UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

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(Mark One)


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

For the quarterly period ended June 28, 2008

OR



For the transition period from ________to _________

Commission file number :  001-13748

ZiLOG, Inc.(Exact name of Registrant as specified in its Charter)



|Delaware                                                       | 13-3092996                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

6800 Santa Teresa Boulevard
San Jose, California     95119

(408) 513-1500

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 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 a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (Check one):
YES     ̈ NO    x Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section
12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.   
YES    x NO     ̈ Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date.

|Class                                   | Outstanding at June 28, 2008
|--------------------------------------- | ----------------------------
|Common Stock, $0.01 par value per share | 16,948,361 shares           








Note:PDF provided as a courtesy

FORWARD-LOOKING STATEMENTS

Some of the statements under the sections entitled "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Form 10-Q, constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. In some cases, you can identify forward-looking statements by terminology such as
"may", "will", "should", "expects", "anticipates", "believes",
"estimates", "potential", "continue", or the negative terms or other comparable terminology.  These statements
include, without limitation:

- estimates of market growth;

- estimates of capital expenditures;

- the adequacy of available cash;

- the cost or outcome of any litigation pending or threatened;

- the impact on recent accounting pronouncements;

- any gross margin improvement resulting from our research and development effort; and

- the expected cost of compliance with environmental laws.

These statements relate to future events or our future financial performance and involve known and may involve unknown risks,
uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or implied by forward-looking statements including, but not limited
to, prospects for future market growth. Other factors that may cause or contribute to differences include, but are not limited to, continued
availability of third-party foundry and assembly services with commercially-reasonable quality and prices; under-absorption of manufacturing
costs in our test and manufacturing support facilities from under-utilization of capacity; our distributors and customers significantly reducing their
existing inventories before ordering new products and the costs associated with the Microchip lawsuit. In evaluating these statements, you
should specifically consider various factors, including the risks outlined under "Risk Factors"
in our Form 10-K for the fiscal year ended March 31, 2008.

Although we believe that the expectations in the forward-looking statements contained in this Form 10-Q are reasonable, we cannot
guarantee future results, levels of activity, and performance achievements. These forward-looking statements are based on our current
expectations, and we disclaim any obligation to update these forward-looking statements for subsequent events or to explain why actual results
differ unless otherwise required by law. You should not place undue reliance on these forward-looking statements.

Unless otherwise specified as a forward-looking statement, the information contained in this report is historical in nature and speaks as of
the date of this report unless otherwise clearly indicated.  We disclaim any obligation to update this information for subsequent events.

Based in San Jose, California, we were incorporated in California in September 1973 and merged with a subsidiary of Exxon (which
subsidiary changed its name to ZiLOG, Inc.) in November 1981.  We were reacquired by an affiliate of Warburg Pincus and Management in
1989 and reincorporated in Delaware in April 1997. We were acquired by an affiliate of Texas Pacific Group in 1998 and we were reorganized in
bankruptcy in 2002. In this report, "ZiLOG," "the Company," "our," "us," "we," and
similar expressions refer to ZiLOG, Inc. and its subsidiaries.  However, when these expressions are used throughout this report in connection
with ZiLOG, Inc.'s reorganization under Chapter 11 of the U.S. bankruptcy code, they are referring only to the parent company, ZiLOG, Inc., and
not to any of its subsidiaries.  EZ80ACCLAIM!, CRIMZON, Zatara, ZiLOG, Z8, Z80, eZ80, Z8 ENCORE!, Encore!XP and Zneo are registered
trademarks of ZiLOG, Inc., in the United States and in other countries. ARM is a registered trademark of ARM Limited in the EU and other
countries. Other product and or service names mentioned herein may be trademarks of the companies with which they are associated.

2

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ZILOG, INC.
                  QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 28, 2008
                  TABLE OF CONTENTS

|PART I. FINANCIAL INFORMATION                                                                                                            | Page
|---------------------------------------------------------------------------------------------------------------------------------------- | ----
|Item 1.Financial Statements                                                                                                              |     
|Unaudited Condensed Consolidated Statements of Operations for the quarters ended
                 ended June 28, 2008 and June 30, 2007  | 3   
|Unaudited Condensed Consolidated Balance Sheets at June 28, 2008 and March 31, 2008                                                      | 4   
|Unaudited Condensed Consolidated Statements of Cash Flows for the quarters ended 
                 ended June 28, 2008 and June 30, 2007 | 5   
|Unaudited Condensed Consolidated Statements of Stockholders' Equity for the quarter
          ended June 28, 2008                        | 6   
|Notes to Unaudited Condensed Consolidated Financial Statements                                                                           | 7   
|Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations                                             | 17  
|Item 3.Quantitative and Qualitative Disclosures About Market
Risk                                                                        | 24  
|Item 4.Controls and
Procedures                                                                                                           | 25  
|                                                                                                                                         |     
|PART II. OTHER INFORMATION                                                                                                               |     
|Item 1.Legal Proceedings                                                                                                                 | 26  
|Item 1A.Risk Factors                                                                                                                     | 27  
|Item 2.Unregistered Sales of Equity Securities and Use of
Proceeds                                                                       | 27  
|Item 3.Defaults Upon Senior Securities                                                                                                   | 27  
|Item 4.Submission of Matters to a Vote of Security Holders                                                                               | 27  
|Item 5.Other Information                                                                                                                 | 27  
|Item 6.Exhibits                                                                                                                          | 28  
|                                                                                                                                         |     

3

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PART I
                  FINANCIAL INFORMATION

Item 1.  Financial Statements

ZILOG, INC.

                    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                          (in millions, except per share data)

|                                                              |  |   | Three Months Ended
|------------------------------------------------------------- |  | - | ------------------
|                                                              |  |   | June 28,          
|                                                              |  |   | 2008              
|Net sales                                                     |  | $ | 18,154            
|Cost of sales                                                 |  |   | 9,604             
|Gross margin                                                  |  |   | 8,550             
|                                                              |  |   |                   
|Operating expenses:                                           |  |   |                   
|Research and development                                      |  |   | 3,931             
|Selling, general and administrative                           |  |   | 5,641             
|Special charges and credits                                   |  |   | 590               
|Amortization of intangible assets                             |  |   | 208               
|Total operating expenses                                      |  |   | 10,370            
|                                                              |  |   |                   
|Operating loss                                                |  |   | (1,820)           
|                                                              |  |   |                   
|Other income:                                                 |  |   |                   
|Other income (expense)                                        |  |   | 111               
|Interest income                                               |  |   | 70                
|Loss before provision for income taxes                        |  |   | (1,639)           
|Provision for income taxes                                    |  |   | 102               
|Net loss                                                      |  | $ | (1,741)           
|                                                              |  |   |                   
|Basic and diluted net loss per share                          |  | $ | (0.10)            
|                                                              |  |   |                   
|Shares used in computing basic and diluted net loss per share |  |   | 16,948            

See accompanying notes to unaudited condensed consolidated financial statements.

4

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ZILOG, INC.

                     UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

                                      (in millions)

|                                                                     |  |   | June 28, |  |   | March 31,
|-------------------------------------------------------------------- |  | - | -------- |  | - | ---------
|                                                                     |  |   | 2008     |  |   | 2008     
|ASSETS                                                               |  |   |          |  |   |          
|Current assets:                                                      |  |   |          |  |   |          
|Cash and cash equivalents                                            |  | $ | 17,829   |  | $ | 16,625   
|Accounts receivable, less allowance for doubtful accounts of $139 at |  |   |          |  |   |          
|June 28, 2008 and $145 at March 31, 2008                             |  |   | 7,435    |  |   | 6,834    
|Inventory                                                            |  |   | 8,703    |  |   | 8,413    
|Deferred tax assets                                                  |  |   | 263      |  |   | 263      
|Prepaid expenses and other current assets                            |  |   | 1,710    |  |   | 1,663    
|Total current assets                                                 |  |   | 35,940   |  |   | 33,798   
|                                                                     |  |   |          |  |   |          
|Long term investments                                                |  |   | 1,500    |  |   | 1,925    
|Property, plant and equipment, net                                   |  |   | 8,549    |  |   | 6,604    
|Goodwill                                                             |  |   | 2,211    |  |   | 2,211    
|Intangible assets, net                                               |  |   | 2,320    |  |   | 2,528    
|Other assets                                                         |  |   | 768      |  |   | 774      
|Total assets                                                         |  | $ | 51,288   |  | $ | 47,840   
|                                                                     |  |   |          |  |   |          
|LIABILITIES AND STOCKHOLDERS' EQUITY                                 |  |   |          |  |   |          
|Current liabilities:                                                 |  |   |          |  |   |          
|Short term debt                                                      |  | $ | 1,385    |  | $ | 720      
|Accounts payable                                                     |  |   | 8,886    |  |   | 7,258    
|Current liability - license agreements                               |  |   | 1,422    |  |   | 525      
|Income taxes payable                                                 |  |   | 391      |  |   | 535      
|Accrued compensation and employee benefits                           |  |   | 3,389    |  |   | 2,444    
|Other accrued liabilities                                            |  |   | 2,407    |  |   | 2,094    
|Deferred income on shipments to distributors                         |  |   | 5,450    |  |   | 5,867    
|Total current liabilities                                            |  |   | 23,330   |  |   | 19,443   
|                                                                     |  |   |          |  |   |          
|Deferred tax liabilities                                             |  |   | 263      |  |   | 263      
|Other long term liabilities - license agreements                     |  |   | 1,597    |  |   | 592      
|Other non-current tax liabilities                                    |  |   | 717      |  |   | 663      
|Total liabilities                                                    |  |   | 25,907   |  |   | 20,961   
|                                                                     |  |   |          |  |   |          
|Stockholders' equity:                                                |  |   |          |  |   |          
|Common stock, $0.01 par value; 60.0 million shares authorized:       |  |   |          |  |   |          
|16.9 million shares issued and outstanding                           |  |   |          |  |   |          
|at June 28, 2008 and March 31, 2008, respectively                    |  |   | 185      |  |   | 185      
|Additional paid-in capital                                           |  |   | 126,081  |  |   | 125,838  
|Treasury stock                                                       |  |   | (7,456)  |  |   | (7,456)  
|Other comprehensive income                                           |  |   | 102      |  |   | 102      
|Accumulated deficit                                                  |  |   | (93,531) |  |   | (91,790) 
|Total stockholders' equity                                           |  |   | 25,381   |  |   | 26,879   
|Total liabilities and stockholders' equity                           |  | $ | 51,288   |  | $ | 47,840   

See accompanying notes to unaudited condensed consolidated financial statements.

5

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ZILOG, INC.

               UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                    (in millions)

|                                                                        |   | Three Months Ended
|----------------------------------------------------------------------- | - | ------------------
|                                                                        |   | June 28,          
|                                                                        |   | 2008              
|Cash Flows from Operating Activities:                                   |   |                   
|Net loss                                                                | $ | (1,741)           
|Adjustments to reconcile net loss to net cash provided by               |   |                   
|(used in) operating activities:                                         |   |                   
|Depreciation and other amortization                                     |   | 844               
|Loss (gain) on disposition of operating assets                          |   | (31)              
|Stock-based compensation                                                |   | 435               
|Amortization of fresh-start intangible assets                           |   | 208               
|Changes in operating assets and liabilities:                            |   |                   
|Accounts receivable, net                                                |   | (601)             
|Inventory                                                               |   | (290)             
|Prepaid expenses and other current and non-current assets               |   | (40)              
|Accounts payable                                                        |   | 1,628             
|Accrued compensation and employee benefits                              |   | 945               
|Deferred income on shipments to distributors                            |   | (417)             
|Accrued and other current and non-current liabilities                   |   | (513)             
|Net cash provided by (used in) operating activities                     |   | 427               
|                                                                        |   |                   
|Cash Flows from Investing Activities:                                   |   |                   
|Disposal of assets held for sale - MOD II property                      |   | -                 
|Redemption of long term investments                                     |   | 425               
|Capital expenditures                                                    |   | (359)             
|Net cash provided by investing activities                               |   | 66                
|                                                                        |   |                   
|Cash Flows From Financing Activities:                                   |   |                   
|Short term debt                                                         |   | 665               
|Proceeds from issuance of common stock under stock purchase plans       |   | 46                
|Net cash provided by financing activities                               |   | 711               
|                                                                        |   |                   
|Net increase in cash and cash equivalents                               |   | 1,204             
|Cash and cash equivalents at beginning of period                        |   | 16,625            
|Cash and cash equivalents at end of period                              | $ | 17,829            
|                                                                        |   |                   
|Supplemental Disclosure of Non-Cash Investing and Financing Activities: |   |                   
|Purchase of a development license through a long term payment           |   |                   
|arrangement                                                             | $ | 2,400             

See accompanying notes to unaudited condensed consolidated financial statements.

5

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ZILOG, INC.

               UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                    (in thousands)



|                                                    |  | Common Stock |  |   | Additional
Paid-in |  |   | Treasury |  |   | Other
Comprehensive |  |   | Accumulated |  |   | Total
Stock-
holders'
|--------------------------------------------------- |  | ------------ |  | - | ------------------ |  | - | -------- |  | - | ------------------- |  | - | ----------- |  | - | ---------------------
|                                                    |  | Shares       |  |   | Amount             |  |   | Capital  |  |   | Stock               |  |   | Income      |  |   | Deficit              
|Balance at March 31, 2007                           |  | 16,840       |  | $ | 183                |  | $ | 124,558  |  | $ | (7,174)             |  | $ | -           |  | $ | (82,820)             
|Adoption of FIN48                                   |  | -            |  |   | -                  |  |   | -        |  |   | -                   |  |   | -           |  |   | 568                  
|Issuance of common stock under stock option plans   |  | 48           |  |   | 1                  |  |   | 167      |  |   | -                   |  |   | -           |  |   | -                    
|Issuance of common stock under employee stock       |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   |                      
|purchase plan                                       |  | 20           |  |   | -                  |  |   | 71       |  |   | -                   |  |   | -           |  |   | -                    
|Stock-based compensation expense - director shares  |  | 5            |  |   | -                  |  |   | 28       |  |   | -                   |  |   | -           |  |   | -                    
|Stock-based compensation expense                    |  | -            |  |   | -                  |  |   | 381      |  |   | -                   |  |   | -           |  |   | -                    
|Comprehensive loss:                                 |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   |                      
|Other comprehensive income - defined benefit plan   |  | -            |  |   | -                  |  |   | -        |  |   | -                   |  |   | 81          |  |   | -                    
|Net loss                                            |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   | (3,048)              
|Net loss and comprehensive loss                     |  | -            |  |   | -                  |  |   | -        |  |   | -                   |  |   | -           |  |   |                      
|Balance at June 30, 2007                            |  | 16,913       |  | $ | 184                |  | $ | 125,205  |  | $ | (7,174)             |  | $ | 81          |  | $ | (85,301)             
|                                                    |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   |                      
|Balance at March 31, 2008                           |  | 16,923       |  | $ | 185                |  | $ | 125,838  |  | $ | (7,456)             |  | $ | 102         |  | $ | (91,790)             
|Issuance of common stock under stock option plans   |  | 3            |  |   | -                  |  |   | 11       |  |   | -                   |  |   | -           |  |   | -                    
|Issuance of common stock under employee stock       |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   |                      
|purchase plan                                       |  | 13           |  |   | -                  |  |   | 35       |  |   | -                   |  |   | -           |  |   | -                    
|Stock-based compensation expense - directors shares |  | 9            |  |   | -                  |  |   | 29       |  |   | -                   |  |   | -           |  |   | -                    
|Stock-based compensation expense                    |  | -            |  |   | -                  |  |   | 168      |  |   | -                   |  |   | -           |  |   | -                    
|Comprehensive loss:                                 |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   |                      
|Net loss                                            |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   | (1,741)              
|Total comprehensive loss                            |  | -            |  |   | -                  |  |   | -        |  |   | -                   |  |   |             |  |   |                      
|Balance at June 28, 2008                            |  | 16,948       |  | $ | 185                |  | $ | 126,081  |  | $ | (7,456)             |  | $ | 102         |  | $ | (93,531)             

See accompanying notes to unaudited condensed consolidated financial statements.

7

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ZILOG, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.	BASIS OF PRESENTATION

The accompanying interim financial information is unaudited.  In the opinion of ZiLOG, Inc.'s ("ZiLOG" or
the "Company") management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of
interim results have been included. The results for interim periods are not necessarily indicative of results to be expected for the full fiscal year.
These unaudited condensed consolidated financial statements and notes should be read in conjunction with the Company's annual
consolidated financial statements and notes thereto contained in the Company's 2008 Annual Report filed on Form 10-K (File Number 001-13748)
for the fiscal year ended March 31, 2008, filed on June 30, 2008 with the Securities and Exchange Commission.

The Company's fiscal year ends March 31 with interim results based on fiscal quarters of approximately thirteen
weeks in duration ending on the closest Saturday to each calendar quarter end, with the exception of the fiscal fourth quarter, which ends on
March 31.  Certain reclassifications have been made to prior-period balances to present the consolidated financial statements on a consistent
basis with the current year presentation. Any reference to year pertains to the fiscal year unless otherwise indicated. The operating results for
any period are not necessarily indicative of results for any subsequent period or the full fiscal year.

The condensed consolidated balance sheet at March 31, 2008 was derived from audited financial statements at that date, but does not
include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial
statements.
NOTE 2.  	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company's significant accounting policies is described in its Annual Report for the 2008 fiscal year ended March 31,
2008, filed on Form 10-K with the Securities and Exchange Commission on June 30, 2008. The Company's significant accounting policies
remain unchanged from those disclosed on Form 10-K for the fiscal year ended March 31, 2008, except for the following:
Adoption of Accounting Standards. Effective April 1, 2008, the Company adopted SFAS No. 159
"The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). The Company did not elect
to adopt the fair value option under this pronouncement which permits entities to choose to measure many financial instruments and certain
other items at fair value on a contract by contract basis.

Effective April 1, 2008, the Company adopted SFAS No. 157, "Fair Value Measurements" ("SFAS
No. 157"). In February 2008, the Financial Accounting Standards Board ("FASB") issued Staff Position
No. FAS 157-2, "Effective Date of FASB Statement No. 157," which provides a one-year deferral of the effective date of
SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial
statements at fair value at least annually. Therefore, the Company has adopted the provisions of SFAS No. 157 with respect to its
financial assets and liabilities only. SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally
accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under SFAS No. 157 as
the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure
fair value under SFAS No. 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard
describes a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value:

|•    Level 1  - | Quoted prices in active markets for identical assets or liabilities;                                                                                                                                                                                                                                                                       
|--------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|•    Level 2  - | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted
prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities; and

8

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|•    Level 3  - | Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
|--------------- | -----------------------------------------------------------------------------------------------------------------------------------------------

In accordance with SFAS 157, the following table represents the Company's fair value hierarchy for its financial assets (cash
equivalents and available for sale investments) as of June 28, 2008 (in thousands):

|                                  | June 28, 2008      
|--------------------------------- | -------------------
|                                  | Fair Value         
|Money market funds                | $            12,589
|Commercial paper                  | 296                
|Auction rate preferred securities | 1,500              
|Total                             | $            14,385

Since February 2008, due to various factors including the tightening of liquidity in the financial market, regularly held auctions for Auction
Rate Preferred Securities ("ARPS"), have been unsuccessful. Following the failure of these auctions, the Company has received
$2.5 million from redemptions of its ARPS. The remaining ARPS balance of $1.5 million
as of June 28, 2008, has been classified as long-term investments and accrues interest pending their redemption or sale.

In determining fair value, the Company uses various valuation techniques, including market and income approaches to value available-for-sale
investments.  The availability of observable inputs can vary from instrument to instrument and to the extent that valuation is based on
inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. The degree of judgment
exercised by the Company's management in determining fair value is greatest for instruments categorized in Level 3. All of the Company's ARPS
have AAA credit ratings, are 100% collateralized and continue to pay interest in accordance with their contractual terms. Additionally, the issuers
reported collateralized asset value ranges which exceed the value of ARPS held by the Company by 200 to 300 percent. Accordingly, the
remaining ARPS balance of $1.5 million is categorized as Level 2 for fair value measurement under FAS 157 and has been recorded at full par
value on the consolidated balance sheet as of June 28, 2008. The Company currently believes the ARPS values are not impaired and as such,
no impairment has been recognized against the investment. If the issuers are unable to successfully close future auctions and their credit rating
deteriorates, the Company may be required to record an impairment charge against the value of its ARPS.

NOTE 3.	INVENTORY

Inventories are stated at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market. Provisions, when required,
are made to reduce inventory values from cost to their estimated net realizable values. It is possible that estimates of net realizable value can
change in the short-term. Inventory reserves for excess or obsolete inventory are released only upon sale, scrap or other disposition of the
reserved inventory. Inventories, net of provisions, consist of the following (in thousands):

|                 |  |   | June 28, |  |  |   | March 31,
|---------------- |  | - | -------- |  |  | - | ---------
|                 |  |   | 2008     |  |  |   | 2008     
|Raw materials    |  | $ | 392      |  |  | $ | 447      
|Work-in-progress |  |   | 6,433    |  |  |   | 5,924    
|Finished goods   |  |   | 1,878    |  |  |   | 2,042    
|Inventory, net   |  | $ | 8,703    |  |  | $ | 8,413    

9

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NOTE 4.	SPECIAL CHARGES AND CREDITS

The components of special charges and credits are as follows (in thousands):

|                                                   |  |   | Three Months Ended
|-------------------------------------------------- |  | - | ------------------
|                                                   |  |   | June 28,          
|                                                   |  |   | 2008              
|Restructuring of operations:                       |  |   |                   
|Engineering consolidation severance                |  |   |                   
|and termination costs                              |  | $ | 19                
|Reimbursement of retirement benefits - Philippines |  |   |                   
|defined benefit plan                               |  |   | -                 
|Outsourcing costs - test operations                |  |   | 571               
|MOD II maintenance and selling costs               |  |   | -                 
|Professional fees for debt restructuring           |  |   | -                 
|Total special charges and credits                  |  | $ | 590               

As part of the Company's ongoing efforts to reduce costs and streamline activities, in November 2007, the Company initiated a plan to
outsource its production test operations currently performed in its Philippines facility to third parties. Previously, the Company also reorganized
certain of its sales offices, relocated its corporate headquarters to a new facility in San Jose, California in July 2007 and consolidated certain
research and development activities in April 2007 including the transfer of certain activities from its Shanghai, China and Seattle, Washington
facilities to its San Jose, California and Meridian, Idaho facilities.

During the three months ended June 28, 2008 and June 30, 2007, the Company incurred $0.6 million and $0.4 million, respectively, in
special charges.  Special charges of $0.6 million for the three months ended June 28, 2008, include severance and other costs related to the
Company's outsourcing activities.

Special charges of $0.4 million for the three months ended June 30, 2007 include severance and termination costs associated with the
consolidation of its research and development activities, MOD II maintenance and selling costs partially offset by reimbursements from the
Company's Philippines defined benefit plan.

The following table summarizes activity in accrued special charges which is included in other accrued liabilities on the condensed
consolidated balance sheets (in thousands):

|                          |  |   | Accrued
|------------------------- |  | - | -------
|                          |  |   | Special
|                          |  |   | Charges
|Balance at March 31, 2008 |  | $ | 489    
|Accruals                  |  |   | 139    
|Cash payments             |  |   | -      
|Balance at June 28, 2008  |  | $ | 628    

NOTE 5.	GEOGRAPHIC AND SEGMENT INFORMATION

Segment Information. The Company's business is comprised of one operating segment. The Company engages primarily in
the design, development, manufacture and marketing of semiconductor products. The Company sells its products to distributors and direct
customer accounts including original equipment manufacturers ("OEMs") and original design manufacturers ("ODMs") in
a broad range of market segments. The Company's operations outside the United States consist of a final test and global support facility in the
Philippines and sales and support and design

10

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centers in certain foreign countries. Domestic operations are responsible for the design,
development and the coordination of production planning and shipping to meet worldwide customer commitments. The Philippine facility is
reimbursed in relation to its value added with respect to test operations and other functions performed, and certain foreign sales offices receive
a commission on export sales within their territory. Accordingly, for financial statement purposes, it is not meaningful to segregate sales or
operating profits for the test and foreign sales office operations.

The Company has two broad current product categories based on product technologies, referred to as new products and 8-bit classic
products.

Sales by Product Category. The following table represents the Company's net sales by product category for each of the
periods indicated (in thousands):

|                               |  |   | Three Months Ended
|------------------------------ |  | - | ------------------
|                               |  |   | June 28,          
|                               |  |   | 2008              
|Net sales by product category: |  |   |                   
|New Products                   |  | $ | 11,064            
|8-bit classic products         |  |   | 7,090             
|Total Net Sales                |  | $ | 18,154            

The following table summarizes the Company's net sales by region and by channel (in thousands):

|                      |  |   | Three Months Ended
|--------------------- |  | - | ------------------
|                      |  |   | June 28,          
|                      |  |   | 2008              
|Net sales by region:  |  |   |                   
|Americas              |  | $ | 5,645             
|Asia                  |  |   | 9,616             
|Europe                |  |   | 2,893             
|Total net sales       |  | $ | 18,154            
|                      |  |   |                   
|Net sales by channel: |  |   |                   
|Direct                |  | $ | 9,102             
|Distribution          |  |   | 9,052             
|Total net sales       |  | $ | 18,154            

Major customers:  During the quarter ended June 28, 2008, one distributor and two customers each individually accounted
forgreater than 10% of the Company's total net sales.  The distributor and two customers accounted for approximately 24%,
16% and 11% of net sales, respectively.

During the quarter ended June 30, 2007, two customers accounted for greater than 10%
of the Company's total net sales.  These two customers, including one distributor,
accounted for approximately 25% and 14% of net sales, respectively.

NOTE 6.      STOCK, OPTIONS AND STOCK-BASED COMPENSATION

Stock-based compensation. The Company has a stock-based compensation program that includes non-statutory stock
option awards and restricted stock awards ("RSAs").  Stock options are generally time-based, vesting 25% on the first anniversary of
the grant-date and monthly thereafter over the next three years and expire ten years from the grant-date. As of June 28, 2008, the Company
had 2,132,909 shares available for grant.

Additionally, the Company has an Employee Stock Purchase Plan ("ESPP") that allows employees to purchase shares of
common stock at 85% of the fair market value at the lower of either the date of enrollment or the date of

11

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purchase. In addition to the shares
available for issuance under the stock option and restricted stock plans, the
Company had approximately 957,075 shares of common stock reserved for future issuance under its ESPP plan as of June 28, 2008.

The Company records stock-based compensation in accordance with the provisions of Statement of Financial Standard No.123(R),
"Share-Based Payment" ("SFAS 123R"), which establishes valuation and accounting resulting in the Company's
recognition of expense related to the fair value of its stock-based compensation awards.

During each of the quarters ended June 28, 2008 and June 30, 2007, the Company recorded $0.4 million in stock compensation expense
which includes the cancellation of certain previously expensed stock options.
Included in the Company's stock compensation expense for the quarter ended June 28, 2008 is
$0.2 million of accrued stock compensation expense associated with its new employee incentive plans which
are stock-based for certain employees.

The following table sets forth the total stock-based compensation expense resulting from  equity plans and incentive programs included in
the Company's unaudited condensed consolidated statements of operations (in thousands):

|                                       |  |  |  |  |  | Three Months Ended
|-------------------------------------- |  |  |  |  |  | ------------------
|                                       |  |  |  |  |  |                   
|                                       |  |  |  |  |  |                   
|Cost of sales                          |  |  |  |  |  | $                 
|Research and development               |  |  |  |  |  |                   
|Selling, general and administrative    |  |  |  |  |  |                   
|Total stock-based compensation expense |  |  |  |  |  | $                 

The fair value of stock-based awards expense resulting from equity plans was estimated on the date of grant using the Black-Scholes
valuation pricing model with the following weighted-average assumptions:

|Stock Options                                       |  |   | Three Months Ended
|--------------------------------------------------- |  | - | ------------------
|                                                    |  |   | June 28,          
|                                                    |  |   | 2008              
|Expected life (in years)                            |  |   | 4.77              
|Interest rate                                       |  |   | 3.3%              
|Volatility                                          |  |   | 49.08%            
|Dividend yield                                      |  |   | -                 
|Weighted-average per share fair value at grant date |  | $ | 3.43              



|Employee Stock Purchase Plan                        |  |   | Three Months Ended
|--------------------------------------------------- |  | - | ------------------
|                                                    |  |   | June 28,          
|                                                    |  |   | 2008              
|Expected life (in years)                            |  |   | 0.6               
|Interest rate                                       |  |   | 1.40%             
|Volatility                                          |  |   | 35.68%            
|Dividend yield                                      |  |   | -                 
|Weighted-average per share fair value at grant date |  | $ | 2.67              

The computation of expected volatility for the quarters ended June 28, 2008 and June 30, 2007 is based on a blended calculation of
historical and market-based implied volatility. The computation of expected life is based on a combination of historical and expected exercise
patterns. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of
grant.

12

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Stock option activity for the quarter ended June 28, 2008, is as follows (dollars in thousands, except
weighted average exercise price):

|                                        |  |  |         |  |  |   |                |  |  |  | Weighted-        |  |  |   |                
|--------------------------------------- |  |  | ------- |  |  | - | -------------- |  |  |  | ---------------- |  |  | - | ---------------
|                                        |  |  |         |  |  |   | Weighted-      |  |  |  | Average          |  |  |   |                
|                                        |  |  |         |  |  |   | Average        |  |  |  | Remaining        |  |  |   | Aggregate      
|                                        |  |  | Shares  |  |  |   | Exercise Price |  |  |  | Contractual Term |  |  |   | Intrinsic Value
|Outstanding at March 31, 2008           |  |  | 2,082.8 |  |  | $ | 4.89           |  |  |  |                  |  |  |   |                
|Grants                                  |  |  | 25.8    |  |  |   | 3.43           |  |  |  |                  |  |  |   |                
|Exercises                               |  |  | (2.8)   |  |  |   | 2.70           |  |  |  |                  |  |  |   |                
|Forfeitures or expirations              |  |  | (19.1)  |  |  |   | 7.07           |  |  |  |                  |  |  |   |                
|Outstanding at June 28, 2008            |  |  | 2,086.6 |  |  | $ | 4.85           |  |  |  | 7.82             |  |  | $ | 86.9           
|                                        |  |  |         |  |  |   |                |  |  |  |                  |  |  |   |                
|Outstanding Vested and Expected to Vest |  |  |         |  |  |   |                |  |  |  |                  |  |  |   |                
|at June 28, 2008                        |  |  | 1,867.3 |  |  | $ | 5.00           |  |  |  | 7.67             |  |  | $ | 80.6           
|                                        |  |  |         |  |  |   |                |  |  |  |                  |  |  |   |                
|Exercisable at June 28, 2008            |  |  | 880.3   |  |  | $ | 6.47           |  |  |  | 6.23             |  |  | $ | 39.6           

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between the Company's
closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by
the option holders had all option holders exercised their options on June 28, 2008. This amount will change based on fluctuations of the fair
market value of the Company's stock. The total intrinsic value of options vested and expected to vest is approximately $0.1 million at June 28, 2008.

There were 2,791 stock option exercises

No income tax benefit was realized from stock option exercises during the quarters ended June 28, 2008 and June 30, 2007. In accordance
with SFAS 123R, the Company presents excess tax benefits from the exercise of stock options, if any, as financing cash flows rather than
operating cash flows.

As of June 28, 2008, $1.4 million of total unrecognized compensation costs related to stock options is expected to be recognized over a
weighted-average remaining period of 2.9 years.  The total unrecognized compensation cost related to restricted shares granted as of June 28,
2008 is $0.2 million, which is expected to be recognized over a weighted-average remaining period of 0.7 years.

NOTE 7.	CONTINGENCIES

On August 11, 2005, Microchip Technology, Inc. ("Microchip") filed a patent infringement claim against the Company
in the U.S. District Court of Arizona (case number CV05-2406-PHX-MHM). Microchip alleges that the Company has infringed, and currently
infringes, its patents numbered 5,847,450, 6,696,316 and 6,483,183. Microchip claims that unspecified products of the company, including the
Z8 Encore! XP 4K Series of products, infringe these patents and is seeking preliminary and permanent injunctive relief, unspecified
damages and costs, including attorneys' fees. The Company filed a response to the claims on September 15, 2005 generally denying the
claims and challenging the validity of the patents. On January 10, 2006, the Company filed a request for patent re-examination with the U.S.
PTO, which was granted in February and March 2006 for all 3 patents. On April 11, 2008, the Company received a notice that all of Microchip's
claims under these three patents have been rejected by the U.S. PTO. Notwithstanding this favorable ruling, because Microchip has a right to
appeal the patent office's decision, the Company does not believe it is feasible to predict or determine the outcome or resolution of this litigation
at this time. The Company believes it has meritorious defenses and will defend itself vigorously against these claims. The Company may incur
substantial expenses in its defense against these claims. In the event of a determination adverse to the Company, it may incur substantial
monetary liabilities and be required to change our

13

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business practices. Either of these could have a material adverse effect on its financial
position, results of operations and/or cash flows.

On December 1, 2006, the Company filed a patent infringement claim against Altera Corporation ("Altera") and Actel
Corporation ("Actel")  in the U.S. District Court of California (civil docket number 4:06-cv-07388-SBA). The Company alleges
that Altera and Actel have infringed, and currently infringe, its patent numbered 4,670,749 which the Company believes to be the fundamental
patent for programmable logic. The Company claims that Altera's and Actel's products infringe these patents and is seeking unspecified
damages and costs, including attorneys' fees.  Actel settled their case with the Company on June 11, 2007 for an undisclosed
amount.  The case against Altera is currently on stay pending reexamination of the patent in suit.

On May 23, 2008, Altera Corporation ("Altera") filed a patent infringement claim against the Company in the U.S. District Court of
Texas (civil action number 2:08-CV-218). Altera alleges that the Company has infringed, and currently infringes, its patents numbered
6,097,211, 6,147,511 and 6,314,550. Altera claims that unspecified products of the Company's, including its eZ80 and Zneo series of
products, infringe these patents and is seeking preliminary and permanent injunctive relief, unspecified damages and costs, including attorneys'
fees. The Company does not believe it is feasible to predict or determine the outcome or resolution of this litigation at this time. The Company
will defend itself vigorously against these claims. The Company may incur substantial expenses in its defense against these claims. In the event
of a determination adverse to the Company, it may incur substantial monetary liabilities, and be required to change its business practices. Either
of these could have a material adverse effect on its financial position, results of operations or cash flow.

The Company is participating in other litigation and responding to other claims arising in the ordinary course of business.  The Company
intends to defend itself vigorously in these matters.  The Company's management believes that it is unlikely that the outcome of these matters
will have a material adverse effect on the Company's financial statements, although there can be no assurance in this regard.

From time to time the Company has agreed to indemnify and hold harmless certain customers for potential allegations of infringement of
intellectual property rights and patents arising from the use of its products. During the ordinary course of business, in certain limited
circumstances, the Company has agreed to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally
parties with which the Company has commercial relations, in connection with certain intellectual property infringement claims by any third party
with respect to its products and services. The Company has indemnification arrangements that limit its net contingent obligation to pay for
defense costs, if any, up to a maximum of $500,000. To date, there have not been any costs incurred in connection with such indemnification
arrangements; therefore, there is no accrual of such amounts at December 29, 2007. The Company discloses indemnification liabilities
according to FASB Staff Position FIN45-1, "Accounting for Intellectual Property Infringement Indemnifications under FAS Interpretation
No. 45." Under FAS No. 5, "Loss Contingencies," a claim would be accrued when a loss is probable and the
amount can be reasonably estimated. At June 28, 2008, no such amounts are accrued.

In connection with the lease in July 2007 for its new corporate headquarters located in San Jose, California, the Company established an
Irrevocable Letter of Credit in the amount of $0.3 million with Wells Fargo Bank. This letter of credit is in lieu of a security deposit with theist San
Jose facility landlord. The letter of credit initially expired in April 2008, but has been automatically extended, without written amendment, and
shall be automatically extended in each succeeding calendar year up to April 2012, and then to, but not beyond a final expiration date of
October 31, 2012.

14

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NOTE 8.      SHORT-TERM DEBT

During the fiscal year ended March 31, 2008, the Company entered into a short term financing agreement totaling $1.4 million. Borrowings
on the agreement bear interest at a rate per annum equal, at the Company's option, to the Lender's stated prime rate or LIBOR, plus 1.75%
which was 4.2% at June 28, 2008. As of June 28, 2008, the Company had $1.4 million of borrowings outstanding under this agreement and
separately the Company had $0.3 million of standby letters of credit, respectively, issued to vendors.  The Company had no borrowings or
letters of credit outstanding as of June 30, 2007.

Additionally in April 2008, the Company entered into a three-year agreement to license certain technologies to further develop
its 32-bit ARM core based technology. The total cost of this agreement was $2.4 million and the unpaid portion of $2.2 million
has been included in short and long-term liabilities on the Company's consolidated balance sheet as of June 28, 2008.

NOTE 9.	INCOME TAXES

The Company adopted the provisions of Financial Standards Accounting Board Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109 ("FIN48") effective April 1, 2007. In connection with the adoption of FIN
48, the Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as
all open tax years in these jurisdictions.

As of June 28, 2008, the total amount of unrecognized tax benefits was approximately $5.2 million of which $4.6 million is recorded as a
deferred tax asset that is fully offset by a valuation allowance and $0.7 million which if recognized, would affect the Company's effective tax rate.
The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations.
Management assesses the Company's tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the
countries in which the Company does business.

A valuation allowance is required to be recorded if in management's judgment, based on available evidence, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.  Based on available evidence, management has concluded that a
valuation allowance is necessary to reduce the net deferred tax asset.  Accordingly, deferred tax assets have been recognized only to the
extent of deferred tax liabilities.

The Company recognizes interest in accordance with Paragraph 15 of FIN48 and recognizes penalties in accordance with Paragraph 16 of
FIN48 which are classified as part of income taxes.  As of June 28, 2008, the Company had approximately $0.1 million of accrued interest and
penalties related to uncertain tax positions.

The Company is subject to taxation in the United States and various states and foreign jurisdictions.  There are no ongoing examinations by
taxing authorities at this time.  The Company's various tax years beginning in 2001 through 2007 remain open in various taxing
jurisdictions.

During the quarter ended June 28, 2008, the Company's income tax provision was $0.1 million which primarily reflects provisions for taxes
in certain profitable foreign jurisdictions. During the quarter ended June 30, 2007, the Company's income tax provision was $0.5 million which
primarily reflects amortization of deferred charges and provisions for taxes in certain profitable foreign jurisdictions.

The Company provides for income tax expense in foreign jurisdictions where its foreign subsidiaries operations generate profits that are
taxable.  The Company's income tax expense reflects the estimated annual effective tax rate at that time based on projections of operations.
Tax authorities may challenge the allocation of profits between the Company's subsidiaries and may challenge certain tax benefits claimed on
its tax returns, and the Company may not prevail in any such challenge.  If the Company were not to prevail, it could be subject to higher
tax rates or lose certain tax benefit that could result in a higher tax rate.

15

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NOTE 10.   RETIREMENT AND BENEFIT PLANS

U.S. 401(k) retirement plan: The Company has an employee savings plan that qualifies as a deferred salary arrangement under
Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). Under the 401(k) Plan, participating U.S. employees may defer a
portion of their pretax earnings, up to the Internal Revenue Service annual contribution limit. The Company may make matching contributions on
behalf of each participating employee in an amount equal to 100% of the participant's deferral contribution, up to 1.5% of the participant's
compensation on a quarterly basis. The Company may also make additional discretionary contributions to the 401(k) Plan. Matching
contributions to the 401(k) Plan were less than $0.1 million for the three months ended June 28, 2008 and the three months ended June 30,
2007, respectively. There were no discretionary contributions made in the three months ended June 28, 2008 and the three months ended June
30, 2007, respectively.

Philippine defined benefit plan: The Company's Philippines subsidiary maintains a defined benefit pension plan for local
employees, which is consistent with local statutes and practices. The Company has adopted SFAS 158, which supersedes the previous
accounting under SFAS 87. As of June 28, 2008 based on its actuarial report as of March 31, 2008, the pension plan was over-funded by
approximately $0.1 million which is classified as other assets on the consolidated balance sheet.  The over-funded position generally reflects a
decline in the number of employees who are eligible for entitlements under the plan, coupled with increased returns on the plan assets that are
greater than the increase in the employees' entitlement liabilities.  During the quarter ended June 28, 2008, the net periodic benefit costs
were immaterial.

During fiscal 2009, the Company expects to receive approximately $0.7 million of plan assets as entitlement benefits for terminated
employees related to the Company's restructuring and outsourcing activities in its Philippines operations.

16

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ITEM 2.	 Management's Discussion and Analysis of Financial Condition and Results of Operations

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors including
those set forth in the section entitled "Risk Factors" in our Form 10-K for the year ended March 31, 2008 and in other sections of this
quarterly report.

Overview

The following is management's discussion and analysis of financial condition and results of our operations and those of our
subsidiaries for the quarters ended June 28, 2008 and June 30, 2007.  This discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements and notes thereto included elsewhere herein and in our 2008 annual report on
Form 10-K.  Management's discussion and analysis provides information concerning our business environment, consolidated results of
operations and liquidity and capital resources.

Our fiscal year ends on March 31 with interim results based on fiscal quarters of approximately thirteen weeks in duration ending on
the closest Saturday to each calendar quarter end, with the exception of the fourth quarter, which ends on March 31.  The
operating results for any interim period are not necessarily indicative of results for any subsequent period or the full fiscal year.

Critical Accounting Estimates

Our critical accounting policies are disclosed in the Annual Report on Form 10-K for the year ended March 31, 2008 and have not
changed materially as of June 28, 2008, with the exception of the following:

Fair Value of Financial Instruments:

Effective April 1, 2008, the Company adopted SFAS No. 157, "Fair Value Measurements" ("SFAS
No. 157"). In February 2008, the Financial Accounting Standards Board ("FASB") issued Staff Position
No. FAS 157-2, "Effective Date of FASB Statement No. 157," which provides a one-year deferral of the effective date of
SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial
statements at fair value at least annually. Therefore, the Company has adopted the provisions of SFAS No. 157 with respect to its
financial assets and liabilities only. SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally
accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under SFAS No. 157 as
the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure
fair value under SFAS No. 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard
describes a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value:

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

In accordance with SFAS 157, the following table represents the Company's fair value hierarchy for its financial assets (cash
equivalents and available for sale investments) as of June 28, 2008 (in thousands):

17

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|                                  | June 28, 2008      
|--------------------------------- | -------------------
|                                  | Fair Value         
|Money market funds                | $            12,589
|Commercial paper                  | 296                
|Auction rate preferred securities | 1,500              
|Total                             | $            14,385

On an on-going basis, we evaluate our estimates and assumptions, including those related to sales returns, allowance for doubtful
accounts, inventory write-downs, asset impairments, stock-based compensation expense and deferred taxes.  We base our estimates on
historical trends and various other assumptions that we believe to be reasonable at the time the estimates are made.  Actual results could differ
from those estimates.  Please refer to the critical accounting estimates described in our Form 10-K for the 2008 fiscal year ended March 31,
2008, filed on June 30, 2008.

Reporting Segments

We conduct our business in one reportable segment to reflect the manner in which our chief operating decision-maker allocates
resources and assesses the performance of our business.

Results of Operations

O

|                      |  |   | Three Months Ended
|--------------------- |  | - | ------------------
|                      |  |   | June 28,          
|                      |  |   | 2008              
|Net sales by region:  |  |   |                   
|Americas              |  | $ | 5,645             
|Asia                  |  |   | 9,616             
|Europe                |  |   | 2,893             
|Total net sales       |  | $ | 18,154            
|                      |  |   |                   
|Net sales by channel: |  |   |                   
|Direct                |  | $ | 9,102             
|Distribution          |  |   | 9,052             
|Total net sales       |  | $ | 18,154            



|                               |  |   | Three Months Ended
|------------------------------ |  | - | ------------------
|                               |  |   | June 28,          
|                               |  |   | 2008              
|Net sales by product category: |  |   |                   
|New Products                   |  | $ | 11,064            
|8-bit classic products         |  |   | 7,090             
|Total Net Sales                |  | $ | 18,154            

18

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Key Metrics

Other key indices relevant in understanding our business and financial performance include the following metrics (unaudited):

|                                          |  |  | Three Months Ended
|----------------------------------------- |  |  | ------------------
|                                          |  |  | June 28,          
|                                          |  |  | 2008              
|Days sales outstanding                    |  |  | 37                
|Net sales to inventory ratio (annualized) |  |  | 8.4               
|Weeks of inventory at distributors        |  |  | 11                
|Current ratio                             |  |  | 1.5               

We calculate each of these key metrics based on annualized quarterly results of operations data and balance sheet data as of the end of
the period indicated. Each of these key metrics is described below:

Days sales outstanding, DSO, is a common metric used to analyze how quickly our customers pay us. This metric is influenced largely by
the timing of our customer billings, collections, and individual payment terms. At June 28, 2008, our DSO was 37 days as compared to 49 days
at June 30, 2007. This decrease in DSO is largely due to increased linearity of our shipments in the quarter ended June 28, 2008 versus the
comparable quarter a year ago, thus allowing a higher portion of customer receivables to be collected during the quarter in which they were
sold.

Net sales to inventory ratio is a metric we use to analyze how quickly our investment in inventories is recovered by our sales and is
calculated by dividing ending inventory into sales for the quarter annualized. This metric may not be comparable to other companies who use
inventory ratios to analyze inventory and is not the same as a typical inventory turns ratio. Our net sales to inventory ratio increased to 8.4 from
8.2 in the quarter ended June 28, 2008 compared to the quarter ended June 30, 2007 reflecting slightly higher inventory levels on significantly
higher sales.

Weeks of inventory at distributors measures how quickly our distributors sell the inventories that we sell to them.  We do not recognize
revenue on shipments to distributors until our distributors resell our products. Although our distributors in various regions of the world
maintain different inventory stocking levels, globally we maintain 10 to 13 weeks of inventories at our distributors.
Both actual inventory levels and the weeks of inventory at distributors decreased in the quarter reflecting generally lower inventory levels held
by our distributors.

Current ratio represents current assets divided by current liabilities and is commonly used to assess a company's liquidity. We use this ratio
to make spending determinations on discretionary items.  Our current ratio as of June 28, 2008 was 1.5 a decrease from 2.1 as of June 30,
2007. This decrease is primarily due to a decrease in cash which was used for working capital needs and the reclassification of our ARPS from
cash and cash equivalents to long-term investments, offset by a decline in deferred income on shipments to our distributors as their inventory
levels decreased.

Quarter Ended June 28, 2008 Compared to Quarter Ended June 30, 2007

Net Sales.  Net sales were $18.2 million for the quarter ended June 28, 2008, an increase of 8% as compared to net sales of $16.8
million for the quarter ended June 30, 2007.

Net sales of our new products which include our 32-bit Zatara, universal remote control solutions and 8-bit embedded flash microcontrollers
increased 24% to $11.1 million for the three months ended June 28, 2008 compared to $8.9 million for the three months ended June 30, 2007.
This increase was primarily driven by an increase in our 32-bit Zatara product sales for our new secured transactions microprocessors for the
point of sale market, an increase in sales of our remote control solutions reflecting continued customer expansion and existing customer growth
with new programs, including shipments of our new low power CrimzonTMproducts, partially offset by a decrease in our
embedded flash sales reflecting a reduction in sales to the consumer market.

19

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Net sales of our 8-bit classic products, consisting of our traditional Z8, Z80 and SCC products decreased by 10% to $7.1 million for the
quarter ended June 28, 2008, from $7.9 million for the quarter ended June 30, 2007, reflecting a decline in demand for certain consumer,
security and telecommunications applications and lower distribution resales into the broad based general purpose market including industrial
market applications. Compared to year ago levels, we have experienced a reduction in sales of certain security applications reflecting what we
believe is the impact of a slow down in the U.S. economy as it relates to the housing market and lower overall housing starts.

Gross Margin.  Cost of sales primarily represents manufacturing costs relating to wafer fabrication, package assembly, product
testing operations and logistics costs. Cost of sales fluctuates, depending on materials and services prices from our vendors, manufacturing
productivity, product mix, equipment utilization and depreciation. Gross margin as a percent of net sales was 47.1% for the quarter ended June
28, 2008 and 43.9% for the quarter ended June 30, 2007.  The gross margin increase was primarily due to overall higher volumes, improved
operating efficiencies and yields as well as reductions in wafer costs from our wafer foundry suppliers.

Research and Development Expenses.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses increased to $5.7 million for the quarter
ended June 28, 2008 from $4.9 million for the quarter ended June 30, 2007.  Both sales and marketing and general and administrative costs
increased reflecting costs to support new sales and marketing programs, legal and professional fees associated with our strategic alternatives
review and the incremental costs of our new employee incentive programs.

Special Charges and Credits.  Special charges and credits for the periods indicated were as follows (unaudited, in thousands):

|                                                   |  |   | Three Months Ended
|-------------------------------------------------- |  | - | ------------------
|                                                   |  |   | June 28,          
|                                                   |  |   | 2008              
|Restructuring of operations:                       |  |   |                   
|Engineering consolidation severance                |  |   |                   
|and termination costs                              |  | $ | 19                
|Reimbursement of retirement benefits - Philippines |  |   |                   
|defined benefit plan                               |  |   | -                 
|Outsourcing costs - test operations                |  |   | 571               
|MOD II maintenance and selling costs               |  |   | -                 
|Professional fees for debt restructuring           |  |   | -                 
|Total special charges and credits                  |  | $ | 590               

During the quarter ended June 28, 2008, special charges totaled $0.6 million representing costs associated with our test operations
outsource activities and costs associated with the consolidation of our engineering sites. During the quarter ended June 30, 2007, special
charges totaled $0.4 million representing costs associated with the consolidation of our engineering sites and MOD II maintenance costs and
selling costs, partially offset by reimbursements of retirement benefits from our Philippines defined benefit plan.

20

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Amortization of Intangible Assets.   Under the provisions of SFAS No. 142, "Goodwill and Other
Intangible Assets", goodwill and intangible assets with indefinite lives are not amortized, but are reviewed annually or more frequently if
impairment indicators arise.

We performed our annual impairment test of goodwill and intangible assets during the quarter ended March 31, 2008.  As of June 28, 2008,
there was no indication of impairment of our intangible assets' carrying value.

Separable intangible assets that are deemed to have defined lives have been recorded and continue to be amortized over their useful lives.
These intangible assets are being amortized utilizing the pattern-of-use method over their estimated useful lives of six years for current
technology and ten years for brand name.

The separable intangible assets identified in connection with fresh-start accounting and included in the unaudited condensed consolidated
balance sheet are as follows (in thousands):

|                                         |  |   | Current    |  |  |   | Brand |  |  |   |       
|---------------------------------------- |  | - | ---------- |  |  | - | ----- |  |  | - | ------
|                                         |  |   | Technology |  |  |   | Name  |  |  |   | Total 
|Gross carrying amount, recorded May 2002 |  | $ | 16,959     |  |  | $ | 9,243 |  |  | $ | 26,202
|Accumulated amortization                 |  |   | 16,926     |  |  |   | 6,956 |  |  |   | 23,882
|Book value at June 28, 2008              |  | $ | 33         |  |  | $ | 2,287 |  |  | $ | 2,320 

The anticipated remaining amortization schedule for these assets is as follows (in thousands):

|                            |  |   | Current    |  |  |   | Brand |  |  |   |      
|--------------------------- |  | - | ---------- |  |  | - | ----- |  |  | - | -----
|Fiscal Year                 |  |   | Technology |  |  |   | Name  |  |  |   | Total
|2009 - remaining 3 quarters |  | $ | 33         |  |  | $ | 560   |  |  | $ | 593  
|2010                        |  |   | -          |  |  |   | 680   |  |  |   | 680  
|2011                        |  |   | -          |  |  |   | 617   |  |  |   | 617  
|2012                        |  |   | -          |  |  |   | 430   |  |  |   | 430  
|Total                       |  | $ | 33         |  |  | $ | 2,287 |  |  | $ | 2,320

Interest and Other Income (Expense).  Interest income relates to interest earned on our cash and cash equivalents included in our
short-term investment portfolio and auction rate preferred securities.  Cash equivalents are primarily invested in money market funds and
high-grade commercial paper with maturities of 90 days or less. Interest income for the quarter ended June 28, 2008, was $0.1 million as compared
to $0.2 million for the quarter ended June 30, 2007

Income Taxes.  For the quarter ended June 28, 2008, our income tax provision reflects provisions for taxes in certain profitable
foreign jurisdictions.  For the quarter ended June 30, 2007, our income tax provision reflects the amortization of deferred charges and provisions
for taxes in certain profitable foreign jurisdictions.  The amortization of deferred charges is now complete and as such, no amortization charges
were recorded in the quarter ended June 28, 2008. We anticipate operating at a loss for U.S. tax purposes for the fiscal year ending March 31,
2009 however, we provide for income tax expense in foreign jurisdictions where the foreign subsidiaries' operations generate profits that are
taxable.

Deferred tax assets have been recorded net of valuation allowances. A valuation allowance is required to be recorded if in
management's judgment, and based on available evidence, it is more likely than not that some portion

21

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or all of the deferred tax assets will not
be realized.  Based on available evidence, we have concluded that a valuation allowance is necessary and have reduced our net deferred
tax assets to the extent of our deferred tax liabilities.

Liquidity and Capital Resources

As of June 28, 2008, we had $1.4 million of bank borrowings outstanding primarily reflecting borrowings
under a short term bank arrangement utilized to finance a three-year license agreement for engineering
development software. Approximately 75% of the total three-year cost is required to be paid in the first
seven months of the agreement beginning January 1, 2008. As of June 30, 2007, we had no debt or bank
borrowings outstanding. Additionally in April 2008, we entered into a three-year agreement to license
certain technologies to further develop our 32-bit ARM core based technology. The total cost of this
agreement was $2.4 million and the unpaid portion of $2.2 million has been included in short and long-term
liabilities on our consolidated balance sheet as of June 28, 2008.

widespread failed auctions.  Those failed auctions resulted in a loss of liquidity for sellers but did not constitute a default by the issuer of
the underlying security.  As of March 31, 2008 we held $3.9 million in ARPS and subsequently have received $2.4 million from
redemptions of our ARPS which have been included in cash and cash equivalents as of June 28, 2008.

We adopted SFAS No. 157 (SFAS 157), "Fair Value Measurements," on April 1, 2008. SFAS 157 establishes a fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into a three broad categories for disclosure to show
the extent and level of judgment used to estimate fair value measurements.  In determining fair value, we use various valuation
techniques, including market and income approaches to value available-for-sale investments.  The availability of observable inputs can vary
from instrument to instrument and to the extent that valuation is based on inputs that are less observable or unobservable in the market, the
determination of fair value requires more judgment. The degree of judgment exercised by our management in determining fair value is greatest
for instruments categorized in Level 3.  All of our ARPS have AAA credit ratings, are 100% collateralized and continue to pay interest in
accordance with their contractual terms. The issuers reported collateralized asset value ranges which exceed the value of ARPS held by us by
200 to 300 percent. Accordingly, our remaining ARPS balance of $1.5 million has been categorized as Level 2 for fair value measurement and
has been recorded at full par value on our consolidated balance sheet as of June 28, 2008. We believe the ARPS values are not impaired and
as such, no impairment has been recognized against the investment. If the issuers are unable to successfully close future auctions and their
credit rating continues to deteriorate, we may be required to record an impairment charge against the value of our ARPS holdings.

We believe that existing cash, cash equivalents and investments, together with any cash generated from operations will be sufficient to
meet normal operating requirements including capital expenditures for the next twelve months.

Cash Flows From Operating Activities.

Cash Flows From Investing Activities.

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expenditures primarily related to  our headquarter facility relocation.

Cash Flows From Financing Activities.  During the quarters ended June 28, 2008 and June 30, 2007, $0.7 million and $0.2
million in net cash was provided by financing activities, respectively.  During the quarter ended June 28, 2008, our financing activities includes
the receipt of cash under our short term financing arrangement of $0.7 million and $46,000 of proceeds from the issuance of common stock
under employee stock and option plans. During the quarter ended June 30, 2007, $0.2 million of cash was provided by proceeds from the
issuance of common stock under employee stock option and purchase plans.

Non-GAAP EBITDA Measure.  We present EBITDA amounts to reflect a non-GAAP measure of our liquidity.  EBITDA
reflects our earnings before interest, taxes, depreciation and amortization.  We believe the disclosure of such information helps investors more
meaningfully evaluate our liquidity position by the elimination of non-cash related items such as depreciation and amortization.  We believe that
our investor base regularly uses EBITDA as a measure of the liquidity of our business.   Our management uses EBITDA as a supplement to
cash flow from operations as a way to assess the cash generated from our business available for capital expenditures and debt service.
However, we recommend that investors carefully review the GAAP financial information included as part of our Quarterly Reports on Form 10-Q,
our Annual Reports on Form 10-K, and our quarterly earnings releases, compare GAAP financial information with the non-GAAP financial
results disclosed in our quarterly earnings releases and investor calls, and read the associated reconciliation.

Our EBITDA, reconciled to cash provided by (used in) operations (the most directly comparable measure of operating cash flows under
accounting principles generally accepted in the United States) for each period presented, is as follows (unaudited, in thousands):

|                                                    |  |   | Three Months Ended
|--------------------------------------------------- |  | - | ------------------
|                                                    |  |   | June 28,          
|                                                    |  |   | 2008              
|Reconciliation of net loss to EBITDA:               |  |   |                   
|Net loss                                            |  | $ | (1,741)           
|Depreciation and amortization                       |  |   | 1,052             
|Interest income                                     |  |   | (70)              
|Provision for income taxes                          |  |   | 102               
|EBITDA                                              |  | $ | (657)             
|                                                    |  |   |                   
|Reconciliation of EBITDA to net cash provided by    |  |   |                   
|(used in) operating activities:                     |  |   |                   
|EBITDA                                              |  | $ | (657)             
|Provision for income taxes                          |  |   | (102)             
|Interest income                                     |  |   | 70                
|Stock-based compensation                            |  |   | 435               
|Loss (gain) on disposition of operating assets      |  |   | (31)              
|Changes in operating assets and liabilities         |  |   | 712               
|Net cash provided by (used in) operating activities |  | $ | 427               

Changes in operating assets and liabilities generally reflect changes in working capital as well as certain other non-current assets and
liability amounts. For the quarter ended June 28, 2008, the changes in operating assets and liabilities primarily reflect the increase in cash and
cash equivalents and accounts receivable, the changes in our overall inventory position and the increase in our short term debt, accounts
payable for inventory, other accrued liabilities for restructuring and accrued compensation and employee benefits.

Contractual Obligations. We lease certain of our facilities and equipment under non-cancelable operating leases, which expire in
fiscal 2009 through fiscal 2014. These facility lease agreements generally provide for base rental rates, which increase at various times during
the terms of the leases and also provide for renewal options at fair

23

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market rental value. We are also responsible for common area maintenance
charges on certain office leases, which are not included in the table below.  These charges are generally less than 10% of base rents.

|                            |  |   |        |  |   | Payment due by period (unaudited, in thousands)
|--------------------------- |  | - | ------ |  | - | -----------------------------------------------
|                            |  |   |        |  |   |                                                
|                            |  |   |        |  |   | Within                                         
|                            |  |   | Total  |  |   | 1 year                                         
|Operation lease obligations |  | $ | 4,111  |  | $ | 1,210                                          
|                            |  |   |        |  |   |                                                
|Purchase obligations        |  |   | 6,013  |  |   | 3,384                                          
|                            |  |   |        |  |   |                                                
|Total                       |  | $ | 10,124 |  | $ | 4,594                                          

We generally make purchases under cancelable purchase orders and do not enter into long-term supply agreements. Certain of our wafer
foundry, assembly, materials suppliers, software vendors and support tool manufacturers require non-cancelable purchase orders since they
often provide products and services tailored to our specifications.

From time to time, we have agreed to indemnify and hold harmless certain customers for potential allegations of infringement of intellectual
property rights and patents arising from the use of our products. During the ordinary course of business, in certain limited circumstances, we
have agreed to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally parties with which we have
commercial relations, in connection with certain intellectual property infringement claims by any third party with respect to its products and
services. We have indemnification arrangements that limit our net contingent obligation to pay for defense costs, if any, up to a maximum of
$500,000. To date, there have not been any costs incurred in connection with such indemnification arrangements; therefore, there is no accrual
of such amounts at June 28, 2008. We disclose indemnification liabilities according to FASB Staff Position FIN45-1, "Accounting for Intellectual
Property Infringement Indemnifications under FAS Interpretation No. 45." Under FAS No. 5, "Loss Contingencies," a claim would
be accrued when a loss is probable and the amount can be reasonably estimated. At June 28, 2008, no such amounts have been accrued.

Off-Balance Sheet Arrangements

As of June 28, 2008, we are not involved in any off-balance sheet arrangements, as defined in Item 303(a) (4)(ii) of SEC
Regulation S-K

Seasonality

Sales typically increase in the June quarter and peak in the September quarter driven by increased holiday demand from our customers in
the home entertainment and consumer products markets. Our sales are generally lower in the March and December quarters as compared to
the June and September quarters, although our trends have fluctuated considerably in the most recent periods. Our sales have been impacted
by non-seasonal trends including sales reductions by certain direct customers and declines in our classic business. Additionally, general
world-wide economic, political and regional instabilities may impact our results of operations in any given period.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our short-term investment portfolio. We do not use derivative
financial investments in our investment portfolio. Our primary investment objectives are to preserve capital and maintain liquidity. These
objectives are met by investing in high-quality credit issuances and

24

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limiting the amount of credit exposure to any one company. Our policy is to
mitigate default risk by investing in only the highest quality securities and monitoring the credit ratings of such investments.

As of June 28, 2008, our cash and cash equivalents of $17.8 million were invested in bank time deposits and money market funds.

In February 2008, tightening of the U.S. liquidity markets caused the auction rate process to default and our Auction Rate
Preferred Securities ("ARPS") could not be successfully sold. At that time, we had $4.0 million invested in ARPS. Subsequently, we
have received cash proceeds from the redemption at par of $2.5 million of our ARPS. As of June 28, 2008 our remaining investment in ARPS of
$1.5 million has been classified as long-term investments at full par value on our consolidated balance sheet.

Foreign Currency Exchange Risk

We transact business in various foreign countries of which a significant portion of our consolidated net sales and purchases are
denominated in U.S. dollars. Currently, we do not employ a foreign currency hedging program to mitigate our foreign currency exchange risk as
we believe the risks to date have not been significant or economically viable to conduct such activities. We maintain local currency bank
accounts in our international offices to facilitate payment of local operating costs.

Item 4. Controls and Procedures

(a) Disclosure Controls and Procedures. The Company's management, with the participation of the Company's

Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as of June 28, 2008. Based on such evaluation, the Company's  Chief Executive Officer and Chief Financial Officer have concluded
that, as of June 28, 2008, the Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting,
on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are
effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.

(b) Internal Control Over Financial Reporting. There have been no changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 28, 2008 that have
materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

25

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PART II
OTHER INFORMATION

Item 1.  Legal Proceedings

On August 11, 2005, Microchip Technology, Inc. ("Microchip") filed a patent infringement claim against us in the U.S.
District Court of Arizona (case number CV05-2406-PHX-MHM). Microchip alleges that we have infringed, and currently infringe, its patents
numbered 5,847,450, 6,696,316 and 6,483,183. Microchip claims that unspecified products of ours, including the Z8 Encore! XP 4K
Series of products, infringe these patents and is seeking preliminary and permanent injunctive relief, unspecified damages and costs,
including attorneys' fees. We filed a response to the claims on September 15, 2005 generally denying the claims and challenging the
validity of the patents. On January 10, 2006, we filed a request for patent re-examination with the U.S. PTO, which was granted in February and
March 2006 for all 3 patents. On April 11, 2008, we received a notice that all of Microchip's claims under these three patents have been rejected
by the U.S. PTO. Notwithstanding this favorable ruling, because Microchip has a right to appeal the patent office's decision, we do not believe it
is feasible to predict or determine the outcome or resolution of this litigation at this time. We believe we have meritorious defenses and will
defend ourselves vigorously against these claims. We may incur substantial expenses in our defense against these claims. In the event of a
determination adverse to us, we may incur substantial monetary liabilities and be required to change our business practices. Either of these
could have a material adverse effect on our financial position, results of operations and/or cash flows.

On December 1, 2006, we filed a patent infringement claim against Altera Corporation ("Altera") and Actel Corporation
("Actel")  in the U.S. District Court of California (civil docket number 4:06-cv-07388-SBA). We allege that Altera and Actel have
infringed, and currently infringe, our patent numbered 4,670,749 which we believe to be the fundamental patent for programmable logic. We
claim that Altera's and Actel's products infringe these patents and are seeking unspecified damages and costs, including attorneys' fees.
 Actel settled their case with us on June 11, 2007 for an undisclosed amount.  The case against Altera is currently on stay pending
reexamination of the patent in suit.

On May 23, 2008, Altera Corporation ("Altera") filed a patent infringement claim against us in the U.S. District Court of Texas
(civil action number 2:08-CV-218). Altera alleges that we have infringed, and currently infringe, its patents numbered 6,097,211, 6,147,511 and
6,314,550. Altera claims that unspecified products of ours, including our eZ80 and Zneo series of products, infringe these patents and is
seeking preliminary and permanent injunctive relief, unspecified damages and costs, including attorneys' fees.

We do not believe it is feasible to predict or determine the outcome or resolution of this litigation at this time. We may incur substantial
expenses in our defense against these claims. In the event of a determination adverse to us, we may incur substantial monetary liabilities, and
be required to change our business practices. Either of these could have a material adverse effect on our financial position, results of operations
and/or cash flows.

We are participating in other litigation and responding to claims arising in the ordinary course of business. We intend to defend ourselves
vigorously in these other matters. Our management believes that it is unlikely that the outcome of these other matters will have a material
adverse effect on our consolidated financial statements, although there can be no assurance in this regard.

26

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Item 1A. Risk Factors

Risk Factors.

In addition to the other information set forth in this report, you should consider the risk factors discussed in Part I
"Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008, which could materially affect
our business, financial condition or future results. The risk factors in our Form 10-K have not materially changed. The risk factors described in
our Form 10-K, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem
to be immaterial also may materially adversely affect our business, financial conditions and/or operating results.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

None

Item 4.  Submission of Matters to a Vote of Security Holders.

None

Item 5.  Other Information

None.

27

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Item 6.  Exhibits

a)	Exhibits are filed or incorporated herein by reference as indicated below:

|Exhibit
Number | Description                                                                                                                                                                                                           
|-------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 (a)        | Amended and Restated Certificate of Incorporation of ZiLOG, Inc., as amended and corrected.                                                                                                                           
|3.2 (b)        | Amended and Restated Bylaws of ZiLOG, Inc.                                                                                                                                                                            
|3.3 (c)        | Amendment to Amended and Restated Bylaws of ZiLOG, Inc.
    PDF                                                                                                                                                       
|10.1 (c)       | Severance Pay Plan.
    PDF                                                                                                                                                                                           
|10.2 (c)       | Key Employee Protection Plan.
    PDF                                                                                                                                                                                 
|31.1           | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 12, 2008.
    PDF             
|31.2           | Certifications of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 12, 2008.
    PDF            
|32             | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 12, 2008.
    PDF

_____________

|(a) | Incorporated herein by reference to the item of the same name filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on
November 21, 2007.                               
|(c) | Filed herewith.                                                                                                                                                           

28

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ZiLOG, Inc.

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.



| |                          
| | -------------------------
| | ZiLOG, Inc.  (Registrant)



| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | /s/ Perry J. Grace
      
           Perry J. GraceExecutive Vice President and Chief Financial Officer         (Duly Authorized Officer)



| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | /s/ Darin G. Billerbeck
      
           Darin G. BillerbeckPresident, Chief Executive Officer and Director         (Duly Authorized Officer)

Date:  August 12, 2008

29

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