10-Q

UNITED STATES

SECURITIES AND 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 December 31, 2012

OR

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

For the transition period from to

Commission file number 000-23084

 __________________________________________

Integrated Silicon Solution, Inc.

(Exact name of registrant as specified in its charter)

 ___________________________________________

Delaware	77-0199971
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1940 Zanker Road, San Jose, California	95112
(Address of principal executive offices)	(Zip Code)

(408) 969-6600

(Registrant’s telephone number, including area code)

______________________________________________________

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  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	ý
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

The number of outstanding shares of the registrant’s Common Stock as of February 1, 2013 was 27,984,171.

TABLE OF CONTENTS

PART I	Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Income for the three months ended December 31, 2012 and 2011 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the three months ended December 31, 2012 and 2011 (Unaudited)	2
	Condensed Consolidated Balance Sheets as of December 31, 2012 (Unaudited) and September 30, 2012	3
	Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2012 and 2011 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	23
PART II	Other Information
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	24
Item 4.	Mine Safety Disclosures	32
Item 6.	Exhibits	33
Signatures		34

References in this Quarterly Report on Form 10-Q to “we,” “us,” “our” and “ISSI” mean Integrated Silicon Solution, Inc. and all entities controlled by Integrated Silicon Solution, Inc.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Integrated Silicon Solution, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

	Three Months Ended December 31,
	2012		2011
Net sales	$	76,399	$	66,164
Cost of sales	51,908		43,966
Gross profit	24,491		22,198
Operating expenses:
Research and development	10,023		7,601
Selling, general and administrative	11,089		9,497
Total operating expenses	21,112		17,098
Operating income	3,379		5,100
Interest and other income, net	268		213
Income before income taxes	3,647		5,313
Provision for income taxes	1,159		1,544
Consolidated net income	2,488		3,769
Net loss attributable to noncontrolling interests	11		21
Net income attributable to ISSI	$	2,499	$	3,790
Basic net income per share	$	0.09	$	0.14
Shares used in basic per share calculation	27,696		26,638
Diluted net income per share	$	0.09	$	0.13
Shares used in diluted per share calculation	29,106		28,333

See accompanying notes to condensed consolidated financial statements.

1

Integrated Silicon Solution, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

	Three Months Ended December 31,
	2012			2011
Consolidated net income	$	2,488		$	3,769
Other comprehensive income (loss), net of tax:
Currency translation adjustments	869			669
Unrealized gains (losses) on investments, net of tax effect of $1,301 in 2012 and $(20) in 2011	5,942			(34		)
Change in retirement plan actuarial losses	25			24
Change in retirement plan transition obligation	(15		)	(15		)
Comprehensive income	$	9,309		$	4,413
Comprehensive loss attributable to noncontrolling interest	11			21
Comprehensive income attributable to ISSI	$	9,320		$	4,434

See accompanying notes to condensed consolidated financial statements.

2

Integrated Silicon Solution, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

	December 31, 2012			September 30, 2012
	(unaudited)			(1)
ASSETS
Current assets:
Cash and cash equivalents	$	79,797		$	75,497
Short-term investments	7,237			6,541
Accounts receivable, net	43,395			47,710
Inventories	69,270			66,964
Deferred tax assets	6,782			8,940
Other current assets	12,663			12,264
Total current assets	219,144			217,916
Property, equipment and leasehold improvements, net	36,808			29,286
Purchased intangible assets, net	7,825			8,226
Goodwill	9,178			9,178
Deferred tax assets	13,736			13,588
Other assets	45,724			38,877
Total assets	$	332,415		$	317,071
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	50,504		$	44,705
Accrued compensation and benefits	6,221			9,420
Accrued expenses	8,160			11,133
Current portion of long-term debt	195			—
Total current liabilities	65,080			65,258
Long-term debt	4,680			—
Other long-term liabilities	5,441			5,478
Total liabilities	75,201			70,736
Commitments and contingencies
Stockholders’ equity:
Common stock	3			3
Additional paid-in capital	332,043			330,473
Accumulated deficit	(87,547		)	(90,046		)
Accumulated other comprehensive income	9,220			2,399
Total ISSI stockholders’ equity	253,719			242,829
Noncontrolling interest	3,495			3,506
Total stockholders’ equity	257,214			246,335
Total liabilities and stockholders’ equity	$	332,415		$	317,071

(1) Derived from audited financial statements.

See accompanying notes to condensed consolidated financial statements.

3

Integrated Silicon Solution, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three Months Ended December 31,
	2012			2011
Cash flows from operating activities
Consolidated net income	$	2,488		$	3,769
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,400			1,354
Stock-based compensation	1,440			1,185
Amortization of intangibles	401			466
Equity in net income of affiliate	79			—
Net foreign currency transaction losses	30			149
Deferred tax assets	580			1,616
Other non-cash items	23			79
Net effect of changes in current and other assets and current liabilities	1,653			(1,022		)
Net cash provided by operating activities	8,094			7,596
Cash flows from investing activities
Acquisition of property, equipment and leasehold improvements	(8,754		)	(1,734		)
Purchases of available-for-sale securities	(3,359		)	—
Proceeds from sales of available-for-sale securities	3,079			322
Cash used in investing activities	(9,034		)	(1,412		)
Cash flows from financing activities
Repurchases and retirement of common stock	(537		)	(455		)
Proceeds from issuance of common stock	667			1,288
Proceeds from borrowings	4,875			—
Proceeds from borrowings under short-term lines of credit	—			4,036
Principal payments of short-term lines of credit	—			(4,036		)
Cash provided by financing activities	5,005			833
Effect of exchange rate changes on cash and cash equivalents	235			93
Net increase in cash and cash equivalents	4,300			7,110
Cash and cash equivalents at beginning of period	75,497			83,863
Cash and cash equivalents at end of period	$	79,797		$	90,973

See accompanying notes to condensed consolidated financial statements.

4

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

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

On January 31, 2011, the Company acquired Si En Integration Holdings Limited (Si En) and the Company’s financial results reflect accounting for Si En on a consolidated basis from the date of acquisition.

On September 14, 2012, the Company acquired Chingis Technology Corporation (Chingis) and the Company’s financial results reflect accounting for Chingis on a consolidated basis from the date of acquisition.

The Company’s operating results for the three months ended December 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2013 or for any other period. The financial statements included herein should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

2. Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Such estimates include the useful lives of fixed assets, the fair value of investments, allowances for doubtful accounts and customer returns, valuation allowances for deferred tax assets, inventory write-downs, potential reserves relating to litigation matters, accrued liabilities, and other reserves. The Company bases its estimates and judgments on its historical experience, knowledge of current conditions and its beliefs of what could occur in the future, given available information. Actual results may differ from those estimates, and such differences may be material to the financial statements.

3. Impact of Recently Issued Accounting Pronouncements

Impact of Recently Adopted Accounting Standards

On October 1, 2012, the Company adopted the following accounting standard, which did not have a material effect on its consolidated results of operations during such period or its financial condition at the end of such period:

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (FASB) amended its guidance on the presentation of comprehensive income. This amendment eliminates the currently available option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. Under this amendment, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In addition, this amendment requires that an entity present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. In December 2011, the FASB further amended its guidance to defer changes related to the presentation of reclassification adjustments indefinitely as a result of concerns raised that the new presentation requirements would be difficult for preparers and add unnecessary complexity to financial statements. The Company elected to present the items of net income and other comprehensive income in two separate, but consecutive statements.

5

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

4. Fair Value Measurements

Under FASB guidance, fair value is defined as the price expected to be received from the sale of an asset or paid to transfer a liability in a transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. The FASB guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that the market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect a company’s judgment concerning the assumptions that market participants would use in pricing the asset or liability developed based on the best information available at that time. The fair value hierarchy is broken down into the following three levels based on the reliability of inputs:

• Level 1 – Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices which are readily and regularly available in an active market, valuation of these products can be done without a significant degree of judgment.

• Level 2 – Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments and model-derived valuations in which all significant inputs and significant value drives are observable in active markets.

• Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

As of December 31, 2012, the Company’s financial assets utilizing Level 1 inputs include investment securities traded on an active securities exchange. The Company did not have any financial assets utilizing Level 2 or Level 3 inputs at December 31, 2012 or September 30, 2012.

The following table represents the Company’s fair value hierarchy for financial assets measured at fair value on a recurring basis:

	December 31, 2012		September 30, 2012
	(Level 1)		(Level 1)
	(In thousands)
Money market instruments (1)	$	29,324	$	34,317
Semiconductor Manufacturing International Corp.
(SMIC) common stock (2)	1,485		1,099
Nanya Technology Corporation (Nanya) common stock (3)	21,719		14,752
	$	52,528	$	50,168

(1) Included in cash and cash equivalents

(2) Included in short-term investments

(3) Included in other assets

There were no transfers in or out of our Level 1 assets during the three months ended December 31, 2012.

As of December 31, 2012, the Company did not have any liabilities or non-financial assets that are measured at fair value on a recurring basis.

6

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Available-for-sale marketable securities consisted of the following:

December 31, 2012	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
				(In thousands)
Money market instruments	$	29,324		$	—	$	—		$	29,324
Certificates of deposit	18,269			—		—			18,269
SMIC common stock	1,099			386		—			1,485
Nanya common stock	16,697			5,022		—			21,719
Total	65,389			5,408		—			70,797
Less: Amounts included in cash, cash equivalents
and restricted cash	(41,841		)	—		—			(41,841		)
	$	23,548		$	5,408	$	—		$	28,956
September 30, 2012	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
				(In thousands)
Money market instruments	$	34,317		$	—	$	—		$	34,317
Certificates of deposit	18,302			—		—			18,302
SMIC common stock	1,099			—		—			1,099
Nanya common stock	16,587			—		(1,835		)	14,752
Total	70,305			—		(1,835		)	68,470
Less: Amounts included in cash, cash equivalents
and restricted cash	(47,177		)	—		—			(47,177		)
	$	23,128		$	—	$	(1,835	)	$	21,293

As of December 31, 2012 and September 30, 2012, the Company had cash, cash equivalents and short-term investments of $47.9 million ($3.8 million of which is in China and subject to exchange control regulations) and $39.3 million, respectively, in foreign financial institutions.

5. Stock-based Compensation

Stock-Based Benefit Plans

The Company grants stock-based compensation awards under its 2007 Incentive Compensation Plan (the 2007 Plan) which permits the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units (RSUs), performance shares and performance units. The Company has outstanding grants under its 2012 Inducement Option Plan (the Inducement Plan) and under prior plans, though no further grants can be made under these plans. At December 31, 2012, 399,000 shares were available for future grant under the 2007 Plan. Options generally vest ratably over a four-year period with a 6-month or 1-year cliff vest and then vesting ratably over the remaining period. Options granted prior to October 1, 2005 expire ten years after the date of grant; options granted after October 1, 2005 expire seven years after the date of the grant. RSUs generally vest annually over periods ranging from two years to four years based upon continued employment with the Company.

In addition, the Company has an Employee Stock Purchase Plan (ESPP) which permits eligible employees to purchase the Company’s common stock through payroll deductions. As approved by the Board of Directors, effective August 1, 2010, shares under the ESPP will be purchased at a price equal to 85% of the lesser of the fair market value of the Company’s common stock as of the first day or the last day of each six-month offering period. The offering periods under the ESPP commence on approximately February 1 and August 1 of each year. At December 31, 2012, 818,000 shares were available for future issuance under the ESPP.

7

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Stock-Based Compensation

The following table outlines the effects of total stock-based compensation.

	Three Months Ended December 31,
	2012		2011
	(In thousands)
Stock-based compensation
Cost of sales	$	43	$	33
Research and development	522		315
Selling, general and administrative	875		837
Total stock-based compensation	1,440		1,185
Tax effect on stock-based compensation	—		—
Net effect on net income	$	1,440	$	1,185

As of December 31, 2012, there was approximately $13.2 million of total unrecognized stock-based compensation expense under the Company’s stock option plans that will be recognized over a weighted-average period of approximately 2.97 years. Future stock option grants will add to this total whereas quarterly amortization and the vesting of the existing stock option grants will reduce this total. In addition, as of December 31, 2012, there was approximately $38,000 of total unrecognized stock-based compensation expense under the Company’s ESPP that will be recognized over a weighted-average period of approximately 1 month.

The Company uses the Black-Scholes option pricing model to estimate the fair value of the options granted and rights to acquire stock granted under the ESPP. The weighted average estimated fair values of stock option grants and rights granted under the ESPP, as well as the weighted average assumptions used in calculating these values during the three month periods ended December 31, 2012 and 2011 were based on estimates at the date of grant as follows:

	Three Months Ended December 31,
	2012			2011
Options
Weighted-average fair value of grants	$	4.32		$	4.48
Expected term in years	4.45			4.37
Estimated volatility	59		%	60		%
Risk-free interest rate	0.52		%	0.68		%
Dividend yield	—		%	—		%

The Company issues RSUs from time to time. The estimated fair value of RSU awards is calculated based on the market price of the Company’s common stock on the date of grant. The weighted average grant date fair value of RSUs granted in the three month periods ended December 31, 2012 and December 31, 2011, was $9.14 per share and $9.36 per share, respectively.

8

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

A summary of the Company’s stock option activity and related information for the three months ended December 31, 2012 follows (number of shares and aggregate intrinsic value are presented in thousands):

	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding at September 30, 2012	5,477		$	6.81
Granted	899		$	9.14
Exercised	(147	)	$	4.53		$	650
Cancelled/Expired	(13	)	$	9.10
Outstanding at December 31, 2012	6,216		$	7.20	4.59	$	13,264
Exercisable at December 31, 2012	3,231		$	5.61	3.30	$	11,398
Vested and expected to vest after December 31, 2012	6,002		$	7.12	4.53	$	13,209

A summary of the Company’s RSU activity and related information for the three months ended December 31, 2012 under the 2007 Plan follows (number of shares and aggregate intrinsic value are presented in thousands):

	Number of Shares		Weighted-Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at September 30, 2012	323		$	8.41
Granted	121		$	9.14
Vested	(157	)	$	9.31	$	1,464
Forfeited	—		$	—
Outstanding at December 31, 2012	287		$	8.23	$	2,584

6. Concentrations

In the three months ended December 31, 2012, revenue from the Company's largest distributor accounted for approximately 14% of the Company's total net sales. In the three months ended December 31, 2012, revenue from the Company's second largest distributor accounted for approximately 11% of the Company's total net sales. In the three months ended December 31, 2011, revenue from the Company's largest distributor accounted for approximately 13% of the Company's total net sales. In the three months ended December 31, 2011, revenue from the Company's second largest distributor accounted for approximately 12% of the Company's total net sales.

7. Inventories

The following is a summary of inventories by major category:

	December 31, 2012		September 30, 2012
	(In thousands)
Purchased components	$	13,648	$	17,059
Work-in-process	21,401		28,921
Finished goods	34,221		20,984
	$	69,270	$	66,964

During the three months ended December 31, 2012 and December 31, 2011, the Company recorded inventory write-downs of $0.8 million and $1.6 million, respectively. The inventory write-downs were predominantly for excess and obsolescence and lower of cost or market issues on certain of the Company's products.

9

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

8.     Other Assets

Other assets consisted of the following:

	December 31, 2012		September 30, 2012
	(In thousands)
Restricted assets	$	347	$	239
Deposits to foundry for capacity	3,500		3,500
Investment in Giantec	4,025		4,025
Other investments	1,921		2,000
Nanya common stock	21,719		14,752
Nanya private placement shares	11,120		11,042
Other	3,092		3,319
	$	45,724	$	38,877

The Company has various deposits including deposits with suppliers for purchase guarantees and for customs clearance. These deposits are included in restricted assets.

In September 2012, the Company invested approximately $27.1 million in Nanya, which was comprised of common shares which are classified as available-for-sale securities and private placement shares which are accounted for on the cost-basis. The Company accounts for the private placement shares it acquired in Nanya on the cost-basis as these securities are restricted and the restrictions do not terminate within one year of the reporting date. In addition, as of December 31, 2012, the Company had pledged $7.1 million of its Nanya private placement shares with Nanya as collateral for the Company's accounts payable. At December 31, 2012, the Company classified its common shares in Nanya as long-term as the Company's intent was to hold these shares for more than one year.

In March 2012, the Company made an equity investment of $2.0 million in a private technology company headquartered in Hong Kong. At December 31, 2012, the Company's ownership interest in such company was approximately 31%. This investment is accounted for under the equity method and the Company's results include its percentage share of such company's results of operations in interest and other income, net.

9. Purchased Intangible Assets

The following tables present details of the Company’s total purchased intangible assets:

	Gross		Accumulated Amortization		Net
	(In thousands)
December 31, 2012
Developed technology	$	4,930	$	1,089	$	3,841
In-process technology (IPR&D)	400		—		400
Customer relationships	3,340		162		3,178
Other	450		44		406
Total	$	9,120	$	1,295	$	7,825
September 30, 2012
Developed technology	$	4,930	$	879	$	4,051
In-process technology (IPR&D)	400		—		400
Customer relationships	3,340		9		3,331
Other	450		6		444
Total	$	9,120	$	894	$	8,226

10

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents details of the amortization expense of purchased intangible assets as reported in the consolidated statements of income:

	Three Months Ended December 31,
	2012		2011
	(In thousands)
Reported as:
Cost of sales	$	210	$	234
Operating expenses	191		232
Total	$	401	$	466

The following table presents the estimated future amortization expense of the Company’s purchased intangible assets at December 31, 2012 (in thousands). The weighted-average remaining amortization period for developed technology, customer relationships and other intangibles is 5.33 years, 5.71 years and 2.71 years, respectively. If the Company acquires additional purchased intangible assets in the future, its future amortization may be increased by those assets. Furthermore, upon completion of the IPR&D projects, the Company will amortize the IPR&D over the useful life of the asset.

Fiscal year
Remainder of 2013	$	1,177
2014	1,466
2015	1,316
2016	1,172
2017	1,172
Thereafter	1,122
Total	$	7,425

10. Borrowings

In December 2012, the Company obtained a bank loan in the amount of $4.9 million (the “Loan”), to partially finance the $6.5 million purchase price of approximately 2.85 acres of land and an approximately 55,612 square foot building located at 1623 Buckeye Drive, Milpitas, California for its corporate headquarters. The Loan has a maturity date of November 30, 2017 and is secured by the property and an assignment of all leases and rents relating to the property. The Loan is subject to customary events of default, including defaults in the payment of principal and interest. The Loan bears an interest rate of one percent above LIBOR adjusted on a monthly basis. Principal payments due under the Loan are as follows (in thousands):

Fiscal year
Remainder of 2013	$	146
2014	195
2015	195
2016	195
2017	195
Thereafter	3,949
Total	$	4,875

11

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

11. Stockholders’ Equity

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

	December 31, 2012			September 30, 2012
	(In thousands)
Accumulated foreign currency translation adjustments	$	6,917		$	6,048
Accumulated net unrealized gain on SMIC	251			—
Accumulated net unrealized gain (loss) on Nanya	4,168			(1,523		)
Accumulated net retirement plan transition obligation	100			115
Accumulated net retirement plan actuarial losses	(2,216		)	(2,241		)
Total accumulated other comprehensive income	$	9,220		$	2,399

12. Income Taxes

The income tax provision includes U.S. federal, state and local, and foreign income taxes and is based on the application of a forecasted annual income tax rate applied to the current quarter's year-to-date pre-tax income for fiscal 2013. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company's annual earnings, taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the Company's ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives. Discrete items, including the effect of changes in tax laws, tax rates, and certain circumstances with respect to valuation allowances or other unusual or non-recurring tax adjustments are reflected in the period in which they occur as an addition to, or reduction from, the income tax provision, rather than being included in the estimated annual effective income tax rate.

For the three months ended December 31, 2012, the Company recorded income tax expense of $1.2 million that represents an effective tax rate of approximately 32% . The difference between the recorded provision for income taxes and the tax provision, based on the federal statutory rate of 35%, was primarily attributable to the differential in foreign tax rates and non-deductible stock-based compensation expense.

For the three months ended December 31, 2011, the Company recorded an income tax expense of $1.5 million that represents an effective tax rate of approximately 29%. The difference between the recorded provision for income taxes and the tax provision, based on the federal statutory rate of 35%, was primarily attributable to the the differential in foreign tax rates and non-deductible stock-based compensation expense.

As of December 31, 2012, the Company had no unrecognized tax positions that would impact its effective tax rate.

12

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

13. Per Share Data

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

	Three Months Ended December 31,
	2012		2011
Numerator for basic and diluted net income per share:
Net income attributable to ISSI	$	2,499	$	3,790
Denominator for basic net income per share:
Weighted average common shares outstanding	27,696		26,638
Dilutive stock options and awards	1,410		1,695
Denominator for diluted net income per share	29,106		28,333
Basic net income per share	$	0.09	$	0.14
Diluted net income per share	$	0.09	$	0.13

For the three months ended December 31, 2012 and December 31, 2011, stock options and awards for 3,256,000 shares and 1,832,000 shares, respectively, were excluded from diluted earnings per share by the application of the treasury stock method.

14. Common Stock Repurchase Program

In the three month period ended December 31, 2012, the Company did not repurchase any shares of its common stock in the open market. As of December 31, 2012, the Company had repurchased and retired an aggregate of 14,179,711 shares of common stock at a cost of approximately $88.5 million since September 2007. As of December 31, 2012, $19.8 million remained available under the Company's existing share repurchase authorization.

The Company issues RSUs as part of its equity incentive plan. For a portion of RSUs granted, the number of shares issued on the date the RSUs vest is net of the statutory withholding requirements that the Company pays on behalf of its employees. During the three months ended December 31, 2012, the Company withheld 34,555 shares to satisfy approximately $0.5 million of employee tax obligations. Although the shares withheld are not issued, they are treated as common stock repurchases for accounting purposes, as they reduce the number of shares that would have been issued upon vesting.

15. Commitments and Contingencies

Patents and Licenses

In the semiconductor industry, it is not unusual for companies to receive notices alleging infringement of patents or other intellectual property rights of others. The Company has been, and from time-to-time expects to be, notified of claims that it may be infringing patents, maskwork rights or copyrights owned by third parties. If it appears necessary or desirable, the Company may seek licenses under patents that it is alleged to be infringing. Although patent holders commonly offer such licenses, licenses may not be offered and the terms of any offered licenses may not be acceptable to the Company. The failure to obtain a license under a key patent or intellectual property right from a third party for technology used by the Company could cause it to incur substantial liabilities and to suspend the manufacture of the products utilizing the invention or to attempt to develop non-infringing products, any of which could materially and adversely affect the Company’s business and operating results. Furthermore, there can be no assurance that the Company will not become involved in protracted litigation regarding its alleged infringement of third party intellectual property rights or litigation to assert and protect its patents or other intellectual property rights. Any litigation relating to patent infringement or other intellectual property matters could result in substantial cost and diversion of the Company’s resources.

Legal Proceedings

DRAM Memory Technologies LLC v. Integrated Silicon Solution, Inc., et al.

On March 11, 2011, a patent infringement suit was filed against the Company and several other semiconductor companies in the United States District Court for the Central District of California by DRAM Memory Technologies LLC, for the alleged infringement of various patents related to certain technology allegedly applicable to DRAM devices (Case No.

13

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

SACV11-00332). The complaint also alleges willful infringement of the patents by the Company and seeks a permanent injunction of the alleged infringing acts by the Company, as well as up to the trebling of unspecified damages. The Company and the plaintiff entered into a settlement and license agreement on March 29, 2012 and are awaiting judicial approval of a Joint Stipulation to Dismiss the litigation with prejudice filed on April 2, 2012.

VAREP GmBH v. Integrated Silicon Solution, Inc.

On August 21, 2012, a lawsuit was filed against the Company in the Superior Court of California, County of Santa Clara by a former independent sales representative based in Germany named Varep GmbH (Varep), for the alleged underpayment of commissions (Case No. 112CV230846).  The complaint alleges 11 causes of action, including, among others, breach of contract, Labor Code violations, and violations of the Independent Wholesale Sales Representatives Contractual Relations Act.  A demurrer by the Company challenging the legal sufficiency of the complaint was sustained with leave to amend and a motion to strike portions of the initial complaint by the Company was granted in part and denied in part. On December 28, 2012, Varep filed a first amended complaint asserting nine causes of action, including, among others, breach of contract and Labor Code violations. On January 7, 2013, the Company filed a demurrer challenging the legal sufficiency of the first amended complaint and a motion to strike portions of the first amended complaint. A hearing is set for February 19, 2013. No party has yet served any discovery requests. The Company believes it has meritorious defenses to the claims alleged by Varep and intends to defend this suit vigorously.

Other Legal Proceedings

In the ordinary course of its business, the Company has been involved in a limited number of other legal actions, both as plaintiff and defendant, and could incur uninsured liability in any one or more of them. Although the outcome of these actions is not presently determinable, the Company believes that the ultimate resolution of these matters will not have a material adverse effect on its financial position, cash flows or results of operations. However, no assurances can be given with respect to the extent or outcome of any such litigation in the future.

Commitments to Wafer Fabrication Facilities and Contract Manufacturers

The Company issues purchase orders for wafers to various wafer foundries. These purchase orders are generally considered to be cancelable. However, to the degree that the wafers have entered into work-in-process at the foundry, as a matter of practice, it becomes increasingly difficult to cancel the purchase order. As of December 31, 2012, the Company had approximately $20.8 million of purchase orders for which the related wafers had been entered into wafer work-in-process (i.e., manufacturing had begun).

16. Geographic and Segment Information

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

	Three Months Ended December 31,
	2012		2011
	(In thousands)
Net sales
United States	$	8,628	$	11,853
China	5,420		2,531
Hong Kong	19,617		14,248
Japan	7,742		8,229
Korea	3,279		3,026
Taiwan	10,342		6,366
Other Asia Pacific countries	6,808		6,171
Europe	14,233		13,382
Other	330		358
Total net sales	$	76,399	$	66,164

14

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

	December 31, 2012		September 30, 2012
	(In thousands)
Long-lived assets
United States	$	6,807	$	440
Hong Kong	8		7
China	680		558
Taiwan	29,313		28,281
	$	36,808	$	29,286

Revenues are attributed to countries based on the customers' ship-to location.

Long-lived assets by geographic area are those assets used in the Company’s operations in each area.

17. Related Party Transactions

The Company sells semiconductor products to Chrontel International Ltd. (Chrontel). Jimmy S.M. Lee, the Company’s Executive Chairman, has been a director of Chrontel since July 1995. Sales to Chrontel were $108,000 and $114,000 during the three month periods ended December 31, 2012 and December 31, 2011, respectively. Accounts receivable from Chrontel was approximately $38,000 and $30,000 at December 31, 2012 and September 30, 2012, respectively.

The Company purchases ASSP products from Giantec Semiconductor, Inc. (Giantec). At December 31, 2012, the Company had approximately a 19.85% ownership interest in Giantec. The Company’s Executive Chairman, Jimmy S.M. Lee, is a director of Giantec. The Company also provides logistic services to Giantec for which it is reimbursed and receives certain licensing fees from Giantec. During the three months ended December 31, 2012, the Company purchased approximately $74,000 of products from Giantec. During the three months ended December 31, 2011, the Company purchased no products from Giantec. Accounts payable to Giantec was approximately $100,000 and $26,000 at December 31, 2012 and September 30, 2012, respectively. During each of the three months ended December 31, 2012 and December 31, 2011, the Company provided Giantec services of approximately $18,000, and received licensing fees from Giantec of approximately $5,000 and $10,000, respectively. Accounts receivable from Giantec was approximately $17,000 and $12,000 at December 31, 2012 and September 30, 2012, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this report that are subject to risks and uncertainties. Forward-looking statements include information concerning possible or assumed future results of our operations. Also, when we use words such as “believes,” “expects,” “anticipates” or similar expressions, we are making forward-looking statements. You should note that an investment in our securities involves certain risks and uncertainties that could affect our future financial results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in “Risk Factors” and elsewhere in this report.

We believe it is important to communicate our expectations to our investors. However, there may be events in the future that we are not able to predict accurately or over which we have no control. The risks described in “Risk Factors” included in this report, as well as any other cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of the events described in “Risk Factors” and elsewhere in this report could harm our business and adversely affect our results.

All forward-looking statements made by us or persons acting on our behalf are expressly qualified in their entirety by the Risk Factors and other cautionary statements set forth in this report. Except as required by federal securities laws, we are under no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Overview

We are a fabless semiconductor company that designs and markets high performance integrated circuits for the following key markets: (i) automotive, (ii) communications, (iii) industrial, medical and military, and (iv) digital consumer. Our primary products are low and medium density DRAM and high speed and low power SRAM. In the first quarter of fiscal 2013 and in fiscal 2012, approximately 86% and 96%, respectively, of our revenue was derived from our DRAM and SRAM products. Sales of our DRAM products have represented a majority of our net sales in each year since fiscal 2003.

On September 14, 2012, we acquired approximately 94.1% of Chingis Technology Corporation (Chingis) for approximately $32 million, or $13 million net of the approximately $19 million in cash and cash equivalents on Chingis' balance sheet at closing. Founded in 1995, Chingis provides a variety of NOR flash memory technologies used in standalone and embedded applications. Chingis is headquartered in HsinChu, Taiwan and has offices in Taiwan, Korea, China and the U.S. Our financial results reflect accounting for Chingis on a consolidated basis beginning September 14, 2012.

On January 31, 2011, we acquired Si En Integration Holdings Limited (Si En), a privately held fabless provider of high performance analog and mixed signal integrated circuits headquartered in Xiamen, China. Si En targets the mobile communications, digital consumer, networking, and automotive markets with high quality analog products. Si En’s current products include audio power amplifiers, LED drivers, voltage converters and temperature sensors.

In order to control our operating expenses, for the past several years we have limited our headcount in the U.S. and maintained much of our operations in Taiwan and China. We believe this strategy has enabled us to limit our operating expenses while simultaneously locating these operations closer to our manufacturing partners and our customers. As a result of these efforts, we currently have significantly more employees in Asia than we do in the U.S. We intend to continue these strategies going forward.

As a fabless semiconductor company, our business model is less capital intensive because we rely on third parties to manufacture, assemble and test our products. Because of our dependence on third-party wafer foundries, our ability to increase our unit sales volumes depends on our ability to increase our wafer capacity allocation from current foundries, add additional foundries and improve yields of good die per wafer. In recent years, it has become more difficult for us to secure long-term foundry capacity (particularly for our DRAM products) due to industry consolidation affecting foundries and adverse financial conditions at foundries.  In this regard, in September 2012, we invested approximately $27.1 million in Nanya and entered into an agreement with Nanya to provide us with access to leading edge process technologies and certain wafer volume guarantees. In addition, certain of our foundries have decided not to produce the type of wafers that we need (especially certain types of DRAM wafers) so we have been forced to rely on alternative sources of supply and to place large last time buy orders which expose us to the risk of inventory obsolescence. Once a product is in production at a particular foundry, it is time consuming and costly to have such product manufactured at a different foundry.  Although such matters have not had a material adverse impact on our business or financial results in recent periods, there can be no assurance as to the future impact that such matters will have on our business, customer relationships or results of operations.

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The average selling prices of our DRAM and SRAM products are sensitive to supply and demand conditions in our target markets and have generally declined over time. We experienced declines in the average selling prices for certain of our products in the first three months of fiscal 2013 and in fiscal 2012. We expect average selling prices for our products to decline in the future, principally due to market demand, market competition and the supply of competitive products in the market. Any future decreases in our average selling prices could have an adverse impact on our revenue growth rate, gross margins and operating margins. Our ability to maintain or increase revenues will be highly dependent upon our ability to increase unit sales volumes of existing products and to introduce and sell new products in quantities sufficient to compensate for the anticipated declines in average selling prices of existing products. Declining average selling prices will adversely affect our gross margins unless we are able to offset such declines with commensurate reductions in per unit costs or changes in product mix in favor of higher margin products.

Revenue from product sales to our direct customers is recognized upon shipment provided that persuasive evidence of a sales arrangement exists, the price is fixed or determinable, title has transferred, collection of resulting receivables is reasonably assured, there are no customer acceptance requirements and there are no remaining significant obligations. A portion of our sales is made to distributors under agreements that provide for the possibility of certain sales price rebates and limited product return privileges. Given the uncertainties associated with credits that will be issued to these distributors, we defer recognition of such sales until our products are sold by the distributors to their end customers. Revenue from sales to distributors who do not have sales price rebates or product return privileges is recognized at the time our products are sold by us to the distributors.

We market and sell our products in Asia, the U.S., Europe and other locations through our direct sales force, distributors and sales representatives. The percentage of our sales shipped outside the U.S. was approximately 89% in the first three months of fiscal 2013, approximately 82% in the first three months of fiscal 2012, approximately 84% in fiscal 2012 and approximately 85% in fiscal 2011. We measure sales location by the shipping destination. We anticipate that sales to international customers will continue to represent a significant percentage of our net sales. The percentages of our net sales by region are set forth in the following table:

	Three Months Ended December 31,				Fiscal Years Ended September 30,
	2012		2011		2012		2011
Asia	70	%	61	%	62	%	64	%
Europe	19		20		21		20
U.S.	11		18		16		15
Other	—		1		1		1
Total	100	%	100	%	100	%	100	%

Our sales are generally made by purchase orders. Because industry practice allows customers to reschedule or cancel orders on relatively short notice, backlog may not be a good indicator of our future sales. Cancellations of customer orders or changes in product specifications could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses.

Due to the complex nature of the markets we serve and the broad fluctuations in economic conditions in the U.S. and other countries, it is difficult for us to assess the impact of seasonal factors on our business.

We are subject to the risks of conducting business internationally, including economic conditions in Asia, particularly Taiwan and China, changes in trade policy and regulatory requirements, duties, tariffs and other trade barriers and restrictions, the burdens of complying with foreign laws and, possibly, political instability. Most of our foundries and all of our assembly and test subcontractors are located in Asia. Although our international sales are largely denominated in U.S. dollars, we do have sales transactions in New Taiwan dollars, in Hong Kong dollars and in Chinese renminbi. In addition, we have foreign operations where expenses are generally denominated in the local currency. Such transactions expose us to the risk of exchange rate fluctuations. We monitor our exposure to foreign currency fluctuations, but have not adopted any hedging strategies to date. There can be no assurance that exchange rate fluctuations will not harm our business and operating results in the future.

Critical Accounting Policies

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

17

what could occur in the future, considering the information available at the time. Actual results could differ from those estimates and such differences may be material to our financial statements. We reevaluate our estimates and judgments on an ongoing basis.

Our critical accounting policies which are impacted by our estimates are: (i) the valuation of our inventory, which impacts cost of goods sold and gross profit; (ii) the valuation of our allowance for sales returns and allowances, which impacts net sales; (iii) the valuation of our allowance for doubtful accounts, which impacts general and administrative expense; (iv) accounting for acquisitions and goodwill, which impacts cost of goods sold and operating expense when we record impairments; (v) accounting for stock-based compensation which impacts costs of goods sold, research and development expense and selling, general and administrative expense and (vi) accounting for income taxes. Each of these policies is described in more detail below. We also have other key accounting policies that may not require us to make estimates and judgments that are as subjective or difficult. For instance, our policies with regard to revenue recognition, including the deferral of revenues on sales to distributors with sales price rebates and product return privileges. These policies are described in the notes to our financial statements contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

Valuation of inventory.    Our inventories are stated at the lower of cost or market value. Determining the market value of inventories on hand and at distributors as of the balance sheet date involves numerous judgments, including projecting average selling prices and sales volumes for future periods and costs to complete products in work in process inventories. When market values are below our costs, we record a charge to cost of goods sold to write down our inventories to their estimated market value in advance of when the inventories are actually sold. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required that may adversely affect our operating results. If actual market conditions are more favorable, we may have higher gross margins when the written down products are sold. In addition to lower of cost or market write-downs, we also analyze inventory to determine whether any of it is excess, obsolete or defective. We write down to zero dollars (which is a charge to cost of goods sold) the carrying value of inventory on hand that has aged over one year (two years for wafer and die bank) to cover estimated excess and obsolete exposures, unless adjustments are made based on management’s judgments for newer products, end of life products, planned inventory increases or strategic customer supply. In making such judgments to write down inventory, we take into account the product life cycles which can range from six to 30 months, the stage in the life cycle of the product, and the impact of competitors’ announcements and product introductions on our products. Once established, these write-downs are considered permanent.

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

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

Accounting for acquisitions and goodwill.    We account for acquisitions using the purchase accounting method. Under this method, the total consideration paid is allocated over the fair value of the net assets acquired, including in-process research and development, with any excess allocated to goodwill. Goodwill is defined as the excess of the purchase price over the fair value allocated to the net assets. Our judgments as to fair value of the assets will, therefore, affect the amount of goodwill that we record. Management is responsible for the valuation of tangible and intangible assets. For tangible assets acquired in any acquisition, such as plant and equipment, the useful lives are estimated by considering comparable lives of similar assets, past history, the intended use of the assets and their condition. In estimating the useful life of the acquired intangible assets with definite lives, we consider the industry environment and unique factors relating to each product relative to our business strategy and the likelihood of technological obsolescence. Acquired intangible assets primarily include developed and in-process technology (IPR&D), customer relationships, trade names and non-compete agreements. The amounts allocated to IPR&D projects are not expensed until technological feasibility is reached for each project. Upon completion of development for each project, the acquired IPR&D will be amortized over its useful life. We are currently amortizing our acquired intangible assets with definite lives over periods generally ranging from three to six years.

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We perform goodwill impairment tests on an annual basis and between annual tests in certain circumstances where indicators of impairment may exist. For instance, in response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of tangible and intangible assets, including goodwill. In this regard, in fiscal 2012, we recorded impairment charges of $13.1 million for intangible assets and goodwill from our acquisition of Si En and $1.2 million for the impairment of certain tangible assets.

Accounting for stock-based compensation.    Stock option fair value is calculated on the date of grant using the Black-Scholes valuation model. The compensation cost is then recognized on a straight-line basis over the requisite service period of the option, which is generally the option vesting term of four years. The Black-Scholes valuation model requires us to estimate key assumptions such as expected term, volatility, dividend yield and risk-free interest rates that determine the stock option fair value. In addition, we estimate forfeitures at the time of grant. In subsequent periods, if actual forfeitures differ from the estimate, the forfeiture rate may be revised. We estimate our expected forfeitures rate based on our historical activity and judgment regarding trends. We estimate the expected term for option grants based upon historical exercise data. If we determined that another method used to estimate expected life was more reasonable than our current method, or if another method for calculating these input assumptions was prescribed by authoritative guidance, the fair value calculated could change materially.

Accounting for income taxes.    We account for income taxes under the asset and liability approach. We record a valuation allowance to reduce our net deferred tax assets to the amount that we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consider historical levels of income, projections of future income, expectations and risks associated with estimates of future taxable income, and ongoing prudent and practical tax planning strategies. To the extent we believe it is more likely than not that some portion of our deferred tax assets will not be realized, we would increase the valuation allowance against the deferred tax assets. Realization of our deferred tax assets is dependent primarily upon future U.S. and foreign taxable income. Our judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. These changes, if any, may require possible material adjustments to these deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period when such determinations are made.

We are subject to income taxes in the U.S. and foreign countries, and we are subject to routine corporate income tax audits in certain of these jurisdictions. We believe that our tax return positions are fully supported, but tax authorities may challenge certain positions, which may not be fully sustained. Our income tax expense includes amounts intended to satisfy income tax assessments that result from these challenges. Determining the income tax expense for these potential assessments and recording the related assets and liabilities requires management judgment and estimates. We evaluate our uncertain tax positions and believe that our provision for uncertain tax positions, including related interest and penalties, is adequate based on information currently available to us. However, the amount ultimately paid upon resolution of audits could be materially different from the amounts previously included in income tax expense and therefore could have a material impact on our tax provision, net income and cash flows. Our overall tax provision requirement could change due to the issuance of new regulations or new case law, management's judgments on undistributed foreign earnings including judgments about and intentions concerning our future operations, negotiations with tax authorities, resolution with respect to individual audit issues, or the entire audit, or the expiration of statutes of limitations.

Accounting Changes and Recent Accounting Pronouncements

For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated condensed financial statements, see “Note 3: Impact of Recently Issued Accounting Pronouncements” in the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

Three Months Ended December 31, 2012 Compared to Three Months Ended December 31, 2011

Net Sales. Net sales consist principally of total product sales less estimated sales returns. Net sales increased to $76.4 million in the three months ended December 31, 2012 from $66.2 million in the three months ended December 31, 2011. The increase of $10.2 million was primarily the result of $9.0 million of NOR Flash revenue from our acquisition of Chingis which closed on September 14, 2012. Our DRAM and SRAM revenue increased by $2.0 million in the three months ended December 31, 2012 compared to the three months ended December 31, 2011 principally as a result of changes in the type of DRAM and SRAM products sold. However, our analog revenue decreased by $0.8 million in the three months ended December 31, 2012 compared to the three months ended December 31, 2011. We anticipate that the average selling prices of our existing products will generally decline over time, although the rate of decline may fluctuate for certain products. There can be no assurance that any future price declines will be offset by higher volumes or by higher prices on newer products.

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In the three months ended December 31, 2012, revenue from our largest and second largest distributor accounted for approximately 14% and 11%, respectively, of our total net sales. In the three months ended December 31, 2011, revenue from our largest and second largest distributor accounted for approximately 13% and 12%, respectively, of our total net sales.

Gross profit. Cost of sales includes die cost from wafers acquired from foundries, subcontracted package, assembly and test costs, costs associated with in-house product testing, quality assurance and import duties. Gross profit increased by $2.3 million to $24.5 million in the three months ended December 31, 2012 from $22.2 million in the three months ended December 31, 2011 primarily as a result of sales of our NOR Flash products. Our gross margin was 32.1% in the three months ended December 31, 2012 which included a charge of 1.1% for inventory write-downs compared to 33.5% in the three months ended December 31, 2011 which included a 2.5% charge for inventory write-downs. Excluding the impact of the inventory write-downs, the decrease in gross margin in the three months ended December 31, 2012 compared to the three months ended December 31, 2011 can be attributed to the unfavorable impact in the current period of lower margin NOR flash products. We believe that the average selling prices of our products will decline over time and, unless we are able to reduce our cost per unit to the extent necessary to offset such declines, the decline in average selling prices could result in a material decline in our gross margin. In addition, our product costs could increase if our suppliers raise prices, which could result in a material decline in our gross margin. Although we have product cost reduction programs in place that involve efforts to reduce internal costs and supplier costs, there can be no assurance that product costs will be reduced or that such reductions will be sufficient to offset the expected declines in average selling prices. We do not believe that such cost reduction efforts are likely to have a material adverse impact on the quality of our products or the level of service provided by us.

Research and Development. Research and development expenses increased by 32% to $10.0 million in the three months ended December 31, 2012 compared to $7.6 million in the three months ended December 31, 2011. As a percentage of net sales, research and development expenses increased to 13.1% in the three months ended December 31, 2012 from 11.5% in the three months ended December 31, 2011. The increase in research and development expenses of $2.4 million was primarily the result of a $1.8 million increase in research and development expenses for our NOR flash products as a result of our acquisition of Chingis. In addition, headcount related and product development costs increased in the three months ended December 31, 2012 compared to the three months ended December 31, 2011. We expect the dollar amount of our research and development expenses to remain relatively flat in the March 2013 quarter and expect such expenses to fluctuate as a percentage of net sales depending on our overall level of sales.

Selling, General and Administrative. Selling, general and administrative expenses increased by 17% to $11.1 million in the three months ended December 31, 2012 from $9.5 million in the three months ended December 31, 2011. As a percentage of net sales, selling, general and administrative expenses increased to 14.5% in the three months ended December 31, 2012 from 14.4% in the three months ended December 31, 2011. The increase in selling, general and administrative expenses of $1.6 million was primarily the result of a $1.0 million increase in expenses as a result of our acquisition of Chingis. In addition, increases in headcount related expenses and professional services fees in the three months ended December 31, 2012 compared to the three months ended December 31, 2011 were partially offset by a reduction in amortization of certain intangible assets from our acquisition of Si En which were written-off in the September 2012 quarter. We expect the dollar amount of our selling, general and administrative expenses to remain relatively flat in the March 2013 quarter and expect such expenses to fluctuate as a percentage of net sales depending on our overall level of sales.

Interest and other income, net. Interest and other income, net was $0.3 million in the three months ended December 31, 2012 compared to $0.2 million in the three months ended December 31, 2011. The $0.3 million of interest and other income in the three months ended December 31, 2012 is comprised primarily of rental income from the lease of excess space in our Taiwan facility. The $0.2 million of interest and other income in the three months ended December 31, 2011 is comprised primarily of rental income of $0.3 million from the lease of excess space in our Taiwan facility offset by foreign exchange losses of $0.1 million.

Provision for income taxes. For the three months ended December 31, 2012, we recorded income tax expense of $1.2 million that represents an effective tax rate of approximately 32%. The difference between the recorded provision for income taxes and the tax provision, based on the federal statutory rate of 35%, was primarily attributable to the differential in foreign tax rates and non-deductible stock-based compensation expense. For the three months ended December 31, 2011, we recorded income tax expense of $1.5 million that represents an effective tax rate of approximately 29%. The difference between the recorded provision for income taxes and the tax provision, based on the federal statutory rate of 35%, was primarily attributable to the differential in foreign tax rates and non-deductible stock-based compensation expense.

Net loss attributable to noncontrolling interests. The net loss attributable to noncontrolling interests was $11,000 in the three months ended December 31, 2012 compared to $21,000 in the three months ended December 31, 2011.

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Liquidity and Capital Resources

As of December 31, 2012, our principal sources of liquidity included cash, cash equivalents and short-term investments of approximately $87.0 million. During the three months ended December 31, 2012, we generated cash of $8.1 million from operating activities compared to $7.6 million generated in the three months ended December 31, 2011. The cash provided by operations in the three months ended December 31, 2012 was primarily due to our net income of $2.5 million adjusted for non-cash items of $3.9 million, increases in accounts payable of $5.5 million and decreases in accounts receivable of $4.4 million. This was partially offset by decreases in accrued liabilities of $6.1 million, increases in inventories of $1.9 million and increases in other assets of $0.2 million. The cash provided by operations in the three months ended December 31, 2011 was primarily due to our net income of $3.8 million adjusted for non-cash items of $4.8 million and decreases in inventories of $5.9 million and decreases in accounts receivable of $4.2 million. This was partially offset by decreases in accounts payable of $7.3 million, decreases in accrued liabilities of $1.2 million, and increases in other assets of $2.6 million.

In the three months ended December 31, 2012, we used $9.0 million for investing activities compared to $1.4 million used in the three months ended December 31, 2011. The cash used in the three months ended December 31, 2012 included $8.7 million for the acquisition of property, equipment and building improvements including $6.5 million for our new corporate headquarters and $0.3 million from net purchases of available-for-securities. The cash used in the three months ended December 31, 2011 included $1.7 million for the acquisition of property, equipment and leasehold improvements. In the three months ended December 31, 2011, we generated $0.3 million from net sales of available-for-sale securities.

In the three months ended December 31, 2012, we made capital expenditures of approximately $8.7 million which includes $6.5 million for our new corporate headquarters and the balance for test equipment, engineering tools, and computer hardware and software compared to $1.7 million in the three months ended December 31, 2011. We expect to spend approximately $8.5 million to $11.5 million to purchase property, building improvements and capital equipment during the next twelve months, including approximately $2.4 million for building improvements for our new corporate headquarters, and the balance for additional test equipment, design and engineering tools, and computer hardware. We expect to fund our capital expenditures for fiscal 2013 from our existing cash and cash equivalent balances.

We generated $5.0 million from financing activities during the three months ended December 31, 2012 compared to $0.8 million during the three months ended December 31, 2011. Our sources of financing for the three months ended December 31, 2012 were borrowings of $4.9 million to purchase our new corporate headquarters and proceeds from the issuance of common stock of $0.7 million from stock option exercises. In the three months ended December 31, 2012, we used $0.5 million to settle shares withheld for statutory withholding requirements upon the vesting of RSUs. Our sources of financing for the three months ended December 31, 2011 were proceeds from the issuance of common stock of $1.3 million from stock option exercises and borrowings of $4.0 million under short-term lines of credit. In the three months ended December 31, 2011, we used $4.0 million for the repayment of short-term borrowings and $0.5 million to settle shares withheld for statutory withholding requirements upon the vesting of RSUs.

We have $18.6 million in borrowings available through a number of short-term lines of credit with various financial institutions in Taiwan. These lines of credit expire at various times through November 2013. As of December 31, 2012, we had no outstanding borrowings under these short-term lines of credit.

We lease approximately 30,000 square feet of office space in San Jose for our headquarters and the lease on this building expires in June 2013. On December 4, 2012, we purchased a building in Milpitas, California consisting of approximately 55,612 square feet on approximately 2.85 acres for $6.5 million. We plan to relocate our headquarters to this location prior to the expiration of our current lease. We financed a portion of the purchase price for our new headquarters with a loan for approximately $4.9 million. Outside of the U.S., we have operations in leased sites in China and Hong Kong. In addition to these sites, we lease sales offices in the U.S., Europe and Asia. These leases expire at various dates through 2014. In Taiwan, we own and occupy our building and the land upon which our building is situated is leased under an operating lease that expires in March 2016. Our outstanding commitments under these leases were approximately $1.7 million at December 31, 2012.

We generally warrant our products against defects in materials and workmanship for a period of 12 months. Liability for a stated warranty period is usually limited to the replacement of defective items or return of amounts paid. Warranty expense has historically been immaterial to our financial statements.

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Our contractual cash obligations at December 31, 2012 are outlined in the table below:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(In thousands)
Operating leases	$	1,703	$	896	$	689	$	118	$	—
Borrowings	4,875		146		390		390		3,949
Purchase obligations with wafer foundries	20,797		20,797		—		—		—
Acquisition related liability	2,425		2,425		—		—		—
Total contractual cash obligations	$	29,800	$	24,264	$	1,079	$	508	$	3,949

At December 31, 2012, we had outstanding authorization from our Board to purchase up to $19.8 million of our common stock from time to time.

We believe our existing funds will satisfy our anticipated working capital and other cash requirements through at least the next 12 months. We may from time to time take actions to further increase our cash position through equity or debt financings, sales of shares of investments, additional bank borrowings, or the disposition of certain assets. From time to time, we may also commit to acquisitions or equity investments, including strategic investments in or prepayments to wafer fabrication foundries or assembly and test subcontractors. To the extent we enter into such transactions, any such transaction could require us to seek additional equity or debt financing to fund such activities. There can be no assurance that any such additional financing could be obtained on terms acceptable to us, if at all.

Off-Balance Sheet Arrangements

We may be obligated to indemnify certain customers, distributors, suppliers, and subcontractors for attorney fees and damages and costs awarded against these parties in certain circumstances in which our products are alleged to infringe third party intellectual property rights, including patents, registered trademarks, or copyrights. In certain cases, there are limits on and exceptions to our potential liability for indemnification relating to intellectual property infringement claims. In addition, we have entered into indemnification agreements with our officers and directors, and the Company’s bylaws provide that indemnification may be provided to our agents. We have directors’ and officers’ insurance pursuant to which we may be reimbursed for certain indemnity expenses, subject to the terms of the insurance policy. We cannot estimate the amount of potential future indemnity expenses that we may be required to make. The amount of available directors’ and officers’ insurance may not be sufficient to cover our indemnity obligations, which may have a material adverse effect on our results of operations in future periods.

Other than as set forth above, we are not currently party to any off-balance sheet arrangements as defined in Item 303 (a)(4)(ii) of SEC Regulation S-K.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Risk.    We anticipate that international sales will continue to account for a significant portion of our consolidated revenue. Our international sales are largely denominated in U.S. dollars and therefore are not subject to material foreign currency exchange risk. However, we have operations in China, Europe, Taiwan, Hong Kong, India, Japan, Korea and Singapore where our expenses are denominated in each country’s local currency and are subject to foreign currency exchange risk. In the three months ended December 31, 2012 and in fiscal 2012, we recorded exchange losses of approximately $30,000 and $0.6 million, respectively. We do not currently engage in any hedging activities. In the future, if we feel our foreign currency exposure has significantly increased, we may consider entering into hedging transactions to help mitigate that risk.

Interest Rate Risk.    We had cash, cash equivalents and short-term investments of $87.0 million at December 31, 2012. These funds were primarily invested in money market funds and certificates of deposit. Due to the relatively short-term nature of our investment portfolio, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. We believe a hypothetical 100 basis point increase in interest rates would not materially affect the fair value of our interest-sensitive financial instruments. Since we believe we have the ability to liquidate this portfolio, we do not expect our operating results or cash flows to be materially affected to any significant degree by a sudden change in market interest rates on our investment portfolio.

Investments in Publicly Traded Companies.    We own ordinary shares in SMIC which is classified as an available-for-sale investment and is recorded at fair value with the unrealized gain or loss reported as a component in “Accumulated other comprehensive loss” in our Consolidated Balance Sheets. The original cost basis of our shares in SMIC was approximately $3.4 million and the market value at December 31, 2012 was approximately $1.5 million and is included in short-term investments.

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The market value of SMIC shares is subject to fluctuations and our carrying value will be subject to adjustments to reflect changes in SMIC’s market value in future periods. The fair value of our SMIC stock would be approximately $1.6 million or $1.3 million, respectively, based on a hypothetical 10 percent increase or 10 percent decrease in SMIC’s stock price. In the event the decline in the market value of our SMIC shares below our cost basis is determined to be other-than-temporary, we would be required to recognize a loss on our investment through our operating results. In this regard, in September 2012, we recorded a $2.3 million charge in our statement of operations as we determined that the decline in the value of our shares in SMIC was other-than temporary.

In September 2012, we invested approximately $27.1 million in Nayna which was comprised of private placement shares which are accounted for on the cost basis and common shares which are classified as an available-for-sale investment and are recorded at fair value with the unrealized gain or loss reported as a component in “Accumulated other comprehensive income” in our Consolidated Balance Sheets. The total cost basis of our common shares in Nanya is approximately $16.7 million and the market value at December 31, 2012 was approximately $21.7 million and is included in other assets. The market value of Nanya shares is subject to fluctuations and our carrying value will be subject to adjustments to reflect changes in Nanya’s market value in future periods. The fair value of our Nanya stock would be approximately $23.9 million or $19.5 million, respectively, based on a hypothetical 10 percent increase or 10 percent decrease in Nanya's stock price. In the event the decline in the market value of our Nanya shares below our cost basis is determined to be other-than-temporary, we would be required to recognize a loss on our investment through our operating results.

Item 4.Controls and Procedures

Our Chief Executive Officer and our Chief Financial Officer, based on the evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that, as of December 31, 2012, our disclosure controls and procedures were effective to ensure that the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Chingis operated under its own set of systems and internal controls. Following our acquisition of Chingis on September 14, 2012, we began to transition certain of Chingis' processes to our internal control processes; however, we are separately maintaining many of Chingis' internal controls until we are able to complete the integration of Chingis' operations into our systems and control environment. We currently expect this transition to be complete by the end of fiscal 2013.

Other than with the respect to our transition of Chingis to our systems and control environment as described above, during the three months ended December 31, 2012, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1.Legal Proceedings

DRAM Memory Technologies LLC v. Integrated Silicon Solution, Inc., et al.

On March 11, 2011, a patent infringement suit was filed against us and several other semiconductor companies in the United States District Court for the Central District of California by DRAM Memory Technologies LLC, for the alleged infringement of various patents related to certain technology allegedly applicable to DRAM devices (Case No. SACV11-00332). The complaint also alleges willful infringement of the patents by us and seeks a permanent injunction of the alleged infringing acts by us, as well as up to the trebling of unspecified damages. We and the plaintiff entered into a settlement and license agreement on March 29, 2012 and are awaiting judicial approval of a Joint Stipulation to Dismiss the litigation with prejudice filed on April 2, 2012.

VAREP GmBH v. Integrated Silicon Solution, Inc.

On August 21, 2012, a lawsuit was filed against us in the Superior Court of California, County of Santa Clara by a former independent sales representative based in Germany named Varep GmbH (Varep), for the alleged underpayment of commissions(Case No. 112CV230846).  The complaint alleges 11 causes of action, including, among others, breach of contract, Labor Code

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violations, and violations of the Independent Wholesale Sales Representatives Contractual Relations Act.  A demurrer by us challenging the legal sufficiency of the Complaint was sustained with leave to amend and a motion to strike portions of the initial complaint by us was granted in part and denied in part. On December 28, 2012, Varep filed a First Amended Complaint asserting nine causes of action, including, among others, breach of contract and Labor Code violations. On January 7, 2013, we filed a demurrer challenging the legal sufficiency of the first amended complaint and a motion to strike portions of the first amended complaint. A hearing is set for February 19, 2013. No party has yet served any discovery requests. We believe we have meritorious defenses to the claims alleged by Varep and intend to defend this suit vigorously.

Other Legal Proceedings

In the ordinary course of our business, as is common in the semiconductor industry, we have been involved in a limited number of other legal actions, both as plaintiff and defendant, and could incur uninsured liability in any one or more of them. Although the outcome of these actions is not presently determinable, we believe that the ultimate resolution of these matters will not have a material adverse effect on our financial position, cash flows or results of operations. However, no assurances can be given with respect to the extent or outcome of any such litigation in the future.

Item 1A. Risk Factors

Uncertain economic conditions and any future downturn in the automotive market or other markets we serve are expected to adversely affect our business and financial results.

Substantially all of our products are incorporated into products for the automotive, communications, industrial, medical and military, and digital consumer electronics markets. In particular, in the three months ended December 31, 2012 and in fiscal 2012, approximately 45% and 41%, respectively, of our sales were to the automotive market and any future downturn in this market would have a material adverse effect on our revenue and profitability. Historically, the automotive, communications, industrial, medical and military, and digital consumer electronics markets have experienced cyclical depressed business conditions, often in connection with, or in anticipation of, a decline in general economic conditions, or due to adverse supply and demand conditions in such markets. Industry downturns have resulted in reduced demand and declining average selling prices for our products which adversely affected our business. During uncertain economic conditions, our current or potential customers may delay or reduce purchases of our products which would adversely affect our revenues and harm our business and financial results. In addition, any uncertainty in the economy may negatively impact the spending patterns of businesses including our current and potential customers. We expect our business to be adversely impacted by any further downturn in the U.S. or global economies.

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

In the first quarter of fiscal 2013 and in fiscal 2012, approximately 86% and 96%, respectively, of our net sales were derived from the sale of DRAM and SRAM products, which are subject to unit volume fluctuations and declines in average selling prices that could harm our business. While our total revenue increased in the December 2012 quarter, our DRAM and SRAM revenue declined 4.9% in the December 2012 quarter from the September 2012 quarter due to continuing weakness in the communications market. We also experienced a sequential decline in revenue from $66.2 million in the December 2011 quarter to $62.5 million in the March 2012 quarter primarily as a result of a decrease in unit shipments of our DRAM products. We experienced a sequential decline in revenue from $71.3 million in our September 2011 quarter to $66.2 million in our December 2011 quarter partially as a result of a decrease in unit shipments of our SRAM products. We may not be able to offset any future price declines for our products by higher volumes or by higher prices on newer products. While we experienced increases in the average selling prices for certain of our products in fiscal 2011, fiscal 2012, and the first quarter of fiscal 2013, historically, average selling prices for semiconductor memory products have declined, and we expect that average selling prices for our products will decline in the future. Our ability to maintain or increase revenues will depend upon our ability to increase unit sales volume of existing products and introduce and sell new products that compensate for the anticipated declines in the average selling prices of our existing products.

If we are unable to obtain an adequate supply of wafers due to industry consolidation involving foundries, financial difficulties at foundries or other reasons, our business will be harmed unless we are able to secure alternative capacity in a timely manner and on reasonable terms.

If we are unable to obtain an adequate supply of wafers from our current suppliers or any alternative sources in a timely manner and on reasonable terms, our business will be severely harmed. Our principal manufacturing relationships are with Nanya, Powerchip Semiconductor, SMIC, TSMC, Global Foundries, Hynix and IBM. Each of our wafer foundries also supplies wafers to other semiconductor companies, including certain of our competitors or for their own account. Although we are allocated wafer capacity from our key suppliers, we may not be able to obtain such capacity in periods of tight supply. If any of our suppliers

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experience manufacturing failures or yield shortfalls, severe financial or operational difficulties, choose to prioritize capacity for other uses, or reduce or eliminate deliveries to us for any other reason, we may not be able to obtain enough wafers to meet the market demand for our products which would adversely affect our revenues. In recent years, it has been more difficult for us to secure long-term foundry capacity (particularly for our DRAM products) due to industry consolidation affecting foundries and adverse financial conditions at foundries. From time to time, certain of our wafer foundries have announced that they will no longer produce a specific type of wafer we may need (especially certain types of DRAM wafers). In such event, we have had to and expect in the future to have to place large last time buy orders which expose us to the risk of inventory obsolescence. In this regard, in the September 2012 quarter, we took delivery of a large quantity of DRAM wafers as the result of a last time buy with one of our foundries. Once a product is in production at a particular foundry, it is time consuming and costly to have such product manufactured at a different foundry. In addition, we may not be able to qualify additional manufacturing sources for existing or new products in a timely manner and we cannot be certain that other manufacturing sources would be able to deliver an adequate supply of wafers to us or at the same cost.

Foundry capacity can be limited, resulting in higher wafer prices, and we have had to enter into special arrangements to secure foundry capacity.

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

• option payments or other prepayments to foundries;

• increased prices for wafers;

• purchases of equity or debt securities in foundries;

• joint ventures;

• process development relationships with foundries;

• contracts that commit us to purchase specified quantities of wafers over extended periods; and

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

In this regard, in September 2012, we invested approximately $27.1 million in Nanya and entered into an agreement with Nanya to provide us with access to leading edge process technologies and certain wafer volume guarantees.

In the future, we may not be able to make arrangements for needed foundry capacity in a timely fashion or at all, and such arrangements, if any, may not be on terms favorable to us. Once we make commitments to secure foundry capacity, we may incur significant financial penalties if we subsequently determine that we are not able to utilize all of that capacity. Such penalties may be substantial and could harm our financial results. In addition, we must be able to secure sufficient assembly and test capacity from third-party contractors. In order to secure such capacity, we are exposed to some of the same risks we face when securing foundry capacity. In the past, we have purchased testing equipment for use by our contractors to satisfy a portion of our capacity needs. If we are not able to secure required assembly and test capacity, our business and customer relationships would be harmed.

We rely on third-party contractors to fabricate, assemble and test our products. Our business is highly dependent on the continued operations of such contractors and our failure to successfully manage our relationships with these contractors could damage our relationships with our customers, decrease our sales and limit our growth.

We rely on third-party contractors located in Asia to fabricate, assemble and test our products. Any uncertain economic conditions or uncertainty in the U.S. and global credit markets could materially impact the financial condition or operations of our third-party contractors such as our wafer foundries, test contractors and assembly contractors. Our business is highly dependent on the continued operations of such contractors. Any deterioration in the financial condition of our contractors or any disruption in the operations of our contractors could adversely impact the flow of our products to our end customers and materially adversely impact our business and results of operation. In recent years, several foundries have experienced financial difficulties and have filed for bankruptcy protection, substantially reduced their operations or been acquired by competing companies. There are significant risks associated with our reliance on these third-party contractors, including:

• potential price increases;

• possible capacity shortages;

• foundries ceasing production of wafer types that we need;

• financial viability of our foundries or other contractors;

• reduced control over product quality;

• reduced control over delivery schedules;

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• their inability to increase production and achieve acceptable yields on a timely basis;

• absence of long-term agreements;

• limited warranties on products supplied to us;

• impact of foreign exchange rates on our product costs; and

• general risks related to conducting business internationally.

If any of these risks are realized, our business and results of operations could be adversely affected until our subcontractor is able to remedy the problem or until we are able to secure an alternative subcontractor.

Our foundries may experience lower than expected yields which could adversely affect our business.

The manufacture of integrated circuits is a highly complex and technically demanding process. Production yields and device reliability can be affected by a large number of factors. As is typical in the semiconductor industry, our foundries have from time to time experienced lower than anticipated manufacturing yields and device reliability problems, particularly in connection with the introduction of new products and changes in such foundry’s processing steps. There can be no assurance that our foundries will not experience lower than expected manufacturing yields or device reliability problems in the future, which could materially and adversely affect our business and operating results.

Our operating results are expected to continue to fluctuate and may not meet our financial guidance or published analyst forecasts. This may cause the price of our common stock to decline significantly.

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

• changes in the global economy;

• changes in business conditions in our key markets especially the automotive market;

• shortages in foundry, assembly or test capacity;

• the cyclicality of the semiconductor industry;

• declines in average selling prices of our products;

• changes in our product mix which could reduce our gross margins;

• disruption in the supply of wafers, assembly or test services;

• changes in the pricing for wafers or assembly or test services;

• oversupply of memory or analog products in the market;

• inventory write-downs for lower of cost or market or excess and obsolete;

• cancellation of existing orders or the failure to secure new orders;

• excess inventory levels at our customers;

• decreases in the demand for our memory or analog products;

• our ability to control or reduce our operating expenses;

• fluctuations in foreign currencies relative to the U.S. dollar

• increased expenses associated with new product introductions, masks or process changes;

• the ability of customers to make payments to us;

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

• market acceptance of ours and our customers’ products;

• a failure to anticipate changing customer product requirements;

• fluctuations in manufacturing yields at our suppliers;

• fluctuations in product quality resulting in rework, replacement, or loss due to damages;

• a failure to deliver products to customers on a timely basis;

• the timing of significant orders;

• the outcome of any pending or future litigation; and

• the commencement of any future litigation or antidumping proceedings.

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Shifts in industry-wide capacity may cause our results to fluctuate. These shifts may occur quickly with little or no advance notice. Such shifts have historically resulted in significant inventory write-downs.

The semiconductor industry is highly cyclical and is subject to significant downturns resulting from excess capacity, overproduction, reduced demand or technological obsolescence. Shifts in industry-wide capacity from shortages to oversupply or from oversupply to shortages may result in significant fluctuations in our quarterly or annual operating results. These shifts in industry conditions can occur quickly with little or no advance notice to us. Adverse changes in industry conditions are likely to result in a decline in average selling prices and the stated value of our inventory. In the first quarter of fiscal 2013, in fiscal 2012, and in fiscal 2011, we recorded inventory write-downs of $0.8 million, $5.7 million, and $3.5 million, respectively. These inventory write-downs related to valuing our inventory at the lower-of-cost-or-market, and adjusting our inventory valuation for certain excess and obsolete products.

Differences in forecasted average selling prices used in calculating lower of cost or market adjustments can result in significant changes in the estimated net realizable value of inventory and accordingly the amount of write-down recorded. If the estimated market value of products in inventory at quarter-end is below the manufacturing cost of these products, we will recognize charges to write down the carrying value of our inventories to market value. In addition, we write down to zero dollars the carrying value of inventory on hand that has aged over one year (two years for wafer and die bank) to cover estimated excess and obsolete exposures, unless adjustments are made based on management’s judgments for newer products, end of life products, planned inventory increases or strategic customer supply. In making such judgments to write down inventory, management takes into account the product life cycles which can range from six to 30 months, the stage in the life cycle of the product, the impact of competitors’ announcements and product introductions on our products. Future additional inventory write-downs may occur due to lower of cost or market accounting, excess inventory or inventory obsolescence.

Strong competition in the semiconductor market may harm our business.

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

• the pricing of our products;

• the supply and cost of wafers;

• product design, functionality, performance and reliability;

• successful and timely product development;

• the performance of our competitors and their pricing policies;

• wafer manufacturing over or under capacity;

• real or perceived imbalances in supply and demand for our products;

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

• the success of our customers’ products and end-user demand;

• access to advanced process technologies at competitive prices;

• achievement of acceptable yields of functional die;

• the capacity of our third-party contractors to assemble and test our products;

• the gain or loss of significant customers;

• the nature of our competitors;

• our financial strength and the financial strength of our competitors; and

• general economic conditions.

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

We may encounter difficulties in effectively integrating newly acquired businesses.

From time to time, we have acquired and expect in the future to acquire other companies or assets that we believe to be complementary to our business. In this regard, in September 2012, we acquired Chingis Technology Corporation (Chingis), a provider of NOR flash memory technologies used in standalone and embedded applications headquartered in Taiwan. In addition, in January 2011, we acquired Si En Integration Holding Limited (Si En), a privately held fabless provider of high performance

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analog and mixed signal integrated circuits headquartered in Xiamen, China. Acquisitions may result in the use of our cash resources, potentially dilutive issuances of equity securities, incurrence of debt and contingent liabilities, amortization expenses related to intangible assets, and the possible impairment of goodwill, which could harm our profitability. In addition, acquisitions (including our acquisition of Chingis) involve numerous risks, including:

• lower than expected sales of any acquired products;

• the risk that the markets for acquired products do not develop as expected;

• difficulties in continuing to develop new technologies and deliver products to market on time;

• the potential loss of key employees and customers as a result of the acquisition;

• difficulties in successfully assimilating the operations, technologies and personnel of the acquired company;

• diversion of management’s attention from other business concerns;

• risks of entering markets in which we have no, or limited, direct prior experience; and

• higher than estimated acquisition expenses.

There is no assurance that any of our recent or future acquisitions will contribute positively to our business or operating results.

The loss of a significant customer or a reduction in orders from one or more large customers could adversely affect our operating results.

As sales to our customers are executed pursuant to purchase orders and no purchasing contracts typically exist, our customers can cease doing business with us at any time. We may not be able to retain our key customers, such customers may cancel or reschedule orders, and in the event of canceled orders, such orders may not be replaced by other sales. In addition, sales to any particular customer may fluctuate significantly from quarter to quarter, and such fluctuating sales could harm our business and financial results.

We have significant international sales and operations and risks related to our international activities could harm our operating results.

In the three months ended December 31, 2012, approximately 11% of our net sales was attributable to customers located in the U.S., 19% was attributable to customers located in Europe and 70% was attributable to customers located in Asia. In fiscal 2012, approximately 16% of our net sales was attributable to customers located in the U.S., 21% was attributable to customers located in Europe and 62% was attributable to customers located in Asia. In fiscal 2011, approximately 15% of our net sales was attributable to customers located in the U.S., 20% was attributable to customers located in Europe and 64% was attributable to customers located in Asia. We anticipate that sales to international sites will continue to represent a significant percentage of our net sales. Although our international sales are largely denominated in U.S. dollars, we do have sales transactions in New Taiwan dollars, in Hong Kong dollars and in Chinese renminbi. In addition, our wafer foundries and assembly and test subcontractors are primarily located in Taiwan and China and, while our wafer purchases are denominated in U.S. dollars, most of our assembly and test costs are denominated in New Taiwan dollars. A substantial majority of our employees are located outside of the U.S and the expenses for our foreign operations are generally denominated in local currency. As a result, a devaluation of the U.S. dollar compared to the New Taiwan dollar or Chinese renminbi could substantially increase the cost of our products and our operations in Taiwan or China.

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

• global economic conditions, particularly in Taiwan and China;

• foreign currency fluctuations;

• duties, tariffs and other trade barriers and restrictions;

• changes in trade policy and regulatory requirements;

• transportation delays;

• the burdens of complying with foreign laws;

• imposition of foreign currency controls;

• language barriers;

• difficulties in hiring and retaining experienced engineers in countries such as China and Taiwan;

• difficulties in collecting foreign accounts receivable;

• difficulties in protecting our intellectual property rights;

• political instability, including any changes in relations between China and Taiwan;

28

• public health outbreaks such as SARS or avian flu; and

• earthquakes and other natural disasters.

Adverse changes in our effective tax rate will harm our results of operations.

A number of factors may increase our future effective tax rates, including:

• changes in the valuation of our deferred tax assets and liabilities, and changes in deferred tax valuation allowances;

• exhaustion of our existing federal and foreign net operating loss carryforwards and credits;

• increases in expenses not deductible for tax purposes, including impairments of goodwill in connection with acquisitions;

• the jurisdictions in which our profits are determined to be earned and taxed;

• limitations on the utilization of federal net operating loss carryforwards and credits;

• the resolution of issues arising from tax audits with various tax authorities;

• adjustments to income taxes upon finalization of various tax returns;

• changes in available tax credits;

• changes in tax laws or the interpretation of such tax laws;

• changes in U.S. generally accepted accounting principles; and

• our decision to repatriate non-U.S. earnings for which we have not previously provided for U.S. taxes.

Any significant increase in our future effective tax rates will reduce our net income for future periods.

Our revenues and business would be harmed if we are not able to successfully develop, introduce and sell new products and develop and implement new manufacturing technologies in a timely manner. Our research and development expenses could increase and our business could be harmed if the implementation of these new manufacturing technologies is unsuccessful.

We operate in highly competitive, quickly changing markets which are characterized by rapid obsolescence of existing products. As a result, our future success depends on our ability to develop and introduce new products that our customers choose to buy in significant quantities. If we fail to introduce new products in a timely manner or if our customers’ products do not achieve commercial success, our business and results of operations could be seriously harmed. The design and introduction of new products is challenging as such products typically incorporate more functions and operate at faster speeds than prior products. Increasing complexity generally requires smaller features on a chip. This makes developing new generations of products substantially more difficult than prior generations. The cost to develop products utilizing these new technologies is expensive and requires significant research and development spending and, as a result, our research and development expenses could increase in the future. Further, new products may not work properly in our customers’ applications. If we are unable to design, introduce, manufacture, market and sell new products successfully, our business and financial results would be seriously harmed.

Our products are complex and could contain defects, which could reduce sales of those products or result in claims against us.

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

Potential intellectual property claims and litigation could subject us to significant liability for damages and could invalidate our proprietary rights.

In the semiconductor industry, it is not unusual for companies to receive notices alleging infringement of patents or other intellectual property rights. We have been, and from time-to-time expect to be, notified of claims that we may be infringing patents, maskwork rights or copyrights owned by third-parties. If it appears necessary or desirable, we may seek licenses under patents that we are alleged to be infringing. However, licenses may not be offered and the terms of any offered licenses may not be acceptable to us.

29

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

We may be unable to effectively protect our intellectual property, which would negatively impact our ability to compete.

We believe that the protection of our intellectual proprietary rights will continue to be important to the success of our business. We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We also enter into confidentiality or license agreements with our employees, consultants and business partners, and take actions to control access to and distribution of our documentation and other proprietary information. Despite these efforts, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary technology. Monitoring unauthorized use of our technology is difficult, and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as do the laws of the U.S. Many U.S. companies have encountered substantial infringement problems in foreign countries, including countries in which we design and sell our products. We cannot be certain that patents will be issued as a result of our pending applications nor can we be certain that any issued patents would protect or benefit us or give us adequate protection from competing products. For example, issued patents may be circumvented or challenged and declared invalid or unenforceable. We also cannot be certain that others will not develop our unpatented proprietary technology or develop competing technologies on their own.

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

Though we had been profitable for twelve consecutive quarters beginning with the September 2009 quarter through the June 2012 quarter, we incurred a loss of $13.2 in the September 2012 quarter and a loss of $2.7 million for fiscal 2012, which included a $14.3 million write-down for certain tangible and intangible net assets related to our acquisition of Si En and a charge of $2.3 million to write-down our investment in Semiconductor Manufacturing International Corporation (SMIC) due to the decline in fair market value of such shares being considered other than temporary. We incurred a loss of $5.1 million in fiscal 2009, which included a $0.7 million charge for acquired in-process technology. There can be no assurance that we will maintain profitability in future periods. Our ability to maintain profitability on a quarterly or fiscal year basis in the future will depend on a variety of factors, including the need for future inventory write-downs, our ability to increase net sales, maintain or expand gross margins, introduce new products on a timely basis, secure sufficient wafer fabrication and assembly and test capacity and control operating expenses, including stock-based compensation. Adverse developments with respect to these or other factors could result in quarterly or annual operating losses in the future.

Our results of operations could vary as a result of the methods, estimates, and judgments we use in applying our accounting policies.

The methods, estimates, and judgments we use in applying our accounting policies have a significant impact on our results of operations (see “Critical Accounting Policies” in Part I, Item 2 of this Form 10-Q). Such methods, estimates, and judgments are, by their nature, subject to substantial risks, uncertainties, and assumptions, and factors may arise over time that lead us to change our methods, estimates, and judgments and such changes could significantly affect our results of operations. In particular, the calculation of share-based compensation expense requires us to use valuation methodologies (which were not developed for use in valuing employee stock options) and a number of assumptions, estimates, and conclusions regarding matters such as expected forfeitures, expected volatility of our share price, the expected dividend rate with respect to our common stock, and the option exercise behavior of our employees. Furthermore, there are no means, under applicable accounting principles, to compare and adjust our expense if and when we learn about additional information that may affect the estimates that we previously made, with the exception of changes in expected forfeitures of share-based awards. In the future, factors may arise that lead us to change our estimates and assumptions with respect to future share-based compensation arrangements, resulting in variability in our share-based compensation expense over time. Changes in forecasted share-based compensation expense could impact our gross margin percentage, research and development expenses, and selling, general and administrative expenses.

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

Our success depends upon the continued service of our key technical and management personnel. Several of our important manufacturing and other subcontractor relationships are based on personal relationships between our senior executive officers and such parties. In particular, our Executive Chairman has long-term relationships with our key foundries. If we were to lose the services of any key executives, it may negatively impact the related business relationships since we typically have no long-term

30

contractual agreements with such parties. Our success also depends on our ability to continue to attract, retain and motivate qualified technical personnel, particularly experienced circuit designers and process engineers. The competition for such employees depends on general economic and industry conditions but such competition has been intense in prior periods of industry growth. We have no employment contracts or key person life insurance policies with or for any of our employees. The loss of the service of one or more of our key personnel could harm our business.

Our stock price is expected to continue to be volatile.

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

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

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

• new or revised earnings estimates or guidance by us or industry analysts;

• comments or recommendations issued by analysts who follow us, our competitors or the semiconductor industry;

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

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

• increases or decreases in available wafer capacity;

• governmental regulations, trade laws and import duties;

• announcements related to future or existing litigation involving us or any of our competitors;

• announcements of technological innovations by us or our competitors;

• announcements regarding our share repurchase program and the timing and amount of shares we purchase under such program;

• additions or departures of senior management; and

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

In addition, stock markets have from time to time experienced extreme price and trading volume volatility. This volatility has had a substantial effect on the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations have adversely affected the market price of our common stock in the past and are likely to continue to do so in the future.

We have used and may in the future use a significant amount of our cash resources to repurchase shares of our common stock and such repurchases present potential risks and disadvantages to us and our continuing stockholders.

While we have not repurchased any shares since fiscal 2011, from September 2007 through September 2011, we repurchased and retired an aggregate of 14,179,711 shares of our common stock in the open market under Rule 10b-18 and pursuant to our tender offers at a cost of approximately $88.5 million. At December 31, 2012, we had outstanding authorization from our Board to purchase up to an additional $19.8 million of our common stock from time to time. Although our Board of Directors has determined that these repurchase programs are in the best interests of our stockholders, these repurchases expose us to a number of risks including:

• the use of a substantial portion of our cash reserves, which may reduce our ability to engage in significant cash acquisitions or to pursue other business opportunities that could create significant value to our stockholders;

• the risk that we would not be able to replenish our cash reserves by raising debt or equity financing in the future on terms acceptable to us, or at all;

• the risk that these repurchases have reduced our “public float,” which is the number of our shares owned by non-affiliate stockholders and available for trading in the securities markets, and likely reduced the number of our stockholders, which may reduce the volume of trading in our shares and may result in lower stock prices and reduced liquidity in the trading of our shares; and

• the risk that our stock price could decline and that we would be able to repurchase shares of our common stock at a lower price per share than the prices we pay in our repurchase programs.

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Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our worldwide operations, including the operations of our foundries and other suppliers, could be subject to natural disasters and other business disruptions, which could seriously harm our revenue and financial condition and increase our costs and expenses. Our corporate headquarters, and a portion of our research and development activities, are located in San Jose, California, and our other critical business operations and many of our suppliers are located in Asia, near major earthquake faults. The ultimate impact on us, our significant suppliers and our general infrastructure of being located near major earthquake faults is unknown, but our revenue, profitability and financial condition could suffer in the event of a major earthquake or other natural disaster. Losses and interruptions could also be caused by earthquakes, power shortages, telecommunications failures, water shortages, tsunamis, floods, typhoons, volcanic eruptions, fires, extreme weather conditions, medical epidemics such as a flu outbreak and other natural or manmade disasters.

Our operations involve the use of hazardous and toxic materials, and we must comply with environmental laws and regulations, which can be expensive, and may adversely affect our business and operating results.

We are subject to federal, state and local regulations relating to the use, handling, storage, disposal and human exposure to hazardous and toxic materials. If we were to violate or become liable under environmental laws in the future as a result of our inability to obtain permits, human error, accident, equipment failure or other causes, we could be subject to fines, costs, or civil or criminal sanctions, face property damage or personal injury claims or be required to incur substantial investigation or remediation costs or experience disruptions in our operations, any of which could have a material adverse effect on our business. In addition, environmental laws could become more stringent over time, imposing greater compliance costs and increasing the risks and penalties associated with violations, which could harm our business.

We also face increasing complexity in our product design as we adjust to new and future requirements relating to the materials composition of our products, including the restrictions on lead and other hazardous substances applicable to specified electronic products placed on the market in the European Union (Restriction on the Use of Hazardous Substances Directive 2002/95/EC, also known as the RoHS Directive). We also expect that our operations will be affected by other new environmental laws and regulations on an ongoing basis. Although we cannot predict the ultimate impact of any such new laws and regulations, they will likely result in additional costs, and could require that we change the design or manufacturing of our products, any of which could have a material adverse effect on our business.

We may experience difficulties in complying with Sarbanes-Oxley Section 404 in future periods.

We concluded that our internal control over financial reporting was effective at September 30, 2012. If in the future, we are unable to conclude that our internal control over financial reporting is effective or we are unable to conclude that our disclosure controls and procedures are effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.

Item 4. Mine Safety Disclosures

None.

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Item 6. Exhibits

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

Exhibit 31.1		Certification Pursuant to SEC Release No. 33-8238, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2		Certification Pursuant to SEC Release No. 33-8238, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS	**	XBRL Instance Document
Exhibit 101.SCH	**	XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL	**	XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF	**	XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB	**	XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE	**	XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

33

SIGNATURES

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

		Integrated Silicon Solution, Inc.
		(Registrant)
Dated:	February 8, 2013	/s/ John M. Cobb
		John M. Cobb
		Vice President and Chief Financial Officer
		(Principal Financial and
		Accounting Officer)

34

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Scott D. Howarth, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Integrated Silicon Solution, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 8, 2013

/s/ Scott D. Howarth

Scott D. Howarth

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John M. Cobb, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Integrated Silicon Solution, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 8, 2013

/s/ John M. Cobb

John M. Cobb

Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott D. Howarth, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Integrated Silicon Solution, Inc. on Form 10-Q for the quarterly period ended December 31, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Integrated Silicon Solution, Inc.

By:	/s/ Scott D. Howarth
	Scott D. Howarth
	President and Chief Executive Officer
	February 8, 2013

I, John M. Cobb, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Integrated Silicon Solution, Inc. on Form 10-Q for the quarterly period ended December 31, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Integrated Silicon Solution, Inc.

By:	/s/ John M. Cobb
	John M. Cobb
	Vice President and Chief Financial Officer
	February 8, 2013

XML

Stock Based Compensation (Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Wieghted Average Grant Date Fair Value) (Details) (Stock Options, USD $)	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average fair value of grants	$ 4.32	$ 4.48
Expected term in years	4 years 5 months 12 days	4 years 4 months 13 days
Estimated volatility	59.00%	60.00%
Risk-free interest rate	0.52%	0.68%

XML

Income Taxes (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure [Abstract]
Income tax expense	$ 1,159	$ 1,544
Effective tax rate	32.00%	29.00%
Federal statutory rate	35.00%	35.00%

XML

Purchased Intangible Assets (Schedule of Finite-Lived Intangible Assets by Major Class) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Sep. 30, 2012
Finite-Lived Intangible Assets [Line Items]
Net	$ 7,425
Gross	9,120	9,120
Accumulated Amortization	1,295	894
Total, Net	7,825	8,226	[1]
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross	4,930	4,930
Accumulated Amortization	(1,089)	(879)
Net	3,841	4,051
In-process technology (IPR&D)
Finite-Lived Intangible Assets [Line Items]
Gross	400	400
Accumulated Amortization	0	0
Net	400	400
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross	3,340	3,340
Accumulated Amortization	(162)	(9)
Net	3,178	3,331
Other
Finite-Lived Intangible Assets [Line Items]
Gross	450	450
Accumulated Amortization	(44)	(6)
Net	$ 406	$ 444

[1] Derived from audited financial statements.

XML

Per Share Data (Narrative) (Details) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Earnings Per Share [Abstract]
Stock options and awards excluded from diluted earnings per share (shares)	3,256	1,832

XML

Other Assets (Schedule of Other Assets) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Sep. 30, 2012
Other Assets [Abstract]
Restricted assets	$ 347	$ 239
Deposits to foundry for capacity	3,500	3,500
Investment in Giantec	4,025	4,025
Other investments	1,921	2,000
Nanya common stock	21,719	14,752
Nanya private placement shares	11,120	11,042
Other	3,092	3,319
Other Assets	$ 45,724	$ 38,877	[1]

[1] Derived from audited financial statements.

XML

Geographic and Segment Information (Tables)

3 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area

The following table summarizes the Company’s operations in different geographic areas:

	Three Months Ended December 31,
	2012		2011
	(In thousands)
Net sales
United States	$	8,628	$	11,853
China	5,420		2,531
Hong Kong	19,617		14,248
Japan	7,742		8,229
Korea	3,279		3,026
Taiwan	10,342		6,366
Other Asia Pacific countries	6,808		6,171
Europe	14,233		13,382
Other	330		358
Total net sales	$	76,399	$	66,164

Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country

	December 31, 2012		September 30, 2012
	(In thousands)
Long-lived assets
United States	$	6,807	$	440
Hong Kong	8		7
China	680		558
Taiwan	29,313		28,281
	$	36,808	$	29,286

XML

Common Stock Repurchase Program (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended	64 Months Ended
	Dec. 31, 2012	Dec. 31, 2012
Common Stock Repurchase Program [Abstract]
Stock repurchased and retired during period (shares)		14,179,711
Stock repurchased and retired during period, value		$ 88.5
Stock repurchase program, remaining authorized repurchase amount	19.8
Shares paid for tax withholding for share based compensation (shares)	34,555
Payments related to tax withholding for share-based compensation	$ 0.5

XML

Fair Value Measurements (Tables)

3 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Assets Measured on Recurring Basis

The following table represents the Company’s fair value hierarchy for financial assets measured at fair value on a recurring basis:

	December 31, 2012		September 30, 2012
	(Level 1)		(Level 1)
	(In thousands)
Money market instruments (1)	$	29,324	$	34,317
Semiconductor Manufacturing International Corp.
(SMIC) common stock (2)	1,485		1,099
Nanya Technology Corporation (Nanya) common stock (3)	21,719		14,752
	$	52,528	$	50,168

(1) Included in cash and cash equivalents

(2) Included in short-term investments

Available-for-sale Securities

Available-for-sale marketable securities consisted of the following:

December 31, 2012	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
				(In thousands)
Money market instruments	$	29,324		$	—	$	—		$	29,324
Certificates of deposit	18,269			—		—			18,269
SMIC common stock	1,099			386		—			1,485
Nanya common stock	16,697			5,022		—			21,719
Total	65,389			5,408		—			70,797
Less: Amounts included in cash, cash equivalents
and restricted cash	(41,841		)	—		—			(41,841		)
	$	23,548		$	5,408	$	—		$	28,956
September 30, 2012	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
				(In thousands)
Money market instruments	$	34,317		$	—	$	—		$	34,317
Certificates of deposit	18,302			—		—			18,302
SMIC common stock	1,099			—		—			1,099
Nanya common stock	16,587			—		(1,835		)	14,752
Total	70,305			—		(1,835		)	68,470
Less: Amounts included in cash, cash equivalents
and restricted cash	(47,177		)	—		—			(47,177		)
	$	23,128		$	—	$	(1,835	)	$	21,293

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Purchased Intangible Assets (Schedule Finite-Lived Intangible Assets, Future Amortization Expense) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2013	$ 1,177
2013	1,466
2014	1,316
2015	1,172
2016	1,172
Thereafter	1,122
Net	$ 7,425

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Concentrations (Narrative) (Details) (Sales Revenue, Goods, Net)	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Largest Distributor
Concentration Risk [Line Items]
Concentration Risk, Largest Customers	14.00%	13.00%
Second Largest Distributor
Concentration Risk [Line Items]
Concentration Risk, Largest Customers	11.00%	12.00%

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Stock Based Compensation (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future grant under the 2007 Plan (shares)	399,000
Option vesting period (years)	4 years
Percentage discount from fair market value for shares purchased under the Employee Stock Purchase Plan	85.00%
Offering period (years)	6 months
Shares available for future issuance under the Employee Stock Purchase Plan (shares)	818,000
Prior to October 1 2005
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expiration period (years)	10 years
After October 1 2005
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expiration period (years)	7 years
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option Cliff vesting period	6 months
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option Cliff vesting period	1 year
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Wieghted average grant date fair value	$ 9.14	$ 9.36
Restricted Stock Units (RSUs) | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSU vesting period (years)	2 years
Restricted Stock Units (RSUs) | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSU vesting period (years)	4 years
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation expense	$ 13.2
Nonvested awards, total compensation cost not yet recognized, period for recognition (years)	2 years 11 months 19 days
Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation expense	$ 0
Nonvested awards, total compensation cost not yet recognized, period for recognition (years)	1 month

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Borrowings (Schedule of Maturities of Debt) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Debt Disclosure [Abstract]
Remainder of 2013	$ 146
2014	195
2015	195
2016	195
2017	195
Thereafter	3,949
Total	$ 4,875

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Related Party Transactions (Narrative) (Details) (Jimmy S.M. Lee, Executive Chairman, USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended
	Aug. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Sep. 30, 2012
Related Party Transaction [Line Items]
Revenues from transactions with related party		$ 108	$ 114
Accounts Receivable, Related Parties		38		30
Giantec Semiconductor, Inc
Related Party Transaction [Line Items]
Revenues from transactions with related party		18
Accounts Receivable, Related Parties		17		12
Ownership percentage	19.85%
Purchases with related party		74
Accounts payable		100		26
Licensing fees received from Giantec		$ 5	$ 10

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Purchased Intangible Assets (Narrative) (Details)	3 Months Ended
	Dec. 31, 2012
Developed technology
Acquired Indefinite-lived Intangible Assets [Line Items]
Weighted average useful life for intangibles (years)	5 years 3 months 29 days
Customer relationships
Acquired Indefinite-lived Intangible Assets [Line Items]
Weighted average useful life for intangibles (years)	5 years 8 months 16 days
Other
Acquired Indefinite-lived Intangible Assets [Line Items]
Weighted average useful life for intangibles (years)	2 years 8 months 16 days

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Impact of Recently Issued Accounting Pronouncements

3 Months Ended

Dec. 31, 2012

Accounting Changes and Error Corrections [Abstract]

Impact of Recently Issued Accounting Pronouncements

Impact of Recently Issued Accounting Pronouncements

Impact of Recently Adopted Accounting Standards

On October 1, 2012, the Company adopted the following accounting standard, which did not have a material effect on its consolidated results of operations during such period or its financial condition at the end of such period:

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (FASB) amended its guidance on the presentation of comprehensive income. This amendment eliminates the currently available option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. Under this amendment, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In addition, this amendment requires that an entity present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. In December 2011, the FASB further amended its guidance to defer changes related to the presentation of reclassification adjustments indefinitely as a result of concerns raised that the new presentation requirements would be difficult for preparers and add unnecessary complexity to financial statements. The Company elected to present the items of net income and other comprehensive income in two separate, but consecutive statements.

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Inventories (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Inventory Disclosure [Abstract]
Inventory write-down	$ 0.8	$ 1.6

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Purchased Intangible Assets (Tables)

3 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets by Major Class

The following tables present details of the Company’s total purchased intangible assets:

	Gross		Accumulated Amortization		Net
	(In thousands)
December 31, 2012
Developed technology	$	4,930	$	1,089	$	3,841
In-process technology (IPR&D)	400		—		400
Customer relationships	3,340		162		3,178
Other	450		44		406
Total	$	9,120	$	1,295	$	7,825
September 30, 2012
Developed technology	$	4,930	$	879	$	4,051
In-process technology (IPR&D)	400		—		400
Customer relationships	3,340		9		3,331
Other	450		6		444
Total	$	9,120	$	894	$	8,226

Schedule of amorization expense of purchased intangible assets as reported in the consolidated statements of income

The following table presents details of the amortization expense of purchased intangible assets as reported in the consolidated statements of income:

	Three Months Ended December 31,
	2012		2011
	(In thousands)
Reported as:
Cost of sales	$	210	$	234
Operating expenses	191		232
Total	$	401	$	466

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Fiscal year
Remainder of 2013	$	1,177
2014	1,466
2015	1,316
2016	1,172
2017	1,172
Thereafter	1,122
Total	$	7,425

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Other Assets (Tables)

3 Months Ended

Dec. 31, 2012

Other Assets [Abstract]

Schedule of Other Assets

Other assets consisted of the following:

	December 31, 2012		September 30, 2012
	(In thousands)
Restricted assets	$	347	$	239
Deposits to foundry for capacity	3,500		3,500
Investment in Giantec	4,025		4,025
Other investments	1,921		2,000
Nanya common stock	21,719		14,752
Nanya private placement shares	11,120		11,042
Other	3,092		3,319
	$	45,724	$	38,877

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Per Share Data (Calculation of Basic and Diluted EPS) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Earnings Per Share [Abstract]
Net income attributable to ISSI	$ 2,499	$ 3,790
Denominator for basic net income per share:
Weighted average common shares outstanding	27,696	26,638
Dilutive stock options and awards	1,410	1,695
Denominator for diluted net income per share	29,106	28,333
Basic net income per share (in dollars per share)	$ 0.09	$ 0.14
Diluted net income per share (in dollars per share)	$ 0.09	$ 0.13

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Inventories (Schedule of Inventory, Current by major category) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Sep. 30, 2012
Inventory Disclosure [Abstract]
Purchased components	$ 13,648	$ 17,059
Work-in-process	21,401	28,921
Finished goods	34,221	20,984
Inventories	$ 69,270	$ 66,964	[1]

[1] Derived from audited financial statements.

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Borrowings (Tables)

3 Months Ended

Dec. 31, 2012

Debt Disclosure [Abstract]

Schedule of Maturities of Long-term Debt

Principal payments due under the Loan are as follows (in thousands):

Fiscal year
Remainder of 2013	$	146
2014	195
2015	195
2016	195
2017	195
Thereafter	3,949
Total	$	4,875

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Stockholders' Equity (Tables)

3 Months Ended

Dec. 31, 2012

Stockholders' Equity Note [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

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

	December 31, 2012			September 30, 2012
	(In thousands)
Accumulated foreign currency translation adjustments	$	6,917		$	6,048
Accumulated net unrealized gain on SMIC	251			—
Accumulated net unrealized gain (loss) on Nanya	4,168			(1,523		)
Accumulated net retirement plan transition obligation	100			115
Accumulated net retirement plan actuarial losses	(2,216		)	(2,241		)
Total accumulated other comprehensive income	$	9,220		$	2,399

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Use of Estimates

3 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Such estimates include the useful lives of fixed assets, the fair value of investments, allowances for doubtful accounts and customer returns, valuation allowances for deferred tax assets, inventory write-downs, potential reserves relating to litigation matters, accrued liabilities, and other reserves. The Company bases its estimates and judgments on its historical experience, knowledge of current conditions and its beliefs of what could occur in the future, given available information. Actual results may differ from those estimates, and such differences may be material to the financial statements.

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Per Share Data (Tables)

3 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

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

	Three Months Ended December 31,
	2012		2011
Numerator for basic and diluted net income per share:
Net income attributable to ISSI	$	2,499	$	3,790
Denominator for basic net income per share:
Weighted average common shares outstanding	27,696		26,638
Dilutive stock options and awards	1,410		1,695
Denominator for diluted net income per share	29,106		28,333
Basic net income per share	$	0.09	$	0.14
Diluted net income per share	$	0.09	$	0.13

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Stock Based Compensation (Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding and Exercisable) (Details) (Stock Options, USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2012
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at September 30, 2012	5,477
Granted	899
Exercised	(147)
Cancelled/Expired	(13)
Outstanding at December 31, 2012	6,216
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding at September 30, 2012	$ 6.81
Granted	$ 9.14
Exercised	$ 4.53
Cancelled/Expired	$ 9.10
Outstanding at December 31, 2012	$ 7.20
Aggregate Intrinsic Value, options exercised	$ 650
Wieghted-Average Remaining Contractual Term in Years, Outstanding at December 31, 2012 (years)	4 years 7 months 2 days
Aggregate Intrinsic Value, Outstanding at December 31, 2012	13,264
Number of Shares, Exercisable at December 31, 2012 (shares)	3,231
Wieghted-Average Exercise Price, Exercisable at December 31, 2012	$ 5.61
Wieghted-Average Remaining Contractual Term in Years, Exercisable at December 31, 2012 (years)	3 years 3 months 18 days
Aggregate Intrinsic Value, Exercisable at December 31, 2012	11,398
Number of Shares, Vested and expected to vest after December 31, 2012 (shares)	6,002
Wieghted-Average Exercise Price, Vested and expected to vest after December 31, 2012	$ 7.12
Weighted-Average Remaining Contractual Term in Years, Vested and expected to vest after December 31, 2012 (years)	4 years 6 months 11 days
Aggregate Intrinsic Value, Vested and expected to vest after December 31, 2012	$ 13,209

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Stockholders' Equity (Schedule of Accumulated Other Comprehensive Income (Loss)) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Sep. 30, 2012
Schedule of Available-for-sale Securities [Line Items]
Accumulated foreign currency translation adjustments	$ 6,917	$ 6,048
Accumulated net retirement plan transition obligation	100	115
Accumulated net retirement plan actuarial losses	(2,216)	(2,241)
Total accumulated other comprehensive income	9,220	2,399	[1]
Nanya Technology Corporation
Schedule of Available-for-sale Securities [Line Items]
Accumulated net unrealized gain on SMIC	4,168	(1,523)
Semiconductor Manufacturing International Corporation
Schedule of Available-for-sale Securities [Line Items]
Accumulated net unrealized gain on SMIC	$ 251	$ 0

[1] Derived from audited financial statements.

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Condensed Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Net sales	$ 76,399	$ 66,164
Cost of sales	51,908	43,966
Gross profit	24,491	22,198
Operating expenses:
Research and development	10,023	7,601
Selling, general and administrative	11,089	9,497
Total operating expenses	21,112	17,098
Operating income	3,379	5,100
Interest and other income, net	268	213
Income before income taxes	3,647	5,313
Provision for income taxes	1,159	1,544
Consolidated net income	2,488	3,769
Net loss attributable to noncontrolling interests	11	21
Net income attributable to ISSI	$ 2,499	$ 3,790
Basic net income per share (in dollars per share)	$ 0.09	$ 0.14
Shares used in basic per share calculation (in dollars per share)	27,696	26,638
Diluted net income per share (in dollars per share)	$ 0.09	$ 0.13
Shares used in diluted per share calculation	29,106	28,333

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Other Assets (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended
	Sep. 30, 2012	Dec. 31, 2012
Entity Information [Line Items]
Purchases of available for sale securities	$ 27,109
Termination period	1 year
Nanya private placement shares	11,042	11,120
Other investments	2,000	1,921
Hong Kong
Entity Information [Line Items]
Equity method investment ownership percentage	31.00%
Pledged Nanya private placement shares
Entity Information [Line Items]
Nanya private placement shares	$ 7,100

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2012		Dec. 31, 2011
Cash flows from operating activities
Consolidated net income	$ 2,488		$ 3,769
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,400		1,354
Stock-based compensation	1,440		1,185
Amortization of intangibles	401		466
Equity in net income of affiliate	79		0
Net foreign currency transaction losses	30		149
Deferred tax assets	580		1,616
Other non-cash items	23		79
Net effect of changes in current and other assets and current liabilities	1,653		(1,022)
Net cash provided by operating activities	8,094		7,596
Cash flows from investing activities
Acquisition of property, equipment and leasehold improvements	(8,754)		(1,734)
Purchases of available-for-sale securities	(3,359)		0
Proceeds from sales of available-for-sale securities	3,079		322
Cash used in investing activities	(9,034)		(1,412)
Cash flows from financing activities
Repurchases and retirement of common stock	(537)		(455)
Proceeds from issuance of common stock	667		1,288
Proceeds from borrowings	4,875		0
Proceeds from borrowings under short-term lines of credit	0		4,036
Principal payments of short-term lines of credit	0		(4,036)
Effect of exchange rate changes on cash and cash equivalents	5,005		833
Effect of exchange rate changes on cash and cash equivalents	235		93
Net increase in cash and cash equivalents	4,300		7,110
Cash and cash equivalents at beginning of period	75,497	[1]	83,863
Cash and cash equivalents at end of period	$ 79,797		$ 90,973

[1] Derived from audited financial statements.

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Geographic and Segment Information (Schedule of Revenues, by Geographical Areas) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 76,399	$ 66,164
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	8,628	11,853
China
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	5,420	2,531
Hong Kong
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	19,617	14,248
Japan
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	7,742	8,229
Korea
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	3,279	3,026
Taiwan
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	10,342	6,366
Other Asia Pacific countries
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	6,808	6,171
Europe
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	14,233	13,382
Other
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 330	$ 358

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Fair Value Measurements (Assets and Liabilities that are Measured at Fair Value on a Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Sep. 30, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets measured at fair value	$ 70,797		$ 68,470
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets measured at fair value	52,528		50,168
Money market instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets measured at fair value	29,324		34,317
Money market instruments | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets measured at fair value	29,324	[1]	34,317	[1]
Semiconductor Manufacturing International Corp. | Available-for-sale Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets measured at fair value	1,485		1,099
Semiconductor Manufacturing International Corp. | Available-for-sale Securities | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets measured at fair value	1,485	[2]	1,099	[2]
Nanya Technology Corporation | Available-for-sale Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets measured at fair value	21,719		14,752
Nanya Technology Corporation | Available-for-sale Securities | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets measured at fair value	$ 21,719	[3]	$ 14,752	[3]

[1] Included in cash and cash equivalents

[2] Included in short-term investments

[3] Included in other assets

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Geographic and Segment Information

3 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Geographic and Segment Information

Geographic and Segment Information

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

	Three Months Ended December 31,
	2012		2011
	(In thousands)
Net sales
United States	$	8,628	$	11,853
China	5,420		2,531
Hong Kong	19,617		14,248
Japan	7,742		8,229
Korea	3,279		3,026
Taiwan	10,342		6,366
Other Asia Pacific countries	6,808		6,171
Europe	14,233		13,382
Other	330		358
Total net sales	$	76,399	$	66,164

	December 31, 2012		September 30, 2012
	(In thousands)
Long-lived assets
United States	$	6,807	$	440
Hong Kong	8		7
China	680		558
Taiwan	29,313		28,281
	$	36,808	$	29,286

Revenues are attributed to countries based on the customers' ship-to location.

Long-lived assets by geographic area are those assets used in the Company’s operations in each area.

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Fair Value Measurements (Marketable Equity and Cash Equivalents (Classified as Available-for-sale) and Cost Method Investments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Sep. 30, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 65,389	$ 70,305
Gross Unrealized Holding Gains	5,408	0
Gross Unrealized Holding Losses	0	(1,835)
Fair Value	70,797	68,470
Money market instruments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	29,324	34,317
Gross Unrealized Holding Gains	0	0
Gross Unrealized Holding Losses	0	0
Fair Value	29,324	34,317
Certificates of deposit
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	18,269	18,302
Gross Unrealized Holding Gains	0	0
Gross Unrealized Holding Losses	0	0
Fair Value	18,269	18,302
Cash and Cash Equivalents and Restricted Cash
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	41,841	47,177
Gross Unrealized Holding Gains	0	0
Gross Unrealized Holding Losses	0	0
Fair Value	41,841	47,177
Short-term Investments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	23,548	23,128
Gross Unrealized Holding Gains	5,408	0
Gross Unrealized Holding Losses	0	(1,835)
Fair Value	28,956	21,293
Semiconductor Manufacturing International Corp. | Available-for-sale Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,099	1,099
Gross Unrealized Holding Gains	386	0
Gross Unrealized Holding Losses	0	0
Fair Value	1,485	1,099
Nanya Technology Corporation | Available-for-sale Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	16,697	16,587
Gross Unrealized Holding Gains	5,022	0
Gross Unrealized Holding Losses	0	(1,835)
Fair Value	$ 21,719	$ 14,752

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Basis of Presentation (Policies)

3 Months Ended

Dec. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Accounting, Policy

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

XML

Basis of Presentation

3 Months Ended

Dec. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

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

On January 31, 2011, the Company acquired Si En Integration Holdings Limited (Si En) and the Company’s financial results reflect accounting for Si En on a consolidated basis from the date of acquisition.

On September 14, 2012, the Company acquired Chingis Technology Corporation (Chingis) and the Company’s financial results reflect accounting for Chingis on a consolidated basis from the date of acquisition.

The Company’s operating results for the three months ended December 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2013 or for any other period. The financial statements included herein should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

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Condensed Statement of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Consolidated net income	$ 2,488	$ 3,769
Currency translation adjustments	869	669
Unrealized gains (losses) on investments, net of tax effect of $1,301 in 2012 and $(20) in 2011	5,942	(34)
Change in retirement plan actuarial losses	25	24
Change in retirement plan transition obligation	(15)	(15)
Comprehensive income	9,309	4,413
Comprehensive loss attributable to noncontrolling interest	11	21
Comprehensive income attributable to ISSI	$ 9,320	$ 4,434

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Stockholders' Equity

3 Months Ended

Dec. 31, 2012

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

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

	December 31, 2012			September 30, 2012
	(In thousands)
Accumulated foreign currency translation adjustments	$	6,917		$	6,048
Accumulated net unrealized gain on SMIC	251			—
Accumulated net unrealized gain (loss) on Nanya	4,168			(1,523		)
Accumulated net retirement plan transition obligation	100			115
Accumulated net retirement plan actuarial losses	(2,216		)	(2,241		)
Total accumulated other comprehensive income	$	9,220		$	2,399

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Document and Entity Information	3 Months Ended
	Dec. 31, 2012	Feb. 01, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	INTEGRATED SILICON SOLUTION INC
Entity Central Index Key	0000854701
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Dec. 31, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		27,984,171

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Income Taxes

3 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax provision includes U.S. federal, state and local, and foreign income taxes and is based on the application of a forecasted annual income tax rate applied to the current quarter's year-to-date pre-tax income for fiscal 2013. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company's annual earnings, taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the Company's ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives. Discrete items, including the effect of changes in tax laws, tax rates, and certain circumstances with respect to valuation allowances or other unusual or non-recurring tax adjustments are reflected in the period in which they occur as an addition to, or reduction from, the income tax provision, rather than being included in the estimated annual effective income tax rate.

For the three months ended December 31, 2012, the Company recorded income tax expense of $1.2 million that represents an effective tax rate of approximately 32% . The difference between the recorded provision for income taxes and the tax provision, based on the federal statutory rate of 35%, was primarily attributable to the differential in foreign tax rates and non-deductible stock-based compensation expense.

For the three months ended December 31, 2011, the Company recorded an income tax expense of $1.5 million that represents an effective tax rate of approximately 29%. The difference between the recorded provision for income taxes and the tax provision, based on the federal statutory rate of 35%, was primarily attributable to the the differential in foreign tax rates and non-deductible stock-based compensation expense.

As of December 31, 2012, the Company had no unrecognized tax positions that would impact its effective tax rate.

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Condensed Statement of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Unrealized gains (losses) on investments, tax effect	$ 1,301	$ (20)

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Concentrations

3 Months Ended

Dec. 31, 2012

Risks and Uncertainties [Abstract]

Concentrations

Concentrations

In the three months ended December 31, 2012, revenue from the Company's largest distributor accounted for approximately 14% of the Company's total net sales. In the three months ended December 31, 2012, revenue from the Company's second largest distributor accounted for approximately 11% of the Company's total net sales. In the three months ended December 31, 2011, revenue from the Company's largest distributor accounted for approximately 13% of the Company's total net sales. In the three months ended December 31, 2011, revenue from the Company's second largest distributor accounted for approximately 12% of the Company's total net sales.

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Stock Based Compensation

3 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation

Stock-based Compensation

Stock-Based Benefit Plans

The Company grants stock-based compensation awards under its 2007 Incentive Compensation Plan (the 2007 Plan) which permits the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units (RSUs), performance shares and performance units. The Company has outstanding grants under its 2012 Inducement Option Plan (the Inducement Plan) and under prior plans, though no further grants can be made under these plans. At December 31, 2012, 399,000 shares were available for future grant under the 2007 Plan. Options generally vest ratably over a four-year period with a 6-month or 1-year cliff vest and then vesting ratably over the remaining period. Options granted prior to October 1, 2005 expire ten years after the date of grant; options granted after October 1, 2005 expire seven years after the date of the grant. RSUs generally vest annually over periods ranging from two years to four years based upon continued employment with the Company.

In addition, the Company has an Employee Stock Purchase Plan (ESPP) which permits eligible employees to purchase the Company’s common stock through payroll deductions. As approved by the Board of Directors, effective August 1, 2010, shares under the ESPP will be purchased at a price equal to 85% of the lesser of the fair market value of the Company’s common stock as of the first day or the last day of each six-month offering period. The offering periods under the ESPP commence on approximately February 1 and August 1 of each year. At December 31, 2012, 818,000 shares were available for future issuance under the ESPP.

Stock-Based Compensation

The following table outlines the effects of total stock-based compensation.

	Three Months Ended December 31,
	2012		2011
	(In thousands)
Stock-based compensation
Cost of sales	$	43	$	33
Research and development	522		315
Selling, general and administrative	875		837
Total stock-based compensation	1,440		1,185
Tax effect on stock-based compensation	—		—
Net effect on net income	$	1,440	$	1,185

As of December 31, 2012, there was approximately $13.2 million of total unrecognized stock-based compensation expense under the Company’s stock option plans that will be recognized over a weighted-average period of approximately 2.97 years. Future stock option grants will add to this total whereas quarterly amortization and the vesting of the existing stock option grants will reduce this total. In addition, as of December 31, 2012, there was approximately $38,000 of total unrecognized stock-based compensation expense under the Company’s ESPP that will be recognized over a weighted-average period of approximately 1 month.

The Company uses the Black-Scholes option pricing model to estimate the fair value of the options granted and rights to acquire stock granted under the ESPP. The weighted average estimated fair values of stock option grants and rights granted under the ESPP, as well as the weighted average assumptions used in calculating these values during the three month periods ended December 31, 2012 and 2011 were based on estimates at the date of grant as follows:

	Three Months Ended December 31,
	2012			2011
Options
Weighted-average fair value of grants	$	4.32		$	4.48
Expected term in years	4.45			4.37
Estimated volatility	59		%	60		%
Risk-free interest rate	0.52		%	0.68		%
Dividend yield	—		%	—		%

The Company issues RSUs from time to time. The estimated fair value of RSU awards is calculated based on the market price of the Company’s common stock on the date of grant. The weighted average grant date fair value of RSUs granted in the three month periods ended December 31, 2012 and December 31, 2011, was $9.14 per share and $9.36 per share, respectively.

A summary of the Company’s stock option activity and related information for the three months ended December 31, 2012 follows (number of shares and aggregate intrinsic value are presented in thousands):

	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding at September 30, 2012	5,477		$	6.81
Granted	899		$	9.14
Exercised	(147	)	$	4.53		$	650
Cancelled/Expired	(13	)	$	9.10
Outstanding at December 31, 2012	6,216		$	7.20	4.59	$	13,264
Exercisable at December 31, 2012	3,231		$	5.61	3.30	$	11,398
Vested and expected to vest after December 31, 2012	6,002		$	7.12	4.53	$	13,209

A summary of the Company’s RSU activity and related information for the three months ended December 31, 2012 under the 2007 Plan follows (number of shares and aggregate intrinsic value are presented in thousands):

	Number of Shares		Weighted-Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at September 30, 2012	323		$	8.41
Granted	121		$	9.14
Vested	(157	)	$	9.31	$	1,464
Forfeited	—		$	—
Outstanding at December 31, 2012	287		$	8.23	$	2,584

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Related Party Transactions

3 Months Ended

Dec. 31, 2012

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

The Company sells semiconductor products to Chrontel International Ltd. (Chrontel). Jimmy S.M. Lee, the Company’s Executive Chairman, has been a director of Chrontel since July 1995. Sales to Chrontel were $108,000 and $114,000 during the three month periods ended December 31, 2012 and December 31, 2011, respectively. Accounts receivable from Chrontel was approximately $38,000 and $30,000 at December 31, 2012 and September 30, 2012, respectively.

The Company purchases ASSP products from Giantec Semiconductor, Inc. (Giantec). At December 31, 2012, the Company had approximately a 19.85% ownership interest in Giantec. The Company’s Executive Chairman, Jimmy S.M. Lee, is a director of Giantec. The Company also provides logistic services to Giantec for which it is reimbursed and receives certain licensing fees from Giantec. During the three months ended December 31, 2012, the Company purchased approximately $74,000 of products from Giantec. During the three months ended December 31, 2011, the Company purchased no products from Giantec. Accounts payable to Giantec was approximately $100,000 and $26,000 at December 31, 2012 and September 30, 2012, respectively. During each of the three months ended December 31, 2012 and December 31, 2011, the Company provided Giantec services of approximately $18,000, and received licensing fees from Giantec of approximately $5,000 and $10,000, respectively. Accounts receivable from Giantec was approximately $17,000 and $12,000 at December 31, 2012 and September 30, 2012, respectively.

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Per Share Data

3 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Per Share Data

Per Share Data

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

	Three Months Ended December 31,
	2012		2011
Numerator for basic and diluted net income per share:
Net income attributable to ISSI	$	2,499	$	3,790
Denominator for basic net income per share:
Weighted average common shares outstanding	27,696		26,638
Dilutive stock options and awards	1,410		1,695
Denominator for diluted net income per share	29,106		28,333
Basic net income per share	$	0.09	$	0.14
Diluted net income per share	$	0.09	$	0.13

For the three months ended December 31, 2012 and December 31, 2011, stock options and awards for 3,256,000 shares and 1,832,000 shares, respectively, were excluded from diluted earnings per share by the application of the treasury stock method.

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Purchased Intangible Assets

3 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Purchased Intangible Assets

Purchased Intangible Assets

The following tables present details of the Company’s total purchased intangible assets:

	Gross		Accumulated Amortization		Net
	(In thousands)
December 31, 2012
Developed technology	$	4,930	$	1,089	$	3,841
In-process technology (IPR&D)	400		—		400
Customer relationships	3,340		162		3,178
Other	450		44		406
Total	$	9,120	$	1,295	$	7,825
September 30, 2012
Developed technology	$	4,930	$	879	$	4,051
In-process technology (IPR&D)	400		—		400
Customer relationships	3,340		9		3,331
Other	450		6		444
Total	$	9,120	$	894	$	8,226

The following table presents details of the amortization expense of purchased intangible assets as reported in the consolidated statements of income:

	Three Months Ended December 31,
	2012		2011
	(In thousands)
Reported as:
Cost of sales	$	210	$	234
Operating expenses	191		232
Total	$	401	$	466

The following table presents the estimated future amortization expense of the Company’s purchased intangible assets at December 31, 2012 (in thousands). The weighted-average remaining amortization period for developed technology, customer relationships and other intangibles is 5.33 years, 5.71 years and 2.71 years, respectively. If the Company acquires additional purchased intangible assets in the future, its future amortization may be increased by those assets. Furthermore, upon completion of the IPR&D projects, the Company will amortize the IPR&D over the useful life of the asset.

Fiscal year
Remainder of 2013	$	1,177
2014	1,466
2015	1,316
2016	1,172
2017	1,172
Thereafter	1,122
Total	$	7,425

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Geographic and Segment Information (Schedule of Long-Lived Assets, by Geographical Areas) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Sep. 30, 2012
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	$ 36,808	$ 29,286
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	6,807	440
Hong Kong
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	8	7
China
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	680	558
Taiwan
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	$ 29,313	$ 28,281

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Inventories

3 Months Ended

Dec. 31, 2012

Inventory Disclosure [Abstract]

Inventories

Inventories

The following is a summary of inventories by major category:

	December 31, 2012		September 30, 2012
	(In thousands)
Purchased components	$	13,648	$	17,059
Work-in-process	21,401		28,921
Finished goods	34,221		20,984
	$	69,270	$	66,964

During the three months ended December 31, 2012 and December 31, 2011, the Company recorded inventory write-downs of $0.8 million and $1.6 million, respectively. The inventory write-downs were predominantly for excess and obsolescence and lower of cost or market issues on certain of the Company's products.

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Other Assets

3 Months Ended

Dec. 31, 2012

Other Assets [Abstract]

Other Assets

Other Assets

Other assets consisted of the following:

	December 31, 2012		September 30, 2012
	(In thousands)
Restricted assets	$	347	$	239
Deposits to foundry for capacity	3,500		3,500
Investment in Giantec	4,025		4,025
Other investments	1,921		2,000
Nanya common stock	21,719		14,752
Nanya private placement shares	11,120		11,042
Other	3,092		3,319
	$	45,724	$	38,877

The Company has various deposits including deposits with suppliers for purchase guarantees and for customs clearance. These deposits are included in restricted assets.

In September 2012, the Company invested approximately $27.1 million in Nanya, which was comprised of common shares which are classified as available-for-sale securities and private placement shares which are accounted for on the cost-basis. The Company accounts for the private placement shares it acquired in Nanya on the cost-basis as these securities are restricted and the restrictions do not terminate within one year of the reporting date. In addition, as of December 31, 2012, the Company had pledged $7.1 million of its Nanya private placement shares with Nanya as collateral for the Company's accounts payable. At December 31, 2012, the Company classified its common shares in Nanya as long-term as the Company's intent was to hold these shares for more than one year.

In March 2012, the Company made an equity investment of $2.0 million in a private technology company headquartered in Hong Kong. At December 31, 2012, the Company's ownership interest in such company was approximately 31%. This investment is accounted for under the equity method and the Company's results include its percentage share of such company's results of operations in interest and other income, net.

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Borrowings

3 Months Ended

Dec. 31, 2012

Debt Disclosure [Abstract]

Borrowings

Borrowings

In December 2012, the Company obtained a bank loan in the amount of $4.9 million (the “Loan”), to partially finance the $6.5 million purchase price of approximately 2.85 acres of land and an approximately 55,612 square foot building located at 1623 Buckeye Drive, Milpitas, California for its corporate headquarters. The Loan has a maturity date of November 30, 2017 and is secured by the property and an assignment of all leases and rents relating to the property. The Loan is subject to customary events of default, including defaults in the payment of principal and interest. The Loan bears an interest rate of one percent above LIBOR adjusted on a monthly basis. Principal payments due under the Loan are as follows (in thousands):

Fiscal year
Remainder of 2013	$	146
2014	195
2015	195
2016	195
2017	195
Thereafter	3,949
Total	$	4,875

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Fair Value Measurements (Narrative) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Sep. 30, 2012
Other geographic areas
Segment Reporting Information [Line Items]
Cash and cash equivalents, and short-term investments	$ 47.9	$ 39.3
China
Segment Reporting Information [Line Items]
Cash and cash equivalents, and short-term investments	$ 3.8

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Borrowings (Narrative) (Details) (USD $)	2 Months Ended
	Dec. 04, 2012 sqft acre	Dec. 31, 2012
Debt Disclosure [Abstract]
Bank loan		$ 4,875,000
Purchase price of headquarters	$ 6,500,000
Acres of land	2.85
Square footage of building	55,612

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Commitments and Contingencies

3 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Patents and Licenses

In the semiconductor industry, it is not unusual for companies to receive notices alleging infringement of patents or other intellectual property rights of others. The Company has been, and from time-to-time expects to be, notified of claims that it may be infringing patents, maskwork rights or copyrights owned by third parties. If it appears necessary or desirable, the Company may seek licenses under patents that it is alleged to be infringing. Although patent holders commonly offer such licenses, licenses may not be offered and the terms of any offered licenses may not be acceptable to the Company. The failure to obtain a license under a key patent or intellectual property right from a third party for technology used by the Company could cause it to incur substantial liabilities and to suspend the manufacture of the products utilizing the invention or to attempt to develop non-infringing products, any of which could materially and adversely affect the Company’s business and operating results. Furthermore, there can be no assurance that the Company will not become involved in protracted litigation regarding its alleged infringement of third party intellectual property rights or litigation to assert and protect its patents or other intellectual property rights. Any litigation relating to patent infringement or other intellectual property matters could result in substantial cost and diversion of the Company’s resources.

Legal Proceedings

DRAM Memory Technologies LLC v. Integrated Silicon Solution, Inc., et al.

On March 11, 2011, a patent infringement suit was filed against the Company and several other semiconductor companies in the United States District Court for the Central District of California by DRAM Memory Technologies LLC, for the alleged infringement of various patents related to certain technology allegedly applicable to DRAM devices (Case No. SACV11-00332). The complaint also alleges willful infringement of the patents by the Company and seeks a permanent injunction of the alleged infringing acts by the Company, as well as up to the trebling of unspecified damages. The Company and the plaintiff entered into a settlement and license agreement on March 29, 2012 and are awaiting judicial approval of a Joint Stipulation to Dismiss the litigation with prejudice filed on April 2, 2012.

VAREP GmBH v. Integrated Silicon Solution, Inc.

On August 21, 2012, a lawsuit was filed against the Company in the Superior Court of California, County of Santa Clara by a former independent sales representative based in Germany named Varep GmbH (Varep), for the alleged underpayment of commissions (Case No. 112CV230846).  The complaint alleges 11 causes of action, including, among others, breach of contract, Labor Code violations, and violations of the Independent Wholesale Sales Representatives Contractual Relations Act.  A demurrer by the Company challenging the legal sufficiency of the complaint was sustained with leave to amend and a motion to strike portions of the initial complaint by the Company was granted in part and denied in part. On December 28, 2012, Varep filed a first amended complaint asserting nine causes of action, including, among others, breach of contract and Labor Code violations. On January 7, 2013, the Company filed a demurrer challenging the legal sufficiency of the first amended complaint and a motion to strike portions of the first amended complaint. A hearing is set for February 19, 2013. No party has yet served any discovery requests. The Company believes it has meritorious defenses to the claims alleged by Varep and intends to defend this suit vigorously.

Other Legal Proceedings

In the ordinary course of its business, the Company has been involved in a limited number of other legal actions, both as plaintiff and defendant, and could incur uninsured liability in any one or more of them. Although the outcome of these actions is not presently determinable, the Company believes that the ultimate resolution of these matters will not have a material adverse effect on its financial position, cash flows or results of operations. However, no assurances can be given with respect to the extent or outcome of any such litigation in the future.

Commitments to Wafer Fabrication Facilities and Contract Manufacturers

The Company issues purchase orders for wafers to various wafer foundries. These purchase orders are generally considered to be cancelable. However, to the degree that the wafers have entered into work-in-process at the foundry, as a matter of practice, it becomes increasingly difficult to cancel the purchase order. As of December 31, 2012, the Company had approximately $20.8 million of purchase orders for which the related wafers had been entered into wafer work-in-process (i.e., manufacturing had begun).

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Stock Based Compensation (Tables)

3 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

The following table outlines the effects of total stock-based compensation.

	Three Months Ended December 31,
	2012		2011
	(In thousands)
Stock-based compensation
Cost of sales	$	43	$	33
Research and development	522		315
Selling, general and administrative	875		837
Total stock-based compensation	1,440		1,185
Tax effect on stock-based compensation	—		—
Net effect on net income	$	1,440	$	1,185

Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value

The weighted average estimated fair values of stock option grants and rights granted under the ESPP, as well as the weighted average assumptions used in calculating these values during the three month periods ended December 31, 2012 and 2011 were based on estimates at the date of grant as follows:

	Three Months Ended December 31,
	2012			2011
Options
Weighted-average fair value of grants	$	4.32		$	4.48
Expected term in years	4.45			4.37
Estimated volatility	59		%	60		%
Risk-free interest rate	0.52		%	0.68		%
Dividend yield	—		%	—		%

Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding and Exercisable

A summary of the Company’s stock option activity and related information for the three months ended December 31, 2012 follows (number of shares and aggregate intrinsic value are presented in thousands):

	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding at September 30, 2012	5,477		$	6.81
Granted	899		$	9.14
Exercised	(147	)	$	4.53		$	650
Cancelled/Expired	(13	)	$	9.10
Outstanding at December 31, 2012	6,216		$	7.20	4.59	$	13,264
Exercisable at December 31, 2012	3,231		$	5.61	3.30	$	11,398
Vested and expected to vest after December 31, 2012	6,002		$	7.12	4.53	$	13,209

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

A summary of the Company’s RSU activity and related information for the three months ended December 31, 2012 under the 2007 Plan follows (number of shares and aggregate intrinsic value are presented in thousands):

	Number of Shares		Weighted-Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at September 30, 2012	323		$	8.41
Granted	121		$	9.14
Vested	(157	)	$	9.31	$	1,464
Forfeited	—		$	—
Outstanding at December 31, 2012	287		$	8.23	$	2,584

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Purchased Intangible Assets (Schedule of Current Finite-Lived Intangible Asset Amortization Expense by Income Statement Line Item) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Schedule of Current Intangible Asset Amortization Expense By Income Statement Line Item [Line Items]
Amortization of intangibles	$ 401	$ 466
Cost of sales
Schedule of Current Intangible Asset Amortization Expense By Income Statement Line Item [Line Items]
Amortization of intangibles	210	234
Operating expenses
Schedule of Current Intangible Asset Amortization Expense By Income Statement Line Item [Line Items]
Amortization of intangibles	$ 191	$ 232

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Stock Based Compensation (Restricted Stock and Restricted Stock Units Activity) (Details) (Restricted Stock Units (RSUs), USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding at September 30, 2012	323
Granted	121
Vested	(157)
Forfeited	0
Outstanding at December 31, 2012	287
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Wieghted-Average Grant Date Fair Value, Outstanding at September 30, 2012	$ 8.41
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 9.14	$ 9.36
Vested	$ 9.31
Forfeited	$ 0.00
Weighted-Average Grant Date Fair Value, Outstanding at December 31, 2012	$ 8.23
Aggregate Intrinsic Value, Vested	$ 1,464,000
Aggregate Intrinsic Value, Outstanding at December 31, 2012	$ 2,584,000

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Sep. 30, 2012
Current assets:
Cash and cash equivalents	$ 79,797	$ 75,497	[1]
Short-term investments	7,237	6,541	[1]
Accounts receivable, net	43,395	47,710	[1]
Inventories	69,270	66,964	[1]
Deferred tax assets	6,782	8,940	[1]
Other current assets	12,663	12,264	[1]
Total current assets	219,144	217,916	[1]
Property, equipment and leasehold improvements, net	36,808	29,286	[1]
Purchased intangible assets, net	7,825	8,226	[1]
Goodwill	9,178	9,178	[1]
Deferred tax assets	13,736	13,588	[1]
Other assets	45,724	38,877	[1]
Total assets	332,415	317,071	[1]
Current liabilities:
Accounts payable	50,504	44,705	[1]
Accrued compensation and benefits	6,221	9,420	[1]
Accrued expenses	8,160	11,133	[1]
Current portion of long-term debt	195	0	[1]
Total current liabilities	65,080	65,258	[1]
Long-term debt	4,680	0	[1]
Other long-term liabilities	5,441	5,478	[1]
Total liabilities	75,201	70,736	[1]
Commitments and contingencies			[1]
Stockholders’ equity:
Common stock	3	3	[1]
Additional paid-in capital	332,043	330,473	[1]
Accumulated deficit	(87,547)	(90,046)	[1]
Total accumulated other comprehensive income	9,220	2,399	[1]
Total ISSI stockholders’ equity	253,719	242,829	[1]
Noncontrolling interest	3,495	3,506	[1]
Total stockholders’ equity	257,214	246,335	[1]
Total liabilities and stockholders’ equity	$ 332,415	$ 317,071	[1]

[1] Derived from audited financial statements.

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Fair Value Measurements

3 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Under FASB guidance, fair value is defined as the price expected to be received from the sale of an asset or paid to transfer a liability in a transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. The FASB guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that the market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect a company’s judgment concerning the assumptions that market participants would use in pricing the asset or liability developed based on the best information available at that time. The fair value hierarchy is broken down into the following three levels based on the reliability of inputs:

• Level 1 – Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices which are readily and regularly available in an active market, valuation of these products can be done without a significant degree of judgment.

• Level 2 – Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments and model-derived valuations in which all significant inputs and significant value drives are observable in active markets.

• Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

As of December 31, 2012, the Company’s financial assets utilizing Level 1 inputs include investment securities traded on an active securities exchange. The Company did not have any financial assets utilizing Level 2 or Level 3 inputs at December 31, 2012 or September 30, 2012.

The following table represents the Company’s fair value hierarchy for financial assets measured at fair value on a recurring basis:

	December 31, 2012		September 30, 2012
	(Level 1)		(Level 1)
	(In thousands)
Money market instruments (1)	$	29,324	$	34,317
Semiconductor Manufacturing International Corp.
(SMIC) common stock (2)	1,485		1,099
Nanya Technology Corporation (Nanya) common stock (3)	21,719		14,752
	$	52,528	$	50,168

(1) Included in cash and cash equivalents

(2) Included in short-term investments

(3) Included in other assets

There were no transfers in or out of our Level 1 assets during the three months ended December 31, 2012.

As of December 31, 2012, the Company did not have any liabilities or non-financial assets that are measured at fair value on a recurring basis.

Available-for-sale marketable securities consisted of the following:

December 31, 2012	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
				(In thousands)
Money market instruments	$	29,324		$	—	$	—		$	29,324
Certificates of deposit	18,269			—		—			18,269
SMIC common stock	1,099			386		—			1,485
Nanya common stock	16,697			5,022		—			21,719
Total	65,389			5,408		—			70,797
Less: Amounts included in cash, cash equivalents
and restricted cash	(41,841		)	—		—			(41,841		)
	$	23,548		$	5,408	$	—		$	28,956
September 30, 2012	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
				(In thousands)
Money market instruments	$	34,317		$	—	$	—		$	34,317
Certificates of deposit	18,302			—		—			18,302
SMIC common stock	1,099			—		—			1,099
Nanya common stock	16,587			—		(1,835		)	14,752
Total	70,305			—		(1,835		)	68,470
Less: Amounts included in cash, cash equivalents
and restricted cash	(47,177		)	—		—			(47,177		)
	$	23,128		$	—	$	(1,835	)	$	21,293

As of December 31, 2012 and September 30, 2012, the Company had cash, cash equivalents and short-term investments of $47.9 million ($3.8 million of which is in China and subject to exchange control regulations) and $39.3 million, respectively, in foreign financial institutions.

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Commitments and Contingencies (Narrative) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
Amount of purchase orders that had been entered into wafer work-in-process	$ 20.8

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Inventories (Tables)

3 Months Ended

Dec. 31, 2012

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

The following is a summary of inventories by major category:

	December 31, 2012		September 30, 2012
	(In thousands)
Purchased components	$	13,648	$	17,059
Work-in-process	21,401		28,921
Finished goods	34,221		20,984
	$	69,270	$	66,964

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Stock Based Compensation (Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	$ 1,440	$ 1,185
Tax effect on stock-based compensation	0	0
Net effect on net income	1,440	1,185
Cost of sales
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	43	33
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	522	315
Selling, general and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	$ 875	$ 837

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Common Stock Repurchase Program

3 Months Ended

Dec. 31, 2012

Common Stock Repurchase Program [Abstract]

Common Stock Repurchase Program

Common Stock Repurchase Program

In the three month period ended December 31, 2012, the Company did not repurchase any shares of its common stock in the open market. As of December 31, 2012, the Company had repurchased and retired an aggregate of 14,179,711 shares of common stock at a cost of approximately $88.5 million since September 2007. As of December 31, 2012, $19.8 million remained available under the Company's existing share repurchase authorization.

The Company issues RSUs as part of its equity incentive plan. For a portion of RSUs granted, the number of shares issued on the date the RSUs vest is net of the statutory withholding requirements that the Company pays on behalf of its employees. During the three months ended December 31, 2012, the Company withheld 34,555 shares to satisfy approximately $0.5 million of employee tax obligations. Although the shares withheld are not issued, they are treated as common stock repurchases for accounting purposes, as they reduce the number of shares that would have been issued upon vesting.