well as the
competitive pressure, and acceptance of our newly introduced ICs, and market
acceptance of our customers' products. Due to the effect of these factors on
future operations, past performance may be a limited indicator in assessing
potential future performance.

LIQUIDITY AND CAPITAL RESOURCES

At March 30, 2002, our principal sources of liquidity included cash and
investments of $93.9 million as compared to of $94.4 million at June 30, 2001.
The cash and investment balances include amounts which have been permanently
reinvested into the Singapore operations. If we were to repatriate these
amounts, they would be subject to US Federal Income Tax. Net cash provided by
operating activities was $40.2 million in the first nine months of fiscal year
2002, as compared to $50.7 million in the prior year period. This decrease is
primarily attributable to the decrease in revenue. Our days sales outstanding
decreased from 71 days as of the fourth quarter of fiscal year 2001 to 50 days
in the third quarter of fiscal year 2002, while inventory turns decreased from
5.2 times in fiscal year 2001 to 4.6 times in the third quarter of fiscal year
2002.

Purchases for property and equipment remained flat at $2.7 million in the first
nine months of fiscal year 2002 and fiscal year 2001.

                                       15

<PAGE>

In September, we announced a repurchase program, which authorized the purchase,
from time to time, of 2.0 million shares of our common stock on the market. As
of March 30, 2002, we had purchased 655,000 shares for $7.8 million.

In June 2000, we obtained a $30.0 million revolving credit facility with a
commercial bank to expire in June 2002, with an option to extend the facility
for an additional period subject to certain covenants, including maintenance of
certain financial ratios. At the beginning of the third quarter, we terminated
this credit facility and entered into a new facility as discussed below.

In connection with the acquisition of Micro Networks, we entered into a new
revolving credit and term loan facility dated December 31, 2001, which will
expire December 31, 2004. The new facility enables us to draw down $45.0 million
under the term loan and $10.0 million under the revolving credit facility. At
our option, the interest rates under the term loan will be either (1) a base
rate, which is the higher of (i) a rate of interest announced from time to time
by the lenders' administrative agent as the base rate ("Base Rate") or (ii) the
sum of 0.5% per annum plus the federal funds rate or (2) London Interbank Offer
Rate ("LIBOR") plus 1.75%. At our option, the interest rates under the Revolving
Credit Loan, will be either (1) the Base Rate or (2) the LIBOR Rate plus a
pre-formulated margin. During the third quarter of fiscal year 2002, we paid
down $1.5 million of the term loan. As of March 30, 2002, $43.5 million was
outstanding on our term loan, $12.0 million of this is classified current.

The following summarizes our significant contractual obligations and commitments
as of March 30, 2002 (in thousands):
<TABLE>
<CAPTION>

            Contractual                              Less than                                               After
            Obligations              Total             1 year         1 - 3 years      4 - 5 years          5 years
       ----------------------- ----------------- ----------------- ----------------- ---------------- ------------------
       <S>                     <C>               <C>               <C>               <C>              <C>
       Long-Term Debt                  $ 43,500          $ 12,000          $ 31,500          $    --            $    --
       Operating Leases                  18,700             2,924             8,260            4,837              2,679
       ----------------------- ----------------- ----------------- ----------------- ---------------- ------------------
       Total                           $ 62,200          $ 14,924          $ 39,760          $ 4,837            $ 2,679
       ----------------------- ----------------- ----------------- ----------------- ---------------- ------------------
</TABLE>

Operating leases primarily consist of leased facilities that we utilize in
various locations.

Certain of our loan agreements require the maintenance of specified financial
ratios and impose financial limitations. At March 30, 2002, we were in
compliance with the covenants.

On January 4, 2002, we acquired Micro Networks Corporation ("MNC") for $75.2
million, net of cash on hand. The purchase price includes $2.9 million in
purchase accounting liabilities related to our preliminary plan to restructure
the activities of the acquired entity. The results of MNC have been included in
the consolidated financial statements since that acquisition date. The
acquisition was accounted for using the purchase method, and accordingly,
goodwill of approximately $33.7 million was recorded as part of the transaction.

In fiscal year 2001, we entered into an Investment and Stock Trade Agreement
(the "agreement") with Maxtek Technology Co. Ltd ("Maxtek"), a distributor in
Taiwan. We invested $4.0 million and own approximately 10% of Maxtek. The
agreement states that if Maxtek fails to successfully complete a public offering
by December 5, 2005, we, at our sole option, have the right to demand immediate
repurchase of all 4.0 million shares, at the original purchase price plus
accrued annual interest (commercial rate set by the Central Bank of China)
during the said period. Maxtek, our distributor for our PC business in Taiwan
and China, represented approximately 19% of our sales for the first nine months
of fiscal year 2002, and 13% in the prior year period. Additionally, sales to
Maxtech Corporation Limited ("Maxtech"), a Maxtek subsidiary, were 19% of our
sales in the first nine months of fiscal year 2002 and 9% in the prior year
period.

We believe that the funds on hand together with funds expected to be generated
from our operations as well as borrowings under our bank revolving credit
facility will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next twelve months.
Thereafter, we may need to raise additional funds in

                                       16

<PAGE>

future periods to fund our operations and potential acquisitions if any. We may
also consider conducting future equity or debt financings if we perceive an
opportunity to access the capital markets on a favorable basis, within the next
twelve months or thereafter. Any such additional financing, if needed, might not
be available on reasonable terms or at all. Failure to raise capital when needed
could seriously harm our business and results of operations. If additional funds
were raised through the issuance of equity securities or convertible debt
securities, the percentage of ownership of our shareholders would be reduced.
Furthermore, such equity securities or convertible debt securities might have
rights, preferences or privileges senior to our common stock.

Critical Accounting Policies

In response to the SEC's Release No. 33-8040, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies," we have identified below some of
the accounting principles critical to our business and results of operations. We
determined the critical principles by considering accounting policies that
involve the most complex or subjective decisions or assessments. We state these
accounting policies in Management's Discussion and Analysis of Financial
Condition and Results of Operations and in the Notes to the consolidated
financial statements contained in our Annual Report on Form 10-K for our fiscal
year ended June 30, 2001. In addition, we believe our most critical accounting
policies include, but are not limited to, the following:

Our preparation of this Quarterly Report on Form 10-Q requires us to make
estimates and assumptions that affect amounts reported in the consolidated
financial statements and notes. Actual results could differ from those estimates
and assumptions. Had our estimates been based on a different set of assumptions,
then estimates may have resulting in a significant impact of the financial
statements.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets
acquired from business acquisitions. Prior to July 1, 2001, all goodwill was
amortized using the straight-line method over periods ranging from five to
thirty years. Statement of Financial Accounting Standards Number 142, "Goodwill
and Other Intangible Assets" (SFAS 142), addresses, among other things, how
goodwill and other intangible assets should be accounted for after they have
been initially recorded in the financial statements. Under SFAS 142, goodwill
and other indefinite lived intangible assets are no longer amortized. Beginning
July 1, 2001, we ceased the amortization of goodwill. Instead, we will, at least
annually, review the recoverability of goodwill and other indefinite lived
intangible assets. In assessing recoverability, many factors are considered,
including historical and forecasted operating results and cash flows of the
acquired businesses. After consideration of these factors, we will determine
whether or not there is an impairment to goodwill and other indefinite lived
intangible assets.

Revenues

Revenues from product sales are recognized as revenue upon shipment to the
customer. We offer a right of return to certain customers. Allowances are
established to provide for estimated returns at the time of sale. We recognize
sales to these customers, in accordance with the criteria of Statement of
Financial Accounting Standards ("SFAS") No. 48, "Revenue Recognition When Right
of Return Exists", at the time of the sale based on the following: the selling
price is fixed at the date of sale, the buyer is obligated to pay for the
products, title of the products has transferred, the buyer has economic
substance apart from us, we do not have further obligations to assist the buyer
in the resale of the product and the returns can be reasonably estimated at the
time of sale.

Income Taxes

Income tax expense includes U.S., state and international income taxes and are
computed in accordance with SFAS No. 109, "Accounting for Income  Taxes".
Certain items of income and expense are not reported in income tax returns and
financial statements in the same year. The income tax effects of these
differences are reported as deferred income taxes. Income tax credits are
accounted for as a reduction of income tax expense in the year in which the
credits reduce income taxes payable. Valuation allowances are provided against
deferred income tax assets which are not likely to be realized. We currently
provide income taxes on the earnings of foreign subsidiaries to the extent those
earnings are taxable in the

                                       17

<PAGE>

local jurisdictions. We do not provide for United States income tax on foreign
earnings because, in management's opinion, such earnings have been indefinitely
reinvested in foreign operations.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB")issued Statement
of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business
Combinations", which supersedes Accounting Principles Board Opinion No. 16 ("APB
No. 16"), "Business Combinations". The most significant changes made by SFAS No.
141 is the requirement of the usage of the purchase method of accounting for all
business combinations initiated after June 30, 2001 and established specific
criteria for the recognition of intangible assets separately from goodwill. We
adopted this statement during the first quarter of fiscal year 2002.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which supercedes APB No. 17, "Intangible Assets". SFAS No. 142 provides
guidance on accounting for goodwill and other intangible assets subsequent to
acquisition. These provisions are effective for fiscal years beginning after
December 15, 2001. We adopted this statement during the first quarter of fiscal
year 2002.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", which amends SFAS No. 19, "Financial Accounting and Reporting by
Oil and Gas Producing Companies". SFAS No. 143 provides guidance on accounting
for the retirement of tangible long-lived assets and the associated asset
retirement costs. These provisions are effective for fiscal year beginning after
June 15, 2002. We do not believe that adoption of this statement will have a
material impact on our operating results.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", which supercedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". SFAS No. 144 established a single accounting model for the disposition of
long-lived assets by sale. These provisions are effective for fiscal years
beginning after December 15, 2001. We do not believe that adoption of this
statement will have a material impact on our operating results.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB No. 13, and Technical  Corrections." SFAS No.
145 updates, clarifies and simplifies existing accounting pronouncements. We do
not believe that adoption of this statement will have a material impact on our
operating results.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exposures

Our sales are denominated in U.S. dollars, accordingly, we do not use forward
exchange contracts to hedge exposures denominated in foreign currencies or any
other derivative financial instruments for trading or speculative purposes. The
effect of an immediate 10% change in exchange rates would not have a material
impact on our future operating results or cash flows.

Interest Rate Risk

In connection with our bank agreement, we entered into an 18-month interest rate
swap agreement with the same financial institution. The interest rate swap
agreement essentially enables us to manage the exposure to fluctuations in
interest rates on a portion of our term loan.

Our term loan requires us to pay interest based on a variable rate. Under the
interest rate swap agreement, we are exchanging the variable rate interest on a
portion of our term loan, equal to a notional amount of $22.5 million, with a
fixed rate of 3.25%. The interest rate swap agreement is in effect until June
2003, with the notional amount decreasing to $14.8 million over the effective
period.

                                       18

<PAGE>


The interest rate swap agreement has been designated as a cash flow hedge and,
therefore, changes in the fair value of the agreement will be recorded in
comprehensive loss. To date there has not been a significant change in fair
value.

We do not use derivatives for trading or speculative purposes, nor are we party
to leverage derivatives.

The company had interest expense of $0.5 million for the third quarter of fiscal
year 2002. The potential increase in interest expense for the third quarter of
fiscal year 2002 from hypothetical 2% adverse change in variable interest rates
would be approximately $0.2 million.

                                       19

<PAGE>

         Item 6.  Exhibits and Reports on Form 8-K

                  (a)     Exhibits
<TABLE>
<CAPTION>

                                  Exhibit
                                  Number                             Description
                                  -------                            -----------
                                  <S>                                <C>

                                  None
</TABLE>

                  (b)     Reports on Form 8-K:

         A report on Form 8-K, dated January 4, 2002, was filed to report the
         announcement that we had acquired Micro Networks Corporation, a leading
         supplier of a broad range of precision electronic devices and modules
         for the optical networking, wireless and broadband infrastructure, and
         high-end network servers using surface acoustic wave (SAW) technology.

         A report on Form 8-K/A, dated March 20, 2002, was filed to amend its
         Current Report on Form 8-K dated January 4, 2002, in order to include
         the financial statements and pro forma information.

                                       20

<PAGE>

                                   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.

                                           INTEGRATED CIRCUIT SYSTEMS, INC.




Date: May 14, 2002                         By: /s/Hock E Tan
                                              ----------------------------------
                                           Hock E. Tan
                                           President and Chief Executive Officer


Date: May 14, 2002                         By: /s/ Justine F. Lien
                                              ----------------------------------
                                           Justine F. Lien
                                           Vice President, Finance and Chief
                                           Financial Officer
                                           (Principal financial & accounting
                                           officer)


                                       21