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

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

                                    FORM 10-Q

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

          [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended August 31, 2005

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                          Commission file number 0-7422

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

                        STANDARD MICROSYSTEMS CORPORATION

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

             (Exact name of registrant as specified in its charter)

                               DELAWARE 11-2234952

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

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

                    80 Arkay Drive, Hauppauge, New York 11788

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

      (Address of principal executive offices)           (Zip Code)

        Registrant's telephone number, including area code: 631-435-6000

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 ____

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes _X_ No ____

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

As of August 31, 2005, there were 20,953,000  shares of the registrant's  common
stock outstanding.


<PAGE>
                        Standard Microsystems Corporation

                                    Form 10-Q
                      For the Quarter Ended August 31, 2005

                                Table of Contents




Part I      Financial Information

Item 1    Financial Statements (unaudited):
          Condensed  Consolidated  Balance  Sheets  as of  August  31,  2005 and
          February 28, 2005
          Condensed  Consolidated  Statements  of  Operations  for the Three and
          Six-Month Periods Ended August 31, 2005 and 2004
          Condensed  Consolidated  Statements  of Cash  Flows for the  Six-Month
          Periods Ended August 31, 2005 and 2004
          Notes to Condensed Consolidated Financial Statements
Item 2    Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations
Item 3    Quantitative and Qualitative Disclosures About Market Risk
Item 4    Controls and Procedures

Part II     Other Information

Item 1    Legal Proceedings
Item 2    Unregistered Sales of Equity Securities and Use of Proceeds
Item 3    Defaults Upon Senior Securities
Item 4    Submission of Matters to a Vote of Security Holders
Item 5    Other Information
Item 6    Exhibits

Signature

<PAGE>



PART I - FINANCIAL INFORMATION


ITEM 1.   Financial Statements

STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)



                                             August 31,          February 28,
                                               2005                 2005
                                           -------------       ----------------
Assets
Current assets:
 Cash and cash equivalents                $     24,678        $       116,126
 Short-term investments                        106,988                 56,519
 Accounts receivable, net                       29,109                 23,788
 Inventories                                    38,818                 33,310
 Deferred income taxes                          16,612                 17,701
 Other current assets                            4,794                  4,295
-------------------------------------------------------------------------------

     Total current assets                      220,999                251,739
-------------------------------------------------------------------------------

Property, plant and equipment, net              28,915                 22,630
Goodwill                                        79,032                 29,435
Intangible assets, net                          48,152                  3,584
Deferred income taxes                            9,456                  7,163
Other assets                                     3,864                  4,708
-------------------------------------------------------------------------------

                                          $    390,418        $       319,259
===============================================================================

Liabilities and shareholders' equity
Current liabilities:
 Accounts payable                         $     22,216        $        15,995
 Deferred income on shipments to
 distributors                                    8,876                  7,689
 Accrued expenses, income taxes
 and other liabilities                          21,574                 13,400
-------------------------------------------------------------------------------

     Total current liabilities                  52,666                 37,084
-------------------------------------------------------------------------------

Deferred income taxes                           16,116                    -
Other liabilities                               15,429                 12,326

Shareholders' equity:
 Preferred stock                                   -                      -
 Common stock                                    2,295                  2,053
 Additional paid-in capital                    229,340                187,854
 Retained earnings                             103,658                100,612
 Treasury stock, at cost                       (25,961)               (23,799)
 Deferred stock-based compensation              (3,588)                (1,925)
 Accumulated other comprehensive income            463                  5,054
-------------------------------------------------------------------------------

     Total shareholders' equity                306,207                269,849
-------------------------------------------------------------------------------

                                          $    390,418        $       319,259
===============================================================================

See Notes to Condensed Consolidated Financial Statements.
<PAGE>
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)

<TABLE>
<CAPTION>


                                                           Three Months Ended                       Six Months Ended
                                                               August 31,                               August 31,
                                                   ----------------------------------      ----------------------------------

                                                        2005                2004                 2005               2004
                                                   --------------     ---------------      ---------------     --------------
<S>                                               <C>                <C>                  <C>                 <C>

Revenues                                          $      79,060      $       50,157       $      147,867      $     103,210

Costs and expenses:
 Cost of goods sold                                      44,372              26,260               80,864             52,645
 Research and development                                14,685              11,220               27,651             22,082
 Selling, general and administrative                     18,554              11,852               32,145             23,704
 Amortization of intangible assets                        1,557                 266                2,710                583
 In-process research and development                        -                   -                    895                -
-------------------------------------------------------------------------------------     -----------------------------------

Income (loss) from operations                              (108)                559                3,602              4,196

Interest income                                             649                 556                1,372              1,022
Other expense, net                                           (5)                 (6)                 (52)               (38)
-------------------------------------------------------------------------------------     -----------------------------------

Income before provision for income taxes                    536               1,109                4,922              5,180

Provision for income taxes                                  517                 214                1,876              1,373
-------------------------------------------------------------------------------------     -----------------------------------

Net income                                        $          19      $          895       $        3,046      $       3,807
=====================================================================================     ===================================


Basic net income per share:                       $         -        $         0.05       $         0.15      $        0.21
=====================================================================================     ===================================

Diluted net income per share:                     $         -        $         0.05       $         0.14      $        0.20
=====================================================================================     ===================================

Weighted average common shares outstanding:
 Basic                                                   20,630              18,308               20,325             18,278
 Diluted                                                 21,611              19,169               21,071             19,482

</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>

                                                                                             Six Months Ended
                                                                                                 August 31,
                                                                                ----------------------------------------
                                                                                      2005                    2004
                                                                                -----------------      -----------------

<S>                                                                             <C>                    <C>
Cash flows from operating activities:
 Cash received from customers and licensees                                     $       150,179        $       105,124
 Cash paid to suppliers and employees                                                  (118,969)               (98,520)
 Interest received                                                                        1,067                    983
 Interest paid                                                                              (45)                   (72)
 Income taxes refunded (paid)                                                            (2,560)                 6,738
------------------------------------------------------------------------------------------------------------------------

     Net cash provided by operating activities                                           29,672                 14,253
------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
 Capital expenditures                                                                    (9,204)                (6,202)
 Acquisition of Oasis SiliconSystems Holding AG, net of cash acquired                   (60,349)                   -
 Sales of long-term investments                                                             -                    4,000
 Purchases of short-term investments                                                   (248,227)              (231,141)
 Sales of short-term investments                                                        197,831                276,923
 Other                                                                                       21                     36
------------------------------------------------------------------------------------------------------------------------

     Net cash provided by (used for) investing activities                              (119,928)                43,616
------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
 Proceeds from issuance of common stock                                                   2,814                    976
 Purchases of treasury stock                                                             (2,162)                   -
 Repayments of obligations under capital leases and notes payable                        (1,313)                (1,016)
------------------------------------------------------------------------------------------------------------------------

     Net cash used for financing activities                                                (661)                   (40)
------------------------------------------------------------------------------------------------------------------------

Effect of foreign exchange rate changes on cash and cash equivalents                       (531)                    15
------------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                                     (91,448)                57,844

Cash and cash equivalents at beginning of period                                        116,126                 14,050
------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of period                                      $        24,678        $        71,894
========================================================================================================================

Reconciliation of net income to
net cash provided by operating activities:

Net income                                                                      $         3,046        $         3,807
Adjustments to reconcile net income to
net cash provided by operating activities:
 Depreciation and amortization                                                            8,238                  5,664
 Tax benefits from employee stock plans                                                     698                    117
 In-process research and development charge                                                 895                    -
 Stock-based compensation                                                                 6,347                    500
 Other adjustments, net                                                                     (11)                   (18)
 Changes in operating assets and liabilities,
 net of business acquisition impact:
   Accounts receivable                                                                      (13)                (5,632)
   Inventories                                                                            6,675                 (4,696)
   Accounts payable, deferred income, accrued expenses and other liabilities              4,336                  6,882
   Current and deferred income taxes                                                     (1,370)                 7,995
   Other changes, net                                                                       831                   (366)
------------------------------------------------------------------------------------------------------------------------

Net cash provided by operating activities                                       $        29,672        $        14,253
========================================================================================================================

</TABLE>

See Notes to Condensed Consolidated Financial Statements.

<PAGE>
               STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.        Basis of Presentation

The  accompanying  unaudited  condensed  consolidated  financial  information of
Standard Microsystems Corporation and subsidiaries, referred to herein as "SMSC"
or "the  Company,"  has been  prepared in  accordance  with  generally  accepted
accounting  principles  and the  rules and  regulations  of the  Securities  and
Exchange  Commission  (SEC),  and reflects all  adjustments,  consisting only of
normal  recurring  adjustments,  which in management's  opinion are necessary to
state fairly the Company's  financial  position,  results of operations and cash
flows for all periods presented.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of assets and  liabilities  and the  disclosure  of
contingent  assets and liabilities at the date of the financial  statements,  as
well as the  reported  amounts of revenues  and  expenses  during the  reporting
period. Actual results may differ from those estimates, and such differences may
be material to the financial statements.  These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements for the fiscal year ended February 28, 2005 included in the Company's
annual  report on Form 10-K,  as filed on May 16, 2005 with the SEC. The results
of operations for the three and six-month  periods ended August 31, 2005 are not
necessarily indicative of the results to be expected for any future periods.


2.        Stock-Based Compensation

The Company has in effect  several  stock-based  compensation  plans under which
incentive stock options,  non-qualified  stock options,  restricted stock awards
and stock appreciation rights (SARs) are granted to employees and directors. All
stock options and SARs are granted with exercise  prices equal to the fair value
of the underlying  shares on the date of grant.  The Company  accounts for stock
option grants in accordance with Accounting  Principles  Board (APB) Opinion No.
25,  "Accounting  for Stock Issued to Employees" and  accordingly  recognizes no
compensation  expense  for  the  stock  option  grants.   Additional  pro  forma
disclosures as required under Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based  Compensation," as amended by SFAS No. 148,
"Accounting  for  Stock-Based  Compensation  - Transition and  Disclosure,"  are
detailed below.

For  purposes  of the pro  forma  disclosures  required  by SFAS  No.  123,  the
estimated fair market value of the Company's  options is amortized as an expense
over the  options'  vesting  periods.  The fair value of each option  grant,  as
defined  by  SFAS  No.  123,  is  estimated  on the  date  of  grant  using  the
Black-Scholes  option-pricing  model. The Black-Scholes  model, as well as other
currently  accepted option valuation models,  was developed to estimate the fair
value  of  freely   tradable,   fully   transferable   options  without  vesting
restrictions,  that significantly differ from the Company's stock option awards.
Because the Company's employee stock options have characteristics  significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate,  in the opinion
of management,  the existing models do not necessarily provide a reliable single
measure of the fair value of employee stock options.

Had compensation expense been recorded under the provisions of SFAS No. 123, the
Company's  net income (loss) and net income (loss) per share would have been the
pro forma amounts indicated below (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                                Three Months Ended           Six Months Ended
                                                                    August 31,                  August 31,
                                                            -----------------------------------------------------
                                                               2005          2004           2005         2004
-----------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>            <C>          <C>

Net income - as reported                                      $     19      $    895       $  3,046     $  3,807
Stock-based compensation expense included in net income,
net of taxes - as reported                                       3,844           189          3,989          331
Stock-based compensation expense determined using the
fair value method for all awards, net of taxes                  (5,416)       (2,100)        (7,731)      (4,522)
-----------------------------------------------------------------------------------------------------------------
Net loss - pro forma                                          $ (1,553)     $ (1,016)      $   (696)    $   (384)
=================================================================================================================

Basic net income per share - as reported                      $    -        $   0.05       $   0.15     $   0.21
=================================================================================================================
Diluted net income per share - as reported                    $    -        $   0.05       $   0.14     $   0.20
=================================================================================================================
Basic and diluted net loss per share - pro forma              $  (0.08)     $  (0.06)      $  (0.03)    $  (0.02)
=================================================================================================================
</TABLE>


3.        Acquisition of OASIS SiliconSystems Holding AG

On March 30, 2005,  SMSC announced the completion that day of its acquisition of
OASIS SiliconSystems Holding AG (OASIS).  Based in Karlsruhe,  Germany, OASIS is
engaged in the  development  and  marketing of  integrated  circuits that enable
networking of multimedia devices for automotive infotainment applications.

The  transaction  was accounted for as a purchase  under  accounting  principles
generally  accepted in the United States of America,  whereby the purchase price
for OASIS has been allocated to the net tangible and intangible assets acquired,
based upon their fair  values as of March 30,  2005,  and the  results of OASIS'
operations  subsequent  to March 30, 2005 have been  included  in the  Company's
consolidated results of operations.

SMSC acquired all of OASIS' outstanding  capital stock in exchange for aggregate
consideration of $118.7 million,  including  approximately 2.1 million shares of
SMSC common stock valued for accounting purposes at $35.8 million, $79.5 million
of cash, and approximately $3.4 million of direct  acquisition costs,  including
legal,  banking,  accounting and valuation fees. The tangible assets of OASIS at
March  30,  2005  included   approximately   $22.4  million  of  cash  and  cash
equivalents,  resulting  in a net cash outlay of  approximately  $60.5  million.
SMSC's  existing  cash  balances  were  the  source  of  the  cash  used  in the
transaction.  For  accounting  purposes,  the value of the SMSC common stock was
determined using the stock's market value for the average of the two days before
and after the date the terms of the acquisition were announced.  Under the terms
of the Share  Purchase  Agreement,  approximately  1.2 million of the shares and
$1.8  million of the cash  issued to the former  shareholders  of OASIS is being
held in an escrow  account as security  for  certain  indemnity  obligations  of
OASIS' former  shareholders.  Up to $20.0  million of additional  consideration,
payable  in  cash  and  SMSC  common  stock,  may be  issued  to  OASIS'  former
shareholders  during fiscal 2007 upon satisfaction of certain future performance
goals.  Any  additional  consideration  earned  and  paid  will be  recorded  as
goodwill.

The  following  table  summarizes  the  components  of the  purchase  price  (in
millions):


Cash                                          $           79.5
SMSC common stock issued                                  35.8
Transaction costs                                          3.4
----------------------------------------------------------------

                                              $          118.7
================================================================


The  following  table  summarizes  the  allocation  of the  purchase  price  (in
millions):


 Cash and cash equivalents                    $           22.4
 Accounts receivable                                       5.8
 Inventory                                                12.9
 Other current assets                                      0.5
 Identifiable intangible assets:
   Purchased technology                                   32.4
   Customer relationships                                 10.5
   Trademark                                               5.4
   Other                                                   0.6
 Property and equipment                                    2.7
 Goodwill                                                 51.9
 Deferred income tax benefits                              0.6
 Accounts payable                                         (1.7)
 Accrued expenses and income taxes                        (6.9)
 Deferred income tax liabilities                         (19.3)
 In-process research and development                       0.9
----------------------------------------------------------------

                                              $          118.7
================================================================


The  majority  of  OASIS'  net  assets,   including  goodwill  and  identifiable
intangible assets, are located in Europe, and the functional  currency of OASIS'
operations in Europe is the euro. Accordingly, these euro-denominated net assets
are  translated  into U.S.  dollars at  period-end  exchange  rates and gains or
losses arising from translation are included as a component of accumulated other
comprehensive income within shareholders' equity.

In  accordance  with the  provisions  of SFAS No.  141,  OASIS'  finished  goods
inventory was valued at estimated  selling prices less the costs of disposal and
a reasonable  profit  allowance for the related selling effort;  work-in-process
inventory  was valued at estimated  selling  prices of the  finished  goods less
costs to complete,  costs of disposal, and a reasonable profit allowance for the
completing  and  selling  efforts;  and raw  materials  were  valued at  current
replacement costs.  These values initially exceeded OASIS' historical  inventory
cost by  approximately  $1.7 million.  This value was included  within the $12.9
million of fair value  assigned to OASIS'  inventory at March 30,  2005,  and is
being recorded as a component of cost of goods sold as the underlying  inventory
is sold, $1.0 million and $1.6 million of which was recognized  during the three
and six-month periods ended August 31, 2005, respectively.

The estimated fair value attributed to purchased technology was determined based
upon a  discounted  forecast  of the  estimated  net  future  cash  flows  to be
generated  from the  technologies,  using a discount  rate of 25%. The estimated
fair value of purchased  technology is being  amortized over a period of 8 years
on a straight-line  basis,  which approximates the pattern in which the economic
benefits of the technology are expected to be realized.

The estimated  fair value  attributed to customer  relationships  was determined
based on a  discounted  forecast  of the  estimated  net future cash flows to be
generated  from the  relationships,  discounted  at a rate of 23%. The estimated
fair value of the customer  relationships  is being amortized over a period of 8
years on a  straight-line  basis,  which  approximates  the pattern in which the
economic benefits of the customer relationships are expected to be realized.

OASIS owns certain trademarks related to its automotive infotainment technology.
The  estimated  fair value  attributed  to these  trademarks  was  determined by
calculating  the present value of the royalty  savings related to the trademarks
using  an  assumed  royalty  rate  of 1.5%  and a  discount  rate of 23%.  These
trademarks have  indefinite  lives and are therefore not being  amortized.  They
will be subject to an impairment  test on an annual  basis,  or when an event or
circumstance occurs indicating a possible impairment in value.

Goodwill represents the excess of the purchase price over the fair values of the
net tangible and intangible  assets  acquired.  This  acquisition  significantly
expands  SMSC's  sales  of  integrated  circuits  into  automotive  infotainment
applications,  and is also providing  opportunities  for expanded  revenues into
other applications,  including consumer  networking.  It also added an assembled
workforce of approximately 150 employees into SMSC's  operations.  These factors
contributed to recognition of goodwill in the purchase price. In accordance with
SFAS No. 142,  goodwill is not  amortized  but will be tested for  impairment at
least annually.

The $0.9 million allocated to in-process research and development represents the
fair value of purchased in-process  technology for research projects that, as of
the  March  30,  2005  closing  date  of  the   acquisition,   had  not  reached
technological  feasibility  and had no alternative  future uses.  This value was
based upon discounted  cash flows  attributable to the projects using a discount
rate of 28%, the estimated time to complete the projects and the levels of risks
involved.  These  projects  are  primarily  focused  on  deployment  of  certain
technology into consumer applications.  The $0.9 million estimated fair value of
in-process  research and development is reflected  within Costs and expenses for
the six-month period ended August 31, 2005.

The following  unaudited pro forma financial  information  presents the combined
operating results of SMSC and OASIS as if the acquisition had occurred as of the
beginning  of each  period  presented.  Pro forma  data is  subject  to  various
assumptions  and estimates,  and is presented for  informational  purposes only.
This pro forma  data does not  purport  to  represent  or be  indicative  of the
consolidated operating results that would have been reported had the transaction
been  completed  as  described  herein,  and the  data  should  not be  taken as
indicative  of  future  consolidated  operating  results.  Pro  forma  financial
information for the three and six-month periods ended August 31, 2005 and August
31, 2004,  is presented in the following  table (in  millions,  except per share
data):


                                        Three Months Ended     Six Months Ended
                                            August 31,             August 31,
                                       -----------------------------------------
                                        2005        2004       2005      2004
 -------------------------------------------------------------------------------

 Revenues                               $  79.1     $  63.3    $ 152.0   $ 128.3
 Net income (loss)                      $  (0.5)    $  (0.8)   $   2.5   $   1.9
 Basic net income (loss) per share      $ (0.03)    $ (0.04)   $  0.12   $  0.09
 Diluted net income (loss) per share    $ (0.03)    $ (0.04)   $  0.12   $  0.09



4.        Short-Term Investments

Short-term  investments consist of investments in obligations with maturities of
between three and twelve months, at acquisition, and investments in auction rate
securities.  All of these investments are classified as available-for-sale.  The
costs of these  short-term  investments  approximate  their market  values as of
February 28, 2005 and August 31, 2005.

The Company invests excess cash in a variety of marketable securities, including
auction rate  securities.  Auction rate  securities  have  long-term  underlying
maturities,  but have  interest  rates that are reset every 90 days or less,  at
which time the  securities  can typically be purchased or sold,  which creates a
highly liquid market for these  securities.  The Company's intent is not to hold
these securities to maturity,  but rather to use the interest rate reset feature
to provide liquidity as necessary.  The Company's investment in these securities
provides higher yields than money market and other cash equivalent  investments.
For all periods through November 30, 2004, the Company  classified  auction rate
securities  as cash  equivalents.  Effective at February 28, 2005,  auction rate
securities  are being  classified  as  short-term  investments  on the Company's
consolidated   balance  sheet  for  all  dates  presented,   reflecting  current
interpretations of the accounting  treatment for these securities.  In addition,
consistent  with  this  change in  classification,  all  purchases  and sales of
auction rate securities are reflected in the investing activities section of the
Company's Consolidated  Statements of Cash Flows for all periods presented.  The
Company does not consider  this change in  classification  to be material to its
financial  condition or cash flows. In addition,  this  reclassification  has no
effect on the Company's total current assets,  working capital, total assets, or
operating  cash  flows,  and the change in  classification  in no way revises or
restates the Company's  Consolidated  Statements of Operations.  For purposes of
the  Condensed  Consolidated  Statement  of Cash Flows for the six months  ended
August 31,  2004,  auction  rate and other  securities  at August 31,  2004 were
changed in classification as follows (in thousands):


                                                    Cash and Cash    Short-Term
                                                     Equivalents    Investments
--------------------------------------------------------------------------------
As previously classified                              $  159,524      $  13,835
Change in classification - auction rate securities       (87,369)        87,369
Change in classification - other securities                 (261)           261
--------------------------------------------------------------------------------

As currently classified                               $   71,894      $ 101,465
================================================================================


For the  six-month  period  ended  August 31,  2004,  $33.5  million of net cash
provided  by  investing   activities,   related  to  activity  in  auction  rate
securities,  was  previously  included  in the net  increase  in cash  and  cash
equivalents in the Consolidated Statements of Cash Flows.


5.        Balance Sheet Data

Inventories  are valued at the lower of first-in,  first-out  cost or market and
consist of the following (in thousands):

                                August 31,            February 28,
                                  2005                   2005
-----------------------------------------------------------------------

Raw materials              $             1,343     $             1,143
Work in process                         17,592                  16,626
Finished goods                          19,883                  15,541
-----------------------------------------------------------------------

                           $            38,818     $            33,310
=======================================================================

Property, plant and equipment consist of the following (in thousands):

                                August 31,            February 28,
                                  2005                   2005
-----------------------------------------------------------------------

Land                       $               578     $               578
Buildings and improvements              12,275                  12,064
Machinery and equipment                 72,328                  68,190
Construction in progress                 9,007                   1,601
-----------------------------------------------------------------------
                                        94,188                  82,433
Less: accumulated depreciation          65,273                  59,803
-----------------------------------------------------------------------

                           $            28,915     $            22,630
=======================================================================

The  increase in  construction  in progress  reflects  expenditures  incurred to
expand the Company's  primary facility in Hauppauge,  New York, which will allow
consolidation  of the Company's  Hauppauge  operations  into a single  facility,
currently  expected to occur  during  fiscal  2007.  Portions  of the  Company's
Hauppauge  operations currently occur in a separate 50,000 square foot facility,
the lease for which will  expire  during  fiscal  2007.  The  Company  currently
expects the cost of this building expansion to be approximately $20 million. The
majority  of the  expenditures  for this  project are  expected to occur  during
fiscal 2006.


6.        Net Income Per Share

Basic net income per share is calculated  using the  weighted-average  number of
common  shares  outstanding  during the period.  Diluted net income per share is
calculated using the weighted-average number of common shares outstanding during
the period,  plus the dilutive  effect of unvested  restricted  stock awards and
shares issuable through stock options.

The shares  used in  calculating  basic and diluted net income per share for the
Condensed Consolidated  Statements of Operations included within this report are
reconciled as follows (in thousands):
<TABLE>
<CAPTION>

                                                         Three Months Ended            Six Months Ended
                                                             August 31,                    August 31,
                                                         2005          2004            2005        2004
 -----------------------------------------------------------------------------------------------------------
 <S>                                                       <C>           <C>             <C>         <C>

 Average shares outstanding for basic net income
   per share                                               20,630        18,308          20,325      18,278
 Dilutive effect of stock options and unvested
   restricted stock awards                                    981           861             746       1,204
 -----------------------------------------------------------------------------------------------------------

 Average shares outstanding for diluted net income
      per share                                            21,611        19,169          21,071      19,482
 -----------------------------------------------------------------------------------------------------------
</TABLE>

Options covering 1.6 million and 1.3 million shares for the three-month  periods
ended  August 31, 2005 and 2004,  respectively,  and 2.1 million and 0.8 million
shares for the six-month  periods ended August 31, 2005 and 2004,  respectively,
were excluded from the computation of average shares outstanding for diluted net
income per share because their effect was antidilutive.


7.        Comprehensive Income

The  Company's  other   comprehensive   income  consists  of  foreign   currency
translation  adjustments  from those  subsidiaries  not using the U.S. dollar as
their functional currency, and unrealized gains and losses on equity investments
classified as available-for-sale.  The components of the Company's comprehensive
income for the three and  six-month  periods ended August 31, 2005 and 2004 were
as follows (in thousands):
<TABLE>
<CAPTION>

                                                         Three Months Ended             Six Months Ended
                                                             August 31,                     August 31,
                                                         2005          2004             2005         2004
 ------------------------------------------------------------------------------------------------------------
 <S>                                                     <C>           <C>              <C>          <C>

 Net income                                              $    19       $  895           $ 3,046      $ 3,807
 Other comprehensive income (loss):
 Change in foreign currency translation
   adjustments                                              (175)          43            (4,643)         (10)
 Change in unrealized gain (loss) on marketable
   equity securities, net of taxes                           (19)         (15)               52          (19)
 ------------------------------------------------------------------------------------------------------------

 Total comprehensive income (loss)                       $  (175)      $  923           $(1,545)     $ 3,778
 ============================================================================================================
</TABLE>


8.        Business Restructuring

In December 2001, the Company  announced a restructuring  plan for its exit from
the PC chipset business.

The Company's reserve related to this  restructuring  declined from $0.5 million
at February  28, 2005 to $0.4 million at August 31,  2005,  reflecting  payments
against  previously  reserved  non-cancelable  lease  obligations,   which  will
continue through their respective lease terms through August 2008.


9.        Goodwill and Intangible Assets

The Company's March 2005  acquisition of OASIS included the acquisition of $42.9
million of finite-lived intangible assets, an indefinite-lived trademark of $5.4
million,  and goodwill of $51.9  million.  Some of these  intangible  assets are
denominated  in  currencies  other than the U.S.  dollar,  and these  March 2005
values reflect foreign  exchange rates in effect on the date of the transaction.
The June 2002 acquisition of Tucson,  Arizona-based Gain Technology  Corporation
included the acquisition of $7.1 million of finite-lived  intangible  assets and
$29.4 million of goodwill, after adjustments.

All finite-lived intangible assets are being amortized on a straight-line basis,
which  approximates the pattern in which the estimated  economic benefits of the
assets are realized,  over their estimated useful lives.  Existing  technologies
have been assigned estimated useful lives of between six and eight years, with a
weighted-average   useful   life  of   approximately   eight   years.   Customer
relationships  and contracts have been assigned  useful lives of between one and
ten years, with a weighted-average useful life of approximately eight years.

Intangible  assets that are denominated in a functional  currency other than the
U.S. dollar have been  translated  into U.S.  dollars using the exchange rate in
effect on the reporting  date. As of August 31, 2005 and February 28, 2005,  the
Company's  identifiable   intangible  assets  consisted  of  the  following  (in
thousands):
<TABLE>
<CAPTION>

                                                  August 31, 2005                February 28, 2005
------------------------------------------------------------------------------------------------------
                                                            Accumulated                   Accumulated
                                                 Cost      Amortization         Cost     Amortization
------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>            <C>            <C>

Purchased technologies                        $  37,799       $  4,994       $  6,179       $  2,832
Customer relationships and contracts             10,354            628            326             89
-----------------------------------------------------------------------------------------------------
 Total - finite-lived intangible assets          48,153          5,622          6,505          2,921
-----------------------------------------------------------------------------------------------------
Trademark and other                               5,621            -              -              -
-----------------------------------------------------------------------------------------------------

                                              $  53,774       $  5,622       $  6,505       $  2,921
 =====================================================================================================
</TABLE>

Total amortization expense recorded for finite-lived  intangible assets was $1.6
million and $0.3 million for the  three-month  periods ended August 31, 2005 and
2004, respectively,  and $2.7 million and $0.6 million for the six-month periods
ended August 31, 2005 and 2004, respectively.

Estimated  future  finite-lived  intangible asset  amortization  expense for the
remainder of fiscal 2006 and thereafter is as follows (in thousands):

Period                                      Amount
---------------------------------------------------

Remainder of fiscal 2006                  $  3,134
Fiscal 2007                                  6,268
Fiscal 2008                                  6,268
Fiscal 2009                                  5,496
Fiscal 2010                                  5,239
Fiscal 2011 and thereafter                  16,126
===================================================


10.       Retirement Plans

The Company  maintains an unfunded  Supplemental  Executive  Retirement  Plan to
provide senior  management with retirement,  disability and death benefits.  The
Company's  subsidiary,  SMSC Japan, also maintains an unfunded  retirement plan,
which provides its employees and directors with separation benefits,  consistent
with customary  practices in Japan.  Benefits under these defined  benefit plans
are based upon various  service and  compensation  factors.  The following table
sets forth the components of the  consolidated  net periodic pension expense for
these plans for the three and six-month  periods ended August 31, 2005 and 2004,
respectively (in thousands):

<TABLE>
<CAPTION>

                                                      Three Months Ended          Six Months Ended
                                                          August 31,                 August 31,
                                                    --------------------------------------------------
                                                       2005        2004           2005       2004
------------------------------------------------------------------------------------------------------
<S>                                                     <C>         <C>           <C>        <C>

Service cost - benefits earned                          $  85       $  71         $ 171      $  143
Interest cost on projected benefit obligations             99         107           197         213
Net amortization and deferral                              67          73           134         145
------------------------------------------------------------------------------------------------------

Net periodic pension expense                            $ 251       $ 251         $ 502      $  501
======================================================================================================
</TABLE>

Additionally,  the Company is the  beneficiary of life  insurance  policies that
have  been  purchased  as a method of  partially  financing  benefits  under the
Supplemental Executive Retirement Plan.


11.       Common Stock Repurchase Program

The Company  maintains a common  stock  repurchase  program,  as approved by its
Board of  Directors,  which  authorizes  the Company to  repurchase  up to three
million   shares  of  its  common  stock  on  the  open  market  or  in  private
transactions.  Under this program, the Company repurchased approximately 150,000
shares of its common stock at a cost of $2.2 million during the first quarter of
fiscal  2006.  No shares were  repurchased  during the second  quarter of fiscal
2006.  The Company  repurchased  approximately  22,000  shares at a cost of $0.3
million during the second quarter of fiscal 2005.  The Company  currently  holds
repurchased  shares as treasury  stock.  As of August 31, 2005,  the Company has
repurchased a total of approximately  2.0 million shares of its common stock, at
a cost of $26.0 million, under this program.


12.       Operating Segment Information

The Company's  operating  segments conform to aggregation  criteria set forth in
SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information,"  and their  operating  results are therefore  aggregated  into one
reportable  operating  segment  -  the  design,  development  and  marketing  of
semiconductor integrated circuits.


13.       Recent Accounting Pronouncements

In November 2004, the Financial  Accounting  Standards  Board (FASB) issued SFAS
No. 151,  "Inventory Costs, An Amendment of ARB No. 43, Chapter 4." SFAS No. 151
clarifies that abnormal inventory costs such as costs of idle facilities, excess
freight and handling costs, and wasted  materials  (spoilage) are required to be
recognized  as  current  period  charges.  The  provisions  of SFAS No.  151 are
effective  for fiscal  years  beginning  after  June 15,  2005.  The  Company is
currently evaluating the provisions of SFAS No. 151 and does not expect that its
adoption will have a material impact on its  consolidated  financial  condition,
results of operations and cash flows.

In December  2004,  the FASB issued SFAS No. 123R (Revised  2004),  "Share-Based
Payment."  The  scope of SFAS No.  123R  includes  a wide  range of  share-based
compensation  arrangements  including  stock  options,  restricted  stock plans,
performance-based awards, stock appreciation rights, and employee stock purchase
plans.  SFAS  No.  123R  replaces  SFAS No.  123,  "Accounting  for  Stock-Based
Compensation,"  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to  Employees."  SFAS No.  123, as  originally  issued in 1995,  established  as
preferable a  fair-value-based  method of  accounting  for  share-based  payment
transactions  with employees.  However,  that statement  permitted the option of
continuing to apply the guidance in APB Opinion 25,  provided that the footnotes
to the consolidated  financial statements disclosed pro forma net income and net
income per share, as if the preferable fair-value-based method had been applied.
SFAS No. 123R requires that compensation  costs relating to share-based  payment
transactions   be  recognized   in  the   consolidated   financial   statements.
Compensation  costs  will be  measured  based on the fair value of the equity or
liability  instruments  issued.  SFAS No. 123R is effective for the first annual
reporting  period  that begins  after June 15,  2005.  The Company is  currently
evaluating  the impact of SFAS No. 123R and  believes  that the adoption of this
statement could have a material impact on its  consolidated  financial  position
and results of operations.

In  December  2004,  the FASB issued SFAS No.  153,  "Exchanges  of  Nonmonetary
Assets,"  an  amendment  of APB  Opinion  No.  29.  SFAS No. 153  addresses  the
measurement  of  exchanges  of  nonmonetary  assets and  redefines  the scope of
transactions  that  should be  measured  based on the fair  value of the  assets
exchanged.  SFAS No. 153 is effective for nonmonetary  asset exchanges in fiscal
periods beginning after June 15, 2005. The adoption of SFAS No. 153 did not have
a material impact on the Company's consolidated  financial position,  results of
operations and cash flows.

In  December  2004,  the FASB  issued  FASB  Staff  Position  (FSP)  No.  109-2,
"Accounting  and  Disclosure  Guidance  for the  Foreign  Earnings  Repatriation
Provision  within the American  Jobs  Creation  Act of 2004." The American  Jobs
Creation Act introduces a special one-time  dividends  received deduction on the
repatriation of certain foreign  earnings to U.S.  companies,  provided  certain
criteria are met. FSP No. 109-2 provides  accounting and disclosure  guidance on
the impact of the  repatriation  provision on a company's income tax expense and
deferred  tax  liability.  The Company is  currently  studying the impact of the
one-time  favorable  foreign  dividend  provision  and intends to  complete  the
analysis by the end of fiscal  2006.  Accordingly,  the Company has not recorded
any  adjustments  to its income tax expense or deferred  income taxes to reflect
the tax impact of any repatriation of non-U.S. earnings it may make.

In  March  2005,  the  FASB  issued   Interpretation  No.  47,  "Accounting  for
Conditional Asset Retirement Obligations."  Interpretation No. 47 clarifies that
an  entity  must  record  a  liability  for  a  "conditional"  asset  retirement
obligation  if the fair value of the  obligation  can be  reasonably  estimated.
Interpretation  No. 47 also  clarifies  when an  entity  would  have  sufficient
information  to  reasonably  estimate  the fair  value  of an  asset  retirement
obligation.  Interpretation  No. 47 is  effective  no later  than the end of the
fiscal year ending  after  December  15,  2005.  The Company does not expect the
adoption of Interpretation  No. 47 to have a material impact on its consolidated
financial position, results of operations and cash flows.


In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections",  which  supersedes  APB Opinion No. 20,  "Accounting  Changes" and
"SFAS No. 3, "Reporting  Accounting  Changes in Interim  Financial  Statements."
SFAS 154 provides  guidance on the  accounting  for and  reporting of accounting
changes and error  corrections.  Opinion  No. 20 had  required  that  changes in
accounting  principles be recognized by including the  cumulative  effect of the
change in the period in which the new accounting principle was adopted. SFAS No.
154 requires retrospective application of the change to prior periods' financial
statements,  unless it is impracticable to determine the period-specific effects
of the change.  The  Statement is effective  for fiscal  years  beginning  after
December  15,  2005.  The  adoption of this  statement is not expected to have a
material effect on the Company's financial statements.


ITEM 2.   Management's  Discussion  and  Analysis  of  Financial  Conditions and
          Results of Operations

The  following  discussion  should  be read in  conjunction  with the  Company's
Consolidated Financial Statements and notes thereto contained in this report.

Portions of this report may contain  forward-looking  statements  about expected
future  events and  financial  and  operating  results  that  involve  risks and
uncertainties.  Words such as  "believe,"  "expect,"  "anticipate"  and  similar
expressions identify forward-looking  statements.  Such statements are qualified
in their entirety by the inherent  risks and  uncertainties  surrounding  future
expectations   and  may  not  reflect  the   potential   impact  of  any  future
acquisitions, mergers or divestitures. All forward-looking statements speak only
as of the date hereof and are based upon the  information  available  to SMSC at
this time.  Such  information  is subject to  change,  and the  Company  may not
inform, or be required to inform, investors of such changes.

SMSC  competes  in the  semiconductor  industry,  which  has  historically  been
characterized  by intense  competition,  rapid  technological  change,  cyclical
market  patterns,  price  erosion and periods of  mismatched  supply and demand.
These and other risks and uncertainties, including potential liability resulting
from  pending  or  future  litigation,  are  detailed  from  time to time in the
Company's  reports  filed  with  the  SEC.  Investors  are  advised  to read the
Company's  Annual Report on Form 10-K and  quarterly  reports on Form 10-Q filed
with the SEC,  particularly  those  sections  entitled  "Other  Factors That May
Affect Future  Operating  Results," for a more complete  discussion of these and
other  risks  and  uncertainties.  Other  cautionary  statements  and  risks and
uncertainties may also appear elsewhere in this report.


Overview
--------

Description of Business

Many of the  world's  global  technology  companies  rely  upon  SMSC as a go-to
resource  for  semiconductor  system  solutions  that span  analog,  digital and
mixed-signal   technologies.   Leveraging  intellectual  property,   integration
expertise  and  a  comprehensive  global  infrastructure,   SMSC  solves  design
challenges and delivers performance,  space, cost and time-to-market  advantages
to  its  customers.  SMSC's  application  focus  targets  key  vertical  markets
including mobile and desktop PCs, consumer electronics,  automotive infotainment
and industrial  applications.  The Company has developed leadership positions in
its  select  markets  by  providing   application  specific  solutions  such  as
mixed-signal PC system controllers,  non-PCI Ethernet, ARCNET, MOST and Hi-Speed
USB.

SMSC is headquartered  in Hauppauge,  New York with operations in North America,
Taiwan,  Japan, Korea, China and Europe.  Engineering design centers are located
in Arizona, New York, Texas and Karlsruhe,  Germany.  Additional  information is
available at www.smsc.com.


Key Indicators

Management  measures the condition and performance of the Company's  business in
numerous  ways.  Among the key  quantitative  indicators  generally used in this
regard  are  bookings,  revenues,  cost of  goods  sold and  operating  expenses
relative to revenues.  The Company also  carefully  monitors the progress of its
product development efforts.


Critical Accounting Policies and Estimates
------------------------------------------

This discussion and analysis of the Company's financial condition and results of
operations  is  based  upon  the  unaudited  condensed   consolidated  financial
statements included in this report,  which have been prepared in accordance with
accounting principles for interim financial statements generally accepted in the
United  States.  The  preparation  of financial  statements in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect the reported  amount of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported amount of sales and revenues and expenses during the
reporting period.

The Company believes that the critical  accounting policies and estimates listed
below are important to the portrayal of the  Company's  financial  condition and
operating results, and require critical management judgments and estimates about
matters that are inherently  uncertain.  Although  management  believes that its
judgments and estimates are appropriate  and  reasonable,  actual future results
may differ from these  estimates,  and to the extent that such  differences  are
material, future reported operating results may be affected.

o   Revenue recognition
o   Inventory valuation
o   Determination of the allowance for doubtful accounts receivable
o   Valuation of long-lived assets
o   Accounting for deferred income taxes
o   Legal contingencies

Further  information  regarding these policies appears within the  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included in the  Company's  annual report on Form 10-K for the fiscal year ended
February  28, 2005 filed with the SEC on May 16,  2005.  During the  three-month
period ended August 31, 2005, there were no significant  changes to any critical
accounting  policies  or to the  related  estimates  and  judgments  involved in
applying these policies.


Business Acquisition
--------------------

On March 30, 2005,  SMSC announced the completion that day of its acquisition of
OASIS SiliconSystems Holding AG (OASIS).  Based in Karlsruhe,  Germany, OASIS is
engaged in the  development  and  marketing of  integrated  circuits that enable
networking of multimedia devices for automotive infotainment applications. OASIS
is a leading provider of Media Oriented Systems Transport (MOST(R))  technology,
which enables the seamless  transport of digital audio,  video, and packet-based
data, along with control information, within automobiles.

SMSC acquired all of OASIS' outstanding  capital stock in exchange for aggregate
consideration of $118.7 million,  including  approximately 2.1 million shares of
SMSC common stock valued for accounting purposes at $35.8 million, $79.5 million
of cash, and approximately $3.4 million of direct  acquisition costs,  including
legal,  banking,  accounting and valuation fees. The tangible assets of OASIS at
March  30,  2005  included   approximately   $22.4  million  of  cash  and  cash
equivalents,  resulting  in a net cash outlay of  approximately  $60.5  million.
SMSC's  existing  cash  balances  were  the  source  of  the  cash  used  in the
transaction.

The results of OASIS' operations subsequent to March 30, 2005 have been included
in the Company's consolidated results of operations.

Up to $20.0 million of additional consideration, payable in cash and SMSC common
stock,  may be issued to OASIS'  former  shareholders  during  fiscal  2007 upon
satisfaction of certain future performance goals.


Stock Appreciation Rights
-------------------------

The Company  maintains a Stock  Appreciation  Rights (SAR) Plan,  the purpose of
which is to attract,  retain,  reward and motivate  employees and consultants to
promote the Company's best interests and to share in its future  success.  As of
August 31, 2005, there were approximately 1.5 million SARs outstanding,  none of
which were vested, but all of which are scheduled to vest between September 2005
and September 2010.  Recognition of compensation  expense for SARs is based upon
the  market  price of the  Company's  common  stock at the end of the  reporting
period and the vesting period of the SAR. Based upon the $26.05 closing price of
the  Company's  common  stock on August  31,  2005,  the  Company  recorded  SAR
compensation  expense of $5.7 million  during the quarter ended as of that date,
including $0.4 million within cost of goods sold,  $1.4 million within  research
and  development,  and $3.9 million within selling,  general and  administrative
expenses.  For the current  six-month  period,  SAR  expense  was $5.6  million,
including $0.4 million within cost of goods sold,  $1.4 million within  research
and  development,  and $3.8 million within selling,  general and  administrative
expenses.

Based upon SARs  outstanding  at August 31,  2005,  if the market  price of SMSC
stock  remained  at $26.05  on  November  30,  2005,  an  expense  provision  of
approximately  $1.0  million  would be required in the third  quarter due to the
passage of  additional  SARs vesting  time.  Each $1.00 change in the  Company's
stock  price  above or below  $26.05 at  November  30,  2005 would  result in an
additional  expense  provision  or credit of  approximately  $0.8 million in the
third quarter, with any credit limited to a maximum of $5.7 million.


Results of Operations
---------------------

Revenues

Beginning in fiscal 2006, SMSC is categorizing  its revenues into three vertical
markets,  as  presented  in the  following  tables  for the three and  six-month
periods ended August 31, 2005 and 2004 (dollars in millions):

                                             Three Months Ended August 31,
                                                2005                2004
                                          Amount    Percent   Amount    Percent
 -------------------------------------------------------------------------------

 Mobile and desktop PC                     $  39.0      49%    $  28.4      56%
 Consumer electronics and infotainment        26.1      33%        7.9      16%
 Industrial and other                         14.0      18%       13.9      28%
 -------------------------------------------------------------------------------

                                           $  79.1     100%    $  50.2     100%
 ===============================================================================


                                              Six Months Ended August 31,
                                                2005               2004
                                          Amount    Percent   Amount   Percent
 -------------------------------------------------------------------------------

 Mobile and desktop PC                     $  75.4      51%    $  59.1      57%
 Consumer electronics and infotainment        45.3      31%       15.0      15%
 Industrial and other                         27.2      18%       29.1      28%
 -------------------------------------------------------------------------------

                                           $ 147.9     100%    $ 103.2     100%
 ===============================================================================

Revenues for the three months ended August 31, 2005 were $79.1 million, compared
to  revenues  of $50.2  million  for the year  earlier  period,  an  increase of
approximately  58%. Included in the current quarter's revenues are $14.4 million
of revenues associated with the acquisition of OASIS.

Revenues for the six months ended August 31, 2005 were $147.9 million,  compared
to  revenues  of $103.2  million  for the  year-earlier  period,  an increase of
approximately 43%. Included in the current six-month period's revenues are $23.7
million of revenues associated with the acquisition of OASIS. The OASIS revenues
reflect shipments subsequent to March 30, 2005, representing  approximately five
months of activity within the current six-month period.

The increase in mobile and desktop PC revenues, for both the three and six-month
periods, was driven by an increase in revenues from mobile products,  reflecting
strong  market  demand in mobile  computing  applications,  as well as increased
revenues  from  environmental  monitoring  and  control  (EMC)  products,  which
benefited from broader product  offerings in the current year quarter.  Revenues
from mobile PC products  also include $1.1 million of revenue  recognized in the
second  quarter  of fiscal  2006  associated  with a prior  accounts  receivable
collectibility issue, as more fully described in the subsequent paragraph.

During  the  second  half of fiscal  2005,  mobile PC  revenues  were  adversely
impacted  by an  accounts  receivable  collectibility  issue  with  one  of  the
Company's Taiwan-based component distributors,  which prevented the Company from
recognizing   approximately   $5.4  million  of  revenues  during  that  period.
Approximately  $2.7 million of inventory  underlying  those revenues,  which had
already been shipped to and resold by the distributor prior to identification of
the  collectibility  issue,  was  written  off within  cost of goods sold in the
fourth  quarter of fiscal 2005.  During the second  quarter of fiscal 2006,  the
Company received a payment of $1.1 million from this customer, which recovered a
portion  of the  distributor's  obligation  to the  Company.  This $1.1  million
payment was  recognized  within  revenues for the current  quarter,  without any
associated cost of goods sold, because, as noted above, the underlying inventory
was written off during the fourth quarter of fiscal 2005. Any future collections
from this distributor would also be recognized as revenue when received, but the
likelihood of any such payments remains uncertain.

The  increase in revenues  from  consumer  and  infotainment  products  includes
revenues  associated  with the March 2005  acquisition  of OASIS,  totaling $9.3
million and $23.7 million for the three and  six-month  periods ended August 31,
2005,  respectively.   These  revenues  are  from  products  serving  automotive
infotainment  applications.  Revenues  from  connectivity  products for consumer
electronics  applications,  which have benefited from broader product  offerings
during fiscal 2006, also increased in the current year periods,  compared to the
prior-year periods.

Industrial and other revenues  primarily  represent  revenues from products used
within  industrial  information  networking  applications  in various  business,
service, factory, transportation and telecommunications  environments.  Revenues
from  these  products  were  approximately  flat in the  current  year  quarter,
compared to the prior year quarter. The decline in industrial and other revenues
for the six-month  period,  compared to the  prior-year  period,  reflects lower
revenues from certain  telecommunications  applications,  and lower intellectual
property revenues.

Revenues from customers outside of North America accounted for approximately 87%
and 86% of the  Company's  consolidated  revenues  for the three  and  six-month
periods ended August 31, 2005, respectively.  The comparable percentages for the
three  and  six-month  periods  in the  prior  fiscal  year  were  79% and  81%,
respectively.  While the largest portion of the Company's  revenues continues to
be derived from Asia, the acquisition of OASIS has  significantly  increased the
Company's  revenues  in Europe,  which  accounts  for the  general  increase  in
revenues outside of North America in fiscal 2006 periods, compared to the fiscal
2005 periods.  The Company's revenues in Europe,  including the impact of OASIS,
were about $14.1 million in the current year  quarter,  compared to $2.7 million
in the prior year quarter. For the current year six-month period,  revenues from
Europe were $23.6 million,  compared to $5.6 million in the prior year six-month
period. The Company expects that international shipments,  particularly to Asia,
will continue to represent a significant portion of its revenues.

Cost of Goods Sold

Cost of goods sold for the quarter ended August 31, 2005 was $44.4  million,  or
56.1% of revenues,  compared to $26.3  million,  or 52.4% of  revenues,  for the
three  months  ended  August 31,  2004.  The increase in cost of goods sold as a
percentage  of revenues in the current year  period,  compared to the prior year
period,  results from a combination of (1) declines in average selling prices on
certain  desktop I/O products,  which  outpaced  reductions  in unit costs;  (2)
production yield losses aggregating $1.5 million resulting from certain atypical
production   issues;   (3)  $0.4  million  of  higher   charges  for   inventory
obsolescence;  (4) a $0.4 million provision for SAR compensation  expense in the
current year  quarter;  and (5) a higher  proportion  of  intellectual  property
revenues in the prior year quarter.  Partially offsetting these factors was $1.1
million of revenue  recognized  during  the  current  year  period  without  any
associated  cost of goods  sold,  as  discussed  earlier  within the  "Revenues"
section.   The  yield   losses  noted  in  item  (2)  were  related  to  certain
device-specific  supplier  production issues.  These issues have been corrected,
and production yields have now returned to acceptable levels.

For the six-months  ended August 31, 2005, cost of goods sold was $80.9 million,
or 54.7% of revenues,  compared to $52.6 million, or 51.0% of revenues,  for the
six-month period ended August 31, 2004. The factors contributing to the increase
in cost of goods sold as a percentage of revenues for the  six-month  period are
the same as those that  contributed to the increase for the three-month  period,
as discussed in the previous  paragraph,  although the dollar impact differs for
some of the factors.  The current year six-month period includes $0.2 million of
higher  inventory  obsolescence  charges,  compared to the prior year  six-month
period.

Research and Development Expenses

Research  and  development  (R&D)  expenses  consist  primarily  of salaries and
related  costs  of  employees  engaged  in  research,   design  and  development
activities,  costs related to  engineering  design tools and computer  hardware,
subcontractor  costs and device  prototyping costs. The Company's R&D activities
are performed by highly-skilled and experienced  engineers and technicians,  and
are primarily  directed  towards the design of new  integrated  circuits and the
development  of new  software  drivers,  firmware and design tools and blocks of
logic,  as well as ongoing  cost  reductions  and  performance  improvements  in
existing products.

The Company  intends to continue its efforts to develop  innovative new products
and technologies and believes that an ongoing  commitment to R&D is essential in
order to maintain product  leadership and compete  effectively.  Therefore,  the
Company expects to continue to make significant R&D investments in the future.

R&D expenses were $14.7 million, or approximately 19% of revenues, for the three
months ended August 31, 2005, compared to $11.2 million, or approximately 22% of
revenues,  for the three  months  ended  August 31,  2004.  The  increase in the
current  year's  three-month  period,  compared to the prior year's  three-month
period,  is primarily due to the addition of  approximately  $2.5 million of R&D
expenses   associated  with  the  operations  of  OASIS,  whose  staff  includes
approximately  90  engineers  and  technicians.  The current  year  quarter also
includes a charge of $1.4 million for SAR compensation expense.  These increases
were partially offset by a decline in device prototype expenses,  reflecting the
timing of product development projects.

For the six months ended August 31, 2005,  R&D expenses were $27.7  million,  or
approximately 19% of revenues,  compared to $22.1 million,  or approximately 21%
of revenues,  for the six months ended August 31, 2004. As with the  three-month
comparison, the increase in the current year's six-month period, compared to the
prior year's six-month period, is primarily due to the addition of approximately
$4.1 million of R&D expenses  associated  with the  operations  of OASIS,  which
impacted five months of the current six-month period's  operating  results.  The
remainder  of  the  increase  resulted   primarily  from  $1.4  million  of  SAR
compensation expense.

Selling, General and Administrative Expenses

Selling,   general  and   administrative   expenses  were  $18.6   million,   or
approximately 23% of revenues,  for the quarter ended August 31, 2005,  compared
to $11.9 million, or approximately 24% of revenues, for the quarter ended August
31, 2004. The increase in the current year's three-month period, compared to the
prior year's three-month  period,  reflects $2.3 million of expenses  associated
with the operations of OASIS, $3.9 million of SAR compensation expense, and $0.4
million of higher employee recruiting and relocation expenses.

For  the  six-month  period  ended  August  31,  2005,   selling,   general  and
administrative  expenses were $32.1 million,  or approximately  22% of revenues,
compared to $23.7 million,  or approximately 23% of revenues,  for the six-month
period ended August 31, 2004.  This  period-over-period  increase  reflects $3.7
million of expenses associated with the operations of OASIS, $3.8 million of SAR
compensation  expense,  and $0.4  million  of  higher  employee  recruiting  and
relocation expenses.

Amortization of Intangible Assets

For the three and six-month  periods ended August 31, 2005, the Company recorded
$1.3  million  and $2.2  million,  respectively,  of  amortization  expense  for
finite-lived  intangible  assets acquired in the OASIS  transaction,  as well as
$0.3  million  and $0.5  million,  respectively,  of  amortization  expense  for
finite-lived   intangible   assets  associated  with  the  acquisition  of  Gain
Technology  Corporation (Gain) during fiscal 2003.  Amortization expense of $0.3
million and $0.6  million  for the Gain  intangible  assets was  recorded in the
prior year's three and six-month periods, respectively.

In-Process Research and Development

The $0.9 million  in-process  research and development  expense  recorded in the
fiscal 2006 six-month period represents the fair value of in-process  technology
for OASIS  research  projects that, as of the March 30, 2005 closing date of the
OASIS  acquisition,  had  not  reached  technological  feasibility  and  had  no
alternative  future uses. These projects are primarily  focused on deployment of
certain technology into consumer  electronics  applications.  The estimated fair
value of this in-process  research and development was recorded as an expense in
the quarter ended May 31, 2005.

Other Income and Expense

The  increases  in  interest  income in the  current  year  three and  six-month
periods,  compared to the corresponding  prior year periods,  primarily reflects
the impact of higher average interest rates, partially offset by a lower average
level of investments, during the current year periods.

Provision For Income Taxes

The Company's  effective income tax rate reflects statutory  federal,  state and
foreign tax rates, the impact of certain permanent  differences between the book
and tax treatment of certain  expenses,  and the impact of tax-exempt income and
various income tax credits.

The Company's $0.5 million and $1.9 million  provisions for income taxes for the
three and  six-month  periods  ended August 31, 2005,  respectively,  reflect an
expected fiscal 2006 effective tax rate of approximately 31%, and also include a
provision  of $0.35  million  for  incremental  taxes  resulting  from  internal
corporate restructuring activities completed during the second quarter of fiscal
2006.  Since  these   restructuring   activities  were  considered  unusual  and
infrequent,  these taxes are reflected  entirely within the provision for income
taxes for the second  quarter of fiscal 2006,  and are not reflected  within the
31% expected effective tax rate for fiscal 2006.

The Company's  $1.4 million  provision for income taxes for the six months ended
August 31, 2004  reflected an expected  fiscal 2005 effective tax rate of 26.5%,
which was a reduction from a 28.5% effective rate expected at May 31, 2004. This
reduction  in  the  then-anticipated  fiscal  2005  effective  income  tax  rate
reflected  a higher  proportionate  impact of  anticipated  income  tax  credits
against a reduced  pre-tax  income  projection.  The $0.2 million  provision for
income taxes for the three months ended August 31, 2004 reflected the cumulative
impact of this lower expected effective income tax rate for fiscal 2005.

The higher projected  effective tax rate for fiscal 2006 (31%),  compared to the
effective  tax rate which was  anticipated  for fiscal  2005 at August 31,  2004
(26.5%),  reflects a lower proportionate effective tax rate impact of income tax
credits and  tax-exempt  interest  income,  resulting from a higher current year
pre-tax income expectation.


Liquidity and Capital Resources

The Company currently  finances its operations through a combination of existing
resources and cash generated by operations.

The Company's cash,  cash  equivalents  and short-term  investments  were $131.7
million at August 31, 2005,  compared to $172.6  million at February 28, 2005, a
decrease of $40.9 million.

Operating activities generated $29.7 million of cash during the first six months
of fiscal  2006,  compared  to a $14.3  million  during  the first six months of
fiscal 2005.  Operating cash flows during the current year period reflect a $6.7
million combined decrease in accounts receivable and inventories  (excluding the
impact of the OASIS  acquisition),  while the prior year's  six-month  operating
cash flows were  burdened  by a $10.3  million  combined  increase  in  accounts
receivable  and  inventory  receivable.  Discussion of accounts  receivable  and
inventory activity appear later within this section.  The current year six-month
period's  operating  activities  include  $15.5  million  of  non-cash  charges,
including  depreciation,  amortization,  in-process research and development and
stock-based  compensation,  compared to $6.2 million in the prior year six-month
period.

Investing  activities  consumed  $119.9 million of cash during the first half of
fiscal 2006, due principally to $60.3 million used for the acquisition of OASIS,
a net increase of $50.4 million in short-term  investments,  and $9.2 million of
capital  expenditures.  The $60.3  million of cash used for the  acquisition  of
OASIS  includes $79.5 million of cash paid to the former OASIS  shareholders  as
part of the transaction's consideration, $3.4 million of transaction costs ($0.2
million of which were paid prior to the current year quarter),  partially offset
by $22.4  million of cash  acquired from OASIS.  Investing  activities  provided
$43.6 million of cash during the first half of fiscal 2005, due principally to a
net decrease of $49.8 million in short-term and long-term investments, offset by
$6.2 million of capital expenditures.

Net cash of $0.7  million  used for  financing  activities  during the first six
months of fiscal 2006 included $2.2 million of treasury stock purchases and $1.3
million of debt  repayments,  partially  offset by $2.8 million of proceeds from
exercises of stock options. Financing activities were neutral to cash during the
first six months of fiscal 2005,  and were comprised of $1.0 million of proceeds
from exercises of stock options, offset by $1.0 million of debt repayments.

The Company's  inventories  were $38.8  million at August 31, 2005,  compared to
$33.3  million at February 28, 2005.  This  increase  includes  $10.1 million of
OASIS product inventories at August 31, 2005,  partially offset by a net decline
in PC I/O, networking and connectivity device inventories.

Accounts  receivable  increased from $23.8 million at February 28, 2005 to $29.1
million at August 31, 2005, an increase of $5.3 million.  This increase includes
$5.8 million of accounts  receivable of OASIS,  partially offset by a decline in
other trade accounts receivable.

Total current  liabilities  increased from $37.1 million at February 28, 2005 to
$52.7 million at August 31, 2005, including $10.2 million of current liabilities
associated with the operations of OASIS, and a $1.2 million increase in deferred
income on shipments to distributors. The increase in deferred income reflects an
increase in distributor  inventories  in advance of  anticipated  product demand
during the Company's third quarter ending November 30, 2005.

Capital  expenditures  for the six-month  period ended August 31, 2005 were $9.2
million,  and  were  predominantly  for  facility  expansion,   production  test
equipment,  advanced  semiconductor design tools and investments in intellectual
property.  Capital expenditures were $6.2 million for the six-month period ended
August 31, 2004.

The Company  anticipates  that capital  expenditures  in fiscal 2006 will exceed
those  incurred  during fiscal 2005,  due in part to the  Company's  in-progress
construction  of an  addition to its primary  facility in  Hauppauge,  New York,
which  will  expand  the  facility  from  its  current  80,000  square  feet  to
approximately  200,000  square feet, and which will allow  consolidation  of the
Company's  Hauppauge  operations into a single facility,  currently  expected to
occur  during  fiscal  2007.  Portions  of the  Company's  Hauppauge  operations
currently occur in a separate  50,000 square foot facility,  the lease for which
will expire during fiscal 2007. The Company  currently  expects the cost of this
building  expansion to be approximately  $20 million,  of which $9.0 million has
been  expended,  and is classified as  construction  in progress,  at August 31,
2005.  The majority of the  expenditures  for this project are expected to occur
during  fiscal  2006.  There  were no other  material  commitments  for  capital
expenditures as of August 31, 2005.

SMSC maintains a common stock  repurchase  program,  as approved by its Board of
Directors, which authorizes the Company to repurchase up to three million shares
of its common  stock on the open market or in private  transactions.  Under this
program,  the Company  repurchased  approximately  150,000  shares of its common
stock at a cost of $2.2  million  during the first  quarter of fiscal  2006.  No
shares were  repurchased  during the second  quarter of fiscal 2006. The Company
repurchased  approximately  22,000  shares at a cost of $0.3 million  during the
second quarter of fiscal 2005. The Company currently holds repurchased shares as
treasury  stock.  As of August 31, 2005, the Company has  repurchased a total of
approximately  2.0  million  shares  of its  common  stock,  at a cost of  $26.0
million, under this program.

In connection  with the March 2005  acquisition of OASIS, up to $20.0 million of
additional  consideration,  payable in cash and SMSC common stock, may be issued
to the former  shareholders  of OASIS during  fiscal 2007 upon  satisfaction  of
certain future performance goals.

The Company has considered in the past,  and will continue to consider,  various
possible  transactions to secure necessary wafer foundry and assembly  capacity,
including equity investments in, prepayments to, or deposits with foundries,  in
exchange  for  guaranteed  capacity  or other  arrangements  which  address  the
Company's  manufacturing  requirements.  The Company may also consider utilizing
cash to acquire or invest in  complementary  businesses or products or to obtain
the right to use complementary technologies.  From time to time, in the ordinary
course of  business,  the  Company may  evaluate  potential  acquisitions  of or
investments in such businesses, products or technologies owned by third parties.

The Company expects that its cash,  cash  equivalents,  short-term  investments,
cash flows from  operations  and its  borrowing  capacity  will be sufficient to
finance the Company's  operating and capital  requirements for at least the next
twelve months and for the foreseeable future thereafter.


Recent Accounting Pronouncements
---------------------------------

In November 2004, the Financial  Accounting  Standards  Board (FASB) issued SFAS
No. 151,  "Inventory Costs, An Amendment of ARB No. 43, Chapter 4." SFAS No. 151
clarifies that abnormal inventory costs such as costs of idle facilities, excess
freight and handling costs, and wasted  materials  (spoilage) are required to be
recognized  as  current  period  charges.  The  provisions  of SFAS No.  151 are
effective  for fiscal  years  beginning  after  June 15,  2005.  The  Company is
currently evaluating the provisions of SFAS No. 151 and does not expect that its
adoption will have a material impact on its  consolidated  financial  condition,
results of operations and cash flows.

In December  2004,  the FASB issued SFAS No. 123R (Revised  2004),  "Share-Based
Payment."  The  scope of SFAS No.  123R  includes  a wide  range of  share-based
compensation  arrangements  including  stock  options,  restricted  stock plans,
performance-based awards, stock appreciation rights, and employee stock purchase
plans.  SFAS  No.  123R  replaces  SFAS No.  123,  "Accounting  for  Stock-Based
Compensation,"  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to  Employees."  SFAS No.  123, as  originally  issued in 1995,  established  as
preferable a  fair-value-based  method of  accounting  for  share-based  payment
transactions  with employees.  However,  that statement  permitted the option of
continuing to apply the guidance in APB Opinion 25,  provided that the footnotes
to the consolidated  financial statements disclosed pro forma net income and net
income per share, as if the preferable fair-value-based method had been applied.
SFAS No. 123R requires that compensation  costs relating to share-based  payment
transactions   be  recognized   in  the   consolidated   financial   statements.
Compensation  costs  will be  measured  based on the fair value of the equity or
liability  instruments  issued.  SFAS No. 123R is effective for the first annual
reporting  period  that begins  after June 15,  2005.  The Company is  currently
evaluating  the impact of SFAS No. 123R and  believes  that the adoption of this
statement could have a material impact on its  consolidated  financial  position
and results of operations.

In December 2004, the FASB issued  Statement No. 153,  "Exchanges of Nonmonetary
Assets,"  an  amendment  of APB  Opinion  No.  29.  SFAS No. 153  addresses  the
measurement  of  exchanges  of  nonmonetary  assets and  redefines  the scope of
transactions  that  should be  measured  based on the fair  value of the  assets
exchanged.  SFAS No. 153 is effective for nonmonetary  asset exchanges in fiscal
periods beginning after June 15, 2005. The adoption of SFAS No. 153 did not have
a material impact on the Company's consolidated  financial position,  results of
operations and cash flows.

In  December  2004,  the FASB  issued  FASB  Staff  Position  (FSP)  No.  109-2,
"Accounting  and  Disclosure  Guidance  for the  Foreign  Earnings  Repatriation
Provision  within the American  Jobs  Creation  Act of 2004." The American  Jobs
Creation Act introduces a special one-time  dividends  received deduction on the
repatriation of certain foreign  earnings to U.S.  companies,  provided  certain
criteria are met. FSP No. 109-2 provides  accounting and disclosure  guidance on
the impact of the  repatriation  provision on a company's income tax expense and
deferred  tax  liability.  The Company is  currently  studying the impact of the
one-time  favorable  foreign  dividend  provision  and intends to  complete  the
analysis by the end of fiscal  2006.  Accordingly,  the Company has not recorded
any  adjustments  to its income tax expense or deferred  income taxes to reflect
the tax impact of any repatriation of non-U.S. earnings it may make.

In March 2005, the Financial  Accounting  Standards Board issued  Interpretation
No.   47,   "Accounting   for   Conditional   Asset   Retirement   Obligations."
Interpretation  No. 47  clarifies  that an entity must record a liability  for a
"conditional"  asset  retirement  obligation if the fair value of the obligation
can be reasonably estimated. Interpretation No. 47 also clarifies when an entity
would have  sufficient  information to reasonably  estimate the fair value of an
asset retirement  obligation.  Interpretation  No. 47 is effective no later than
the end of the fiscal year ending after  December 15, 2005. The Company does not
expect the adoption of  Interpretation  No. 47 to have a material  impact on its
consolidated financial position, results of operations and cash flows.


In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections",  which  supersedes  APB Opinion No. 20,  "Accounting  Changes" and
"SFAS No. 3, "Reporting  Accounting  Changes in Interim  Financial  Statements."
SFAS 154 provides  guidance on the  accounting  for and  reporting of accounting
changes and error  corrections.  Opinion  No. 20 had  required  that  changes in
accounting  principles be recognized by including the  cumulative  effect of the
change in the period in which the new accounting principle was adopted. SFAS No.
154 requires retrospective application of the change to prior periods' financial
statements,  unless it is impracticable to determine the period-specific effects
of the change.  The  Statement is effective  for fiscal  years  beginning  after
December  15,  2005.  The  adoption of this  statement is not expected to have a
material effect on the Company's financial statements.


ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company's exposure to interest rate risk relates primarily to its investment
portfolio. The primary objective of SMSC's investment portfolio management is to
invest available cash while preserving principal and meeting liquidity needs. In
accordance  with the Company's  investment  policy,  investments are placed with
high credit-quality  issuers and the amount of credit exposure to any one issuer
is limited.

As of August 31, 2005, the Company's  $107.0  million of short-term  investments
consisted  primarily of investments in auction rate securities,  and investments
in corporate,  government and municipal  obligations  with maturities of between
three and twelve months at  acquisition.  Auction rate securities have long-term
underlying  maturities,  but have interest rates that are reset every 90 days or
less, at which time the securities can typically be purchased or sold.

As with all fixed-income  instruments,  these securities are subject to interest
rate risk and would  likely  decline in market  value if market  interest  rates
increase. If market interest rates were to increase immediately and uniformly by
10% from levels at August 31, 2005,  the Company  estimates that the fair values
of  these  investments  would  decline  by an  immaterial  amount,  due  to  the
portfolio's relatively short-term overall maturity. Furthermore, the Company has
the option to hold its fixed-income  investments until maturity and,  therefore,
would not expect to realize any  material  adverse  impact to its  results  from
operations or cash flows from such a decline.  Declines in market interest rates
would, over time, reduce the Company's interest income.

Equity Price Risk

The Company has no material  investments in equity securities of other companies
on its Consolidated Balance Sheet as of August 31, 2005.

Foreign Currency Risk

The Company has international sales and expenditures and is, therefore,  subject
to certain foreign  currency rate exposures.  The Company conducts a significant
amount of its business in Asia. In order to reduce the risk from  fluctuation in
foreign  exchange  rates,  most of the  Company's  product  sales and all of its
arrangements with its foundry, test and assembly vendors are denominated in U.S.
dollars.  Most  transactions  in the  Japanese  market  made  by  the  Company's
subsidiary,  SMSC Japan, are denominated in Japanese yen. SMSC Japan purchases a
significant  amount of its  products for resale from SMSC in U.S.  dollars,  and
from time to time has entered into forward  exchange  contracts to hedge against
currency fluctuations associated with these product purchases. No such contracts
were executed  during either fiscal 2005 or the first six months of fiscal 2006,
and there are no obligations under any such contracts as of August 31, 2005. The
Company  has never  received a cash  dividend  (repatriation  of cash) from SMSC
Japan.

OASIS'  operating  activities in Europe include  transactions  conducted in both
euros  and U.S.  dollars.  The euro has been  designated  as  OASIS'  functional
currency for its European operations.  From time to time, OASIS has entered into
foreign  currency   contracts  to  minimize  the  exposure  of  its  U.S  dollar
denominated transactions, assets and liabilities to currency exchange rate risk.
Gains or losses on these  contracts  are  intended to offset the gains or losses
recorded from the  remeasurement  of certain  assets and  liabilities  from U.S.
dollars into euros. As of August 31, 2005, OASIS has foreign currency  contracts
to convert an aggregate of $2.1  million into euros in varying  monthly  amounts
through December 31, 2005. Gains and losses on these contracts, as well as gains
and losses recorded from the remeasurement of U.S. dollar denominated assets and
liabilities  into  euros,  were not  significant  during the three or  six-month
periods ended August 31, 2005.


Other Factors That May Affect Future Operating Results
------------------------------------------------------

As a supplier of semiconductors,  the Company competes in a challenging business
environment,  which is characterized by intense competition, rapid technological
changes and cyclical business  patterns.  Except for the historical  information
contained  herein,  the matters  discussed  in this  report are  forward-looking
statements. The Company faces a variety of risks and uncertainties in conducting
its business,  some of which are out of its control, and any of which, were they
to occur, could impair the Company's operating performance.  For a more detailed
discussion of risk factors,  please refer to the Company's annual report on Form
10-K for the fiscal year ended  February  28, 2005 filed with the SEC on May 16,
2005.


ITEM 4.   Controls and Procedures

The Company has carried out an  evaluation  under the  supervision  and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. There are inherent limitations
to the  effectiveness  of any  system of  disclosure  controls  and  procedures,
including the possibility of human error and the  circumvention or overriding of
the controls and procedures. Accordingly, even effective disclosure controls and
procedures  can only provide  reasonable  assurance of achieving  their  control
objectives. Based upon the Company's evaluation, the Chief Executive Officer and
Chief  Financial  Officer  have  concluded  that,  as of August  31,  2005,  the
disclosure controls and procedures are effective to provide reasonable assurance
that information required to be disclosed in the reports the Company files under
the Exchange Act is recorded,  processed,  summarized,  and reported as and when
required.

There have been no changes in the  Company's  internal  control  over  financial
reporting  during the Company's  fiscal quarter covered by this report that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.

The Company  completed the acquisition of OASIS on March 30, 2005, as more fully
described in Note 3 to the Condensed  Consolidated Financial Statements included
within  Part I of this report on Form 10-Q.  As part of its ongoing  integration
activities,  the Company is in the process of  incorporating  its  controls  and
procedures into OASIS' operating activities.



<PAGE>
PART II - OTHER INFORMATION


ITEM 1.   Legal Proceedings

As of August 31, 2005,  SMSC was not a party to any legal  proceedings,  claims,
disputes or litigation  that are expected to have a material  adverse  effect on
the Company's results of operations or financial condition.


ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Purchases of Equity Securities by the Issuer

In October 1998, the Company's  Board of Directors  approved a plan  authorizing
the repurchase of up to one million shares of the Company's  common stock in the
open market or in private  transactions.  The Board of Directors  increased  the
authorization  from one million  shares to two million  shares in July 2000, and
from two million  shares to three million  shares in July 2002.  The plan has no
specified  expiration  date.  Shares of common stock  purchased  pursuant to the
repurchase plan are held as treasury stock.

There was no activity  under this plan during the current period covered by this
report.


ITEM 3.   Defaults Upon Senior Securities

None.


ITEM 4.   Submission of Matters to a Vote of Security Holders

The  following  matters  were  submitted  to a vote of  security  holders at the
registrant's August 1, 2005 annual meeting of shareholders.

(1) The following were elected directors, each receiving the number of votes set
opposite their respective names:


                       Votes For                 Votes Withheld
                       ---------                 --------------

Steven J. Bilodeau     17,696,755                    230,610
Peter F. Dicks         16,904,013                  1,023,352


Each of the following directors, who were not up for reelection at the August 1,
2005 annual meeting of shareholders, will continue to serve as directors: Andrew
M.  Caggia,  Timothy  P.  Craig,  Ivan T.  Frisch,  Robert M. Brill and James A.
Donahue.

(2) The selection of  PricewaterhouseCoopers  LLP as the Company's  auditors for
the fiscal year ended February 28, 2006 was ratified by the following vote:


               Votes For            Votes Against            Abstained
               ---------            -------------            ---------

               17,821,209               98,534                  7,622


ITEM 5.   Other Information

None.


ITEM 6.   Exhibits

3.1 -     By-Laws of  Standard   Microsystems   Corporation,   as   amended  and
restated.

10.1 -    Standard     Microsystems    Corporation    2005   Directors'    Stock
Appreciation  Rights  Plan,  as adopted by the Board of  Directors on October 7,
2005. *

31.1 -    Certification  of   Chief    Executive    Officer   pursuant  to  Rule
13a-14(a)  (17 CFR  240.13a-14(a)),  as adopted  pursuant  to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2 -    Certification  of   Chief  Financial   Officer   pursuant    to   Rule
13a-14(a)  (17 CFR  240.13a-14(a)),  as adopted  pursuant  to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1 -    Certifications   of   Chief   Executive  Officer  and  Chief Financial
Officer  pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.


* Indicates a management or compensatory plan or arrangement.

<PAGE>


                                    SIGNATURE


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.



                                       STANDARD MICROSYSTEMS CORPORATION


DATE:  October 11, 2005                       By: /s/ Andrew M. Caggia
                                              -------------------------
                                                  (Signature)

                                         Andrew M. Caggia
                                         Senior Vice President (duly authorized
                                         officer) and Chief Financial Officer
                                         (principal financial officer)