UNITED STATES
                        SECURITIES & EXCHANGE COMMISSION
                             Washington, D.C. 20549
                           --------------------------

                                    FORM 10-Q

(Mark One)

  X     Quarterly report pursuant to Section 13 or 15(d) of the Securities
----    Exchange Act of 1934. For the quarterly period ended October 4, 1998.

        Transition report pursuant to Section 13 or 15(d) of the Securities 
----    Exchange Act of 1934.  For the transition period from _____________
        to _____________.

                       Commission File Number: 001-13748
                                               ---------

                                   ZILOG, INC.
            (Exact name of registrant as specified in its charter)

          Delaware                                       13-3092996
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

              910 East Hamilton Avenue, Campbell, California, 95008
              -----------------------------------------------------
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (408) 558-8500


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                             Yes           No    X
                                 -------      -------

As of November 1, 1998, there were 30,098,736 shares of the Company's Voting
Common Stock, $.01 par value and 10,000,000 shares of the Company's Non-Voting
Common Stock, $.01 par value outstanding.


<PAGE>



Part I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                                   ZILOG, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                      AND COMPREHENSIVE INCOME (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                        Three Months Ended  Nine Months Ended
                                       ------------------- ---------------------
                                        Oct. 4,  Sept. 28,  Oct. 4,   Sept. 28,
                                         1998      1997      1998       1997
                                       --------- --------- ---------- ----------
<S>                                    <C>       <C>       <C>        <C>
Net sales.............................  $52,530   $60,824   $150,637   $202,218
                                       --------- --------- ---------- ----------

Costs and expenses:
  Cost of sales.......................   42,070    40,486    123,711    130,061
  Research and development............    7,135     7,554     22,155     22,305
  Selling, general and administrative.   13,656    11,372     40,508     35,754
  Special charges:
  Recapitalization....................    5,487       --      31,174       --
  Restructimg of operations...........    1,641       --       1,641       --
                                       --------- --------- ---------- ----------
                                         69,989    59,412    219,189    188,120
                                       --------- --------- ---------- ----------
Operating income (loss)...............  (17,459)    1,412    (68,552)    14,098

Other income (expense):
  Interest income.....................      733       515      2,653      1,894
  Interest expense....................   (7,293)      (68)   (17,323)      (137)
  Other, net..........................       51       158       (200)       (93)
                                       --------- --------- ---------- ----------
Income (loss) before income taxes.....  (23,968)    2,017    (83,422)    15,762
Provision (benefit) for income taxes..   (2,314)      --     (13,016)     4,260
                                       --------- --------- ---------- ----------
Net income (loss).....................  (21,654)    2,017    (70,406)    11,502

Other comprehensive loss,
   net of tax.........................      --         (7)       (93)       (20)
                                       --------- --------- ---------- ----------
Comprehensive income (loss)........... ($21,654)   $2,010   ($70,499)   $11,482
                                       ========= ========= ========== ==========
</TABLE>
   See accompanying notes to condensed consolidated financial statements.
<PAGE>








                                   ZILOG, INC.

                CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                              (dollars in thousands)
<TABLE>
<CAPTION>
                                                         October 4,  December 31,
                                                           1998         1997
                                                        -----------  -----------
<S>                                                     <C>          <C>
                                  ASSETS
Current assets:
  Cash and cash equivalents.............................   $39,614      $92,184
  Short-term investments................................       --        14,127
  Accounts receivable, less allowance for doubtful
     accounts of $366 in 1998 and $250 in 1997..........    24,215       31,633
  Inventories...........................................    26,269       32,968
  Prepaid expenses, deferred income taxes and
     other current assets...............................    19,548       19,769
                                                        -----------  -----------
          Total current assets..........................   109,646      190,681
                                                        -----------  -----------
Property, plant and equipment, at cost..................   432,522      415,458
Less: accumulated depreciation and amortization.........  (237,504)    (191,881)
                                                        -----------  -----------
   Net property, plant and equipment....................   195,018      223,577
Other assets............................................    10,026        1,381
                                                        -----------  -----------
                                                          $314,690     $415,639
                                                        ===========  ===========
             LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
  Accounts payable......................................   $18,212      $24,733
  Accrued compensation and employee benefits............    22,677       18,284
  Other accrued liabilities.............................     8,928        5,287
  Income taxes payable..................................       --        10,783
                                                        -----------  -----------
          Total current liabilities.....................    49,817       59,087

Notes Payable...........................................   280,000          --

Deferred income taxes...................................    16,070       16,070

Shareholders' equity (deficiency):
  Preferred Stock, $100.00 par value; 5,000,000 shares
   authorized; 1,500,000 shares designated as Series A
   Cumulative Preferred Stock; 250,000 shares of Series
   A Cumulative Preferred Stock issued and outstanding
   at October 4, 1998; aggregate liquidation preference
   $26,173 ($0.01 par value; 190,000 shares authorized;
   no shares issued and outstanding at December 31,
   1997)................................................    25,000          --
  Common Stock, $0.01 par value; 70,000,000 shares
   authorized; 30,098,736 shares issued and
   outstanding at October 4, 1998.  Class A 
   Non-voting Common Stock, $0.01 par value; 
   30,000,000 shares authorized; 10,000,000 shares
   issued and outstanding at October 4, 1998. (Common
   Stock, $0.01 par value; 75,000,000 shares
   authorized; 20,333,741 shares issued and
   outstanding at December 31, 1997; retired in
   February 1998).......................................       401          203
 Additional paid-in capital.............................       --       164,950
 Retained earnings (deficit)............................   (56,598)     175,236
 Net unrealized gain on securities......................       --            93
                                                        -----------  -----------
          Total shareholders' equity (deficiency).......   (31,197)     340,482
                                                        -----------  -----------
                                                          $314,690     $415,639
                                                        ===========  ===========
</TABLE>
   See accompanying notes to condensed consolidated financial statements.
<PAGE>







































                                   ZILOG, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                Increase (decrease) in cash and cash equivalents
                             (dollars in thousands)
<TABLE>
<CAPTION>
                                                            Nine Months Ended
                                                          ----------------------
                                                           Oct. 4,     Sept. 28,
                                                             1998        1997
                                                          ----------  ----------
<S>                                                       <C>         <C>
Cash flows from operating activities:
Net income (loss)........................................  ($70,406)    $11,502
  Adjustments to reconcile net income (loss) to cash
     provided (used) by operating activities:
     Depreciation and amortization.......................    47,986      47,381
     Loss from disposition of equipment..................        10          28
  Changes in assets and liabilities:
     Accounts receivable.................................     7,418      (6,081)
     Inventories.........................................     6,699       2,354
     Prepaid expenses, deferred income taxes and
       other assets......................................       484        (329)
     Accounts payable....................................    (6,521)     (6,161)
     Accrued compensation and employee benefits..........     4,393         401
     Other accrued liabilities and income taxes payable..    (9,155)      2,035
                                                          ----------  ----------
           Cash provided (used) by operating activities..   (19,092)     51,130
                                                          ----------  ----------
Cash flows from investing activities:
   Capital expenditures..................................   (18,635)    (28,507)
   Short-term investments:
     Purchases...........................................       --     (157,534)
     Proceeds from sales.................................    14,127      63,039
     Proceeds from maturities............................       --       76,974
                                                          ----------  ----------
          Cash provided (used) by investing activities...    (4,508)    (46,028)
                                                          ----------  ----------
Cash flows from financing activities:
  Proceeds from issuance of common stock.................       208       1,894
  Purchase of outstanding shares.........................  (399,475)        --
  Merger costs charged to retained earnings..............   (17,401)        --
  Net proceeds from issuance of notes....................   270,198         --
  Investment by Texas Pacific Group......................   117,500         --
                                                          ----------  ----------
           Cash provided (used) by financing activities..   (28,970)      1,894
                                                          ----------  ----------
Decrease in cash and cash equivalents....................   (52,570)      6,996
Cash and cash equivalents at beginning of period.........    92,184      15,511
                                                          ----------  ----------
Cash and cash equivalents at end of period...............   $39,614     $22,507
                                                          ==========  ==========
</TABLE>
   See accompanying notes to condensed consolidated financial statements.
<PAGE>

                                   ZILOG, INC.
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


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 entire year.  These 
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 Form 8-K filed on February 11, 1998.  The 
condensed consolidated balance sheet at December 31, 1997 has been 
derived from audited financial statements at that date.

2)  INVENTORIES

The components of inventories are as follows (in thousands):

<TABLE>
<CAPTION>
                                    October 4,  December 31,
                                       1998        1997
                                    ----------- -----------
<S>                                 <C>         <C>
     Raw  materials..............       $2,688      $4,171
     Work-in-process.............       19,069      23,543
     Finished goods..............        4,512       5,254
                                    ----------- -----------
                                       $26,269     $32,968
                                    =========== ===========
</TABLE>

3)  THE MERGER

Pursuant to the Agreement and Plan of Merger by and among TPG Partners 
II, L.P. ("TPG II"), TPG Zeus Acquisition Corporation ("Merger Sub") 
and ZiLOG dated as of July 20, 1997, as amended (the "Merger 
Agreement"), Merger Sub merged with and into ZiLOG on February 27, 
1998 and ZiLOG continues as the surviving corporation (the "Merger").  
The Merger was accounted for as a recapitalization (the 
"Recapitalization") which resulted in TPG Partners, II, L.P. owning 
90 percent of the voting shares and the pre-Merger shareholders owning 
10 percent of the voting shares.

Approximately $434.3 million was used to complete the Merger and 
consisted of the following:  (i) $399.5 million for the purchase of the 
pre-Merger outstanding common stock; (ii) $4.2 million for the 
cancellation of existing stock options; and (iii) approximately $30.6 
million in fees and expenses.



The cash funding requirements for the Merger were satisfied through the 
following:  (i) an equity investment by TPG II and certain other 
investors of $117.5 million; (ii) use of approximately $36.8 million of 
ZiLOG's cash and cash equivalents; and (iii) $280 million of gross 
proceeds from the sale of senior secured notes through a private 
placement.  As a result of the Merger (on a post-split basis), the 
Company, as of October 4, 1998,  had 250,000 shares of Series A 
Cumulative Preferred Stock, 30,098,736 shares of Common Stock and 
10,000,000 shares of Class A Non-Voting Common Stock issued and 
outstanding.

The Company has issued $280 million 9 1/2 % Senior Secured Notes (the 
"Notes"), which mature on February 27, 2005.  Interest is payable to 
note holders semi-annually on the first of March and September.  
Expenses associated with the offering of approximately $9.8 million 
were deferred and are being amortized to interest expense over the term 
of the notes.

4)  STOCK SPLIT

The Company's Board of Directors approved a 2:1 stock split which 
became effective in August 1998.  Common Stock authorized shares 
increased from 35,000,000 shares to 70,000,000 shares and issued and 
outstanding shares increased from 15,049,368 to 30,098,736 shares.  
Class A Non-Voting Common Stock authorized shares increased from 
15,000,000 shares to 30,000,000 shares and issued and outstanding 
shares increased from 5,000,000 shares to 10,000,000 shares.

5)  STOCK PLANS

The ZiLOG, Inc. Long-Term Stock Incentive Plan (the "Plan") and the 
ZiLOG, Inc. 1998 Executive Officer Stock Incentive Plan (the 
"Executive Plan") were adopted by the Company's Board of Directors 
(the "Board") in August 1998.  Under the Plan and the Executive Plan, 
the Company may grant to eligible employees Nonstatutory Stock Options 
("NSO's) and Incentive Stock Options ("ISO's) or award eligible 
employees restricted shares or stock units up to a total of 2,500,000 
and 5,500,000 shares, respectively, at an exercise price established by 
a committee (the "Committee") appointed by the Board.

Options under the Plan and the Executive Plan generally vest 25% at the 
end of one year from the date of the grant and 25% on each anniversary 
of the grant date thereafter.  The terms and conditions of each option 
grant or stock award are determined by the Committee and are set forth 
in a Stock Option agreement between the employee and the Company.  As 
of October 4, 1998, options granted under the Plan and the Executive 
Plan were approximately 2,234,000 and 3,960,000, respectively.

6)  CREDIT FACILITIES

On October 2, 1998, ZiLOG received a commitment letter from a financial 
institution (the "Lender") for up to $40 million in the form of a 
senior secured revolving and capital equipment credit facility (the 
"New Facility").  The New Facility will replace ZiLOG's existing $25 
million senior secured credit facility (the "Old Facility") which was 
subject to financial covenants that restricted the Company's ability to 
utilize the Old Facility.  The revolving line of credit for the New 
Facility provides for borrowings of up to $25 million, subject to a 
borrowing base consisting of 80% of eligible accounts receivable and 
40% of eligible inventories.  The $15 million capital expenditure line 
is secured by eligible equipment financed.  Borrowings, on the 
revolving line of credit under the New Facility will bear interest at a 
rate per annum (at ZiLOG's option) equal to the London Inter-Bank 
Overnight Rate (LIBOR) plus 2%, or the Lender's published prime rate.  
Borrowings for the capital expenditure line under the New Facility will 
bear interest at a rate per annum (at ZiLOG's option) equal to LIBOR 
plus 3% or the Lender's prime rate plus 1%.  The term of the revolving 
credit facility is three years and the capital expenditure line is five 
years.  There have been no borrowings under either credit facility.


7)  RELATED PARTY TRANSACTIONS

On September 10, 1998, Newbridge Asia signed an agreement to acquire 
100 percent of P.T. Astra Microtronics Technology ("AMT").  Texas 
Pacific Group ("TPG") and Richard C. Blum & Associates  jointly  
established Newbridge Asia  in 1994.  Affiliates of TPG  owned   
approximately 89 percent of ZiLOG's outstanding Common Stock at October 
4, 1998. ZiLOG purchased semiconductor assembly and test services from 
AMT totaling approximately $1.9 million and $1.8 million for the three 
months ended October 4, 1998 and September 28, 1997, respectively, and 
$5.0 million and $6.1 million for the nine months ended October 4, 1998 
and September 28, 1997, respectively.  ZiLOG had payables to AMT of 
approximately $652,000 and $736,000 at October 4, 1998 and December 31, 
1997, respectively.  Payment terms between ZiLOG and AMT are net 30 
days.


























8)  SPECIAL CHARGES

Recapitalization expenses consist of charges directly related to the 
change in control and repositioning of the Company as a result of the 
Merger (as discussed in Note 3 above), including an executive bonus 
which is earned ratably over the current year.  Restructuring expenses 
consist primarily of employee severance and termination benefits 
related to the reductions in force completed during the third quarter 
at the Company's Nampa, Idaho wafer fab plant and in its sales and 
headquarters operations.   Special charges are as follows:

<TABLE>
<CAPTION>
                                       Three       Nine
                                      Months      Months
                                       Ended       Ended
                                    October 4,  October 4,
          (in thousands)               1998        1998
----------------------------------- ----------- -----------
<S>                                 <C>         <C>
Recapitalization:                   
 Executive severance pay and
   new executive bonuses.........       $2,236     $12,049
 Stock option buyout.............         --         4,195
 Bridge loan fees................         --         3,360
 Employee retention bonus........        2,178       9,511
 Consultants, other..............        1,073       2,059
                                    ----------- -----------
                                         5,487      31,174
                                    ----------- -----------
Restructimg of operations:
 Employee severance and
   termination benefits..........        1,641       1,641
                                    ----------- -----------
                                        $7,128     $32,815
                                    =========== ===========
</TABLE>


9)  CONCENTRATION OF CREDIT RISK

For the nine month period ended October 4, 1998, one customer accounted 
for approximately 10.5% of net sales.  No customer accounted for more than 
10% of net sales for the comparable nine month period ended September 28, 
1997.


<PAGE>








Part I.  FINANCIAL INFORMATION

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

This Form 10-Q includes "forward-looking statements" within the 
meaning of various provisions of the Securities Act of 1933, as 
amended, and the Securities Exchange Act of 1934, as amended.  All 
statements, other than statements of historical facts, included in this 
Form 10-Q that address activities, events or developments that the 
Company expects or anticipates will or may occur in the future, are 
forward-looking statements.  These forward-looking statements involve a 
number of risks and uncertainties which are described throughout this 
Form 10-Q, including the significant considerations and risks discussed 
in this Form 10-Q; the results of the Company's Recapitalization; 
execution of the Company's new business strategy and cost reduction 
programs; general economic, market or business conditions; the 
opportunities (or lack thereof) that may be presented to and pursued by 
the Company and its subsidiaries; competitive actions by other 
companies; changes in the mix of products or customers or in the level 
of operating expenses; the ability of the Company to generate cash and 
service debt; and other factors, many of which are beyond the control 
of ZiLOG and its subsidiaries.  The actual results that the Company 
achieves may differ materially from any forward-looking statements due 
to such risks and uncertainties.  Consequently, all of the forward-
looking statements made in this Form 10-Q are qualified by these 
cautionary statements and there can be no assurance that the results or 
developments anticipated by the Company will be realized or, even if 
substantially realized, that they will have the expected consequences 
to or effects on the Company and its subsidiaries or their business or 
operations.  The Company expressly disclaims any obligation or 
undertaking to release publicly any updates or revisions to these 
forward-looking statements to reflect events or circumstances that 
occur or arise or are anticipated to occur or arise after the date 
hereof.

During the second half of 1997 and the nine months ended October 4, 
1998, ZiLOG experienced a decline in revenue and profit comparable to 
the decline suffered generally in the semiconductor industry.  
Accordingly, the Company implemented and is considering additional 
cost-cutting measures which include, but are not limited to, the 
following: refocusing business priorities; renegotiations with vendors 
and service providers to lower costs of materials and services; 
reallocation of personnel and responsibilities to better employ human 
resources; partnering to better utilize assets; reductions in 
workforce; changes in manufacturing processes; increased use of 
subcontractor or foundry for greater efficiency and lower short term 
costs; changes in shift structures; and temporary plant shutdowns.  In 
addition, ZiLOG is realigning capital expenditures to make them 
consistent with its current level of business.  There can be no 
assurance that such cost-cutting measures will be successful or result 
in increased efficiency or profitability.

The following tables present unaudited financial information.  The 
Company believes that all necessary adjustments, consisting only of 
normal recurring adjustments, are included in the amounts shown below 
to state fairly the selected quarterly and nine month information when 
read in conjunction with the condensed consolidated financial 
statements included elsewhere herein.  Interim results are based on 
fiscal quarters of thirteen weeks duration ending on the last Sunday of 
each quarter.  The operating results for any quarter or the nine month 
period ended October 4, 1998  are not necessarily indicative of results 
for any subsequent quarter or the full fiscal year.  All tabular 
information is presented in thousands, except percentages.


RESULTS OF OPERATIONS

The Company's quarterly operating results have and will vary because of 
a number of factors, including the timing and success of new product 
introductions, the success of cost reduction programs, changes in 
product mix, volume, timing and shipment of orders and fluctuations in 
manufacturing productivity.  Quarter-to-quarter sales comparisons are 
also subject to customer order patterns and seasonality.  Because the 
Company's products are available from both the Company and 
distributors, the customer's decision to buy from a distributor or 
directly from the Company can affect ZiLOG's quarterly sales and 
profitability.  See "Factors That May Affect Future Results" for a 
discussion of additional considerations which may affect the Company's 
future operating results.

<TABLE>
<CAPTION>
                                        Three Months Ended  Nine Months Ended
                                       ------------------- ---------------------
                                        Oct. 4,  Sept. 28,  Oct. 4,   Sept. 28,
            (in thousands)               1998      1997      1998       1997
                                       --------- --------- ---------- ----------
<S>                                    <C>       <C>       <C>        <C>
Net sales.............................  $52,530   $60,824   $150,637   $202,218
Operating income (loss)............... ($17,459)   $1,412   ($68,552)   $14,098
Net income (loss)..................... ($21,654)   $2,017   ($70,406)   $11,502

</TABLE>



NET SALES

Net sales for the third quarter of 1998 decreased 13.6% from the 
comparable quarter of 1997, and decreased 25.5% for the nine months 
ended October 4, 1998 when compared to the similar period of 1997.  The 
decline in sales was primarily attributable to a decrease in the sale 
of products in the Company's communications group as a result of lower 
volumes and prices, particularly in the modem product line, and weaker 
distribution sales as distributors reduced inventory levels.  The modem 
product sales volume decline was affected by the loss of a significant 
design position with a data communications equipment manufacturer.  
This customer placed no orders for modem products in the nine months 
ended October 4, 1998 and ZiLOG does not anticipate receiving future 
orders for modem products from this customer.  This decrease was 
partially offset by an increase in sales in the Company's home 
entertainment group.

Domestic and international net sales in the third quarter of 1998 each 
represented 50.0% of total net sales, compared to 58.1% and 41.9%, 
respectively, in the third quarter of 1997.  For the nine months ended 
October 4, 1998, domestic and international net sales were 50.8% and 
49.2% of total net sales, respectively, as compared to 52.9% and 47.1%, 
respectively, for the same period in 1997. While recent economic events 
in Asia have not significantly affected the Company, the Company has 
significant international revenues, which may be affected by such 
events in the future.

Although ZiLOG believes it has developed a business strategy that will 
improve its operating performance, it is anticipated that revenue and 
EBITDA will decline significantly in 1998 as compared to prior years 
while this strategy is being implemented.

COST OF SALES

<TABLE>
<CAPTION>
                                        Three Months Ended  Nine Months Ended
                                       ------------------- ---------------------
                                        Oct. 4,  Sept. 28,  Oct. 4,   Sept. 28,
            (in thousands)               1998      1997      1998       1997
                                       --------- --------- ---------- ----------
<S>                                    <C>       <C>       <C>        <C>
  Cost of sales.......................  $42,070   $40,486   $123,711   $130,061
  Percentage of sales.................     80.1%     66.6%      82.1%      64.3%
</TABLE>


The Company's cost of sales represents the cost of its wafer 
fabrication, assembly and test operations.  Cost of sales fluctuates, 
depending on manufacturing productivity, product mix, equipment 
utilization and depreciation.  The increase in percentage of cost of 
sales to sales for both the third quarter of 1998 and for the 1998 year 
to date period was attributable to lower revenue and under utilization 
of wafer fabrication manufacturing capacity.   Late in the third 
quarter of 1998, ZiLOG implemented a restructuring of its Nampa, Idaho 
wafer fabrication operations.  In connection with this action, 
approximately 120 employees were terminated and more production was 
shifted into the Company's newer 8-inch, .35 micron silicon wafer 
fabrication facility.  The restructuring actions are intended to reduce 
manufacturing costs so that they align more closely with the Company's 
current revenue base.  A consequence of this restructuring is that lead 
times for certain of the Company's products may be extended.









RESEARCH AND DEVELOPMENT

<TABLE>
<CAPTION>
                                        Three Months Ended  Nine Months Ended
                                       ------------------- ---------------------
                                        Oct. 4,  Sept. 28,  Oct. 4,   Sept. 28,
            (in thousands)               1998      1997      1998       1997
                                       --------- --------- ---------- ----------
<S>                                    <C>       <C>       <C>        <C>
  Research and development............   $7,135    $7,554    $22,155    $22,305
  Percentage of sales.................     13.6%     12.4%      14.7%      11.0%
</TABLE>

The Company's investment in research and development in 1998 was 
consistent with 1997 levels.  During 1998, the Company's research and 
development was  focused  largely on  technology for its 8-inch silicon 
wafer fabrication processes, as well as continued investment in new and 
enhanced product development.  During 1998, the Company's research and 
development expenditures were focused on technology for its new .35 
micron CMOS wafer fabrication process, new and enhanced product 
development, and new customer development tools.  Product development 
in 1998 was primarily in the areas of modem and modem modules, home 
entertainment and Z8+ microprocessor core products.


SELLING, GENERAL AND ADMINISTRATIVE

<TABLE>
<CAPTION>
                                        Three Months Ended  Nine Months Ended
                                       ------------------- ---------------------
                                        Oct. 4,  Sept. 28,  Oct. 4,   Sept. 28,
            (in thousands)               1998      1997      1998       1997
                                       --------- --------- ---------- ----------
<S>                                    <C>       <C>       <C>        <C>
  Selling, general and administrative.  $13,656   $11,372    $40,508    $35,754
  Percentage of sales.................     26.0%     18.7%      26.9%      17.7%
</TABLE>

Selling, general and administrative expenses increased during both the 
quarter and nine month periods ended October 4, 1998 as compared to 
similar periods in 1997.  The increases over 1997 levels were primarily 
related to increased rent and operating costs associated with the 
Company's new headquarters facility, increased information systems 
costs, higher payroll and travel expenses.


SPECIAL CHARGES  (Recapitalization Related and Restructuring Expenses)

As a result of the Merger, the Company recorded recapitalization 
expenses related to the change in control and repositioning of ZiLOG in 
the amount of $5.5 million during the third quarter of 1998 and $31.2 
million for the nine months ended October 4, 1998.  These charges 
consisted primarily of executive severance costs, employee stock option 
buy-outs, retention bonus accruals for existing employees, new 
executive bonuses (including an executive bonus which is ratably 
accrued over the current year), bridge loan fees and consulting fees 
and expenses.  The Company also incurred restructuring expenses in the 
amount of  $1.6 million primarily related to severance costs during the 
third quarter of 1998.


OTHER INCOME (EXPENSE)

<TABLE>
<CAPTION>
                                        Three Months Ended  Nine Months Ended
                                       ------------------- ---------------------
                                        Oct. 4,  Sept. 28,  Oct. 4,   Sept. 28,
            (in thousands)               1998      1997      1998       1997
                                       --------- --------- ---------- ----------
<S>                                    <C>       <C>       <C>        <C>
  Other income (expense), net.........  ($6,509)     $605   ($14,870)    $1,664
  Percentage of sales.................    -12.4%      1.0%      -9.9%       0.8%
</TABLE>

Other income (expense),  net, increased  to $6.5 million in expense in 
the third quarter of 1998 from $605,000 of income for the similar 
period in 1997.  The primary reason for the increase was interest 
expense on the Notes, which exceeded royalty income.  The Company will 
incur approximately $26.6 million in interest expense annually on the 
Notes. 


INCOME TAXES

The estimated annual benefit for income taxes was 9.7% and 15.6% for 
the three and nine months ended Oct. 4, 1998, respectively, compared to 
tax provisions for income taxes of 0% and 27% for similar periods of 
1997.  The 1998 rate reflects the estimated benefit of refundable taxes 
related to the Company's overall  loss  position  and  realization of  
deferred  tax assets based on the reversal of taxable temporary 
differences, offset by foreign taxes.  The third quarter of 1998 was 
impacted by a cumulative adjustment to record the revised lower 
estimated tax rate for the year.  A valuation  allowance was set up  in 
1998 for approximately $19.0 million  related to net operating loss 
carryforwards based on management's assessment of future taxable income 
over the next two to three years.  The tax provisions for 1997 differed 
from the federal statutory rate primarily as a result of the tax 
benefit from exempt earnings and foreign earnings taxed at a lower than 
U.S. tax rate, offset by state taxes.  The Philippines tax holiday 
expired December 1996.

Under Statement of Financial Accounting Standards No. 109 (FAS 109), 
deferred tax assets and liabilities are determined based on differences 
between financial reporting and tax bases of assets and liabilities and 
are measured using the enacted tax rates and laws that will be in 
effect when the differences are expected to reverse.  FAS 109 provides 
for the recognition of deferred tax assets if realization of such 
assets is more likely than not.  Based on the weight of available 
evidence, the Company has provided a valuation allowance against 
certain deferred tax assets for 1998.  The Company will continue to 
evaluate the realizability of the deferred tax assets on a quarterly 
basis.


EBITDA

EBITDA represents earnings (losses) from operations before interest 
income and expense (including amortization of deferred financing 
costs), income taxes, depreciation, amortization of goodwill, non-cash 
stock option compensation expenses and special charges.  EBITDA is 
presented because it is a widely accepted financial indicator of a 
leveraged company's ability to service and/or incur indebtedness and 
because management believes that EBITDA is a relevant measure of the 
Company's ability to generate cash without regard to its capital 
structure or working capital needs.  EBITDA as presented may not be 
comparable to similarly titled measures presented by other companies, 
depending on the non-cash charges included.

For the third quarter ended Oct. 4, 1998 the Company recorded EBITDA of 
$5.3 million as compared to $17.7 million for the year-ago period.  
ZiLOG had EBITDA of $11.2 million for the nine months ended October 4, 
1998 compared to $60.9 million for the nine months ended September 28, 
1997.  The primary reason for the decrease in EBITDA from 1997 to 1998 
was lower sales. 


LIQUIDITY AND CAPITAL RESOURCES  

<TABLE>
<CAPTION>
                                                            Nine Months Ended
                                                          ----------------------
                                                           Oct. 4,     Sept. 28,
                                                             1998        1997
                                                          ----------  ----------
<S>                                                       <C>         <C>
Cash, cash equivalents and
   short-term investments................................   $39,614     $93,455
Working capital..........................................   $59,829    $122,341
Cash provided (used) by operating activities.............  ($19,092)    $51,130
Cash provided (used) by investing activities.............   ($4,508)   ($46,028)
Cash provided (used) by financing activities.............  ($28,970)     $1,894
</TABLE>

At October 4, 1998, the Company had cash, cash equivalents and short-
term investments totaling $39.6 milion, a decrease of $52.6 million 
from the period ended December 31, 1997.

Cash used by operating activities was $19.1 million for the nine months 
ended October 4, 1998, while cash provided by operations was $51.1 
million for the similar period of 1997.  The use of cash by operating 
activities in 1998 was primarily due to the Company's net loss, which 
was the result of reduced sales when compared to the similar period of 
1997, approximately $32.8 million in special charges, as a result of 
the Merger and restructuring of the Company, and approximately $17.3 
million of interest expense associated with the Company's notes 
payable, none of which were present in the comparable period of 1997.

Cash used by investing activities was $4.5 million during the nine 
months ended Oct. 4, 1998, as compared to $46.0 million for the similar 
period of 1997.  Cash used by investing activities in 1998 was 
primarily due to capital expenditures while cash used by investing 
activities in 1997 was primarily due to capital expenditures and 
purchases of short-term investments (which were partially offset by 
sales and maturities). 

Cash used by financing activities for the nine months ended Oct. 4, 
1998 was $29.0 million, while cash provided by financing activities was 
$1.9 million for the similar period of 1997.  The use of cash by 
financing activities in 1998 was primarily for cash transactions 
related to the Merger, while cash provided by financing activities in 
1997 was primarily for exercises of stock options and purchases under 
ZiLOG's Stock Purchase Plan.

In conjunction with the Merger, ZiLOG entered into a five-year 
Revolving Credit Agreement (the "Agreement") with a commercial bank, 
which was collateralized by certain accounts receivable and 
inventories.  The Agreement allowed the Company to borrow up to $25 
million subject to certain restrictive conditions and financial 
covenants. ZiLOG's ability to meet its sales and income projections 
were hampered by an overall decline in the semiconductor industry 
during the first nine months of 1998.  

On October 2, 1998, ZiLOG received a commitment letter from another 
lender (the "Lender") for a new senior secured credit facility (the 
"New Facility") with an outline of terms more favorable to the 
Company.  The commitment of up to $40 million provides for a three-year 
revolving credit facility of up to $25 million and a five-year capital 
expenditure line of up to $15 million.  The New Facility will be 
secured by a perfected interest in all of the accounts receivable and 
inventory and proceeds thereof of ZiLOG, and all equipment eligible for 
financing.  Loans and letters of credit under the New Facility will be 
available at any time during its three-year term subject to a borrowing 
base of 80% of eligible accounts receivable and 40% of eligible 
inventory and the fulfillment of customary conditions precedent. The 
capital equipment line provides for loans up to 70% of invoice for new 
equipment and 80% of appraised value for used equipment.  Under the New 
Facility, ZiLOG will not be subject to any financial covenants as long 
as there remains $7.5 million in availability on both the revolving 
credit facility and capital equipment line.  Borrowings under the New 
Facility will bear interest at a rate per annum equal (at ZiLOG's 
option) to the Lender's stated prime rate or the London Interbank 
Overnight Rate ("LIBOR") plus 2% for the revolving credit facility 
and the lender's prime rate plus 1% or LIBOR plus 3% for the capital 
expenditure line.  ZiLOG is  required to pay the Lender, on a quarterly 
basis, a commitment fee on the undrawn portion of the facility equal to 
1/4 of 1% per annum.  ZiLOG is also obligated to pay a per annum letter 
of credit fee on the aggregate amount of outstanding letters of credit 
and customary arrangement and similar fees.  The Company terminated the 
Agreement at the end of the third quarter.  There have been no 
borrowings under either facility.  The final financing agreement for 
the New Facility is expected to be completed by November 20, 1998.

 The Company has incurred substantial indebtedness in connection with 
the Merger.  ZiLOG's ability to make scheduled principal payments, or 
to pay the interest, or premium if any, or to refinance its 
indebtedness (including the Notes), or to fund capital and other 
expenditures will depend on its future performance, which, to a certain 
extent, is subject to general economic, financial, competitive, 
legislative, regulatory and other factors that are beyond its control.  
ZiLOG's primary cash needs are working capital and capital 
expenditures. In addition, ZiLOG made its first semi-annual interest 
payment on the Notes of approximately $13.4 million on September 1, 
1998. The Company has financed its cash requirements for working 
capital and capital expenditures primarily through internally generated 
cash flow and existing cash reserves.  Based upon the current level of 
operations, management believes that cash flow from operations, 
available cash and its new credit facility will be adequate to meet 
ZiLOG's future requirements for working capital, budgeted capital and 
other expenditures and scheduled payments of principal and interest on 
its indebtedness, including the Notes, for at least the next twelve 
months.  However, there can be no assurance that ZiLOG's business will 
generate sufficient cash to enable the Company to service its 
indebtedness, including the Notes, or make anticipated capital and 
other expenditures.


YEAR 2000 COMPLIANCE

ZiLOG has an active year 2000 ("Y2K") readiness program and has, as 
of October 4, 1998, made a substantial effort to reasonably evaluate 
that its operations to prevent material adverse Y2K-related impact.  
This program began with a survey of potential sources of Y2K exposure 
which could reasonably affect the Company's business.  As of October 4, 
1998, the majority of this initial source identification phase has been 
completed.  For potential sources of Y2K risk which are external to the 
Company, such as with the Company's external vendors and suppliers, the 
Company typically relied upon written assurances of Y2K compliance from 
those various parties in lieu of physical testing by the Company's 
employees.  To date, the Company has not identified any Y2K issues 
inherent in the products manufactured by the Company. 

The next step in the Company's remediation program was to 
systematically analyze each identified potential internal source of Y2K 
exposure to determine its likelihood of material effect on the 
Company's operations and the range of available remediation actions by 
performing physical tests which simulated performance of the systems 
with post-year 2000 dates.  The Company's products, for the most part, 
involve hardware integrated circuits which, at the time of sale to 
customers, have no inherent date sensitive features.  As of October 4, 
1998, the analysis phase of the Y2K readiness program is still 
underway.  The analysis phase is expected to be substantially completed 
by December 31, 1998 and the Company expects to complete its internal 
and external Y2K readiness programs by July 1, 1999.

The total cost associated with required modifications to become Y2K 
compliant is not expected to be material to the Company's financial 
position.  The amount expended through October 4, 1998 was 
approximately $2.6 million, primarily associated with the total 
replacement of the information systems related to the Company's sales 
order process, planning, physical distribution and finance functions 
which are expected to be completed by December 31, 1998.  The Company 
had intended to replace such systems in the ordinary course of its 
business and the implementation was not substantially accelerated due 
to Y2K.  The Company believes that the cost of its Y2K readiness 
program, as well as currently anticipated costs to be incurred with 
respect to Y2K issues of third-parties, will not exceed $8 million, 
inclusive of the costs described above.  It is anticipated that all 
such expenditures will be funded from operating cash flows and absorbed 
as part of the Company's ongoing operations.

THE FOREGOING STATEMENTS RELATED TO MATERIALITY OF Y2K COSTS, THE COSTS 
TO ADDRESS Y2K ISSUES AND THE FUNDING AND ABSORPTION OF SUCH COSTS ARE 
FORWARD LOOKING STATEMENTS.  ACTUAL RESULTS COULD DIFFER MATERIALLY 
BECAUSE OF THE FOLLOW FACTORS, AMONG OTHERS:  THE FAILURE TO CORRECTLY 
AND/OR TIMELY IDENTIFY AND CORRECT Y2K PROBLEMS, EITHER BY THE COMPANY 
OR ITS KEY SUPPLIERS OR CUSTOMERS.

Having reasonably determined that the Company's own hardware and 
software systems will be substantially Y2K compliant and that its 
products inherently have no date code-related issues, management 
believes that the worst case scenarios would most likely involve 
massive, simultaneous Y2K-related disruptions from the Company's key 
external raw material suppliers and/or service providers.  For these 
worst case scenarios to have maximum adverse impact on the Company, the 
vendors in question would either need to be sole-source providers, or 
their peer companies, who would otherwise be potential second-source 
suppliers, would also need to undergo similar Y2K-related disruption.  
Examples on the material supplier side would include extended and 
substantial disruptions of the Company's key raw material suppliers of: 
silicon wafers, leadframes, specialty chemicals and gasses.  Examples 
on the service provider side would include extended, substantial 
disruptions of the Company's third party semiconductor assembly firms, 
telecommunications and datacommunications  services, airfreight and 
delivery services, or the worldwide banking system.  The Company 
believes that such massive and simultaneous disruptions of the supply 
of basic goods and services due to Y2K-related issues are unlikely to 
occur.
The Company has made no contingency plans for handling Y2K issues 
because it believes that the steps it has taken to assess its own 
hardware and software systems and those of its key vendors and 
suppliers are adequate to prevent all but minimal disruptions to its 
business processes.  In the event of random, unforeseen Y2K problems 
(such as the failure of specific pieces of process equipment, or the 
temporary inability of certain vendors to provide materials or 
services), the Company believes that these types of issues will most 
likely be able to be resolved in the normal course of business, 
including the potential use of alternate suppliers, in most cases.





FACTORS THAT MAY AFFECT FUTURE RESULTS.

This Form 10-Q contains certain forward-looking statements within the 
meaning of various provisions of the Securities Act of 1933, as amended 
and the Securities Exchange Act of 1934 as amended.  Actual results 
could differ materially from those projected in the forward-looking 
statements as a result of certain factors and uncertainties including 
those set forth below and elsewhere in this Form 10-Q.

SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE INDEBTEDNESS.  ZiLOG has 
incurred substantial indebtedness in connection with the 
Recapitalization, which became effective February 27, 1998.  At Oct. 4, 
1998, ZiLOG had $280 million of consolidated long-term indebtedness and 
a capital deficiency of $31.2 million. 

The high degree to which the Company is leveraged may have important 
consequences to the Company, including the following:  (i) the 
Company's ability to obtain additional financing for working capital, 
capital expenditures, product development, future acquisitions (if 
any), or other purposes may be impaired or any such financing may not 
be available on terms favorable to the Company; (ii) a substantial 
portion of the Company's cash flow available from operations after 
satisfying certain liabilities arising in the ordinary course of 
business will be dedicated to the payment of debt service, thereby 
reducing funds that would otherwise be available to the Company; (iii) 
a decrease in net operating cash flows or an increase in expenses could 
make it difficult for the Company to meet its debt service requirements 
or force it to modify its operations; and (iv) high leverage may place 
the Company at a competitive disadvantage, limit its flexibility in 
reacting to changes in its operating environment and make it vulnerable 
to a downturn in its business or the economy generally.  

To satisfy the Company's obligations under the Notes, the Company will 
be required to generate substantial operating cash flow.  The ability 
of the Company to meet debt service and other obligations or to 
refinance any such obligation will depend on the future performance of 
the Company, which will be subject to prevailing economic conditions 
and to financial, business and other factors, certain of which may be 
beyond the control of the Company.  While the Company believes that, 
based on current levels of operations and its business plan, it will be 
able to meet its debt service and other obligations or to refinance its 
indebtedness, there can be no assurances with respect thereto.  During 
the second quarter of 1998 Standard & Poor's lowered its ratings of the 
Company's corporate credit and senior secured notes to single `B' minus 
from single `B' and lowered its bank loan rating on the Company to 
single `B' from single `B' plus, citing the Company's leveraged capital 
structure, reduced revenues and cash balances, weak profitability and 
low ratio of EBITDA to interest coverage.  
RECENT AND ANTICIPATED OPERATING RESULTS.  The Company's operating 
results are affected by a wide variety of factors which could have a 
material adverse effect on it including, but not limited to, the 
Company's ability to introduce and sell new products and technologies 
on a timely basis, execute on cost reduction programs, changes in 
product mix or fluctuations in manufacturing yields which affect the 
Company's gross margins, market acceptance of the Company's and its 
customers' products, the level of orders that are received and can be 
shipped in a quarter, customer order patterns and seasonality, 
cyclicality in the semiconductor industry, increases in freight costs, 
gain or loss of a significant customer and whether the Company's 
customers buy from a distributor or directly from the Company.  Certain 
of the Company's products have sustained decreases in average selling 
prices during 1998 and this trend may continue.  Significant reductions 
in selling prices may have a material adverse effect on the Company.  
The Company will likely experience substantial period-to-period 
fluctuations in future operating results due to general industry 
conditions including cyclical  periods of diminished  product  demand, 
product mix,  accelerated erosion of average  selling prices and 
production over-capacity or events occurring in the United States 
economy or the economies of the worldwide markets the Company serves.  
A significant decline in demand for the Company's products could have a 
material adverse effect on the Company, and there can be no assurance 
that any new products will receive or maintain substantial market 
acceptance. 

The Company's revenue and EBITDA have declined from $298.4 million and 
$92.0 million, respectively, for 1996 to $261.1 million and 
$75.7 million, respectively, for 1997.  For the nine months ended Oct. 
4, 1998, ZiLOG had revenues of $150.6 million and EBITDA of 
$11.2 million.  Although the Company believes that it has developed a 
business strategy that will improve its operating performance, it is 
anticipated that revenue and EBITDA will decline significantly in 1998 
while this business strategy is being implemented.  Many of the factors 
which affect the Company's operating performance are outside the 
Company's control and there can be no assurance that the Company's 
business strategy will be successful or that results of operations will 
not continue to decline.  Implementation of the Company's business plan 
requires significant expenditures and there can be no assurance that 
the Company will be in a position to implement it fully or that such 
expenditures will be offset by any increase in revenue.  Continued 
significant declines in operating performance could have a material 
adverse effect on the Company and its ability to meet its debt service 
and other obligations. 

During the second half of 1997 and the nine months ended October 4, 
1998, ZiLOG experienced a general decline in revenue and profit as the 
semiconductor industry also incurred an overall decline.  Similar to 
other semiconductor companies, the Company has implemented and is 
considering implementing additional cost-cutting measures which may 
include, but are not limited to, the following:  refocusing of business 
priorities; renegotiations with vendors and service providers to lower 
the costs of materials and services; reallocation of personnel and 
responsibilities to better utilize human resources; partnering to 
better utilize assets; reductions in workforce; changes of 
manufacturing mix; increased use of subcontractors or foundry for 
greater efficiency and lower short term costs; changes in shift 
structures; and temporary plant shutdowns.  In addition, the Company is 
considering realignment of capital expenditures consistent with its 
current level of business.  There can be no assurance that such cost-
cutting measures will be successful in repositioning the Company or 
result in increased efficiency or profitability.  


THE SEMICONDUCTOR INDUSTRY.  The semiconductor industry has been 
characterized by cyclicality.  The industry has experienced significant 
economic downturns at various times in the last three decades, 
characterized by diminished product demand, accelerated erosion of 
average selling prices and production over-capacity.  During the second 
half of 1997 and the nine months ended October 4, 1998, ZiLOG 
experienced a general decline in revenue and profit as the 
semiconductor industry also incurred an overall decline.  The Company 
will likely experience substantial period-to-period fluctuations in 
future operating results due to general industry conditions or events 
occurring in the general economy.  The fluctuations are difficult to 
foresee and there can be no assurance that future fluctuations will not 
be more severe or prolonged or otherwise would not have a material 
adverse effect on the Company. 

Certain of the Company's products are incorporated into printers, 
mouse-type pointing devices, keyboards and modems.  As a result, a 
slowdown in the demand for personal computers and related peripherals 
could adversely affect the Company's operating results.  A significant 
portion of the Company's sales are to the consumer electronics markets 
for use in products such as television sets, infrared remote controls 
and telephone answering machines.  The consumer electronics markets are 
volatile and rapid changes in customer preferences for electronics 
products could have a material adverse effect on the Company.


DEPENDENCE ON NEW PRODUCTS AND TECHNOLOGIES.  The Company's operating 
results will depend to a significant extent on its ability to continue 
to introduce and sell new products.  The success of new product 
introductions is dependent on several factors, including proper new 
product selection, timely completion and introduction of new product 
designs, complexity of the new products to be designed and 
manufactured, development of support tools and collateral literature 
that make complex new products easy for engineers to understand and use 
and market acceptance of customers' end products.  There can be no 
assurance that any new products will receive or maintain substantial 
market acceptance.  The Company's new business strategy includes 
increased focus on design wins.  However, there is a substantial delay 
between a design win and sales of new products.  Any such sales are 
subject to the success or failure of the customer's product.  There can 
be no assurance that the Company will successfully identify new product 
opportunities and develop and bring new products to market in a timely 
and cost-effective manner, or that products or technologies developed 
by others will not render the Company's products or technologies 
obsolete or noncompetitive.  A fundamental shift in technology in 
ZiLOG's product markets could have a material adverse effect on the 
Company.  


NEW MANAGEMENT AND KEY PERSONNEL.  As of February 27, 1998, upon 
completion of the Recapitalization, Curtis J. Crawford became President 
and CEO of the Company, replacing the former CEO.  In addition, the 
Company has hired a number of other officers and executives during 
1998, essentially replacing most of its executive management team.  
Although Mr. Crawford has significant experience in the industry in 
which ZiLOG competes, there can be no assurance that the management 
transition and the implementation of a new management team and strategy 
will not adversely affect operating results.  In addition, the Company 
depends upon its ability to hire and retain qualified technical, sales 
and management personnel.  The competition for such personnel is 
intense, and there can be no assurance that the Company will be 
successful in attracting and retaining such personnel. 


CUSTOMER CONCENTRATION.  In 1997, the Company's 10 largest customers 
accounted for approximately 44% of the Company's net sales, although no 
single customer accounted for more than 8% of the Company's net sales.  
For the first nine months of 1998, the Company's 10 largest customers 
accounted for approximately 45% of the Company's net sales, with one 
customer accounting for approximately 10.5% of the Company's net sales.  
Particular customers may change from period to period but the Company 
expects that sales to a limited number of customers will continue to 
account for a significant percentage of its revenue in any particular 
period for the foreseeable future.  The Company has no long-term 
contracts with its customers and there can be no assurance that its 
current customers will place additional orders, or that the Company 
will obtain orders of similar magnitude from other customers.  The loss 
of one or more major customers or any reduction, delay or cancellation 
of orders by any such customer or the failure of the Company to market 
successfully to new customers, could have a material adverse effect on 
the Company.  During 1997, purchases by a major customer, which had 
accounted for approximately 13% of the Company's total revenue in 1996, 
declined to approximately 6% of the Company's total revenue in 1997 and 
declined to less than 1% in the nine months ended October 4, 1998.  
This decline was primarily attributable to a technology shift at the 
customer resulting in a product that did not require a controller, 
which had been provided by ZiLOG.  There can be no assurance that sales 
to one or more significant customers will not decline in the future or 
that any such decline will not have a material adverse effect on the 
Company. 


PRODUCTION YIELDS AND MANUFACTURING RISKS.  The manufacture of 
semiconductor products is highly complex and production yields are 
sensitive to a wide variety of factors, including the level of 
contaminants in the manufacturing environment, impurities in the 
materials used and the performance of personnel and equipment.  In 
addition, as is common in the semiconductor industry, the Company has 
from time to time experienced difficulty in beginning production at its 
facilities or in effecting transitions to new manufacturing processes, 
delays in product deliveries or reduced yields.  As an example, 
operating results could be adversely affected if any problems occur 
that make it difficult to produce quantities of commercial product at 
its facility in Nampa, Idaho.  Such difficulties can include, but are 
not limited to (i) equipment being delivered later than or not 
performing as expected; (ii) process technology changes not operating 
as expected; (iii) engineers not operating equipment as expected; and 
(iv) other difficulties.  The Company believes that an important 
competitive factor will be its ability to continue to successfully 
increase production capacity to meet customer demand and shorten 
delivery time.  No assurance can be given that the Company or its 
outside wafer foundries will not experience production yield problems 
in the future which could have a material adverse effect on the 
Company.  While the Company believes its manufacturing capacity to be 
sufficient, the failure to increase production capacity through the 
successful and efficient expansion of production at its facility in 
Nampa, Idaho or to obtain wafers from outside suppliers as needed 
during periods of increased demand could have a material adverse effect 
on the Company.  A consequence of the Company's restructuring is that 
lead times for certain of the Company's products may be extended.

The Company's future success is dependent upon its ability to develop 
and implement new design and process technologies.  Semiconductor 
design and process methodologies are extremely complex and subject to 
rapid technological change, requiring large expenditures for research 
and development.  Most new products are extremely complex in design and 
many use the Company's 0.65 micron CMOS process.  The Company has 
developed a 0.35 micron CMOS process.  A failure to make a successful 
transition to the 0.35 micron CMOS process could have a material 
adverse effect on the Company.  Manufacture of large complex die 
involves a significant technological risk.  The failure to complete new 
product designs in time to meet market requirements and achieve volume 
production of new products at acceptable yields using the new 
manufacturing processes would have a material adverse effect on the 
Company.  

The Company also uses outside contract assemblers for packaging a 
portion of its production.  Shortages in contract assembly capacity 
could adversely impact the Company's financial results.  Should the 
Company be unable to obtain additional assembly capacity, the Company's 
ability to achieve continued revenue growth might be restricted.  
Shortage of product could also result in the loss of customers.


COMPETITION.  The semiconductor industry is intensely competitive and 
is characterized by price erosion, rapid technological change and 
heightened foreign competition in many markets.  The industry consists 
of major domestic and international semiconductor companies, many of 
which have substantially greater financial and other resources than the 
Company with which to pursue engineering, manufacturing, marketing and 
distribution of their products.  Emerging companies are also increasing 
their participation in the semiconductor market.  The ability of the 
Company to compete successfully in its markets depends on factors both 
within and outside of its control including, but not limited to, 
success in designing and manufacturing new products that implement new 
technologies, protection of the Company's products by effective 
utilization of intellectual property laws, product quality, 
reliability, ease of use, price, diversity of product line, efficiency 
of production, the pace at which customers incorporate the Company's 
microprocessors, microcontrollers and digital signal processors into 
their products, success of competitors' products and general economic 
conditions. 


EXPORT SALES; INTERNATIONAL OPERATIONS.  Approximately 58% and 50%, 
respectively, of the Company sales in 1997 and the first nine months of 
1998 were to foreign customers and the Company expects that export 
sales will continue to represent a significant portion of sales, 
although there can be no assurance that export sales, as a percentage 
of net sales, will remain at current levels.  Beginning in the fourth 
quarter of 1997, certain countries in Asia, which accounted for 
approximately 38% and 40%, respectively, of ZiLOG's 1997 and the first 
nine months of 1998 revenue, experienced general market instability 
characterized by a substantial decrease in demand that resulted in 
significant capital constraints throughout the region.  In many cases, 
these constraints were exacerbated by the continuing need of businesses 
in the region to service indebtedness denominated in dollars or other 
foreign currencies.  As a result, many businesses in the region have 
explored ways to preserve capital, including reducing capital 
investment, reducing working capital, outsourcing manufacturing 
functions, selling assets and discontinuing lines of business.  In 
addition, substantial devaluations of local currencies have 
significantly improved  the competitive position of certain competitors 
of the Company that operate in the affected regions.  ZiLOG believes 
that this instability did not have a material effect on revenue in 
1997.  During  the  nine  months  ended October 4, 1998,  certain of  
the Company's customers in these regions have delayed purchases of the
Company's products, significantly reduced the production of products
which utilize the Company's Application Specific Standard Products
("ASSPs") or have purchased ASSPs from the Company's competitors that
operate in the affected regions.  There can be no assurance that this
instability will not continue to have a material adverse effect on the
Company. 

The Company purchases a substantial portion of its raw materials and 
equipment from foreign suppliers.  While the Company's export sales are 
primarily United States Dollar denominated transactions, the Company is 
subject to the risks of conducting business internationally, including 
unexpected changes in, or impositions of, legislative or regulatory 
requirements, fluctuations in the United States Dollar against foreign 
currencies, which could increase the sales price in local currencies of 
the Company's products in foreign markets or increase the cost of 
wafers purchased by the Company, delays resulting from difficulty in 
obtaining export licenses for certain technology, tariffs and other 
barriers and restrictions, potentially longer payment cycles, greater 
difficulty in accounts receivable collection, potentially adverse taxes 
and the burdens of complying with a variety of foreign laws.  In 
addition, the Company is subject to general geopolitical risks, such as 
political and economic instability and changes in diplomatic and trade 
relationships, which could affect, among other things, customers' 
ordering patterns and  inventory levels.  There can be no assurance 
that such regulatory, geopolitical, economic and other factors will not 
adversely impact the Company in the future or require ZiLOG to modify 
its current business practices.  In addition, the laws of certain 
foreign countries may not protect the Company's intellectual property 
rights to the same extent as do the laws of the United States. 

The Company operates two primary assembly and test facilities in the 
Philippines through two wholly owned subsidiaries.  ZiLOG has a 
significant capital investment at these facilities.  The Company's 
reliance on personnel and assets and its maintenance of inventories at 
these facilities entails certain political and economic risks, 
including political instability and expropriation, currency controls 
and exchange fluctuations, as well as changes in tax laws, tariff and 
freight rates.  Political stability in the Philippines  appears to  
have increased  markedly  during the  past three  years, but  no  
assurances of continued stability can be given.  The Company has not 
experienced any significant interruptions in its business operations in 
the Philippines to date.  Nonetheless, any loss or disruption of 
production in the Philippines could have a material adverse effect on 
the Company, particularly if operations or air transportation from the 
Philippines were disrupted for a substantial period of time.


INTELLECTUAL PROPERTY RIGHTS.  The Company's ability to compete will be 
affected by its ability to protect its proprietary information.  The 
Company relies primarily on its trade secrets and technological know-
how in the conduct of its business.  There can be no assurance that the 
steps taken by the Company to protect its intellectual property will be 
adequate to prevent misappropriation of its technology or that the 
Company's competitors will not independently develop technologies that 
are substantially equivalent or superior to the Company's technology.  
The semiconductor industry is characterized by frequent claims and 
related litigation regarding patent and other intellectual property 
rights.  There can be no assurance that third parties will not assert 
additional claims or initiate litigation against the Company, its 
foundries or its customers with respect to existing or future products.  
In addition, the Company may initiate claims or litigation against 
third parties for infringement of the Company's proprietary rights or 
to determine the scope and validity of the proprietary rights of the 
Company or others.  Litigation by or against the Company could result 
in significant expense to the Company and divert the efforts of the 
Company's technical and management personnel, whether or not litigation 
is determined in favor of the Company.  In the event of an adverse 
result in any such litigation, the Company could be required to pay 
substantial damages, cease the manufacture, use, sale, offer for sale 
and importation of infringing products, expend significant resources to 
develop or obtain non-infringing technology, discontinue the use of 
certain processes, or obtain licenses to the technology which is the 
subject of the litigation.  There can be no assurance that the Company 
would be successful in such development or acquisition or that any such 
licenses, if available, would be available on commercially reasonable 
terms, and any such development or acquisition could require 
expenditures by the Company of substantial time and other resources.  
Any such litigation or adverse result therefrom could have an adverse 
effect on the Company.  

The Company has been notified by three parties that it may be 
infringing certain patent ownership and other intellectual property 
rights.  In the event the Company determines that such notices may 
involve meritorious claims, the Company may seek a license.  Based on 
industry practice, the Company believes that in most cases any  
necessary  licenses or other rights could  be obtained on commercially 
reasonable terms.  However, no assurance can be given that licenses 
could be obtained on acceptable terms or that litigation will not 
occur.  The failure to obtain necessary licenses or other rights or the 
advent of litigation arising out of such claims could have a material 
adverse effect on the Company.


ENVIRONMENTAL REGULATION.  The Company is subject to a variety of 
government regulations related to the discharge or disposal of 
hazardous materials used in its manufacturing process.  Although the 
Company believes that it is in substantial compliance with all relevant 
regulations and has all permits necessary to conduct its business, the 
failure to comply with present or future regulations or the loss of any 
permit could result in fines being imposed on the Company, limitation 
or suspension of production or cessation of operations.  Compliance 
with any such future regulations could require the Company to acquire  
additional  equipment or to incur  substantial other
expenses.  Any failure by the Company to control the use of, or 
adequately restrict the discharge of, hazardous materials could subject 
it to future liabilities.  Further there can be no assurance that the 
Company will not in the future incur significant expense in connection 
with governmental investigations and/or environmental or employee 
health and safety matters.


RESTRICTIVE DEBT COVENANTS.  The terms of the Notes contain a number of 
significant covenants that, among other things, restrict the ability of 
the Company to dispose of assets, incur additional indebtedness, prepay 
other indebtedness or amend certain debt instruments, pay dividends, 
create liens on assets, enter into sale and leaseback transactions, 
make investments, loans or advances, make acquisitions, engage in 
mergers or consolidations, change the business conducted by the company 
or its subsidiaries, make capital expenditures or engage in certain 
transactions with affiliates and otherwise restrict certain corporate 
activities. 

The Company's ability to comply with such agreements may be affected by 
events beyond its control, including prevailing economic, financial and 
industry conditions.  The breach of any of such covenants or 
restrictions could result in a default, which would permit the holders 
of the Notes, to declare all amounts borrowed thereunder to be due and 
payable, together with accrued and unpaid interest.  



<PAGE>















Part II.  Other Information

Item 6.  Exhibits and Reports on Form 8-K

a) The following exhibits are filed herewith:

        Exhibit 3.5     Certificate of Amendment of Certificate of 
                        Incorporation

        Exhibit 10.17   1998 Long-Term Stock Incentive Plan

        Exhibit 10.18   1998 Executive Officer Stock Incentive Plan

        Exhibit 27      Financial Data Schedule


b) Reports on Form 8-K:
        None.


<PAGE>



































                                   ZILOG, INC.

                                   SIGNATURES

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


Date:    November 17, 1998

                                        ZILOG, INC.


                                       /s/ James M. Thorburn
                                       ----------------------------
                                       James M. Thorburn
                                       Senior Vice President and
                                       Chief Financial Officer
                                       (Principal Financial Officer 
                                       and Duly Authorized Officer)

<PAGE>

































                               INDEX TO EXHIBITS




Exhibit
Number                           Description
-------                          -----------

3.5       Certificate of Amendment of Certificate of 
          Incorporation

10.17     1998 Long-Term Stock Incentive Plan

10.18     1998 Executive Officer Stock Incentive Plan

27        Financial Data Schedule