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 June 30, 2015

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.)
1623 Buckeye Drive, Milpitas, California	95035
(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 July 24, 2015 was 32,262,717.

TABLE OF CONTENTS

PART I	Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Income for the three and nine months ended June 30, 2015 and 2014 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2015 and 2014 (Unaudited)	2
	Condensed Consolidated Balance Sheets as of June 30, 2015 (Unaudited) and September 30, 2014	3
	Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2015 and 2014 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II	Other Information
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 6.	Exhibits	37
Signatures		38

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   June 30,						Nine Months Ended   June 30,
	2015			2014			2015			2014
Net sales	$	81,240		$	84,834		$	242,254		$	244,825
Cost of sales	53,936			55,538			157,757			162,250
Gross profit	27,304			29,296			84,497			82,575
Operating expenses:
Research and development	11,777			10,978			36,448			32,363
Selling, general and administrative	16,179			11,942			43,253			34,845
Total operating expenses	27,956			22,920			79,701			67,208
Operating income (loss)	(652		)	6,376			4,796			15,367
Interest and other income (expense), net	213			99			740			905
Gain on sale of investments	—			2,140			—			11,300
Income (loss) before income taxes	(439		)	8,615			5,536			27,572
Provision (benefit) for income taxes	(461		)	2,388			1,147			6,941
Consolidated net income	22			6,227			4,389			20,631
Net income attributable to noncontrolling interests	(6		)	(41		)	(71		)	(198		)
Net income attributable to ISSI	$	16		$	6,186		$	4,318		$	20,433
Basic net income per share	$	—		$	0.20		$	0.14		$	0.69
Shares used in basic per share calculation	31,950			30,312			31,495			29,816
Diluted net income per share	$	—		$	0.19		$	0.13		$	0.65
Shares used in diluted per share calculation	33,852			31,963			33,300			31,337

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   June 30,						Nine Months Ended   June 30,
	2015			2014			2015			2014
Consolidated net income	$	22		$	6,227		$	4,389		$	20,631
Other comprehensive income (loss), net of tax:
Change in unrealized loss on investments:
Changes arising during current period, net of tax benefit of $0, $0, $0 and $251, respectively	—			—			—			(349		)
Reclassification for gain included in net income, net of tax expense of $0, $592, $0 and $3,589, respectively	—			(1,024		)	—			(6,029		)
	—			(1,024		)	—			(6,378		)
Change in cumulative translation adjustment:
Changes arising during current period	1,784			2,989			(3,171		)	(1,020		)
Change in retirement plan actuarial losses:
Reclassification for gain included in net income, net of tax expense (benefit) of $0 for the three and nine months ended June 30, 2015 and 2014	29			27			87			82
Change in retirement plan transition obligation:
Reclassification for gain included in net income, net of tax expense (benefit) of $0 for the three and nine months ended June 30, 2015 and 2014	(15		)	(15		)	(44		)	(45		)
Other comprehensive income (loss)	1,798			1,977			(3,128		)	(7,361		)
Comprehensive income	1,820			8,204			1,261			13,270
Comprehensive income attributable to noncontrolling interest	(6		)	(41		)	(71		)	(198		)
Comprehensive income attributable to ISSI	$	1,814		$	8,163		$	1,190		$	13,072

See accompanying notes to condensed consolidated financial statements.

2

Integrated Silicon Solution, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

	June 30, 2015			September 30, 2014
	(unaudited)			(1)
ASSETS
Current assets:
Cash and cash equivalents	$	97,474		$	137,534
Restricted cash	19,170			1,000
Short-term investments	1,447			1,477
Accounts receivable, net	51,107			50,458
Inventories	87,441			85,093
Deferred tax assets	1,898			1,868
Other current assets	28,279			17,033
Total current assets	286,816			294,463
Property, equipment and leasehold improvements, net	58,046			58,847
Purchased intangible assets, net	4,051			5,093
Goodwill	9,178			9,178
Deferred tax assets	8,768			8,392
Other assets	53,845			24,369
Total assets	$	420,704		$	400,342
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	62,377		$	54,554
Accrued compensation and benefits	12,540			9,875
Accrued expenses	12,517			11,365
Current portion of long-term debt	195			195
Total current liabilities	87,629			75,989
Long-term debt	4,193			4,339
Other long-term liabilities	5,299			5,456
Total liabilities	97,121			85,784
Commitments and contingencies
Stockholders’ equity:
Common stock	3			3
Additional paid-in capital	378,009			364,587
Accumulated deficit	(52,416		)	(51,076		)
Accumulated other comprehensive loss	(4,172		)	(1,044		)
Total ISSI stockholders’ equity	321,424			312,470
Noncontrolling interest	2,159			2,088
Total stockholders’ equity	323,583			314,558
Total liabilities and stockholders’ equity	$	420,704		$	400,342

(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)

	Nine Months Ended   June 30,
	2015			2014
Cash flows from operating activities
Consolidated net income	$	4,389		$	20,631
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,574			5,885
Stock-based compensation	3,959			4,585
Excess tax loss (benefit) from share-based compensation	395			(2,567		)
Tax loss associated with employee stock plans	(395		)	—
Amortization of intangibles	1,042			1,186
Gain on sale of investments	—			(11,300		)
Equity in net loss of affiliate	78			215
Net foreign currency transaction gains	(162		)	(405		)
Deferred tax assets	(650		)	1,736
Other non-cash items	61			(35		)
Net effect of changes in current and other assets and current liabilities	(6,787		)	(14,231		)
Net cash provided by operating activities	8,504			5,700
Cash flows from investing activities
Acquisition of property and equipment	(6,353		)	(9,928		)
Acquisition of noncontrolling interest in consolidated subsidiary	—			(199		)
Investment in Powerchip Leased Assets	(20,574		)	—
Payment of license fees	(6,180		)	(7,098		)
Increase in restricted cash	(18,170		)	(1,000		)
Purchases of available-for-sale securities	(1,272		)	(1,316		)
Sales of available-for-sale securities	1,313			22,143
Net cash (used in) provided by investing activities	(51,236		)	2,602
Cash flows from financing activities
Repurchases and retirement of common stock	(513		)	(350		)
Proceeds from issuance of stock through compensation plans	10,371			9,569
Dividends Paid	(5,658		)	—
Excess tax (loss) benefit from share-based compensation	(395		)	2,567
Principal payments of long-term obligations	(146		)	(146		)
Net cash provided by financing activities	3,659			11,640
Effect of exchange rate changes on cash and cash equivalents	(987		)	(470		)
Net (decrease) increase in cash and cash equivalents	(40,060		)	19,472
Cash and cash equivalents at beginning of period	137,534			119,997
Cash and cash equivalents at end of period	$	97,474		$	139,469

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 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 March 12, 2015, the Company and Uphill Investment Co. (Uphill) entered into a definitive merger agreement (as amended, the Merger Agreement) under which Uphill would acquire all of the Company's outstanding shares for $19.25 per share in cash (the Merger).  Subsequent to March 12, the merger agreement was amended several times to increase the purchase price.  As a result of the amendment to the Merger Agreement executed on June 22, 2015, the purchase price to be paid by Uphill to the Company’s stockholders is $23.00 per share in cash. The transaction was approved by the stockholders of the Company on June 29, 2015. The closing of the transaction is pending regulatory approvals. As part of the transaction, the Merger Agreement contemplates that, in connection with the closing of the merger, the Company's operations in Taiwan will be restructured or some or all of the Company's Taiwan operations may be sold in order to comply with the requirements of Taiwan laws and regulations. The transaction is currently expected to close in the third calendar quarter of 2015.

On September 14, 2012, the Company acquired approximately 94.1% of the outstanding shares of Chingis Technology Corporation (Chingis) and the Company’s financial results reflect accounting for Chingis on a consolidated basis from the date of acquisition. In May 2013, the Company acquired an additional 4.8% of Chingis for approximately $1.6 million. In fiscal 2014, the Company acquired the remaining 1.1% of Chingis for approximately $0.4 million, and at June 30, 2015, the Company owned 100% of Chingis.

The Company’s operating results for the nine months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2015 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, 2014.

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, 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 and Standards

Impact of Recently Adopted Accounting Standards

On October 1, 2014, the Company adopted the following accounting standards, which did not have any impact on its consolidated results of operations during such period or its financial condition at the end of such period:

Liabilities

In February 2013, the Financial Accounting Standards Board (FASB) issued guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the reporting date. Examples of obligations include debt arrangements, other contractual obligations, settled litigation and judicial rulings. The guidance requires an entity to measure such obligations as the sum of the amount that the reporting entity agreed to pay on the basis of its arrangement among its co-obligors in addition to amounts the reporting entity expects to pay on behalf of its co-obligors.

5

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Foreign Currency Matters

In March 2013, the FASB issued guidance on when foreign currency translation adjustments should be released to net income. When a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.

Accounting Pronouncements

The following issued accounting pronouncements are not yet effective for the Company as of June 30, 2015.

Revenue from Contracts with Customers

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The new guidance establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The guidance becomes effective for the Company beginning in the first quarter of fiscal 2019. Early adoption is not permitted. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company has not yet selected a transition method nor has the Company determined the impact of adopting the new revenue standard on its consolidated financial statements.

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 June 30, 2015 and September 30, 2014, all of the Company’s financial assets utilized Level 1 inputs.

As of June 30, 2015, 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:

June 30, 2015	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
				(In thousands)
Available-for-sale
Level 1:
Money market instruments	$	9,327		$	—	$	—	$	9,327
Certificates of deposit	13,840			—		—		13,840
Total	23,167			—		—		23,167
Less: Amounts included in cash and cash
equivalents	(21,720		)	—		—		(21,720		)
	$	1,447		$	—	$	—	$	1,447
September 30, 2014	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
				(In thousands)
Available-for-sale
Level 1:
Money market instruments	$	22,519		$	—	$	—	$	22,519
Certificates of deposit	20,679			—		—		20,679
Total	43,198			—		—		43,198
Less: Amounts included in cash, cash
equivalents and restricted cash	(41,721		)	—		—		(41,721		)
	$	1,477		$	—	$	—	$	1,477

There were no transfers in or out of Level 1 assets during the three months ended June 30, 2015.

As of June 30, 2015 and September 30, 2014, the Company had cash, cash equivalents, restricted cash and short-term investments in foreign financial institutions of $55.4 million ($1.6 million of which was in China and subject to exchange control regulations) and $71.9 million, respectively.

7

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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 (SARs), 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 June 30, 2015, 1,530,000 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.

The Company began granting cash-settled SARs in the first quarter of fiscal 2014. The SARs vest ratably over a four-year period with a 6-month or 1-year cliff vest and then vest ratably each month over the remaining period based upon continued employment with the Company. The SARs expire seven years after the date of grant. These SARs allow the holder to receive in cash the difference between the SARs' exercise price (which is the closing market price of the Company's common stock on the grant date) and the closing market price of the Company's common stock on the date the holder exercises the SAR. The SARs are recorded as a liability in accrued compensation and benefits in the Company's balance sheet.

The Company had an Employee Stock Purchase Plan (ESPP) which permitted eligible employees to purchase shares of the Company’s common stock through payroll deductions. As approved by the Board of Directors, effective August 1, 2010, shares under the ESPP were 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 commenced on approximately February 1 and August 1 of each year. The ESPP terminated pursuant to its terms on February 2, 2015, therefore at June 30, 2015, no shares were available for future issuance under the ESPP.

Stock-Based Compensation

The following table outlines the effects of total stock-based compensation including expense related to SARs.

	Three Months Ended   June 30,						Nine Months Ended   June 30,
	2015			2014			2015			2014
	(In thousands)
Stock-based compensation
Cost of sales	$	26		$	50		$	124		$	154
Research and development	650			694			2,146			2,119
Selling, general and administrative	1,867			1,017			4,294			3,156
Total stock-based compensation	2,543			1,761			6,564			5,429
Tax effect on stock-based compensation	(688		)	(330		)	(1,520		)	(1,018		)
Net effect on net income	$	1,855		$	1,431		$	5,044		$	4,411
Compensation related to SARs included in total stock-based compensation	$	1,374		$	222		$	2,605		$	844

As of June 30, 2015, there was approximately $7.7 million of total unrecognized stock-based compensation expense related to awards under the Company’s stock-based benefit plans that will be recognized over a weighted-average period of approximately 2.18 years. Future awards will add to this total whereas quarterly amortization and the vesting of existing awards will reduce this total. As of June 30, 2015, there was approximately $10.5 million of total unrecognized stock-based compensation expense related to SARs that will be recognized over a weighted-average period of approximately 2.86 years. Future SAR grants will add to this total whereas quarterly amortization and the vesting of SARs will reduce this total. In addition, because SARs are settled with cash, the fair value of SARs must be revalued on a quarterly basis which will likely impact the amount of expense in future periods.

8

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The Company uses the Black-Scholes option pricing model to estimate the fair value of the options and SARs 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 and nine month periods ended June 30, 2015 and 2014 were based on estimates at the date of grant as follows:

	Three Months Ended   June 30,						Nine Months Ended   June 30,
	2015			2014			2015			2014
Options
Weighted-average fair value of grants	$	—		$	6.13		$	4.11		$	4.70
Expected term in years	—			4.42			4.27			4.42
Estimated volatility	—		%	51		%	38		%	51		%
Risk-free interest rate	—		%	1.21		%	1.25		%	1.04		%
Dividend yield	—		%	—		%	1.66		%	—		%
ESPP
Weighted-average fair value of grants	$	—		$	—		$	—		$	2.66
Expected term in years	—			—			—			0.49
Estimated volatility	—		%	—		%	—		%	27		%
Risk-free interest rate	—		%	—		%	—		%	0.41		%
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 and nine months ended June 30, 2015 was $18.70 per share and $13.59 per share, respectively. The weighted average grant date fair value of RSUs granted in the three and nine months ended June 30, 2014 was $14.45 per share and $11.62 per share, respectively.

A summary of the Company’s stock option activity and related information for the nine months ended June 30, 2015 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, 2014	4,240		$	8.10
Granted	85		$	14.83
Exercised	(1,190	)	$	7.67		$	11,883
Cancelled/Expired	(47	)	$	10.84
Outstanding at June 30, 2015	3,088		$	8.40	3.40	$	42,421
Exercisable at June 30, 2015	2,192		$	7.50	2.85	$	32,077
Vested and expected to vest after June 30, 2015	3,057		$	8.38	3.39	$	42,082

A summary of the Company’s RSU activity and related information for the nine months ended June 30, 2015 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, 2014	262		$	9.91
Granted	230		$	13.59
Vested	(110	)	$	9.43	$	1,546
Forfeited	(3	)	$	13.22
Outstanding at June 30, 2015	379		$	12.26	$	8,385

9

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

A summary of the Company’s SAR activity and related information for the nine months ended June 30, 2015 under the 2007 Plan 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, 2014	747		$	10.96
Granted	682		$	13.55
Exercised	(107	)	$	13.55		$	895
Cancelled/Expired	(27	)	$	12.17
Outstanding at June 30, 2015	1,295		$	12.25	5.85	$	12,811
Exercisable at June 30, 2015	247		$	11.36	5.51	$	2,662

6. Concentrations

In the three and nine months ended June 30, 2015, revenue from the Company's largest distributor accounted for approximately 18% and 16%, respectively, of the Company's total net sales. In the three and nine months ended June 30, 2015, revenue from the Company's second largest distributor accounted for approximately 11% and 13%, respectively, of the Company's total net sales. In the three and nine months ended June 30, 2014, revenue from the Company's largest distributor accounted for approximately 20% and 18%, respectively, of the Company's total net sales. In the three and nine months ended June 30, 2014, revenue from the Company's second largest distributor accounted for approximately 12% and 13%, respectively, of the Company's total net sales.

7. Inventories

The following is a summary of inventories by major category:

	June 30, 2015		September 30, 2014
	(In thousands)
Purchased components	$	25,001	$	21,677
Work-in-process	22,959		27,058
Finished goods	39,481		36,358
	$	87,441	$	85,093

During the three and nine months ended June 30, 2015, the Company recorded inventory write-downs of $1.5 million and $4.7 million, respectively. During the three and nine months ended June 30, 2014, the Company recorded inventory write-downs of $2.1 million and $4.3 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.

10

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

8.     Other Current Assets and Other Assets

Other current assets consisted of the following:

	June 30, 2015		September 30, 2014
	(In thousands)
Prepayments for Powerchip lease related assets	$	11,173	$	—
Other current assets	17,106		17,033
	$	28,279	$	17,033

Other assets consisted of the following:

	June 30, 2015		September 30, 2014
	(In thousands)
Restricted assets	$	651	$	499
Other investment	1,358		1,436
Nanya private placement shares	10,428		10,645
Technology licenses, net	15,339		10,644
Powerchip lease related assets	24,904		—
Other	1,165		1,145
	$	53,845	$	24,369

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

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.

From time to time, the Company licenses patents or other intellectual property rights from third parties. The technology licenses are being amortized over their estimated useful lives ranging from three to fifteen years.

On April 20, 2015, the Company entered into Equipment Lease Agreements ( Lease Agreements) with Powerchip Technology Corporation (Powerchip). Under the Lease Agreements, the Company will purchase and then lease up to an aggregate of $73.5 million in semiconductor manufacturing equipment to Powerchip whereby Powerchip will acquire ownership of the equipment at the end of the lease period, and the Company will obtain access to certain manufacturing capacity and technology at Powerchip. As of June 30, 2015, the Company had purchased $24.9 million of equipment related to the Powerchip lease.

The Lease Agreements provide for a term of approximately six years, each ending December 31, 2021. Beginning in 2019 and continuing through 2021, Powerchip will make quarterly payments to the Company in an aggregate amount of approximately $82.1 million (the Quarterly Payments). Until such time as all Quarterly Payments have been made, the Company shall own, and continue to own, all equipment subject to the Lease Agreements.

In addition to making the Quarterly Payments, Powerchip shall provide the Company with manufacturing capacity to produce a specified number of wafers each month beginning in 2015 through 2021. The Company has an option to renew such manufacturing arrangement for an additional three years.

In March 2012, the Company made an equity investment of $2.0 million in a private technology company headquartered in Hong Kong. At June 30, 2015, the Company's ownership interest in such company was approximately 25%. 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 (expense), net.

11

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

9. Purchased Intangible Assets

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

	Gross		Accumulated Amortization		Net
	(In thousands)
June 30, 2015
Developed technology	$	5,330	$	3,096	$	2,234
Customer relationships	3,340		1,554		1,786
Other	450		419		31
Total	$	9,120	$	5,069	$	4,051
September 30, 2014
Developed technology	$	5,330	$	2,584	$	2,746
Customer relationships	3,340		1,137		2,203
Other	450		306		144
Total	$	9,120	$	4,027	$	5,093

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

	Three Months Ended   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
	(In thousands)
Reported as:
Cost of sales	$	171	$	191	$	512	$	656
Operating expenses	177		177		530		530
Total	$	348	$	368	$	1,042	$	1,186

The following table presents the estimated future amortization expense of the Company’s purchased intangible assets at June 30, 2015 (in thousands). The weighted-average remaining amortization period for developed technology, customer relationships and other intangibles is 3.29 years, 3.21 years and 0.21 years, respectively. If the Company acquires additional purchased intangible assets in the future, its future amortization may be increased by those assets.

Fiscal year
Remainder of 2015	$	341
2016	1,238
2017	1,238
2018	1,195
2019	39
Thereafter	—
Total	$	4,051

12

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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 a 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. The interest rate on the Loan was 1.25% at June 30, 2015. Principal payments due under the Loan are as follows (in thousands):

Fiscal year
Remainder of 2015	$	49
2016	195
2017	195
2018	3,949
2019	—
Thereafter	—
Total	$	4,388

11. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax, were as follows (in thousands):

	June 30, 2015			September 30, 2014
Accumulated foreign currency translation adjustments	$	(2,120	)	$	1,051
Accumulated net retirement plan transition asset (liability) (net of tax of $124 and $124, respectively)	(36		)	8
Accumulated net retirement plan actuarial losses (net of tax of $477 and $477, respectively)	(2,016		)	(2,103		)
Total accumulated other comprehensive loss	$	(4,172	)	$	(1,044	)

The significant amounts reclassified out of accumulated other comprehensive loss into the consolidated condensed statements of income, with presentation location, during the three and nine months ended June 30, 2015 and June 30, 2014 were as follows:

	Three Months Ended   June 30,					Nine Months Ended   June 30,
	2015		2014			2015		2014
	(In thousands)
Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Loss										Location
Unrealized holding gains on available-for -sale investments
	$	—	$	1,616		$	—	$	9,618		Gain on the sale of investments
	—		(592		)	—		(3,589		)	Provision for income taxes
	$	—	$	1,024		$	—	$	6,029

13

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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 2015. 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 and nine months ended June 30, 2015, the Company recorded income tax expense (benefit) of $(0.5) million and $1.1 million, respectively, that represents an effective tax rate of approximately 104% and 21%, respectively. The differences between the recorded provision for income taxes and the tax provision, based on the federal statutory rate of 35%, were primarily attributable to the differential in foreign tax rates, non-deductible stock-based compensation expense and certain foreign losses not benefited.

For the three and nine months ended June 30, 2014, the Company recorded income tax expense of $2.4 million and $6.9 million, respectively, that represents an effective tax rate of approximately 28% and 25%, respectively. 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.

As of June 30, 2015, the Company had unrecognized tax positions that would impact its effective tax rate, if realized.

14

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   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
Numerator for basic and diluted net income per share:
Net income attributable to ISSI	$	16	$	6,186	$	4,318	$	20,433
Denominator for basic net income per share:
Weighted average common shares outstanding	31,950		30,312		31,495		29,816
Dilutive stock options and awards	1,902		1,651		1,805		1,521
Denominator for diluted net income per share	33,852		31,963		33,300		31,337
Basic net income per share	$	—	$	0.20	$	0.14	$	0.69
Diluted net income per share	$	—	$	0.19	$	0.13	$	0.65

For the three months and nine months ended June 30, 2015, stock options and awards for 46,000 shares and 100,000 shares, respectively, were excluded from diluted earnings per share by the application of the treasury stock method. For the three months and nine months ended June 30, 2014, stock options and awards for 686,000 shares and 1,070,000 shares, respectively, were excluded from diluted earnings per share by the application of the treasury stock method.

14. Common Stock Repurchase Program

In the nine month period ended June 30, 2015, the Company did not repurchase any shares of its common stock in the open market. As of June 30, 2015, 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 June 30, 2015, $19.8 million remained available under the Company's existing share repurchase authorization. However, under the terms of the Merger Agreement, the Company is currently prohibited from repurchasing any shares of its common stock.

The Company issues RSUs as part of its equity incentive plan. For a portion of the 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 nine months ended June 30, 2015, the Company withheld 36,891 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

Legal Matters

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.

15

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

GSI Technology Inc. v. Integrated Silicon Solution, Inc., et al.

On October 2, 2013, GSI Technology Inc. (GSI) filed a Second Amended Complaint in a lawsuit filed earlier in 2013 solely against defendant United Memories, Inc. in the United States District Court for the Northern District of California.  GSI named the Company as a new, second defendant in the Second Amended Complaint.  On April 18, 2014, the Court granted the Company's motion to dismiss that complaint in part, leaving claims against the Company for Unfair Competition under California Business & Professions Code 17200, misappropriation of trade secrets, and intentional interference with prospective economic advantage.  In the remaining portion of the complaint, GSI alleged that the Company acted together with United Memories, Inc. to harm GSI in connection with a bid requested by Cisco Systems, Inc. and misappropriated alleged GSI trade secrets.  GSI seeks damages and injunctive relief.  The Company filed an answer on June 2, 2014 and asserted a declaratory relief counterclaim against GSI.  Before the Company was named as a defendant, the Court denied motions by GSI against United Memories, Inc. for temporary and preliminary injunctive relief.  The Court issued a revised case management order on January 7, 2015 with a scheduled trial date of October 26, 2015.   Motions for summary judgment, including a motion filed by the Company, were heard on June 30, 2015 and are currently pending before the Court. The Company believes it has meritorious defenses to the claims alleged by GSI and intends to defend this suit vigorously.  However, there can be no assurance as to the outcome of this matter or any future litigation.

Legal Proceedings Regarding our Pending Acquisition

Beginning on April 1, 2015, three purported stockholder class action complaints were filed in the Superior Court of the State of California in the County of Santa Clara on behalf of a putative class of ISSI stockholders and naming as defendants ISSI’s Board of Directors and Uphill: Richard Wilson III v. Jimmy S.M. Lee, et al., Case No. 1-15-CV-278815 (filed April 1, 2015); Matthew Sciabacucchi v. Jimmy S.M. Lee, et al., Case No. 1-15-CV-278812 (filed April 1, 2015); and Kathy Guerra v. Scott D. Howarth, et al., Case No. 1-15-CV-279142 (filed April 8, 2015) (the “Guerra Action”). On May 5, 2015, the actions were consolidated to form In re Integrated Silicon Solution, Inc. Stockholder Litigation, Lead Case No. 1-15-cv-278812, and plaintiffs designated the complaint filed in the Guerra Action as the operative complaint. The operative complaint generally alleges that, in connection with the proposed acquisition of ISSI by Uphill, the ISSI directors breached their fiduciary duties owed to ISSI’s stockholders by, among other things, purportedly failing to take steps to maximize the value of ISSI to ISSI’s stockholders and agreeing to allegedly preclusive deal protection devices in the Merger Agreement. The operative complaint also alleges that the ISSI directors breached their fiduciary duties by allegedly failing to disclose material information to ISSI stockholders. The operative complaint further generally alleges that Uphill aided and abetted the ISSI directors in the alleged breaches of their fiduciary duties. The operative complaint seeks, among other things, an order enjoining the defendants from consummating the proposed transaction, or alternatively, in the event that the proposed transaction is consummated, an order rescinding it. A case management conference is currently scheduled for October 2, 2015.

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 June 30, 2015, the Company had approximately $20.9 million of purchase orders for which the related wafers had been entered into wafer work-in-process (i.e., manufacturing had begun).

16

INTEGRATED SILICON SOLUTION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
			(In thousands)
Net sales
United States	$	10,148	$	9,571	$	30,254	$	28,449
China	8,392		9,838		27,149		32,689
Hong Kong	15,049		16,456		43,444		45,499
Japan	7,753		5,916		20,371		16,569
Korea	3,289		4,000		11,112		10,544
Taiwan	10,416		12,344		32,186		35,099
Other Asia Pacific countries	5,332		6,435		16,858		18,390
Europe	20,608		19,587		60,138		56,207
Other	253		687		742		1,379
Total net sales	$	81,240	$	84,834	$	242,254	$	244,825

	June 30, 2015		September 30, 2014
	(In thousands)
Long-lived assets
United States	$	11,171	$	11,174
Hong Kong	10		14
China	13,956		12,908
Taiwan	32,909		34,751
	$	58,046	$	58,847

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 $0 and $144,000 during the three and nine months ended June 30, 2015, respectively. Sales to Chrontel were $80,000 and $162,000 during the three months and nine months ended June 30, 2014, respectively. Accounts receivable from Chrontel were approximately $0 and $59,000 at June 30, 2015 and September 30, 2014, respectively.

17

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, and (iv) digital consumer. Our primary products are DRAM in both package and Known Good Die (KGD) form and high speed and low power SRAM, serial and parallel NOR flash products and a variety of mixed signal and analog products. In the first nine months of fiscal 2015 and in fiscal 2014, approximately 92% and 89%, respectively, of our revenue was derived from our DRAM and SRAM products. Sales of our DRAM products have represented a majority of our revenue in each year since fiscal 2003.

On March 12, 2015, we and Uphill Investment Co. (Uphill) entered into a definitive merger agreement (as amended, the Merger Agreement) under which Uphill would acquire all of our outstanding shares for $19.25 per share in cash (the Merger) .  Subsequent to March 12, the merger agreement was amended several times to increase the purchase price.  As a result of the amendment to the Merger Agreement executed on June 22, 2015, the purchase price to be paid by Uphill to our stockholders is $23.00 per share in cash. The transaction was approved by the stockholders of ISSI on June 29, 2015. The closing of the transaction is pending regulatory approvals. As part of the transaction, the Merger Agreement contemplates that, in connection with the closing of the Merger, ISSI’s operations in Taiwan will be restructured or some or all of ISSI’s Taiwan operations may be sold in order to comply with the requirements of Taiwan laws and regulations. The transaction is currently expected to close in the third calendar quarter of 2015.

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 April 2015, we entered into Equipment Lease Agreements ( the Lease Agreements) with Powerchip Technology Corporation (Powerchip). Under the Lease Agreements, we will purchase and then lease up to an aggregate of $73.5 million in semiconductor manufacturing equipment to Powerchip whereby Powerchip will acquire ownership of the equipment at the end of the lease period, and we will obtain access to certain manufacturing capacity and technology at Powerchip. As of June 30, 2015, we had purchased $24.9 million of equipment related to the Powerchip lease. In addition, 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. Certain of our foundries have decided from time to time 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 exposes us to the risk of inventory obsolescence. Once a product

18

is in production at a particular foundry, it is time consuming and costly to have such product manufactured at a different foundry.  There can be no assurance as to the future impact that such matters will have on our business, customer relationships or results of operations.

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 nine months of fiscal 2015 and in fiscal 2014. 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, 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 87% in each of the three months and nine months ended June 30, 2015, approximately 89% in the three months ended June 30, 2014, and approximately 88% in the nine months ended June 30, 2014. 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   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
Asia	62	%	65	%	62	%	65	%
Europe	25		23		25		23
U.S.	13		11		13		12
Other	—		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.

19

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 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, 2014.

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 the 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

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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.

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.

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. We also use the Black-Scholes model to estimate the value of cash-settled stock appreciation rights (SARs). The fair value of the SARs must be revalued on a quarterly basis which will likely impact the amount of our expense in future periods. Upon the exercise of a SAR, the expense recognized is adjusted to reflect the difference between the exercise price of the SAR and the closing market price of our common stock on the date of exercise.

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 and Standards” in the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

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Results of Operations

Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014

Net Sales. Net sales consist principally of total product sales less estimated sales returns. Net sales decreased to $81.2 million in the three months ended June 30, 2015 from $84.8 million in the three months ended June 30, 2014. The decrease of $3.6 million was the result of a decrease in SRAM and flash revenue partially offset by an increase in DRAM and analog revenue in the three months ended June 30, 2015 compared to the three months ended June 30, 2014. Our SRAM revenue decreased by $3.3 million in the three months ended June 30, 2015 compared to the three months ended June 30, 2014 as a result of a decrease in unit shipments and an overall net decline in average selling prices. In addition, our flash revenue decreased by $3.1 million primarily as a result of a decrease in unit shipments. However, our DRAM revenue increased by $2.7 million as a result of an increase in unit shipments of our DRAM products which was partially offset by the impact of a decline in average selling prices for our DRAM products. In addition, our analog revenue increased by $0.1 million in the three months ended June 30, 2015 compared to the three months ended June 30, 2014. 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.

In the three months ended June 30, 2015, revenue from our largest and second largest distributor accounted for approximately 18% and 11%, respectively, of our total net sales. In the three months ended June 30, 2014, revenue from our largest and second largest distributor accounted for approximately 20% 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 decreased by $2.0 million to $27.3 million in the three months ended June 30, 2015 from $29.3 million in the three months ended June 30, 2014 primarily as a result of a decrease in SRAM shipments. Our gross margin was 33.6% in the three months ended June 30, 2015 compared to 34.5% in the three months ended June 30, 2014. The decrease in gross margin in the three months ended June 30, 2015 compared to the three months ended June 30, 2014 can be primarily attributed to a change in product mix for our DRAM 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 7% to $11.8 million in the three months ended June 30, 2015 compared to $11.0 million in the three months ended June 30, 2014. As a percentage of net sales, research and development expenses increased to 14.5% in the three months ended June 30, 2015 from 12.9% in the three months ended June 30, 2014. The increase in research and development expenses of $0.8 million was primarily the result of an increase in product development costs and headcount related expenses in the three months ended June 30, 2015 compared to the three months ended June 30, 2014.

Selling, General and Administrative. Selling, general and administrative expenses increased by 35% to $16.2 million in the three months ended June 30, 2015 from $11.9 million in the three months ended June 30, 2014. As a percentage of net sales, selling, general and administrative expenses increased to 19.9% in the three months ended June 30, 2015 from 14.1% in the three months ended June 30, 2014. The increase in selling, general and administrative expenses of $4.3 million was primarily the result of $2.1 million of expenses related to our pending acquisition, an increase of $1.6 million in legal expenses related to our GSI litigation and a $0.1 million increase in proxy related expenses in the three months ended June 30, 2015 compared to the three months ended June 30, 2014. In addition, increases in headcount related expenses were partially offset by a decrease in sales commissions and expenses related to our world-wide sales conference.

Interest and other income, net. Interest and other income, net was $0.2 million in the three months ended June 30, 2015 compared to $0.1 million in the three months ended June 30, 2014. The $0.2 million of interest and other income in the three months ended June 30, 2015 is comprised primarily of $0.1 million in rental income from the lease of excess space in our Taiwan facility and an exchange gain of $0.1 million as a result of the appreciation of the U.S. dollar compared to the New Taiwan dollar. The $0.1 million of interest and other income in the three months ended June 30, 2014 is comprised primarily of $0.2 million in rental income from the lease of excess space in our Taiwan facility and an exchange loss of $0.1 million as a result of the depreciation of the U.S. dollar compared to the New Taiwan dollar.

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Gain on the sale of investments. In the three months ended June 30, 2014, we sold our approximately 2.3 million remaining salable shares of Nanya common stock for approximately $3.6 million which resulted in a pre-tax gain of approximately $2.1 million.

Provision (benefit) for income taxes. For the three months ended June 30, 2015, we recorded an income tax benefit of $0.5 million that represents an effective tax rate of approximately 104% as our pre-tax loss was more than offset by a tax benefit in the U.S. 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, non-deductible stock-based compensation expense and certain foreign losses not benefited. For the three months ended June 30, 2014, we recorded income tax expense of $2.4 million that represents an effective tax rate of approximately 28%. 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, non-deductible stock-based compensation expense and certain foreign losses not benefited.

Net income attributable to noncontrolling interests. The net income attributable to noncontrolling interests was net income of $6,000 in the three months ended June 30, 2015 compared to net income of $41,000 in the three months ended June 30, 2014.

Nine Months Ended June 30, 2015 Compared to Nine Months Ended June 30, 2014

Net Sales. Net sales decreased to $242.3 million in the nine months ended June 30, 2015 from $244.8 million in the nine months ended June 30, 2014. The decrease of $2.5 million was the result of a decrease in SRAM and flash revenue partially offset by an increase in DRAM and analog revenue in the nine months ended June 30, 2015 compared to the nine months ended June 30, 2014. Our SRAM revenue decreased by $7.9 million in the nine months ended June 30, 2015 compared to the nine months ended June 30, 2014 as a result of a decrease in unit shipments and an overall net decline in average selling prices. In addition, our flash revenue decreased by $6.2 million primarily as a result of a decrease in unit shipments. However, our DRAM revenue increased by $11.3 million as a result of an increase in units shipments of our DRAM products which was partially offset by the impact of a decline in average selling prices for our DRAM products in the nine months ended June 30, 2015 compared to the nine months ended June 30, 2014 and our analog revenue increased by $0.3 million.

In the nine months ended June 30, 2015, revenue from our largest and second largest distributor accounted for approximately 16% and 13%, respectively, of our total net sales. In the nine months ended June 30, 2014, revenue from our largest and second largest distributor accounted for approximately 18% and 13%, respectively, of our total net sales.

Gross profit. Gross profit increased by $1.9 million to $84.5 million in the nine months ended June 30, 2015 from $82.6 million in the nine months ended June 30, 2014 primarily as a result of an increase in DRAM shipments. Our gross margin was 34.9% in the nine months ended June 30, 2015 compared to 33.7% in the nine months ended June 30, 2014. The increase in gross margin in the nine months ended June 30, 2015 compared to the nine months ended June 30, 2014 can be attributed to the favorable impact in the current period from decreased product costs for certain DRAM products which more than offset a decrease in average selling prices for certain of our DRAM products.

Research and development. Research and development expenses increased by 13% to $36.4 million in the nine months ended June 30, 2015 compared to $32.4 million in the nine months ended June 30, 2014. As a percentage of net sales, research and development expenses increased to 15.0% in the nine months ended June 30, 2015 from 13.2% in the nine months ended June 30, 2014. The increase in research and development expenses of $4.0 million was primarily the result of increases in product development costs and headcount related expenses in the nine months ended June 30, 2015 compared to the nine months ended June 30, 2014.

Selling, general and administrative. Selling, general and administrative expenses increased by 24% to $43.3 million in the nine months ended June 30, 2015 from $34.8 million in the nine months ended June 30, 2014. As a percentage of net sales, selling, general and administrative expenses increased to 17.9% in the nine months ended June 30 2015 from 14.2% in the nine months ended June 30, 2014. The increase in selling, general and administrative expenses of $8.5 million was primarily the result of $3.7 million of expenses related to our pending acquisition, an increase of $3.3 million in legal expenses related to our GSI litigation and a $0.6 million increase in proxy related expenses in the nine months ended June 30, 2015 compared to the nine months ended June 30, 2014. In addition, increases in headcount related expenses were partially offset by a decrease in sales commissions and expenses related to our world-wide sales conference.

Interest and other income, net. Interest and other income, net was $0.7 million in the nine months ended June 30, 2015 compared to $0.9 million in the nine months ended June 30, 2014. The $0.7 million of interest and other income in the nine months ended June 30, 2015 is comprised primarily of $0.7 million in rental income from the lease of excess space in our Taiwan facility and an exchange gain of $0.2 million as a result of the appreciation of the U.S. dollar compared to the New Taiwan dollar partially offset by $0.2 million of other items. The $0.9 million of interest and other income in the nine months ended June 30, 2014 is comprised primarily of $0.7 million in rental income from the lease of excess space in our Taiwan facility and an exchange gain

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of $0.4 million as a result of the appreciation of the U.S. dollar compared to the New Taiwan dollar partially offset by $0.2 million of other items.

Gain on the sale of investments. In the nine months ended June 30, 2014, we sold approximately 11.0 million shares of Nanya common stock for approximately $16.2 million which resulted in a pre-tax gain of approximately $9.2 million. In addition, we sold our remaining shares of SMIC for approximately $3.2 million which resulted in a pre-tax gain of approximately $2.1 million.

Provision for income taxes. For the nine months ended June 30, 2015, we recorded income tax expense of $1.1 million that represents an effective tax rate of approximately 21%. The difference between the recorded provision for income taxes and the tax provision, based on the federal statutory rate of 35%, were primarily attributable to the differential in foreign tax rates, non-deductible stock-based compensation expense and certain foreign losses not benefited. For the nine months ended June 30, 2014, we recorded income tax expense of $6.9 million that represents an effective tax rate of approximately 25%. 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 income attributable to noncontrolling interests. The net income attributable to noncontrolling interests was $71,000 in the nine months ended June 30, 2015 compared to net income of $198,000 in the nine months ended June 30, 2014.

Liquidity and Capital Resources

As of June 30, 2015, our principal sources of liquidity included cash, cash equivalents, restricted cash and short-term investments of approximately $118.1 million. During the nine months ended June 30, 2015, we generated $8.5 million from operating activities compared to $5.7 million generated in the nine months ended June 30, 2014. The cash generated by operations in the nine months ended June 30, 2015 was primarily due to our net income of $4.4 million adjusted for non-cash items of $10.9 million, an increase in accrued liabilities of $4.1 million and a decrease in other assets of $0.8 million. This was partially offset by an increase in inventories of $4.1 million, an increase in accounts receivable of $0.8 million and a decrease in accounts payable of $6.8 million. The cash generated by operations in the nine months ended June 30, 2014 was primarily due to our net income of $20.6 million adjusted for non-cash items of $0.7 million and increases in accrued liabilities of $5.8 million. This was partially offset by increases in accounts receivable of $4.3 million, increases in inventories of $11.5 million, increases in other assets of $1.3 million and decreases in accounts payable of $2.9 million.

In the nine months ended June 30, 2015, we used $51.2 million for investing activities compared to $2.6 million generated in the nine months ended June 30, 2014. The cash used in the nine months ended June 30, 2015 included $6.3 million for the acquisition of property and equipment, $20.6 million for the investment in assets leased to Powerchip, a net increase in restricted cash of $18.2 million and $6.2 million for the payment of license fees. As contemplated by the terms of the Merger Agreement, we deposited $19.2 million into an escrow account which resulted in the increase in our restricted cash. The escrow funds were released to us in July 2015. In the nine months ended June 30, 2015, we generated $0.1 million from net sales of other available-for-sale-securities. The cash generated in the nine months ended June 30, 2014 included $16.2 million from the sale of our remaining freely-tradeable shares of Nanya common stock, $3.2 million from the sale of our remaining shares of SMIC common stock and $1.4 million from net sales of other available-for-sale securities. In the nine months ended June 30, 2014, we used $9.9 million for the acquisition of property and equipment, $7.1 million for the payment of license fees, $1.0 million to collateralize accounts payable to a supplier and $0.2 million to acquire additional shares of our Chingis subsidiary.

In the nine months ended June 30, 2015, we made capital expenditures of approximately $6.3 million for test equipment, engineering tools, building improvements and computer hardware. We expect to spend approximately $6.0 million to $10.0 million for capital expenditures during the next twelve months, principally for the purchase of additional test equipment, design and engineering tools and computer hardware and software. In addition, we have spent $20.6 million to purchase manufacturing equipment that will be leased to Powerchip whereby Powerchip will acquire ownership of the equipment at the end of the lease period. We expect to spend an additional $52.9 million to purchase manufacturing equipment to be leased to Powerchip during the next six months. Beginning in 2019 and continuing through 2021, Powerchip will make quarterly lease payments to us in an aggregate amount of approximately $82.1 million. Until such time as all quarterly payments have been made, we will continue to own all equipment subject to the Lease Agreements. We expect to fund our capital expenditures from our existing cash and cash equivalent balances and new borrowings.

We generated $3.7 million from financing activities during the nine months ended June 30, 2015 compared to $11.6 million generated during the nine months ended June 30, 2014. Our sources of financing for the nine months ended June 30, 2015 were proceeds from the issuance of common stock of $10.4 million from stock option exercises. In the nine months ended June 30, 2015, we used $5.7 million for payments of dividends to stockholders, $0.5 million to settle shares withheld for statutory withholding requirements upon the vesting of RSUs, $0.4 million in excess tax loss from share-based compensation and $0.1 million for the repayment of long-term borrowings. Our sources of financing for the nine months ended June 30, 2014 were proceeds from the issuance of common stock of $9.6 million from stock option exercises and sales under our employee stock purchase plan and $2.6

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million excess tax benefits from share-based compensation. In the nine months ended June 30, 2014, we used $0.4 million to settle shares withheld for statutory withholding requirements upon the vesting of RSUs and $0.2 million for the repayment of long-term borrowings.

At June 30, 2015, we had $16.7 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 May 2016. As of June 30, 2015, we had no outstanding borrowings under these short-term lines of credit.

On December 4, 2012, we purchased a building in Milpitas, California consisting of 55,612 square feet on approximately 2.85 acres for $6.5 million. We relocated our headquarters to this location in June 2013. We financed a portion of the purchase price for our new headquarters with a loan for approximately $4.9 million. 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. We have operations in leased sites in the U.S., 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 2019. Our outstanding commitments under these leases were approximately $1.3 million at June 30, 2015.

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.

Our contractual cash obligations at June 30, 2015 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	$	1,349	$	258	$	939	$	152	$	—
Borrowings	4,388		49		390		3,949		—
Purchase obligations with wafer foundries	20,929		20,929		—		—		—
Total contractual cash obligations	$	26,666	$	21,236	$	1,329	$	4,101	$	—

At June 30, 2015, we had outstanding authorization from our Board to purchase up to $19.8 million of our common stock from time to time. However, under the terms of the Merger Agreement, we are currently prohibited from repurchasing shares of our common stock.

Our total cash, cash equivalents, restricted cash and short-term investments held by our foreign subsidiaries was $79.7 million at June 30, 2015 and $91.3 million at September 30, 2014. Under current tax laws and regulations, if accumulated earnings and profits held by our foreign subsidiaries that U.S. taxes had not previously been provided for were to be distributed to the U.S., in the form of dividends or otherwise, we would be subject to additional U.S. income taxes and foreign withholding taxes. Our balance of cash, cash equivalents, restricted cash and short-term investments available for our U.S. operations as of June 30, 2015 and September 30, 2014 was approximately $38.4 million and $48.7 million, respectively. We utilize a variety of tax planning and financing strategies with the objective of having our worldwide cash available in the locations in which it is needed. We consider our offshore earnings to be permanently reinvested offshore. However, we could determine to repatriate some of our offshore earnings in future periods to fund stockholder dividends, share repurchases, acquisitions or other corporate activities.  We expect that a significant portion of our future cash generation will be in our foreign subsidiaries.

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 or equipment purchases for 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. However, under the terms of the Merger Agreement, there are certain limitations to us entering into certain of the foregoing transactions without prior Uphill approval. There can be no assurance that any such additional financing could be obtained on terms acceptable to us, if at all.

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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, certain key employees 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 nine months ended June 30, 2015 and in fiscal 2014, we recorded exchange gains of approximately $0.2 million and $0.4 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, restricted cash and short-term investments of $118.1 million at June 30, 2015. 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 approximately $10.4 million of private placement shares in Nanya which are accounted for on the cost-basis. We account for such shares on the cost-basis as these securities are restricted and the restrictions are not expected to terminate within one year of the reporting date. In the event a 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 June 30, 2015, 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

During the three months ended June 30, 2015, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities 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.

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Part II. OTHER INFORMATION

Item 1.Legal Proceedings

GSI Technology Inc. v. Integrated Silicon Solution, Inc., et al.

On October 2, 2013, GSI Technology Inc. (GSI) filed a Second Amended Complaint in a lawsuit filed earlier in 2013 solely against defendant United Memories, Inc. in the United States District Court for the Northern District of California.  GSI named us as a new, second defendant in the Second Amended Complaint.  On April 18, 2014, the Court granted our motion to dismiss that complaint in part, leaving claims against us for Unfair Competition under California Business & Professions Code 17200, misappropriation of trade secrets, and intentional interference with prospective economic advantage.  In the remaining portion of the complaint, GSI alleged that we acted together with United Memories, Inc. to harm GSI in connection with a bid requested by Cisco Systems, Inc. and misappropriated alleged GSI trade secrets.  GSI seeks damages and injunctive relief.  We filed an answer on June 2, 2014 and asserted a declaratory relief counterclaim against GSI.  Before we were named as a defendant, the Court denied motions by GSI against United Memories, Inc. for temporary and preliminary injunctive relief.  The Court issued a revised case management order on January 7, 2015 with a scheduled trial date of October 26, 2015.   Motions for summary judgment, including a motion filed by us, were heard on June 30, 2015 and are currently pending before the Court. We believe we have meritorious defenses to the claims alleged by GSI and intend to defend this suit vigorously.  However, there can be no assurance as to the outcome of this matter or any future litigation.

Legal Proceedings Regarding our Pending Acquisition

Beginning on April 1, 2015, three purported stockholder class action complaints were filed in the Superior Court of the State of California in the County of Santa Clara on behalf of a putative class of ISSI stockholders and naming as defendants ISSI’s Board of Directors and Uphill: Richard Wilson III v. Jimmy S.M. Lee, et al., Case No. 1-15-CV-278815 (filed April 1, 2015); Matthew Sciabacucchi v. Jimmy S.M. Lee, et al., Case No. 1-15-CV-278812 (filed April 1, 2015); and Kathy Guerra v. Scott D. Howarth, et al., Case No. 1-15-CV-279142 (filed April 8, 2015) (the “Guerra Action”). On May 5, 2015, the actions were consolidated to form In re Integrated Silicon Solution, Inc. Stockholder Litigation, Lead Case No. 1-15-cv-278812, and plaintiffs designated the complaint filed in the Guerra Action as the operative complaint. The operative complaint generally alleges that, in connection with the proposed acquisition of ISSI by Uphill, the ISSI directors breached their fiduciary duties owed to ISSI’s stockholders by, among other things, purportedly failing to take steps to maximize the value of ISSI to ISSI’s stockholders and agreeing to allegedly preclusive deal protection devices in the Merger Agreement. The operative complaint also alleges that the ISSI directors breached their fiduciary duties by allegedly failing to disclose material information to ISSI stockholders. The operative complaint further generally alleges that Uphill aided and abetted the ISSI directors in the alleged breaches of their fiduciary duties. The operative complaint seeks, among other things, an order enjoining the defendants from consummating the proposed transaction, or alternatively, in the event that the proposed transaction is consummated, an order rescinding it. A case management conference is currently scheduled for October 2, 2015.

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

Risks Related to our Pending Acquisition

The parties may be unable to satisfy the conditions to the closing of our acquisition by Uphill and the acquisition may not be consummated.

Consummation of our acquisition by Uphill is subject to various closing conditions, including, among other things, (i) the absence of any legal restraints or prohibitions on the consummation of the Merger, and (ii) receipt of clearance from the Committee on Foreign Investment in the United States (CFIUS) and other regulatory approvals. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct (subject to certain materiality exceptions), the other party having performed in all material respects its obligations under the Merger Agreement and the other party not having suffered a Material Adverse Effect (as defined in the Merger Agreement). These and other conditions to the consummation of the Merger may fail to be satisfied. In addition, satisfying the conditions to the Merger may take longer,

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and could cost more, than ISSI and Uphill currently expect. The satisfaction of all of the required conditions could delay the completion of the Merger for a significant period of time or prevent it from occurring. Thus, there can be no assurance that the conditions to the Merger will be satisfied or waived or that the Merger will be consummated.

In addition, the Merger Agreement may be terminated under specified circumstances. Failure to complete the Merger could adversely affect our business and the market price of our common stock in a number of ways, including:

• the current ISSI stock price likely reflects a market assumption that the proposed acquisition will occur, meaning that a failure to complete the proposed transaction could result in a decline in the price of ISSI common stock;

• we may be required to pay a termination fee of $19.2 million if the Merger Agreement is terminated under certain circumstances, and any such payment would negatively affect our liquidity; and

• we have and expect to incur substantial transaction costs in connection with the proposed transaction, whether or not it is completed.

The announcement and pendency of our proposed acquisition by Uphill could materially adversely affect our business, financial condition, and results of operations.

The announcement and pendency of our proposed acquisition by Uphill could disrupt our business and create uncertainty about our future, which could have a material and negative impact on our business, financial condition, and results of operations, regardless of whether the acquisition is completed. These risks to our business, all of which could be exacerbated by any delay in the closing of the acquisition, include:

• restrictions in the Merger Agreement on the conduct of our business prior to the closing of the acquisition, which prevent us from taking specified actions without the prior consent of Uphill, which actions we might otherwise take in the absence of the Merger Agreement;

• the attention of our management may be directed towards the closing of the acquisition and may be diverted from our day-to-day business operations, and matters related to the acquisition may require commitments of time and resources that could otherwise have been devoted to other opportunities that might have been beneficial to us;

• our customers, suppliers and other third parties may decide not to renew or seek to terminate, change or renegotiate their relationships with us, whether pursuant to the terms of their existing agreements with us or otherwise;

• our employees may experience uncertainty regarding their future roles, which might adversely affect our ability to retain, recruit and motivate key personnel;

• certain actions we take in connection with the restructuring of our operations in Taiwan as contemplated by the Merger Agreement may result in significant costs or disruptions to our business or relationships with our employees; and

• litigation relating to the merger and the related costs.

Any of these matters could adversely affect our stock price, business, financial condition, results of operations, or business prospects.

Risks Related to our Business

Uncertain economic conditions and any future downturn in the automotive market, industrial 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, and digital consumer markets. In particular, in the nine months ended June 30, 2015 and in fiscal 2014, approximately 51% and 47%, 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, and digital consumer 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.

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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 nine months of fiscal 2015 and in fiscal 2014, approximately 92% and 89%, 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. We experienced a sequential decline in revenue from $84.2 million in the September 2014 quarter to $80.9 million in the December 2014 quarter as a result of a decrease in unit shipments of our DRAM and SRAM products. We experienced a sequential decline in revenue from $84.8 million in the June 2014 quarter to $84.2 million in the September 2014 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 2013, fiscal 2014 and the first nine months of fiscal 2015, 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. Although we entered the NOR Flash market with our acquisition of Chingis in September 2012, our NOR Flash business is generally subject to the same types of unit volume fluctuations and declines in average selling prices as our DRAM and SRAM businesses. Our ability to maintain or increase revenues will depend upon our ability to increase unit sales 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. For example, our revenue in each of the December 2014 quarter, September 2014 quarter and the March 2013 quarter was adversely affected as we were unable to secure an adequate supply of NOR flash wafers. Our principal manufacturing relationships are with GlobalFoundries, Hynix, Nanya, Powerchip, SMIC, TSMC, UMC, Vanguard and XMC. 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 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. 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;

• nonrefundable deposits with, loans to, or equipment purchases for foundries in exchange for capacity commitments;

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

• process development relationships with foundries; and

• joint ventures.

In this regard, in April 2015, we entered into the Lease Agreements with Powerchip under which we will purchase and then lease up to an aggregate of $73.5 million in semiconductor manufacturing equipment to Powerchip, whereby Powerchip will acquire ownership of the equipment at the end of the lease period, and we will obtain access to certain manufacturing capacity and technology at Powerchip. Also, 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.

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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 many 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 equity or 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 operations. In recent years, several foundries (including foundries that we relied on for wafers) experienced financial difficulties and filed for bankruptcy protection, substantially reduced their operations or were 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;

• 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.

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.

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. In this regard, please refer to "Part II, Item 1. Legal Proceedings" for discussion of our pending litigation with GSI.

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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 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 and industrial markets;

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

• 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;

• the impact of our pending acquisition by Uphill;

• increased expenses related to our pending acquisition;

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

• our ability to control or reduce our operating expenses;

• the costs and outcome of any pending or future litigation including our litigation with GSI;

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

• 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 products;

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

• excess inventory levels at our customers;

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

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

• the ability of customers to make payments to us;

• 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;

• the timing of significant orders; and

• the commencement of any future litigation or antidumping proceedings.

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 nine months of fiscal 2015, in fiscal 2014, and in fiscal 2013, we recorded inventory write-downs of $4.7 million, $5.6 million, and $4.6 million, respectively. These inventory write-downs related to adjusting our inventory valuation for certain excess and obsolete products, and valuing our inventory at the lower-of-cost-or-market.

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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;

• the impact of our pending acquistion by Uphill;

• 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 gain or loss of significant customers;

• 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 nature and success 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.

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.

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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 nine months ended June 30, 2015, approximately 13% of our net sales was attributable to customers located in the U.S., 25% was attributable to customers located in Europe and 62% was attributable to customers located in Asia. In fiscal 2014, approximately 12% of our net sales was attributable to customers located in the U.S., 23% was attributable to customers located in Europe and 65% was attributable to customers located in Asia. In fiscal 2013, approximately 12% of our net sales was attributable to customers located in the U.S., 20% was attributable to customers located in Europe and 67% 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;

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

• 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 collecting foreign accounts receivable;

• difficulties in protecting our intellectual property rights;

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

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

• earthquakes and other natural disasters.

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 executive, it may negatively impact the related business relationships since we typically have no long-term 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 has been intense in recent periods. 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.

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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.

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 similar technology or develop competing technologies on their own.

We may encounter difficulties in effectively integrating newly acquired businesses.

From time to time, we have acquired other companies or assets that we believe to be complementary to our business. In this regard, in September 2012, we acquired 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, a privately held fabless provider of high performance 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. For example, in fiscal 2012, we wrote-off $4.3 million of the goodwill we acquired with the acquisition of Si En. In addition, acquisitions 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 acquisitions will contribute positively to our business or operating results.

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:

• the announcement of our pending acquisition by Uphill and matters related to the completion of such acquisition;

• 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;

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• 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;

• 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 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 million 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 SMIC due to the decline in fair market value of such shares being considered other than temporary. 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, impairment of goodwill, 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.

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

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

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

• 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;

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

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

• 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; and

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

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

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 Milpitas, 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

35

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 or ebola outbreak and other natural or manmade disasters.

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.

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 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, 2014. 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.

36

Item 6. Exhibits

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

Exhibit 2.1(1)	Amendment No. 2 to Agreement and Plan of Merger, dated as of May 29, 2015, by and among Uphill Investment Co., Indigo Acquisition Sub, and Integrated Silicon Solution, Inc.
Exhibit 2.2(2)	Amendment No. 3 to Agreement and Plan of Merger, dated as of June 11, 2015, by and among Uphill Investment Co., Indigo Acquisition Sub, and Integrated Silicon Solution, Inc.
Exhibit 2.3(3)	Amendment No. 4 to Agreement and Plan of Merger, dated as of June 18, 2015, by and among Uphill Investment Co., Indigo Acquisition Sub, and Integrated Silicon Solution, Inc.
Exhibit 2.4(4)	Amendment No. 5 to Agreement and Plan of Merger, dated as of June 22, 2015, by and among Uphill Investment Co., Indigo Acquisition Sub, and Integrated Silicon Solution, Inc.
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
(1)	Incorporated by reference to the Company's Current Report on Form 8-K filed on May 29, 2015.
(2)	Incorporated by reference to the Company's Current Report on Form 8-K filed on June 11, 2015.
(3)	Incorporated by reference to the Company's Current Report on Form 8-K filed on June 19, 2015.
(4)	Incorporated by reference to the Company's Current Report on Form 8-K filed on June 23, 2015.

37

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:	July 31, 2015	/s/ John M. Cobb
		John M. Cobb
		Vice President and Chief Financial Officer
		(Principal Financial and
		Accounting Officer)

38

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: July 31, 2015

/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: July 31, 2015

/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 June 30, 2015 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
	July 31, 2015

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 June 30, 2015 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
	July 31, 2015

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Stock-based Compensation (Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value) (Details) - $ / shares	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average fair value of grants	$ 0.00	$ 6.13	$ 4.11	$ 4.70
Expected term in years		4 years 5 months 1 day	4 years 3 months 7 days	4 years 5 months 1 day
Estimated volatility	0.00%	51.00%	38.00%	51.00%
Risk-free interest rate	0.00%	1.21%	1.25%	1.04%
Dividend yield	0.00%	0.00%	1.66%	0.00%
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average fair value of grants	$ 0.00	$ 0.00	$ 0.00	$ 2.66
Expected term in years				5 months 27 days
Estimated volatility	0.00%	0.00%	0.00%	27.00%
Risk-free interest rate	0.00%	0.00%	0.00%	0.41%
Dividend yield	0.00%	0.00%	0.00%	0.00%

XML

Borrowings (Schedule of Maturities of Debt) (Details) - Secured Debt $ in Thousands	Jun. 30, 2015 USD ($)
Debt Instrument [Line Items]
Remainder of 2015	$ 49
2016	195
2017	195
2018	3,949
2019	0
Thereafter	0
Total	$ 4,388

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Other Current Assets and Other Assets (Narrative) (Details) - USD ($) $ in Thousands		9 Months Ended
	Apr. 20, 2015	Jun. 30, 2015	Jun. 30, 2014	Sep. 30, 2014	Mar. 31, 2012
Entity Information [Line Items]
Termination period		1 year
Amount the company will purchase and then lease (up to aggregate of $73.5 million)		$ 20,574	$ 0
Other investment		$ 1,358		$ 1,436	$ 2,000
Hong Kong
Entity Information [Line Items]
Equity method investment ownership percentage		25.00%
Equipment Leased to Other Party | Powerchip Technology Corporation
Entity Information [Line Items]
Amount the company will purchase and then lease (up to aggregate of $73.5 million)	$ 73,500
Powerchip lease related assets		$ 24,904		$ 0
Term of lease agreements	6 years
Amount of quarterly payments	$ 82,100
Additional renewal period	3 years
Technology licenses, net | Minimum
Entity Information [Line Items]
Estimated useful lives		3 years
Technology licenses, net | Maximum
Entity Information [Line Items]
Estimated useful lives		15 years

XML

Other Current Assets and Other Assets (Schedule of Other Current Assets) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Sep. 30, 2014
Capital Leased Assets [Line Items]
Other current assets	$ 17,106	$ 17,033
Total other current assets	28,279	17,033	[1]
Powerchip Technology Corporation | Equipment Leased to Other Party
Capital Leased Assets [Line Items]
Prepayments for Powerchip lease related assets	$ 11,173	$ 0

[1] Derived from audited financial statements.

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Geographic and Segment Information (Tables)

9 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Summary of operations in different geographic areas

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

	Three Months Ended   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
			(In thousands)
Net sales
United States	$	10,148	$	9,571	$	30,254	$	28,449
China	8,392		9,838		27,149		32,689
Hong Kong	15,049		16,456		43,444		45,499
Japan	7,753		5,916		20,371		16,569
Korea	3,289		4,000		11,112		10,544
Taiwan	10,416		12,344		32,186		35,099
Other Asia Pacific countries	5,332		6,435		16,858		18,390
Europe	20,608		19,587		60,138		56,207
Other	253		687		742		1,379
Total net sales	$	81,240	$	84,834	$	242,254	$	244,825

Schedule of long lived assets in different geographic areas

	June 30, 2015		September 30, 2014
	(In thousands)
Long-lived assets
United States	$	11,171	$	11,174
Hong Kong	10		14
China	13,956		12,908
Taiwan	32,909		34,751
	$	58,046	$	58,847

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Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Tax Disclosure [Abstract]
Income tax expense	$ (461)	$ 2,388	$ 1,147	$ 6,941
Effective tax rate	104.00%	28.00%	21.00%	25.00%
Federal statutory rate	35.00%	35.00%	35.00%	35.00%

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Fair Value Measurements (Tables)

9 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Available-for-sale securities

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

June 30, 2015	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
				(In thousands)
Available-for-sale
Level 1:
Money market instruments	$	9,327		$	—	$	—	$	9,327
Certificates of deposit	13,840			—		—		13,840
Total	23,167			—		—		23,167
Less: Amounts included in cash and cash
equivalents	(21,720		)	—		—		(21,720		)
	$	1,447		$	—	$	—	$	1,447
September 30, 2014	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
				(In thousands)
Available-for-sale
Level 1:
Money market instruments	$	22,519		$	—	$	—	$	22,519
Certificates of deposit	20,679			—		—		20,679
Total	43,198			—		—		43,198
Less: Amounts included in cash, cash
equivalents and restricted cash	(41,721		)	—		—		(41,721		)
	$	1,477		$	—	$	—	$	1,477

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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	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Schedule of Current Intangible Asset Amortization Expense By Income Statement Line Item [Line Items]
Amortization of intangibles	$ 348	$ 368	$ 1,042	$ 1,186
Cost of sales
Schedule of Current Intangible Asset Amortization Expense By Income Statement Line Item [Line Items]
Amortization of intangibles	171	191	512	656
Operating expenses
Schedule of Current Intangible Asset Amortization Expense By Income Statement Line Item [Line Items]
Amortization of intangibles	$ 177	$ 177	$ 530	$ 530

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Stock-based Compensation (Schedule of SAR Activity) (Details) - Jun. 30, 2015 - SARS - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	Total
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding at September 30, 2014	747
Granted	682
Exercised	(107)
Cancelled/Expired	(27)
Outstanding at June 30, 2015	1,295
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding at September 30, 2014	$ 10.96
Granted	13.55
Exercised	13.55
Cancelled/Expired	12.17
Outstanding at June 30, 2015	$ 12.25
Aggregate Intrinsic Value, exercised	$ 895
Weighted-Average Remaining Contractual Term in Years, Outstanding at June 30, 2015	5 years 10 months 6 days
Aggregate Intrinsic Value, Outstanding at June 30, 2015	$ 12,811
Number of Shares, Exercisable at June 30, 2015 (shares)	247
Weighted-Average Exercise Price, Exercisable at June 30, 2015	$ 11.36
Weighted-Average Remaining Contractual Term in Years, Exercisable at June 30, 2015	5 years 6 months 4 days
Aggregate Intrinsic Value, Exercisable at June 30, 2015	$ 2,662

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Stock-based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future grant under the 2007 Plan	1,530,000		1,530,000
Vesting period			4 years
1995 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage discount from fair market value for shares purchased under the Employee Stock Purchase Plan			85.00%
Offering period			6 months
Shares available for future issuance under the Employee Stock Purchase Plan	0		0
Prior to October 1 2005
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expiration period			10 years
After October 1 2005
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expiration period			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]
Weighted-average fair value of grants	$ 18.70	$ 14.45	$ 13.59	$ 11.62
Restricted Stock Units (RSUs) | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			2 years
Restricted Stock Units (RSUs) | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
SARS
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
Option expiration period			7 years
Total unrecognized stock-based compensation expense	$ 10.5		$ 10.5
Nonvested awards, total compensation cost not yet recognized, period for recognition			2 years 10 months 10 days
SARS | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option Cliff vesting period			6 months
SARS | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option Cliff vesting period			1 year
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation expense	$ 7.7		$ 7.7
Nonvested awards, total compensation cost not yet recognized, period for recognition			2 years 2 months 5 days

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Purchased Intangible Assets (Schedule Finite-Lived Intangible Assets, Future Amortization Expense) (Details) $ in Thousands	Jun. 30, 2015 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2015	$ 341
2016	1,238
2017	1,238
2018	1,195
2019	39
Thereafter	0
Net	$ 4,051

XML

Commitments and Contingencies (Narrative) (Details) $ in Millions	Jun. 30, 2015 USD ($)	Apr. 01, 2015 complaint
Loss Contingencies [Line Items]
Amount of purchase orders that had been entered into wafer work-in-process	$ 20.9
Stockholder Class Action Complaints | Pending Litigation
Loss Contingencies [Line Items]
Number of stockholder class action complaints | complaint		3

XML

Other Current Assets and Other Assets (Schedule of Other Assets) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Sep. 30, 2014		Mar. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Restricted assets	$ 651	$ 499
Other investment	1,358	1,436		$ 2,000
Nanya private placement shares	10,428	10,645
Other	1,165	1,145
Other assets	53,845	24,369	[1]
Technology licenses, net
Finite-Lived Intangible Assets [Line Items]
Technology licenses, net	15,339	10,644
Powerchip Technology Corporation | Equipment Leased to Other Party
Finite-Lived Intangible Assets [Line Items]
Powerchip lease related assets	$ 24,904	$ 0

[1] Derived from audited financial statements.

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Impact of Recently Issued Accounting Pronouncements and Standards

9 Months Ended

Jun. 30, 2015

Accounting Changes and Error Corrections [Abstract]

Impact of Recently Issued Accounting Pronouncements and Standards

Impact of Recently Issued Accounting Pronouncements and Standards

Impact of Recently Adopted Accounting Standards

On October 1, 2014, the Company adopted the following accounting standards, which did not have any impact on its consolidated results of operations during such period or its financial condition at the end of such period:

Liabilities

In February 2013, the Financial Accounting Standards Board (FASB) issued guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the reporting date. Examples of obligations include debt arrangements, other contractual obligations, settled litigation and judicial rulings. The guidance requires an entity to measure such obligations as the sum of the amount that the reporting entity agreed to pay on the basis of its arrangement among its co-obligors in addition to amounts the reporting entity expects to pay on behalf of its co-obligors.

Foreign Currency Matters

In March 2013, the FASB issued guidance on when foreign currency translation adjustments should be released to net income. When a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.

Accounting Pronouncements

The following issued accounting pronouncements are not yet effective for the Company as of June 30, 2015.

Revenue from Contracts with Customers

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The new guidance establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The guidance becomes effective for the Company beginning in the first quarter of fiscal 2019. Early adoption is not permitted. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company has not yet selected a transition method nor has the Company determined the impact of adopting the new revenue standard on its consolidated financial statements.

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Geographic and Segment Information (Narrative) (Details)	9 Months Ended
	Jun. 30, 2015 Business_Segment
Segment Reporting [Abstract]
Number of operating segments	1

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Concentrations (Narrative) (Details) - Sales Revenue, Goods, Net	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Largest Distributor
Concentration Risk [Line Items]
Concentration risk, largest customers	18.00%	20.00%	16.00%	18.00%
Second Largest Distributor
Concentration Risk [Line Items]
Concentration risk, largest customers	11.00%	12.00%	13.00%	13.00%

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Purchased Intangible Assets (Tables)

9 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of total purchased intangible assets

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

	Gross		Accumulated Amortization		Net
	(In thousands)
June 30, 2015
Developed technology	$	5,330	$	3,096	$	2,234
Customer relationships	3,340		1,554		1,786
Other	450		419		31
Total	$	9,120	$	5,069	$	4,051
September 30, 2014
Developed technology	$	5,330	$	2,584	$	2,746
Customer relationships	3,340		1,137		2,203
Other	450		306		144
Total	$	9,120	$	4,027	$	5,093

Schedule of amortization 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   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
	(In thousands)
Reported as:
Cost of sales	$	171	$	191	$	512	$	656
Operating expenses	177		177		530		530
Total	$	348	$	368	$	1,042	$	1,186

Schedule of estimated future amortization expense of purchased intangible assets

The following table presents the estimated future amortization expense of the Company’s purchased intangible assets at June 30, 2015 (in thousands). The weighted-average remaining amortization period for developed technology, customer relationships and other intangibles is 3.29 years, 3.21 years and 0.21 years, respectively. If the Company acquires additional purchased intangible assets in the future, its future amortization may be increased by those assets.

Fiscal year
Remainder of 2015	$	341
2016	1,238
2017	1,238
2018	1,195
2019	39
Thereafter	—
Total	$	4,051

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Other Current Assets and Other Assets (Tables)

9 Months Ended

Jun. 30, 2015

Other Assets [Abstract]

Schedule of other current assets

Other current assets consisted of the following:

	June 30, 2015		September 30, 2014
	(In thousands)
Prepayments for Powerchip lease related assets	$	11,173	$	—
Other current assets	17,106		17,033
	$	28,279	$	17,033

Schedule of other assets

Other assets consisted of the following:

	June 30, 2015		September 30, 2014
	(In thousands)
Restricted assets	$	651	$	499
Other investment	1,358		1,436
Nanya private placement shares	10,428		10,645
Technology licenses, net	15,339		10,644
Powerchip lease related assets	24,904		—
Other	1,165		1,145
	$	53,845	$	24,369

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Accumulated Other Comprehensive Loss (Schedule of Reclassification out of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Gain on sale of investments	$ 0	$ 2,140	$ 0	$ 11,300
Provision for income taxes	461	(2,388)	(1,147)	(6,941)
Consolidated net income	22	6,227	4,389	20,631
Amount Reclassified from Accumulated Other Comprehensive Loss | Unrealized holding gains on available-for-sale investments
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Gain on sale of investments	0	1,616	0	9,618
Provision for income taxes	0	(592)	0	(3,589)
Consolidated net income	$ 0	$ 1,024	$ 0	$ 6,029

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Inventories (Schedule of Inventory, Current by major category) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Sep. 30, 2014
Inventory Disclosure [Abstract]
Purchased components	$ 25,001	$ 21,677
Work-in-process	22,959	27,058
Finished goods	39,481	36,358
Inventories	$ 87,441	$ 85,093	[1]

[1] Derived from audited financial statements.

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Borrowings (Tables)

9 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Schedule of principal payments due

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

Fiscal year
Remainder of 2015	$	49
2016	195
2017	195
2018	3,949
2019	—
Thereafter	—
Total	$	4,388

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Components of accumulated other comprehensive loss, net of tax

The components of accumulated other comprehensive loss, net of tax, were as follows (in thousands):

	June 30, 2015			September 30, 2014
Accumulated foreign currency translation adjustments	$	(2,120	)	$	1,051
Accumulated net retirement plan transition asset (liability) (net of tax of $124 and $124, respectively)	(36		)	8
Accumulated net retirement plan actuarial losses (net of tax of $477 and $477, respectively)	(2,016		)	(2,103		)
Total accumulated other comprehensive loss	$	(4,172	)	$	(1,044	)

Significant amounts reclassified out of accumulated other comprehensive loss

The significant amounts reclassified out of accumulated other comprehensive loss into the consolidated condensed statements of income, with presentation location, during the three and nine months ended June 30, 2015 and June 30, 2014 were as follows:

	Three Months Ended   June 30,					Nine Months Ended   June 30,
	2015		2014			2015		2014
	(In thousands)
Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Loss										Location
Unrealized holding gains on available-for -sale investments
	$	—	$	1,616		$	—	$	9,618		Gain on the sale of investments
	—		(592		)	—		(3,589		)	Provision for income taxes
	$	—	$	1,024		$	—	$	6,029

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Use of Estimates

9 Months Ended

Jun. 30, 2015

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, 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)

9 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Computation of basic and diluted net income per share

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

	Three Months Ended   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
Numerator for basic and diluted net income per share:
Net income attributable to ISSI	$	16	$	6,186	$	4,318	$	20,433
Denominator for basic net income per share:
Weighted average common shares outstanding	31,950		30,312		31,495		29,816
Dilutive stock options and awards	1,902		1,651		1,805		1,521
Denominator for diluted net income per share	33,852		31,963		33,300		31,337
Basic net income per share	$	—	$	0.20	$	0.14	$	0.69
Diluted net income per share	$	—	$	0.19	$	0.13	$	0.65

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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) - Jun. 30, 2015 - Options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	Total
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at September 30, 2014	4,240
Granted	85
Exercised	(1,190)
Cancelled/Expired	(47)
Outstanding at June 30, 2015	3,088
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding at September 30, 2014	$ 8.10
Granted	14.83
Exercised	7.67
Cancelled/Expired	10.84
Outstanding at June 30, 2015	$ 8.40
Aggregate Intrinsic Value, options exercised	$ 11,883
Weighted-Average Remaining Contractual Term in Years, Outstanding at June 30, 2015	3 years 4 months 24 days
Aggregate Intrinsic Value, Outstanding at June 30, 2015	$ 42,421
Number of Shares, Exercisable at June 30, 2015 (shares)	2,192
Weighted-Average Exercise Price, Exercisable at June 30, 2015	$ 7.50
Weighted-Average Remaining Contractual Term in Years, Exercisable at June 30, 2015	2 years 10 months 6 days
Aggregate Intrinsic Value, Exercisable at June 30, 2015	$ 32,077
Number of Shares, Vested and expected to vest after June 30, 2015 (shares)	3,057
Weighted-Average Exercise Price, Vested and expected to vest after June 30, 2015	$ 8.38
Weighted-Average Remaining Contractual Term in Years, Vested and expected to vest after June 30, 2015	3 years 4 months 21 days
Aggregate Intrinsic Value, Vested and expected to vest after June 30, 2015	$ 42,082

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Borrowings (Narrative) (Details) - Secured Debt $ in Millions	1 Months Ended
	Dec. 31, 2012 USD ($) a ft²	Jun. 30, 2015
Debt Instrument [Line Items]
Amount of bank loan	$ 4.9
Purchase price of headquarters	$ 6.5
Acres of land | a	2.85
Square footage of building | ft²	55,612
LIBOR
Debt Instrument [Line Items]
Interest rate spread above LIBOR	1.00%
LIBOR	LIBOR
Interest rate on loan at period end		1.25%

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Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Net sales	$ 81,240	$ 84,834	$ 242,254	$ 244,825
Cost of sales	53,936	55,538	157,757	162,250
Gross profit	27,304	29,296	84,497	82,575
Operating expenses:
Research and development	11,777	10,978	36,448	32,363
Selling, general and administrative	16,179	11,942	43,253	34,845
Total operating expenses	27,956	22,920	79,701	67,208
Operating income (loss)	(652)	6,376	4,796	15,367
Interest and other income (expense), net	213	99	740	905
Gain on sale of investments	0	2,140	0	11,300
Income (loss) before income taxes	(439)	8,615	5,536	27,572
Provision (benefit) for income taxes	(461)	2,388	1,147	6,941
Consolidated net income	22	6,227	4,389	20,631
Net income attributable to noncontrolling interests	(6)	(41)	(71)	(198)
Net income attributable to ISSI	$ 16	$ 6,186	$ 4,318	$ 20,433
Basic net income per share (in dollars per share)	$ 0.00	$ 0.20	$ 0.14	$ 0.69
Shares used in basic per share calculation	31,950	30,312	31,495	29,816
Diluted net income per share (in dollars per share)	$ 0.00	$ 0.19	$ 0.13	$ 0.65
Shares used in diluted per share calculation	33,852	31,963	33,300	31,337

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Inventories (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Inventory Disclosure [Abstract]
Inventory write-downs	$ 1.5	$ 2.1	$ 4.7	$ 4.3

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Jun. 30, 2015		Jun. 30, 2014
Cash flows from operating activities
Consolidated net income	$ 4,389		$ 20,631
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,574		5,885
Stock-based compensation	3,959		4,585
Excess tax loss (benefit) from share-based compensation	395		(2,567)
Tax loss associated with employee stock plans	(395)		0
Amortization of intangibles	1,042		1,186
Gain on sale of investments	0		(11,300)
Equity in net loss of affiliate	78		215
Net foreign currency transaction gains	(162)		(405)
Deferred tax assets	(650)		1,736
Other non-cash items	61		(35)
Net effect of changes in current and other assets and current liabilities	(6,787)		(14,231)
Net cash provided by operating activities	8,504		5,700
Cash flows from investing activities
Acquisition of property and equipment	(6,353)		(9,928)
Acquisition of noncontrolling interest in consolidated subsidiary	0		(199)
Investment in Powerchip Leased Assets	(20,574)		0
Payment of license fees	(6,180)		(7,098)
Increase in restricted cash	(18,170)		(1,000)
Purchases of available-for-sale securities	(1,272)		(1,316)
Sales of available-for-sale securities	1,313		22,143
Net cash (used in) provided by investing activities	(51,236)		2,602
Cash flows from financing activities
Repurchases and retirement of common stock	(513)		(350)
Proceeds from issuance of stock through compensation plans	10,371		9,569
Dividends Paid	(5,658)		0
Excess tax (loss) benefit from share-based compensation	(395)		2,567
Principal payments of long-term obligations	(146)		(146)
Net cash provided by financing activities	3,659		11,640
Effect of exchange rate changes on cash and cash equivalents	(987)		(470)
Net (decrease) increase in cash and cash equivalents	(40,060)		19,472
Cash and cash equivalents at beginning of period	137,534	[1]	119,997
Cash and cash equivalents at end of period	$ 97,474		$ 139,469

[1] Derived from audited financial statements.

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Per Share Data (Narrative) (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Stock options and awards excluded from diluted earnings per share (shares)	46	686	100	1,070

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Fair Value Measurements (Marketable Equity and Cash Equivalents (Classified as Available-for-sale) and Cost Method Investments) (Details) - Fair Value, Inputs, Level 1 - USD ($) $ in Thousands	Jun. 30, 2015	Sep. 30, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 23,167	$ 43,198
Gross Unrealized Holding Gains	0	0
Gross Unrealized Holding Losses	0	0
Fair Value	23,167	43,198
Money market instruments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	9,327	22,519
Gross Unrealized Holding Gains	0	0
Gross Unrealized Holding Losses	0	0
Fair Value	9,327	22,519
Certificates of deposit
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	13,840	20,679
Gross Unrealized Holding Gains	0	0
Gross Unrealized Holding Losses	0	0
Fair Value	13,840	20,679
Cash and Cash Equivalents
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	21,720
Gross Unrealized Holding Gains	0
Gross Unrealized Holding Losses	0
Fair Value	21,720
Cash and Cash Equivalents and Restricted Cash
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		41,721
Gross Unrealized Holding Gains		0
Gross Unrealized Holding Losses		0
Fair Value		41,721
Short-term Investments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,447	1,477
Gross Unrealized Holding Gains	0	0
Gross Unrealized Holding Losses	0	0
Fair Value	$ 1,447	$ 1,477

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Related Party Transactions (Narrative) (Details) - Jimmy S.M. Lee, Executive Chairman - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Sep. 30, 2014
Related Party Transaction [Line Items]
Revenue from related parties	$ 0	$ 80	$ 144	$ 162
Accounts receivable, related parties	$ 0		$ 0		$ 59

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Geographic and Segment Information

9 Months Ended

Jun. 30, 2015

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   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
			(In thousands)
Net sales
United States	$	10,148	$	9,571	$	30,254	$	28,449
China	8,392		9,838		27,149		32,689
Hong Kong	15,049		16,456		43,444		45,499
Japan	7,753		5,916		20,371		16,569
Korea	3,289		4,000		11,112		10,544
Taiwan	10,416		12,344		32,186		35,099
Other Asia Pacific countries	5,332		6,435		16,858		18,390
Europe	20,608		19,587		60,138		56,207
Other	253		687		742		1,379
Total net sales	$	81,240	$	84,834	$	242,254	$	244,825

	June 30, 2015		September 30, 2014
	(In thousands)
Long-lived assets
United States	$	11,171	$	11,174
Hong Kong	10		14
China	13,956		12,908
Taiwan	32,909		34,751
	$	58,046	$	58,847

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 (Narrative) (Details) - USD ($) $ in Millions	Jun. 30, 2015	Sep. 30, 2014
Foreign
Segment Reporting Information [Line Items]
Cash and cash equivalents, and short-term investments	$ 55.4	$ 71.9
China
Segment Reporting Information [Line Items]
Cash and cash equivalents, and short-term investments	$ 1.6

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Basis of Presentation (Policies)

9 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Integrated Silicon Solution, Inc. (the Company or ISSI) and its 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.

Impact of Recently Adopted Accounting Standards and Accounting Pronouncements

Impact of Recently Adopted Accounting Standards

On October 1, 2014, the Company adopted the following accounting standards, which did not have any impact on its consolidated results of operations during such period or its financial condition at the end of such period:

Liabilities

In February 2013, the Financial Accounting Standards Board (FASB) issued guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the reporting date. Examples of obligations include debt arrangements, other contractual obligations, settled litigation and judicial rulings. The guidance requires an entity to measure such obligations as the sum of the amount that the reporting entity agreed to pay on the basis of its arrangement among its co-obligors in addition to amounts the reporting entity expects to pay on behalf of its co-obligors.

Foreign Currency Matters

In March 2013, the FASB issued guidance on when foreign currency translation adjustments should be released to net income. When a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.

Accounting Pronouncements

The following issued accounting pronouncements are not yet effective for the Company as of June 30, 2015.

Revenue from Contracts with Customers

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The new guidance establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The guidance becomes effective for the Company beginning in the first quarter of fiscal 2019. Early adoption is not permitted. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company has not yet selected a transition method nor has the Company determined the impact of adopting the new revenue standard on its consolidated financial statements.

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Basis of Presentation

9 Months Ended

Jun. 30, 2015

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 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 March 12, 2015, the Company and Uphill Investment Co. (Uphill) entered into a definitive merger agreement (as amended, the Merger Agreement) under which Uphill would acquire all of the Company's outstanding shares for $19.25 per share in cash (the Merger).  Subsequent to March 12, the merger agreement was amended several times to increase the purchase price.  As a result of the amendment to the Merger Agreement executed on June 22, 2015, the purchase price to be paid by Uphill to the Company’s stockholders is $23.00 per share in cash. The transaction was approved by the stockholders of the Company on June 29, 2015. The closing of the transaction is pending regulatory approvals. As part of the transaction, the Merger Agreement contemplates that, in connection with the closing of the merger, the Company's operations in Taiwan will be restructured or some or all of the Company's Taiwan operations may be sold in order to comply with the requirements of Taiwan laws and regulations. The transaction is currently expected to close in the third calendar quarter of 2015.

On September 14, 2012, the Company acquired approximately 94.1% of the outstanding shares of Chingis Technology Corporation (Chingis) and the Company’s financial results reflect accounting for Chingis on a consolidated basis from the date of acquisition. In May 2013, the Company acquired an additional 4.8% of Chingis for approximately $1.6 million. In fiscal 2014, the Company acquired the remaining 1.1% of Chingis for approximately $0.4 million, and at June 30, 2015, the Company owned 100% of Chingis.

The Company’s operating results for the nine months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2015 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, 2014.

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Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Consolidated net income	$ 22	$ 6,227	$ 4,389	$ 20,631
Change in unrealized loss on investments:
Changes arising during current period, net of tax benefit of $0, $0, $0 and $251, respectively	0	0	0	(349)
Reclassification for gain included in net income, net of tax expense of $0, $592, $0 and $3,589, respectively	0	(1,024)	0	(6,029)
Change in unrealized loss on investments:	0	(1,024)	0	(6,378)
Change in cumulative translation adjustment:
Changes arising during current period	1,784	2,989	(3,171)	(1,020)
Change in retirement plan actuarial losses:
Reclassification for gain included in net income, net of tax expense (benefit) of $0 for the three and nine months ended June 30, 2015 and 2014	29	27	87	82
Change in retirement plan transition obligation:
Reclassification for gain included in net income, net of tax expense (benefit) of $0 for the three and nine months ended June 30, 2015 and 2014	(15)	(15)	(44)	(45)
Other comprehensive income (loss)	1,798	1,977	(3,128)	(7,361)
Comprehensive income	1,820	8,204	1,261	13,270
Comprehensive income attributable to noncontrolling interest	(6)	(41)	(71)	(198)
Comprehensive income attributable to ISSI	$ 1,814	$ 8,163	$ 1,190	$ 13,072

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Accumulated Other Comprehensive Loss

9 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax, were as follows (in thousands):

	June 30, 2015			September 30, 2014
Accumulated foreign currency translation adjustments	$	(2,120	)	$	1,051
Accumulated net retirement plan transition asset (liability) (net of tax of $124 and $124, respectively)	(36		)	8
Accumulated net retirement plan actuarial losses (net of tax of $477 and $477, respectively)	(2,016		)	(2,103		)
Total accumulated other comprehensive loss	$	(4,172	)	$	(1,044	)

The significant amounts reclassified out of accumulated other comprehensive loss into the consolidated condensed statements of income, with presentation location, during the three and nine months ended June 30, 2015 and June 30, 2014 were as follows:

	Three Months Ended   June 30,					Nine Months Ended   June 30,
	2015		2014			2015		2014
	(In thousands)
Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Loss										Location
Unrealized holding gains on available-for -sale investments
	$	—	$	1,616		$	—	$	9,618		Gain on the sale of investments
	—		(592		)	—		(3,589		)	Provision for income taxes
	$	—	$	1,024		$	—	$	6,029

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Document and Entity Information - shares	9 Months Ended
	Jun. 30, 2015	Jul. 24, 2015
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	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		32,262,717

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Income Taxes

9 Months Ended

Jun. 30, 2015

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 2015. 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 and nine months ended June 30, 2015, the Company recorded income tax expense (benefit) of $(0.5) million and $1.1 million, respectively, that represents an effective tax rate of approximately 104% and 21%, respectively. The differences between the recorded provision for income taxes and the tax provision, based on the federal statutory rate of 35%, were primarily attributable to the differential in foreign tax rates, non-deductible stock-based compensation expense and certain foreign losses not benefited.

For the three and nine months ended June 30, 2014, the Company recorded income tax expense of $2.4 million and $6.9 million, respectively, that represents an effective tax rate of approximately 28% and 25%, respectively. 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.

As of June 30, 2015, the Company had unrecognized tax positions that would impact its effective tax rate, if realized.

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Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Unrealized gain (loss) on investments, Changes arising during current period, tax	$ 0	$ 0	$ 0	$ 251
Unrealized gain (loss) on investments, Reclassification for gain included in net income, tax	0	592	0	3,589
Retirement plan actuarial losses, Reclassification for gain included in net income, tax	0	0	0	0
Retirement plan transition obligation, Reclassification for gain included in net income, tax	$ 0	$ 0	$ 0	$ 0

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Concentrations

9 Months Ended

Jun. 30, 2015

Risks and Uncertainties [Abstract]

Concentrations

Concentrations

In the three and nine months ended June 30, 2015, revenue from the Company's largest distributor accounted for approximately 18% and 16%, respectively, of the Company's total net sales. In the three and nine months ended June 30, 2015, revenue from the Company's second largest distributor accounted for approximately 11% and 13%, respectively, of the Company's total net sales. In the three and nine months ended June 30, 2014, revenue from the Company's largest distributor accounted for approximately 20% and 18%, respectively, of the Company's total net sales. In the three and nine months ended June 30, 2014, revenue from the Company's second largest distributor accounted for approximately 12% and 13%, respectively, of the Company's total net sales.

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Stock-based Compensation

9 Months Ended

Jun. 30, 2015

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 (SARs), 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 June 30, 2015, 1,530,000 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.

The Company began granting cash-settled SARs in the first quarter of fiscal 2014. The SARs vest ratably over a four-year period with a 6-month or 1-year cliff vest and then vest ratably each month over the remaining period based upon continued employment with the Company. The SARs expire seven years after the date of grant. These SARs allow the holder to receive in cash the difference between the SARs' exercise price (which is the closing market price of the Company's common stock on the grant date) and the closing market price of the Company's common stock on the date the holder exercises the SAR. The SARs are recorded as a liability in accrued compensation and benefits in the Company's balance sheet.

The Company had an Employee Stock Purchase Plan (ESPP) which permitted eligible employees to purchase shares of the Company’s common stock through payroll deductions. As approved by the Board of Directors, effective August 1, 2010, shares under the ESPP were 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 commenced on approximately February 1 and August 1 of each year. The ESPP terminated pursuant to its terms on February 2, 2015, therefore at June 30, 2015, no shares were available for future issuance under the ESPP.

Stock-Based Compensation

The following table outlines the effects of total stock-based compensation including expense related to SARs.

	Three Months Ended   June 30,						Nine Months Ended   June 30,
	2015			2014			2015			2014
	(In thousands)
Stock-based compensation
Cost of sales	$	26		$	50		$	124		$	154
Research and development	650			694			2,146			2,119
Selling, general and administrative	1,867			1,017			4,294			3,156
Total stock-based compensation	2,543			1,761			6,564			5,429
Tax effect on stock-based compensation	(688		)	(330		)	(1,520		)	(1,018		)
Net effect on net income	$	1,855		$	1,431		$	5,044		$	4,411
Compensation related to SARs included in total stock-based compensation	$	1,374		$	222		$	2,605		$	844

As of June 30, 2015, there was approximately $7.7 million of total unrecognized stock-based compensation expense related to awards under the Company’s stock-based benefit plans that will be recognized over a weighted-average period of approximately 2.18 years. Future awards will add to this total whereas quarterly amortization and the vesting of existing awards will reduce this total. As of June 30, 2015, there was approximately $10.5 million of total unrecognized stock-based compensation expense related to SARs that will be recognized over a weighted-average period of approximately 2.86 years. Future SAR grants will add to this total whereas quarterly amortization and the vesting of SARs will reduce this total. In addition, because SARs are settled with cash, the fair value of SARs must be revalued on a quarterly basis which will likely impact the amount of expense in future periods.

The Company uses the Black-Scholes option pricing model to estimate the fair value of the options and SARs 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 and nine month periods ended June 30, 2015 and 2014 were based on estimates at the date of grant as follows:

	Three Months Ended   June 30,						Nine Months Ended   June 30,
	2015			2014			2015			2014
Options
Weighted-average fair value of grants	$	—		$	6.13		$	4.11		$	4.70
Expected term in years	—			4.42			4.27			4.42
Estimated volatility	—		%	51		%	38		%	51		%
Risk-free interest rate	—		%	1.21		%	1.25		%	1.04		%
Dividend yield	—		%	—		%	1.66		%	—		%
ESPP
Weighted-average fair value of grants	$	—		$	—		$	—		$	2.66
Expected term in years	—			—			—			0.49
Estimated volatility	—		%	—		%	—		%	27		%
Risk-free interest rate	—		%	—		%	—		%	0.41		%
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 and nine months ended June 30, 2015 was $18.70 per share and $13.59 per share, respectively. The weighted average grant date fair value of RSUs granted in the three and nine months ended June 30, 2014 was $14.45 per share and $11.62 per share, respectively.

A summary of the Company’s stock option activity and related information for the nine months ended June 30, 2015 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, 2014	4,240		$	8.10
Granted	85		$	14.83
Exercised	(1,190	)	$	7.67		$	11,883
Cancelled/Expired	(47	)	$	10.84
Outstanding at June 30, 2015	3,088		$	8.40	3.40	$	42,421
Exercisable at June 30, 2015	2,192		$	7.50	2.85	$	32,077
Vested and expected to vest after June 30, 2015	3,057		$	8.38	3.39	$	42,082

A summary of the Company’s RSU activity and related information for the nine months ended June 30, 2015 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, 2014	262		$	9.91
Granted	230		$	13.59
Vested	(110	)	$	9.43	$	1,546
Forfeited	(3	)	$	13.22
Outstanding at June 30, 2015	379		$	12.26	$	8,385

A summary of the Company’s SAR activity and related information for the nine months ended June 30, 2015 under the 2007 Plan 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, 2014	747		$	10.96
Granted	682		$	13.55
Exercised	(107	)	$	13.55		$	895
Cancelled/Expired	(27	)	$	12.17
Outstanding at June 30, 2015	1,295		$	12.25	5.85	$	12,811
Exercisable at June 30, 2015	247		$	11.36	5.51	$	2,662

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Related Party Transactions

9 Months Ended

Jun. 30, 2015

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 $0 and $144,000 during the three and nine months ended June 30, 2015, respectively. Sales to Chrontel were $80,000 and $162,000 during the three months and nine months ended June 30, 2014, respectively. Accounts receivable from Chrontel were approximately $0 and $59,000 at June 30, 2015 and September 30, 2014, respectively.

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Per Share Data

9 Months Ended

Jun. 30, 2015

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   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
Numerator for basic and diluted net income per share:
Net income attributable to ISSI	$	16	$	6,186	$	4,318	$	20,433
Denominator for basic net income per share:
Weighted average common shares outstanding	31,950		30,312		31,495		29,816
Dilutive stock options and awards	1,902		1,651		1,805		1,521
Denominator for diluted net income per share	33,852		31,963		33,300		31,337
Basic net income per share	$	—	$	0.20	$	0.14	$	0.69
Diluted net income per share	$	—	$	0.19	$	0.13	$	0.65

For the three months and nine months ended June 30, 2015, stock options and awards for 46,000 shares and 100,000 shares, respectively, were excluded from diluted earnings per share by the application of the treasury stock method. For the three months and nine months ended June 30, 2014, stock options and awards for 686,000 shares and 1,070,000 shares, respectively, were excluded from diluted earnings per share by the application of the treasury stock method.

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Purchased Intangible Assets

9 Months Ended

Jun. 30, 2015

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)
June 30, 2015
Developed technology	$	5,330	$	3,096	$	2,234
Customer relationships	3,340		1,554		1,786
Other	450		419		31
Total	$	9,120	$	5,069	$	4,051
September 30, 2014
Developed technology	$	5,330	$	2,584	$	2,746
Customer relationships	3,340		1,137		2,203
Other	450		306		144
Total	$	9,120	$	4,027	$	5,093

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

	Three Months Ended   June 30,				Nine Months Ended   June 30,
	2015		2014		2015		2014
	(In thousands)
Reported as:
Cost of sales	$	171	$	191	$	512	$	656
Operating expenses	177		177		530		530
Total	$	348	$	368	$	1,042	$	1,186

The following table presents the estimated future amortization expense of the Company’s purchased intangible assets at June 30, 2015 (in thousands). The weighted-average remaining amortization period for developed technology, customer relationships and other intangibles is 3.29 years, 3.21 years and 0.21 years, respectively. If the Company acquires additional purchased intangible assets in the future, its future amortization may be increased by those assets.

Fiscal year
Remainder of 2015	$	341
2016	1,238
2017	1,238
2018	1,195
2019	39
Thereafter	—
Total	$	4,051

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Common Stock Repurchase Program (Narrative) (Details) - Jun. 30, 2015 - USD ($) $ in Millions	Total	Total
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	$ 19.8
Shares paid for tax withholding for share based compensation (shares)	36,891
Payments related to tax withholding for share-based compensation	$ 0.5

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Inventories

9 Months Ended

Jun. 30, 2015

Inventory Disclosure [Abstract]

Inventories

Inventories

The following is a summary of inventories by major category:

	June 30, 2015		September 30, 2014
	(In thousands)
Purchased components	$	25,001	$	21,677
Work-in-process	22,959		27,058
Finished goods	39,481		36,358
	$	87,441	$	85,093

During the three and nine months ended June 30, 2015, the Company recorded inventory write-downs of $1.5 million and $4.7 million, respectively. During the three and nine months ended June 30, 2014, the Company recorded inventory write-downs of $2.1 million and $4.3 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 Current Assets and Other Assets

9 Months Ended

Jun. 30, 2015

Other Assets [Abstract]

Other Current Assets and Other Assets

Other Current Assets and Other Assets

Other current assets consisted of the following:

	June 30, 2015		September 30, 2014
	(In thousands)
Prepayments for Powerchip lease related assets	$	11,173	$	—
Other current assets	17,106		17,033
	$	28,279	$	17,033

Other assets consisted of the following:

	June 30, 2015		September 30, 2014
	(In thousands)
Restricted assets	$	651	$	499
Other investment	1,358		1,436
Nanya private placement shares	10,428		10,645
Technology licenses, net	15,339		10,644
Powerchip lease related assets	24,904		—
Other	1,165		1,145
	$	53,845	$	24,369

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

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.

From time to time, the Company licenses patents or other intellectual property rights from third parties. The technology licenses are being amortized over their estimated useful lives ranging from three to fifteen years.

On April 20, 2015, the Company entered into Equipment Lease Agreements ( Lease Agreements) with Powerchip Technology Corporation (Powerchip). Under the Lease Agreements, the Company will purchase and then lease up to an aggregate of $73.5 million in semiconductor manufacturing equipment to Powerchip whereby Powerchip will acquire ownership of the equipment at the end of the lease period, and the Company will obtain access to certain manufacturing capacity and technology at Powerchip. As of June 30, 2015, the Company had purchased $24.9 million of equipment related to the Powerchip lease.

The Lease Agreements provide for a term of approximately six years, each ending December 31, 2021. Beginning in 2019 and continuing through 2021, Powerchip will make quarterly payments to the Company in an aggregate amount of approximately $82.1 million (the Quarterly Payments). Until such time as all Quarterly Payments have been made, the Company shall own, and continue to own, all equipment subject to the Lease Agreements.

In addition to making the Quarterly Payments, Powerchip shall provide the Company with manufacturing capacity to produce a specified number of wafers each month beginning in 2015 through 2021. The Company has an option to renew such manufacturing arrangement for an additional three years.

In March 2012, the Company made an equity investment of $2.0 million in a private technology company headquartered in Hong Kong. At June 30, 2015, the Company's ownership interest in such company was approximately 25%. 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 (expense), net.

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Borrowings

9 Months Ended

Jun. 30, 2015

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 a 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. The interest rate on the Loan was 1.25% at June 30, 2015. Principal payments due under the Loan are as follows (in thousands):

Fiscal year
Remainder of 2015	$	49
2016	195
2017	195
2018	3,949
2019	—
Thereafter	—
Total	$	4,388

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Geographic and Segment Information (Schedule of Long-Lived Assets, by Geographical Areas) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Sep. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	$ 58,046	$ 58,847
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	11,171	11,174
Hong Kong
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	10	14
China
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	13,956	12,908
Taiwan
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	$ 32,909	$ 34,751

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Geographic and Segment Information (Schedule of Revenues, by Geographical Areas) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 81,240	$ 84,834	$ 242,254	$ 244,825
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	10,148	9,571	30,254	28,449
China
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	8,392	9,838	27,149	32,689
Hong Kong
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	15,049	16,456	43,444	45,499
Japan
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	7,753	5,916	20,371	16,569
Korea
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	3,289	4,000	11,112	10,544
Taiwan
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	10,416	12,344	32,186	35,099
Other Asia Pacific countries
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	5,332	6,435	16,858	18,390
Europe
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	20,608	19,587	60,138	56,207
Other
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 253	$ 687	$ 742	$ 1,379

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Basis of Presentation (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	9 Months Ended		12 Months Ended
	May. 31, 2013	Jun. 30, 2015	Jun. 30, 2014	Sep. 30, 2014	Sep. 30, 2015	Mar. 12, 2015	Sep. 14, 2012
Business Acquisition [Line Items]
Original offer price per share of outstanding shares						$ 19.25
Additional interest acquired		$ 0	$ 199
Chingis Technology Corporation
Business Acquisition [Line Items]
Percentage of interests acquired							94.10%
Percentage of additional voting interests acquired	4.80%			1.10%
Additional interest acquired	$ 1,600			$ 400
Percentage ownership of Chingis		100.00%
Scenario, Forecast
Business Acquisition [Line Items]
Acquisition price per share of outstanding shares					$ 23.00

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Purchased Intangible Assets (Narrative) (Details)	9 Months Ended
	Jun. 30, 2015
Developed technology
Acquired Indefinite-lived Intangible Assets [Line Items]
Weighted average useful life for intangibles (years)	3 years 3 months 15 days
Customer relationships
Acquired Indefinite-lived Intangible Assets [Line Items]
Weighted average useful life for intangibles (years)	3 years 2 months 16 days
Other
Acquired Indefinite-lived Intangible Assets [Line Items]
Weighted average useful life for intangibles (years)	2 months 15 days

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Commitments and Contingencies

9 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Matters

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.

GSI Technology Inc. v. Integrated Silicon Solution, Inc., et al.

On October 2, 2013, GSI Technology Inc. (GSI) filed a Second Amended Complaint in a lawsuit filed earlier in 2013 solely against defendant United Memories, Inc. in the United States District Court for the Northern District of California.  GSI named the Company as a new, second defendant in the Second Amended Complaint.  On April 18, 2014, the Court granted the Company's motion to dismiss that complaint in part, leaving claims against the Company for Unfair Competition under California Business & Professions Code 17200, misappropriation of trade secrets, and intentional interference with prospective economic advantage.  In the remaining portion of the complaint, GSI alleged that the Company acted together with United Memories, Inc. to harm GSI in connection with a bid requested by Cisco Systems, Inc. and misappropriated alleged GSI trade secrets.  GSI seeks damages and injunctive relief.  The Company filed an answer on June 2, 2014 and asserted a declaratory relief counterclaim against GSI.  Before the Company was named as a defendant, the Court denied motions by GSI against United Memories, Inc. for temporary and preliminary injunctive relief.  The Court issued a revised case management order on January 7, 2015 with a scheduled trial date of October 26, 2015.   Motions for summary judgment, including a motion filed by the Company, were heard on June 30, 2015 and are currently pending before the Court. The Company believes it has meritorious defenses to the claims alleged by GSI and intends to defend this suit vigorously.  However, there can be no assurance as to the outcome of this matter or any future litigation.

Legal Proceedings Regarding our Pending Acquisition

Beginning on April 1, 2015, three purported stockholder class action complaints were filed in the Superior Court of the State of California in the County of Santa Clara on behalf of a putative class of ISSI stockholders and naming as defendants ISSI’s Board of Directors and Uphill: Richard Wilson III v. Jimmy S.M. Lee, et al., Case No. 1-15-CV-278815 (filed April 1, 2015); Matthew Sciabacucchi v. Jimmy S.M. Lee, et al., Case No. 1-15-CV-278812 (filed April 1, 2015); and Kathy Guerra v. Scott D. Howarth, et al., Case No. 1-15-CV-279142 (filed April 8, 2015) (the “Guerra Action”). On May 5, 2015, the actions were consolidated to form In re Integrated Silicon Solution, Inc. Stockholder Litigation, Lead Case No. 1-15-cv-278812, and plaintiffs designated the complaint filed in the Guerra Action as the operative complaint. The operative complaint generally alleges that, in connection with the proposed acquisition of ISSI by Uphill, the ISSI directors breached their fiduciary duties owed to ISSI’s stockholders by, among other things, purportedly failing to take steps to maximize the value of ISSI to ISSI’s stockholders and agreeing to allegedly preclusive deal protection devices in the Merger Agreement. The operative complaint also alleges that the ISSI directors breached their fiduciary duties by allegedly failing to disclose material information to ISSI stockholders. The operative complaint further generally alleges that Uphill aided and abetted the ISSI directors in the alleged breaches of their fiduciary duties. The operative complaint seeks, among other things, an order enjoining the defendants from consummating the proposed transaction, or alternatively, in the event that the proposed transaction is consummated, an order rescinding it. A case management conference is currently scheduled for October 2, 2015.

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 June 30, 2015, the Company had approximately $20.9 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)

9 Months Ended

Jun. 30, 2015

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

Schedule of total stock-based compensation

The following table outlines the effects of total stock-based compensation including expense related to SARs.

	Three Months Ended   June 30,						Nine Months Ended   June 30,
	2015			2014			2015			2014
	(In thousands)
Stock-based compensation
Cost of sales	$	26		$	50		$	124		$	154
Research and development	650			694			2,146			2,119
Selling, general and administrative	1,867			1,017			4,294			3,156
Total stock-based compensation	2,543			1,761			6,564			5,429
Tax effect on stock-based compensation	(688		)	(330		)	(1,520		)	(1,018		)
Net effect on net income	$	1,855		$	1,431		$	5,044		$	4,411
Compensation related to SARs included in total stock-based compensation	$	1,374		$	222		$	2,605		$	844

Weighted average estimated fair values of option grants and rights and weighted average assumptions used in calculating values

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 and nine month periods ended June 30, 2015 and 2014 were based on estimates at the date of grant as follows:

	Three Months Ended   June 30,						Nine Months Ended   June 30,
	2015			2014			2015			2014
Options
Weighted-average fair value of grants	$	—		$	6.13		$	4.11		$	4.70
Expected term in years	—			4.42			4.27			4.42
Estimated volatility	—		%	51		%	38		%	51		%
Risk-free interest rate	—		%	1.21		%	1.25		%	1.04		%
Dividend yield	—		%	—		%	1.66		%	—		%
ESPP
Weighted-average fair value of grants	$	—		$	—		$	—		$	2.66
Expected term in years	—			—			—			0.49
Estimated volatility	—		%	—		%	—		%	27		%
Risk-free interest rate	—		%	—		%	—		%	0.41		%
Dividend yield	—		%	—		%	—		%	—		%

Summary of stock option activity and related information

A summary of the Company’s stock option activity and related information for the nine months ended June 30, 2015 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, 2014	4,240		$	8.10
Granted	85		$	14.83
Exercised	(1,190	)	$	7.67		$	11,883
Cancelled/Expired	(47	)	$	10.84
Outstanding at June 30, 2015	3,088		$	8.40	3.40	$	42,421
Exercisable at June 30, 2015	2,192		$	7.50	2.85	$	32,077
Vested and expected to vest after June 30, 2015	3,057		$	8.38	3.39	$	42,082

Schedule of RSU activity and related information

A summary of the Company’s RSU activity and related information for the nine months ended June 30, 2015 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, 2014	262		$	9.91
Granted	230		$	13.59
Vested	(110	)	$	9.43	$	1,546
Forfeited	(3	)	$	13.22
Outstanding at June 30, 2015	379		$	12.26	$	8,385

Summary of SAR activity and related information

A summary of the Company’s SAR activity and related information for the nine months ended June 30, 2015 under the 2007 Plan 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, 2014	747		$	10.96
Granted	682		$	13.55
Exercised	(107	)	$	13.55		$	895
Cancelled/Expired	(27	)	$	12.17
Outstanding at June 30, 2015	1,295		$	12.25	5.85	$	12,811
Exercisable at June 30, 2015	247		$	11.36	5.51	$	2,662

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Purchased Intangible Assets (Schedule of Finite-Lived Intangible Assets by Major Class) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Sep. 30, 2014
Finite-Lived Intangible Assets [Line Items]
Gross	$ 9,120	$ 9,120
Accumulated Amortization	5,069	4,027
Net	4,051
Total, Net	4,051	5,093	[1]
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross	5,330	5,330
Accumulated Amortization	3,096	2,584
Net	2,234	2,746
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross	3,340	3,340
Accumulated Amortization	1,554	1,137
Net	1,786	2,203
Other
Finite-Lived Intangible Assets [Line Items]
Gross	450	450
Accumulated Amortization	419	306
Net	$ 31	$ 144

[1] Derived from audited financial statements.

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Stock-based Compensation (Restricted Stock and Restricted Stock Units Activity) (Details) - Restricted Stock Units (RSUs) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding at September 30, 2014			262
Granted			230
Vested			(110)
Forfeited			(3)
Outstanding at June 30, 2015	379		379
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Outstanding at September 30, 2014, Weighted-Average Grant Date Fair Value			$ 9.91
Weighted-average fair value of grants	$ 18.70	$ 14.45	13.59	$ 11.62
Weighted average grant date fair value, vested			9.43
Weighted average grant date fair value, forfeited			13.22
Outstanding at June 30, 2015, Weighted-Average Grant Date Fair Value	$ 12.26		$ 12.26
Aggregate Intrinsic Value, Vested			$ 1,546
Aggregate Intrinsic Value, Outstanding at June 30, 2015	$ 8,385		$ 8,385

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Sep. 30, 2014	[1]
Current assets:
Cash and cash equivalents	$ 97,474	$ 137,534
Restricted cash	19,170	1,000
Short-term investments	1,447	1,477
Accounts receivable, net	51,107	50,458
Inventories	87,441	85,093
Deferred tax assets	1,898	1,868
Other current assets	28,279	17,033
Total current assets	286,816	294,463
Property, equipment and leasehold improvements, net	58,046	58,847
Purchased intangible assets, net	4,051	5,093
Goodwill	9,178	9,178
Deferred tax assets	8,768	8,392
Other assets	53,845	24,369
Total assets	420,704	400,342
Current liabilities:
Accounts payable	62,377	54,554
Accrued compensation and benefits	12,540	9,875
Accrued expenses	12,517	11,365
Current portion of long-term debt	195	195
Total current liabilities	87,629	75,989
Long-term debt	4,193	4,339
Other long-term liabilities	5,299	5,456
Total liabilities	$ 97,121	$ 85,784
Commitments and contingencies
Stockholders’ equity:
Common stock	$ 3	$ 3
Additional paid-in capital	378,009	364,587
Accumulated deficit	(52,416)	(51,076)
Accumulated other comprehensive loss	(4,172)	(1,044)
Total ISSI stockholders’ equity	321,424	312,470
Noncontrolling interest	2,159	2,088
Total stockholders’ equity	323,583	314,558
Total liabilities and stockholders’ equity	$ 420,704	$ 400,342

[1] Derived from audited financial statements.

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Fair Value Measurements

9 Months Ended

Jun. 30, 2015

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 June 30, 2015 and September 30, 2014, all of the Company’s financial assets utilized Level 1 inputs.

As of June 30, 2015, 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:

June 30, 2015	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
				(In thousands)
Available-for-sale
Level 1:
Money market instruments	$	9,327		$	—	$	—	$	9,327
Certificates of deposit	13,840			—		—		13,840
Total	23,167			—		—		23,167
Less: Amounts included in cash and cash
equivalents	(21,720		)	—		—		(21,720		)
	$	1,447		$	—	$	—	$	1,447
September 30, 2014	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
				(In thousands)
Available-for-sale
Level 1:
Money market instruments	$	22,519		$	—	$	—	$	22,519
Certificates of deposit	20,679			—		—		20,679
Total	43,198			—		—		43,198
Less: Amounts included in cash, cash
equivalents and restricted cash	(41,721		)	—		—		(41,721		)
	$	1,477		$	—	$	—	$	1,477

There were no transfers in or out of Level 1 assets during the three months ended June 30, 2015.

As of June 30, 2015 and September 30, 2014, the Company had cash, cash equivalents, restricted cash and short-term investments in foreign financial institutions of $55.4 million ($1.6 million of which was in China and subject to exchange control regulations) and $71.9 million, respectively.

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Per Share Data (Calculation of Basic and Diluted EPS) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Net income attributable to ISSI	$ 16	$ 6,186	$ 4,318	$ 20,433
Denominator for basic net income per share:
Weighted average common shares outstanding	31,950	30,312	31,495	29,816
Dilutive stock options and awards (in shares)	1,902	1,651	1,805	1,521
Denominator for diluted net income per share (in shares)	33,852	31,963	33,300	31,337
Basic net income per share (in dollars per share)	$ 0.00	$ 0.20	$ 0.14	$ 0.69
Diluted net income per share (in dollars per share)	$ 0.00	$ 0.19	$ 0.13	$ 0.65

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Inventories (Tables)

9 Months Ended

Jun. 30, 2015

Inventory Disclosure [Abstract]

Schedule of inventories by major category

The following is a summary of inventories by major category:

	June 30, 2015		September 30, 2014
	(In thousands)
Purchased components	$	25,001	$	21,677
Work-in-process	22,959		27,058
Finished goods	39,481		36,358
	$	87,441	$	85,093

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Stock-based Compensation (Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	$ 2,543	$ 1,761	$ 6,564	$ 5,429
Tax effect on stock-based compensation	(688)	(330)	(1,520)	(1,018)
Net effect on net income	1,855	1,431	5,044	4,411
SARS
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Net effect on net income	1,374	222	2,605	844
Cost of sales
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	26	50	124	154
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	650	694	2,146	2,119
Selling, general and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	$ 1,867	$ 1,017	$ 4,294	$ 3,156

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Common Stock Repurchase Program

9 Months Ended

Jun. 30, 2015

Common Stock Repurchase Program [Abstract]

Common Stock Repurchase Program

Common Stock Repurchase Program

In the nine month period ended June 30, 2015, the Company did not repurchase any shares of its common stock in the open market. As of June 30, 2015, 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 June 30, 2015, $19.8 million remained available under the Company's existing share repurchase authorization. However, under the terms of the Merger Agreement, the Company is currently prohibited from repurchasing any shares of its common stock.

The Company issues RSUs as part of its equity incentive plan. For a portion of the 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 nine months ended June 30, 2015, the Company withheld 36,891 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.