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FORM 10-Q

UNITED STATES 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                      June 30, 2003 .

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
incorporation or organization) |  | (I.R.S Employer
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

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

The number of outstanding shares of the registrants Common Stock as of
August 8, 2003 was 28,059,248





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TABLE OF CONTENTS



|                           |                                                                                               |  |  |  |  |  |  | 
|-------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                           | Item 1. Financial Statements                                                                 
|                           | Condensed Consolidated Statements of Operations                                              
|                           | Condensed Consolidated Balance Sheets                                                        
|                           | Condensed Consolidated Statements of Cash Flows                                              
|                           | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                         
|                           | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                           | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|                           | Item 4. Controls and Procedures                                                              
|Part II. OTHER INFORMATION
|                           | Item 1. Legal Proceedings                                                                    
|                           | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                
|EXHIBIT INDEX             
|EXHIBIT 31                
|EXHIBIT 32                



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##### Table of Contents



TABLE OF CONTENTS

|           |  |                                                                                                                |  |   
|---------- |  | -------------------------------------------------------------------------------------------------------------- |  | --
|PART I     |  | Financial Information                                                                                          |  |   
|Item 1.    |  | Financial Statements                                                                                           |  |   
|           |  | Condensed Consolidated Statements of Operations
Three and nine months ended June 30, 2003 and 2002 (Unaudited) |  | 1 
|           |  | Condensed Consolidated Balance Sheets
June 30, 2003 (Unaudited) and September 30, 2002                         |  | 2 
|           |  | Condensed Consolidated Statements of Cash Flows
Nine months ended June 30, 2003 and 2002 (Unaudited)           |  | 3 
|           |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                               |  | 4 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                          |  | 14
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                     |  | 28
|Item 4.    |  | Controls and Procedures                                                                                        |  | 29
|PART II    |  | Other Information                                                                                              |  |   
|Item 1.    |  | Legal Proceedings                                                                                              |  | 29
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                               |  | 29
|Signatures |  |                                                                                                                |  | 30





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##### Table of Contents






Item 1. Financial Statements




Integrated Silicon Solution, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)

|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |        |        | 
|------------------------------------------------------------------------------------------ | ----------------------------------- | ------------------------ | ------ | ------------------ | ----- | ----------------- | ------- | ----- | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                                           |                                     |                          |        | Three Months Ended |       | Nine Months Ended
|                                                                                           |                                     |                          |        | June 30,           |       | June 30,         
|                                                                                           |                                     |                          |        |                    |       |                  
|                                                                                           |                                     |                          |        | 2003               |       | 2002              |         | 2003  |        | 2002
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |     
|Net sales (See Note 14)                                                                    |                                     | $                        | 24,285 |                    |       | $                 | 18,532  |       |        | $    | 67,635  |        |        | $ | 50,261  |       
|Cost of sales                                                                              |                                     |                          | 20,271 |                    |       |                   | 31,563  |       |        |      | 61,503  |        |        |   | 57,597  |       
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|Gross profit (loss)                                                                        |                                     |                          | 4,014  |                    |       |                   | (13,031 | )     |        |      | 6,132   |        |        |   | (7,336  | )     
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|Operating Expenses:                                                                        |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|                                                                                           | Research and development            |                          |        | 5,584              |       |                   |         | 8,016 |        |      |         | 18,523 |        |   |         | 21,815 |       
|                                                                                           | Selling, general and administrative |                          |        | 3,039              |       |                   |         | 4,213 |        |      |         | 10,095 |        |   |         | 12,181 |       
|                                                                                           | In-process technology charge        |                          |        |                   |       |                   |         |      |        |      |         |       |        |   |         | 4,689  |       
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|                                                                                           |                                     | Total operating expenses |        |                    | 8,623 |                   |         |       | 12,229 |      |         |        | 28,618 |   |         |        | 38,685 | 
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|Operating loss                                                                             |                                     |                          | (4,609 | )                  |       |                   | (25,260 | )     |        |      | (22,486 | )      |        |   | (46,021 | )     
|Other income (expense), net                                                                |                                     |                          | (1,134 | )                  |       |                   | 853     |       |        |      | (964    | )      |        |   | 2,183   |       
|Gain on sale of investments                                                                |                                     |                          | 418    |                    |       |                   |        |       |        |      | 418     |        |        |   | 35      |       
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|Loss before income taxes, minority
interest and equity in net loss of
affiliated companies |                                     |                          | (5,325 | )                  |       |                   | (24,407 | )     |        |      | (23,032 | )      |        |   | (43,803 | )     
|Provision (benefit) for income taxes                                                       |                                     |                          |       |                    |       |                   | 3       |       |        |      |        |        |        |   | (3,220  | )     
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|Loss before minority interest
and equity in net loss of
affiliated companies               |                                     |                          | (5,325 | )                  |       |                   | (24,410 | )     |        |      | (23,032 | )      |        |   | (40,583 | )     
|Minority interest in net (income)
loss of
consolidated subsidiary                          |                                     |                          |       |                    |       |                   | (6      | )     |        |      | 17      |        |        |   | 18      |       
|Equity in net loss of
affiliated companies                                                 |                                     |                          | (615   | )                  |       |                   | (511    | )     |        |      | (2,584  | )      |        |   | (4,946  | )     
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|Net loss                                                                                   |                                     | $                        | (5,940 | )                  |       | $                 | (24,927 | )     |        | $    | (25,599 | )      |        | $ | (45,511 | )     
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|Basic and diluted net loss per share                                                       |                                     | $                        | (0.21  | )                  |       | $                 | (0.91   | )     |        | $    | (0.92   | )      |        | $ | (1.69   | )     
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       
|Shares used in per share calculation                                                       |                                     |                          | 27,774 |                    |       |                   | 27,309  |       |        |      | 27,682  |        |        |   | 26,954  |       
|                                                                                           |                                     |                          |        |                    |       |                   |         |       |        |      |         |        |        |   |         |       

See accompanying notes to condensed consolidated financial statements.

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Integrated Silicon Solution, Inc.
Condensed Consolidated Balance Sheets
(In thousands)

|                                                     |                                                        |   |         |             |   |               |         |         |   | 
|---------------------------------------------------- | ------------------------------------------------------ | - | ------- | ----------- | - | ------------- | ------- | ------- | - | 
|                                                     |                                                        |   |         | June 30,    |   | September 30,
|                                                     |                                                        |   |         | 2003        |   | 2002         
|                                                     |                                                        |   |         |             |   |              
|                                                     |                                                        |   |         | (unaudited) |   | (1)          
|ASSETS                                               |                                                        |   |         |             |   |               |         |        
|Current assets:                                      |                                                        |   |         |             |   |               |         |        
|                                                     | Cash and cash equivalents                              |   | $       | 11,295      |   |               | $       | 11,622  |  
|                                                     | Short-term investments                                 |   |         | 48,200      |   |               |         | 67,200  |  
|                                                     | Accounts receivable                                    |   |         | 10,794      |   |               |         | 7,445   |  
|                                                     | Accounts receivable from related parties (See Note 14) |   |         | 1,051       |   |               |         | 946     |  
|                                                     | Inventories                                            |   |         | 13,253      |   |               |         | 17,665  |  
|                                                     | Other current assets                                   |   |         | 3,310       |   |               |         | 3,448   |  
|                                                     |                                                        |   |         |             |   |               |         |        
|Total current assets                                 |                                                        |   | 87,903  |             |   |               | 108,326 |        
|Property, equipment, and leasehold improvements, net |                                                        |   | 8,100   |             |   |               | 10,673  |        
|Other assets                                         |                                                        |   | 59,714  |             |   |               | 65,677  |        
|                                                     |                                                        |   |         |             |   |               |         |        
|Total assets                                         |                                                        | $ | 155,717 |             |   | $             | 184,676 |        
|                                                     |                                                        |   |         |             |   |               |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                 |                                                        |   |         |             |   |               |         |        
|Current liabilities:                                 |                                                        |   |         |             |   |               |         |        
|                                                     | Accounts payable                                       |   | $       | 8,750       |   |               | $       | 17,871  |  
|                                                     | Accounts payable to related parties (See Note 14)      |   |         | 7,804       |   |               |         | 3,905   |  
|                                                     | Accrued compensation and benefits                      |   |         | 3,247       |   |               |         | 3,394   |  
|                                                     | Accrued expenses                                       |   |         | 4,732       |   |               |         | 3,830   |  
|                                                     | Current portion of long-term obligations               |   |         | 30          |   |               |         | 158     |  
|                                                     |                                                        |   |         |             |   |               |         |        
|Total current liabilities                            |                                                        |   | 24,563  |             |   |               | 29,158  |        
|Minority interest                                    |                                                        |   | 78      |             |   |               | 95      |        
|Stockholders equity:                                |                                                        |   |         |             |   |               |         |        
|                                                     | Common stock                                           |   |         | 3           |   |               |         | 3       |  
|                                                     | Additional paid-in capital                             |   |         | 231,638     |   |               |         | 231,032 |  
|                                                     | Accumulated deficit                                    |   |         | (94,850     | ) |               |         | (69,251 | )
|                                                     | Unearned compensation                                  |   |         | (288        | ) |               |         | (778    | )
|                                                     | Accumulated comprehensive loss                         |   |         | (5,427      | ) |               |         | (5,583  | )
|                                                     |                                                        |   |         |             |   |               |         |        
|Total stockholders equity                           |                                                        |   | 131,076 |             |   |               | 155,423 |        
|                                                     |                                                        |   |         |             |   |               |         |        
|Total liabilities and stockholders equity           |                                                        | $ | 155,717 |             |   | $             | 184,676 |        
|                                                     |                                                        |   |         |             |   |               |         |        

(1) Derived from audited financial statements.

See accompanying notes to condensed consolidated financial statements.

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Integrated Silicon Solution, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

|                                                             |                                                                                            |                                                 |        |                   |         |      |        |         |       | 
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------ | ----------------------------------------------- | ------ | ----------------- | ------- | ---- | ------ | ------- | ----- | 
|                                                             |                                                                                            |                                                 |        | Nine Months Ended
|                                                             |                                                                                            |                                                 |        | June 30,         
|                                                             |                                                                                            |                                                 |        |                  
|                                                             |                                                                                            |                                                 |        | 2003              |         | 2002
|                                                             |                                                                                            |                                                 |        |                   |         |     
|Cash flows from operating activities                         |                                                                                            |                                                 |        |                   |         |      |        |        
|                                                             | Net loss                                                                                   |                                                 | $      | (25,599           | )       |      | $      | (45,511 | )    
|                                                             | Depreciation and amortization                                                              |                                                 |        | 3,692             |         |      |        | 2,917   |      
|                                                             | Amortization of intangibles and unearned compensation                                      |                                                 |        | 382               |         |      |        | 170     |      
|                                                             | In-process technology charge                                                               |                                                 |        |                  |         |      |        | 4,689   |      
|                                                             | Gain on sale of investments                                                                |                                                 |        | (418              | )       |      |        | (35     | )    
|                                                             | Loss on imbedded derivative                                                                |                                                 |        | 365               |         |      |        |        |      
|                                                             | Loss on impairment of investment                                                           |                                                 |        | 1,296             |         |      |        | 150     |      
|                                                             | Loss on disposal of fixed assets                                                           |                                                 |        | 178               |         |      |        |        |      
|                                                             | Net foreign currency transaction losses                                                    |                                                 |        | 30                |         |      |        |        |      
|                                                             | Equity in net loss of affiliated companies                                                 |                                                 |        | 2,584             |         |      |        | 4,946   |      
|                                                             | Minority interest in net loss of consolidated subsidiary                                   |                                                 |        | (17               | )       |      |        | (18     | )    
|                                                             | Net effect of changes in current and other assets and current liabilities                  |                                                 |        | (3,490            | )       |      |        | 33,300  |      
|                                                             |                                                                                            |                                                 |        |                   |         |      |        |         |      
|                                                             |                                                                                            | Cash provided by (used in) operating activities |        |                   | (20,997 | )    |        |         | 608   | 
|Cash flows from investing activities                         |                                                                                            |                                                 |        |                   |         |      |        |        
|                                                             | Capital expenditures                                                                       |                                                 |        | (1,297            | )       |      |        | (5,232  | )    
|                                                             | Purchases of available-for-sale securities                                                 |                                                 |        | (16,650           | )       |      |        | (19,600 | )    
|                                                             | Sales of available-for-sale securities                                                     |                                                 |        | 35,650            |         |      |        | 42,600  |      
|                                                             | Proceeds from partial sale of Integrated Circuit Solution, Inc. (ICSI)
equity securities |                                                 |        |                  |         |      |        | 64      |      
|                                                             | Proceeds from partial sale of E-CMOS Corporation equity securities                         |                                                 |        | 2,189             |         |      |        |        |      
|                                                             | Proceeds from minority shareholders of D2Code                                              |                                                 |        |                  |         |      |        | 145     |      
|                                                             | Investment in Purple Ray                                                                   |                                                 |        |                  |         |      |        | (192    | )    
|                                                             | Investment in Semiconductor Manufacturing International Corp. (SMIC)                     |                                                 |        |                  |         |      |        | (11,352 | )    
|                                                             | Other investments                                                                          |                                                 |        |                  |         |      |        | (4,815  | )    
|                                                             |                                                                                            |                                                 |        |                   |         |      |        |         |      
|                                                             |                                                                                            | Cash provided by investing activities           |        |                   | 19,892  |      |        |         | 1,618 | 
|Cash flows from financing activities                         |                                                                                            |                                                 |        |                   |         |      |        |        
|                                                             | Proceeds from issuance of common stock                                                     |                                                 |        | 910               |         |      |        | 1,971   |      
|                                                             | Principal payments on notes payable and long-term obligations                              |                                                 |        | (128              | )       |      |        | (116    | )    
|                                                             |                                                                                            |                                                 |        |                   |         |      |        |         |      
|                                                             |                                                                                            | Cash provided by financing activities           |        |                   | 782     |      |        |         | 1,855 | 
|                                                             |                                                                                            |                                                 |        |                   |         |      |        |         |      
|Effect of exchange rate changes on cash and cash equivalents |                                                                                            |                                                 | (4     | )                 |         |      | 181    |        
|Net increase (decrease) in cash and cash equivalents         |                                                                                            |                                                 | (327   | )                 |         |      | 4,262  |        
|Cash and cash equivalents at beginning of period             |                                                                                            |                                                 | 11,622 |                   |         |      | 19,309 |        
|                                                             |                                                                                            |                                                 |        |                   |         |      |        |         |      
|Cash and cash equivalents at end of period                   |                                                                                            | $                                               | 11,295 |                   |         | $    | 23,571 |        
|                                                             |                                                                                            |                                                 |        |                   |         |      |        |         |      

See accompanying notes to condensed consolidated financial statements.

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INTEGRATED SILICON SOLUTION, INC.




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


1.   Basis of Presentation

The accompanying unaudited 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 accounting principles generally accepted in the United States 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 accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments considered necessary
for fair presentation have been included.

Operating results for the three and nine months ended June 30, 2003 are
not necessarily indicative of the results that may be expected for the year
ending September 30, 2003 or for any other period. The financial statements
included herein should be read in conjunction with the Companys Annual Report
on Form 10-K for the fiscal year ended September 30, 2002.

2.   Concentrations

Sales to Asian Information Technology, Inc. (AIT) accounted for
approximately 11% of total net sales for the three months ended June 30, 2003.
Sales to ATM Electronic Corporation accounted for approximately 10% of total
net sales for the nine months ended June 30, 2003. In the three and nine month
periods ended June 30, 2002, no single customer accounted for over 10% of net
sales.

3.   Cash, Cash Equivalents and Short-term Investments

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

|                                         |  |                |        |               |  |   |        | 
|---------------------------------------- |  | -------------- | ------ | ------------- |  | - | ------ | 
|                                         |  | (In thousands)
|                                         |  | June 30,       |        | September 30,
|                                         |  | 2003           |        | 2002         
|                                         |  |                |        |              
|Cash                                     |  | $              | 6,025  |               |  | $ | 6,327  | 
|Money market instruments                 |  |                | 5,270  |               |  |   | 5,295  | 
|Municipal bonds due in more than 3 years |  |                | 48,200 |               |  |   | 67,200 | 
|                                         |  |                |        |               |  |   |        | 
|                                         |  | $              | 59,495 |               |  | $ | 78,822 | 
|                                         |  |                |        |               |  |   |        | 

4.   Inventories

The following is a summary of inventories by major category: (In
thousands)

|                     |  |          |        |               |  |   |        | 
|-------------------- |  | -------- | ------ | ------------- |  | - | ------ | 
|                     |  | June 30, |        | September 30,
|                     |  | 2003     |        | 2002         
|                     |  |          |        |              
|Purchased components |  | $        | 3,971  |               |  | $ | 4,436  | 
|Work-in-process      |  |          | 867    |               |  |   | 724    | 
|Finished goods       |  |          | 8,415  |               |  |   | 12,505 | 
|                     |  |          |        |               |  |   |        | 
|                     |  | $        | 13,253 |               |  | $ | 17,665 | 
|                     |  |          |        |               |  |   |        | 

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

In the nine months ended June 30, 2003 and in fiscal 2002, the Company
recorded inventory write-downs of $4.1 million and $28.6 million, respectively.
The inventory write-downs were predominately for lower of cost or market and
excess and obsolescence issues on certain of the Companys products.

5.   Other Assets

Other assets consisted of the following: (In thousands)

|                                         |  |          |        |               |  |   |        | 
|---------------------------------------- |  | -------- | ------ | ------------- |  | - | ------ | 
|                                         |  | June 30, |        | September 30,
|                                         |  | 2003     |        | 2002         
|                                         |  |          |        |              
|Investment in ICSI common stock          |  | $        | 13,142 |               |  | $ | 15,690 | 
|Investment in ICSI convertible debenture |  |          | 2,782  |               |  |   | 2,943  | 
|Investment in SMIC                       |  |          | 40,000 |               |  |   | 40,000 | 
|Other                                    |  |          | 3,790  |               |  |   | 7,044  | 
|                                         |  |          |        |               |  |   |        | 
|                                         |  | $        | 59,714 |               |  | $ | 65,677 | 
|                                         |  |          |        |               |  |   |        | 

The market value of the Companys investment in the common stock and
convertible debentures of ICSI at June 30, 2003 was approximately $20,687,000
and $2,782,000, respectively, based on quoted market prices. Since ICSI is
accounted for under the equity method of accounting, the carrying value of the
Companys investment in ICSIs common stock differs from the market value. The
Companys total carrying value for ICSI common stock as of June 30, 2003 was
approximately $18,551,000 of which approximately $5,409,000 is included in
other comprehensive loss as accumulated foreign currency translation adjustment
in the equity portion of the balance sheet.

In the three months ended June 30, 2003, the Company sold shares of E-CMOS
for approximately $2.2 million which resulted in a pre-tax gain of $0.4
million. In addition, in the three months ended June 30, 2003, the Company
recorded an impairment loss of approximately $1.3 million on its investment in
Signia based on the share price of a subsequent investment in Signia in July
2003.

6.   Comprehensive Loss

Comprehensive loss includes net loss as well as other comprehensive income
(loss). The Companys other comprehensive income (loss) consists of changes in
cumulative translation adjustment and unrealized gains and losses on
investments.

Comprehensive loss, net of taxes, was as follows (in thousands):

|                                               |                                             |   |                    |     |                   |   |         |       |      |   |         |    |  |   |         |     | 
|---------------------------------------------- | ------------------------------------------- | - | ------------------ | --- | ----------------- | - | ------- | ----- | ---- | - | ------- | -- |  | - | ------- | --- | 
|                                               |                                             |   | Three Months Ended |     | Nine Months Ended
|                                               |                                             |   | June 30,           |     | June 30,         
|                                               |                                             |   |                    |     |                  
|                                               |                                             |   | 2003               |     | 2002              |   | 2003    |       | 2002
|                                               |                                             |   |                    |     |                   |   |         |       |     
|Net loss                                       |                                             | $ | (5,940             | )   |                   | $ | (24,927 | )     |      | $ | (25,599 | )  |  | $ | (45,511 | )  
|Other comprehensive income (loss), net of tax: |                                             |   |                    |     |                   |   |         |       |      |   |         |    |  |   |         |    
|                                               | Change in cumulative translation adjustment |   |                    | 32  |                   |   |         | 1,111 |      |   |         | 87 |  |   |         | 779 | 
|                                               | Change in unrealized loss on investments    |   |                    | 179 |                   |   |         |      |      |   |         | 69 |  |   |         |    | 
|                                               |                                             |   |                    |     |                   |   |         |       |      |   |         |    |  |   |         |    
|Comprehensive loss                             |                                             | $ | (5,729             | )   |                   | $ | (23,816 | )     |      | $ | (25,443 | )  |  | $ | (44,732 | )  
|                                               |                                             |   |                    |     |                   |   |         |       |      |   |         |    |  |   |         |    

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

The accumulated comprehensive loss component within the stockholders
equity section of the balance sheet is comprised of foreign currency
translation adjustments and the unrealized loss on an investment.

The components of accumulated other comprehensive loss, net of tax, were
as follows:

|                                                                                   |  |                |        |               |  |   |        |  
|---------------------------------------------------------------------------------- |  | -------------- | ------ | ------------- |  | - | ------ | -
|                                                                                   |  | June 30,       |        | September 30,
|                                                                                   |  | 2003           |        | 2002         
|                                                                                   |  |                |        |              
|                                                                                   |  | (In thousands)
|Accumulated foreign currency translation adjustments
related to investment in ICSI |  | $              | (5,409 | )             |  | $ | (5,471 | )
|Other accumulated foreign currency translation adjustments                         |  |                | 151    |               |  |   | 126    |  
|Accumulated net unrealized loss on available-for-sale investments                  |  |                | (169   | )             |  |   | (238   | )
|                                                                                   |  |                |        |               |  |   |        |  
|Total accumulated other comprehensive loss                                         |  | $              | (5,427 | )             |  | $ | (5,583 | )
|                                                                                   |  |                |        |               |  |   |        |  

7.   Stock Options

The Company applies the intrinsic-value method prescribed in APB Opinion
No. 25, Accounting for Stock issued to Employees, in accounting for employee
stock options. Accordingly compensation expense is generally recognized only
when options are granted with an exercise price less than fair value on the
date of grant. Any resulting compensation expense would be recognized ratably
over the associated service period, which is generally the option vesting term.

The Company has determined pro forma loss and loss per share information
as if the fair value method described in SFAS No. 123, Accounting for Stock
Based Compensation, had been applied to its employee stock-based compensation.
The proforma effect on net loss and net loss per share is as follows for the
three month and nine month periods ending June 30, 2003 and 2002 (in thousands,
except per share data):

|                                                                                                                                   |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                                   |  | Three Months Ended |        | Nine Months Ended
|                                                                                                                                   |  | June 30,           |        | June 30,         
|                                                                                                                                   |  |                    |        |                  
|                                                                                                                                   |  | 2003               |        | 2002              |  | 2003 |         | 2002
|                                                                                                                                   |  |                    |        |                   |  |      |         |     
|Net loss, as reported                                                                                                              |  | $                  | (5,940 | )                 |  | $    | (24,927 | )    |  | $ | (25,599 | ) |  | $ | (45,511 | )
|Add: Total stock-based employee compensation
expense determined under fair value method for
all awards, net of related tax effects |  |                    | 1,208  |                   |  |      | 1,727   |      |  |   | 3,476   |   |  |   | 6,189   |  
|Less: Stock-based employee compensation expense
included in reported net loss, net of related
tax effects                          |  |                    | 28     |                   |  |      |        |      |  |   | 28      |   |  |   |        |  
|                                                                                                                                   |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|Pro forma net loss                                                                                                                 |  | $                  | (7,120 | )                 |  | $    | (26,654 | )    |  | $ | (29,047 | ) |  | $ | (51,700 | )
|                                                                                                                                   |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|Basic and diluted net loss per share, as reported                                                                                  |  | $                  | (0.21  | )                 |  | $    | (0.91   | )    |  | $ | (0.92   | ) |  | $ | (1.69   | )
|Basic and diluted net loss per share, Pro forma                                                                                    |  | $                  | (0.26  | )                 |  | $    | (0.98   | )    |  | $ | (1.05   | ) |  | $ | (1.92   | )

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

8.   Income Taxes

The Company recorded no provision for income taxes for the three and nine
month periods ended June 30, 2003 due to its net operating loss position. The
provision for income taxes for the three month period ended June 30, 2002 of
$3,000 consists of foreign withholding taxes. The benefit for income taxes for
the nine month period ended June 30, 2002 reflects a benefit for alternative
minimum taxes provided for the fiscal year ended September 30, 2001 which can
be recovered based on changes in the tax laws.

9.   Net Loss Per Share

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

|                                                      |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|----------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                      |  | Three Months Ended |        | Nine Months Ended
|                                                      |  | June 30,           |        | June 30,         
|                                                      |  |                    |        |                  
|                                                      |  | 2003               |        | 2002              |  | 2003 |         | 2002
|                                                      |  |                    |        |                   |  |      |         |     
|Numerator for basic and diluted net loss per share:   |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|Net loss                                              |  | $                  | (5,940 | )                 |  | $    | (24,927 | )    |  | $ | (25,599 | ) |  | $ | (45,511 | )
|                                                      |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|Denominator for basic and diluted net loss per
share: |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|Weighted average common shares outstanding            |  |                    | 27,774 |                   |  |      | 27,309  |      |  |   | 27,682  |   |  |   | 26,954  |  
|                                                      |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|Basic and diluted net loss per share                  |  | $                  | (0.21  | )                 |  | $    | (0.91   | )    |  | $ | (0.92   | ) |  | $ | (1.69   | )
|                                                      |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  

The above diluted calculation for the three and nine months ended June 30,
2003 and June 30, 2002 does not include approximately 6,349,000 and 5,181,000
shares attributable to options outstanding as of June 30, 2003 and 2002,
respectively, as their impact would be anti-dilutive.

10.   Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and the disclosure of contingent assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates, and such difference, may be material to the financial
statements.

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

11.   Impact of Recently Issued Accounting Standards

In July 2002, the Financial Accounting Standards Board issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities.
SFAS No. 146 addresses the financial accounting and reporting for obligations
associated with an exit activity, including restructuring, or with a disposal
of long-lived assets. Exit activities include, but are not limited to,
eliminating or reducing product lines, terminating employees and contracts and
relocating plant facilities or personnel. SFAS No. 146 specifies that a company
will record a liability for a cost associated with an exit or disposal activity
only when that liability is incurred and can be measured at fair value.
Therefore, commitment to an exit plan or a plan of disposal expresses only
managements intended future actions and, therefore, does not meet the
requirement for recognizing a liability and the related expense. SFAS No. 146
is effective prospectively for exit or disposal activities initiated after
December 31, 2002, with earlier adoption encouraged. The adoption of SFAS No.
146 did not have a material effect on the Companys financial position or
results of operations.

In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, (FIN 45).
FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a
liability for the fair value of an obligation assumed under a guarantee. FIN 45
also requires additional disclosures by a guarantor in its interim and annual
financial statements about the obligations associated with guarantees issued.
The recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. The Company adopted the disclosure requirements in the first quarter of
fiscal 2003. The adoption of FIN 45 did not have a material effect on the
Companys financial position, results of operations, or cash flows.

In December 2002, the Financial Accounting Standards Board issued SFAS No.
148, Accounting for Stock-Based Compensation  Transition and Disclosure.
SFAS No. 148 amends SFAS No. 123 to provide alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The transition guidance and annual disclosure requirements are
effective for interim and annual periods beginning after December 15, 2002.
The Company adopted the interim disclosure requirements in the quarter ended
March 31, 2003 as disclosed in Note 9. The Company will continue to account for
stock-based compensation under the provisions of APB Opinion No. 25 using the
intrinsic value method.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51, (FIN 46). FIN 45 requires certain variable
interest entities (VIEs) to be consolidated by the primary beneficiary of the
entity if the equity investors in the entity do not have the characteristics of
a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new VIEs created or
acquired after January 31, 2003. For VIEs created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The Company is
currently evaluating the effect that the adoption of FIN 46 will have on its
results of operations and financial condition.

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

In April 2003, the Financial Accounting Standards Board issued SFAS No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No.149 is generally
effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The Company is
currently evaluating the effect that the adoption of SFAS No. 149 will have on
its results of operations and financial condition.

In May 2003, the Financial Accounting Standards Board issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity. SFAS No. 150 requires that certain financial
instruments, which under previous guidance were accounted for as equity, must
now be accounted for as liabilities. The financial instruments affected
include mandatorily redeemable stock, certain financial instruments that
require or may require the issuer to buy back shares in exchange for cash or
other assets and certain obligations that can be settled with shares of stock.
SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003 and must be applied to existing financial
instruments effective July 1, 2003, the beginning of the first fiscal period
after June 15, 2003. The Company does not expect the adoption of SFAS No. 150
to have a material effect on its results of operations or financial condition.

12.   Commitments and Contingencies

Legal Proceedings

On June 16, 2003, Symbol Technologies, Inc. filed suit against the Company
in the Supreme Court of the State of New York. The complaint alleges claims of
breach of warranty, negligent misrepresentation, breach of implied contract,
negligence and breach of implied warranties related to certain of the Companys
products purchased by Symbol. The complaint seeks monetary damages in an
amount not less than $5.0 million, pre-judgment interest and court costs. The
Company has not yet responded to the complaint but believes the suit is without
merit and intends to defend against the claims vigorously.

Commitments to Wafer Fabrication Facilities

At June 30, 2003, the Company had $25.0 million in non-cancelable purchase
orders to a wafer foundry for the purchase of wafers with delivery scheduled by
December 31, 2003.

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

13.     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:

|          |                      |   |                   |        |      |   |        |        | 
|--------- | -------------------- | - | ----------------- | ------ | ---- | - | ------ | ------ | 
|          |                      |   | Nine Months Ended
|          |                      |   | June 30,         
|          |                      |   |                  
|          |                      |   | 2003              |        | 2002
|          |                      |   |                   |        |     
|          |                      |   | (In thousands)   
|Net Sales |                      |   |                   |        |      |   |        |       
|          | United States        |   | $                 | 10,130 |      |   | $      | 16,746 | 
|          | China                |   |                   | 12,118 |      |   |        | 9,199  | 
|          | Hong Kong            |   |                   | 7,931  |      |   |        | 5,054  | 
|          | Taiwan               |   |                   | 16,059 |      |   |        | 5,794  | 
|          | Korea                |   |                   | 8,547  |      |   |        | 1,159  | 
|          | Asia / Pacific other |   |                   | 5,867  |      |   |        | 4,391  | 
|          | Europe               |   |                   | 6,962  |      |   |        | 7,553  | 
|          | Canada               |   |                   | 21     |      |   |        | 365    | 
|          |                      |   |                   |        |      |   |        |        | 
|          |                      | $ | 67,635            |        |      | $ | 50,261 |       
|          |                      |   |                   |        |      |   |        |        | 

|                  |                         |   |                |       |               |   |        |       | 
|----------------- | ----------------------- | - | -------------- | ----- | ------------- | - | ------ | ----- | 
|                  |                         |   | June 30,       |       | September 30,
|                  |                         |   | 2003           |       | 2002         
|                  |                         |   |                |       |              
|                  |                         |   | (In thousands)
|Long-lived assets |                         |   |                |       |               |   |        |      
|                  | United States           |   | $              | 5,331 |               |   | $      | 7,942 | 
|                  | Hong Kong               |   |                | 415   |               |   |        | 691   | 
|                  | China                   |   |                | 2,211 |               |   |        | 1,771 | 
|                  | Other foreign locations |   |                | 143   |               |   |        | 269   | 
|                  |                         |   |                |       |               |   |        |       | 
|                  |                         | $ | 8,100          |       |               | $ | 10,673 |      
|                  |                         |   |                |       |               |   |        |       | 

14.     Related Party Transactions

For the nine months ended June 30, 2003 and June 30, 2002, the Company
sold (net of returns) approximately $(114,000) and $819,000, respectively, of
memory products to ICSI. The Company currently has approximately a 29%
ownership interest in ICSI. The Companys Chairman and Chief Executive Officer
(CEO), Jimmy S.M. Lee, is a director of ICSI. The Company also provides
services and licenses certain products to ICSI. At June 30, 2003 and September
30, 2002, the Company had an accounts receivable balance from ICSI of
approximately $98,000 and $560,000, respectively.

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

The Company purchases goods and contract manufacturing services from ICSI.
For the nine months ended June 30, 2003 and June 30, 2002, purchases of goods
and services were approximately $53,000 and $2,665,000, respectively. The
Company also pays ICSI for certain product development costs, license fees and
royalties. For the nine months ended June 30, 2003 and June 30, 2002, these
charges totaled approximately $276,000 and $2,669,000, respectively. At June
30, 2003 and September 30, 2002, the Company had an accounts payable balance to
ICSI of approximately $50,000 and $777,000, respectively.

The Company purchases services from NexFlash. The Company currently has
approximately a 14% ownership interest in NexFlash. The Companys Chairman and
CEO, Jimmy S.M. Lee, is a director of NexFlash. For the nine months ended June
30, 2003, purchases of services were approximately $14,000. At June 30, 2003
and September 30, 2002, the Company had an accounts payable balance to NexFlash
of approximately $0 and $4,000, respectively.

The Company provides services to GetSilicon in which the Company currently
has approximately a 17% ownership interest. The Companys Chairman and CEO,
Jimmy S.M. Lee, was the Chairman of GetSilicon until May 14, 2002 and continues
to serve as a director. For the nine months ended June 30, 2003 and June 30,
2002, the Company provided services of approximately $55,000 and $112,000,
respectively, to GetSilicon. At June 30, 2003 and September 30, 2002, the
Company had an accounts receivable balance from GetSilicon of approximately
$13,000 and $73,000, respectively.

The Company engages GetSilicon for business-to-business data exchange and
professional services. For the nine months ended June 30, 2003 and June 30,
2002, the purchase of services by the Company was approximately $84,000 and
$229,000, respectively. At June 30, 2003 and September 30, 2002, the Company
had an accounts payable balance to GetSilicon of approximately $60,000 and
$317,000, respectively.

For the nine months ended June 30, 2003 and June 30, 2002, the Company
sold approximately $46,000 and $393,000, respectively, of memory products to
E-CMOS in which the Company currently has approximately a 13% ownership
interest. The Companys Chairman and CEO, Jimmy S.M. Lee, was the Chairman of
E-CMOS until June, 2003 and continues to serve as a director. At June 30, 2003
and September 30, 2002, the Company had an accounts receivable balance from
E-CMOS of approximately $28,000 and $12,000, respectively.

The Company receives administrative support services and reimburses E-CMOS
for expenses incurred on its behalf. For the nine months ended June 30, 2003
and June 30, 2002, the purchase of services and expenses reimbursed by the
Company was approximately $333,000 and $1,448,000, respectively. At June 30,
2003 and September 30, 2002, the Company had an accounts payable balance to
E-CMOS of approximately $67,000 and $434,000, respectively.

For the nine months ended June 30, 2003 and June 30, 2002, the Company
sold approximately $1,018,000 and $650,000, respectively, of memory products to
Marubun USA Corporation (Marubun). Hide L. Tanigami, a director of the
Company, is the president and chief executive officer of Marubun. At June 30,
2003 and September 30, 2002, the Company had an accounts receivable balance
from Marubun of approximately $664,000 and $301,000, respectively.

The Company purchases goods from SMIC in which the Company has less than a
4% ownership interest. The Companys Chairman and CEO, Jimmy S.M. Lee, is a
director of SMIC. For the nine months ended June 30, 2003 and June 30, 2002,
purchases of goods from SMIC were approximately $27,518,000 and $781,000,
respectively. At June 30, 2003 and September 30, 2002, the Company had an
accounts payable balance to SMIC of approximately $7,627,000 and $2,373,000,
respectively.

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

Lip-Bu Tan, a director of the Company, has been a director of Flextronics
International Ltd. (Flextronics) since April 3, 2003. For the three months
ended June 30, 2003, the Company sold approximately $214,000 of memory products
to Flextronics. At June 30, 2003, the Company had an accounts receivable
balance from Flextronics of approximately $303,000. The Company had been doing
business with Flextronics prior to Mr. Tan joining the board of directors of
Flextronics.

The Company provides manufacturing support services to Signia Technologies
Co. Ltd. (Signia) in which the Company currently has approximately a 7%
ownership interest. The Companys Chairman and CEO, Jimmy S.M. Lee, is a
director of Signia. For the nine months ended June 30, 2003, the Company
provided services of approximately $135,000 to Signia. At June 30, 2003, the
Company had an accounts receivable balance from Signia of approximately
$43,000.

15.     Investment in Integrated Circuit Solution Inc. (ICSI)

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

|                                                |  |          |        |               |  |   |        | 
|----------------------------------------------- |  | -------- | ------ | ------------- |  | - | ------ | 
|                                                |  | June 30, |        | September 30,
|                                                |  | 2003     |        | 2002         
|                                                |  |          |        |              
|Current assets                                  |  | $        | 75,311 |               |  | $ | 77,026 | 
|Property, plant, and equipment and other assets |  |          | 37,275 |               |  |   | 45,810 | 
|Current liabilities                             |  |          | 36,384 |               |  |   | 39,516 | 
|Long-term debt                                  |  |          | 18,669 |               |  |   | 18,664 | 

|                    |  |                   |        |      |  |   |         |  
|------------------- |  | ----------------- | ------ | ---- |  | - | ------- | -
|                    |  | Nine Months Ended
|                    |  | June 30,         
|                    |  |                  
|                    |  | 2003              |        | 2002
|                    |  |                   |        |     
|Net sales           |  | $                 | 63,709 |      |  | $ | 54,834  |  
|Gross profit (loss) |  |                   | 3,833  |      |  |   | (5,649  | )
|Net loss            |  |                   | (8,963 | )    |  |   | (16,808 | )

In the June 2002 quarter, the Company invested approximately $3.2 million
in convertible debentures issued by ICSI. The Company classifies this
investment as available-for-sale. ICSI raised approximately $17 million with
the proceeds to be used for general working capital purposes. Key terms of the
issuance included: 5 year term, 0% coupon rate, convertible into ICSI common
stock after 90 days, four specified conversion dates per year, conversion price
at 101% over a calculated average closing price, an anti-dilution clause, a put
option at 4% interest after 3 years and 4.5% after 4 years, and callable after
2 years if the market price of ICSI common stock meets certain conditions.

12



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

As a result of a decline in ICSIs convertible debenture price, the
Company has recorded an unrealized loss of approximately $169,000 related to
the ICSI convertible debentures. The unrealized loss is included in
accumulated other comprehensive loss. In addition, in the three and nine month
periods ended June 30, 2003, the Company recorded charges of approximately $0
and $365,000, respectively, related to the decline in the fair value of an
embedded derivative associated with the ICSI convertible debenture. The charge
associated with the embedded derivative is included in other income (expense).
The market value of the Companys convertible debentures at June 30, 2003 was
approximately $2.8 million.

The Company accounts for investments in 50% or less owned companies over
which it has the ability to exercise significant influence using the equity
method of accounting. At June 30, 2003 and September 30, 2002, approximately,
$2.0 million and $4.6 million, respectively, of undistributed earnings of 50%
or less owned companies accounted for using the equity method are included in
consolidated retained earnings. The Company periodically reviews these
investments for other-than-temporary declines in market value and writes these
investments to their fair value when an other-than-temporary decline has
occurred.

13



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##### Table of Contents






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 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 memory products used in networking, Internet
infrastructure, telecommunications, wireless products, handheld devices,
computer peripherals and automotive electronics. Our high speed and low power
SRAMs, our low to medium density DRAMs, and our family of EEPROMs enable
customers to design products that meet the demanding connectivity, portability
and bandwidth requirements of todays electronic products. Our objective is to
capitalize on major trends in electronic products and position ISSI as a key
supplier to leading companies in such markets. Our goal is to be a focused
supplier of high performance memories targeting the mobile communications,
networking/broadband, digital consumer and automotive electronics 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 with Chartered Semiconductor in 1994 and have also worked closely with
United Microelectronics Corporation (UMC) since 1995. We are also an equity
investor and have a seat on the board of directors of Semiconductor
Manufacturing International Corporation (SMIC), the first eight-inch wafer
foundry in China. 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 that 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 2003 and fiscal 2002 reflect accounting
for ICSI on the equity basis and include our percentage share of the results of
ICSIs operations. Our financial results for fiscal 2002 and for fiscal 2003
through the period ended April 30, 2003 reflect accounting for E-CMOS on the
equity basis and include our percentage share of the results of E-CMOSs
operations. Effective May 2003, our ownership of E-CMOS became less than 20%,
and we began accounting for E-CMOS on the cost basis. Our financial results for
fiscal 2003 and fiscal 2002 reflect accounting for GetSilicon, NexFlash, Signia
and SMIC on the cost basis. At June 30, 2003, we owned approximately 29% of
ICSI, approximately 13% of E-CMOS, approximately 17% of GetSilicon,
approximately 14% of NexFlash, approximately 7% of Signia and less than 4% of
SMIC.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
difficult and subjective estimates, judgments and assumptions. These estimates,
judgments and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenue and
expenses during the reporting period. The estimates and judgments that we use
in applying our accounting policies have a significant impact on the results we
report in our financial statements. We base our estimates and judgments on our
historical experience combined with knowledge of current conditions and our
beliefs of what could occur in the future considering the information available
at the time. Actual results could

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differ from those estimates and such differences may be material to our
financial statements. We reevaluate our estimates and judgments on an ongoing
basis.

Our critical accounting policies which are impacted by estimates are: (i)
the valuation of our inventory, which impacts cost of goods sold and gross
profit; (ii) the valuation of our allowance for sales returns and allowances,
which impacts net sales (iii) the valuation of our allowance for doubtful
accounts, which impacts general and administrative expense; and (iv) the
valuation of our non-marketable equity securities, which impacts gains and
losses on equity securities when we record impairments. Each of these policies
is described in more detail below. We also have other key accounting policies
that may not require us to make estimates and judgments that are as subjective
or difficult, for instance, our policies with regard to revenue recognition,
including the deferral of revenues on sales to distributors. These policies
are described in the notes to our financial statements contained in our Annual
Report on Form 10-K for the year ended September 30, 2002.

Valuation of inventory

Our inventories are stated at the lower of cost or market value.
Determining market value requires us to project unit prices and volumes for
future periods in which we expect to sell inventory on hand as of the balance
sheet date. As a result of these estimates, we may record a charge to cost of
goods sold, which decreases our gross profit, in advance of when the inventory
is actually sold to reflect market values that are below our manufacturing and
sales commission costs. Conversely, if we sell inventory that has previously
been written down to the lower of cost or market at more favorable prices than
we had forecasted at the time of the write-down, our gross profit may be
higher. In addition to lower of cost or market write-downs, we also analyze
inventory to determine whether any of it is excess or obsolete. We write down
to zero dollars (which is a charge to cost of goods sold) the carrying value of
inventory on hand in excess of six months estimated sales volumes to cover
estimated excess and obsolete exposures, unless adjustments are made to the
forecast based on our judgments for newer products, end of life products or
planned inventory increases. In making such judgments to write down inventory,
we take into account the product life cycles which can range from 6 to 30
months, the stage in the life cycle of the product, the impact of competitors
announcements and product introductions on our products.

Valuation of allowance for sales returns and allowances

Net sales consist principally of total product sales less estimated sales
returns. To estimate sales returns and allowances, we analyze potential
customer specific product application issues, potential quality and reliability
issues and historical returns. We evaluate quarterly the adequacy of the
reserve for sales returns and allowances. This reserve is reflected as a
reduction to accounts receivable in our consolidated balance sheets. Increases
to the reserve are recorded as a reduction to net sales. Because the reserve
for sales returns and allowances is based on our judgments and estimates,
particularly as to product application, quality and reliability issues, our
reserves may not be adequate to cover actual sales returns and other
allowances. If our reserves are not adequate, our net sales could be adversely
affected.

Valuation of allowance for doubtful accounts

We maintain an allowance for doubtful accounts for losses that we estimate
will arise from our customers inability to make required payments for goods
and services purchased from us. We make our estimates of the uncollectibility
of our accounts receivable by analyzing historical bad debts, specific customer
creditworthiness and current economic trends. Once an account is deemed
unlikely to be fully collected, we write down the carrying value of the
receivable to the estimated recoverable value, which results in a charge to
general and administrative expense, which decreases our profitability.

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Valuation of non-marketable securities

Our ability to recover our investments in equity securities that are
non-marketable and to earn a return on these investments is largely dependent
on financial market conditions and the occurrence of liquidity events, such as
initial public offerings, mergers or acquisitions and private party
transactions. All of these events are difficult to predict, particularly in
the recent environment. In addition, under our accounting policy, we are
required to periodically review all of our investments for impairment. In the
case of non-marketable equity securities, this requires significant judgment on
our part, including an assessment of the investees financial condition, the
existence of subsequent rounds of financing and the impact of any relevant
equity preferences, as well as the investees historical results of operations,
and projected results and cash flows. If the actual outcomes for the
investees are significantly different from their forecasts, the carrying value
of our non-marketable equity securities may be overstated, and we may incur
additional charges in future periods, which will decrease our profitability.
At June 30, 2003, our strategic investments in non-marketable securities
totaled $43.6 million of which $40.0 million was invested in SMIC.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

Net Sales. Net sales consist principally of total product sales less
estimated sales returns. Net sales increased by 31% to $24.3 million in the
three months ended June 30, 2003 from $18.5 million in the three months ended
June 30, 2002. The increase in sales was principally due to an increase in unit
shipments of our 64 megabit DRAM products partially offset by declines in the
average selling prices for such products in the three months ended June 30,
2003 compared to the three months ended June 30, 2002. In the three months
ended June 30, 2003, there was an overall reduction in our SRAM revenue as a
result of a decrease in units shipped coupled with a decline in the average
selling prices of SRAM products compared to the three months ended June 30,
2002. 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. In this regard, the average selling prices for certain of
our SRAM products declined in the three months ended June 30, 2003 compared to
the three months ended March 31, 2003. However, the average selling prices for
certain of our DRAM products increased in the three months ended June 30, 2003
compared to the three months ended March 31, 2003. We anticipate further price
declines for our products in the future. There can be no assurance that such
declines will be offset by higher volumes or by higher prices on newer
products.

Sales to Asian Information Technology, Inc. (AIT) accounted for
approximately 11% of our total net sales for the three months ended June 30,
2003. In the three months ended June 30, 2002, no single customer accounted
for over 10% of our net sales. As sales to AIT executed pursuant to purchase
orders and no purchasing contract exists, this customer can cease doing
business with us at any time.

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, import
duties and inventory write-downs. Gross profit increased to $4.0 million in the
three months ended June 30, 2003 from $(13.0) million in the three months ended
June 30, 2002. As a percentage of net sales, gross profit increased to 16.5% in
the three months ended June 30, 2003 from (70.3)% in the three months ended
June 30, 2002. In the three months ended June 30, 2002, we recorded an
inventory write-down of approximately $15.0 million predominately for lower of
cost or market accounting on our DRAM and SRAM products and to a lesser extent,
excess inventory. Excluding the inventory write-downs, the increase in gross
profit dollars was principally due to an increase in unit shipments of our DRAM
products in the three months ended June 30, 2003 compared to the three months
ended June 30, 2002. In addition, reductions in the cost of our DRAM and SRAM
products more than offset declines in the average selling prices of such
products in the three months ended June 30, 2003 compared to the three months
ended June 30, 2002, resulting in an increase in the gross profit percentage.
We believe that the average selling prices 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 this regard, we
experienced a decline in the average selling prices for certain of our SRAM
products in the three months ended June 30, 2003 compared to the three months
ended March 31, 2003. However, the average selling prices for certain of our

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DRAM products increased in the three months ended June 30, 2003 compared
to the three months ended March 31, 2003. We anticipate further price declines
for our products in the future. In addition, product unit costs could increase
if our 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 provided by us.

Research and Development. Research and development expenses decreased by
30% to $5.6 million in the three months ended June 30, 2003 from $8.0 million
in the three months ended June 30, 2002. As a percentage of net sales,
research and development expenses decreased to 23.0% in the three months ended
June 30, 2003 from 43.3% in the three months ended June 30, 2002. The decrease
in absolute dollars was primarily the result of a reduction in expenses
associated with new product development as we limited the focus of our
development efforts resulting in a substantial reduction in masks set costs and
engineering wafers. In addition, we have reduced research and development
expenses through salary reductions, headcount reductions and the transfer of
some design and engineering efforts to Asia. The increased costs associated
with the development of new products could offset these reductions, which could
result in our research and development expenses increasing in absolute dollars
in future periods.

Selling, General and Administrative. Selling, general and administrative
expenses decreased by 28% to $3.0 million in the three months ended June 30,
2003 from $4.2 million in the three months ended June 30, 2002. As a
percentage of net sales, selling, general and administrative expenses decreased
to 12.5% in the three months ended June 30, 2002 from 22.7% in the three months
ended June 30, 2002. The decrease in absolute dollars was primarily the result
of controlling expenses through salary reductions, headcount reductions and
limiting discretionary spending. 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.The gain on sale of investments increased to
$0.4 million in the three months ended June 30, 2003 from $0 in the three
months ended June 30, 2002. In the three months ended June 30, 2003, we sold
shares of E-CMOS for approximately $2.2 million which resulted in a pre-tax
gain of $0.4 million.

Other income (expense), net.Other income (expense), net decreased by $2.0
million to approximately $(1.1) million in the three months ended June 30, 2003
from $0.9 million in the three months ended June 30, 2002. The decrease was
primarily the result of a $1.3 million charge we recorded on the impairment of
our investment in Signia based on the share price of a subsequent investment in
Signia in July 2003. In addition, interest income decreased by $0.7 million as
the result of lower cash balances.

Provision (benefit) for income taxes.We recorded no provision for income
taxes for the three month period ended June 30, 2003 due to our net operating
loss position. The provision for income taxes for the three month period ended
June 30, 2002 of $3,000 consists of foreign withholding taxes.

Minority interest in net (income) loss of consolidated subsidiary.In
October 2001, we invested $3.0 million for a 95% interest in D2Code Co. Inc.
(D2Code), a subsidiary that we established in Korea to focus on semiconductor
design activities. The results of their operations are included in our
consolidated financial statements. The minority interest in net loss of
consolidated subsidiary, represents the minority shareholders proportionate
share of the net loss of D2Code. The minority interest in net (income) loss of
consolidated subsidiary decreased to $0 in the three months ended June 30, 2003
from $(6,000) in the three months ended June 30, 2002.

Equity in net loss of affiliated companies.Equity in net loss of
affiliated companies increased by $0.1 million to $0.6 million in the three
months ended June 30, 2003 from $0.5 million in the three months ended June 30,
2002. This primarily reflects an increase in the loss from our percentage
share of ICSIs financial results in the three months ended June 30, 2003
compared to the three months ended June 30, 2002.

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Nine Months Ended June 30, 2003 Compared to Nine Months Ended June 30, 2002

Net Sales. Net sales increased by 35% to $67.6 million in the nine months
ended June 30, 2003 from $50.3 million in the nine months ended June 30, 2002.
The increase in sales was principally due to an increase in unit shipments of
our DRAM products, specifically our 64, 4 and 16 megabit devices, partially
offset by declines in the average selling prices for such products in the nine
months ended June 30, 2003 compared to the nine months ended June 30, 2002.
While SRAM units shipped increased slightly in the nine months ended June 30,
2003 compared to the nine months ended June 30, 2002, the impact of the
reduction in average selling prices for such products resulted in an overall
reduction in our SRAM revenue. 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. In this regard, the average selling
prices for certain of our SRAM products declined in the three months ended June
30, 2003 compared to the three months ended March 31, 2003. However, the
average selling prices for certain of our DRAM products increased in the three
months ended June 30, 2003 compared to the three months ended March 31, 2003.
We anticipate further price declines for our products in the future. There can
be no assurance that such declines will be offset by higher volumes or by
higher prices on newer products.

Sales to ATM Electronic Corporation accounted for approximately 10% of our
total net sales for the nine months ended June 30, 2003. In the nine months
ended June 30, 2002, no single customer accounted for over 10% of our net
sales. As sales ATM are executed pursuant to purchase orders and no purchasing
contract exists, this customer can cease doing business with us at any time.

Gross Profit. Gross profit increased to $6.1 million in the nine months
ended June 30, 2003 from $(7.3) million in the nine months ended June 30, 2002.
As a percentage of net sales, gross profit increased to 9.1% in the nine
months ended June 30, 2003 from (14.6)% in the nine months ended June 30, 2002.
In the nine months ended June 30, 2003, we recorded inventory write-downs of
$4.1 million predominately for lower of cost or market adjustments. We recorded
inventory write-downs of $19.4 million in the nine months ended June 30, 2002
predominately for lower of cost or market adjustments on our DRAM and SRAM
products and to a lesser extent, excess inventory. Our gross margin for the
nine months ended June 30, 2002 benefited from the reversal of approximately
$5.2 million in antidumping duties previously charged to cost of sales, as a
result of the favorable termination of an antidumping case. Excluding the
inventory write-downs and the benefit of the reversal of antidumping duties,
the increase in gross profit dollars was principally due to an increase in unit
shipments of our DRAM products, and to a lesser extent our SRAM products, in
the nine months ended June 30, 2003 compared to the nine months ended June 30,
2002. In addition, reductions in the cost of our DRAM and SRAM products more
than offset declines in the average selling prices of such products in the nine
months ended June 30, 2003 compared to the nine months ended June 30, 2002,
resulting in an increase in the gross profit dollars. We believe that the
average selling prices 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 our 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 provided by us.

Research and Development. Research and development expenses decreased by
15% to $18.5 million in the nine months ended June 30, 2003 from $21.8 million
in the nine months ended June 30, 2002. As a percentage of net sales, research
and development expenses decreased to 27.4% in the nine months ended June 30,
2003, from 43.4% in the nine months ended June 30, 2002. The decrease in
absolute dollars was primarily the result of a reduction in expenses associated
with new product development as we limited the focus of our development efforts
resulting in a substantial reduction in masks set costs and engineering wafers.
In addition, we have reduced research and development expenses through salary
reductions, headcount reductions and the transfer of some design and
engineering efforts to Asia.

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Selling, General and Administrative. Selling, general and administrative
expenses decreased by 17% to $10.1 million in the nine months ended June 30,
2003 from $12.2 million in the nine months ended June 30, 2002. As a
percentage of net sales, selling, general and administrative expenses decreased
to 14.9% in the nine months ended June 30, 2003, from 24.2% in the nine months
ended June 31, 2002. The decrease in absolute dollars was primarily the result
of controlling expenses through salary reductions, headcount reductions and
limiting discretionary spending.

In-process Technology. On February 13, 2002, we acquired Purple Ray, Inc.
The assets of Purple Ray consisted primarily of intellectual property. The
transaction was accounted for using the purchase method of accounting. The
total estimated purchase price of $7.1 million consisted of the fair market
value of ISSIs common stock of $5.2 million, the fair value of options to
purchase Purple Ray common stock assumed by ISSI of $1.7 million and estimated
transaction costs of $0.2 million. The transaction resulted in an in-process
technology charge of $4.7 million in our March 31, 2002 quarter.

Gain on sale of investments.The gain on the sale of investments increased
to $0.4 million in the nine months ended June 30, 2003 from $35,000 in the nine
months ended June 30, 2002. In the nine months ended June 30, 2003 we sold
shares of E-CMOS for approximately $2.2 million which resulted in a pre-tax
gain of $0.4 million. In the nine months ended June 30, 2002, we sold shares
of ICSI for approximately $64,000 resulting in a pre-tax gain of $35,000.

Other income (expense), net. Other income (expense), net decreased by
$3.2 million to $(1.0) million in the nine months ended June 30, 2003 from $2.2
million in the nine months ended June 30, 2002. The decrease was primarily the
result of a $1.8 million decrease in interest income as the result of lower
cash balances and interest rates. In the nine months ended June 30, 2003, we
recorded an impairment loss of approximately $1.3 million on our investment in
Signia based on the share price of a subsequent investment in Signia in July
2003. In addition, in the nine months ended June 30, 2003, we recorded a charge
of approximately $365,000 related to the decline in the fair value of an
embedded derivative associated with the ICSI convertible debenture.

Benefit for Income Taxes.We recorded no provision for income taxes for
the nine month period ended June 30, 2003 due to our net operating loss
position. The benefit for income taxes for the nine month period ended June 30,
2002 reflects a benefit for alternative minimum taxes provided for the fiscal
year ended September 30, 2001 which can be recovered based on changes in the
tax law in 2002.

Equity in net loss of affiliated companies.Equity in net loss of
affiliated companies decreased by $2.4 million to $2.6 million in the nine
months ended June 30, 2003 from $5.0 million in the nine months ended June 30,
2002. This primarily reflects a decrease in the loss from our percentage share
of ICSIs financial results in the nine months ended June 30, 2003 compared to
the nine months ended June 30, 2002.

Minority interest in net loss of consolidated subsidiary.In October
2001, we invested $3.0 million for a 95% interest in D2Code Co. Inc. The
results of their operations are included in our consolidated financial
statements. The minority interest in net loss of consolidated subsidiary
decreased to $17,000 in the nine months ended June 30, 2003 from $18,000 in the
nine months ended June 30, 2002.

Liquidity and Capital Resources

As of June 30, 2003, our principal sources of liquidity included cash,
cash equivalents and short-term investments of approximately $59.5 million.
During the nine months ended June 30, 2003, operating activities used cash of
approximately $21.0 million compared to $0.6 million of cash provided in the
nine months ended June 30, 2002. Cash used by operations was primarily due to
our net loss of $25.6 million adjusted for non-cash charges including
depreciation of $3.7 million, equity in net loss of affiliated companies of
$2.6 million, loss on impairment of investment of $1.3 million and other
non-cash items of $0.5 million, as well as decreases in accounts payable of
$5.2 million and increases in accounts receivables of $3.5 million, partially
offset by decreases in inventories of $4.4 million primarily driven by
inventory write-downs and increases in accrued expenses of $0.8 million.

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In the nine months ended June 30, 2003, we generated $19.9 million from
investing activities compared to $1.6 million generated in the nine months
ended June 30, 2002. The cash generated by investing activities in the nine
months ended June 30, 2003 primarily resulted from net sales of
available-for-sale securities of $19.0 million. In addition, in the three
months ended June 30, 2003, we sold shares of E-CMOS for $2.2 million which
resulted in a pre-tax gain of approximately $0.4 million. The cash generated
from investing activities in the nine months ended June 30, 2002 was primarily
the result of net sales of available-for-sale securities of $23.0 million. In
addition, in the nine months ended June 30, 2002, we made additional
investments totaling $11.4 million in SMIC and other investments of $4.8
million including $3.2 million in ICSI convertible debentures and $0.6 million
in E-CMOS.

In the nine months ended June 30, 2003, we made capital expenditures of
approximately $1.3 million for engineering tools, computer software and
leasehold improvements. We expect to spend approximately $1.0 million to $2.0
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 $0.8 million from financing activities during the nine months
ended June 30, 2003 compared to $1.9 million in the nine months ended June 30,
2002. Cash generated from financing activities for the nine months ended June
30, 2003 and June 30, 2002 was primarily the result of proceeds from the
issuance of common stock from option exercises and sales under our employee
stock purchase plan.

In August 2000, we made a commitment for an equity investment in SMIC. In
fiscal 2002, we made investments totaling $21.2 million in SMIC, bringing our
total investment in this foundry as of June 30, 2003, to $40.0 million. We have
no further commitments to SMIC for additional equity investments at this time.
At June 30, 2003, we had $25.0 million in non-cancelable purchase orders to a
wafer foundry for the purchase of wafers with delivery scheduled by December
31, 2003.

In July 2002, we made a commitment for an equity investment in Signia
Technologies, Inc. (Signia), a development stage company focusing on
BlueTooth design. As of June 30, 2003, we had invested $1.5 million in
Signia. We were committed to invest an additional $1.5 million in Signia, if
Signia achieved certain milestones with respect to its BlueTooth product by
January 19, 2003. As Signia did not achieve the milestones by January 19,
2003, we were no longer contractually obligated to this commitment. However,
we invested approximately $0.9 million in Signia in July 2003. In the three
months ended June 30, 2003, we recorded an impairment loss of approximately
$1.3 million on our Signia investment based on the share price of our July 2003
investment.

We lease our facilities including our headquarters in Santa Clara,
California, our field sales offices in the U.S. and Europe and sales and
engineering offices in Asia. Our leases expire at various dates through 2007.
Our outstanding commitments under these leases are approximately $6.1 million.

Our contractual cash obligations at June 30, 2003 are outlined in the
table below:

|                                                  |  |                                       |        |             |  |            |        |             |  |        |        |        |  |   |       | 
|------------------------------------------------- |  | ------------------------------------- | ------ | ----------- |  | ---------- | ------ | ----------- |  | ------ | ------ | ------ |  | - | ----- | 
|                                                  |  | Payments Due by Period (in thousands)
|                                                  |  |                                      
|                                                  |  |                                       |        |             |  |            |        |             |  | Fiscal |        | Fiscal
|Contractual Obligations                           |  | Total                                 |        | Fiscal 2003 |  | 2004 -2005 |        | 2006 - 2007
|                                                  |  |                                       |        |             |  |            |        |            
|Equipment lease debt                              |  | $                                     | 30     |             |  | $          | 30     |             |  | $      |       |        |  | $ |      | 
|Operating leases                                  |  |                                       | 6,127  |             |  |            | 392    |             |  |        | 3,486  |        |  |   | 2,249 | 
|Non-cancelable purchase orders to
a wafer foundry |  |                                       | 24,989 |             |  |            | 14,111 |             |  |        | 10,878 |        |  |   |      | 
|                                                  |  |                                       |        |             |  |            |        |             |  |        |        |        |  |   |       | 
|Total contractual cash obligations                |  | $                                     | 31,146 |             |  | $          | 14,533 |             |  | $      | 14,364 |        |  | $ | 2,249 | 
|                                                  |  |                                       |        |             |  |            |        |             |  |        |        |        |  |   |       | 

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We believe our existing funds 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 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
our financial guidance or 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:



| |  |  | the cyclicality of the semiconductor industry;                                                         
| | - |  | -------------------------------------------------------------------------------------------------------
|
| |  |  | decreases in the demand for our products;                                                              
|
| |  |  | excess inventory levels at our customers;                                                              
|
| |  |  | declines in average selling prices of our products;                                                    
|
| |  |  | cancellation of existing orders or the failure to secure new orders;                                   
|
| |  |  | oversupply of memory products in the market;                                                           
|
| |  |  | our failure to introduce new products and to implement technologies on a timely basis;                 
|
| |  |  | market acceptance of ours and our customers products;                                                 
|
| |  |  | economic slowness and low end-user demand;                                                             
|
| |  |  | our failure to anticipate changing customer product requirements;                                      
|
| |  |  | fluctuations in manufacturing yields;                                                                  
|
| |  |  | our failure to deliver products to customers on a timely basis;                                        
|
| |  |  | disruption in the supply of wafers or assembly services;                                               
|
| |  |  | changes in product mix;                                                                                
|
| |  |  | the timing of significant orders;                                                                      
|
| |  |  | increased expenses associated with new product introductions, masks, or process changes;               
|
| |  |  | the ability of customers to make payments to us; and                                                   
|
| |  |  | the commencement of, or developments with respect to, any litigation
or future antidumping proceedings.

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We have incurred significant losses in certain recent periods, and there can be
no assurance that we will be able to achieve or sustain profitability in the
future.

We have incurred losses in the nine consecutive quarters ended June 30,
2003 totaling $121.5 million. We expect to incur a loss in the September 2003
quarter and may incur losses in subsequent quarters. We were profitable for
fiscal 2001 and fiscal 2000. Our ability to achieve or 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.

Any continued downturn in the markets we serve would harm our business.

Substantially all of our products are incorporated into products such as
internet access devices, networking equipment, digital consumer products,
telecom/mobile communications devices, and automotive electronics.
Historically, 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 demand and declining average selling prices for our products.
Certain of these markets are currently experiencing severely depressed business
conditions which are adversely affecting our business. We are unable to
predict how long this current downturn will continue or whether current
conditions will worsen.

Our sales depend on SRAM and DRAM products, and a decline in average selling
prices or reduced demand for these products could harm our business.

A substantial majority of our net sales are derived from the sale of DRAM
and SRAM products, which are subject to unit volume fluctuations and declines
in average selling prices that could harm our business. In fiscal 2001, we
experienced sequential declines in revenue in the March 2001, June 2001, and
September 2001 quarters. These declines were a result of a decline in the
average selling prices for our products as well as a decrease in unit shipments
of our products as a result of lower demand for electronic products that use
our devices. The average selling prices for certain of our SRAM products
declined in the three months ended June 30, 2003 compared to the three months
ended March 31, 2003 and unit shipments of certain of our SRAM products
decreased which resulted in an overall decrease in our SRAM revenue. We
anticipate further price declines for certain of our products in the future.
There can be no assurance that such declines will 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 as well as product inventory 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. In this regard, we
experienced a decline in the average selling prices for most of our products
during fiscal 2002, and for certain SRAM products in the most recent quarter
ended June 30, 2003. We anticipate a further decline in the average selling
prices for certain of our products 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 that 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.

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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 the nine months ended June 30, 2003, in fiscal 2002 and in fiscal
2001, we recorded inventory write-downs of $4.1 million, $28.6 million and
$38.3 million, respectively. The inventory write-downs were predominately for
lower of cost or market accounting on our products, and to a lesser extent,
excess inventory.

We write down to zero carrying value inventory on hand in excess of six
months estimated sales volumes to cover estimated excess and obsolete
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 30 months, the
stage in the life cycle of the product, the impact of competitors
announcements and product introductions on our products.

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 $10.4
million for fiscal 2002 and $5.7 million for fiscal year 2001. 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. Our
principal manufacturing relationships are with TSMC and SMIC. 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 some suppliers, if any 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 any
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 can be 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 foundry capacity, we have entered into
and may enter into various arrangements with suppliers, which could include:



| |  |  | contracts that commit us to purchase specified quantities of silicon wafers over extended periods;
| | - |  | --------------------------------------------------------------------------------------------------
|
| |  |  | investments in foundries;                                                                         
|
| |  |  | joint ventures;                                                                                   
|
| |  |  | other partnership relationships with foundries;                                                   
|
| |  |  | option payments or other prepayments to foundries; or                                             

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| |  |  | 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. For example, at June 30, 2003,
we had $25.0 million in non-cancelable purchase orders to a wafer foundry for
the purchase of wafers with delivery scheduled by December 31, 2003.

We depend on a small number of customers for a high percentage of our sales,
and the loss of a significant customer could adversely effect our operating
results.

In the nine months ended June 30, 2003, sales to ATM Electronic
Corporation accounted for approximately 10% of our total net sales. In fiscal
2001, sales to Flextronics International accounted for approximately 15% of our
net sales. Substantially all of our sales to Flextronics were for products to
be delivered to Cisco. Shipments for Cisco directly, or indirectly through
subcontractors, accounted for approximately 18% of our net sales for fiscal
2001. Shipments for 3Com directly, or indirectly through subcontractors,
accounted for approximately 11% of our net sales for fiscal 2001. As sales to
our customers are executed pursuant to purchase orders and no purchasing
contract exists, our customers can cease doing business with us at any time. In
this regard, we experienced order cancellations from these customers in the
March 2001 quarter that adversely impacted our operating results in subsequent
quarters. We expect a significant portion of our future sales to remain
concentrated within a limited number of 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. Although we specifically limit our
liability to replacement of defective items or return of amounts paid, 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 memory
market depends on factors both within and outside of our control, including:



| |  |  | real or perceived imbalances in supply and demand;                          
| | - |  | ----------------------------------------------------------------------------
|
| |  |  | product pricing;                                                            
|
| |  |  | the rate at which OEM customers incorporate our products into their systems;

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| |  |  | the success of our customers products and end-user demand;   
| | - |  | --------------------------------------------------------------
|
| |  |  | access to advanced process technologies at competitive prices;
|
| |  |  | product functionality, performance and reliability;           
|
| |  |  | successful and timely product development;                    
|
| |  |  | the supply and cost of wafers;                                
|
| |  |  | achievement of acceptable yields of functional die;           
|
| |  |  | the gain or loss of significant customers; and                
|
| |  |  | 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.

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. 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 related to our international
operations could harm our operating results.

In the nine months ended June 30, 2003, approximately 15% of our net sales
was attributable to customers located in the United States, 10% was
attributable to customers located in Europe and 74% was attributable to
customers located in Asia. In fiscal 2002, approximately 30% of our net sales
was attributable to customers located in the United States, 15% was
attributable to customers located in Europe and 55% was attributable to
customers located in Asia. In fiscal 2001, approximately 52% of our net sales
was attributable to customers located in the United States, 25% was
attributable to customers located in Europe and 23% was attributable to
customers located in Asia. Accordingly, our future operating results will
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.

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



| |  |  | economic conditions in Europe and Asia, particularly in Taiwan and
the Peoples Republic of China;
| | - |  | --------------------------------------------------------------------------------------------------
|
| |  |  | travel or other restrictions related to the SARS outbreak or other
public health issues;          
|
| |  |  | changes in trade policy and regulatory requirements;                                              
|
| |  |  | duties, tariffs and other trade barriers and restrictions;                                        
|
| |  |  | the burdens of complying with foreign laws;                                                       
|
| |  |  | foreign currency fluctuations;                                                                    
|
| |  |  | difficulties in collecting foreign accounts receivable; and                                       
|
| |  |  | political instability.                                                                            

We have made strategic equity investments in other companies with no assurance
that they will increase in value.

Over the last few years, we have made several strategic equity investments
in other technology companies. At June 30, 2003, we had investments in equity
securities of privately held companies of approximately $43.6 million, $40
million of which is in SMIC. There can be no assurance that these investments
will increase in value and there is the possibility that they could decrease in
value over time, even to the point of becoming completely worthless. These
investments are tested for impairment on a recurring basis and any reductions
in the carrying value would lower our profitability. In this regard, we
recorded approximately a $1.3 million impairment loss on one of our investments
in the three months ended June 30, 2003. In addition, we recorded
approximately $397,000 in impairment losses during fiscal 2002.

We may encounter difficulties in effectively integrating acquired businesses.

From time to time, we may acquire other companies that would be
complementary to our business. Acquisitions may result in potentially dilutive
issuances of equity securities, incurrence of debt and contingent liabilities,
amortization expenses related to intangible assets and the possible impairment
of goodwill, which could harm our profitability. In addition, acquisitions
involve numerous risks, including, among other things: higher than estimated
acquisition expenses; difficulties in successfully assimilating the operations,
technologies and personnel of the acquired company; diversion of managements
attention from other business concerns; risks of entering markets in which we
have no or limited direct prior experience; and the potential loss of key
employees and customers as a result of the acquisition. In this regard, in
February 2002, we acquired Purple Ray, Inc., a privately held research and
development stage company developing network search engine and content
addressable memory integrated circuits. To date, we have not generated any
revenue as a result of this acquisition and none is anticipated in the near
future. There can be no assurance as to the effect of future acquisitions on
our business or operating results.

We depend on our ability to attract and retain our key technical and management
personnel.

Our success depends upon the continued service of our key technical and
management personnel, including Jimmy S.M. Lee, our Chairman and Chief
Executive Officer, and Gary L. Fischer, our President, Chief Operating Officer,
and Chief Financial Officer, as well as 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.

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Terrorist attacks, threats of further attacks, threats of war, and acts of war
may negatively impact all aspects of our operations, revenues, costs and stock
price.

The September 2001 terrorist attacks in the United States, as well as
future events occurring in response or connection to them, including, future
terrorist attacks against United States targets, rumors or threats of war,
actual conflicts involving the United States or its allies (such as the recent
war in Iraq), or trade disruptions impacting our domestic or foreign suppliers
or our customers, may impact our operations and may, among other things, cause
delays or losses in the delivery of wafers or other products to us and
decreased sales of our products. More generally, these events have affected,
and are expected to continue to affect, the general economy and customer demand
for products sold by our customers. Any of these occurrences could have a
significant impact on our operating results, revenues, and costs, which in turn
may result in increased volatility in our common stock price and a decline in
the price of our common stock.

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:



| |  |  | quarter-to-quarter variations in our operating results;                                                                                 
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | new or revised earnings estimates by us or industry analysts;                                                                           
|
| |  |  | comments or recommendations issued by analysts who follow us, our
competitors or the semiconductor industry and other events or factors;
|
| |  |  | aggregate valuations and movement of stocks in the broader semiconductor industry;                                                      
|
| |  |  | announcements of new products, strategic relationships or acquisitions by us or our competitors;                                        
|
| |  |  | increases or decreases in wafer capacity;                                                                                               
|
| |  |  | general conditions or cyclicality in the semiconductor industry or the end markets that we serve;                                       
|
| |  |  | governmental regulations, trade laws and import duties;                                                                                 
|
| |  |  | announcements related to future or existing litigation involving us or any of our competitors;                                          
|
| |  |  | announcements of technological innovations by us or our competitors;                                                                    
|
| |  |  | additions or departures of senior management; and                                                                                       
|
| |  |  | 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.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our financial market risk includes risks associated with international
operations and related foreign currencies. We anticipate that international
sales will continue to account for a significant portion of our consolidated
revenue. Our international sales are largely denominated in U.S. dollars and
therefore are not subject to material foreign currency exchange risk. We have
operations in China, Europe, Taiwan, Hong Kong, and Korea. Expenses of our
international operations are denominated in each countrys local currency and
therefore are subject to foreign currency exchange risk; however, through June
30, 2003 we have not experienced any significant negative impact on our
operations as a result of fluctuations in foreign currency exchange rates. We
do not currently engage in any hedging activities, and our derivative financial
instruments were immaterial at June 30, 2003.

We had short-term investments of $48.2 million at June 30, 2003. The
primary objective of our investment activities is to preserve principal while
at the same time maximizing yields without increasing risk. We invest primarily
in high-quality, short-term debt instruments such as municipal auction rate
certificates and instruments issued by high quality financial institutions and
companies, including money market instruments. A hypothetical one percentage
point decrease in interest rates would result in approximately a $0.5 million
decrease in our interest income.

We own approximately 29% of ICSI, a public company listed on the Taiwan
Stock Exchange. We account for this investment on the equity basis and our
total carrying value of this investment as of June 30, 2003 was approximately
$18.5 million of which $13.1 million is included in other assets and $5.4
million is included in other comprehensive loss in the equity portion of our
balance sheet. The market value of our investment in the common stock of ICSI
at June 30, 2003 was approximately $20.7 million, based on quoted market
prices. The share price of ICSI is subject to fluctuations. A significant
decline in the stock price of ICSI may require us to record a loss related to
this investment. In addition, we own approximately $2.8 million of ICSI
convertible debentures. As a result of a decline in ICSIs convertible
debenture price, we recorded an unrealized loss of approximately $169,000
related to the ICSI convertible debentures. This loss was included in other
comprehensive loss in the equity portion of our balance sheet. In addition, in
the three and nine month periods ended June 30, 2003, we recorded charges of
approximately $0 and $365,000, respectively, related to the decline in the fair
value of an embedded derivative associated with the ICSI convertible debenture.
The charge associated with the embedded derivative is included in other income
(expense). Further deterioration in ICSIs debenture price would result in
additional losses.

We have investments in equity securities of privately held companies for
the promotion of business and strategic objectives of approximately $43.6
million at June 30, 2003, of which $40.0 million is invested in SMIC. These
investments are generally in companies in the semiconductor industry. These
investments are included in other assets and are accounted for using the cost
method. For investments in which no public market exists, our policy is to
review the operating performance, recent financing transactions and cash flow
forecasts for such companies in assessing the net realizable values of the
securities of these companies. Impairment losses on equity investments are
recorded when events and circumstances indicate that such assets are impaired
and the decline in value is other than temporary. In this regard, we recorded
approximately a $1.3 million impairment loss on our investment in Signia in the
three months ended June 30, 2003. In addition, we recorded approximately
$397,000 in impairment losses during fiscal 2002.

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Item 4. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, based on the
evaluation of our disclosure controls and procedures (as defined in Rule
13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended)
required by paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that,
as of June 30, 2003, our disclosure controls and procedures were effective to
ensure that the information we are required to disclose in reports that we file
or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in Securities
Exchange Commission rules and forms. During the three months ended June 30,
2003, there was no change in our internal control over financial reporting
identified in connection with the evaluation required by paragraph (d) of Rule
13a-15 or Rule 15d-15 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




Part II. OTHER INFORMATION




Item 1. Legal Proceedings

On June 16, 2003, Symbol Technologies, Inc. filed suit against ISSI in the
Supreme Court of the State of New York. The complaint alleges claims of breach
of warranty, negligent misrepresentation, breach of implied contract,
negligence and breach of implied warranties related to certain ISSI products
purchased by Symbol. The complaint seeks monetary damages in an amount not
less than $5.0 million, pre-judgment interest and court costs. ISSI has not
yet responded to the complaint but believes the suit is without merit and
intends to defend against the claims vigorously.




Item 6. Exhibits and Reports on Form 8-K

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

| |  |            |  |                                                                                                                         
| |  | ---------- |  | ------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit 31 |  | Certification Pursuant to SEC Release No. 33-8238,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| |  | Exhibit 32 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

(b)  Reports on Form 8-K.

On April 24, 2003, we filed a report on Form 8-K related to our
results for the second fiscal quarter ended March 31, 2003.

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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: August 14, 2003 |  | /s/ Gary L. Fischer

Gary L. Fischer
President, Chief Operating Officer,
and Chief Financial Officer
(Principal Financial and
Accounting Officer)

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EXHIBIT INDEX

|            |  |                                                                                                                         
|----------- |  | ------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                             
|            |  |                                                                                                                         
|            |  |                                                                                                                         
|Exhibit 31  |  | Certification Pursuant to SEC Release No. 33-8238,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|            |  |                                                                                                                         
|Exhibit 32  |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.