Employee PowerPoint Presentation

Disclaimer

The following is a brief summary of the terms of the

offer to exchange certain outstanding options to

purchase common stock for new options (the “Offer”).

All statements made within this presentation material

and through related discussions is in no way a

comprehensive representation of the terms of the Offer.

We urge you to read carefully the Offer documents in

their entirety for definitive rules and specifics regarding

the Offer before making a decision to participate.

You should consult your tax advisor regarding your

specific questions with regard to income tax

consequences of the Offer.

Reasons for the Offer to Exchange

ISSI needs to maintain competitive incentive programs

ISSI stock price has been negatively impacted by the

sharp decline in global equity markets

Nearly

all

stock

options

are

currently

“underwater”

and,

therefore, do not provide an incentive to employees

Offer to exchange options is intended to:

–

Restore equity incentives for employees

–

Reduce the number of outstanding options that are significantly

“underwater”

and are unlikely to be exercised

The Offer

Eligible participants may exchange certain existing out-

of-the-money options for new options.

The offering period commenced March 2, 2009 and

closes at 5:00 pm (U.S. Pacific Time) on April 1, 2009.

Eligible participants may elect to participate at any time

during the Offer period.

Who is Eligible to Participate?

Current employees of ISSI or one of our subsidiaries who

own eligible option grants

Employees on an authorized leave of absence

Participation is VOLUNTARY

Officers and members of ISSI’s

board of directors are

NOT eligible for the Offer

Terms of the Offer

You may exchange option grants with an exercise price

equal

greater

than

$6.00

per

share.

Exchanged options will be cancelled on the date the

new options are issued.

Each new option grant will have a different number of

shares, exercise price, and vesting schedule, than each

cancelled option. The remaining term of the new option

will be the same as that of the cancelled option.

Number of Shares

The

Offer

“value-for-value”

exchange

which

will

result in each new option grant representing the right to

purchase fewer shares

than the option tendered for

exchange.

The number of shares represented by each new option

grant was determined using an exchange ratio which

will result in the fair value of the new option being

substantially equal to the fair value of the cancelled

option.

ISSI

established

four

different

exchange

ratios

based

on the exercise price of the options to be cancelled.

Exchange Ratios

Outstanding Option

Exchange

Exercise Price

Ratio

$6.00 -

$6.80

5-for-1

$6.81 -

$9.80

6-for-1

$9.81 -

$13.80

10-for-1

$13.81 and Higher

15-for-1

Example Option Exchanges

Current

New

Price

Ratio

1000

$6.75

5-for-1

200

1200

$7.50

6-for-1

200

500

$10.00

10-for-1

300

$15.00

15-for-1

Individual Option Grants

You can decide to exchange none of your eligible

options, some of your eligible options, or all of your

eligible options.

However,

for

each

individual

option

grant

you

must

either

exchange

all

the

under

that

grant

none

the

shares.

You

cannot

exchange

some

and not others under the same option grant.

Exercise Price of the New Option

The exercise price of the new option will be equal to the

closing price of ISSI common stock as reported on

Nasdaq one business day after the expiration date of

the Offer (currently intended to be April 2, 2009).

Vesting Schedule

The vesting schedule of your new option will be different

from the vesting schedule of your cancelled option.

If your cancelled option was fully vested (generally

outstanding four years or more):

–

New option vests 50% immediately, and 50% at the one year

anniversary of the new grant

If your cancelled option was only partially vested

(generally outstanding less than four years):

–

New option vests 33% immediately; 33% at the one year

anniversary of the new grant; and the remaining 33% at the two

year anniversary of the new grant

New Option Vesting Examples

Fully-vested old option

New option grant of 60

–

30 vest on April 2, 2009

–

30 vest on April 2, 2010

Partially-vested old option

New option grant of 60

–

20 vest on April 2, 2009

–

20 vest on April 2, 2010

–

20 vest on April 2, 2011

Decision Notification and Logistics

Documentation will be sent to you by email. You may

also access the SEC documents through the Investor

Relations section of the ISSI Web site.

Please read all Offer documentation before making a

decision whether to tender your eligible options.

If you decide to participate in the Offer, you will need to

submit a completed Election Form to Thanh Ha (San

Jose) by 5:00 pm (U.S. Pacific Time) on April 1, 2009

per the instructions provided in the Offer

documentation.

Decision Notification and Logistics (cont.)

You are responsible for making sure that the forms are

timely delivered. Late submission will NOT be accepted.

You may withdraw your election at any time during the

Offer period by submitting a valid withdrawal form. The

form will be provided in the Offer documentation.

You are responsible for making sure that the withdrawal

form is timely delivered.

If we extend the date of exchange beyond April 1, 2009

we are required to notify you and provide you with

additional time to determine whether to tender your

options.

Further Questions

If after thoroughly reading the Offer documentation, you

still have questions, please contact one of the following:

–

San Jose

•

TBD

–

Hsinchu

•

TBD

–

Shanghai

•

TBD

–

Hong Kong

•

TBD