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 September 27, 2008





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





For
      the
      Transition Period from _______ to _______





Commission
      File Number 0-27026





Pericom
      Semiconductor Corporation


(Exact
      Name of Registrant as Specified in Its Charter)





California
            
            77-0254621(State
                or Other Jurisdiction of
            
            (I.R.S.
                EmployerIncorporation
                or Organization)
            
            Identification
                No.)





3545
      North First Street


San
      Jose,
      California 95134


(408)
      435-0800


(Address
      of Principal Executive Offices and


Issuer’s
      Telephone Number, Including Area Code)




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the registrant
      was required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days.    Yes  x No  o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act:


Large
                accelerated filer ̈
            
            Accelerated filerxNon-accelerated filer ̈(Do not check if a smaller reporting company)
            
            Smaller reporting company ̈




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).    Yes  ̈ No x





As
      of
      October 31, 2008, there were 25,561,528 shares of the registrant’s Common Stock
      outstanding.








Pericom
      Semiconductor Corporation





Form
      10-Q
      for the Quarter Ended September 27, 2008





INDEX





PagePART
                I. FINANCIAL INFORMATIONItem
                1:
            Condensed
                Consolidated Financial Statements (Unaudited)
            3Condensed
                Consolidated Balance Sheets as of
              September
                27, 2008 and June 28, 2008
            3Condensed
                Consolidated Statements of Operations
              for
                the three months ended September 27, 2008 and September 29,
                2007
            4Condensed
                Consolidated Statements of Cash Flows
              for
                the three months ended September 27, 2008 and September 29,
                2007
            5Notes
                to Condensed Consolidated Financial Statements
            6Item
                2:
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            18Item
                3:
            Quantitative
                and Qualitative Disclosures about Market Risk
            29Item
                4:
            Controls
                and Procedures
            29PART
                II. OTHER INFORMATIONItem
                1A:
            Risk
                Factors
            29Item
                2:
            Unregistered
                Sale of Equity Securities and Use of Proceeds
            39Item
                6:
            Exhibits
            40Signatures
            
            40




2


PART
      I.
      FINANCIAL INFORMATION


Item
      1:
      Condensed Consolidated Financial Statements





Pericom
      Semiconductor Corporation


Condensed
      Consolidated Balance Sheets


(In
      thousands, except share data)





September 27,
            
            June 28,2008
            
            2008(unaudited)
            
            (1)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            39,069
            
            $
            41,646Short-term
                investments in marketable securities
            
            
            45,589
            
            
            72,108Accounts
                receivable:Trade
                (net of allowances of $2,163 and $1,950)
            
            
            32,397
            
            
            29,002Other
                receivables
            
            
            1,817
            
            
            1,684Inventories
            
            
            18,740
            
            
            17,921Prepaid
                expenses and other current assets
            
            
            4,895
            
            
            5,943Deferred
                income taxes
            
            
            3,996
            
            
            3,344Total
                current assets
            
            
            146,503
            
            
            171,648Property,
                plant and equipment – net
            
            
            28,751
            
            
            29,173Investments
                in unconsolidated affiliates
            
            
            10,512
            
            
            10,392Deferred
                income taxes – non-current
            
            
            4,554
            
            
            4,543Long-term
                investments in marketable securities
            
            
            36,332
            
            
            10,171Goodwill
            
            
            1,325
            
            
            1,325Intangible
                assets (net of accumulated amortization of $806 and $772)
            
            
            1,090
            
            
            1,140Other
                assets
            
            
            3,283
            
            
            3,191Total
                assets
            
            $
            232,350
            
            $
            231,583LIABILITIES
                AND SHAREHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable
            
            $
            14,831
            
            $
            13,431Accrued
                liabilities
            
            
            7,874
            
            
            8,779Total
                current liabilities
            
            
            22,705
            
            
            22,210Deferred
                tax liabilities
            
            
            800
            
            
            800Income
                tax liability
            
            
            1,018
            
            
            -Minority
                interest in consolidated subsidiaries
            
            
            1,163
            
            
            1,118Total
                liabilities
            
            
            25,686
            
            
            24,128Shareholders’
                equity:Common
                stock and paid in capital - no par value, 60,000,000 shares authorized;
                shares issued and outstanding: September 27, 2008, 25,562,000; June
                28,
                2008, 25,703,000.
            
            
            130,580
            
            
            132,028Retained
                earnings
            
            
            76,087
            
            
            72,162Accumulated
                other comprehensive income (loss), net of tax
            
            
            (3
            )
            
            3,265Total
                shareholders’ equity
            
            
            206,664
            
            
            207,455Total
                liabilities and shareholders' equity
            
            $
            232,350
            
            $
            231,583





(1)
      The
      information in this column was derived from the Company’s audited consolidated
      financial statements for the year ended June 28, 2008 .




See
      notes
      to condensed consolidated financial statements.


3





Pericom
      Semiconductor Corporation


Condensed
      Consolidated Statements of Operations


(In
      thousands, except per share amounts, unaudited)





Three Months EndedSeptember 27,
            
            September 29,2008
            
            2007Net
                revenues
            
            $
            43,896
            
            $
            38,468Cost
                of revenues
            
            
            27,914
            
            
            24,467Gross
                profit
            
            
            15,982
            
            
            14,001Operating
                expenses:Research
                and development
            
            
            4,221
            
            
            4,082Selling,
                general and administrative
            
            
            6,901
            
            
            5,839Total
            
            
            11,122
            
            
            9,921Income
                from operations
            
            
            4,860
            
            
            4,080Interest
                and other income, net
            
            
            1,106
            
            
            1,370Other
                than temporary decline in value of investments
            
            
            (44
            )
            
            -Income
                before income tax expense
            
            
            5,922
            
            
            5,450Income
                tax expense
            
            
            2,069
            
            
            1,691Minority
                interest in (income) loss of consolidated subsidiaries
            
            
            (45
            )
            
            3Equity
                in net income of unconsolidated affiliates
            
            
            117
            
            
            121Net
                income
            
            $
            3,925
            
            $
            3,883Basic income
                per share
            
            $
            0.15
            
            $
            0.15Diluted income
              per share
            
            $
            0.15
            
            $
            0.15Shares
                used in computing basic income per share
            
            
            25,679
            
            
            25,745Shares
                used in computing diluted income per share
            
            
            26,239
            
            
            26,379





See
      notes
      to condensed consolidated financial statements.


4


Pericom
      Semiconductor Corporation


Condensed
      Consolidated Statements of Cash Flows


(In
      thousands, unaudited)


Three Months EndedSeptember 27,
                
                September 29,2008
                
                2007CASH FLOWS FROM OPERATING ACTIVITIES:Net
                    income
                
                $
                3,925
                
                $
                3,883Adjustments
                    to reconcile net income to net cash provided by operating activities:Depreciation
                    and amortization
                
                
                1,964
                
                
                1,178Share-based
                    compensation
                
                
                795
                
                
                508Tax
                    benefit related to share-based transactions
                
                
                -
                
                
                (34
                )Excess
                    tax benefit on share-based transactions
                
                
                (58
                )
                
                (55
                )Other
                    than temporary decline in value of investments
                
                
                44
                
                
                -Gain
                    on sale of investments
                
                
                (25
                )
                
                -Gain
                    on disposal of assets
                
                
                -
                
                
                (7
                )Equity
                    in net income of unconsolidated affiliates
                
                
                (117
                )
                
                (121
                )Deferred
                    taxes
                
                
                (643
                )
                
                (105
                )Minority
                    interest in consolidated subsidiary income (loss)
                
                
                45
                
                
                (3
                )Changes
                    in assets and liabilities:Accounts
                    receivable
                
                
                (4,169
                )
                
                (1,758
                )Inventories
                
                
                (1,017
                )
                
                (1,271
                )Prepaid
                    expenses and other current assets
                
                
                1,005
                
                
                18Other
                    assets
                
                
                (248
                )
                
                (943
                )Accounts
                    payable
                
                
                1,915
                
                
                1,875Other
                    accrued liabilities
                
                
                307
                
                
                1,476Other
                    long term liabilities
                
                
                -
                
                
                (8
                )Net
                    cash provided by operating activities
                
                
                3,723
                
                
                4,633CASH
                    FLOWS FROM INVESTING ACTIVITIES:Additions
                    to property and equipment
                
                
                (2,468
                )
                
                (1,439
                )Purchase
                    of available for sale investments
                
                
                (29,458
                )
                
                (63,888
                )Maturities
                    and sales of available for sale investments
                
                
                28,470
                
                
                42,453Net
                    cash used in investing activities
                
                
                (3,456
                )
                
                (22,874
                )CASH
                    FLOWS FROM FINANCING ACTIVITIES:Sale
                    of common stock
                
                
                426
                
                
                667Excess
                    tax benefit on share-based compensation
                
                
                58
                
                
                55Payments
                    on debt
                
                
                -
                
                
                (98
                )Repurchase
                    of common stock
                
                
                (2,668
                )
                
                (4,958
                )Net
                    cash used in financing activities
                
                
                (2,184
                )
                
                (4,334
                )EFFECT
                    OF EXCHANGE RATE CHANGES ON CASH AND CASH
                    EQUIVALENTS
                
                
                (660
                )
                
                212NET
                    DECREASE IN CASH AND CASH EQUIVALENTS
                
                
                (2,577
                )
                
                (22,363
                )CASH
                    AND CASH EQUIVALENTS:Beginning
                    of period
                
                
                41,646
                
                
                29,173End
                    of period
                
                $
                39,069
                
                $
                6,810





See
      notes
      to condensed consolidated financial statements.


5





Pericom
      Semiconductor Corporation


Notes
      To
      Condensed Consolidated Financial Statements


(Unaudited)





**1.
      BASIS OF PRESENTATION**





The
      condensed consolidated financial statements have been prepared by Pericom
      Semiconductor Corporation (“Pericom” or the “Company”) pursuant to the rules and
      regulations of the Securities and Exchange Commission. In the opinion of
      management, these accompanying unaudited condensed consolidated financial
      statements include all adjustments, consisting only of normal recurring
      adjustments and accruals, necessary for a fair presentation of the Company’s
      financial position as of September 27, 2008, the results of operations for
      the
      three months ended September 27, 2008 and September 29, 2007, and cash flows
      for
      the three months ended September 27, 2008 and September 29, 2007. Each period
      presented had 13 weeks. The condensed consolidated balance sheet at June 28,
      2008 was derived from audited financial statements as of that date but does
      not
      include all disclosures required by U.S. generally accepted accounting
      principles for complete financial statements. These unaudited quarterly
      information should be read in conjunction with the audited consolidated
      financial statements of Pericom and the notes thereto incorporated by reference
      in the Company’s Annual Report on Form 10-K as filed with the Securities and
      Exchange Commission on September 11, 2008.





The
      Company was incorporated in June 1990 in the state of California. The Company
      designs, manufactures and markets high performance digital, analog and
      mixed-signal integrated circuits (“IC”s) and frequency control products (“FCP”s)
      used for the transfer, routing, and timing of digital and analog signals within
      and between computer, networking, datacom and telecom systems.





The
      preparation of these interim condensed consolidated financial statements in
      conformity with accounting principles generally accepted in the United States
      of
      America requires management to make estimates and assumptions that affect the
      reported amounts of assets, liabilities, revenues and expenses during the
      reporting period. Actual results could differ from those estimates. The
      Company’s results of operations for the three month periods ended September 27,
      2008 and September 29, 2007 are not necessarily indicative of the results to
      be
      expected for the entire year.





These
      interim condensed consolidated financial statements include the accounts of
      Pericom Semiconductor Corporation and its wholly owned subsidiaries, Pericom
      Semiconductor (HK) Limited and Pericom Asia Limited (“PAL”) as well as its two
      majority owned subsidiaries, SaRonix-eCERA Corporation (“SRe”) and Pericom
      Taiwan Limited Corporation (“PTL”). In January 2008, we initiated a project to
      build a factory in China for the development and manufacture of FCPs. The
      factory will be located in the Jinan Development Zone in Shandong Province.
      It
      is expected that our total investment will be approximately $35 million over
      the
      next two years. We have land use rights for 75 acres, and the factory is being
      designed for 13 surface mount device (“SMD”) production lines, with Phase I
      expected to be completed late in fiscal 2009. We have established PSE Technology
      (Shandong) Corporation ("PSE") in China to develop and operate the factory.
      PSE
      is a wholly-owned subsidiary of PAL. The Company eliminates all significant
      intercompany balances and transactions in consolidation.





**Recently
      Issued Accounting Standards**





Updates
      to recent accounting standards as disclosed in Pericom’s Annual Report on
      Form 10-K for the fiscal year ended June 28, 2008 are as
      follows:





In
      May 2008, the Company adopted Statement of Financial Accounting Standards,
      or “SFAS”, (“SFAS No. 162”), “The Hierarchy of Generally Accepted
      Accounting Principles”. SFAS No. 162 was intended to improve financial
      reporting by identifying a consistent framework, or hierarchy, for selecting
      accounting principles to be used in preparing financial statements that are
      presented in conformity with generally accepted accounting principles in the
      United States for non-governmental entities. SFAS No. 162 is effective
      November 15, 2008. The
      adoption of SFAS No. 162 did not have an impact on the Company’s
      consolidated financial position or results of operation.


6





On June
      29, 2008, the Company adopted SFAS No. 157, "Fair Value Measurements" ("SFAS
      157") for financial assets and liabilities, which clarifies the meaning of
      fair
      value, establishes a framework for measuring fair value and expands disclosures
      about fair value measurements.  Fair value is defined under SFAS No.
      157 as the exchange price that would be received for an asset or paid to
      transfer a liability in the principal or most advantageous market for the assets
      or liabilities in an orderly transaction between market participants on the
      measurement date.  Subsequent changes in fair value of these financial
      assets and liabilities are recognized in earnings or other comprehensive income
      when they occur. The effective date of the provisions of SFAS No.157 for
      non-financial assets and liabilities is the fiscal year beginning June 28,
      2009,
      except for items recognized at fair value on a recurring basis.  The
      Company is currently evaluating the impact of the provisions for non-financial
      assets and liabilities.  The adoption of SFAS No. 157 for financial
      assets and liabilities did not have an impact on the Company's consolidated
      financial position or results of operations.  For additional
      information on the fair value of financial assets and liabilities, see Note
      13,
      Fair Value Measurements.





In
      December 2007, the FASB issued Statement of Financial Accounting Standards,
      SFAS
      No. 141 (Revised 2007), "Business Combinations" ("SFAS No. 141(R)"). SFAS
      No. 141(R) establishes principles and requirements for how the acquirer of
      a business recognizes and measures in its financial statements the identifiable
      assets acquired, the liabilities assumed and any noncontrolling interest in
      the
      acquiree. SFAS No. 141(R) also provides guidance for recognizing and
      measuring the goodwill acquired in the business combination and determines
      what
      information to disclose to enable users of the financial statements to evaluate
      the nature and financial effects of the business combination. The provisions
      of
      SFAS No.141(R) are effective for the fiscal year beginning June 28,
      2009.  The Company is currently evaluating the impact of the
      provisions of SFAS No. 141(R).




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements-an Amendment of ARB No. 51” (“SFAS
      No. 160”). SFAS No. 160 establishes new accounting and reporting
      standards for a non-controlling interest in a subsidiary and for the
      deconsolidation of a subsidiary. Specifically, this statement requires the
      recognition of a non-controlling interest (minority interest) as equity in
      the
      consolidated financial statements separate from the parent’s equity. The amount
      of net income attributable to the non-controlling interest will be included
      in
      consolidated net income on the face of the income statement. SFAS No. 160
      clarifies that changes in a parent’s ownership interest in a subsidiary that do
      not result in deconsolidation are equity transactions if the parent retains
      its
      controlling financial interest. In addition, this statement requires that a
      parent recognize a gain or loss in net income when a subsidiary is
      deconsolidated. Such gain or loss will be measured using the fair value of
      the
      non-controlling equity investment on the deconsolidation date. SFAS No. 160
      also includes expanded disclosure requirements regarding the interests of the
      parent and its non-controlling interest. The provisions of SFAS No. 160 are
      effective for the fiscal year beginning June 28, 2009 and the presentation
      and disclosure requirements must be applied retrospectively for all periods
      presented at that date. We are currently evaluating the impact that SFAS
      No. 160 will have on our financial statements.


7




**2.
      INTANGIBLE ASSETS**




Pericom’s
      intangible assets are derived from completed acquisitions and for each of the
      following periods are composed of:





**(in
                thousands)**
            
            **September 27, 2008**
            
            **June 28, 2008****Gross**
            
            **Accumulated**
              **Amortization**
            
            **Net**
            
            **Gross**
            
            **Accumulated**
              **Amortization**
            
            **Net**eCERA
                customer relationships
            
            $
            112
            
            $
            (112
            )
            $
            -
            
            $
            117
            
            $
            (111
            )
            $
            6eCERA
                trade name
            
            
            41
            
            
            (18
            )
            
            23
            
            
            43
            
            
            (17
            )
            
            26Core
                developed technology
            
            
            931
            
            
            (582
            )
            
            349
            
            
            939
            
            
            (566
            )
            
            373SaRonix
                supplier relationship
            
            
            397
            
            
            (94
            )
            
            303
            
            
            398
            
            
            (78
            )
            
            320Total
                amortizable purchased intangible assets
            
            
            1,481
            
            
            (806
            )
            
            675
            
            
            1,497
            
            
            (772
            )
            
            725SaRonix
                trade name
            
            
            415
            
            
            -
            
            
            415
            
            
            415
            
            
            -
            
            
            415Total
                purchased intangible assets
            
            $
            1,896
            
            $
            (806
            )
            $
            1,090
            
            $
            1,912
            
            $
            (772
            )
            $
            1,140





Amortization
      expense related to finite-lived purchased intangible assets was approximately
      $42,000 and $44,000 for the three month periods ended September 27, 2008 and
      September 29, 2007, respectively.




The
      Company performs an impairment review of its intangible assets at least
      annually, in conformity with SFAS No. 142, *Goodwill
      and Other Intangible Assets* (“SFAS
      No. 142”). Based on the results of its most recent impairment review, the
      Company determined that no impairment of its intangible assets existed as of
      June 28, 2008. However, future impairment reviews could result in a charge
      to
      earnings.





The
      finite-lived purchased intangible assets consist of supplier relationships,
      trade names and core developed technology, which have remaining average useful
      lives of approximately five years. We expect our future amortization expense
      associated with the Company’s intangible assets over the next five years to be:


**Next 12**
              
              **13-24**
              
              **25-36**
              
              **37-48**
              
              **49-60****(in thousands)**
              
              **Months**
              
              **Months**
              
              **Months**
              
              **Months**
              
              **Months**Expected
                  amortization-eCERA
              
              $
              29
              
              $
              29
              
              $
              29
              
              $
              27
              
              $
              -Expected
                  amortization-SaRonix
              
              
              117
              
              
              117
              
              
              117
              
              
              117
              
              
              94$
              146
              
              $
              146
              
              $
              146
              
              $
              144
              
              $
              94




8





**3.
      INCOME PER SHARE**





Basic
      income per share is based upon the weighted average number of common shares
      outstanding. Diluted income per share reflects the additional potential dilution
      that could occur if securities or other contracts to issue common stock were
      exercised or converted into common stock.





Basic
      and
      diluted income per share for the three month periods ended September 27, 2008
      and September 29, 2007 are computed as follows:





**(in
                thousands, except per share data)**
            
            **Three Months Ended****September 27,**
              **2008**
            
            **September 29,**
              **2007**Net
                income
            
            $
            3,925
            
            $
            3,883Computation
                of common shares outstanding – basic earnings per
                share:Weighted
                average shares of common stock
            
            
            25,679
            
            
            25,745Computation
                of common shares outstanding – diluted earnings per
                share:Weighted
                average shares of common stock
            
            
            25,679
            
            
            25,745Assumed
                conversion of dilutive stock options and awards
            
            
            600
            
            
            634Shares
                used in computing diluted earnings per share
            
            
            26,239
            
            
            26,379Basic
                and diluted earnings per share
            
            $
            0.15
            
            $
            0.15





Options
      to purchase 1,828,185 and 2,676,189 shares of common stock and restricted stock
      units of 60,181 and 0 were outstanding as of September 27, 2008, and September
      29, 2007 for the three months ended respectively, but not included in the
      computation of diluted earnings per share because the awards would be
      anti-dilutive.





**4.
      INVENTORIES**





Inventories
      consist of:





**(in thousands)**
            
            **September 27,**
            
            **June 28,****2008**
            
            **2008**Raw
                materials
            
            $
            7,866
            
            $
            6,326Work
                in process
            
            
            5,204
            
            
            4,472Finished
                goods
            
            
            5,670
            
            
            7,123$
            18,740
            
            $
            17,921




The
      Company considers raw material inventory obsolete and writes it off if the
      raw
      material has not moved in 365 days. The Company reviews its assembled devices
      for excess and writes them off if the quantity of assembled devices in inventory
      is in excess of the greater of the quantity shipped in the previous twelve
      months, the quantity in backlog or the quantity forecasted to be shipped in
      the upcoming twelve months. In certain circumstances, management will
      determine, based on expected usage or other factors, that inventory considered
      excess by these guidelines should not be written off. As of September 27, 2008,
      the Company had $4.4 million of written-off inventory as compared to $5.0
      million at June 28, 2008. The Company attributes this reduction of approximately
      $0.6 million in written-off inventory between September 27, 2008 and June 28,
      2008 as well as selling of some of the previously written off
      inventory.


9





**5.
      ACCRUED LIABILITIES**





Accrued
      liabilities consist of:


**(in thousands)**
              
              **September 27,**
              
              **June 28,****2008**
              
              **2008**Accrued
                  compensation
              
              $
              5,700
              
              $
              6,089Other
                  accrued expenses
              
              
              2,174
              
              
              2,690$
              7,874
              
              $
              8,779




**6.
      INDUSTRY AND SEGMENT INFORMATION**





The
      following table indicates the percentage of our net revenues and accounts
      receivable in excess of 10% with any single customer:




**Percentage of Net Revenues**
              **Three months ended****September 27, 2008**
            
            **September 29, 2007**Customer A
            
            
            18
            %
            
            14
            %Customer B
            
            
            14
            
            
            7Customer
                C
            
            
            *
            
            
            *All
                others
            
            
            68
            
            
            79100
            %
            
            100
            %





**Percentage of Trade Accounts Receivable****September 27, 2008**
            
            **June 28, 2008**Customer A
            
            
            16
            %
            
            16
            %Customer
                B
            
            
            *
            
            
            *Customer
                C
            
            
            10
            
            
            *All
                others
            
            
            74
            
            
            84100
            %
            
            100
            %




*
      less
      than 10% of total net revenues and accounts receivable





For
      geographical reporting, we attribute net sales to the country where customers
      are located (the “bill to” location). We neither conduct business in nor sell to
      persons in Iran, Syria, Sudan, or North Korea, countries located in the
      referenced regions that are identified as state sponsors of terrorism by the
      U.S. Department of State, and are subject to U.S. economic sanctions and export
      controls. Long-lived assets consist of all non-monetary assets, excluding
      non-current deferred tax assets, goodwill and intangible assets. We attribute
      long-lived assets to the country where they are located. The following tables
      reflects our net sales for the three month periods ended September 27, 2008
      and
      September 29, 2007, and net book values of long-lived assets as of September
      27,
      2008 and June 28, 2008 by geographical segment:


**(in thousands)**
              
              **Net Revenues****September 27, 2008**
              
              **September 29, 2007**China (including Hong Kong)
              
              $
              15,433
              
              $
              15,387United States
              
              
              2,504
              
              
              3,847Taiwan
              
              
              18,323
              
              
              11,156Singapore
              
              
              2,069
              
              
              1,923Others
                  (less than 10% each)
              
              
              5,567
              
              
              6,155Total
                  net sales
              
              $
              43,896
              
              $
              38,468




10




**(in thousands)**
              
              **Total Long-Lived Assets********September 27, 2008**
              
              **June 28, 2008**China
                  (including Hong Kong)
              
              $
              522
              
              $
              345United
                  States
              
              
              5,071
              
              
              6,622Taiwan
              
              
              21,723
              
              
              23,402Korea
              
              
              1,011
              
              
              856Singapore
              
              
              324
              
              
              353Others
                  (less than 10% each)
              
              
              100
              
              
              60Total
                  long-lived assets
              
              $
              28,751
              
              $
              31,638





**7.
      STOCK REPURCHASE PROGRAM**




On
      April
      26, 2007, the Company’s Board of Directors authorized the repurchase of 2.0
      million shares and on April 29, 2008, our Board of Directors authorized the
      repurchase of an additional $30 million of our common stock. Pursuant to the
      2007 authority, the Company repurchased 139,190 shares in the three months
      ended
      September 27, 2008 for an aggregate cost of $1.9 million and completed the
      repurchase of 2,000,000 shares at a cost of approximately $25.2 million.
      Pursuant to the 2008 authority, the Company repurchased 60,810 shares in the
      three months ended September 27, 2008 for an aggregate cost of $0.8 million.
      During the same period in fiscal 2008, the Company repurchased approximately
      454,000 shares for an aggregate cost of $5.0 million.





Repurchases
      may be made from time to time in the open market or through private transactions
      at the discretion of Company management. Current cash balances and the proceeds
      from stock option exercises and purchases in the stock purchase plan have funded
      stock repurchases in the past, and the Company expects to fund future stock
      repurchases from these same sources.





Repurchase
      activity is summarized as follows:




**Three Months Ended****September 27, 2008**
            
            **September 29, 2007**Shares repurchased
            
            
            200,000
            
            
            454,000Average price
                per share
            
            $
            13.34
            
            $
            10.93Aggregate
                purchase price of shares repurchased including commissions
            
            $
            2.7
                million
            
            $
            5.0
                million





**8.
      MINORITY INTEREST**





The
      Company consolidates its subsidiaries Pericom Taiwan Limited (PTL) and SRe,
      each
      of which has a minority interest. During the three months ended December 31,
      2004, the Company sold 6.82% of PTL to its employees for $315,000 in cash.
      This
      minority interest was approximately 7.86% of the outstanding shares at September
      27, 2008, and as of this date the value of the minority interest in PTL was
      negligible. Parties other than the Company own approximately 2.71% of the
      outstanding shares of SRe at September 27, 2008, and as of this date the
      minority interest in SRe was valued at $1.2 million.




**9.
      SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION**





**Preferred
      Stock:** The
      Company’s shareholders have authorized the Board of Directors to issue 5,000,000
      shares of preferred stock from time to time in one or more series and to fix
      the
      rights, privileges and restrictions of each series. As of September 27, 2008,
      the Company has issued no shares of preferred stock.





**Option
      Plans** ***:*** At
      September 27, 2008, the Company had four stock option plans, consisting of
      the
      1995 Stock Option Plan, 2001 Stock Option Plan, SaRonix Acquisition Stock Option
      Plan, and the 2004 Stock Incentive Plan. Under these plans, the Company has
      reserved an aggregate of 5.1 million shares of common stock as of September
      27,
      2008 for issuance to employees, officers, non-employee board members and
      non-employee service providers of the Company in the form of incentive or
      nonqualified stock options, or grants of restricted stock. The Company may
      grant
      options at the fair value and not less than 85% of the fair value on the grant
      date for incentive stock options and nonqualified stock options, respectively.
      Options vest over periods of up to 72 months as determined by the Board of
      Directors. Options granted under the Plans expire 10 years from the grant
      date.


11





**Employee
      Stock Purchase Plan:** The
      Company’s 2000 Employee Stock Purchase Plan, or “ESPP”, allows eligible
      employees of the Company to purchase shares of Common Stock through payroll
      deductions. The Company reserved 2.1 million shares of the Company’s Common
      Stock for issuance under this Plan, of which 519,366 remain available at
      September 27, 2008. Under this plan, eligible employees may purchase Common
      Stock at a discount through payroll deductions, during 24-month purchase
      periods. The Company divides each purchase period into eight consecutive
      three-month accrual periods. Participants in this Plan may purchase stock at
      85%
      of the lower of the stock’s fair market value on the first day of the purchase
      period or the last day of the accrual period. The maximum number of shares
      of
      Common Stock that any employee may purchase under this Plan during any accrual
      period is 1,000 shares. During the first quarter of fiscal years 2009 and 2008,
      the Company issued 24,956 and 34,726 shares of common stock at weighted
      average prices of $10.76 and $6.96.





The
      following table summarizes activity in the Company’s employee stock purchase
      plan during the three months ended September 27, 2008:




**Weighted****Average Purchase****Shares**
            
            **Price**Beginning available
            
            
            544,323Purchases
            
            
            (24,956
            )
            $
            10.76Ending
                available
            
            
            519,367





**SHARE-BASED
      COMPENSATION**





**Valuation
      Assumptions:** ****** The
      fair
      value of the Company’s stock options granted to employees, officers,
      non-employee board members, non-employee service providers and ESPP shares
      granted to employees for the three months ended September 27, 2008 and September
      29, 2007 was estimated using the following weighted average
      assumptions:





**September 27, 2008**
            
            **September 29, 2007****Option Plan**Dividend
                yield
            
            
            None
            
            
            NoneExpected
                volatility
            
            
            46
            %
            
            44
            %Risk
                free interest rate
            
            
            3.29
            %
            
            4.60
            %Expected
                life
            
            
            5.22
                years
            
            
            4.98
                yearsWeighted
                average fair value at grant date
            
            $
            6.64
            
            $
            4.79**Employee
                Stock Purchase Plan**Dividend
                yield
            
            
            None
            
            
            NoneExpected
                volatility
            
            
            61
            %
            
            40
            %Risk
                free interest rate
            
            
            2.19
            %
            
            4.95
            %Expected
                life
            
            
            1.13
                years
            
            
            1.13
                yearsWeighted
                average fair value for grant period
            
            $
            4.31
            
            $
            3.35




12


**Share-Based
      Compensation Plan Activities**





**Stock
      Options:** ****** A
      summary
      of option activity during the three months ended September 27, 2008 is presented
      below:





**Weighted****Average****Weighted**
            
            **Remaining**
            
            **Aggregate****Shares**
            
            **Average**
            
            **Contractual Term**
            
            **Intrinsic Value****(in thousands)**
            
            **Exercise Price**
            
            **(Years)**
            
            **(in millions)**Options outstanding at June 28, 2008
            
            
            3,874
            
            $
            13.42
            
            
            5.20
            
            $
            16.7Granted
            
            
            274
            
            $
            15.12Exercised
            
            
            (34
            )
            $
            5.00
            
            
            
            
            $
            *Cancelled
                or Expired
            
            
            (26
            )
            $
            15.54Options
                outstanding at September 27, 2008
            
            
            4,088
            
            $
            13.59
            
            
            5.27
            
            $
            5.5Options
                vested and expected to vest after September 27, 2008, net of
                forfeitures
            
            
            3,782
            
            $
            13.74
            
            
            5.00
            
            $
            5.1Options
                exercisable at September 27, 2008
            
            
            2,914
            
            $
            14.16
            
            
            3.88
            
            $
            4.2




*
      less
      than $1.0 million





At
      September 27, 2008, expected future compensation expense relating to options
      outstanding on September 27, 2008 is $5.3 million over a weighted-average period
      of 2.75 years.





**Restricted
      Stock Units:** ****** Restricted
      stock units (“RSUs”) are converted into shares of the Company’s common stock
      upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject
      to
      the employee’s continuing service to the Company. RSUs, generally vest over a
      period of 4 years and are expensed ratably on a straight-line basis over their
      respective vesting period net of estimate forfeitures.  The fair value of
      RSUs granted pursuant to the Company’s 2004 Stock Incentive Plan, is the product
      of the number of shares granted and the grant date fair value of our common
      stock as calculated under the 2004 Stock Incentive Plan. Expected future
      compensation expense relating to RSUs outstanding on September 27, 2008 is
      $1.3
      million over a weighted-average period of 3.9 years.  A summary of activity
      of RSUs as of September 27, 2008 is presented below:





**Weighted**
            
            **Aggregate****Average Grant**
            
            **Intrinsic Value****Shares**
            
            **Date Fair Value**
            
            **(in thousands)**Non-vested share units at June 28, 2008
            
            
            -
            
            $
            -
            
            $
            -Granted
            
            
            118,320
            
            $
            15.06Vested
            
            
            
            
            $
            —
            
            $
            -Forfeited
            
            
            (1,300
            )
            $
            15.06Non-vested
                share units at September 27, 2008
            
            
            117,020
            
            
            
            
            $
            1,360




**Employee
      Stock Purchase Plan:** ****** At
      September 27, 2008, there was $0.5 million of unrecognized compensation
      cost related to ESPP is expected to be recognized over a period of approximately
      1 year.





**Share-based
      Compensation Expense:** ******


We
      value
      our option plan shares and our employee stock purchase plan shares using the
      Black-Scholes-Merton option-pricing model. The Company recorded $795,000 and
      $508,000 of share-based compensation expense for the three months ended
      September 27, 2008 and September 29, 2007, respectively, that included the
      following:




13




**(in thousands)**
              
              **Three months ended****September 27, 2008**
              
              **September 29, 2007**Share-based compensation expense by caption:Cost
                  of revenues
              
              $
              51
              
              $
              29Research
                  and development
              
              
              307
              
              
              150Selling,
                  general and administrative
              
              
              437
              
              
              329Pre-tax
                  share-based compensation expense
              
              
              795
              
              
              508Income
                  tax impact
              
              
              278
              
              
              134Net
                  share-based compensation expense
              
              $
              517
              
              $
              374Share-based
                  compensation expense by type of award:Stock
                  options
              
              $
              573
              
              $
              402Restricted
                  stock units
              
              
              51
              
              
              -ESPP
              
              
              171
              
              
              106Total
                  share-based compensation expense
              
              $
              795
              
              $
              508





The
      amount of share-based compensation expense in inventory at September 27, 2008
      and June 28, 2008 is immaterial.





**10.
      INCOME TAXES**




**Accounting
      for Uncertainty in Income Taxes**




Effective
      July 1, 2007, the Company adopted Financial Accounting Standards Interpretation
      No. 48, *Accounting
      for Uncertainty in Income Taxes*–*an interpretation of FASB
      Statement No. 109* (“FIN
      No.
      48”). FIN No. 48 prescribes a recognition threshold and measurement attribute
      for the financial statement recognition and measurement of uncertain tax
      positions taken or expected to be taken in a company’s income tax return, and
      also provides guidance on derecognition, classification, interest and penalties,
      accounting in interim periods, disclosure, and transition. FIN No. 48 utilizes
      a
      two-step approach for evaluating uncertain tax positions accounted for in
      accordance with SFAS No. 109, *Accounting
      for Income Taxes* (“SFAS
      No. 109”). Step one, Recognition, requires a company to determine if the weight
      of available evidence indicates that a tax position is more likely than not
      to
      be sustained upon audit, including resolution of related appeals or litigation
      processes, if any. Step two, Measurement, is based on the largest amount of
      benefit which is more likely than not to be realized on ultimate settlement.
      The
      cumulative effect of adopting FIN No. 48 on July 1, 2007 is recognized as a
      change in accounting principle, recorded as an adjustment to the opening balance
      of retained earnings on the adoption date.




As
      a
      result of the implementation of FIN No. 48, the Company recognized no change
      in
      the liability for unrecognized tax benefits related to tax positions taken
      in
      prior periods. All positions taken in its US and foreign returns with respect
      to
      any book-tax adjustments were highly certain, and accordingly the Company did
      not record any valuation adjustments against those positions. Upon adoption
      of
      FIN No. 48, the Company’s policy to include interest and penalties related to
      unrecognized tax benefits within the Company’s provision for income taxes did
      not change. As of September 27, 2008, the Company had accrued interest and
      penalties of $120,000 related to unrecognized tax benefits. The Company’s total
      amount of unrecognized tax benefits as of September 27, 2008 was $898,000.
      All
      of this amount would affect the corporation’s tax rate if recognized. The tax
      years 2003 to 2007 remain open in the United States.




**Income
      Tax Expense**




Income
      tax expense for the three months ended September 27, 2008 and September 29,
      2007
      was $2.1 million and $1.7 million, respectively, and was comprised of domestic,
      federal and state income tax, foreign income tax and withholding tax.




14




**11.
      INVESTMENTS IN UNCONSOLIDATED AFFILIATES**





Our
      investment in unconsolidated affiliates is comprised of the
      following:


**September 27,**
              
              **June 28,****(in thousands)**
              
              **2008**
              
              **2008**Pericom Technology, Inc.
              
              $
              8,565
              
              $
              8,505Jiyuan
                  Crystal Photoelectric Frequency Technology Ltd.
              
              
              1,947
              
              
              1,887Total
              
              $
              10,512
              
              $
              10,392




The
      Company has an approximate 44.1% ownership interest in Pericom Technology,
      Inc.
      (“PTI”). Pericom accounts for its investment in PTI using the equity method due
      to the Company’s significant influence over its operations. In addition, certain
      of the directors of the Company are directors of PTI, and certain shareholders
      of the Company are shareholders of PTI. At September 27, 2008 and June 28,
      2008,
      the Company's carrying value of the investment in PTI exceeded the Company’s
      underlying equity in the net assets of PTI by $482,000 and $550,000,
      respectively. PTI was incorporated in 1994, and in 1995 established a design
      center and sales office to pursue opportunities and participate in joint
      ventures in the People’s Republic of China (“China”). The Company purchased
      $19,000 and $6,000 in goods and services from PTI during the three months ended
      September 27, 2008 and September 29, 2007, respectively. PTI owed the Company
      $54,000 and $123,000 at September 27, 2008 and June 28, 2008, respectively
      for
      reimbursement of certain administrative expenses incurred by the Company on
      behalf of PTI and for advances made to PTI by the Company.




SRe
      has a
      49% equity interest in Jiyuan
      Crystal Photoelectric Frequency Technology Ltd .
      (“JCP”), an FCP manufacturing company located in Science Park of Jiyuan City,
      Henan Province, China. JCP is a key manufacturing partner of SRe. For the first
      quarter fiscal 2009 and 2008, the Company’s allocated portion of JCP’s results
      was income of $57,000 and $38,000, respectively.




**12.
      COMPREHENSIVE INCOME**




Comprehensive
      income consists of changes in net income, net unrealized gains and losses on
      available-for-sale investments and changes in accumulated translation gains
      (losses) generated by the Company’s consolidated subsidiaries. The components of
      Comprehensive income net of related tax effects, are as follows:


**(in thousands)**
              
              **Three
                  months ended****September 27, 2008**
              
              **September 29, 2007**Net Income
              
              $
              3,925
              
              $
              3,883Change
                  in unrealized gain on investments, net
              
              
              (1,351
              )
              
              656Change
                  in translation gain, net
              
              
              (1,917
              )
              
              202Comprehensive
                  income
              
              $
              657
              
              $
              4,741


15




**13.
      FAIR VALUE MEASUREMENTS**





Effective
      June 29, 2008, we adopted SFAS No. 157, Fair Value Measurements, or
      SFAS No. 157. In February 2008, the FASB issued FASB Staff Position
      No. FAS 157-2, Effective Date of FASB Statement No. 157, which
      provides a one year deferral of the effective date of SFAS No. 157 for
      non-financial assets and non-financial liabilities, except those that are
      recognized or disclosed in the financial statements at fair value at least
      annually (fair value of reporting units for goodwill impairment tests,
      non-financial assets and liabilities acquired in a business combination).
      Therefore, we adopted the provisions of SFAS No. 157 with respect to our
      financial assets and liabilities only. SFAS No. 157 defines fair value,
      establishes a framework for measuring fair value under generally accepted
      accounting principles and enhances disclosures about fair value measurements.
      Fair value is defined under SFAS No. 157 as the exchange price that would
      be received for an asset or paid to transfer a liability (an exit price) in
      the
      principal or most advantageous market for the asset or liability in an orderly
      transaction between market participants on the measurement date. Valuation
      techniques used to measure fair value under SFAS No. 157 must maximize the
      use of observable inputs and minimize the use of unobservable inputs. The
      standard describes a fair value hierarchy based on three levels of inputs,
      of
      which the first two are considered observable and the last unobservable, that
      may be used to measure fair value which are the following:




•
            
            Level
                1 - Quoted prices in active markets for identical assets or liabilities.•
            
            Level
                2 - Inputs other than Level 1 that are observable, either directly
                or
                indirectly, such as quoted prices for similar assets or liabilities;
                quoted prices in markets that are not active; or other inputs that
                are
                observable or can be corroborated by observable market data for
                substantially the full term of the assets or liabilities.•
            
            Level
                3 - Unobservable inputs that are supported by little or no market
                activity
                and that are significant to the fair value of the assets or liabilities.




The
      adoption of this statement with respect to our financial assets and liabilities,
      did not impact our consolidated results of operations and financial condition,
      but required additional disclosure for assets and liabilities measured at fair
      value.  In accordance with SFAS No. 157, the following table
      represents our fair value hierarchy for our financial assets (cash equivalents
      and investments) measured at fair value on a recurring basis as of June 29,
      2008.  Level 1 available-for-sale investments are primarily comprised of
      investments in U.S. Treasury securities.  These securities are valued
      using market prices on active markets.  Level 2 instrument valuations are
      obtained from readily-available pricing sources for comparable instruments.
      The
      Company had no material level three measurements for the quarter ending
      September 27, 2008.





Assets
      measured at fair value as of September 27, 2008 are summarized as
      follows:





**(In
                thousands)**
            
            **Level
                1**
            
            **Level
                2**
            
            **Total****Cash
                equivalents (1):**Money
                market funds
            
            $
            3,197
            
            $
            -
            
            $
            3,197Corporate
                bonds and notes
            
            
            -
            
            
            4,395
            
            
            4,395Government
                agency
            
            
            -
            
            
            11,689
            
            
            11,689**Investments
                (2):**Treasury
                Bills
            
            
            10,858
            
            
            
            
            
            10,858Corporate
                bonds and notes
            
            
            -
            
            
            12,838
            
            
            12,838Government
                agency
            
            
            
            
            
            33,787
            
            
            33,787Asset/mortgage
                backed securities
            
            
            -
            
            
            24,444
            
            
            24,444Total
            
            $
            14,055
            
            $
            87,153
            
            $
            101,208


(1)
            Included
                in cash and cash equivalents on our condensed consolidated balance
                sheet.


(2)
            Fair
                value is included in investments and related interest income earned
                thereon is included in accounts receivable on our condensed consolidated
                balance sheet.


16





Effective
      June 29, 2008, we adopted SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”, or “SFAS No. 159”. SFAS No. 159
      allows an entity the irrevocable option to elect fair value for the initial
      and
      subsequent measurement for specified financial assets and liabilities on a
      contract-by-contract basis. We did not elect to adopt the fair value option
      under SFAS No. 159.





The
      Company’s investment in debt securities includes government securities,
      commercial paper, corporate debt securities and mortgage-backed and asset-backed
      securities. Most of our mortgage-backed securities are collateralized by prime
      residential mortgages, primarily from Federal National Mortgage Association,
      Federal Home Loan Mortgage Corporation and Federal National Mortgage
      Corporation. In addition, we have the ability and intent to hold these
      investments until maturity when the obligors are required to redeem them at
      their full face value, and we believe the obligors have the financial resources
      to redeem those debt securities. Accordingly, we do not consider our investments
      to be other-than-temporarily impaired at September 27, 2008.


17




Item
      2:
      Management’s Discussion and Analysis


of
      Financial Condition and Results of Operations





Pericom
      Semiconductor Corporation





The
      following information should be read in conjunction with the unaudited financial
      statements and notes thereto included in Part 1 - Item 1 of this Quarterly
      Report and the audited financial statements and notes thereto and Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      contained in the Company’s Annual Report on Form 10-K for the year ended June
      28, 2008 (“Form 10-K”).




This
      Quarterly Report on Form 10-Q includes “forward-looking statements” within the
      meaning of Section 27A of the Securities Act and Section 21E of the Exchange
      Act. All statements other than statements of historical fact are
“forward-looking statements” for purposes of these provisions, including any
      statements regarding the Company’s total investment in the Jinan Hi-Tech
      Industries Development Zone, the continuation of a high level of turns orders,
      higher levels of inventory, future gross profit and gross margin; the plans
      and
      objectives of management for future operations; the Company’s tax rate; the
      adequacy of allowances for returns, price protection and other concessions;
      the
      sufficiency of cash generated from operations and cash balances; the Company’s
      exposure to interest rate risk; expectations regarding our R&D and SG&A
      expenses; and our possible future acquisitions and assumptions underlying any
      of
      the foregoing. In some cases, forward-looking statements can be identified
      by
      the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,”
“estimates,” “potential,” or “continue,” or the negative thereof or other
      comparable terminology. Although the Company believes that the expectations
      reflected in the forward-looking statements contained herein are reasonable,
      there can be no assurance that such expectations or any of the forward-looking
      statements will prove to be correct, and actual results could differ materially
      from those projected or assumed in the forward-looking statements. The Company’s
      future financial condition and results of operations, as well as any
      forward-looking statements, are subject to risks and uncertainties, including
      but not limited to the factors set forth (i) in Item 1A, Risk Factors, of Part
      II of this Form 10-Q, (ii) in Item 1A, Risk Factors, of Part I of the Company’s
      Form 10-K for the year ended June 28, 2008, and (iii) in Note 1 to the Notes
      to
      Condensed Consolidated Financial Statements. All forward-looking statements
      and
      reasons why results may differ included in this Quarterly Report are made as
      of
      the date hereof, and the Company assumes no obligation to update any such
      forward-looking statement or reason why actual results may differ.




**Results
      of Operations**





The
      following table sets forth certain statement of operations data as a percentage
      of net revenues for the periods indicated.





**Three Months Ended****September 27,**
            
            **September 29,****(unaudited)**
            
            **2008**
            
            **2007**Net
                revenues
            
            
            100.0
            %
            
            100.0
            %Cost
                of revenues
            
            
            63.6
            %
            
            63.6
            %Gross
                profit
            
            
            36.4
            %
            
            36.4
            %Operating
                expenses:Research
                and development
            
            
            15.7
            %
            
            10.6
            %Selling,
                general and administrative
            
            
            9.6
            %
            
            15.2
            %Total
            
            
            25.3
            %
            
            25.8
            %Income
                from operations
            
            
            11.1
            %
            
            10.6
            %Interest
                and other income
            
            
            2.5
            %
            
            3.6
            %Other
                than temporary decline in value of investment
            
            
            (0.1)
            %
            
            -
            %Income
                before income taxes
            
            
            13.5
            %
            
            14.2
            %Income
                taxes
            
            
            4.7
            %
            
            4.4
            %Minority
                interest in (income) loss of consolidated subsidiaries
            
            
            (0.2)
            %
            
            —
            %Equity
                in net income of investees
            
            
            0.3
            %
            
            0.3
            %Net
                income
            
            
            8.9
            %
            
            10.1
            %




18




***Net
      Revenues***





The
      following table sets forth our revenues and the customer concentrations with
      respect to such revenues for the periods indicated.




**Three Months Ended****September 27,**
            
            **September 29,**
            
            **%****(in thousands, unaudited)**
            
            **2008**
            
            **2007**
            
            **Change**Net revenues
            
            $
            43,896
            
            $
            38,468
            
            
            14.1
            %%
                of net sales accounted for by top 5 direct customers (1)
            
            
            49.3
            %
            
            36.3
            %Number
                of direct customers that each account for more than 10% of net
                sales
            
            
            2
            
            
            1%
                of net sales accounted for by top 5 end customers (2)
            
            
            29.4
            %
            
            22.2
            %Number
                of end customers that each account for more than 10% of net
                sales
            
            
            1
            
            
            None




(1)
            Direct
                customers purchase products directly from the Company. These include
                distributors and contract manufacturers that in turn sell to many
                end
                customers as well as OEMs that also purchase directly from the
                Company.





(2)
            End
                customers are OEMs whose products include the Company’s products. End
                customers may purchase directly from the Company or from distributors
                or
                contract manufacturers. We rely on the end customer data provided
                by our
                direct distribution and contract manufacturing customers to provide
                this
                information.




The
      Company designs, develops and markets high-performance integrated circuits
      (“ICs” or IC products) and frequency control products (“FCPs” or FCP products)
      used in many of today's advanced electronic systems. Our IC products include
      functions that support the connectivity, timing and signal conditioning of
      high-speed parallel and serial protocols that transfer data among a system's
      microprocessor, memory and various peripherals, such as displays and monitors,
      and between interconnected systems. Our FCPs are electronic components that
      provide frequency references such as crystals, oscillators, and hybrid timing
      generation products for computer, communication and consumer electronic
      products. Our analog, digital and mixed-signal ICs, together with our FCP
      products enable higher system bandwidth and signal quality, resulting in better
      operating reliability, signal integrity, and lower overall system cost in
      applications such as notebook computers, servers, network switches and routers,
      storage area networks, digital TVs, cell phone, GPS and digital media
      players.





Net
      revenues consist of product sales, which are recognized upon shipment, less
      an
      estimate for returns and allowances. Net revenue increased $5.4 million or
      14.1%
      in the first quarter of fiscal 2009 versus the first quarter of fiscal 2008
      primarily as the result of:


·
            a
                157.3% increase in the sales of connect IC products to $6.2 million,
                an
                increase of $3.8 million;·
            an
                increase of $3.0 million or 20.0% in sales of our FCP products to
                $18.3
                million, and


·
            an
                offsetting decline of sales in analog, digital switch, clock, and
                interface IC products to $19.4 million, for a $1.4 million sales
                decrease.





19


We
      currently have a cautious outlook on our fiscal second quarter ending December
      27, 2008, due to the challenging business environment and limited visibility
      on
      end-market demands. We have also announced our expectation that fiscal second
      quarter revenues will decline from the amount reported for the fiscal first
      quarter.





The
      following table sets forth net revenues by country as a percentage of total
      net
      revenues for the three month periods ended September 27, 2008 and September
      29,
      2007:





**(in
                thousands, unaudited)**
            
            **Three
                Months Ended**Net
                sales to countries:
            
            **September 27,**
              **2008**
            
            **As a**
              **Percentage of**
              **Net
                Revenue**
            
            **September 29,**
              **2007**
            
            **As a**
              **Percentage of**
              **Net
                Revenue**China
                (including Hong Kong)
            
            $
            15,433
            
            
            35
            %
            $
            15,387
            
            
            40
            %United
                States
            
            
            2,504
            
            
            6
            
            
            3,847
            
            
            10Taiwan
            
            
            18,323
            
            
            42
            
            
            11,156
            
            
            29Singapore
            
            
            2,069
            
            
            5
            
            
            1,923
            
            
            5Others
                (less than 10% each)
            
            
            5,567
            
            
            12
            
            
            6,155
            
            
            16Total
                net sales
            
            $
            43,896
            
            
            100
            %
            $
            38,468
            
            
            100
            %





For
      the
      three months ended September 27, 2008, as compared with the same period of
      the
      prior year, the percentage of our net revenues derived from sales to Asian
      countries increased as a result of an increasing demand for technological
      devices and a continuing concentration of contract manufacturing in those
      regions. We expect our future sales to continue to grow, as a percentage of
      net
      revenues, in Asian countries. As the migration of assembly operations to Asia
      continues, we expect our fiscal 2009 net revenues from sales in North America
      to
      decline, as they have during fiscal 2008.




***Gross
      Profit***





The
      following table sets forth our gross profit for the periods
      indicated.









**Three Months Ended****(In
                thousands, unaudited)**
            
            **September 27,**
            
            **September 29,**
            
            **%****2008**
            
            **2007**
            
            **Change**Net
                revenues
            
            $
            43,896
            
            $
            38,468
            
            
            14.1
            %Gross
                profit
            
            
            15,982
            
            
            14,001
            
            
            14.1
            %Gross
                profit as a percentage of net revenues (gross margin)
            
            
            36.4
            %
            
            36.4
            %





The
      absolute increase in gross profit for the three month period ended September
      27,
      2008 compared with the same period of the prior year was primarily due to rising
      sales of silicon connect IC products and to the consistency in sales of analog
      switches. Silicon connect IC products carried larger profit margins in the
      three
      month period ended September 27, 2008 as compared with the same period of the
      prior year. In addition, analog switches continue to carry above average margins
      over lower margin FCP products; however those margins have decreased in the
      three month period ended September 27, 2008 as compared with the same period
      of
      the prior year. Gross margin for the first fiscal quarter in fiscal 2009 and
      fiscal 2008 remained flat at 36.4%.


20





With
      respect to the increase in gross profit in the first quarter of fiscal 2009
      as
      compared to the first quarter of fiscal 2008 of $2.0 million, the increase
      is
      the result of:


·
            Sales
                growth in silicon connect IC products, which generated $1.8 million
                increased gross profit;·
            increased
                sales of the FCP product family, which contributed $0.8 million of
                increased gross profit,·
            increased
                sales of digital, clock and silicon interface products, which contributed
                $0.8 million of increased gross profit, which was offset
                by·
            a
                decrease of $0.8 million in gross profit from sales of analog
                switches.





During
      the three months ended September 27, 2008 and September 29, 2007, gross profits
      and gross margins benefited from the sale of inventory, previously valued at
      $63,000 and $262,000, respectively, that we had previously identified as excess
      and written off.





Future
      gross profit and gross margin are highly dependent on the level and product
      mix
      of net revenues. This includes the mix of sales between lower margin FCP
      products and our higher margin integrated circuit products. Although we have
      been successful at favorably improving our integrated circuit product mix and
      penetrating new end markets, there can be no assurance that this will continue.
      Accordingly, we are not able to predict future gross profit levels or gross
      margins with certainty.





***Research
      and Development***





**Three Months Ended****(In thousands, unaudited)**
            
            **September 27,**
            
            **September 29,**
            
            **%****2008**
            
            **2007**
            
            **Change**Net
                revenues
            
            $
            43,896
            
            $
            38,468
            
            
            14.1
            %Research
                and development
            
            
            4,221
            
            
            4,082
            
            
            3.4
            %R&D
                as a percentage of net revenues
            
            
            9.6
            %
            
            10.6
            %





Research
      and development expenses consist primarily of costs related to personnel and
      overhead, non-recurring engineering charges, and other costs associated with
      the
      design, prototyping, testing, manufacturing process design support, and
      technical customer applications support of our products. The $139,000 expense
      increase for the three month period ended September 27, 2008 as compared to
      the
      same period of the prior year is primarily attributable to a $154,000 increase
      in salaries and wages due to the merit awards and headcount increases and a
      $157,000 increase in share-based compensation expense offset by a $176,000
      decrease in bonus expense.




The
      Company believes that continued spending on research and development to develop
      new products and improve manufacturing processes is critical to the Company’s
      success, and as a result expects to increase research and development expenses
      in future periods over the long term. In the short term, the Company intends
      to
      continue to focus on cost control while business conditions improve. If business
      conditions deteriorate or the rate of improvement does not meet our
      expectations, the Company may implement cost-cutting actions.





***Selling,
      General and Administrative (“SG&A”)***





**Three Months Ended****(In thousands, unaudited)**
            
            **September 27,**
            
            **September 29,**
            
            **%****2008**
            
            **2007**
            
            **Change**Net
                revenues
            
            $
            43,896
            
            $
            38,468
            
            
            14.1
            %Selling,
                general and administration
            
            
            6,901
            
            
            5,839
            
            
            18.2
            %SG&A
                as a percentage of net revenues
            
            
            15.7
            %
            
            15.2
            %


21





Selling,
      general and administrative expenses consist primarily of personnel and related
      overhead costs for sales, marketing, finance, administration, human resources
      and general management. The $1.1 million expense increase for the three month
      period ended September 27, 2008 as compared to the same period of the prior
      year
      is attributable to a $299,000 increase in salaries and wages due to merit awards
      and headcount increases, a $230,000 increase in temporary labor primarily
      related to the implementation of information technology infrastructure,
      increases of $75,000 in legal fees, $106,000 in accounting services,
      a $108,000 increase in share-based compensation expense, and an
      increase of $111,000 increase in commission expenses in support of increased
      sales. These were partially offset by a decrease of $77,000 in the Company’s bad
      debt expense.




The
      Company anticipates that selling, general and administrative expenses in
      absolute dollars will increase in future periods over the long term due to
      increased staffing levels, particularly in sales and marketing, as well as
      increased commission expense as a function of supporting higher sales levels.
      The Company intends to continue its focus on controlling costs. If business
      conditions deteriorate or the rate of improvement does not meet our
      expectations, the Company may implement cost-cutting actions.




***Interest
      and Other Income, net***


**Three Months Ended****(In thousands, unaudited)**
              
              **September 27,**
              
              **September 29,**
              
              **%****2008**
              
              **2007**
              
              **Change**Interest
                  and other income, net
              
              $
              1,106
              
              $
              1,370
              
              
              (19.3)
              %





Net
      interest and other income declined 19.3% for the three months ended September
      27, 2008 as compared with the same period of the prior year primarily due to
      a
      $528,000 reduction in the interest earned on investments in marketable
      securities and cash and cash equivalents balances offset by a $319,000 exchange
      gain primarily due to the U.S. Dollar strengthening against the New Taiwan
      Dollar.




***Income
      Tax Expense***




**Three Months Ended****(In thousands, unaudited)**
              
              **September 27,**
              
              **September 29,**
              
              **%****2008**
              
              **2007**
              
              **Change**Income
                  before income tax expense
              
              $
              5,922
              
              $
              5,450
              
              
              8.7
              %Income
                  tax
              
              
              2,069
              
              
              1,691
              
              
              22.4
              %Effective
                  tax rate
              
              
              34.9
              %
              
              31.0
              %





The
      increase in income tax expense for the three months ended September 27, 2008
      over the same period of the prior year is due to the increase in income before
      income taxes as well as an increase in the effective tax rate. The increased
      effective tax rate is due primarily to the mix of earnings between tax
      jurisdictions as well as a decrease in the anticipated benefit the Company
      receives from the Federal research and development credit due to the expiration
      of the credit as of December 31, 2007.





During
      the quarter ended September 27, 2008, our effective tax rate did not
      significantly differ from the federal statutory tax rate.




22





***Equity
      in Net Income of Unconsolidated Affiliates***




**Three
                  Months Ended****September 27,**
              
              **September 29,**
              
              **%****(In thousands,
                  unaudited)**
              
              **2008**
              
              **2007**
              
              **Change**Equity in net income of PTI
              
              $
              60
              
              $
              54
              
              
              11.1
              %Equity in net income of JCP
              
              
              57
              
              
              72
              
              
              (20.8)
              %Equity in net losses of other investees
              
              
              —
              
              
              (5
              )
              
              —Total
              
              $
              117
              
              $
              121
              
              
              (3.3)
              %




Equity
      in
      net income of unconsolidated affiliates includes our allocated portion of the
      net income of Pericom Technology, Inc. (“PTI”), a British Virgin Islands
      corporation based in Shanghai, People’s Republic of China and Hong
      Kong .
      Our
      allocated portion of PTI’s results was $60,000 and $54,000 for the three months
      ended September 27, 2008 and September 29, 2007, respectively.





Equity
      in
      net income of unconsolidated affiliates also includes the Company’s allocated
      portion of the net income of Jiyuan Crystal Photoelectric Frequency Technology
      Ltd. (“JCP”), an FCP manufacturing company located in Science Park of Jiyuan
      City, Henan Province, China. JCP is a key manufacturing partner of SRe, and
      SRe
      has acquired a 49% equity interest in JCP. For the three month period ended
      September 27, 2008, the Company’s allocated portion of JCP’s results were income
      of $57,000 as compared with income of $72,000 for the same period of the prior
      year.





***Liquidity
      and Capital Resources***





As
      of
      September 27, 2008, the Company’s principal sources of liquidity included cash,
      cash equivalents and short-term and long-term investments of approximately
      $121.0 million as compared with $123.9 million on June 28, 2008.





As
      of
      September 27, 2008, $39.1 million was classified as cash and cash equivalents
      compared with $41.6 million as of June 28, 2008. The maturities of the Company’s
      short term investments are staggered throughout the year so that cash
      requirements are met. Because the Company is a fabless semiconductor
      manufacturer, it has lower capital equipment requirements than other
      semiconductor manufacturers that own wafer fabrication facilities. For the
      three
      month period ended September 27, 2008, the Company spent approximately $2.5
      million on property and equipment compared to $1.4 million for the three month
      period ended September 29, 2007. The Company generated approximately $1.1
      million of interest and other income, net for the three month period ended
      September 27, 2008, an approximate $264,000 decrease over the $1.4 million
      interest and other income, net for the three month period ended September 29,
      2007. The decrease in interest and other income, net was in primarily due to
      reduction in interest rates earned on investments in marketable securities
      and
      cash balances offset by exchange gains from the U.S. Dollar strengthening
      against the New Taiwan Dollar.





The
      Company’s net cash provided by operating activities of $3.7 million for the
      three months ended September 27, 2008 was primarily the result of net income
      of
      $3.9 million and non-cash expenses of $2.0 million depreciation and
      amortization, $795,000 share-based compensation expense, which was partially
      offset by a $643,000 increase in net deferred taxes and $117,000 equity in
      the net income of unconsolidated affiliates. Additional contributions to cash
      included a $1.9 million increase in accounts payable, a $307,000 increase in
      other accrued liabilities and a $1.0 million decrease in prepaid and other
      current assets. Partially offsetting these were a $4.2 million increase in
      accounts receivable, and a $1.0 million increase in inventory and a $248,000
      increase in other assets. The Company’s net cash provided by operating
      activities was $4.6 million in the three months ended September 29,
      2007.




23


Generally,
        as sales levels rise, the Company expects inventories, accounts receivable
        and
        accounts payable to increase. However, there will be routine fluctuations
        in
        these accounts from period to period that may be significant in
        amount.
 
 The
        Company’s cash used in investing activities of $3.5 million for the three months
        ended September 27, 2008 was primarily due to additions to property and
        equipment of approximately $2.5 million partially offset by maturities
        of investments exceeding purchases of investments by approximately $1.0
        million. The Company used $22.9 million in investing activities for the
        three months ended September 29, 2007.
  The
        Company’s cash used in financing activities for the three months ended September
        27, 2008 of $2.2 million was the result of repurchases of the Company’s common
        stock at a cost of $2.7 million, partially offset by $426,000 in proceeds
        generated from the issuance of common stock in the Company’s employee stock
        plans and $58,000 in excess tax benefits on share-based compensation. The
        Company used $4.3 million in financing activities in the three months ended
        September 29, 2007.
  A
        portion
        of our cash may be used 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, we may evaluate potential acquisitions
        of such businesses, products or technologies.
 
 Our
        long-term future capital requirements will depend on many factors, including
        our
        level of revenues, the timing and extent of spending to support our product
        development efforts, the expansion of sales and marketing efforts, the timing
        of
        our introductions of new products, the costs to ensure access to adequate
        manufacturing capacity, and the continuing market acceptance of our products.
        We
        could be required, or could elect, to seek additional funding through public
        or
        private equity or debt financing and additional funds may not be available
        on
        terms acceptable to us or at all. We believe our current cash balances and
        cash
        flows generated by operations will be sufficient to satisfy our anticipated
        cash
        needs for working capital and capital expenditures .
  **Contractual
        Obligations and Commitments**
 
 The
        Company leases certain facilities under operating leases with termination
        dates
        on or before December 2013. Generally, these leases have multiple options
        to
        extend for a period of years upon termination of the original lease term
        or
        previously exercised option to extend.
 
 The
        Company’s contractual obligations and commitments at September 27, 2008 are as
        follows:
 
 **(in
                  thousands)**
              
              **Payments Due by Period****Total**
              
              **1 Year or Less**
              
              **2 - 3 Years**
              
              **4 - 5 Years**
              
              **Thereafter**Operating
                  leases and operating expense commitments
              
              $
              6,068
              
              $
              1,355
              
              $
              2,214
              
              $
              2,216
              
              $
              283Capital
                  equipment purchase commitments
              
              $
              3,421
              
              $
              3,421
              
              
              1,003
              
              
              -
              
              
              -Total
              
              $
              9,489
              
              $
              4,776
              
              $
              3,217
              
              $
              2,216
              
              $
              283
 ***Jinan
          Cooperation Agreement***
 
 On
          January 26, 2008, the Company entered into a Cooperation Agreement with
          the
          Jinan Hi-Tech Industries Development Zone Commission (the “Commission”) in the
          People’s Republic of China (the “PRC”) for the Company’s investment in the Jinan
          Hi-Tech Industries Development Zone (the “Zone”) that is located in Shandong
          Province, PRC. Under the Cooperation Agreement, the Company will, through
          a
          wholly-owned Hong Kong subsidiary, Pericom Asia Ltd., build a factory in
          the
          Zone for the development and manufacturing of frequency control products.
          It is
          expected that the Company’s total gross investment, over a period of years, will
          be approximately $35 million.
 **Off-Balance
        Sheet Arrangements**
 
 The
        Company has no off-balance sheet arrangements, defined by Regulation S-K
        item
        303(a)(4), other than operating leases.
 
 **Critical
        Accounting Policies**
 
 Our
        condensed consolidated financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States of America.
        The preparation of such statements requires us to make estimates and assumptions
        that affect the reported amounts of revenues and expenses during the reporting
        period and the reported amounts of assets and liabilities as of the date
        of the
        financial statements. Our estimates are based on historical experience and
        other
        assumptions that we consider to be reasonable given the circumstances. Actual
        results may vary from our estimates.
  24
 
 The
        methods, estimates and judgments we use in applying our most critical accounting
        policies have a significant impact on the results we report in our financial
        statements. The Securities and Exchange Commission has defined the most critical
        accounting policies as the ones that are most important to the portrayal
        of a
        company’s financial condition and results of operations, and require the company
        to make its most difficult and subjective accounting judgments, often as
        a
        result of the need to make estimates of matters that are inherently uncertain.
        Based on this definition, our most critical accounting policies include revenue
        recognition and accounts receivable allowances, which impact the recording
        of
        revenues; valuation of inventories, which impacts costs of goods sold and
        gross
        margins; accounting for income taxes, which impacts the income tax provision
        and
        net income; impairment of goodwill, other intangible assets and investments,
        which impacts the goodwill, intangible asset and investment accounts; and
        share-based compensation, which impacts costs of goods sold and operating
        expenses. These policies and the estimates and judgments involved are discussed
        further below.
 
 ***REVENUE
        RECOGNITION*** **.** We
        recognize revenue from the sale of our products in conformity with the SEC
        Staff
        Accounting Bulletin (“SAB”) No. 104, *Revenue
        Recognition* ,
        (“SAB
        No. 104”). Accordingly, the Company recognizes revenue when:
 
 ·
              Persuasive
                  evidence of an arrangement exists;
 ·
              Delivery
                  has occurred;
 ·
              The
                  sales price is fixed or determinable;
                  and
 ·
              Collectibility
                  is reasonably assured.
 
 Generally,
        the Company meets these conditions upon shipment because, in most cases,
        title
        and risk of loss passes to the customer at that time. In addition, the Company
        estimates and records provisions for future returns and other charges against
        revenue at the time of shipment in accordance with SFAS No. 48, *Revenue
        Recognition when Right of Return Exists* (“SFAS
        No. 48”).
 
 For
        some
        of our products, notably our FCPs that we manufacture in Taiwan, we recognize
        revenue upon delivery for Taiwan sales and for foreign sales, 3 days after
        shipment. Our sales terms for FCP are usually FOB shipping point and we use
        Federal Express (“FedEx”) for all of our deliveries. FedEx delivers shipments
        within one day to Taiwanese customers and within 3 days for foreign
        customers.
 
 We
        sell
        products to both large domestic and international distributors. We sell our
        products to domestic distributors at the price listed in our price book for
        that
        distributor. At the time of shipment, we book a sales reserve for the entire
        amount if the customer has the right to return the product. In addition,
        at the
        time of sale we book a sales reserve for ship from stock and debits (“SSD”s),
        stock rotation amounts expected to be returned, return material authorizations
        (“RMA”s), authorized price protection programs, and any special programs
        approved by management. These sales reserves offset revenues, which produces
        the
        net revenues amount we report in our consolidated financial
        statements.
 
 The
        market price for our products can be significantly different from the book
        price
        at which we sold the product to the distributor. When the market price, as
        compared with the book price, of a particular sales opportunity from our
        distributor to their customer would result in low or negative margins to
        our
        distributor, we negotiate a ship from stock and debit with the distributor.
        We
        analyze our SSD history and use the history to develop SSD rates that form
        the
        basis of the SSD sales reserve we record each period. We use historical SSD
        rates to estimate the ultimate net sales price to the distributor.
 
 Our
        distribution agreements provide for semi-annual stock rotation privileges
        of
        typically 10% of net sales for the previous six-month period. The contractual
        stock rotation applies only to shipments at book price. Asian distributors
        typically buy our product at less than book price and therefore are not entitled
        to the 10% stock rotation privilege. In order to provide for routine inventory
        refreshing, for our benefit as well as theirs, we typically grant Asian
        distributors stock rotation privileges between 1% and 5% even though we are
        not
        contractually obligated to do so. Each month we record a sales reserve for
        the
        estimated stock rotation privilege anticipated to be utilized by our
        distributors that month.
  25
  From
        time
        to time, customers may request to return parts for various reasons including
        the
        customers’ belief that the parts are not performing to specification. Many such
        return requests are the result of customers incorrectly using the parts,
        not
        because the parts are defective. Our management reviews these requests and,
        if
        approved, we establish a RMA. We are only obligated to accept returns of
        defective parts. For customer convenience, we may approve a particular return
        request, even though we are not obligated to do so. Each month, we record
        a
        sales reserve for the approved RMAs that have not yet been returned. In the
        past, we have not kept a general warranty reserve because historically valid
        warranty returns, which are the result of a part not meeting specifications
        or
        being non-functional, have been immaterial and frequently we can resell parts
        to
        other customers for use in other applications. We monitor and assess RMA
        activity and overall materiality to assess whether a general warranty reserve
        has become appropriate.
 
 We
        grant
        price protection solely at the discretion of our management. The purpose
        of
        price protection is to reduce our distributors’ cost of inventory as market
        prices fall, which reduces our SSD rates. Our sales management team prepares
        price protection proposals for individual products located at individual
        distributors. Our general management reviews these proposals and if a particular
        price protection arrangement is approved, we estimate the dollar impact based
        on
        the book price reduction per unit for the products approved and the number
        of
        units of those products in that distributor’s inventory. We record a sales
        reserve in that period for the estimated amount in accordance with Issue
        4 of
        Emerging Issues Task Force Issue No. 01-09, *Accounting
        for Consideration Given by a Vendor to a Customer (Including a Reseller of
        the
        Vendor’s Products)* .
 
 At
        the
        discretion of our management, we may offer rebates on specific products sold
        to
        specific end customers. The purpose of the rebates is to allow for pricing
        adjustments for large programs without affecting the pricing we charge our
        distributor customers. We record the customer’s rebate at the time of
        shipment.
 
 Customers
        are typically granted payment terms of between 30 and 60 days and they generally
        pay within those terms. We grant relatively few customers any sales terms
        that
        include cash discounts. We invoice our distributors for shipments at our
        listed
        book price. When our distributors pay those invoices, they may claim debits
        for
        SSDs, stock rotations, cash discounts, RMAs and price protection when
        appropriate. Once claimed, we confirm these debits are in line with our
        management’s prior authorizations and reduce the reserve we previously
        established for that customer.
 
 The
        revenue we record for sales to our distributors is net of estimated provisions
        for these programs. When determining this net revenue, we must make significant
        judgments and estimates. We base our estimates on historical experience rates,
        inventory levels in the distribution channel, current trends and other related
        factors. However, because of the inherent nature of estimates, there is a
        risk
        that there could be significant differences between actual amounts and our
        estimates. Our financial condition and operating results depend on our ability
        to make reliable estimates and we believe that our estimates are reasonable.
 
 ***CASH
        AND CASH EQUIVALENTS.*** **** Cash
        and
        cash equivalents consist of cash on hand and in banks and all highly liquid
        debt
        investments with a time to maturity of three months or less at the time of
        purchase. ******
 
 ***SHORT-
        AND LONG-TERM INVESTMENTS.*** Our
        policy is to invest excess funds in instruments with investment grade credit
        ratings. We classify our investments as “available-for-sale”, “trading” or
“held-to-maturity” in conformity with SFAS No. 115, *Accounting
        for Certain Investments in Debt and Equity Securities* (“SFAS
        No. 115”). Further, we classify our trading securities as current assets and our
        available-for-sale securities as either current or non-current based on the
        specific attributes of each security. We recognize unrealized gains and losses
        in our trading securities in current earnings, and unrealized gains and losses
        in our available-for sale securities as an increase or reduction in
        shareholders’ equity. We report our trading and available-for-sale securities at
        their fair values. We evaluate our available-for-sale securities for impairment
        quarterly. SFAS No. 115 defines impairment as a loss in value that is other
        than
        temporary. We recognize impairment losses in our consolidated statement of
        operations in the period in which we discover the impairment.
 
 We
        have
        also made other investments including loans, bridge loans convertible to
        equity
        or asset purchases as well as direct equity investments. We make these loans
        and
        investments with strategic intentions and, historically, are in privately
        held
        technology companies, which by their nature are high risk. These investments
        are
        included in other assets in the balance sheet and we carry them at the lower
        of
        cost, or market if the investment has experienced an “other than temporary”
decline in value. We monitor these investments quarterly and make appropriate
        reductions in carrying value if we deem a decline in value is other than
        temporary.
  26
 
 ***ALLOWANCE
        FOR DOUBTFUL ACCOUNTS.*** We
        evaluate our allowance for doubtful accounts using a combination of factors.
        We
        record a specific allowance in cases where we become aware of circumstances
        that
        may impair a specific customer’s ability to pay fully their financial obligation
        to us. For all other customers, we recognize an allowance based on the length
        of
        time the receivable balances are past due, based on the current economic
        environment and our historical experience.
 
 ***INVENTORIES.*** For our
        IC and certain FCP families of products we record inventories at the lower
        of
        standard cost (which generally approximates actual cost on a first-in, first-out
        basis) or market value. We adjust the carrying value of inventory for excess
        and
        obsolete inventory based on inventory age, shipment history and our forecast
        of
        demand over a specific future period. The semiconductor markets that we serve
        are volatile and actual results may vary from our forecast or other assumptions,
        potentially affecting our assessment of excess and obsolete inventory resulting
        in material effects on our gross margin.
 
 We
        record
        the inventories of the remainder of our FCP products at the lower of
        weighted-average cost (which approximates actual cost) or market value. Weighted
        average cost is comprised of average manufacturing costs weighted by the
        volume
        produced in each production run. We define market value as the net realizable
        value for our finished goods and replacement cost for raw materials and work
        in
        process.
 
 We
        consider raw material inventory slow moving and we write it down to zero
        if it
        has not moved in 365 days. For assembled devices, we disaggregate the inventory
        by part number. We compare the quantities on hand in each part number category
        to the quantity we shipped in the previous twelve months, the quantity in
        backlog and to the quantity we expect to ship in the next twelve months.
        We
        write down to zero the value of each quantity on hand that is in excess of
        the
        lesser of the three comparisons. We believe our method of evaluating our
        inventory fairly represents market conditions.
 
 We
        consider the material written-off to be available for sale. We do not revalue
        the written off inventory should market conditions change or if a market
        develops for the obsolete inventory. In the past, we have sold obsolete
        inventory that we have previously written off as worthless. Refer to the
        Gross
        Profit discussion in Item 7 of our annual report on Form 10K for further
        discussion of sales of our obsolete inventory.
 
 ***PROPERTY,
        PLANT AND EQUIPMENT.*** We
        record our property, plant and equipment at cost and depreciate the cost
        over
        the estimated useful lives of each asset classification, ranging between
        3 and
        35 years. Cost includes purchase cost, applicable taxes, freight, installation
        costs and interest incurred in the acquisition of any asset that requires
        a
        period of time to make it ready for use. In addition, we capitalize the cost
        of
        major replacements, improvements and betterments, while we expense normal
        maintenance and repair.
 
 ***INVESTMENTS
        IN UNCONSOLIDATED AFFILIATES*** **.** We hold
        ownership interests in various investees. Our ownership in these affiliates
        varies from 20% to approximately 49%, which we classify as investments in
        unconsolidated affiliates in our consolidated balance sheets. We account
        for
        long-term investments in companies in which we have an ownership share larger
        than 20% and in which we have significant influence over the activities of
        the
        investee using the equity method. We recognize our proportionate share of
        each
        investee’s income or loss in the period in which the investee reports the income
        or loss. We eliminate all intercompany transactions in accounting for our
        equity
        method investments.
 
 ***IMPAIRMENT
        OF GOODWILL AND OTHER INTANGIBLE ASSETS*** .
        The
        Company performs an impairment review of its intangible assets at least
        annually, in conformity with SFAS No. 142, *Goodwill
        and Other Intangible Assets* (“SFAS
        No. 142”). Based on the results of its most recent impairment review, the
        Company determined that no impairment of its intangible assets existed as
        of
        June 28, 2008. However, future impairment reviews could result in a charge
        to
        earnings.
  27
 
 ***INCOME
        TAXES.*** We
        account for income taxes using SFAS No. 109, “Accounting for Income Taxes”,
        which requires an asset and liability approach to recording deferred taxes.
        Our
        deferred income tax assets represent temporary differences between the financial
        statement carrying amount and the tax basis of existing assets and liabilities
        that will result in deductible amounts in future years, including net operating
        loss carry forwards. Based on estimates, the carrying value of our net deferred
        tax assets assumes that it is more likely than not that we will be able to
        generate sufficient future taxable income in certain tax jurisdictions. Our
        judgments regarding future profitability may change due to future market
        conditions, changes in U.S. or international tax laws and other factors.
        If, in
        the future, we experiences losses for a sustained period of time, we may
        not be
        able to conclude that it is more likely than not that we will be able to
        generate sufficient future taxable income to realize our deferred tax assets.
        If
        this occurs, we may be required to increase the valuation allowance against
        the
        deferred tax assets resulting in additional income tax expense.
  During
        the three months ended September 27, 2008, there were no significant changes
        in
        our critical accounting policies and estimates.
 
 **Adoption
        of New Pronouncements**
 
 In
        May 2008, the Company adopted Statement of Financial Accounting Standards,
        SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”.
        SFAS No. 162 is intended to improve financial reporting by identifying a
        consistent framework, or hierarchy, for selecting accounting principles to
        be
        used in preparing financial statements that are presented in conformity with
        generally accepted accounting principles in the United States for
        non-governmental entities. SFAS No. 162 is effective 60 days following
        approval by the SEC of the Public Company Accounting Oversight Board’s
        amendments to AU Section 411, *The
        Meaning of Present Fairly in Conformity with Generally Accepted Accounting
        Principles* .
        The
        adoption of SFAS No. 162 did not have an impact on the Company’s
        consolidated financial positon or results of operation..
 
 On
        June
        29, 2008, the Company adopted Statement of Financial Accounting Standard
        ("SFAS") No. 157, "Fair Value Measurements" ("FAS 157") for financial assets
        and
        liabilities, which clarifies the meaning of fair value, establishes a framework
        for measuring fair value and expands disclosures about fair value
        measurements.  Fair value is defined under SFAS 157 as the exchange
        price that would be received for an asset or paid to transfer a liability
        in the
        principal or most advantageous market for the assets or liabilities in an
        orderly transaction between market participants on the measurement
        date.  Subsequent changes in fair value of these financial assets and
        liabilities are recognized in earnings or other comprehensive income when
        they
        occur. The effective date of the provisions of SFAS 157 for non-financial
        assets
        and liabilities, except for items recognized at fair value on a recurring
        basis,
        was deferred by Financial Accounting Standards Board ("FASB") Staff Position
        FAS
        157-2 (FSP FAS 157-2) and are effective for the fiscal year beginning June
        28,
        2009.  The Company is currently evaluating the impact of the
        provisions for non-financial assets and liabilities.  The adoption of
        SFAS 157 for financial assets and liabilities did not have an impact on the
        Company's consolidated financial position or results of
        operations.  For additional information on the fair value of financial
        assets and liabilities, see Note 14, Fair Value Measurements.
 
 In
        December 2007, the FASB issued Statement of Financial Accounting Standards,
        SFAS
        No. 141 (Revised 2007), "Business Combinations" ("SFAS 141(R)"). SFAS
        No. 141(R) establishes principles and requirements for how the acquirer of
        a business recognizes and measures in its financial statements the identifiable
        assets acquired, the liabilities assumed and any noncontrolling interest
        in the
        acquiree. SFAS No. 141(R) also provides guidance for recognizing and
        measuring the goodwill acquired in the business combination and determines
        what
        information to disclose to enable users of the financial statements to evaluate
        the nature and financial effects of the business combination. The provisions
        of
        SFAS No.141(R) are effective for the fiscal year beginning June 28,
        2009.  The Company is currently evaluating the impact of the
        provisions of SFAS 141(R).
  In
        December, 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements-an Amendment of ARB No. 51” (“SFAS
        No. 160”). SFAS No. 160 establishes new accounting and reporting
        standards for a non-controlling interest in a subsidiary and for the
        deconsolidation of a subsidiary. Specifically, this statement requires the
        recognition of a non-controlling interest (minority interest) as equity in
        the
        consolidated financial statements separate from the parent’s equity. The amount
        of net income attributable to the non-controlling interest will be included
        in
        consolidated net income on the face of the income statement. SFAS No. 160
        clarifies that changes in a parent’s ownership interest in a subsidiary that do
        not result in deconsolidation are equity transactions if the parent retains
        its
        controlling financial interest. In addition, this statement requires that
        a
        parent recognize a gain or loss in net income when a subsidiary is
        deconsolidated. Such gain or loss will be measured using the fair value of
        the
        non-controlling equity investment on the deconsolidation date. SFAS No. 160
        also includes expanded disclosure requirements regarding the interests of
        the
        parent and its non-controlling interest. The provisions of SFAS No. 160 are
        effective for the fiscal year beginning June 28, 2009 except for the
        presentation and disclosure requirements, which must be applied retrospectively
        for all periods presented. We are currently evaluating the impact that SFAS
        No. 160 will have on our financial statements.
  28
 
 **ITEM
        3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
        RISK**
 
 At
        September 27, 2008 our investment portfolio consisted of investment-grade
        fixed
        income securities, excluding those classified as cash and cash equivalents,
        of
        $81.9 million. These securities are subject to interest rate risk and will
        decline in value if market interest rates increase. However, we do not believe
        that such a decrease would have a material effect on our results of operations
        over the next fiscal year. Due to the short duration and conservative nature
        of
        these instruments, we do not believe that we have a material exposure to
        interest rate risk.
 
 The
        Company transacts business in various non-U.S. currencies, primarily the
        New
        Taiwan Dollar. The Company is exposed to fluctuations in foreign currency
        exchange rates on accounts receivable from sales in these foreign currencies
        and
        the net monetary assets and liabilities of the related foreign subsidiary.
        A
        hypothetical 10% favorable or unfavorable change in foreign currency exchange
        rates would have a material impact on our financial position or results of
        operations.
  **ITEM
        4. CONTROLS AND PROCEDURES**
 
 **Evaluation
        of Disclosure Controls and Procedures**
  Our
        management, with the participation of our principal executive officer and
        principal financial officer has evaluated the effectiveness of our disclosure
        controls and procedures (as such term is defined in
        Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
        September 27, 2008.  Based on such evaluation, our principal executive
        officer and principal financial officer have concluded that as of September
        27,
        2008 our disclosure controls and procedures were effective.
 
 **Changes
        in Internal Control Over Financial Reporting**
 
 There
        were no changes in our internal control over financial reporting (as such
        term
        is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
        Act) during the three months ended September 27, 2008 that have materially
        affected, or are reasonably likely to materially affect, our internal control
        over financial reporting.
  PART
        II.
        OTHER INFORMATION
  **Item 1****.**
              **Legal
                  Proceedings******
  None.
  **Item
        1A: Risk Factors**
  This
        quarterly report on Form 10-Q contains forward-looking statements which involve
        risks and uncertainties. Our actual results could differ materially from
        those
        anticipated by such forward-looking statement as a result of various factors,
        including those set forth below. The listing below includes any material
        changes
        to and supersedes the description of the risk factors affecting our business
        previously disclosed in “Part I, Item 1A. Risk Factors” of our Annual
        Report on Form 10-K for the fiscal year ended June 28, 2008.
  29
  **FACTORS
        THAT MAY AFFECT OPERATING RESULTS**
 
 **In
        the past, our operating results have varied significantly and are likely
        to
        fluctuate in the future.**
 
 We
        currently have a cautious outlook on our fiscal second quarter ending December
        27, 2008, due to the challenging business environment and limited visibility
        on
        end-market demands. We have also announced our expectation that fiscal second
        quarter revenues will decline from the amount reported for the fiscal first
        quarter.
 
 
 Wide
        varieties of factors affect our operating results. These factors include
        the
        following:
 
 ·
              changes
                  in the quantity of our products
                  sold;
 ·
              changes
                  in the average selling price of our
                  products;
 ·
              general
                  conditions in the semiconductor
                  industry;
 ·
              changes
                  in our product mix;
 ·
              a
                  change in the gross margins of our
                  products;
 ·
              the
                  operating results of the FCP product line, which normally has a
                  lower
                  profit margin than IC products;
 ·
              expenses
                  incurred in obtaining, enforcing, and defending intellectual property
                  rights;
 ·
              the
                  timing of new product introductions and announcements by us and
                  by our
                  competitors;
 ·
              customer
                  acceptance of new products introduced by
                  us;
 ·
              delay
                  or decline in orders received from
                  distributors;
 ·
              growth
                  or reduction in the size of the markets for interface
                  ICs;
 ·
              the
                  availability of manufacturing capacity with our wafer
                  suppliers;
 ·
              changes
                  in manufacturing costs;
 ·
              fluctuations
                  in manufacturing yields;
 ·
              disqualification
                  by our customers for quality or performance related
                  issues;
 ·
              the
                  ability of customers to pay us; and
 ·
              increased
                  research and development expenses associated with new product
                  introductions or process changes.
 
 All
        of
        these factors are difficult to forecast and could seriously harm our operating
        results. Our expense levels are based in part on our expectations regarding
        future sales and are largely fixed in the short term. Therefore, we may be
        unable to reduce our expenses fast enough to compensate for any unexpected
        shortfall in sales. Any significant decline in demand relative to our
        expectations or any material delay of customer orders could harm our operating
        results. In addition, if our operating results in future quarters fall below
        public market analysts' and investors' expectations, the market price of
        our
        common stock would likely decrease.
 
 **The
        demand for our products depends on the growth of our end users' markets.**
 Our
        continued success depends in large part on the continued growth of markets
        for
        the products into which our semiconductor and FCPs are incorporated. These
        markets include the following:
 
 ·
              computers
                  and computer related peripherals;
 ·
              data
                  communications and telecommunications
                  equipment;
 ·
              electronic
                  commerce and the Internet; and
 ·
              consumer
                  electronics equipment.
 
 Any
        decline in the demand for products in these markets could seriously harm
        our
        business, financial condition and operating results. These markets have also
        historically experienced significant fluctuations in demand. We may also
        be
        seriously harmed by slower growth in the other markets in which we sell our
        products.
  30
 
 **If
        we do not develop products that our customers and end-users design into their
        products, or if their products do not sell successfully, our business and
        operating results would be harmed.**
 
 We
        have
        relied in the past and continue to rely upon our relationships with our
        customers and end-users for insights into product development strategies
        for
        emerging system requirements. We generally incorporate new products into
        a
        customer's or end-user's product or system at the design stage. However,
        these
        design efforts, which can often require significant expenditures by us, may
        precede product sales, if any, by a year or more. Moreover, the value to
        us of
        any design win will depend in large part on the ultimate success of the customer
        or end-user's product and on the extent to which the system's design
        accommodates components manufactured by our competitors. If we fail to achieve
        design wins or if the design wins fail to result in significant future revenues,
        our operating results would be harmed. If we have problems developing or
        maintaining our relationships with our customers and end-users, our ability
        to
        develop well-accepted new products may be impaired.
 
 **The
        markets for our products are characterized by rapidly changing technology,
        and
        our financial results could be harmed if we do not successfully develop and
        implement new manufacturing technologies or develop, introduce and sell new
        products.**
 
 The
        markets for our products are characterized by rapidly changing technology,
        frequent new product introductions and declining selling prices over product
        life cycles. We currently offer a comprehensive portfolio of silicon and
        quartz
        based products. Our future success depends upon the timely completion and
        introduction of new products, across all our product lines, at competitive
        price
        and performance levels. The success of new products depends on a variety
        of
        factors, including the following:
 
 ·
              product
                  performance and functionality;
 ·
              customer
                  acceptance;
 ·
              competitive
                  cost structure and pricing;
 ·
              successful
                  and timely completion of product
                  development;
 ·
              sufficient
                  wafer fabrication capacity; and
 ·
              achievement
                  of acceptable manufacturing yields by our wafer suppliers.
 
 We
        may
        also experience delays, difficulty in procuring adequate fabrication capacity
        for the development and manufacture of new products, or other difficulties
        in
        achieving volume production of these products. Even relatively minor errors
        may
        significantly affect the development and manufacture of new products. If
        we fail
        to complete and introduce new products in a timely manner at competitive
        price
        and performance levels, our business would be significantly harmed.
 
 **Intense
        competition in the semiconductor industry may reduce the demand for our products
        or the prices of our products, which could reduce our revenues and gross
        profits.**
 
 The
        semiconductor industry is intensely competitive. Our competitors include
        Analog
        Devices, Cypress Semiconductor Corporation, Fairchild Semiconductor, Int'l.,
        Hitachi, Integrated Device Technology, Inc., Intel Corp., Maxim Integrated
        Products, Inc., Motorola, On Semiconductor Corp., NXP, Tundra Semiconductor
        Corp., Parade Technologies, PLX Technology, STMicroelectronics, Texas
        Instruments, Inc., and Toshiba. Most of those competitors have substantially
        greater financial, technical, marketing, distribution and other resources,
        broader product lines and longer-standing customer relationships than we
        do. We
        also compete with other major or emerging companies that sell products to
        certain segments of our markets. Competitors with greater financial resources
        or
        broader product lines may have a greater ability to sustain price reductions
        in
        our primary markets in order to gain or maintain market share.
  31
  We
        believe that our future success will depend on our ability to continue to
        improve and develop our products and processes. Unlike us, many of our
        competitors maintain internal manufacturing capacity for the fabrication
        and
        assembly of semiconductor products. This ability may provide them with more
        reliable manufacturing capability, shorter development and manufacturing
        cycles
        and time-to-market advantages. In addition, competitors with their own wafer
        fabrication facilities that are capable of producing products with the same
        design geometries as ours may be able to manufacture and sell competitive
        products at lower prices. Any introduction of products by our competitors
        that
        are manufactured with improved process technology could seriously harm our
        business. As is typical in the semiconductor industry, our competitors have
        developed and marketed products that function similarly or identically to
        ours.
        If our products do not achieve performance, price, size or other advantages
        over
        products offered by our competitors, our products may lose market share.
        Competitive pressures could also reduce market acceptance of our products,
        reduce our prices and increase our expenses.
 
 We
        also
        face competition from the makers of ASICs and other system devices. These
        devices may include interface logic functions which may eliminate the need
        or
        sharply reduce the demand for our products in particular applications.
 
 **Our
        results of operations have been adversely affected by global economic slowdowns
        in the past and face current challenges from turmoil in financial and other
        markets.**
 
 In
        the
        past, the global economy has experienced economic slowdowns that were due
        to
        many factors, including decreased consumer confidence, unemployment, the
        threat
        of terrorism, and reduced corporate profits and capital spending. These
        unfavorable conditions have resulted in significant declines in our new customer
        order rates. Any future global economic slowing may materially and adversely
        affect our business, financial condition and results of operations.
 
 Currently
        there appears to be a general slow down in the global economy that may last
        for
        an unpredictable period with adverse impacts on credit availability, ability
        of
        our company and our customers to maintain or grow revenues and profits, and
        purchasing demand across our customer base
 
 **Downturns
        in the semiconductor industry, rapidly changing technology, accelerated selling
        price erosion and evolving industry standards can harm our operating results.**
 
 The
        semiconductor industry has historically been cyclical and periodically subject
        to significant economic downturns--characterized by diminished product demand,
        accelerated erosion of selling prices and overcapacity--as well as rapidly
        changing technology and evolving industry standards. In the future, we may
        experience substantial period-to-period fluctuations in our business and
        operating results due to general semiconductor industry conditions, overall
        economic conditions or other factors. Our business is also subject to the
        risks
        associated with the effects of legislation and regulations relating to the
        import or export of semiconductor products.
 
 **Our
        potential future acquisitions may not be successful.**
 
 Our
        potential future acquisitions could result in the following:
 
 ·
              large
                  one-time write-offs;
 ·
              the
                  difficulty in integrating newly-acquired businesses and operations
                  in an
                  efficient and effective manner;
 ·
              the
                  challenges in achieving strategic objectives, cost savings, and
                  other
                  benefits from acquisitions as
                  anticipated;
 ·
              the
                  risk of diverting the attention of senior management from other
                  business
                  concerns;
 ·
              risks
                  of entering geographic and business markets in which we have no
                  or limited
                  prior experience and potential loss of key employees of acquired
                  organizations;
 ·
              the
                  risk that our markets do not evolve as anticipated and that the
                  technologies and capabilities acquired do not prove to be those
                  needed to
                  be successful in those markets;
 ·
              potentially
                  dilutive issuances of equity
                  securities;
 ·
              the
                  incurrence of debt and contingent liabilities or amortization expenses
                  related to intangible assets;
 ·
              difficulties
                  in the assimilation of operations, personnel, technologies, products
                  and
                  the information systems of the acquired companies;
                  and
  32
  ·
              difficulties
                  in expanding information technology systems and other business
                  processes
                  to accommodate the acquired
                  businesses.
 
 As
        part
        of our business strategy, we expect to seek acquisition prospects that would
        complement our existing product offerings, improve our market coverage or
        enhance our technological capabilities. Although we are evaluating acquisition
        and strategic investment opportunities on an ongoing basis, we may not be
        able
        to locate suitable acquisition or investment opportunities. In addition,
        from
        time to time, we invest in other companies, without actually acquiring them,
        and
        such investments involve many of the same risks as are involved with
        acquisitions.
 
 **The
        trading price of our common stock and our operating results are likely to
        fluctuate substantially in the future.**
 
 The
        trading price of our common stock has been and is likely to continue to be
        highly volatile. Our stock price could fluctuate widely in response to factors
        some of which are not within our control, including:
 
 ·
              general
                  conditions in the semiconductor and electronic systems
                  industries;
 ·
              quarter-to-quarter
                  variations in operating results;
 ·
              announcements
                  of technological innovations or new products by us or our competitors;
                  and
 ·
              changes
                  in earnings estimates by analysts; and price and volume fluctuations
                  in
                  the overall stock market, which have particularly affected the
                  market
                  prices of many high technology
                  companies.
 
 **Implementation
        of Financial Accounting Standards Board (“FASB”) rules for the accounting of
        equity instruments and the issuance of new laws or other accounting regulations,
        or reinterpretation of existing laws or regulations, could materially impact
        our
        business or stated results.**
 
 Statement
        of Financial Accounting Standards (“SFAS”) No. 123(R) *Share-Based
        Payment* required
        the Company to recognize the cost of employee services received in exchange
        for
        awards of equity instruments, based on the grant date fair value of those
        awards, in the financial statements. The adoption of this statement resulted
        in
        a negative impact on the Company’s reported results of operations. In general,
        from time to time, the government, courts and the financial accounting boards
        may issue new laws or accounting regulations, or modify or reinterpret existing
        ones. There may be future changes in laws, interpretations or regulations
        that
        would affect our financial results or the way in which we present them.
        Additionally, changes in the laws or regulations could have adverse effects
        on
        hiring and many other aspects of our business that would affect our ability
        to
        compete, both nationally and internationally.
 
 **We
        and our independent registered public accounting firm previously determined
        that
        we had material weaknesses in our internal control over financial reporting,
        that have since been remediated. There can be no assurance that a material
        weakness will not arise in the future. As a result, current and potential
        stockholders could lose confidence in our financial reporting, which would
        harm
        our business and the trading price of our stock.**
  Under
        Section 404 of the Sarbanes-Oxley Act of 2002 SEC rules, we are required
        to
        evaluate and determine the effectiveness of our internal control over financial
        reporting. In our annual reports on Form 10-K for the years ended June 30,
        2007
        and July 2, 2005 we reported material weaknesses in our internal control
        over
        financial reporting. We have since remediated these deficiencies and continue
        to
        spend a significant amount of time and resources to ensure compliance with
        Section 404 of the Sarbanes-Oxley Act of 2002 maintain internal control over
        financial reporting. As reported in Item 9A of the Company’s Form 10-K for the
        year ended June 28, 2008, our management does not believe we had any material
        weakness in our internal control over financial reporting as of June 28,
        2008,
        and management has determined that as of June 28, 2008, our internal control
        over financial reporting was effective. However, considering we have and
        will as
        we continue to evolve our business in a changing marketplace and will continue
        to make corresponding changes in our internal control in financial reporting,
        there can be no assurance that material weaknesses or significant deficiencies
        will not arise in the future. Should we or our independent registered public
        accounting firm determine in future periods that we have a material weakness
        in
        our internal control over financial reporting, the reliability of our financial
        reports may be impacted or impaired, and investors could lose confidence
        in the
        accuracy and completeness of our financial reports, which could have an adverse
        effect on our stock price.
  33
 
 **Customer
        demand for our products is volatile and difficult to predict.**
 
 The
        Company’s customers continuously adjust their inventories in response to changes
        in end market demand for their products and the availability of semiconductor
        components. This results in frequent changes in demand for our products.
        The
        volatility of customer demand limits our ability to predict future levels
        of
        sales and profitability. The supply of semiconductors can quickly and
        unexpectedly match or exceed demand because end customer demand can change
        very
        quickly. Also, semiconductor suppliers can rapidly increase production output.
        This can lead to a sudden oversupply situation and a subsequent reduction
        in
        order rates and revenues as customers adjust their inventories to true demand
        rates. A rapid and sudden decline in customer demand for the Company’s products
        can result in excess quantities of certain products relative to demand. In
        this
        event, our operating results might be adversely affected as a result of charges
        to reduce the carrying value of inventory to the estimated demand level or
        market price.
 
 **Changes
        to environmental laws and regulations applicable to manufacturers of electrical
        and electronic equipment are causing us to redesign our products, and may
        increase our costs and expose us to liability.**
 
 The
        implementation of new environmental regulatory legal requirements could impact
        our product designs and manufacturing processes. The impact of such regulations
        on our product designs and manufacturing processes could affect the timing
        of
        compliant product introductions as well as their commercial success. Redesigning
        our products to comply with new regulations may result in increased research
        and
        development and manufacturing and quality control costs. In addition, the
        products we manufacture that comply with new regulatory standards may not
        perform as well as our current products. Moreover, if we are unable to
        successfully and timely redesign existing products and introduce new products
        that meet new standards set by environmental regulation and our customers,
        sales
        of our products could decline, which could materially adversely affect our
        business, financial condition and results of operations.
 
 **Our
        contracts with our wafer suppliers do not obligate them to a minimum supply
        or
        set prices. Any inability or unwillingness of our wafer suppliers generally,
        and
        Chartered Semiconductor Manufacturing Ltd. and MagnaChip Semiconductor, Inc.
        in
        particular, to meet our manufacturing requirements would delay our production
        and product shipments and harm our business.**
 
 In
        recent
        years, we purchased approximately 80 to 90% of our wafers from MagnaChip
        and
        Chartered, with the balance coming from three to six other suppliers. Our
        reliance on independent wafer suppliers to fabricate our wafers at their
        production facilities subjects us to possible risks such as:
 
 ·
              lack
                  of adequate capacity;
 ·
              lack
                  of available manufactured products;
 ·
              lack
                  of control over delivery schedules;
                  and
 ·
              unanticipated
                  changes in wafer prices.
 
 Any
        inability or unwillingness of our wafer suppliers generally, and Chartered
        and
        MagnaChip in particular, to provide adequate quantities of finished wafers
        to
        meet our needs in a timely manner would delay our production and product
        shipments and seriously harm our business. In March 2004, Chartered shut
        down
        one of their production facilities that was used to manufacture our products.
        We
        have transitioned the production of these products to different facilities.
        This
        was a major project requiring significant technological coordination between
        Chartered and Pericom. The transfer of production of our products to other
        facilities subjects us to the above listed risks as well as potential yield
        or
        other production problems which could arise as a result of the
        change.
 
 At
        present, we purchase wafers from our suppliers through the issuance of purchase
        orders based on our rolling six-month forecasts. The purchase orders are
        subject
        to acceptance by each wafer supplier. We do not have long-term supply contracts
        that obligate our suppliers to a minimum supply or set prices. We also depend
        upon our wafer suppliers to participate in process improvement efforts, such
        as
        the transition to finer geometries. If our suppliers are unable or unwilling
        to
        do so, our development and introduction of new products could be delayed.
        Furthermore, sudden shortages of raw materials or production capacity
        constraints can lead wafer suppliers to allocate available capacity to customers
        other than us or for the suppliers' internal uses, interrupting our ability
        to
        meet our product delivery obligations. Any significant interruption in our
        wafer
        supply would seriously harm our operating results and our customer relations.
        Our reliance on independent wafer suppliers may also lengthen the development
        cycle for our products, providing time-to-market advantages to our competitors
        that have in-house fabrication capacity.
  34
 
 In
        the
        event that our suppliers are unable or unwilling to manufacture our key products
        in required volumes, we will have to identify and qualify additional wafer
        foundries. The qualification process can take up to six months or longer.
        Furthermore, we are unable to predict whether additional wafer foundries
        will
        become available to us or will be in a position to satisfy any of our
        requirements on a timely basis.
 
 **We
        depend on single or limited source assembly subcontractors with whom we do
        not
        have written contracts. Any inability or unwillingness of our assembly
        subcontractors to meet our assembly requirements would delay our product
        shipments and harm our business.**
 
 We
        primarily rely on foreign subcontractors for the assembly and packaging of
        our
        products and, to a lesser extent, for the testing of finished products. Some
        of
        these subcontractors are our single source supplier for some of our new
        packages. In addition, changes in our or a subcontractor's business could
        cause
        us to become materially dependent on a single subcontractor. We have from
        time
        to time experienced difficulties in the timeliness and quality of product
        deliveries from our subcontractors and may experience similar or more severe
        difficulties in the future. We generally purchase these single or limited
        source
        components or services pursuant to purchase orders and have no guaranteed
        arrangements with these subcontractors. These subcontractors could cease
        to meet
        our requirements for components or services, or there could be a significant
        disruption in supplies from them, or degradation in the quality of components
        or
        services supplied by them. Any circumstance that would require us to qualify
        alternative supply sources could delay shipments, result in the loss of
        customers and limit or reduce our revenues.
 
 **We
        may have difficulty accurately predicting revenues for future periods.**
 
 Our
        expense levels are based in part on anticipated future revenue levels, which
        can
        be difficult to predict. Our business is characterized by short-term orders
        and
        shipment schedules. We do not have long-term purchase agreements with any
        of our
        customers, and customers can typically cancel or reschedule their orders
        without
        significant penalty. We typically plan production and inventory levels based
        on
        forecasts of customer demand generated with input from customers and sales
        representatives. Customer demand is highly unpredictable and can fluctuate
        substantially. If customer demand falls significantly below anticipated levels,
        our gross profit would be reduced.
 
 **We
        compete with others to attract and retain key personnel, and any loss of
        or
        inability to attract key personnel would harm us.**
 
 To
        a
        greater degree than non-technology companies, our future success will depend
        on
        the continued contributions of our executive officers and other key management
        and technical personnel. None of these individuals has an employment agreement
        with us and each one would be difficult to replace. We do not maintain any
        key
        person life insurance policies on any of these individuals. The loss of the
        services of one or more of our executive officers or key personnel or the
        inability to continue to attract qualified personnel could delay product
        development cycles or otherwise harm our business, financial condition and
        results of operations.
 
 Our
        future success also will depend on our ability to attract and retain qualified
        technical, marketing and management personnel, particularly highly skilled
        design, process and test engineers, for whom competition can be intense.
        During
        strong business cycles, we expect to experience difficulty in filling our
        needs
        for qualified engineers and other personnel.
  35
  **Our
        limited ability to protect our intellectual property and proprietary rights
        could harm our competitive position.**
 
 Our
        success depends in part on our ability to obtain patents and licenses and
        preserve other intellectual property rights covering our products and
        development and testing tools. In the United States, we currently hold 111
        patents covering certain aspects of our product designs and have 11 additional
        patent applications pending. Copyrights, mask work protection, trade secrets
        and
        confidential technological know-how are also key to our business. Additional
        patents may not be issued to us or our patents or other intellectual property
        may not provide meaningful protection. We may be subject to, or initiate,
        interference proceedings in the U.S. Patent and Trademark Office. These
        proceedings can consume significant financial and management resources. We
        may
        become involved in litigation relating to alleged infringement by us of others'
        patents or other intellectual property rights. This type of litigation is
        frequently expensive to both the winning party and the losing party and takes
        up
        significant amounts of management's time and attention. In addition, if we
        lose
        such a lawsuit, a court could require us to pay substantial damages and/or
        royalties or prohibit us from using essential technologies. For these and
        other
        reasons, this type of litigation could seriously harm our business. Also,
        although we may seek to obtain a license under a third party's intellectual
        property rights in order to bring an end to certain claims or actions asserted
        against us, we may not be able to obtain such a license on reasonable terms
        or
        at all.
 
 Because
        it is important to our success that we are able to prevent competitors from
        copying our innovations, we intend to continue to seek patent, trade secret
        and
        mask work protection for our technologies. The process of seeking patent
        protection can be long and expensive, and we cannot be certain that any
        currently pending or future applications will actually result in issued patents,
        or that, even if patents are issued, they will be of sufficient scope or
        strength to provide meaningful protection or any commercial advantage to
        us.
        Furthermore, others may develop technologies that are similar or superior
        to our
        technology or design around the patents we own.
 
 We
        also
        rely on trade secret protection for our technology, in part through
        confidentiality agreements with our employees, consultants and third parties.
        However, these parties may breach these agreements. In addition, the laws
        of
        some territories in which we develop, manufacture or sell our products may
        not
        protect our intellectual property rights to the same extent as do the laws
        of
        the United States.
 
 Our
        independent foundries use a process technology that may include technology
        we
        helped develop with them, that may generally be used by those foundries to
        produce their own products or to manufacture products for other companies,
        including our competitors. In addition, we may not have the right to implement
        key process technologies used to manufacture some of our products with foundries
        other than our present foundries.
 
 **We
        may not provide adequate allowances for exchanges, returns and concessions.**
 
 We
        recognize revenue from the sale of products when shipped, less an allowance
        based on future authorized and historical patterns of returns, price protection,
        exchanges and other concessions. We believe our methodology and approach
        are
        appropriate. However, if the actual amounts we incur exceed the allowances,
        it
        could decrease our revenue and corresponding gross profit.
 
 **We
        are subject to risks related to taxes.**
 
 A
        number
        of factors, including unanticipated changes in the mix of earnings in countries
        with differing statutory tax rates or by unexpected changes in existing tax
        laws
        or our interpretation of them, could unfavorably affect our future effective
        tax
        rate. In the event our management determines it is no longer more likely
        than
        not that we will realize a portion of our deferred tax assets we will be
        required to increase our valuation allowance which will result in an increase
        in
        our effective tax rate. Furthermore, our tax returns are subject to examination
        in all the jurisdictions in which we operate which subjects us to potential
        increases in our tax liabilities. All of these factors could have an adverse
        effect on our financial condition and results of operations.
  36
  **The
        complexity of our products makes us susceptible to manufacturing problems,
        which
        could increase our costs and delay our product shipments.**
 
 The
        manufacture and assembly of our products is highly complex and sensitive
        to a
        wide variety of factors, including:
 
 ·
              the
                  level of contaminants in the manufacturing
                  environment;
 ·
              impurities
                  in the materials used; and
 ·
              the
                  performance of manufacturing personnel and production equipment.
 
 In
        a
        typical semiconductor manufacturing process, silicon wafers produced by a
        foundry are cut into individual die. These die are assembled into individual
        packages and tested for performance. Our wafer fabrication suppliers have
        from
        time to time experienced lower than anticipated yields of suitable die. In
        the
        event of such decreased yields, we would incur additional costs to sort wafers,
        an increase in average cost per usable die and an increase in the time to
        market
        or availability of our products. These conditions could reduce our net revenues
        and gross margin and harm our customer relations.
 
 We
        do not
        manufacture any of our IC products. Therefore, we are referred to in the
        semiconductor industry as a "fabless" producer. Consequently, we depend upon
        third party manufacturers to produce semiconductors that meet our
        specifications. We currently have third party manufacturers that can produce
        semiconductors that meet our needs. However, as the industry continues to
        progress to smaller manufacturing and design geometries, the complexities
        of
        producing semiconductors will increase. Decreasing geometries may introduce
        new
        problems and delays that may affect product development and deliveries. Due
        to
        the nature of the industry and our status as a "fabless" IC semiconductor
        company, we could encounter fabrication-related problems that may affect
        the
        availability of our products, delay our shipments or increase our costs.
        With
        the acquisition of SRe we are directly involved in the manufacture of our
        FCP
        products. We may not be successful in operating the FCP facility as technologies
        continue to evolve, and as a consequence, there may be manufacturing related
        problems that affect our FCP products. In addition, we have committed to
        the
        construction of a new FCP facility located in the Jinan Development Zone
        in
        Shandong Province, China, which adds the uncertainties involved with staffing
        and starting up a new facility in a country where we have no previous operating
        experience.
 
 **A
        large portion of our revenues is derived from sales to a few customers, who
        may
        cease purchasing from us at any time.**
 
 A
        relatively small number of customers have accounted for a significant portion
        of
        our net revenues in each of the past several fiscal years. In general we
        expect
        this to continue for the foreseeable future. With the addition of SRe, the
        concentration of our largest customers has been reduced, as the largest
        customers of SRe are somewhat different from those of our core integrated
        circuit business and previously existing FCP business. We had one Asian
        distributor that individually accounted for 18% and 14% of our net revenues
        during the first quarter ended September 27, 2008 and the fiscal year ended
        June
        28, 2008, respectively. A second additional Asian distributor individually
        accounted for an additional 14% our net revenue during the first quarter
        ended
        September 27, 2008. We had one Asian distributor that individually accounted
        for
        13% of our net revenues during the fiscal year ended June 30, 2007. During
        the
        fiscal year ended July 1, 2006, we had one Asian distributor that accounted
        for
        11% of our net revenues. As a percentage of net revenues, sales to our top
        five
        direct customers totaled 49% in the quarter ended September 27, 2008, 40%
        in
        fiscal year ended June 28, 2008, 35% in the fiscal year ended June 30, 2007
        and
        36% in the fiscal year ended July 1, 2006.
 
 We
        do not
        have long-term sales agreements with any of our customers. Our customers
        are not
        subject to minimum purchase requirements, may reduce or delay orders
        periodically due to excess inventory and may discontinue purchasing our products
        at any time. Our distributors typically offer competing products in addition
        to
        ours. For the quarter ended September 27, 2008 and the fiscal year ended
        June
        28, 2008, sales to our distributors were approximately 52% and 49% of net
        revenues, respectively as compared to approximately 40% of net revenues in
        the
        fiscal year ended June 30, 2007, and 39% for the fiscal year ended July 1,
        2006.
        The increase in the percentage of sales to our distributors as compared with
        the
        prior periods was due to growth in sales to Asian distributor customers.
        The
        loss of one or more significant customers, or the decision by a significant
        distributor to carry additional product lines of our competitors could decrease
        our revenues.
  37
 
 **Almost
        all of our wafer suppliers and assembly subcontractors are located in Southeast
        Asia, which exposes us to the problems associated with international operations.**
 
 Risks
        associated with international business operations include the
        following:
 
 ·
              disruptions
                  or delays in shipments;
 ·
              changes
                  in economic conditions in the countries where our subcontractors
                  are
                  located;
 ·
              currency
                  fluctuations;
 ·
              changes
                  in political conditions;
 ·
              potentially
                  reduced protection for intellectual
                  property;
 ·
              foreign
                  governmental regulations;
 ·
              import
                  and export controls; and
 ·
              changes
                  in tax laws, tariffs and freight rates.
 
 In
        particular, there is a potential risk of conflict and further instability
        in the
        relationship between Taiwan and the People's Republic of China. Conflict
        or
        instability could disrupt the operations of one of our principal wafer suppliers
        and several of our assembly subcontractors located in Taiwan.
 
 **Because
        we sell our products to customers outside of the United States, we face foreign
        business, political and economic risks that could seriously harm
        us.**
 
 In
        the
        quarter ended September 27, 2008, w e
        derived
        approximately 91% of our net revenues from sales in Asia and approximately
        3% from
        sales outside of Asia and the United States. In fiscal year 2008, we derived
        approximately 88% of our net revenues from sales in Asia and approximately
        3%
        from sales outside of Asia and the United States. In fiscal year 2007, we
        derived approximately 82% of our net revenues from sales in Asia and
        approximately 4% from sales outside of Asia and the United States. In fiscal
        year 2006, we generated approximately 64% of our net revenues from sales
        in Asia
        and approximately 17% from sales outside of Asia and the United States. We
        expect that export sales will continue to represent a significant portion
        of net
        revenues. We intend to continue the expansion of our sales efforts outside
        the
        United States. This expansion will require significant management attention
        and
        financial resources and further subject us to international operating risks.
        These risks include:
 
 ·
              tariffs
                  and other barriers and
                  restrictions;
 ·
              unexpected
                  changes in regulatory requirements;
 ·
              the
                  burdens of complying with a variety of foreign laws;
                  and
 ·
              delays
                  resulting from difficulty in obtaining export licenses for
                  technology.
 
 We
        are
        also subject to general geopolitical risks in connection with our international
        operations, such as political and economic instability and changes in diplomatic
        and trade relationships. In addition, because our international sales are
        denominated in U.S. dollars, increases in the value of the U.S. dollar could
        increase the price in local currencies of our products in foreign markets
        and
        make our products relatively more expensive than competitors' products that
        are
        denominated in local currencies. Regulatory, geopolitical and other factors
        could seriously harm our business or require us to modify our current business
        practices.
 
 **Our
        shareholder rights plan may adversely affect existing
        shareholders.**
 
 On
        March
        6, 2002, we adopted a shareholder rights plan that may have the effect of
        deterring, delaying, or preventing a change in control that otherwise might
        be
        in the best interests of our shareholders. Under the rights plan, we issued
        a
        dividend of one preferred share purchase right for each share of our common
        stock held by shareholders of record as of March 21, 2002. Each right entitles
        shareholders to purchase one one-hundredth of our Series D Junior Participating
        Preferred Stock.
 
 In
        general, the share purchase rights become exercisable when a person or group
        acquires 15% or more of our common stock or a tender offer for 15% or more
        of
        our common stock is announced or commenced. After such event, our other
        stockholders may purchase additional shares of our common stock at 50% off
        of
        the then-current market price. The rights will cause substantial dilution
        to a
        person or group that attempts to acquire us on terms not approved by our
        Board
        of Directors. The rights should not interfere with any merger or other business
        combination approved by our Board of Directors since the rights may be redeemed
        by us at $0.001 per right at any time before any person or group acquire
        15% or
        more of our outstanding common stock. These rights expire in March
        2012.
  38
 
 **Our
        operations and financial results could be severely harmed by natural disasters.**
 
 Our
        headquarters and some of our major suppliers' manufacturing facilities are
        located near major earthquake faults. One of the foundries we use is located
        in
        Taiwan, which suffered a severe earthquake during fiscal 2000. We did not
        experience significant disruption to our operations as a result of that
        earthquake. However, if a major earthquake or other natural disaster were
        to
        affect our suppliers, our sources of supply could be interrupted, which would
        seriously harm our business.
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of Proceeds**
 
 On
        April
        26, 2007, the Company’s Board of Directors authorized the repurchase of an
        additional 2.0 million shares under a program disclosed in our previous periodic
        reports and on April 29, 2008, our Board of Directors authorized the repurchase
        of an additional $30 million of our common stock, which was announced May
        1,
        2008.
 
 Pursuant
        to the 2007 authority, the Company repurchased 139,190 shares in the three
        months ended September 27, 2008 for an aggregate cost of $1.9 million and
        thereby completed the repurchase of 2,000,000 shares at an aggregate cumulative
        cost of approximately $25.2 million after April 26, 2007. Pursuant to the
        2008
        authority, the Company repurchased 60,810 shares in the three months ended
        September 27, 2008 for an aggregate cost of $0.8 million. During the same
        period
        in fiscal 2008, the
 Company
        repurchased approximately 0.5 million shares for an aggregate cost of $5.0
        million. The average price per share of repurchases under the 2007 and 2008
        authority during the first quarter of fiscal 2009 was $13.34.
 
 The
        repurchases may be made from time to time in the open market or through private
        transactions at the discretion of Company management. Current cash balances
        and
        the proceeds from stock option exercises and employee stock purchase plan
        purchases have funded stock repurchases in the past, and we expect to fund
        future stock repurchases from these same sources.
 
 The
        following table describes the shares repurchased under the authorizations
        described above on a month by month basis during the fiscal first
        quarter:
  **Period**
              
              **Total Number of**
                **Shares**
                **Purchased**
              
              **Average**
                **Price Paid**
                **per Share**
              
              **Total Number of**
                **Shares Purchased**
                **as Part of Publicly**
                **Announced Plans**
                **or Programs**
              
              **Maximum Number**
                **(or Approximate**
                **Dollar Value) of**
                **Shares**
                **that May Yet Be**
                **Purchased Under the**
                **Plans or Programs**63,124
                  shares plusAugust
                  28, 2008 - August 29, 2008
              
              
              76,066
              
              $
              13.72
              
              
              1,936,876
              
              $
              30.0
                  millionSeptember
                  3, 2008 -September 10, 2008
              
              
              123,934
              
              $
              13.11
              
              
              2,060,810
              
              $
              29.2
                  million200,000
              
              $
              13.34
              
              
              2,060,810
              
              $
              29.2
                  million


39
 
 **Item
        6.**  **Exhibits.**
 
 Exhibit
                Number
              
              Exhibit
                Description31.1
              
              Certification
                  of Alex C. Hui, Chief Executive Officer, pursuant to Section 302
                  of the
                  Sarbanes-Oxley Act of 200231.2
              
              Certification
                  of Angela Chen, Chief Financial Officer, pursuant to Section 302
                  of the
                  Sarbanes-Oxley Act of 200232.1
              
              Certification
                  of Alex C. Hui, Chief Executive Officer, pursuant to Section 906
                  of the
                  Sarbanes-Oxley Act of 200232.2
              
              Certification
                  of Angela Chen, Chief Financial Officer, pursuant to Section 906
                  of the
                  Sarbanes-Oxley Act of 2002
 
 
 SIGNATURES
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
  
 Pericom Semiconductor Corporation
 (Registrant)
  Date:
                  November 6, 2008
              By:
              /s/
                  Alex C. HuiAlex
                  C. HuiChief
                  Executive OfficerBy:
              /s/
                  Angela ChenAngela
                  ChenChief
                  Financial Officer
  40