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, 2004

                                       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, 2004, there were 18,460,199  shares of the registrant's  common
stock outstanding.

<PAGE>
                        Standard Microsystems Corporation

                                    Form 10-Q
                      For the Quarter Ended August 31, 2004

                                Table of Contents



PartI    Financial Information

Item 1   Financial  Statements  (unaudited):
         Condensed  Consolidated  Balance  Sheets  as of  August  31,  2004  and
         February 29, 2004
         Condensed  Consolidated  Statements of Operations for the Three and Six
         Month  Periods  Ended August 31, 2004 and 2003  Condensed  Consolidated
         Statements  of Cash Flows for the Six Month
         Periods  Ended  August 31, 2004 and 2003
         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   Changes  in   Securities,  Use  of  Proceeds  and  Issuer Purchases  of
         Equity Securities
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 29,
                                                         2004           2004
                                                         ----           ----
Assets
Current assets:
  Cash and cash equivalents                           $ 159,524    $ 135,161
  Short-term investments                                 13,835       23,136
  Accounts receivable, net                               27,747       21,946
  Inventories                                            27,849       23,162
  Deferred income taxes                                  13,435       15,064
  Other current assets                                    3,314        8,549
--------------------------------------------------------------------------------

       Total current assets                             245,704      227,018
--------------------------------------------------------------------------------

Property, plant and equipment, net                       24,299       23,430
Long-term investments                                     8,600       15,600
Goodwill                                                 29,435       29,595
Intangible assets, net                                    4,115        4,697
Deferred income taxes                                     6,784        6,493
Other assets                                              3,327        3,192
--------------------------------------------------------------------------------

                                                      $ 322,264    $ 310,025
================================================================================

Liabilities and shareholders' equity
Current liabilities:
  Accounts payable                                    $  19,022    $  14,679
  Deferred income on shipments to distributors           12,858        7,972
  Accrued expenses, income taxes and other
   liabilities                                           11,113       13,168
--------------------------------------------------------------------------------

        Total current liabilities                        42,993       35,819
--------------------------------------------------------------------------------

Other liabilities                                        12,143       12,104

Shareholders' equity:
  Preferred stock                                             -            -
  Common stock                                            2,030        2,019
  Additional paid-in capital                            184,023      181,830
  Retained earnings                                     102,817       99,010
  Treasury stock, at cost                               (23,799)     (23,454)
  Deferred stock-based compensation                      (2,573)      (1,962)
  Accumulated other comprehensive income                  4,630        4,659
--------------------------------------------------------------------------------

        Total shareholders' equity                      267,128      262,102
--------------------------------------------------------------------------------

                                                      $ 322,264    $ 310,025
================================================================================

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,
                                                         ----------------------------------     ------------------------------------

                                                                2004              2003                 2004              2003
                                                                ----              ----                 ----              ----
<S>                                                      <C>                <C>                 <C>                <C>

Sales and revenues:
Product sales                                            $        47,233    $        47,961     $        97,585    $        90,449
Intellectual property revenues                                     2,924                328               5,625                561
------------------------------------------------------------------------------------------------------------------------------------
                                                                  50,157             48,289             103,210             91,010

Cost of goods sold                                                26,260             26,783              52,645             48,842
------------------------------------------------------------------------------------------------------------------------------------

Gross profit                                                      23,897             21,506              50,565             42,168

Operating expenses (income):
Research and development                                          11,220              9,280              22,082             18,381
Selling, general and administrative                               11,852              9,965              23,704             19,478
Amortization of intangible assets                                    266                317                 583                677
Gains on real estate transactions                                      -                  -                   -             (1,444)
------------------------------------------------------------------------------------------------------------------------------------

Income from operations                                               559              1,944               4,196              5,076

Interest income                                                      556                391               1,022                834
Other expense, net                                                    (6)                (9)                (38)              (745)
------------------------------------------------------------------------------------------------------------------------------------

Income before provision for income taxes
 and minority interest                                             1,109              2,326               5,180              5,165

Provision for income taxes                                           214                785               1,373              1,680

Minority interest in net income of subsidiary                          -                 35                   -                 96
------------------------------------------------------------------------------------------------------------------------------------

Income from continuing operations                                    895              1,506               3,807              3,389

Loss from discontinued operations (net of income tax
 benefits of $14 and $106)                                             -                (26)                  -               (190)
------------------------------------------------------------------------------------------------------------------------------------

Net income                                               $           895    $         1,480     $         3,807    $         3,199
====================================================================================================================================


Basic net income per share:
 Income from continuing operations                       $          0.05    $          0.09     $          0.21    $          0.20
 Loss from discontinued operations                                     -                  -                   -              (0.01)
------------------------------------------------------------------------------------------------------------------------------------

 Basic net income per share                              $          0.05    $          0.09     $          0.21    $          0.19
====================================================================================================================================

Diluted net income per share:
 Income from continuing operations                       $          0.05    $          0.08     $          0.20    $          0.19
 Loss from discontinued operations                                     -                  -                   -              (0.01)
------------------------------------------------------------------------------------------------------------------------------------

 Diluted net income per share                            $          0.05    $          0.08     $          0.20    $          0.18
====================================================================================================================================

Weighted average common shares outstanding:
 Basic                                                            18,308             16,863              18,278             16,830
 Diluted                                                          19,169             17,869              19,482             17,643
</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,
                                                    -----------------------------------

                                                          2004               2003
                                                    ----------------   ----------------

<S>                                                 <C>                <C>
Cash flows from operating activities:
 Cash received from customers and licensees         $      105,124     $       89,931
 Cash paid to suppliers and employees                      (98,520)           (85,190)
 Interest received                                             983                836
 Interest paid                                                 (72)               (40)
 Income taxes refunded (paid)                                6,738               (510)
---------------------------------------------------------------------------------------

   Net cash provided by operating activities                14,253              5,027
---------------------------------------------------------------------------------------

Cash flows from investing activities:
 Capital expenditures                                       (6,202)            (4,628)
 Sales of property, plant and equipment                          -              7,080
 Sales of long-term investments                              4,000              2,114
 Purchases of short-term investments                        (7,130)           (14,055)
 Sales of short-term investments                            19,431             15,794
 Other                                                          36                149
---------------------------------------------------------------------------------------

   Net cash provided by investing activities                10,135              6,454
---------------------------------------------------------------------------------------

Cash flows from financing activities:
 Proceeds from issuance of common stock                        976              1,036
 Repayments of obligations under capital
  leases and notes payable                                  (1,016)              (874)
---------------------------------------------------------------------------------------

   Net cash provided by (used for) financing
    activities                                                 (40)               162
---------------------------------------------------------------------------------------

Effect of foreign exchange rate changes on
 cash and cash equivalents                                      15                138

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

Net increase in cash and cash equivalents                   24,363             11,485

Cash and cash equivalents at beginning of
 period                                                    135,161             90,025
---------------------------------------------------------------------------------------

Cash and cash equivalents at end of period          $      159,524     $      101,510
=======================================================================================


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

Income from continuing operations                   $        3,807     $        3,389
Adjustments to reconcile income from continuing
 operations to net cash provided by operating
 activities:
 Depreciation and amortization                               6,111              5,429
 Tax benefits from employee stock plans                        117                265
 Gains from sales of investments and property, net               -               (732)
 Other adjustments, net                                        (18)               (74)
 Changes in operating assets and liabilities:
  Accounts receivable                                       (5,632)            (6,431)
  Inventories                                               (4,696)            (3,553)
  Accounts payable, deferred income, accrued
   expenses and other liabilities                            6,935              5,682
  Current and deferred income taxes                          7,995                906
  Other changes, net                                          (366)               146
---------------------------------------------------------------------------------------

Net cash provided by operating activities           $       14,253     $        5,027
=======================================================================================
</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,   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 29, 2004 included in the Company's annual report on
     Form  10-K,  as filed on May 14,  2004  with the  Securities  and  Exchange
     Commission  (SEC).  The results of  operations  for the three and six-month
     periods ended August 31, 2004 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,
                                                           ------------------------------------------------------
                                                               2004          2003          2004         2003
                                                           ------------------------------------------------------
       <S>                                                    <C>           <C>           <C>          <C>

       Net income - as reported                               $   895       $ 1,480       $ 3,807      $ 3,199
       Add: Stock-based compensation expense included in
       net income, net of taxes - as reported                     189           256           331          459
       Deduct: Stock-based compensation expense
       determined using the fair value method for all
       awards, net of taxes                                    (2,100)       (2,256)       (4,522)      (4,691)
       ----------------------------------------------------------------------------------------------------------
       Net loss - pro forma                                   $(1,016)      $  (520)      $  (384)     $(1,033)
       ==========================================================================================================

       Basic net income per share - as reported               $  0.05       $  0.09       $  0.21      $  0.19
       ==========================================================================================================
       Diluted net income per share - as reported             $  0.05       $  0.08       $  0.20      $  0.18
       ==========================================================================================================
       Basic net loss per share - pro forma                   $ (0.06)      $ (0.03)      $ (0.02)     $ (0.06)
       ==========================================================================================================
       Diluted net loss per share - pro forma                 $ (0.06)      $ (0.03)      $ (0.02)     $ (0.06)
       ==========================================================================================================

</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, 2004          Feb. 29, 2004
     ------------------------------------------------------------------------

       Raw materials                    $      1,117           $        910
       Work in process                        17,742                 13,202
       Finished goods                          8,990                  9,050
     ------------------------------------------------------------------------

                                        $     27,849           $     23,162
     ========================================================================

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

                                        Aug. 31, 2004          Feb. 29,2004
     ------------------------------------------------------------------------

       Land                             $      1,570           $      1,570
       Buildings and improvements             21,643                 20,842
       Machinery and equipment                95,166                 90,195
     ------------------------------------------------------------------------
                                             118,379                112,607
       Less: accumulated depreciation         94,080                 89,177
     ------------------------------------------------------------------------

                                        $     24,299           $     23,430
     ========================================================================


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  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):

<PAGE>

                                        Three Months Ended    Six Months Ended
                                            August 31,           August 31,
                                         2004       2003       2004      2003
                                        ----------------------------------------

     Average shares outstanding for
      basic net income per share           18,308     16,863    18,278    16,830

     Dilutive effect of stock options
      and unvested restricted stock
      awards                                  861      1,006     1,204       813
     ---------------------------------------------------------------------------

     Average shares outstanding for
      diluted net income per share         19,169     17,869    19,482    17,643
     ===========================================================================

     Options  covering  1.3 million and 1.9 million  shares for the  three-month
     periods ended August 31, 2004 and 2003,  respectively,  and 0.8 million and
     2.3 million  shares for the  six-month  periods  ended  August 31, 2004 and
     2003,  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 for the three and six months  ended August
     31, 2004 and 2003 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                         Three Months Ended          Six Months Ended
                                                             August 31,                 August 31,
                                                          2004       2003             2004      2003
                                                     ----------------------------------------------------
     <S>                                                  <C>        <C>             <C>        <C>

     Net income                                           $    895   $  1,480        $  3,807   $  3,199
     Other comprehensive income:
     Change in foreign currency translation
       adjustment                                               43        178             (10)       216
     Change in unrealized gain (loss) on marketable
       equity securities, net of taxes                         (15)        21             (19)        35
     Reclassification adjustment for loss on
       marketable equity security included in net
       income, net of taxes                                      -          -               -        665
     ----------------------------------------------------------------------------------------------------

     Total comprehensive income                           $    923   $  1,679        $  3,778   $  4,115
     ====================================================================================================

</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 amount 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

     In  1987,  the  Company  and  Intel  Corporation  (Intel)  entered  into an
     agreement   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  2003, the Company and Intel  announced that they had enhanced
     their intellectual property and business relationship. The companies agreed
     to collaborate on certain future  Input/Output  (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 relationship, Intel will pay to the Company an aggregate
     amount of $75 million, of which $20 million and $2.5 million was recognized
     as  Intellectual  property  revenue,  and paid,  in the  third  and  fourth
     quarters of fiscal 2004,  respectively,  and $2.5 million was recognized as
     Intellectual  property  revenue,  and paid, in each of the first and second
     quarters  of fiscal  2005,  respectively.  Of the  remaining  amount,  $5.0
     million is payable  during the balance of fiscal  2005,  $10.25  million is
     payable in fiscal 2006,  $11.25  million is payable in fiscal  2007,  $12.0
     million  is payable  in fiscal  2008 and $9.0  million is payable in fiscal
     2009. Such amounts are payable in quarterly installments each 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 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 $1.0
     million at February 29, 2004 to $0.7 million at August 31, 2004, reflecting
     payments against  previously  reserved  non-cancelable  lease  obligations,
     which will continue  through their  respective  lease terms through  August
     2008.


8.   Discontinued Operations

     The Company  had been  involved in an  arbitration  proceeding  with Accton
     Technology Corporation (Accton) and SMC Networks, Inc. (Networks), relating
     to claims  associated with the October 1997 purchase of a majority interest
     in Networks by Accton from SMSC.  This  divestiture  was accounted for as a
     discontinued operation, and accordingly, costs associated with this action,
     net of income taxes, were reported within Loss from discontinued operations
     on the Consolidated  Statements of Operations.  These costs were negligible
     for the three-month  period ended August 31, 2003, and totaled $0.2 million
     for the six-month period ended August 31, 2003, after applicable income tax
     benefits. This action was settled during the fourth quarter of fiscal 2004.


9.   Goodwill and Intangible Assets

     The  Company's  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.  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, 2004 and  February 29, 2004,  the  Company's  finite-lived
     intangible assets consisted of the following (in thousands):

                                August 31, 2004            February 29, 2004
     ---------------------------------------------------------------------------
                                         Accumulated               Accumulated
                             Cost        Amortization     Cost     Amortization
     ---------------------------------------------------------------------------

     Existing technologies    $ 6,179          $ 2,317     $ 6,179      $ 1,802
     Customer contracts           326               73         326           57
     Non-compete agreements         -                -         410          359
     ---------------------------------------------------------------------------

                              $ 6,505          $ 2,390     $ 6,915      $ 2,218
     ===========================================================================
<PAGE>


     Estimated future intangible asset amortization expense for the remainder of
     fiscal 2005 and thereafter is as follows (in thousands):

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

     Remainder of fiscal 2005          $    531
     Fiscal 2006                          1,063
     Fiscal 2007                          1,063
     Fiscal 2008                          1,062
     Fiscal 2009                            290
     Fiscal 2010 and thereafter             106
     ===========================================


10.  Real Estate Transactions

     During the quarter ended May 31, 2003, 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  was  therefore  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.  As of August 31, 2004,  the
     Company's  remaining  rent  obligation  over  the  term  of this  lease  is
     approximately $0.4 million.


11.  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
     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. The following table sets forth the
     components of the  consolidated  net periodic pension expense for the three
     and six months ended August 31, 2004 and 2003, respectively (in thousands):


                                         Three Months Ended   Six Months Ended
                                            August 31,          August 31,
                                        ----------------------------------------
                                          2004      2003      2004      2003
     ---------------------------------------------------------------------------

      Service cost - benefits earned       $  71     $  65     $  143    $  131
      Interest cost on projected benefit
       obligations                           107       101        213       203
      Net amortization and deferral           73        68        145       136
     ---------------------------------------------------------------------------

      Net periodic pension expense         $ 251     $ 234     $  501    $  470
     ===========================================================================


12.  Litigation

     In June  2003,  SMSC 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.   The  Company  is  vigorously  defending  the  lawsuit  and
     collecting  evidence  to  support  its  defenses  to  infringement  and its
     allegations  of patent  invalidity  and  unenforceability.  Although  it is
     premature  to assess the outcome of the  litigation,  the Company  believes
     that the allegations against it are without merit.


13.  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
     22,000  shares of its  common  stock 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,  2004,  the  Company  has
     repurchased  a total of  approximately  1.8  million  shares of its  common
     stock, at a cost of $23.8 million, under this program.


14.  Subsequent Event - Stock Appreciation Rights Plan

     In  September  2004,  the  Company's  Board of  Directors  approved a Stock
     Appreciation  Rights  (SAR)  Plan (the  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.  The Plan
     authorizes  the Board's  Compensation  Committee to grant up to two million
     SAR awards to eligible  officers,  employees and  consultants.  Each award,
     when granted, provides the participant with the right to receive payment in
     cash, upon exercise,  for the  appreciated  market value of a share of SMSC
     common stock over the award's  exercise price.  The exercise price of a SAR
     is equal to the  closing  market  price of SMSC stock on the date of grant.
     SAR awards will  generally  vest over four or five-year  periods,  and will
     expire no later than ten years  from the date of grant.  The  Company  will
     recognize compensation expense for the appreciation of a SAR award's market
     value over its exercise price over the term of the award.


15.  Recent Accounting Pronouncements

     In December 2003, the Financial  Accounting  Standards Board (FASB) revised
     SFAS  No.  132,   "Employers'   Disclosures   about   Pensions   and  Other
     Postretirement  Benefits."  The revised  SFAS No. 132  requires  additional
     disclosures about plan assets,  benefit  obligations,  cash flows,  benefit
     costs  and  other  relevant  information  related  to  pensions  and  other
     postretirement  benefits.  It also requires certain  disclosures related to
     pensions  and other  postretirement  benefits to be  included in  quarterly
     filings,  which are included  within Note 11 to the Condensed  Consolidated
     Financial Statements included within this report.

     In March 2004,  the FASB  approved  the  consensus  reached on the Emerging
     Issues   Task  Force  Issue  No.  03-1  (EITF   03-1),   "The   Meaning  of
     Other-Than-Temporary    Impairment   and   Its   Application   to   Certain
     Investments".  The  objective  of this  issue is to  provide  guidance  for
     identifying  impaired  investments.  EITF 03-1 also provides new disclosure
     requirements  for investments  that are deemed to be temporarily  impaired.
     The  accounting  provisions  of EITF 03-1 are  effective  for all reporting
     periods  beginning after June 15, 2004,  while the disclosure  requirements
     are effective for annual  periods  ending after June 15, 2004. In September
     2004,  the EITF  delayed the  effective  date to apply EITF 03-1 on certain
     impaired debt securities. The adoption of this pronouncement did not impact
     the Company's results of operations or financial position.



     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
     Condensed  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.  These include 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,  among others. 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.

     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 (PCs) and peripheral devices, and reductions in
     the rate of growth of the PC,  consumer  electronics  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  may not  inform,  or be  required  to
     inform, investors of such changes. 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.


     Overview
     --------

     Description of Business

     SMSC provides semiconductor systems solutions for high-speed  communication
     and  computing  applications.  Through  the  integration  of  its  digital,
     mixed-signal and analog design  capabilities and software  expertise,  SMSC
     delivers  complete  solutions that monitor and manage computing systems and
     connect peripherals to computers and to one another.

     The Company addresses  computing,  communications and consumer  electronics
     markets  through  world-leading   positions  in  Input/Output  and  non-PCI
     Ethernet  products,  innovations  in  USB2.0  and other  high-speed  serial
     solutions,  and integrated networking products employed in a broad range of
     applications.

     SMSC 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 based in  Hauppauge,  New York  with  operations  in North
     America,  Taiwan, Japan, Korea, China and Europe. SMSC operates engineering
     design centers in New York, Arizona and Texas.

     New Brand Identity and Corporate Image

     On April 26,  2004,  SMSC was honored to open the Nasdaq  stock  market and
     concurrently  unveiled a new global brand  identity,  including a new logo,
     tagline - "Success  by  Design,"  and  website  design at its  www.smsc.com
     homepage.  Through its  communication  initiatives,  the Company is placing
     renewed emphasis on building  awareness of its market  leadership  position
     and  capabilities  to serve its  customers.  The new  "Success  by  Design"
     tagline underscores the Company's mission of being an essential  ingredient
     that fuels its customers' success.  This tagline highlights SMSC's culture,
     which is deliberate  in the manner in which it seeks to ensure  success for
     its customers and stakeholders.


     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 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  29,  2004 filed with the SEC on May 14,  2004.
     During  the  three-month  period  ended  August  31,  2004,  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, 2004 were $50.2
     million,  consisting  of $47.3 million of product sales and $2.9 million of
     intellectual  property  revenues,  compared to sales and  revenues of $48.3
     million for the  prior-year's  corresponding  quarter,  consisting of $48.0
     million  of  products  sales  and $0.3  million  of  intellectual  property
     revenues.  Sales and revenues for the six months ended August 31, 2004 were
     $103.2  million,  consisting  of $97.6  million of  product  sales and $5.6
     million of intellectual  property revenues,  compared to sales and revenues
     of $91.0  million,  consisting  of $90.4  million of product sales and $0.6
     million of intellectual property revenues, for the year earlier period.

     During  the  quarter  ended  August  31,  2004,  consistent  with  a  trend
     experienced  across  much  of  the  semiconductor   industry,  the  Company
     experienced a general  slowdown in orders across its  businesses,  with the
     larger decline  occurring  within PC I/O products.  The Company  attributes
     this, in part, to certain  original design  manufacturers  (ODMs) adjusting
     their  inventories  to reflect both shortened lead times and revised launch
     schedules of Intel chipset products.  As such, second quarter product sales
     of $47.3 million declined  sequentially  from $50.4 million achieved in the
     first  quarter of fiscal  2005,  and were  about 2% below the prior  year's
     second quarter.

     Compared to the prior year's second  quarter,  in which non-PC I/O products
     contributed 26% of total product sales, the Company has experienced  strong
     growth in its non-PC I/O products,  which  contributed 41% of product sales
     for the three months ended  August 31,  2004.  Non-PC I/O products  include
     networking,  connectivity  and other products.  During the six months ended
     August 31,  2004,  non-PC I/O  products  contributed  41% of total  product
     revenue,  compared to 30% for the year  earlier  period.  These mix changes
     reflect  the  impact  of  new  non-PC  I/O  design-wins,   broader  product
     offerings,  and the Company's ongoing focus on aggressively identifying and
     pursuing  market  opportunities  in its non-PC I/O  product  lines,  and is
     consistent with the Company's diversification goals.

     Product  sales  to  customers   outside  of  North  America  accounted  for
     approximately  84% and 86% of the Company's product sales for the three and
     six-month periods ended August 31, 2004, 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 93% and
     92%,  respectively.  The  Company  expects  that  international  shipments,
     particularly to the Asia and Pacific Rim region, will continue to represent
     a significant portion of its product sales.

     Intellectual  property  revenues for the three and six-month  periods ended
     August 31, 2004 were $2.9 million and $5.6 million, respectively,  compared
     to $0.3  million  and $0.6  million,  respectively,  for the  corresponding
     prior-year periods.  Intellectual  property revenues for the current fiscal
     year include payments of $2.5 million from Intel Corporation in each of the
     first and second  quarters,  as more fully  described  within Note 6 to the
     Condensed Consolidated Financial Statements.

     Gross Profit

     Gross profit for the quarter  ended August 31, 2004 was $23.9  million,  or
     47.6% of sales and revenues,  compared to $21.5 million,  or 44.5% of sales
     and  revenues,  for the three  months  ended  August  31,  2003.  Excluding
     intellectual  property revenues,  gross profit from product sales was $21.0
     million,  or 44.4% of product sales, for the quarter ended August 31, 2004,
     compared to $21.2  million,  or 44.2% of product  sales,  for quarter ended
     August 31, 2003.

     For the  six-month  period ended  August 31,  2004,  gross profit was $50.6
     million,  or 49.0% of sales and  revenues,  compared to $42.2  million,  or
     46.3% of sales and  revenues,  for the  six-month  period  ended August 31,
     2003. Excluding  intellectual property revenues,  gross profit from product
     sales was $44.9 million,  or 46.1% of product  sales,  for the current year
     six-month period, compared to $41.6 million, or 46.0% of product sales, for
     prior year six-month period.

     During  fiscal 2005,  the Company has  experienced  a change in its product
     mix, with more of its product sales being derived from non-PC I/O products,
     as  compared to the  year-earlier  periods.  While in the past,  non-PC I/O
     products  traditionally  produced  higher gross profit  margins than PC I/O
     products,  the  Company  has  introduced  new USB2.0  products  into a very
     competitive market which currently generate lower gross profit margins than
     other  non-PC I/O  products.  Accordingly,  the  Company  is not  currently
     realizing  the  overall   increased  gross  profit  percentage  that  would
     otherwise  be  expected  from a higher  product  sales  mix of  non-PC  I/O
     products.  The Company is working on increasing its margins  through design
     changes,  enhanced product  features,  and cost saving  initiatives,  as it
     continues expanding its new product offerings in these competitive markets.

     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,  subcontracting  costs and prototyping costs. 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  $11.2  million,  or  approximately  22% of  sales  and
     revenues,  for the three months  ended  August 31,  2004,  compared to $9.3
     million,  or approximately 19% of sales and revenues,  for the three months
     ended  August 31,  2003.  For the six months  ended  August 31,  2004,  R&D
     expenses were $22.1 million,  or  approximately  21% of sales and revenues,
     compared to $18.4 million, or approximately 20% of sales and revenues,  for
     the six months  ended August 31, 2003.  This dollar  increase  reflects the
     impact  of   engineering   staff   additions,   investments   in   advanced
     semiconductor  design  tools,  higher  costs  associated  with  development
     programs  in  advanced  semiconductor  technologies,  and higher  costs for
     contract design services.

     Selling, General and Administrative Expenses

     Selling,  general  and  administrative  expenses  were  $11.9  million,  or
     approximately  24% of sales and revenues,  for the quarter ended August 31,
     2004,  compared  to  $10.0  million,  or  approximately  21% of  sales  and
     revenues,  for the quarter ended August 31, 2003. For the current six-month
     period, selling, general and administrative expenses were $23.7 million, or
     approximately  23% of sales and  revenues,  compared to $19.5  million,  or
     approximately  21% of sales  and  revenues,  in the  prior  year  six-month
     period.  The  dollar  increases  in both the three and  six-month  periods,
     compared to the prior year periods,  reflect the impact of additional staff
     added to expand the Company's sales and marketing capabilities,  associated
     recruitment  and  relocation  costs,  as well as expenses  associated  with
     projects to achieve compliance with provisions of the Sarbanes-Oxley Act of
     2002.  During the current year periods,  the Company also  incurred  higher
     professional  fees associated  with  litigation  than in the  corresponding
     prior-year periods, and incurred additional costs associated with its April
     2004 launch and  promotion of its new global brand  identity and  corporate
     image campaign.

     Amortization of Intangible Assets

     For the three and  six-month  periods  ended August 31,  2004,  the Company
     recorded   amortization   expenses  of  $0.3  million  and  $0.6   million,
     respectively,   for  intangible   assets  associated  with  the  June  2002
     acquisition of Gain.  Comparable  amortization expense was $0.3 million and
     $0.7 million for the three and six-month periods ended August 31, 2003.

     Gains on Real Estate Transactions

     During the quarter ended May 31, 2003, 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  was  therefore  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.  As of August 31, 2004,  the
     Company's  remaining  rent  obligation  over  the  term  of this  lease  is
     approximately $0.4 million.

     Other Income and Expense

     During the  quarter  ended May 31,  2003,  the Company  sold its  remaining
     equity investment in Chartered Semiconductor Manufacturing, Ltd., realizing
     losses of $0.7 million,  which are included within Other expense,  net, for
     the six-month period ended August 31, 2003.

     Provision For Income Taxes

     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  Company's  $1.4 million  provision for income taxes for the six months
     ended August 31, 2004 reflects an expected  fiscal 2005  effective tax rate
     of 26.5%,  a reduction  from the 28.5%  effective  rate expected at May 31,
     2004.  This reduction in the anticipated  fiscal 2005 effective  income tax
     rate reflects a higher proportionate impact of 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  reflects the  cumulative
     impact of this lower expected effective income tax rate.

     The $1.7 million provision for income taxes for the six months ended August
     31, 2003  reflected  an effective  tax rate of 32.5% for that  period.  The
     higher expected fiscal 2004 effective tax rate at August 31, 2003, compared
     to the expected  fiscal 2005 effective  income tax rate,  reflected a lower
     proportionate  impact from  expected  income tax credits in fiscal 2004. In
     addition,  operating  results  for the  first six  months  of  fiscal  2004
     included unusual and infrequently occurring real estate and equity security
     sale transactions that, net, provided $0.7 million of pre-tax income. Taxes
     on those transactions were provided for at the Company's  approximate 36.0%
     incremental income tax rate.

     Discontinued Operations

     The Company  had been  involved in an  arbitration  proceeding  with Accton
     Technology Corporation (Accton) and SMC Networks, Inc. (Networks), relating
     to claims  associated with the October 1997 purchase of a majority interest
     in Networks by Accton from SMSC.  The  divestiture  was  accounted for as a
     discontinued operation, and accordingly, costs associated with this action,
     net of income taxes, were reported within Loss from discontinued operations
     on the Consolidated  Statements of Operations.  These costs were negligible
     for the quarter  ended  August 31,  2003,  and totaled $0.2 million for the
     six-month  period  ended  August  31,  2003,  after  applicable  income tax
     benefits. This action was settled during the fourth quarter of fiscal 2004.


     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 liquid  investments  (including
     marketable  securities  with  maturities in excess of one year) were $182.0
     million at August 31,  2004,  compared to $173.9  million at  February  29,
     2004,  an increase of $8.1  million.  The  Company's  operating  activities
     provided  $14.3 million of cash during the first six months of fiscal 2005,
     including  income tax refunds of $6.7  million,  net of income  taxes paid.
     Operating activities for the first six months of fiscal 2004 generated $5.0
     million of cash.

     The  Company's  inventories  were  $27.8  million at August  31,  2004,  an
     increase of $4.6  million  compared to $23.2  million at February 29, 2004.
     Inventories at the Company's distributors also increased during the period,
     as  evidenced   by  the  increase  in  Deferred   income  on  shipments  to
     distributors  from $8.0  million at February  29, 2004 to $12.9  million at
     August 31, 2004. This increase in both the Company's and its  distributors'
     inventories  reflects the impact of a general slowdown in orders across the
     Company's  businesses,  as well as higher anticipated product demand during
     the  upcoming  third  quarter.   Management  considers  inventories  to  be
     appropriate for expected demand.

     Accounts  receivable  increased  from $21.9 million at February 29, 2004 to
     $27.7  million  at August 31,  2004,  an  increase  of $5.8  million.  This
     increase in receivables  reflects a reduction in unclaimed  pricing credits
     by distributors during the period. SMSC accrues a liability for distributor
     pricing credits when the distributor ships the Company's products and earns
     such credits, but the issuance of the actual credit memo to the distributor
     is dependent upon the  distributor's  submission of an appropriate claim to
     SMSC. Delays in distributors' claims for these credits typically results in
     lower than expected accounts receivable  balances,  since the delays result
     in full  collections for certain  invoices against which the distributor is
     actually  entitled to, but has not yet claimed,  a pricing  credit.  It has
     been the Company's  experience  that all such pricing  credits are claimed,
     although the timing of the claims varies by  distributor.  Pricing  credits
     are recorded as a reduction of product  sales when  accrued.  Overall,  the
     Company's accounts receivable portfolio remains almost entirely current.

     Capital  expenditures  for the six-month  period ended August 31, 2004 were
     $6.2 million,  and were  predominantly  for  production  test equipment and
     investments in  intellectual  property used in product  design  activities.
     Capital  expenditures  for the six-month  period ended August 31, 2003 were
     $6.7 million, including $4.3 million in advanced design tools, $2.1 million
     of which was  financed on a short-term  basis by the supplier  with payment
     terms which extended  throughout  fiscal 2004. The $2.1 million  obligation
     was reported within Accounts payable at August 31, 2003.

     The  Company  anticipates  that  capital  expenditures  in fiscal 2005 will
     exceed those incurred during fiscal 2004, due in part to the Company's plan
     to begin  construction of an addition to its primary facility in Hauppauge,
     New York,  during the second half of fiscal  2005.  The current  plan is to
     expand the facility from its current  80,000  square feet to  approximately
     200,000  square feet,  allowing  consolidation  of the Company's  Hauppauge
     operations  into a single  facility  during  fiscal  2006.  The  Company is
     awaiting final regulatory approval for this project.  The Company currently
     expects that the cost of this expansion will be between $15 million and $20
     million.  There were no material commitments for capital expenditures as of
     August 31, 2004.

     During the quarter ended August 31, 2004, the Company filed claims for $7.3
     million of Federal income tax refunds which resulted from the carry back of
     several  capital losses  realized  during fiscal 2004 against capital gains
     reported in previous  fiscal  years.  Refunds of $6.9 million were received
     against  these  claims  during  the  second  quarter,  and  receipt  of the
     remaining $0.4 million  refund is dependent upon  completion of the related
     I.R.S. audit.

     For  federal  income tax  purposes,  the  Company  has $8.3  million of net
     operating loss  carryforwards that are available to offset ordinary taxable
     income generated in fiscal 2005 and beyond.

     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 and for the foreseeable future thereafter.


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

     In December  2003, the FASB revised SFAS No. 132,  "Employers'  Disclosures
     about  Pensions and Other  Postretirement  Benefits."  The revised SFAS 132
     requires  additional  disclosures about plan assets,  benefit  obligations,
     cash  flows,  benefit  costs  and other  relevant  information  related  to
     pensions  and  other  postretirement  benefits.  It also  requires  certain
     disclosures  related to pensions  and other  postretirement  benefits to be
     included in quarterly  filings,  which are  included  within Note 11 to the
     Condensed Consolidated Financial Statements included within this report.

     In March 2004,  the FASB  approved  the  consensus  reached on the Emerging
     Issues   Task  Force  Issue  No.  03-1  (EITF   03-1),   "The   Meaning  of
     Other-Than-Temporary    Impairment   and   Its   Application   to   Certain
     Investments".  The  objective  of this  issue is to  provide  guidance  for
     identifying  impaired  investments.  EITF 03-1 also provides new disclosure
     requirements  for investments  that are deemed to be temporarily  impaired.
     The  accounting  provisions  of EITF 03-1 are  effective  for all reporting
     periods  beginning after June 15, 2004,  while the disclosure  requirements
     are effective for annual  periods  ending after June 15, 2004. In September
     2004,  the EITF  delayed the  effective  date to apply EITF 03-1 on certain
     impaired debt securities. The adoption of this pronouncement did not impact
     the Company's results of operations or financial position.
<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 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,  2004,  the  Company's  $22.4  million of  short-term  and
     long-term  investments  consisted  primarily of  investments  in corporate,
     government and municipal  obligations  with maturities of between three and
     fifteen months.  If market interest rates were to increase  immediately and
     uniformly  by 10  percent  from  levels at August  31,  2004,  the  Company
     estimates that the fair value of these short-term and long-term investments
     would decline by an immaterial  amount.  The Company  generally  expects to
     hold these  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.

     Equity  Price Risk - The  Company  has no  material  investments  in equity
     securities  of other  companies  on its  Consolidated  Balance  Sheet as of
     August 31, 2004.

     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
     and the Pacific Rim region. 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
     2004 or the first six months of fiscal 2005,  and there are no  obligations
     under any such contracts as of August 31, 2004.

     The Company has never received a cash dividend  (repatriation of cash) from
     SMSC Japan.


     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  29,  2004  filed with the  Securities  and  Exchange
     Commission on May 14, 2004.


     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,  2004,  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,  SMSC 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.   The  Company  is  vigorously  defending  the  lawsuit  and
     collecting  evidence  to  support  its  defenses  to  infringement  and its
     allegations  of patent  invalidity  and  unenforceability.  Although  it is
     premature  to assess the outcome of the  litigation,  the Company  believes
     that the allegations against it are without merit.


     ITEM 2.  Changes  in  Securities, Use  of  Proceeds and Issuer Purchases of
              Equity Securities

     (e) Purchases of Equity Securities by the Issuer

     In  October  1998,  the  Company's  Board  of  Directors  approved  a  plan
     authorizing the repurchase 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.

     Activity  under this plan  during the period  covered by this report was as
     follows (shares in thousands):


                   Total    Average    Total Number of      Maximum Number of
                 Number of   Price     Shares Purchased     Shares that May Yet
                  Shares    Paid per  as Part of Publicly   Be Purchased Under
      Period     Purchased   Share      Announced Plans    the Plans or Programs
     ---------------------------------------------------------------------------

      June 2004        -         -               -               1,180
      July 2004        -         -               -               1,180
      August 2004     22   $ 15.80              22               1,158
     -----------------------------------------------------
                      22   $ 15.80              22
     =====================================================

     All purchases during this period were open market transactions.


     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 14, 2004 annual meeting of shareholders.

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

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

     Andrew M. Caggia      15,227,175         1,287,363          --
     Timothy P. Craig      15,372,560         1,141,978          --
     Ivan T. Frisch        15,351,314         1,163,224          --

     Each of the following directors, who were not up for reelection at the July
     14,  2004  annual  meeting  of  shareholders,  will  continue  to  serve as
     directors:  Steven J. Bilodeau, Robert M. Brill, James A. Donahue and Peter
     F. Dicks.

     (2) The 2004 Stock Option Plan was not approved by the following vote:

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

                 2,366,550       11,786,623       431,698     1,929,667

<PAGE>

     (3) The 2004 Restricted Stock Plan was not approved by the following vote:

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

                 4,470,293        9,681,324       433,254     1,929,667

     (4) The 2004  Director  Stock Option Plan was not approved by the following
     vote:


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

                 4,526,467        9,624,550       433,854     1,929,667

     (5) The selection of  PricewaterhouseCoopers  LLP as the Company's auditors
     for the fiscal year ended  February 28, 2005 was ratified by the  following
     vote:

                                                               Broker
                   For            Against         Abstain     Non-votes
                   ---            -------         -------     ---------
                16,405,172           84,633        24,733            --


ITEM 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

    10.1 * - Amendments to Stock Option Plans and Restricted Stock Plans,  dated
    April 7, 2004.

    10.2 * - January 1, 2005 Amendment to the Standard Microsystems  Corporation
    Executive Retirement Plan.

    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 contract or compensatory plan or arrangement.


(b) Reports on Form 8-K

    On June 15,  2004,  SMSC  filed a report  on Form 8-K  pursuant  to which it
    furnished a press release announcing the Company's operating results for the
    first quarter of fiscal 2005.



<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 12, 2004                   By: /s/ Andrew M. Caggia
                                          -------------------------
                                                 (Signature)

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