<PAGE>   1


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended                December 31, 2000
                               -------------------------------------------------

                                       OR

[ ]   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                         000-23084
                      ----------------------------------------------------------



                        INTEGRATED SILICON SOLUTION, INC.



                Delaware                                    77-0199971
     -------------------------------                   -------------------
     (State or other jurisdiction of                    (I.R.S. Employer
     incorporation or organization)                    Identification No.)

2231 Lawson Lane, Santa Clara, California                      95054
--------------------------------------------------------------------------------
(Address of principal executive offices)                      zip code

Registrant's telephone number, including area code       (408) 588-0800
                                                  ------------------------------

        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  [ ]

        The number of outstanding shares of the registrant's Common Stock as of
January 31, 2001 was 26,095,321
                     ----------




<PAGE>   2


                        INTEGRATED SILICON SOLUTION, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                      (In thousands, except per share data)


<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED
                                                         DECEMBER 31,
                                                    ----------------------
                                                      2000          1999
                                                    --------      --------
<S>                                                 <C>           <C>
Net sales (See Note 13)                             $ 65,229      $ 23,251
Cost of sales                                         43,054        16,971
                                                    --------      --------
Gross Profit                                          22,175         6,280
                                                    --------      --------

Operating Expenses:
  Research and development                             6,717         3,619
  Selling, general and administrative                  6,230         3,207
                                                    --------      --------
    Total operating expenses                          12,947         6,826
                                                    --------      --------

Operating income (loss)                                9,228          (546)
Gain on sale of investments                           17,202             -
Other income (expense), net                            1,507           (56)
                                                    --------      --------
Income (loss) before income taxes and
  equity in net income of affiliated companies        27,937          (602)
Provision  for income taxes                            6,985            50
                                                    --------      --------

Income (loss) before equity in net income
  of affiliated companies                             20,952          (652)

Equity in net income of
  affiliated companies                                 4,123         1,146
                                                    --------      --------

Net income                                          $ 25,075      $    494
                                                    ========      ========

Basic net income per share                          $   0.97      $   0.02
                                                    ========      ========
Shares used in basic per share calculation            25,822        20,378
                                                    ========      ========

Diluted net income per share                        $   0.91      $   0.02
                                                    ========      ========
Shares used in diluted per share calculation          27,407        22,498
                                                    ========      ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.




<PAGE>   3


                        INTEGRATED SILICON SOLUTION, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (Unaudited)
                                 (In thousands)


<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED
                                                          DECEMBER 31,
                                                    -----------------------
                                                      2000           1999
                                                    --------       --------
<S>                                                 <C>            <C>
Net income                                          $ 25,075       $    494
Other comprehensive income (loss), net of tax:
   Change in cumulative translation adjustment        (1,011)           293
                                                    --------       --------

Comprehensive income                                $ 24,064       $    787
                                                    ========       ========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.
<PAGE>   4


                        INTEGRATED SILICON SOLUTION, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                               DECEMBER 31,   SEPTEMBER 30,
                                                                  2000            2000
                                                               -----------    -------------
                                                               (unaudited)          (1)
<S>                                                             <C>             <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents                                     $  81,453       $  38,778
  Short-term investments                                           57,650          58,800
  Accounts receivable                                              43,642          26,525
  Accounts receivable from related parties (See Note 13)            1,272           1,526
  Inventories                                                      64,392          63,217
  Other current assets                                              3,021           1,271
                                                                ---------       ---------

Total current assets                                              251,430         190,117
Property, equipment, and leasehold improvements, net                5,037           5,429
Other assets                                                       45,832          65,178
                                                                ---------       ---------
Total assets                                                    $ 302,299       $ 260,724
                                                                =========       =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                              $  32,433       $  20,411
  Accounts payable to related parties (See Note 13)                 4,823          13,043
  Accrued compensation and benefits                                 3,545           2,424
  Accrued expenses                                                 13,206           7,513
  Income tax payable                                                7,405             648
  Current portion of long-term obligations                            144             140
                                                                ---------       ---------

Total  current liabilities                                         61,556          44,179
Income tax payable - non-current                                    4,996           4,996
Long-term obligations                                                 276             314

Stockholders' equity:
  Preferred stock                                                       -               -
  Common stock                                                          3               3
  Additional paid-in capital                                      218,012         217,845
  Retained earnings (accumulated deficit)                          22,249          (2,826)
  Accumulated comprehensive income                                 (4,780)         (3,769)
  Unearned compensation                                               (13)            (18)
                                                                ---------       ---------

Total stockholders' equity                                        235,471         211,235
                                                                ---------       ---------
Total liabilities and stockholders' equity                      $ 302,299       $ 260,724
                                                                =========       =========
</TABLE>
---------------
(1) Derived from audited financial statements.

     See accompanying notes to condensed consolidated financial statements.
<PAGE>   5


                        INTEGRATED SILICON SOLUTION, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
                                                                                              DECEMBER 31,
                                                                                        -----------------------
                                                                                          2000           1999
                                                                                        --------       --------
<S>                                                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                                            $ 25,075       $    494
  Gain on sale of investments                                                            (17,202)             -
  Depreciation and amortization                                                              789            725
  Equity in net income of affiliated companies                                            (4,123)        (1,146)
  Other charges to net income not affecting cash                                               -            200
  Net effect of changes in current and other assets and current liabilities               (1,821)        (5,200)
                                                                                        --------       --------
     Cash provided by (used in) operating activities                                       2,718         (4,927)

CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                                                      (397)          (360)
  Purchases of available-for-sale securities                                             (15,100)             -
  Sales of available-for-sale securities                                                  16,250          2,500
  Proceeds from partial sale of Integrated Circuit Solution, Inc. ("ICSI")                 5,147              -
  Investment in Wafertech, LLC                                                                 -         (2,667)
  Proceeds from sale of Wafertech, LLC                                                    40,669              -
  Investment in Semiconductor Manufacturing International Corp. ("SMIC")                  (6,750)             -
                                                                                        --------       --------
     Cash provided by (used in) investing activities                                      39,819           (527)

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of common stock                                                     172            948
  Principal payments on notes payable and long-term obligations                              (34)           (50)
                                                                                        --------       --------
     Cash provided by financing activities                                                   138            898
                                                                                        --------       --------

Net increase (decrease) in cash and cash equivalents                                      42,675         (4,556)
Cash and cash equivalents at beginning of period                                          38,778         15,975
                                                                                        --------       --------
Cash and cash equivalents at end of period                                              $ 81,453       $ 11,419
                                                                                        ========       ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


<PAGE>   6

                        INTEGRATED SILICON SOLUTION, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.      BASIS OF PRESENTATION

        The accompanying condensed financial statements include the accounts of
Integrated Silicon Solution, Inc. (the "Company") and its consolidated majority
owned subsidiaries, after elimination of all significant intercompany accounts
and transactions and have been prepared in accordance with generally accepted
accounting principles for interim financial information and with Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included.

        Operating results for the three months ended December 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2001.


2.      CONCENTRATIONS

        Sales to 3Com accounted for approximately 9% and 12% of total net sales
for the quarters ended December 31, 2000 and December 31, 1999, respectively.
Sales to Flextronics International accounted for approximately 14% and 12% of
total net sales for the quarters ended December 31, 2000 and December 31, 1999,
respectively. Substantially all of the sales to Flextronics were for products to
be delivered to Cisco Systems Inc.

        The Company uses Integrated Circuit Solution Incorporation ("ICSI") for
coordinating wafer purchases, assembly, and testing for a majority of its
inventory.


3.      CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

        Cash, cash equivalents and short-term investments consisted of the
following:

<TABLE>
<CAPTION>
                                                      (In thousands)

                                                 DECEMBER 31   SEPTEMBER 30
                                                     2000          2000
                                                   --------      --------
<S>                                                <C>           <C>
     Cash                                          $ 27,297      $ 10,624
     Money market instruments                        54,156        28,154
     Municipal bonds due in more than 3 years        57,650        58,800
                                                   --------      --------
                                                   $139,103      $ 97,578
                                                   ========      ========
</TABLE>




                                       5
<PAGE>   7


                        INTEGRATED SILICON SOLUTION, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4.      INVENTORIES

        The following is a summary of inventories by major category:

<TABLE>
<CAPTION>
                                   (In thousands)

                             DECEMBER 31     SEPTEMBER 30
                                 2000            2000
                               -------         -------
<S>                            <C>             <C>
     Purchased components      $15,525         $17,566
     Work-in-process             8,334          11,737
     Finished goods             40,533          33,914
                               -------         -------
                               $64,392         $63,217
                               =======         =======
</TABLE>


5.      OTHER ASSETS

        Other assets consisted of the following:

<TABLE>
<CAPTION>
                                                 (In thousands)

                                          DECEMBER 31       SEPTEMBER 30
                                              2000               2000
                                            -------            -------
<S>                                         <C>                <C>
     Investment in ICSI                     $29,788            $31,525
     Investment in WaferTech LLC                  -             23,467
     Investment in SMIC                      11,350              4,600
     Other                                    4,694              5,586
                                            -------            -------
                                            $45,832            $65,178
                                            =======            =======
</TABLE>


6.      INCOME TAXES

        The provision for income taxes for the three month period ended December
31, 2000 is principally comprised of taxes on U.S. earnings and to a lesser
extent taxes on foreign earnings. The income tax provision for the three month
period ended December 31, 1999 is primarily foreign withholding taxes. The
effective tax rate of 25% for the three months ended December 31, 2000 differs
from the federal statutory rate as a result of the reversal of valuation
allowances previously established. A portion of the valuation allowance
previously established is now being realized as a result of the current taxable
income. The 25% effective tax rate is based on current tax law, the current
estimate of earnings and the expected distribution of income among various tax
jurisdictions, and is subject to change.




                                       6
<PAGE>   8


                        INTEGRATED SILICON SOLUTION, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


7.      NET INCOME PER SHARE

        The Company calculates earnings per share in accordance with the
Financial Accounting Standards Board Statement No. 128, "Earnings Per Share."

        The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                                     DECEMBER 31,
                                                                --------------------
                                                                  2000         1999
                                                                -------      -------
<S>                                                             <C>          <C>
     Numerator for basic and diluted net income per share:
     Net income                                                 $25,075      $   494
                                                                =======      =======

     Denominator for basic net income per share:
     Weighted average  common shares outstanding                 25,822       20,378
     Denominator for basic net income  per share                 25,822       20,378
                                                                =======      =======

     Dilutive stock options                                       1,514        1,664
     Dilutive warrants                                               71          456
                                                                -------      -------
     Denominator for diluted net income per share                27,407       22,498
                                                                =======      =======

     Basic net income per share                                 $  0.97      $  0.02
                                                                =======      =======
     Diluted net income per share                               $  0.91      $  0.02
                                                                =======      =======
</TABLE>

        The above diluted calculation does not include approximately 1,158,000
and 346,000 shares attributable to options as of December 31, 2000 and 1999,
respectively, as their impact would be anti-dilutive.


8.      USE OF ESTIMATES

        The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.


9.      IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

        In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition", which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. The Company will be required to adopt
the provisions of SAB 101 in the fourth quarter of fiscal 2001. The Company
believes that its revenue recognition policy is in compliance with the
provisions of SAB 101 and that the adoption of SAB 101 will have no material
effect on its financial position or results of operations.




                                       7
<PAGE>   9




                        INTEGRATED SILICON SOLUTION, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


        In June 1998, the Financial Accounting Standards Board issued Statement
133, ("FAS 133") "Accounting for Derivative Instruments and Hedging Activities",
which is required to be adopted in fiscal years beginning after June 15, 2000.
The Company adopted the provisions of FAS 133 in the first quarter of fiscal
2001. Because the Company's did not use derivatives, the adoption of FAS 133 did
not have an impact on the Company's earnings or its financial position.


10.     LITIGATION

     In April 1998, the U.S. Department of Commerce ("DOC") published an
antidumping duty order on imports of SRAMs from Taiwan, from where we currently
import a majority of our SRAMs. As a consequence of this antidumping duty order,
we are required to post a cash deposit on imports of Taiwan fabricated SRAM
wafers or devices at the ad valorem rate of 7.56%.

     On April 28, 2000, Micron Technology Inc. ("Micron") requested an
administrative review of our Taiwan fabricated SRAMs for the period from April
1, 1999 through March 31, 2000. For entries during this period, the cash
deposits could be returned to us or, alternatively, we could forfeit amounts
deposited and owe duties and interest in addition to the amounts deposited,
depending on results of the DOC administrative review. The final results of the
review are expected in calendar year 2001 and will establish a new deposit rate
for subsequent entries, which may be higher or lower than the current rate.

     We have retained legal counsel to defend our interests in the antidumping
proceedings. In addition, respondents (including ISSI) have challenged certain
aspects of the antidumping determination in federal court proceedings. On August
29, 2000, pursuant to an appeal by ISSI and other respondents, the U.S. Court of
International Trade affirmed the International Trade Commission ("ITC") decision
to reverse the ITC's earlier ruling supporting the imposition of antidumping
duties and rule instead in favor of respondents. This decision by the Court of
International Trade has been appealed by Micron to the Federal Circuit Court of
Appeals. If such appeal is not successful, the antidumping case will be
terminated, the order will be revoked, and we will be entitled to a full refund
of cash deposits. Pending resolution of the appeal, the DOC will continue to
administer the antidumping order.

     Duties calculated and assessed by the government could have a material
adverse affect on our gross margins and profits. Any reviews or proceedings
might not mitigate or eliminate antidumping duties.


11.     LONG TERM OBLIGATIONS

     The Company leases certain of its equipment under a capital lease. The
lease is collateralized by the underlying assets. At December 31, 2000, property
and equipment with a cost of $600,000 was subject to this financing arrangement.
Related accumulated amortization at December 31, 2000 amounted to $162,500.
Under the terms of the lease, the Company owes monthly payments of $15,108
through September 1, 2003. Remaining principle and interest payments were
$419,953 and $63,605, respectively, at December 31, 2000.




                                       8
<PAGE>   10


                        INTEGRATED SILICON SOLUTION, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


12.     GEOGRAPHIC AND SEGMENT INFORMATION

     The Company has one operating segment, which is to design, develop, and
market high-performance SRAM, DRAM, and other memory products. The following
table summarizes the Company's operations in different geographic areas:


<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED DECEMBER 31,
                                                -------------------------------
                                                     2000           1999
                                                   --------       --------
                                                        (In thousands)
<S>                                                <C>            <C>
     Net Sales
        To customer from U.S. operations           $ 59,362       $ 19,380
        To customer from Hong Kong operations         5,867          3,871
        To customer from China operations                 -              -
        Intercompany from U.S.                        7,269          3,750
        Intercompany from Hong Kong                      96            141
                                                   --------       --------
                                                     72,594         27,142
                                                   --------       --------
        Eliminations                                 (7,365)        (3,891)
                                                   --------       --------
        Total net sales                            $ 65,229       $ 23,251
                                                   ========       ========

     Operating income (loss)
        U.S. operations                            $  9,726       $   (404)
        Hong Kong operations                             27            462
        China operations                               (156)             -
                                                   --------       --------
                                                      9,597             58
                                                   --------       --------
        Eliminations                                   (369)          (604)
                                                   --------       --------
        Total operating income (loss)              $  9,228       $   (546)
                                                   ========       ========

     Long-lived assets
        U.S. operations                            $  4,723       $  4,665
        Hong Kong operations                             91            133
        China operations                                223              -
                                                   --------       --------
        Total long-lived assets                    $  5,037       $  4,798
                                                   ========       ========
</TABLE>


13.     RELATED PARTY TRANSACTIONS

     For the three months ended December 31, 2000 and December 31, 1999, the
Company sold approximately $180,000 and $520,000, respectively, of memory
products to ICSI in which the Company currently has approximately a 33%
ownership. At December 31, 2000 and 1999, the Company had an accounts receivable
balance from ICSI of approximately $399,000 and $1,272,000, respectively.

     The Company purchases goods and contract manufacturing services from ICSI.
For the three months ended December 31, 2000 and December 31, 1999, purchases of
goods and services were approximately $7,441,000 and $16,319,000, respectively.
At December 31, 2000 and 1999, the Company had an accounts payable balance to
ICSI of approximately $4,823,000 and $11,628,000, respectively.




                                       9
<PAGE>   11


     For the three months ended December 31, 2000 and December 31, 1999, the
Company sold approximately $0 and $115,000, respectively, of memory products to
NexFlash, in which the Company currently has approximately a 32% ownership. In
addition, the Company received approximately $42,000 in sublease income from
NexFlash in the both the three months ended December 31, 2000 and December 31,
1999. The Company also provides NexFlash various administrative support services
for which it is reimbursed. At December 31, 2000 and 1999, the Company had an
accounts receivable balance from NexFlash of approximately $405,000 and
$984,000, respectively.

     The Company purchases goods and services from NexFlash. For the three
months ended December 31, 2000 and December 31, 1999, purchases of goods and
services were approximately $0 and $18,000, respectively. At December 31, 2000
and 1999, the Company had an accounts payable balance to NexFlash of
approximately $0 and $18,000, respectively.

     The Company provides goods and services to GetSilicon.Net, an equity
investee, in which the Company currently has approximately a 32% ownership. For
the three months ended December 31, 2000 and December 31, 1999, the Company
provided goods and services of approximately $468,000 and $0, respectively, to
GetSilicon.Net. At December 31, 2000 and 1999, the Company had an accounts
receivable balance from GetSilicon.Net of approximately $468,000 and $0,
respectively.


14.     INVESTMENT IN INTEGRATED CIRCUIT SOLUTION INCORPORATION ("ICSI")

     The following summarizes financial information for ICSI, an equity
investee. (In thousands)

<TABLE>
<CAPTION>
                                                     DECEMBER 31,  SEPTEMBER 30,
                                                         2000          2000
                                                       --------      --------
<S>                                                    <C>           <C>
  Current assets                                       $113,528      $109,428
  Property, plant, and equipment and other assets        47,852        45,873
  Current liabilities                                    51,645        53,037
  Long-term debt                                         12,817        15,517
</TABLE>


<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED
                                                            DECEMBER 31,
                                                         ------------------
                                                         2000          1999
                                                       --------      --------
<S>                                                    <C>           <C>
  Net sales                                            $ 53,357      $ 27,116
  Gross profit                                           23,380         7,007
  Net income                                             14,191         3,135
</TABLE>


15.     TRANSACTIONS

        In December 2000, the Company sold its investment of $23.5 million in
WaferTech to Taiwan Semiconductor Manufacturing Corporation for $40.7 million
resulting in a gain of $17.2 million.

        On January 16, 2001, ICSI completed an Initial Public Offering in
Taiwan. As a result of shares of ICSI sold by the Company in the IPO, the
Company will record gross proceeds of approximately $7.4 million in the March
2001 quarter.




                                       10
<PAGE>   12


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

        We have made forward-looking statements in this report on Form 10-Q that
are subject to risks and uncertainties. Forward-looking statements include
information concerning possible or assumed future results of our operations.
Also, when we use such words as "believe," "expect," "anticipate," or similar
expressions, we are making forward-looking statements. Our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth below and elsewhere in
this report on Form 10-Q.

BACKGROUND

        Integrated Silicon Solution, Inc. was founded in October 1988. We
design, develop and market high performance memory semiconductors used in
Internet access devices, networking equipment, telecom and mobile communications
equipment, and computer peripherals. Our high speed and low power SRAMs and our
low to medium density DRAMs enable customers to design products that meet the
demanding connectivity and portability requirements of the data communications
and wireless communications markets. Our objective is to capitalize on major
trends such as the expansion of the communications and Internet infrastructure,
the proliferation of wireless devices, and other trends in electronics
technologies. Our goal is to be a focused supplier of high performance memories
targeting the growing connectivity and communications markets.

        We believe our close relationship with leading silicon wafer foundries
gives us access to the advanced wafer process technology required to design and
manufacture high performance memories. We entered into our first development
program with Taiwan Semiconductor Manufacturing Corporation ("TSMC") in 1990 and
our next development program with Chartered Semiconductor in 1994 and have also
worked closely with United Microelectronics Corporation ("UMC") since 1995.
Through this collaborative strategy, we have been at the forefront in utilizing
the most advanced process technology for memories and in securing access to
wafer capacity. We believe our ability to design and develop high performance,
cost-effective products, and our collaborative development with our
manufacturing partners utilizing state-of-the-art process technology, gives us a
competitive advantage.

RESULTS OF OPERATIONS

        Our financial results for fiscal 2001 and fiscal 2000 reflect accounting
for ICSI, NexFlash and GetSilicon.Net on the equity basis and include our
percentage share of the results of their respective operations. At December 31,
2000, we owned approximately 33% of ICSI, approximately 32% of Nexflash and
approximately 32% of GetSilicon.Net.


THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1999

        Net Sales. Net sales consist principally of total product sales less
estimated sales returns. Net sales increased by 181% to $65.2 million in the
three months ended December 31, 2000 from $23.3 million in the three months
ended December 31, 1999. The increase in sales was principally due to an
increase in unit shipments of our SRAM products, specifically our 256K, 1024K,
32K x 32 and 64K x 16 SRAM products, as well as increased unit shipments of 16
megabit DRAM products. In addition, the average selling prices of our SRAM and
DRAM products generally increased in the three months ended December 31, 2000
compared to the three months ended December 31, 1999. We anticipate that the
average selling prices of our existing products will generally decline over
time, although the rate of decline may fluctuate for certain products. There can
be no assurance that such declines will be offset by higher volumes or by higher
prices on newer products.

        Sales to Flextronics International accounted for approximately 14% and
12% of total net sales for the three months ended December 31, 2000 and December
31, 1999, respectively. Substantially all of the sales to Flextronics were for
products to be delivered to Cisco Systems Inc. Sales to 3Com accounted for
approximately 9% and 12% of total net sales for the three months ended December
31, 2000 and December




                                       11
<PAGE>   13

31, 1999, respectively. As sales to these customers are executed pursuant to
purchase orders and no purchasing contract exists, these customers can cease
doing business with us at any time. Net sales included licensing revenue of
approximately $0.1 million and $0.6 million in the three months ended December
31, 2000 and December 31, 1999, respectively. Net sales included sales of
approximately $0.2 million and $0.5 million to ICSI in the three months ended
December 31, 2000 and December 31, 1999, respectively. Additionally, net sales
include sales of approximately $0.1 million to NexFlash in the three months
ended December 31, 1999.

        Gross Profit. Cost of sales includes die cost from the wafers acquired
from foundries, subcontracted package costs, assembly costs and test costs,
costs associated with in-house product testing, quality assurance and import
duties. Gross profit increased 253% to $22.2 million in the three months ended
December 31, 2000 from $6.3 million in the three months ended December 31, 1999.
As a percentage of net sales, gross profit increased to 34.0% in the three
months ended December 31, 2000 from 27.0% in the three months ended December 31,
1999. The increase in gross profit was principally due to an increase in unit
shipments of our SRAM products, specifically our 256K, 1024K, 32K x 32 and 64K x
16 SRAM products, as well as increased unit shipments of 16 megabit DRAM
products. In addition, increases in the average selling prices of our SRAM and
DRAM products in the three months ended December 31, 2000 compared to the three
months ended December 31, 1999 more than offset any increases in product costs
resulting in higher gross margins. Our gross profit benefited from $0.1 million
and $0.6 million of licensing revenue for the three months ended December 31,
2000 and December 31, 1999, respectively. We believe that the average selling
price of our products will generally decline over time and, unless we are able
to reduce our cost per unit to the extent necessary to offset such declines, the
decline in average selling prices will result in a material decline in our gross
margin. In addition, product unit costs could increase if suppliers raise
prices, which could result in a material decline in our gross margin. Although
we have product cost reduction programs in place for certain products that
involve efforts to reduce internal costs and supplier costs, there can be no
assurance that product costs will be reduced or that such reductions will be
sufficient to offset the expected declines in average selling prices. We do not
believe that such cost reduction efforts are likely to have a material adverse
impact on the quality of our products or the level of service we provide.

        Research and Development. Research and development expenses increased by
86% to $6.7 million in the three months ended December 31, 2000 from $3.6
million in the three months ended December 31, 1999. As a percentage of net
sales, research and development expenses decreased to 10.3% in the three months
ended December 31, 2000 from 15.6% in the three months ended December 31, 1999.
The increase in absolute dollars was primarily the result of an increase in
engineering personnel and payroll related expenses, and increased expenses
related to the development of new products. We anticipate that our research and
development expenses will increase in absolute dollars in future periods,
although such expenses may fluctuate as a percentage of net sales.

        Selling, General and Administrative. Selling, general and administrative
expenses increased by 94% to $6.2 million in the three months ended December 31,
2000 from $3.2 million in the three months ended December 31, 1999. As a
percentage of net sales, selling, general and administrative expenses decreased
to 9.6% in the three months ended December 31, 2000 from 13.8% in the three
months ended December 31, 1999. The increase in absolute dollars was primarily
the result of increased selling commissions associated with higher revenues in
the three months ended December 31, 2000 compared to the three months ended
December 31, 1999. In addition, payroll related expenses increased in the three
months ended December 31, 2000 compared to the three months ended December 31,
1999 as a result of the addition of marketing, sales and administrative
personnel to support our expanding business. We expect our selling, general and
administrative expenses may increase in future quarters although such expenses
may fluctuate as a percentage of net sales.

        Gain on sale of investments. In the three months ended December 31,
2000, we sold our interest in WaferTech to TSMC for approximately $40.7, which
resulted in a pre-tax gain of $17.2 million.




                                       12
<PAGE>   14


        Other income (expense), net. Other income (expense), net increased by
$1.6 million to approximately $1.5 million in the three months ended December
31, 1999 from $(0.1) million in the three months ended December 31, 1999. The
increase resulted from increased interest income as a result of higher cash
balances from our follow-on public stock offering in February 2000.

        Provision for Income Taxes. The income tax provision for the three month
period ended December 31, 1999 is primarily foreign withholding taxes. The
provision for income taxes for the three month period ended December 31, 2000 is
principally comprised of taxes on U.S. earnings and to a lesser extent taxes on
foreign earnings. The effective tax rate of 25% for the three months ended
December 31, 2000 differs from the federal statutory rate as a result of the
reversal of valuation allowances previously established. A portion of the
valuation allowance previously established is now being realized as a result of
the current taxable income. The 25% effective tax rate is based on current tax
law, the current estimate of earnings and the expected distribution of income
among various tax jurisdictions, and is subject to change.

        Equity in net income of affiliated companies. Equity in net income of
affiliated companies increased by $3.0 million to $4.1 million in the three
months ended December 31, 2000 from $1.1 million in the three months ended
December 31, 1999. This primarily reflects an increase in income from our
percentage share of ICSI's financial results in the three months ended December
31, 2000 compared to the three months ended December 31, 1999.


LIQUIDITY AND CAPITAL RESOURCES

        As of December 31, 2000, our principal sources of liquidity included
cash, cash equivalents and short-term investments of approximately $139.1
million. During the three months ended December 31, 2000, operating activities
provided cash of approximately $2.7 million. Cash provided by operations was
primarily due to net income of $25.1 million adjusted for the gain on the sale
of investments of $17.2 million, equity in net income of affiliated companies of
$4.1 million and depreciation of $0.8 million. In addition, increases in income
tax payable of $6.8 million, accrued liabilities of $5.7 million, and accounts
payable of $3.8 million were partially offset by an increase in accounts
receivable of $16.9 million.

        In the three months ended December 31, 2000, we generated $39.8 million
from investing activities compared to $0.5 million used by investing activities
in the three months ended December 31, 1999. The cash generated by investing
activities primarily resulted from $40.7 million received from the sale of our
investment in WaferTech to TSMC. We generated $5.1 million from the sale of
additional shares of ICSI stock and $1.2 million from net sales of
available-for-sale securities. We made an additional investment of $6.8 million
in Semiconductor Manufacturing International Corp ("SMIC"), a foundry currently
under construction in Shanghai, China. We used $0.4 million for the acquisition
of equipment and other fixed assets.

        In the three months ended December 31, 2000, we made capital
expenditures of approximately $0.4 million for engineering tools and computer
software. We expect to spend approximately $10.0 million to purchase capital
equipment during the next twelve months, principally for the purchase of design
and engineering tools, additional test equipment and computer software and
hardware.

        We generated $0.1 million from financing activities during the three
months ended December 31, 2000 compared to $0.9 million in the three months
ended December 31, 1999. The source of financing for the current quarter was
proceeds from the issuance of common stock of $0.2 million from stock option
exercises.

        In June 1998, we sold approximately 46% of ICSI to a group of private
investors. In fiscal 1999 and fiscal 2000, we sold more of our holdings in ICSI
to private investors. In the three months ended December 31, 2000, we received
$5.1 million from the sale of shares of ICSI under the 1998 ISSI-Taiwan Stock
Plan. As of December 31, 2000 we owned approximately 33% of ICSI. On January 16,
2001, ICSI completed an Initial




                                       13
<PAGE>   15


Public Offering in Taiwan. As a result of shares of ICSI sold by us in the IPO,
we will record gross proceeds of approximately $7.4 million in the March 2001
quarter.

        In August 2000, we entered into a wafer fabrication facility investment
agreement with SMIC. Under the terms of this agreement, we have committed to
invest $30.0 million. We have received certain capacity commitments from SMIC.
In the three months ended December 31, 2000 we made an additional investment of
$6.8 million in SMIC. As of December 31, 2000, we had invested $11.4 million in
this foundry, and an additional $7.5 million and $11.1 million are expected to
be invested in fiscal years 2001 and 2002, respectively.

        In June 1996, we entered into a business venture called WaferTech, LLC
with TSMC, Altera, Analog Devices, and private investors to build a wafer
fabrication facility in Camas, Washington. In December 2000, we sold our
investment of $23.5 million in WaferTech to TSMC for $40.7 million resulting in
a gain of $17.2 million.

        In fiscal 1995, we agreed to certain minimum wafer purchase commitments
with TSMC in exchange for wafer capacity commitments through 2001. We also
agreed to make certain annual payments to TSMC, the remaining amount of which
totals approximately $4.8 million through 2001, for additional capacity above
the annual base capacity. Wafer purchases in any given year are first applied to
the base capacity and then to our $4.8 million obligation. As a result, the $4.8
million may be subject to forfeiture if we do not purchase the base capacity and
additional capacity for which we have contracted. We do not currently expect to
forfeit any amounts or incur any losses associated with these capacity
agreements. Although we have rights to re-schedule or assign capacity to another
party, there can be no assurance that such re-schedule or assignment would be
successfully accomplished. Should we fail to re-schedule or assign unneeded
capacity, our business and operating results could be adversely affected.

        In April 1998, the U.S. Department of Commerce ("DOC") published an
antidumping duty order on imports of SRAMs from Taiwan, from where we currently
import a majority of our SRAMs. As a consequence of this antidumping duty order,
we are required to post a cash deposit on imports of Taiwan fabricated SRAM
wafers or devices at the ad valorem rate of 7.56%.

        On April 28, 2000, Micron Technology Inc. ("Micron") requested an
administrative review of our Taiwan fabricated SRAMs for the period from April
1, 1999 through March 31, 2000. For entries during this period, the cash
deposits could be returned to us or, alternatively, we could forfeit amounts
deposited and owe duties and interest in addition to the amounts deposited,
depending on results of the DOC administrative review. The final results of the
review are expected in calendar year 2001 and will establish a new deposit rate
for subsequent entries, which may be higher or lower than the current rate.

        We have retained legal counsel to defend our interests in the
antidumping proceedings. In addition, respondents (including ISSI) have
challenged certain aspects of the antidumping determination in federal court
proceedings. On August 29, 2000, pursuant to an appeal by ISSI and other
respondents, the U.S. Court of International Trade affirmed the International
Trade Commission ("ITC") decision to reverse the ITC's earlier ruling supporting
the imposition of antidumping duties and rule instead in favor of respondents.
This decision by the Court of International Trade has been appealed by Micron to
the Federal Circuit Court of Appeals. If such appeal is not successful, the
antidumping case will be terminated, the order will be revoked, and we will be
entitled to a full refund of cash deposits. Pending resolution of the appeal,
the DOC will continue to administer the antidumping order.

        Duties calculated and assessed by the government could have a material
adverse affect on our gross margins and profits. Any reviews or proceedings
might not mitigate or eliminate antidumping duties.

        We believe our existing funds and available financing will satisfy our
anticipated working capital and other cash requirements through at least the
next 12 months. We may from time to time take actions to further increase our
cash position through bank borrowings, sales of additional shares of ICSI, the
disposition of




                                       14
<PAGE>   16


certain assets, equity financing or debt financing. From time to time, we also
evaluate potential acquisitions and equity investments complementary to our
memory expertise and market strategy, including investments in wafer fabrication
foundries. To the extent we pursue such transactions, any such transaction could
require us to seek additional equity or debt financing to fund such activities.
There can be no assurance that any such additional financing could be obtained
on terms acceptable to us, if at all.


CERTAIN FACTORS WHICH MAY AFFECT OUR BUSINESS OR FUTURE OPERATING RESULTS

OUR OPERATING RESULTS ARE EXPECTED TO CONTINUE TO FLUCTUATE AND MAY NOT MEET
PUBLISHED ANALYST FORECASTS. THIS MAY CAUSE THE PRICE OF OUR COMMON STOCK TO
DECLINE.

     Our future quarterly and annual operating results are subject to
fluctuations due to a wide variety of factors, including:

   o  the cyclicality of the semiconductor industry;

   o  declines in average selling prices of our products;

   o  oversupply of memory products in the market;

   o  our failure to introduce new products and to implement technologies on a
      timely basis;

   o  market acceptance of ours and our customers' products;

   o  the failure to anticipate changing customer product requirements;

   o  fluctuations in manufacturing yields;

   o  failure to deliver products on a timely basis;

   o  disruption in the supply of wafers or assembly services;

   o  changes in product mix;

   o  the timing of significant orders;

   o  increased expenses associated with new product introductions or process
      changes;

   o  the ability of customers to make payments to us; and

   o  increases in antidumping duties.

WE HAVE A RECENT HISTORY OF LOSSES, AND THERE CAN BE NO ASSURANCE THAT WE WILL
BE ABLE TO SUSTAIN PROFITABILITY IN THE FUTURE.

     We incurred losses of $9.5 million and $50.6 million in fiscal 1999 and
1998, respectively. We were profitable for fiscal 2000 and the first quarter of
fiscal 2001. Our ability to maintain profitability on a quarterly basis in the
future will depend on a variety of factors, including our ability to increase
our net sales, introduce new products on a timely basis, secure sufficient wafer
fabrication capacity and control our operating expenses. Adverse developments
with respect to these or other factors could result in quarterly or annual
operating losses in the future.




                                       15
<PAGE>   17


OUR SALES DEPEND ON SRAM PRODUCTS, AND A DECLINE IN AVERAGE SELLING PRICES OR
REDUCED DEMAND FOR THESE PRODUCTS COULD HARM OUR BUSINESS.

     A majority of our net sales are derived from the sale of SRAM products,
which are subject to unit volume fluctuations and declines in average selling
prices which could harm our business. For example, in the three months ended
June 31, 1998, our net sales decreased by 38% to $25.0 million from $40.7
million in the three months ended March 31, 1998, principally due to a decrease
in unit shipments of our SRAM products. Further, we anticipate that the average
selling prices of our existing products will decline over time, although the
rate of decline may fluctuate for certain products. Such declines may not be
offset by higher volumes or by higher prices on newer products.

WE MAY NOT BE ABLE TO COMPENSATE FOR PRICE DECREASES IN OUR PRODUCTS.

     Competitive pricing pressures due to an industry-wide oversupply of wafer
capacity resulted in significant price decreases for our products during fiscal
1996 through fiscal 1999. While we experienced increases in average selling
prices in fiscal 2000, historically, average selling prices for semiconductor
memory products have declined, and we expect that average selling prices will
decline in the future. Our ability to maintain or increase revenues will depend
upon our ability to increase unit sales volume of existing products and
introduce and sell new products which compensate for the anticipated declines in
the average selling prices of our existing products.

     Declining average selling prices will also adversely affect our gross
margins and profits unless we are able to introduce new products with higher
margins or reduce our cost per unit. We may not be able to increase unit sales
volumes, introduce and sell new products or reduce our cost per unit.

SHIFTS IN INDUSTRY-WIDE CAPACITY MAY CAUSE OUR RESULTS TO FLUCTUATE. IN THE
PAST, SUCH SHIFTS HAVE RESULTED IN SIGNIFICANT INVENTORY WRITE-DOWNS.

     Shifts in industry-wide capacity from shortages to oversupply or from
oversupply to shortages may result in significant fluctuations in our quarterly
or annual operating results. The semiconductor industry is highly cyclical and
is subject to significant downturns resulting from excess capacity,
overproduction, reduced demand or technological obsolescence. These factors can
result in a decline in average selling prices and the stated value of inventory.
In fiscal 1998, we recorded inventory write-downs of $23.0 million. The
inventory write-downs were predominately for lower of cost or market accounting
on certain of our products, primarily SRAMs, and, to a lesser extent, excess
inventory.

     We also write down to zero carrying value inventory on hand in excess of
six months' estimated sales volumes to cover estimated exposures, unless
adjustments are made to the forecast based on management's judgments for newer
products, end of life products or planned inventory increases. In making such
judgments to write down inventory, management takes into account the product
life cycles which can range from 6 to 24 months, the stage in the life cycle of
the product, the impact of competitors' announcements and product introductions
on our products, and purchasing opportunities due to excess wafer capacity.

     We believe that six months is an appropriate period because it is difficult
to accurately forecast for a specific product beyond this time frame due to the
potential introduction of products by competitors, technology obsolescence or
fluctuations in demand. Our policy regarding excess inventory resulted in
inventory write-downs for excess inventory of approximately $5.4 million for
fiscal year 1998. While we have not had any material inventory write-down since
fiscal 1998, future additional inventory write-downs may occur due to lower of
cost or market accounting, excess inventory or inventory obsolescence.

IF WE ARE UNABLE TO OBTAIN AN ADEQUATE SUPPLY OF WAFERS, OUR BUSINESS WILL BE
HARMED.

     If we are unable to obtain an adequate supply of wafers from our current or
any alternative sources in a timely manner, our business will be harmed. To
date, our principal manufacturing relationship has been with




                                       16
<PAGE>   18


TSMC, from which we have obtained a majority of our wafers. We also receive
wafers from Chartered Semiconductor and UMC. Each of our wafer foundries also
supplies wafers to other integrated circuit companies, including certain of our
competitors. Although we have written commitments specifying wafer capacities
from our suppliers, if these suppliers experience manufacturing failures or
yield shortfalls, choose to prioritize capacity for other uses, or reduce or
eliminate deliveries to us, we may not be able to enforce fulfillment of the
delivery commitments. Additionally, we may not be able to qualify additional
manufacturing sources for existing or new products in a timely manner and we
cannot be certain that other manufacturing sources would agree to deliver an
adequate supply of wafers to us.

FOUNDRY CAPACITY IS LIMITED AND WE MAY BE REQUIRED TO ENTER INTO COSTLY
LONG-TERM SUPPLY ARRANGEMENTS TO SECURE FOUNDRY CAPACITY.

     If we are not able to obtain additional foundry capacity as required, our
relationships with our customers would be harmed and our future sales would be
adversely impacted. In order to secure additional foundry capacity, we have
entered into and expect to enter into various arrangements with suppliers, which
could include:

   o  contracts that commit us to purchase specified quantities of silicon
      wafers over extended periods;

   o  investments in foundries;

   o  joint ventures;

   o  other partnership relationships with foundries;

   o  option payments or other prepayments to  foundries; or

   o  nonrefundable deposits with or loans to foundries in exchange for capacity
      commitments.

     We may not be able to make any such arrangements in a timely fashion or at
all, and such arrangements, if any, may not be on terms favorable to us.
Moreover, if we are able to secure foundry capacity, we may be obligated to
utilize all of that capacity or incur penalties. Such penalties may be expensive
and could harm our financial results.

ANY DOWNTURN IN THE MARKETS WE SERVE WOULD HARM OUR BUSINESS.

     A majority of our products are incorporated into products such as internet
access devices, networking equipment, and telecom/mobile communications devices.
These markets have from time to time experienced cyclical, depressed business
conditions, often in connection with, or in anticipation of, a decline in
general economic conditions. Such industry downturns have resulted in reduced
product demand and declining average selling prices. Our business would be
harmed by any future downturns in the markets that we serve.

WE DEPEND ON A SMALL NUMBER OF CUSTOMERS FOR A HIGH PERCENTAGE OF OUR SALES, AND
THE LOSS OF A SIGNIFICANT CUSTOMER COULD CAUSE A DECLINE IN OUR PROFITS.

        Sales to Flextronics International accounted for approximately 14% of
total net sales for the three months ended December 31, 2000. Substantially all
of the sales to Flextronics were for products to be delivered to Cisco Systems
Inc. Sales to 3Com accounted for approximately 9% of total net sales for the
three months ended December 31, 2000. In fiscal 2000, no single customer
accounted for over 10% of net sales. However, in fiscal 2000, shipments for
Cisco directly, or indirectly through subcontractors, accounted for
approximately 13% of net revenue. In fiscal 1999 and 1998, one customer, 3Com,
accounted for approximately 20% and 19% of net sales, respectively. As sales to
these customers are executed pursuant to purchase orders and no purchasing
contract exists, these customers can cease doing business with us at any time.
We expect a significant portion of our future sales to remain concentrated
within a limited number of




                                       17
<PAGE>   19


strategic customers. We may not be able to retain our strategic customers, such
customers may cancel or reschedule orders, or in the event of canceled orders,
such orders may not be replaced by other sales. In addition, sales to any
particular customer may fluctuate significantly from quarter to quarter, and
such fluctuating sales could harm our business.


OUR PRODUCTS ARE COMPLEX AND COULD CONTAIN DEFECTS, WHICH COULD REDUCE SALES OF
THOSE PRODUCTS OR RESULT IN CLAIMS AGAINST US.

     We develop complex and evolving products. Despite testing by us and our
customers, errors may be found in existing or new products. This could result in
a delay in recognition or loss of revenues, loss of market share or failure to
achieve market acceptance. These defects also may cause us to incur significant
warranty, support and repair costs, may divert the attention of our engineering
personnel from our product development efforts and could harm our relationships
with our customers. The occurrence of these problems could result in the delay
or loss of market acceptance of our products and would likely harm our business.
Defects, integration issues or other performance problems in our products could
result in financial or other damages to our customers or could lessen market
acceptance of our products. Our customers could also seek and obtain damages
from us for their losses. A product liability claim brought against us, even if
unsuccessful, would likely be time consuming and costly to defend.

STRONG COMPETITION IN THE SEMICONDUCTOR MEMORY MARKET MAY HARM OUR BUSINESS.

     The semiconductor memory market is intensely competitive and has been
characterized by an oversupply of product, price erosion, rapid technological
change, short product life cycles, cyclical market patterns and heightened
foreign and domestic competition. Certain of our competitors offer broader
product lines and have greater financial, technical, marketing, distribution and
other resources than us. We may not be able to compete successfully against any
of these competitors. Our ability to compete successfully in the high
performance memory market depends on factors both within and outside of our
control, including:

   o  real or perceived imbalances in supply and demand;

   o  product pricing;

   o  the rate at which OEM customers incorporate our products into their
      systems;

   o  the success of our customers' products;

   o  access to advanced process technologies at competitive prices;

   o  product functionality, performance and reliability;

   o  successful and timely product development;

   o  the supply and cost of wafers;

   o  achievement of acceptable yields of functional die;

   o  the gain or loss of significant customers; and

   o  the nature of our competitors and general economic conditions.

     In addition, we are vulnerable to technology advances utilized by
competitors to manufacture higher performance or lower cost products. We may not
be able to compete successfully in the future as to any of these factors. Our
failure to compete successfully in these or other areas could harm our business.




                                       18
<PAGE>   20


POTENTIAL INTELLECTUAL PROPERTY CLAIMS AND LITIGATION COULD SUBJECT US TO
SIGNIFICANT LIABILITY FOR DAMAGES AND COULD INVALIDATE OUR PROPRIETARY RIGHTS.

     In the semiconductor industry, it is not unusual for companies to receive
notices alleging infringement of patents or other intellectual property rights
of others. We have been, and from time-to-time expect to be, notified of claims
that we may be infringing patents, maskwork rights or copyrights owned by third
parties. For example, for a number of years we have been corresponding with a
large international semiconductor company regarding potential infringement of
certain of their patents by us and certain of our patents by them. Other
companies may pursue claims against us with respect to the alleged infringement
of patents, maskwork rights, copyrights or other intellectual property owned by
third parties. If it appears necessary or desirable, we may seek licenses under
patents that we are alleged to be infringing. Although patent holders commonly
offer such licenses, licenses may not be offered and the terms of any offered
licenses may not be acceptable to us.

     The failure to obtain a license under a key patent or intellectual property
right from a third party for technology used by us could cause us to incur
substantial liabilities and to suspend the manufacture of the products utilizing
the invention or to attempt to develop non-infringing products, any of which
could materially and adversely affect our business and operating results.
Furthermore, we may become involved in protracted litigation regarding the
alleged infringement by us of third party intellectual property rights or
litigation to assert and protect our patents or other intellectual property
rights. Any litigation relating to patent infringement or other intellectual
property matters could result in substantial cost and diversion of our resources
which could harm our business.

WE HAVE SIGNIFICANT INTERNATIONAL SALES AND RISKS OF OUR INTERNATIONAL
OPERATIONS COULD HARM OUR OPERATING RESULTS.

     In the three months ended December 31, 2000, approximately 52% of our net
sales was attributable to customers located in the United States, 30% was
attributable to customers located in Europe and 18% was attributable to
customers located in Asia. In fiscal 2000, approximately 54% of our net sales
was attributable to customers located in the United States, 23% was attributable
to customers located in Europe and 23% was attributable to customers located in
Asia. In fiscal 1999, approximately 52% of our net sales was attributable to
customers located in the United States, 20% was attributable to customers
located in Europe and 28% was attributable to customers located in Asia.
Accordingly, our future operating results will also depend on general economic
conditions in Asia, Europe, and the United States. In addition, the markets for
our products, which are highly cyclical, may not continue to grow. We anticipate
that sales to international customers will continue to represent a significant
percentage of net sales.

     We are subject to the risks of conducting business internationally,
including:

   o  economic conditions in Asia, particularly Taiwan and China;

   o  changes in trade policy and regulatory requirements;

   o  duties, tariffs and other trade barriers and restrictions;

   o  the burdens of complying with foreign laws;

   o  foreign currency fluctuations; and

   o  political instability.




                                       19
<PAGE>   21


IF WE NEED TO MAKE PAYMENTS FOR UNUSED WAFER CAPACITY, OUR BUSINESS WILL BE
HARMED.

     We have minimum wafer purchase commitments with some of our foundry
partners in exchange for wafer capacity commitments. Should we fail to
reschedule or assign unneeded capacity, we will be required to make payments for
the unused capacity and our business would be harmed. We have agreed to make
certain annual purchases totaling, in aggregate, approximately $4.8 million
through 2001 from TSMC for additional capacity above the annual base capacity.
Wafer purchases in any given year are first applied to the base capacity and
then to our $4.8 million obligation. As a result, we could be forced to pay up
to $4.8 million even if we do not purchase the base capacity and additional
capacity for which we have contracted.

WE DEPEND ON OUR ABILITY TO ATTRACT AND RETAIN OUR KEY TECHNICAL AND MANAGEMENT
PERSONNEL.

     Our success depends upon the continued service of key technical and
management personnel, including Jimmy S.M. Lee, Chairman and Chief Executive
Officer, and on our ability to continue to attract, retain and motivate
qualified personnel, particularly experienced circuit designers and process
engineers. The competition for such employees is intense. We have no employment
contracts or key person life insurance policies with or for any of our executive
officers. The loss of the service of one or more of our key personnel could
materially and adversely affect our business and operating results.

OUR STOCK PRICE IS EXPECTED TO BE VOLATILE.

     The trading price of our common stock has been and is expected to be
subject to wide fluctuations in response to:

   o  quarter-to-quarter variations in our operating results;

   o  comments or recommendations issued by analysts who follow us, our
      competitors or the semiconductor industry and other events or factors;

   o  aggregate valuations and movement of stocks in the broader semiconductor
      industry;

   o  announcements of new products, strategic relationships or acquisitions by
      us or our competitors;

   o  increases or decreases in wafer capacity;

   o  general conditions or cyclicality in the semiconductor industry or the end
      markets that we serve;

   o  governmental regulations, trade laws and import duties;

   o  litigation;

   o  new or revised earnings estimates;

   o  announcements of technological innovations by us or our competitors;

   o  additions or departures of senior management; and

   o  other events or factors many of which are beyond our control.

In addition, stock markets have experienced extreme price and trading volume
volatility in recent years. This volatility has had a substantial effect on the
market prices of securities of many high technology companies for reasons
frequently unrelated to the operating performance of the specific companies.
These broad market fluctuations may adversely affect the market price of our
common stock.




                                       20
<PAGE>   22


ITEM 3.  FINANCIAL MARKET RISK

        We develop products in the United States and sell them worldwide. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
Since our sales are currently priced in U.S. dollars and are translated to local
currency amounts, a strengthening of the dollar could make our products less
competitive in foreign markets. Interest income is sensitive to changes in the
general level of U.S. interest rates, particularly since our investments are in
short-term instruments calculated at variable rates.

        We established policies and business practices regarding our investment
portfolio to preserve principal while obtaining reasonable rates of return
without significantly increasing risk. We place investments with high credit
quality issuers according to our investment policy. We do not use derivative
financial instruments in our investment portfolio. All investments are carried
at cost, which approximates market value. Due to the short-term nature of our
investments and the immaterial amount of our debt obligation, we believe that
there is no material exposure to interest fluctuation. Therefore, no
accompanying table has been provided.




                                       21
<PAGE>   23


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     In April 1998, the U.S. Department of Commerce ("DOC") published an
antidumping duty order on imports of SRAMs from Taiwan, from where we currently
import a majority of our SRAMs. As a consequence of this antidumping duty order,
we are required to post a cash deposit on imports of Taiwan fabricated SRAM
wafers or devices at the ad valorem rate of 7.56%.

     On April 28, 2000, Micron Technology Inc. ("Micron") requested an
administrative review of our Taiwan fabricated SRAMs for the period from April
1, 1999 through March 31, 2000. For entries during this period, the cash
deposits could be returned to us or, alternatively, we could forfeit amounts
deposited and owe duties and interest in addition to the amounts deposited,
depending on results of the DOC administrative review. The final results of the
review are expected in calendar year 2001 and will establish a new deposit rate
for subsequent entries, which may be higher or lower than the current rate.

     We have retained legal counsel to defend our interests in the antidumping
proceedings. In addition, respondents (including ISSI) have challenged certain
aspects of the antidumping determination in federal court proceedings. On August
29, 2000, pursuant to an appeal by ISSI and other respondents, the U.S. Court of
International Trade affirmed the International Trade Commission ("ITC") decision
to reverse the ITC's earlier ruling supporting the imposition of antidumping
duties and rule instead in favor of respondents. This decision by the Court of
International Trade has been appealed by Micron to the Federal Circuit Court of
Appeals. If such appeal is not successful, the antidumping case will be
terminated, the order will be revoked, and we will be entitled to a full refund
of cash deposits. Pending resolution of the appeal, the DOC will continue to
administer the antidumping order.

     Duties calculated and assessed by the government could have a material
adverse affect on our gross margins and profits. Any reviews or proceedings
might not mitigate or eliminate antidumping duties.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)  The following exhibits are filed as a part of this report.

             None.

        (b)  Reports on Form 8-K.
             The registrant did not file any reports on Form 8-K during the
             quarter ended December 31, 2000.




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<PAGE>   24


                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                             Integrated Silicon Solution, Inc.
                                             ---------------------------------
                                             (Registrant)


Dated:  February 12, 2001                     /s/ Gary L. Fischer
                                              --------------------------------
                                              Gary L. Fischer
                                              Executive Vice President
                                              and Chief Financial Officer
                                              (Principal Financial and
                                              Accounting Officer)




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