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, 2003

                                       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 ____

As of August 31, 2003, there were 16,919,452  shares of the registrant's  common
stock outstanding.

<PAGE>

                        Standard Microsystems Corporation

                                    Form 10-Q
                      For the Quarter Ended August 31, 2003

                                Table of Contents



Part I    Financial Information

Item 1    Financial Statements:
          Condensed  Consolidated  Balance  Sheets  as of  August  31,  2003 and
           February 28, 2003
          Condensed Consolidated  Statements of Operations for the Three and Six
           Months   Ended   August  31,  2003  and  August  31,  2002
          Condensed  Consolidated  Statements  of Cash  Flows for the Six Months
           Ended August 31, 2003 and August 31, 2002
          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 4    Submission of Matters to a Vote of Security Holders
Item 6    Exhibits and Reports on Form 8-K


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,
                                                      2003             2003
                                                      ----             ----
Assets
Current assets:
  Cash and cash equivalents                      $   101,510       $    90,025
  Short-term investments                              21,133            22,872
  Accounts receivable, net                            26,696            22,738
  Inventories                                         21,535            17,644
  Deferred income taxes                               11,092             8,545
  Other current assets                                 8,288             8,710
--------------------------------------------------------------------------------

       Total current assets                          190,254           170,534
--------------------------------------------------------------------------------

Property, plant and equipment, net                    19,879            22,257
Goodwill                                              29,595            29,773
Intangible assets, net                                 5,331             6,008
Deferred income taxes                                  8,370            11,779
Other assets                                           5,412             7,598
--------------------------------------------------------------------------------

                                                 $   258,841       $   247,949
================================================================================

Liabilities and shareholders' equity
Current liabilities:
  Accounts payable                               $    12,590       $     9,114
  Deferred income on shipments to distributors         7,805             5,943
  Accrued expenses, income taxes
   and other liabilities                               9,679             9,838
--------------------------------------------------------------------------------

        Total current liabilities                     30,074            24,895
--------------------------------------------------------------------------------

Other liabilities                                      6,981             7,379

Minority interest in subsidiary                       11,759            11,663

Shareholders' equity:
  Preferred stock                                          -                 -
  Common stock                                         1,874             1,859
  Additional paid-in capital                         149,563           147,655
  Retained earnings                                   80,691            77,492
  Treasury stock, at cost                            (23,454)          (23,454)
  Deferred stock-based compensation                   (2,125)           (2,102)
  Accumulated other comprehensive income               3,478             2,562
--------------------------------------------------------------------------------

        Total shareholders' equity                   210,027           204,012
--------------------------------------------------------------------------------

                                                 $   258,841       $   247,949
================================================================================

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

<TABLE>
<CAPTION>

                                                                           Three Months Ended                Six Months Ended
                                                                       ----------------------------    ---------------------------
                                                                                August 31,                      August 31,
                                                                       ----------------------------    ---------------------------
                                                                         2003              2002          2003              2002
                                                                         ----              ----          ----              ----

<S>                                                                   <C>              <C>            <C>              <C>
Sales and revenues                                                    $   48,289       $   38,300     $   91,010       $   72,307

Cost of goods sold                                                        26,783           21,189         48,842           40,124
---------------------------------------------------------------------------------------------------  ------------------------------

Gross profit                                                              21,506           17,111         42,168           32,183

Operating expenses (income):
Research and development                                                   9,280            7,774         18,381           14,625
Selling, general and administrative                                        9,965            8,659         19,478           16,853
Amortization of intangible assets                                            317              447            677              447
Gains on real estate transactions                                              -                -         (1,444)               -
---------------------------------------------------------------------------------------------------  ------------------------------

Income from operations                                                     1,944              231          5,076              258

Interest income                                                              391              533            834            1,114
Other expense, net                                                            (9)              (7)          (745)             (22)
---------------------------------------------------------------------------------------------------  ------------------------------

Income before provision for income taxes
  and minority interest                                                    2,326              757          5,165            1,350

Provision for income taxes                                                   785              197          1,680              351

Minority interest in net income (loss) of subsidiary                          35               (8)            96               (2)
---------------------------------------------------------------------------------------------------  ------------------------------

Income from continuing operations                                          1,506              568          3,389            1,001

Loss from discontinued operations
  (net of income tax benefits of $14, $145, $106, and $191)                  (26)            (258)          (190)            (339)
---------------------------------------------------------------------------------------------------  ------------------------------

Net income                                                            $    1,480       $      310     $    3,199       $      662
===================================================================================================  ==============================

Basic net income per share:
  Income from continuing operations                                   $     0.09       $     0.03     $     0.20       $     0.06
  Loss from discontinued operations                                            -            (0.01)         (0.01)           (0.02)
---------------------------------------------------------------------------------------------------  ------------------------------

Basic net income per share                                            $     0.09       $     0.02     $     0.19       $     0.04
===================================================================================================  ==============================

Diluted net income per share:
  Income from continuing operations                                   $     0.08       $     0.03     $     0.19       $     0.06
  Loss from discontinued operations                                            -            (0.01)         (0.01)           (0.02)
---------------------------------------------------------------------------------------------------  ------------------------------

Diluted net income per share                                          $     0.08       $     0.02     $     0.18       $     0.04
===================================================================================================  ==============================

Weighted average common shares outstanding:
  Basic                                                                   16,863           16,631         16,830           16,365
  Diluted                                                                 17,869           18,214         17,643           18,008

See Notes to Condensed Consolidated Financial Statements.

</TABLE>
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>

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

                                                                                     2003                  2002
                                                                                ---------------       ---------------

<S>                                                                             <C>                   <C>
Cash flows from operating activities:
  Cash received from customers                                                  $      89,931         $      72,660
  Cash paid to suppliers and employees                                                (85,190)              (71,707)
  Interest received                                                                       836                 1,103
  Interest paid                                                                           (40)                  (76)
  Income taxes paid                                                                      (510)                 (138)
---------------------------------------------------------------------------------------------------------------------

    Net cash provided by operating activities                                           5,027                 1,842
---------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Capital expenditures                                                                 (4,628)               (3,208)
  Sales of property, plant and equipment                                                7,080                     -
  Acquisition of Gain Technology Corporation                                                -               (15,669)
  Sales of long-term investments                                                        2,114                     -
  Purchases of short-term investments                                                 (14,055)              (18,292)
  Sales of short-term investments                                                      15,794                 7,600
  Other                                                                                   149                   210
---------------------------------------------------------------------------------------------------------------------

    Net cash provided by (used for) investing activities                                6,454               (29,359)
---------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Proceeds from issuance of common stock                                                1,036                 4,377
  Purchases of treasury stock                                                               -                (9,900)
  Repayments of obligations under capital leases and notes payable                       (874)               (1,585)
---------------------------------------------------------------------------------------------------------------------

    Net cash provided by (used for) financing activities                                  162               (7,108)
---------------------------------------------------------------------------------------------------------------------

Effect of foreign exchange rate changes on cash and cash equivalents                      138                  956

Cash used for discontinued operation                                                     (296)                 (596)
---------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                                   11,485               (34,265)

Cash and cash equivalents at beginning of period                                       90,025                98,065
---------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of period                                      $     101,510         $      63,800
=====================================================================================================================


Reconciliation of  income from continuing operations
to net cash provided by operating activities:

Income from continuing operations                                               $       3,389         $       1,001
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
  Depreciation and amortization                                                         5,429                 5,030
  (Gains) and losses from sales of investments and property, net                         (732)                  (53)
  Other adjustments, net                                                                  (74)                    8
  Changes in operating assets and liabilities:
    Accounts receivable                                                                (6,431)                  783
    Inventories                                                                        (3,553)               (6,111)
    Accounts payable and accrued expenses and other liabilities                         5,682                   810
    Other changes, net                                                                  1,317                   374
---------------------------------------------------------------------------------------------------------------------

Net cash provided by operating activities                                       $       5,027         $       1,842
=====================================================================================================================

See Notes to Condensed Consolidated Financial Statements.

</TABLE>

<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,   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 sales and 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 year ended February 28, 2003 included in the Company's annual report on
     Form  10-K,  as filed on May 29,  2003  with the  Securities  and  Exchange
     Commission.  The results of  operations  for the three and six months ended
     August  31,  2003  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 and restricted
     stock awards are granted to employees and directors.  All stock options 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 pro forma  disclosures,  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):
<PAGE>
<TABLE>
<CAPTION>

                                                           Three Months Ended              Six Months Ended
                                                               August 31,                     August 31,
                                                        -------------------------------------------------------
                                                            2003          2002           2003          2002
                                                        -------------------------------------------------------
       <S>                                                <C>           <C>             <C>          <C>
       Net income - as reported                           $  1,480      $    310       $  3,199      $    662
       Add:  Stock-based compensation expense
       included in net income, net of taxes - as
       reported                                                256            89            459           348
       Deduct:  Stock-based compensation expense
       determined using fair value method, net of
       taxes                                                (2,256)       (2,665)        (4,691)       (3,046)
       --------------------------------------------------------------------------------------------------------
       Net loss - pro forma                               $   (520)     $ (2,266)      $ (1,033)     $ (2,036)
       ========================================================================================================

       Basic net income per share - as reported           $   0.09      $   0.02       $   0.19      $   0.04
       ========================================================================================================
       Diluted net income per share - as reported         $   0.08      $   0.02       $   0.18      $   0.04
       ========================================================================================================
       Basic net loss per share - pro forma               $  (0.03)     $  (0.14)      $  (0.06)     $  (0.12)
       ========================================================================================================
       Diluted net loss per share - pro forma             $  (0.03)     $  (0.12)      $  (0.06)     $  (0.11)
       ========================================================================================================
</TABLE>


3.   Balance Sheet Data

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

                                              Aug. 31, 2003      Feb. 28, 2003
       -------------------------------------------------------------------------

       Raw materials                         $         820      $         761
       Work in process                               9,151              7,686
       Finished goods                               11,564              9,197
       -------------------------------------------------------------------------

                                             $      21,535      $      17,644
       =========================================================================

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

                                              Aug. 31, 2003      Feb. 28, 2003
       -------------------------------------------------------------------------

       Land                                  $       1,571      $       3,434
       Buildings and improvements                   20,543             29,927
       Machinery and equipment                      82,476             81,562
       -------------------------------------------------------------------------
                                                   104,590            114,923
       Less: accumulated depreciation               84,711             92,666
       -------------------------------------------------------------------------

                                             $      19,879      $      22,257
       =========================================================================

     During the three  months  ended May 31,  2003,  the  Company  sold  certain
     portions  of its real estate  holdings,  further  details for which  appear
     within Note 11.


4.   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 shares issuable
     through stock options.
<PAGE>

     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,
                                                    ----------------------------------------------------------
                                                        2003          2002            2003           2002
                                                    ------------- -------------   ------------- --------------

     <S>                                                 <C>           <C>            <C>             <C>
     Average shares outstanding for
      basic net income (loss) per share                  16,863        16,631         16,830          16,365

     Dilutive effect of stock options                     1,006         1,583            813           1,643
     ---------------------------------------------------------------------------------------------------------

     Average shares outstanding for
      diluted net income (loss) per share                17,869        18,214         17,643          18,008
     =========================================================================================================
</TABLE>

     Options  covering  1.9 million and 0.9 million  shares for the  three-month
     periods ended August 31, 2003 and 2002,  respectively,  and 2.3 million and
     0.5 million  shares for the  six-month  periods  ended  August 31, 2003 and
     2002,  respectively,  were excluded from the  computation of average shares
     outstanding  for  diluted  net income per share  because  their  effect was
     antidilutive.


5.   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  (loss) for the three and six months ended
     August 31, 2003 and 2002 were as follows (in thousands):
<TABLE>
<CAPTION>


                                                   Three Months Ended             Six Months Ended
                                                        August 31,                    August 31,
                                              -----------------------------------------------------------
                                                  2003           2002            2003           2002
                                              -------------  -------------   -------------  -------------

     <S>                                       <C>            <C>            <C>              <C>
     Net income                                $   1,480      $     310      $   3,199        $     662
     Other comprehensive income (loss):
     Change in foreign currency
      translation adjustment                         178            752            216            1,718
     Change in unrealized gain (loss) on
      marketable equity securities, net of
      taxes                                           21         (3,119)            35           (3,150)
     Reclassification adjustment for loss
      on marketable equity security
      included in net income, net of taxes             -              -            665                -
     ----------------------------------------------------------------------------------------------------

     Total comprehensive income (loss)         $    1,679     $  (2,057)     $   4,115        $    (770)
     ====================================================================================================
</TABLE>

     During the six months ended August 31, 2003, the Company sold its remaining
     equity  investment  in Chartered  Semiconductor  Manufacturing,  Ltd.  This
     investment was classified as  available-for-sale,  and temporary changes in
     its market value,  net of income taxes,  were included within the Company's
     Other  comprehensive   income,  and  were  presented   cumulatively  as  an
     unrealized  gain or loss,  net of income taxes,  within  Accumulated  other
     comprehensive  income on the Company's  Consolidated  Balance  Sheets.  The
     amount  presented as a  reclassification  adjustment in the preceding table
     represents  the amounts  previously  reported  within  Other  comprehensive
     income as an  unrealized  loss on this  investment,  net of  income  taxes,
     through February 28, 2003.


6.   Agreements with Intel Corporation

     As previously  reported,  the Company and Intel Corporation (Intel) entered
     into an agreement  in 1987  providing  for,  among other  things,  a broad,
     worldwide,  non-exclusive  patent  cross-license,   covering  manufacturing
     processes  and  products,  thereby  providing  each  company  access to the
     other's current and future patent portfolios.

     In  September  1999,  the two  companies  announced a  technology  exchange
     agreement  (the  Agreement)  that would allow SMSC to  accelerate  its then
     ongoing  development of Intel compatible  chipset  products.  The Agreement
     provided,  among other things,  for Intel to transfer certain  intellectual
     property related to Intel chipset  architectures to SMSC, and provided SMSC
     the  opportunity  to supply  Intel  chipset  components  along with its own
     chipset  solutions.  The Agreement  also limited  SMSC's  rights  regarding
     Northbridges  and  Intel  Architecture   Microprocessors   under  the  1987
     agreement.

     The  Agreement  included  provisions  for  its  termination  under  certain
     circumstances.  Under one such provision, SMSC could elect to terminate the
     Agreement  should SMSC not achieve  certain minimum chipset revenue amounts
     set forth in the  Agreement,  unless Intel paid SMSC an amount equal to the
     shortfall  between the minimum  revenue  amount and the actual  revenue for
     that period.  In September  2002,  SMSC notified Intel of a chipset revenue
     shortfall for the 2002 twelve-month period. Intel did not make a payment to
     SMSC  of  that  shortfall  within  the  time  frame  specified  within  the
     Agreement,  and SMSC gave Intel notice of  termination  of the Agreement in
     accordance with the terms thereof,  and the parties  commenced  discussions
     regarding their various corporate and intellectual property relationships.

     In September  2003, the Company and Intel  announced that they had enhanced
     their intellectual property and business relationship. The companies agreed
     to collaborate on certain future I/O and sensor products,  and Intel agreed
     to use the Company's  devices on certain current and future  generations of
     Intel products.  In addition,  the Company agreed to limit its rights under
     its  1987  patent   cross-license   with  Intel  to  manufacture  and  sell
     Northbridge  products and Intel  Architecture  Microprocessors on behalf of
     third parties.  The companies also terminated an Investor Rights  Agreement
     between them,  which had been entered into in connection  with Intel's 1997
     acquisition of 1,543,000 shares of the Company's  common stock.  Under this
     agreement,  Intel had certain  information,  corporate governance and other
     rights with respect to the activities of the Company.

     In  respect  of this new  relationship,  Intel  will pay to the  Company an
     aggregate  amount of $75 million,  of which $20 million will be paid in the
     third  quarter of the  Company's  fiscal 2004,  $10 million will be paid in
     each of calendar  years 2004 and 2005, $11 million will be paid in calendar
     year 2006,  and $12 million will be paid in each of calendar years 2007 and
     2008. Such amounts are payable in equal quarterly  installments within each
     calendar year, and are subject to possible reduction, in a manner and to an
     extent to be agreed by the parties, based upon the companies' collaboration
     and sales,  facilitated  by Intel,  of certain  future new  products of the
     Company.


7.   Business Acquisition

     In June 2002, the Company  acquired all of the outstanding  common stock of
     Gain Technology Corporation (Gain), a developer and supplier of high-speed,
     high-performance analog and mixed-signal communications integrated circuits
     and proprietary  intellectual property cores, based in Tucson, Arizona, for
     initial consideration of $36.1 million.

     The  terms  of  the  acquisition  provided  that  up to  $17.5  million  of
     additional  consideration,  payable in SMSC common stock and cash, could be
     issued to Gains's former  shareholders  during fiscal 2004  contingent upon
     satisfaction of certain performance goals. It has been determined that this
     additional consideration was not earned.

     The  unaudited  pro forma  results of  operations  for the six months ended
     August 31, 2002 set forth below give effect to the  acquisition  of Gain as
     if it had  occurred  at the  beginning  of fiscal  2003.  Pro forma data is
     subject  to  certain  assumptions  and  estimates,  and  is  presented  for
     informational purposes only. This data does not purport to be indicative of
     the results that would have actually occurred had the acquisition  occurred
     on the basis  described  above,  nor do they  purport to be  indicative  of
     future operating results.

                                                         Six Months Ended
                                                          August 31, 2002
                                                  -----------------------------
     (in thousands, except per share data)           Actual        Pro forma
                                                  ------------- ---------------

     Sales and revenues                             $  72,307     $  73,545
     Net income (loss)                                    662          (701)
     ==========================================================================

     Basic and diluted net income (loss)
      per share                                     $    0.04     $   (0.04)
     ==========================================================================


8.   Business Restructuring

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

     A summary of the activity in the reserve related to this  restructuring for
     the six months ended August 31, 2003 is as follows (in thousands):

                                              Non-
                                           cancelable
                                             lease        Other
                                          obligations    Charges       Total
     ---------------------------------------------------------------------------
      Business restructuring reserve at
       February 28, 2003                  $   1,374     $      45    $   1,419
      Cash payments                            (205)            -         (205)
     ---------------------------------------------------------------------------
      Business restructuring reserve at
       August 31, 2003                    $   1,169     $      45    $   1,214
     ===========================================================================

     Payments related to  non-cancelable  lease  obligations are being paid over
     their respective terms through August 2008.


9.   Discontinued Operations

     The  Company is  currently  involved in a legal  action  relating to a past
     divestiture of a business  unit.  This  divestiture  was accounted for as a
     discontinued operation, and accordingly, costs associated with this action,
     net of income taxes, are reported as a Loss from discontinued operations on
     the  Condensed  Consolidated  Statements  of  Operations.  These costs were
     nominal  during the three months  ended  August 31, 2003,  compared to $0.2
     million for the three months ended August 31, 2002, after applicable income
     tax  benefits.  These costs  totaled $0.3 million in each of the  six-month
     periods  ended  August 31, 2003 and 2002,  respectively,  after  applicable
     income tax benefits.


10.  Goodwill and Intangible Assets

     The Company's June 2002 acquisition of Gain Technology Corporation included
     the acquisition of $7.1 million of finite-lived intangible assets and $29.6
     million of goodwill, after adjustments.  During the six months ended August
     31,  2003,  the Company  reduced  the amount of  goodwill  relating to this
     transaction from $29.8 million to $29.6 million,  reflecting the resolution
     of certain contingencies at amounts different than originally estimated. In
     accordance  with the  provisions  of SFAS No.  142,  this  goodwill  is not
     amortized,  but is tested for impairment in value annually, as well as when
     an event or  circumstance  occurs  indicating a possible  impairment in its
     value.

     All finite-lived  intangible  assets are being amortized on a straight-line
     basis  over  their  estimated  useful  lives.  Existing  technologies  were
     assigned an estimated  useful life of six years.  Customer  contracts  were
     assigned useful lives of between one and ten years (with a weighted average
     life  of  approximately  seven  years),  and  non-compete  agreements  were
     assigned useful lives of two years. The weighted average useful life of all
     intangible assets is approximately six years.

     As of  August  31,  2003,  the  Company's  finite-lived  intangible  assets
     consisted of the following (in thousands):


                                                Accumulated
                                    Cost       Amortization              Net
     ------------------------------------------------------------------------

     Existing technologies      $  6,179          $   1,287         $  4,892
     Customer contracts              326                 41              285
     Non-compete agreements          410                256              154
     ------------------------------------------------------------------------

                                $  6,915          $   1,584         $  5,331
     ========================================================================


     Estimated future intangible asset amortization expense for the remainder of
     fiscal 2004,  and for the five fiscal years  thereafter,  is as follows (in
     thousands):

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

     Remainder of fiscal 2004                 $    634
     Fiscal 2005                                 1,114
     Fiscal 2006                                 1,062
     Fiscal 2007                                 1,062
     Fiscal 2008                                 1,062
     Fiscal 2009                                   290
     ==================================================


11.  Real Estate Transactions

     During the first quarter of fiscal 2004, the Company sold certain  portions
     of its Hauppauge,  New York real estate holdings, for aggregate proceeds of
     $7.0 million,  net of transaction costs. These transactions  resulted in an
     aggregate  gain of $1.7 million,  $1.4 million of which related to property
     in which the Company has no continued  interest and was  recognized  within
     the Company's fiscal 2004 first quarter operating results, and $0.3 million
     of which  related to  property  that the  Company  has leased back from the
     purchaser  and has  therefore  been  deferred.  This deferred gain is being
     recognized  within the Company's  operating  results as a reduction of rent
     expense on a straight-line  basis over a 30-month period  beginning in June
     2003,  consistent with the term of the lease. The Company's  remaining rent
     obligation over the term of this lease is approximately $0.8 million.


12.  Sales of Equity Investment

     During the three months ended May 31, 2003,  the Company sold its remaining
     equity investment in Chartered Semiconductor Manufacturing, Ltd., realizing
     a loss of $0.7 million, which is included within Other expense, net.


13.  Litigation

     In June 2003, Standard Microsystems Corporation was named as a defendant in
     a patent  infringement  lawsuit filed by Analog Devices,  Inc. (ADI) in the
     United  States  District  Court for the District of  Massachusetts  (Analog
     Devices,  Inc. v.  Standard  Microsystems  Corporation,  Case Number 03 CIV
     11216).  The  Complaint,  as amended,  alleges  that some of the  Company's
     products  infringe  one or  more of  three  of  ADI's  patents,  and  seeks
     injunctive relief and unspecified  damages.  In September 2003, the Company
     filed an Answer in the  lawsuit,  denying  ADI's  allegations  and  raising
     affirmative defenses and counterclaims.  Although it is premature to assess
     the outcome of the  litigation,  the Company  believes that the allegations
     against it are without merit.


14.  Recent Accounting Pronouncements

     In  November  2002,  the  Emerging  Issues  Task  Force  (EITF),  reached a
     consensus on EITF Issue No.  00-21,  "Revenue  Arrangements  with  Multiple
     Deliverables."  EITF Issue No. 00-21  requires  revenue  arrangements  with
     multiple  deliverables  to be divided into separate  units of accounting if
     the   deliverables  in  the   arrangement   meet  certain   criteria.   The
     arrangement's consideration should be allocated among the separate units of
     accounting  based  on  their  relative  fair  values.   Applicable  revenue
     recognition  criteria  should be considered  separately  for each unit. The
     provisions of EITF Issue No. 00-21 are  effective for revenue  arrangements
     entered into in fiscal periods  beginning after June 15, 2003. The adoption
     of this standard did not have a material impact on the Company's  financial
     condition or results of operations.

     In  December  2002,  the FASB  issued  Statement  of  Financial  Accounting
     Standards  (SFAS) No.  148,  "Accounting  for  Stock-Based  Compensation  -
     Transition  and  Disclosure  - an  Amendment  of SFAS  No.  123",  which is
     effective for financial  statements  for fiscal years ending after December
     15, 2002, with early adoption permitted. SFAS No. 148 will enable companies
     that choose to adopt the fair value based  method to report the full effect
     of employee stock options in their financial  statements  immediately  upon
     adoption,  and to make  available  to  investors  better and more  frequent
     disclosure  about the cost of employee  stock  options.  The  Company  will
     continue to apply the  disclosure-only  provisions of both SFAS No. 123 and
     SFAS No. 148.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
     Derivative  Instruments and Hedging Activities".  This statement amends and
     clarifies  financial  accounting and reporting for derivative  instruments,
     including certain derivative  instruments embedded in other contracts,  and
     for hedging  activities  under SFAS No. 133.  SFAS No. 149 is effective for
     contracts  entered into or modified  after June 30, 2003.  The Company does
     not believe that the  adoption of SFAS No. 149 will have a material  effect
     on its financial condition or results of operations.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
     Financial Instruments with Characteristics of both Liabilities and Equity".
     SFAS  No.  150  establishes  standards  for how an  issuer  classifies  and
     measures  certain  financial   instruments  with  characteristics  of  both
     liabilities  and equity,  and requires that an issuer  classify a financial
     instrument that is within its scope as a liability (or as an asset, in some
     circumstances).  Many of those  instruments  were previously  classified as
     equity. SFAS No. 150 is effective for financial instruments entered into or
     modified  after May 31, 2003.  It is to be  implemented  by  reporting  the
     cumulative  effect of a change in an  accounting  principle  for  financial
     instruments  created  before  the  issuance  date of SFAS No. 150 and still
     existing at the  beginning of the interim  period of adoption.  The Company
     does not  believe  the  adoption of SFAS No. 150 will have an impact on its
     financial condition or results of operations.

<PAGE>
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The  following  discussion  should  be read in  conjunction  with the  Company's
consolidated  condensed 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.  These include,  among others,  the timely development and market
acceptance of new products;  the impact of competitive products and pricing; the
effect of changing economic  conditions in domestic and  international  markets;
changes in customer  order  patterns,  including  loss of key  customers,  order
cancellations  or  reduced  bookings;  and  excess  or  obsolete  inventory  and
variations  in  inventory   valuation.   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.

Standard  Microsystems  Corporation  (the  Company  or  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.  In addition,  sales of many of the
Company's  products depend largely on sales of personal computers and peripheral
devices,  and  reductions  in the rate of growth of the PC and Embedded  markets
could adversely affect its operating results. SMSC conducts business outside the
United  States and is subject to tariff  and  import  regulations  and  currency
fluctuations,  which  may have an effect on its  business.  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  will not  necessarily  inform  investors  of such  changes,  except  as
required by law. 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 Securities and Exchange  Commission
(SEC).  Investors are advised to read the  Company's  Annual Report on Form 10-K
and other 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.


Overview
--------

Description of Business

SMSC is a designer and worldwide supplier of advanced digital,  mixed-signal and
analog semiconductor solutions for a broad range of communications and computing
applications  in the areas of Advanced  Input/Output  (I/O),  USB  connectivity,
networking and embedded control systems. The Company is a fabless  semiconductor
supplier   whose   products  are   manufactured   by   world-class   third-party
semiconductor  foundries and assemblers.  To ensure the highest product quality,
the Company conducts a significant portion of its final testing  requirements in
the Company's own state-of-the-art testing operation.

The Company is  prominent  as the  world's  leading  supplier  of  Advanced  I/O
integrated  circuits  for desktop and mobile  personal  computers.  Advanced I/O
circuits contain a variety of individual functions ranging from legacy PC I/O to
leading edge system management,  including flash memory, infrared communications
support, a real-time clock, and power management.

The Company serves the networking and connectivity  markets with its families of
integrated  Ethernet  and USB 2.0  products,  along with other  products,  which
provide solutions for the needs of network printers, set-top boxes, home gateway
products,  automobile navigation systems, cellular base stations, USB peripheral
devices and a variety of other machine-to-machine communications applications.

The Company's headquarters are located in Hauppauge, New York, and SMSC operates
design and validation centers in New York, Austin,  Texas,  Tucson,  Arizona and
Phoenix,  Arizona, and has sales offices in the United States,  Europe,  Taiwan,
Korea and China.  The Company  conducts  most of its  business  in the  Japanese
market through its majority-owned subsidiary, SMSC Japan.


Strategic Business Agreement

As previously  reported,  the Company and Intel Corporation (Intel) entered into
an agreement in 1987  providing  for,  among other things,  a broad,  worldwide,
non-exclusive  patent  cross-license,   covering  manufacturing   processes  and
products,  thereby  providing  each  company  access to the other's  current and
future patent portfolios.

In September 1999, the two companies  announced a technology  exchange agreement
(the Agreement) that would allow SMSC to accelerate its then ongoing development
of Intel  compatible  chipset  products.  The  Agreement  provided,  among other
things,  for Intel to transfer  certain  intellectual  property related to Intel
chipset architectures to SMSC, and provided SMSC the opportunity to supply Intel
chipset  components  along with its own chipset  solutions.  The Agreement  also
limited   SMSC's   rights   regarding   Northbridges   and  Intel   Architecture
Microprocessors under the 1987 agreement.

The  Agreement   included   provisions   for  its   termination   under  certain
circumstances.  Under one such  provision,  SMSC could  elect to  terminate  the
Agreement  should SMSC not achieve  certain  minimum chipset revenue amounts set
forth in the Agreement,  unless Intel paid SMSC an amount equal to the shortfall
between the minimum  revenue amount and the actual  revenue for that period.  In
September 2002, SMSC notified Intel of a chipset revenue  shortfall for the 2002
twelve-month  period.  Intel  did not make a payment  to SMSC of that  shortfall
within the time frame specified within the Agreement, and SMSC gave Intel notice
of  termination of the Agreement in accordance  with the terms thereof,  and the
parties commenced discussions regarding their various corporate and intellectual
property relationships.

In September  2003, the Company and Intel announced that they had enhanced their
intellectual  property  and  business  relationship.  The  companies  agreed  to
collaborate on certain future I/O and sensor  products,  and Intel agreed to use
the  Company's  devices  on certain  current  and  future  generations  of Intel
products.  In  addition,  the Company  agreed to limit its rights under its 1987
patent cross-license with Intel to manufacture and sell Northbridge products and
Intel  Architecture  Microprocessors  on behalf of third parties.  The companies
also  terminated  an Investor  Rights  Agreement  between  them,  which had been
entered into in connection with Intel's 1997  acquisition of 1,543,000 shares of
the Company's common stock. Under this agreement, Intel had certain information,
corporate  governance  and other  rights with respect to the  activities  of the
Company.

In respect of this new relationship,  Intel will pay to the Company an aggregate
amount of $75 million, of which $20 million will be paid in the third quarter of
the Company's  fiscal 2004,  $10 million will be paid in each of calendar  years
2004 and 2005,  $11 million will be paid in calendar year 2006,  and $12 million
will be paid in each of calendar  years 2007 and 2008.  Such amounts are payable
in equal  quarterly  installments  within each calendar year, and are subject to
possible  reduction,  in a manner and to an extent to be agreed by the  parties,
based upon the companies'  collaboration  and sales,  facilitated  by Intel,  of
certain future new products of the Company.



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

This discussion and analysis of the Company's financial condition and results of
operations  is  based  upon  the  unaudited   consolidated  condensed  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 tax assets
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,  2003 filed  with the SEC on May 29,  2003.  During the  six-month
period ended August 31, 2003, there were no significant  changes to any critical
accounting  policies  or to the  related  estimates  and  judgments  involved in
applying these policies.



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

Sales and Revenues

Sales and  revenues  for the three  months  ended  August  31,  2003 were  $48.3
million,  an increase of approximately 26% compared to $38.3 million reported in
the second quarter of the prior fiscal year. For the six months ended August 31,
2003,  sales and revenues were $91.0  million,  compared to $72.3 million in the
prior year six-month  period,  also an increase of 26%. These increases  reflect
higher  product sales in the current year periods in all of the Company's  major
product  categories,  in  terms  of both  units  and  dollars,  compared  to the
corresponding  prior year  periods.  Several  recent key design wins, as well as
increased PC demand,  have helped drive  increased  unit PC I/O  shipments.  The
Company's non-PC products,  which are focused in networking and USB connectivity
applications,   achieved   higher   product   sales  from   recent  new  product
introductions,   as  well  as  the  Company's   ongoing  focus  on  aggressively
identifying and pursuing market opportunities in these product lines.

Sales and  revenues  from  customers  outside  of North  America  accounted  for
approximately  93% and 92% of the Company's sales and revenues for the three and
six- month periods ended August 31, 2003,  respectively,  the largest portion of
which was to the Asia and Pacific Rim region. The comparable percentages for the
three  and  six-month  periods  in the  prior  fiscal  year  were  90% and  89%,
respectively. The Company expects that international shipments,  particularly to
the Asia and Pacific  Rim  region,  will  continue  to  represent a  significant
portion of its sales and revenues.


Gross Profit

Gross profit for the three months  ended August 31, 2003 was $21.5  million,  or
44.5% of sales and revenues,  compared to $17.1  million,  or 44.7% of sales and
revenues,  for the three months ended August 31, 2002.  For the six months ended
August 31, 2003, gross profit was $42.2 million, or 46.3% of sales and revenues,
compared to $32.2  million,  or 44.5% of sales and  revenues,  in the prior year
six-month period.

The gross profit  percentage did not differ  significantly in the current year's
second  quarter,  as compared to the prior  year's  second  quarter.  The mix of
product sales among the Company's  various product lines was  approximately  the
same in both three-month  periods.  For the current year six-month  period,  the
gross  profit  improvement  reflects a higher  proportionate  sales and  revenue
contribution  from non-PC I/O product lines,  which generally carry higher gross
profit margins than PC I/O products, and higher unit production,  which drives a
more efficient use of fixed  manufacturing  overhead costs.  Gross profit in the
prior  fiscal  year's  six-month  period was also  adversely  impacted by higher
charges for slow-moving and obsolete inventory.


Research and Development Expenses

The  semiconductor  industry,  and the  individual  markets in which the Company
currently competes,  are highly  competitive,  and the Company believes that the
continued   investment  in  research  and  development  (R&D)  is  essential  to
maintaining  and  improving  its  competitive  position,   and  to  driving  its
opportunities for future growth.

The Company's  research and  development  activities  are performed by a team of
highly-skilled  and  experienced  engineers and  technicians,  and are primarily
directed towards the design of new integrated  circuits,  the development of new
software  design tools and blocks of logic,  as well as ongoing cost  reductions
and performance improvements in existing products.

R&D expenses were $9.3 million, or approximately 19% of sales and revenues,  for
the  three  months  ended  August  31,  2003,   compared  to  $7.8  million,  or
approximately  20% of sales and revenues,  for the three months ended August 31,
2002. This dollar increase  reflects the impact of engineering  staff additions,
investments in advanced  semiconductor  design tools and costs  associated  with
development   programs   in  advanced   0.18  and  0.25   micron   semiconductor
technologies.

For the six months  ended  August 31, 2003,  R&D  expenses  were $18.4  million,
compared  to  $14.6   million  for  the  six  months   ended  August  31,  2002,
approximately 20% of sales and revenues in both periods.  This increase reflects
the  impact  of the  factors  noted in the  three-month  discussion  within  the
preceding  paragraph,  as  well  as  the  impact  of  the  Company's  June  2002
acquisition of Gain Technology Corporation (Gain), which added 35 highly skilled
engineers and designers to the Company's staff.


Selling, General and Administrative Expenses

Selling,   general  and   administrative   expenses  were  $10.0   million,   or
approximately  21% of sales and revenues,  for the three months ended August 31,
2003, compared to $8.7 million, or approximately 23% of sales and revenues,  for
the three  months  ended  August 31,  2002.  For the current  six-month  period,
selling,   general  and   administrative   expenses  were  $19.5   million,   or
approximately  21%  of  sales  and  revenues,  compared  to  $16.9  million,  or
approximately 23% of sales and revenues, in the prior year six-month period. The
dollar  increases  reflect  the impact of  additional  staff added to expand the
Company's  sales and  marketing  capabilities,  as well as  incremental  selling
costs,  primarily  sales  commissions  and  incentives,  associated  with higher
product sales in the current year periods.


Amortization of Intangible Assets

For the three and six  months  ended  August  31,  2003,  the  Company  recorded
amortization  expenses  of $0.3  million  and $0.7  million,  respectively,  for
intangible assets associated with the June 2002 acquisition of Gain.  Comparable
amortization  expense was $0.4  million in the three and six months ended August
31, 2002.


Gains on Real Estate Transactions

During the first  quarter of fiscal 2004,  the Company sold certain  portions of
its Hauppauge,  New York real estate  holdings,  for aggregate  proceeds of $7.0
million,  net of transaction costs. These transactions  resulted in an aggregate
gain of $1.7  million,  $1.4  million of which  related to property in which the
Company has no continued interest and was recognized within the Company's fiscal
2004 first  quarter  operating  results,  and $0.3  million of which  related to
property  that the Company has leased back from the  purchaser and has therefore
been  deferred.  This  deferred  gain is being  recognized  within the Company's
operating results as a reduction in rent expense on a straight-line basis over a
30-month period  beginning in June 2003,  consistent with the term of the lease.
The  Company's  remaining  rent  obligation  over  the  term  of this  lease  is
approximately $0.8 million.


Other Income and Expense

Interest  income of $0.4  million and $0.8  million for the three and  six-month
periods ended August 31, 2003, respectively, declined from $0.5 million and $1.1
million for the corresponding  year-earlier  periods,  respectively,  reflecting
lower interest rates on short-term investments.

During the first quarter of fiscal 2004,  the Company sold its remaining  equity
investment in Chartered Semiconductor Manufacturing, Ltd. (Chartered), realizing
losses of $0.7 million,  which are included  within Other expense,  net, for the
six months ended August 31, 2003.


Provision For Income Taxes

The  Company's  provision  for income taxes from  continuing  operations  in the
second quarter of fiscal 2004 was $0.8 million, resulting in an effective income
tax rate of 33.7%. The provision for income taxes from continuing  operations in
the prior  fiscal  year's  second  quarter  was $0.2  million,  resulting  in an
effective  income tax rate of 26.0%.  For the six months  ended August 31, 2003,
the provision for income taxes from continuing  operations was $1.7 million, for
an  effective  rate of 32.5%,  compared to a provision of $0.4  million,  for an
effective income tax 26.0%, in last year's six-month period. The Company expects
its effective tax rate on income from continuing  operations to be approximately
32.0% in fiscal 2004,  excluding the effect of real estate and equity investment
sales,  and  excluding  the effect of special  intellectual  property  revenues.
Income  taxes on  those  transactions  are  recorded  when  they  occur,  at the
Company's  incremental  income  tax rate of  approximately  36.0%.  The  overall
expected  fiscal 2004 effective tax rate on income from  continuing  operations,
including all special transactions, is expected to be 35.0%.

The Company's effective income tax rate primarily reflects statutory Federal and
state income tax rates,  adjusted for the impact of tax-exempt  interest  income
and  anticipated  income tax credits.  The higher  effective  rate  expected for
fiscal 2004,  compared to fiscal 2003,  recognizes  the impact of higher  income
from continuing  operations  expected in the current year, which in turn dilutes
the percentage  impact of income tax credits and tax-exempt  interest  income on
the Company's provision for income taxes.


Discontinued Operations

The  Company  is  currently  involved  in a  legal  action  relating  to a  past
divestiture  of a  business  unit.  This  divestiture  was  accounted  for  as a
discontinued operation, and accordingly,  costs associated with this action, net
of income  taxes,  are reported as a Loss from  discontinued  operations  on the
Consolidated Statements of Operations. These costs were nominal during the three
months  ended  August 31,  2003,  compared to $0.2  million for the three months
ended August 31, 2002, after applicable income tax benefits. These costs totaled
$0.3 million in each of the  six-month  periods  ended August 31, 2003 and 2002,
respectively, after applicable income tax benefits.



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  increased to
$122.6 million as of August 31, 2003, compared to $112.9 million at February 28,
2003. This increase reflects,  among other things, $7.0 million of cash provided
by sales  of real  estate  and $2.1  million  of cash  provided  by sales of the
Company's investment in Chartered.

Operating  activities generated $5.0 million of cash during the six months ended
August 31, 2003. Investing activities provided $6.5 million of cash for the same
period,  including the effects of the  aforementioned  real estate and Chartered
investment  transactions.  Financing  activities  provided  $0.2 million of cash
during the first six months of fiscal 2004.

The Company's  inventories  were $21.5  million at August 31, 2003,  compared to
$17.6  million at February 28, 2003, as the Company  stages for higher  revenues
anticipated  in the third  quarter of fiscal 2004,  consistent  with its typical
business cycle.

Accounts  receivable  increased from $22.7 million at February 28, 2003 to $26.7
million at August 31, 2003,  consistent  with the increase in sales and revenues
in the three-month  periods preceding those dates,  respectively.  The Company's
accounts receivable portfolio remains almost entirely current.

Capital expenditures for the six months ended August 31, 2003 were $6.7 million,
of which $4.6 million was paid in cash. The current  year's capital  investments
include an expenditure of $4.3 million for advanced design tools, which is being
financed on a short-term  basis by the supplier  with  payment  terms  extending
through  March 1, 2004.  As of August 31,  2003,  this  obligation  totals  $2.1
million,  which is  reported  within  Accounts  payable.  There were no material
commitments for capital expenditures as of August 31, 2003.

As noted previously,  the Company completed its acquisition of Gain in June 2002
for total initial  consideration  of $36.1 million.  It has been determined that
$17.5 million of additional SMSC common stock and cash,  which was  contingently
payable to former Gain  shareholders  during  fiscal 2004 upon  satisfaction  of
certain performance goals, was not earned.

During the first six months of fiscal  2004,  the  Company  did not  acquire any
additional  treasury stock through its common stock  repurchase  program,  under
which  approximately 1.2 million shares remain authorized for repurchase.  As of
August 31, 2003, the Company held  approximately  1.8 million shares of treasury
stock, at a cost of $23.5 million.

The Company has considered in the past,  and will continue to consider,  various
possible  transactions  to  secure  necessary  foundry  manufacturing  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
investment 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
12 months.


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

In November 2002, the Emerging Issues Task Force (EITF),  reached a consensus on
EITF Issue No. 00-21,  "Revenue  Arrangements with Multiple  Deliverables." EITF
Issue No. 00-21 requires revenue  arrangements with multiple  deliverables to be
divided into separate units of accounting if the deliverables in the arrangement
meet certain criteria. The arrangement's consideration should be allocated among
the separate units of accounting based on their relative fair values. Applicable
revenue recognition criteria should be considered  separately for each unit. The
provisions  of EITF  Issue No.  00-21 are  effective  for  revenue  arrangements
entered into in fiscal  periods  beginning  after June 15, 2003. The adoption of
this  standard  did  not  have a  material  impact  on the  Company's  financial
condition or results of operations.

In December 2002, the FASB issued  Statement of Financial  Accounting  Standards
(SFAS) No. 148,  "Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosure - an Amendment of SFAS No.  123",  which is effective  for  financial
statements for fiscal years ending after December 15, 2002,  with early adoption
permitted.  SFAS No. 148 will  enable  companies  that  choose to adopt the fair
value based method to report the full effect of employee  stock options in their
financial  statements  immediately  upon  adoption,  and to  make  available  to
investors  better and more frequent  disclosure about the cost of employee stock
options.  The Company will continue to apply the  disclosure-only  provisions of
both SFAS No. 123 and SFAS No. 148.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities".  This  statement  amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities  under SFAS No. 133. SFAS No. 149 is effective for contracts
entered into or modified  after June 30, 2003. The Company does not believe that
the  adoption  of SFAS No.  149 will have a  material  effect  on its  financial
condition or results of operations.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity".  SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics of both liabilities and equity, and
requires that an issuer classify a financial instrument that is within its scope
as a  liability  (or  as  an  asset,  in  some  circumstances).  Many  of  those
instruments were previously  classified as equity. SFAS No. 150 is effective for
financial  instruments  entered into or modified after May 31, 2003. It is to be
implemented  by reporting  the  cumulative  effect of a change in an  accounting
principle for financial instruments created before the issuance date of SFAS No.
150 and still existing at the beginning of the interim  period of adoption.  The
Company does not believe the adoption of SFAS No. 150 will have an impact on its
financial condition or results of operations.

<PAGE>
     ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


     Financial Market Risks
     ----------------------

     Interest Rate Risk - The  Company's  exposure to interest rate risk relates
     primarily  to  its  investment  portfolio.  The  primary  objective  of the
     Company'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,  2003,  the  Company's   $21.1  million  of  short-term
     investments consisted primarily of investments in corporate, government and
     municipal  obligations  with maturities of between three and twelve months.
     If market  interest rates were to increase  immediately and uniformly by 10
     percent from levels at August 31, 2003, the Company estimates that the fair
     value  of these  short-term  investments  would  decline  by an  immaterial
     amount.  The Company generally expects to hold its fixed income investments
     until maturity and,  therefore,  would not expect operating results or cash
     flows to be affected to any significant degree by a sudden change in market
     interest rates on short-term investments.

     Equity  Price Risk - The  Company  has no  material  investments  in equity
     securities  of other  companies  on its  Consolidated  Balance  Sheet as of
     August 31, 2003.

     Foreign   Currency  Risk  -  The  Company  has   international   sales  and
     expenditures  and is,  therefore,  subject to certain foreign currency rate
     exposure.  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.
     Transactions  in the Japanese  market made by the Company's  majority-owned
     subsidiary,  SMSC  Japan,  are  denominated  in  Japanese  yen.  SMSC Japan
     purchases a  significant  amount of its products  for resale from  Standard
     Microsystems Corporation in U.S. dollars, and from time to time enters into
     forward  exchange   contracts  to  hedge  against   currency   fluctuations
     associated  with these product  purchases.  During fiscal 2003,  SMSC Japan
     entered into a contract with a Japanese  financial  institution to purchase
     U.S.  dollars  to meet a portion  of its U.S.  dollar  denominated  product
     purchase requirements.  Gains and losses on this contract, which expired in
     March 2003, were not significant.

     The Company has never received a cash dividend  (repatriation of cash) from
     SMSC  Japan nor does it  expect  to  receive  such a  dividend  in the near
     future.


     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  change  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,  2003  filed with the  Securities  and  Exchange
     Commission on May 29, 2003.


     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,  2003,  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 has been no change in the Company's  internal  control over financial
     reporting  during the Company's  fiscal quarter covered by this report that
     has materially affected,  or is reasonably likely to materially affect, the
     Company's internal control over financial reporting.

<PAGE>
     PART II - OTHER INFORMATION


     ITEM 1.   Legal Proceedings

     In June 2003, Standard Microsystems Corporation was named as a defendant in
     a patent  infringement  lawsuit filed by Analog Devices,  Inc. (ADI) in the
     United  States  District  Court for the District of  Massachusetts  (Analog
     Devices,  Inc. v.  Standard  Microsystems  Corporation,  Case Number 03 CIV
     11216).  The  Complaint,  as amended,  alleges  that some of the  Company's
     products  infringe  one or  more of  three  of  ADI's  patents,  and  seeks
     injunctive relief and unspecified  damages.  In September 2003, the Company
     filed an Answer in the  lawsuit,  denying  ADI's  allegations  and  raising
     affirmative defenses and counterclaims.  Although it is premature to assess
     the outcome of the  litigation,  the Company  believes that the allegations
     against it are without merit.


     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 July 9, 2003 annual meeting of shareholders.


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

                                 Votes             Votes          Broker
                                Received          Withheld       Non-votes
                              ------------      ------------   -------------

     Robert M. Brill           14,321,498         1,082,418          --
     James A. Donahue          14,450,685           953,231          --

     Each of the  following  directors,  who were not up for  reelection  at the
     annual meeting of shareholders, will continue to serve as directors: Steven
     J. Bilodeau, Andrew M. Caggia, Peter F. Dicks, and Ivan T. Frisch.

     In July 2003, the Board of Directors  accepted the  resignation of James R.
     Berrett as a member of the Board.  The Board elected Timothy P. Craig to be
     a director  and to serve as a director for the  remainder of Mr.  Berrett's
     term and until his successor shall be elected and qualified.

     (2) The 2003 Stock  Option and  Restricted  Stock Plan was  approved by the
     following vote:

                                                                    Broker
                         For           Against       Abstain       Non-votes
                     -----------    -------------  -----------  ---------------

                      9,012,842       6,380,078       10,996          --


     (3) The 2003 Director Stock Option Plan was approved by the following vote:

                                                                    Broker
                         For           Against       Abstain       Non-votes
                     -----------    -------------  -----------  ---------------

                      12,587,375      2,797,782       18,759          --


     (4) The selection of  PricewaterhouseCoopers  LLP as the Company's auditors
     for the fiscal year ended  February 29, 2004 was ratified by the  following
     vote:

                                                                    Broker
                         For           Against       Abstain       Non-votes
                     -----------    -------------  -----------  ---------------

                      15,217,424        168,870       17,622          --


     ITEM 6.   Exhibits and Reports on Form 8-K

     (a)  Exhibits

          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 - Certification  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.

     (b)  Reports on Form 8-K

          On June 19,  2003,  the SMSC filed a report on Form 8-K  relating to a
          press release issued on June 16, 2003,  announcing the Company's first
          quarter fiscal 2004 operating results.

<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:  September 19, 2003                   /s/     Andrew M. Caggia
                                                 ------------------------
                                                 (Signature)

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