Prepared by MERRILL CORPORATION

INTEGRATED DEVICE TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)

Former name, former address and former fiscal year (if changed since last report)

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 (X) No ( )

The number of outstanding shares of the registrant's Common Stock, $.001 par value, as of October 26, 2001, was approximately 104,194,500.

INTEGRATED DEVICE TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of these condensed consolidated financial statements.

INTEGRATED DEVICE TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED; IN THOUSANDS)

The accompanying notes are an integral part of these condensed consolidated financial statements.

INTEGRATED DEVICE TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED; IN THOUSANDS)

The accompanying notes are an integral part of these condensed consolidated financial statements.

INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The accompanying unaudited condensed consolidated financial statements of Integrated Device Technology, Inc. (IDT or the Company) contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial information included therein.

These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended April 1, 2001. The results of operations for the three- and six-month periods ended September 30, 2001 are not necessarily indicative of the results to be expected for the full year.

Certain reclassifications have been made to prior-period balances, none of which affected the Company's financial position or results of operations, to present the financial statements on a consistent basis.

Basic and diluted net income per share are computed using weighted-average common shares outstanding in accordance with Statements of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." Diluted net income per share also includes the effect of stock options.

Diluted loss per share for the three- and six-month periods ended September 30, 2001 is based only on weighted-average common shares outstanding; the inclusion of 3,562 (thousand) and 3,830 (thousand) common stock equivalents for the three- and six-month periods, respectively, would have been antidilutive. The computation of diluted net income per share for the three- and six-month periods ended October 1, 2000 includes incremental shares related to stock options of 7,395 (thousand) and 7,377 (thousand), respectively.

Total stock options outstanding, including antidilutive options, were 14.8 million and 14.0 million at September 30, 2001 and October 1, 2000, respectively.

The components of accumulated other comprehensive income (loss) were as follows:

	Sep. 30, 2001			Apr. 1, 2001
	(in thousands)
Cumulative translation adjustments	$	(1,803	)	$	(2,271	)
Unrealized gain on foreign exchange contracts		(7	)		—
Unrealized gain on available-for-sale investments		11,791			1,192

	$	9,981		$	(1,079	)

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 141, all business combinations initiated after June 30, 2001 must be accounted for using the purchase method. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually for impairment (or more frequently if indicators of impairment arise). Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives (but with no maximum life). The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, IDT is required to adopt SFAS No. 142 effective April 1, 2002. The Company is currently evaluating the effect that adoption of the provisions of SFAS No. 142 will have on its results of operations and financial position.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations related to the retirement of tangible long-lived assets and associated asset retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company does not expect adoption to have a material impact on its financial position or results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business. In addition, SFAS No. 144 amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. Adoption of SFAS No. 144 is required during our fiscal year beginning April 1, 2002. The Company is currently evaluating the potential impact of adoption of SFAS No. 144 on its financial position and results of operations.

On April 18, 2001, the Company acquired Newave Semiconductor Corp. (Newave), a privately held designer and marketer of integrated circuits for the telecommunications market. Newave was based in Santa Clara, Calif., with design operations in Shanghai, China. The acquisition is expected to provide technology expertise that supports IDT's communications IC strategy, and to provide additional

telecommunications products to extend the Company's offerings in the telecommunications marketplace.

The Company paid approximately $73.2 million in cash and issued options to purchase approximately 0.47 million shares of IDT stock in exchange for outstanding employee options to acquire Newave stock.

The Newave combination was accounted for as a purchase. Accordingly, the Company's consolidated condensed financial statements include the estimated fair values of assets acquired and liabilities assumed from Newave as of April 18, 2001, the effective date of the purchase, and Newave's results of operations for the period April 18, 2001 through July 1, 2001. There were no significant differences between the accounting policies of the Company and Newave.

The total purchase price for Newave was $75.5 million. The components of purchase price were as follows:

	(in thousands)
Cash price	$	73,235
Less: contingent consideration		(2,422	)
Fair value of options assumed		13,214
Deferred stock compensation		(10,257	)
Direct costs of acquisition		1,685

Total purchase price	$	75,455

On July 1, 2000, the Company adopted FASB Interpretation No. 44 (FIN No. 44), "Accounting For Certain Transactions Involving Stock Compensation—an Interpretation of APB 25." In accordance with FIN No. 44, the intrinsic value of the options assumed as part of the Newave transaction and not vested as of the closing date have been recorded as deferred compensation to be amortized over the respective vesting periods of the options.

The fair value of the options assumed was determined using the Black-Scholes model with a volatility assumption of 83% and a stock price of $33.15, which represents the average IDT stock price for the trading period beginning three days before and ending three days after the signing of the merger. The fair value includes deferred stock compensation of $10.26 million which is associated with approximately 0.41 million unvested options assumed as part of the transaction. The value of the unvested options was determined using the closing IDT stock price of $36.88 on April 18, 2001, the date of the acquisition. The deferred compensation is presented as a component of stockholders' equity and will be amortized over the options' remaining vesting periods of one to four years.

Direct costs of acquisition consisted primarily of investment banking, legal and accounting fees.

The total purchase price was allocated to the estimated fair value of assets acquired and liabilities assumed based on independent appraisals and management estimates as follows:

	(in thousands)
Fair value of tangible net assets acquired	$	2,291
In-process research and development		16,000
Existing technology		22,000
Other identified intangibles		3,150
Deferred taxes		(9,985	)
Excess of purchase price over net assets acquired		41,999

Total purchase price	$	75,455

The Company recorded a $16.0 million charge to in-process research and development during the first quarter of fiscal 2002. The amount was determined by identifying research projects which (1) had not yet proven to be technically feasible, (2) were developed to a point where they had future value associated with them and (3) did not have alternative future uses. Estimated future revenues were allocated to in-process and existing technology, and appropriate estimated expenses were deducted and economic rents charged for the use of other assets. Based on this analysis, a present value calculation of estimated after-tax cash flows attributable to the technology was made.

The amount allocated to existing technology and goodwill is being amortized over estimated useful lives of seven years using the straight-line method. Other identified intangibles are being amortized over estimated useful lives of two to seven years, also using the straight-line method. As a result of adoption of SFAS No. 142 (see Note 4), the Company expects that amortization of certain intangibles, primarily goodwill, will cease on April 1, 2002.

Supplemental pro forma information for the second quarter and first six months of fiscal 2001, which assumes that Newave had been acquired at the beginning of fiscal 2001, appears below. The pro forma information includes amortization of goodwill and other intangibles from that date.

	(in thousands, except per share amounts)
Three months ended October 1, 2000
Revenues	$	269,701
Net income		287,329
Diluted earnings per share		2.55
Six months ended October 1, 2000
Revenues	$	502,294
Net income		346,258
Diluted earnings per share		3.14

Pro forma information for fiscal 2002 is not presented, because the differences from reported amounts would not be significant.

In the first quarter of fiscal 2002, the Company repaid the mortgage payable related to its Salinas, Calif. wafer manufacturing facility. The Company paid approximately $5.7 million, including a 5% prepayment premium, to retire the debt.

During the first quarter of fiscal 2001, the Company called for redemption of its 5.5% Convertible Subordinated Notes (Notes). Substantially all holders elected to convert their Notes into IDT common stock. As a result of the conversion, shares outstanding increased by approximately 6.3 million and stockholders' equity increased by $183.4 million. The Company paid $0.4 million to holders who selected the cash option.

	Sep. 30, 2001		Apr. 1, 2001
	(in thousands)
Raw materials	$	5,108	$	9,586
Work-in-process		57,506		45,601
Finished goods		14,073		20,427

	$	76,687	$	75,614

The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," effective April 2, 2001. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and hedging activities and requires that all derivatives be recognized as either assets or liabilities at fair value. Derivatives that are not designated as hedges are adjusted to fair value through earnings. If the derivative is designated as a hedge, depending on the nature of the exposure being hedged, changes in fair value will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of the hedge is recognized in earnings immediately. The cumulative transition adjustment upon adoption of SFAS No. 133 was not material to the Company's financial position or results of operations.

As a result of its significant international operations, sales and purchase transactions, the Company is subject to risks associated with fluctuating currency exchange rates. The Company uses derivative financial instruments, principally foreign currency forward contracts, to attempt to minimize the impact of currency exchange rate movements on its operating results and on the cost of capital equipment purchases. The Company does not enter into derivative financial instruments for speculative or trading purposes. The Company's major foreign currency exchange exposures and related hedging programs are described below.

Forecasted transactions. The Company uses foreign currency forward contracts to hedge exposures related to forecasted sales denominated in Japanese yen. These contracts are designated as cash flow hedges when the transactions are forecasted and in general closely match the underlying forecasted

transactions in duration. The contracts are carried on the balance sheet at fair value and the effective portion of the contracts' gains and losses is recorded as other comprehensive income until the forecasted transaction occurs. For the first quarter of fiscal 2002, the Company recorded $0.11 million as part of other comprehensive income. For the second quarter of fiscal 2002, the Company recorded $0.01 million as part of other comprehensive loss. The Company expects to reclassify these amounts to earnings during the next twelve months as the underlying sales transactions occur.

If the underlying forecasted transactions do not occur, or it becomes probable that they will not occur, the gain or loss on the related cash flow hedge is recognized immediately, in other income. During the first two quarters of fiscal 2002, the Company did not record any gains or losses related to forecasted transactions which did not occur or became improbable.

The Company measures the effectiveness of hedges of forecasted transactions on at least a quarterly basis by comparing the fair values of the designated foreign currency forward contracts with the fair values of the forecasted transactions. No ineffectiveness was recognized in earnings during the first two quarters of fiscal 2002.

Firm commitments. The Company uses foreign currency forward contracts to hedge certain foreign currency purchase commitments, primarily in Japanese yen and the euro. These contracts are designated as fair value hedges, and changes in the fair value of the contracts are offset against changes in the fair value of the commitment being hedged, through earnings. For the first quarter of fiscal 2002, the Company recorded gains of $0.25 million on hedged foreign-currency purchase commitments and losses of $0.34 million on the related derivative instruments. For the second quarter of fiscal 2002, the Company recorded losses of $0.22 million on hedged foreign-currency purchase commitments and gains of $0.11 million on the related derivative instruments.

For firm commitment hedges, the Company excludes the time value of foreign currency forward contracts from effectiveness testing, as permitted under SFAS No. 133. For the first two quarters of fiscal 2002, the time value of these contracts was recorded as other income and was not significant.

Balance sheet. The Company also utilizes foreign currency forward contracts to hedge currency exchange rate fluctuations related to certain foreign currency assets and liabilities. Gains and losses on these undesignated derivatives offset gains and losses on the assets and liabilities being hedged and the net amount is included in earnings. For the first quarter of fiscal 2002, net losses generated by hedged assets and liabilities totaled $0.19 million, which were offset by gains on the related derivative instruments of $0.25 million. For the second quarter of fiscal 2002, net losses generated by hedged assets and liabilities totaled $0.03 million, which were offset by gains on the related derivative instruments of $0.09 million.

Equity investments. The Company's policies allow for the use of derivative financial instruments to hedge the fair values of investments in publicly traded equity securities. As of September 30, 2001, the Company had not entered into this type of hedge.

The Company operates in two segments: (1) Communications and High-Performance Logic and (2) SRAMs and Other. The Communications and High-Performance Logic segment includes FIFOs and multi-ports, communications applications-specific standard products (ASSPs) and high-performance

logic and clock management devices. The SRAMs and Other segment consists mainly of high-speed SRAMs.

The tables below provide information about these segments for the three-and six-month periods ended September 30, 2001 and October 1, 2000:

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

All references are to our fiscal quarters ended September 30, 2001 (Q2 2002), July 1, 2001 (Q1 2002), and October 1, 2000 (Q2 2001), unless otherwise indicated. Quarterly financial results may not be indicative of the financial results of future periods.

This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve a number of risks and uncertainties. These include, but are not limited to: operating results; new product introductions and sales; competitive conditions; capital expenditures and resources; manufacturing capacity utilization; customer demand and inventory levels; protection of intellectual property; and the risk factors set forth in the section "Factors Affecting Future Results." As a result of these risks and uncertainties, actual results could differ from those anticipated in the forward-looking statements. Unless otherwise required by law, we undertake no obligation to publicly revise these statements for future events or new information after the date of this Quarterly Report on Form 10-Q.

Forward-looking statements, which are generally identified by words such as "anticipate," "expect," "plan," and similar terms, include statements related to revenues and gross profit, research and development activities, selling, general, and administrative expenses, interest expense, interest income and other, taxes, capital spending and financing transactions, as well as statements regarding successful development and market acceptance of new products, industry and overall economic conditions and demand, and capacity utilization.

Revenues for Q2 2002 were $97.1 million, a decrease of $18.8 million and $171.6 million compared to Q1 2002 and Q2 2001, respectively. In percentage terms, revenues for Q2 2002 declined by 16% and 64% compared to Q1 2002 and Q2 2001, respectively. For the first six months of fiscal 2002, revenues decreased by 57% compared to the same period in fiscal 2001.

In Q2 2002, revenues for our Communications and High Performance Logic segment, which includes FIFOs and multi-ports, communications applications-specific standard products (ASSPs) and high-performance logic and clock management devices, declined by 21% and 58% compared to Q1 2002 and Q2 2001, respectively. Revenues in Q2 2002 for our SRAMs and Other segment, which consists mainly of high-speed SRAMs, increased by 8% compared to Q1 2002 and decreased by 76% compared to Q2 2001.

These decreases are due primarily to lower unit volumes, which reflect both customer efforts to reduce component inventories carried in our distributor, CEM, and OEM sales channels, and current lower end-demand in the communications infrastructure equipment markets that our customers serve. We believe that current reduced demand in the markets for our products, as well as customers' current desire to carry lower inventory levels of semiconductor products, results primarily from both cyclically lower global economic demand in our customers markets and global manufacturing overcapacity in place in the semiconductor industry. Global economic conditions have a direct impact on demand in our customers' markets, which are sensitive to both capital and consumer spending trends. We believe that if cyclical global economic conditions and the semiconductor supply and demand balance improve, as they have in the past, demand for the Company's products will also improve. Lower average selling prices for new SRAM orders and current market prices for certain logic products are secondary contributing factors.

While there are some signs of improving inventory and demand conditions in certain segments of our business, it remains extremely difficult to predict either the time required for remaining excess

inventories to be consumed, or the rate at which our customers' demand might recover from depressed levels. As noted, excess sales channel inventories and weak customer end-market conditions adversely impacted our revenues in Q2 2002, and we expect those factors to again impact our Q3 2002 revenues. In the current uncertain environment, customers are waiting as long as possible before placing committed orders for products, and demanding that products be delivered on very short lead times. This behavior results in a very low backlog of firm, committed orders, and makes forecasting even near-term revenues very difficult.

Gross profit for Q2 2002 was $36.9 million, compared to $41.7 million and $162.6 million in Q1 2002 and Q2 2001, respectively. Gross margin for Q2 2002 was 38.0%, compared to 36.0% and 60.5% for Q1 2002 and Q2 2001, respectively.

The declines in gross margin in Q2 2002, particularly in comparison to Q2 2001, are due primarily to lower levels of revenues, further accumulation of inventory reserves and the reduced utilization of our fixed manufacturing infrastructure. Compared to Q1 2002, gross margin in Q2 2002 was adversely impacted by: further reductions in carrying value of inventories recorded during the period, consistent with the current weaker overall business environment; a shift in mix of products sold, with lower-margin SRAM increasing from 16% to 21% of total sales; and lower average selling prices, particularly for new SRAM orders and for certain logic products. These revenue-related pressures were partially offset by reductions in manufacturing spending, as the cost of revenues declined by over $14 million from Q1 2002 to Q2 2002. Significant cost savings included lower depreciation expenses, particularly related to the Hillsboro, Ore., wafer manufacturing facility; lower variable spending on assembly and test operations, as a result of reduced business volumes; and lower personnel expenses as a result of the reduction-in-force that we implemented in Q1 2002.

The $217.4 million decrease in gross profit for the first six months of fiscal 2002 compared to the first six months of fiscal 2001 is generally attributable to the same factors as described above, principally the lower levels of revenue and the lower average selling prices for new SRAM orders and certain logic products.

We implemented further cost reduction measures at the beginning of Q3 2002, including additional headcount reductions at our wafer manufacturing facilities. These and other cost controls lead us to expect that manufacturing spending could be lower in Q3 2002, and that gross margin will depend primarily on the level of revenue achieved.

For Q2 2002, research and development (R&D) expenses were essentially flat compared to Q1 2002 and Q2 2001. Compared with Q2 2001, increases in R&D payroll spending (including payroll costs related to new IDT Newave employees), stock-based compensation expense related to the Newave acquisition, and manufacturing costs allocated to R&D activities were offset by lower profit-sharing and other performance-related costs, and by lower spending on indirect materials. Compared with Q1 2002, overall lower personnel-related spending offset increased manufacturing costs associated with R&D activities (related to both process and product development).

R&D expenses for the first six months of fiscal 2002 increased by 5% compared to the first six months of fiscal 2001, due to generally the same factors as noted above. The increase includes $2.1 million charged to R&D for Newave stock-based compensation during the first six months of fiscal 2002.

We expect R&D spending in Q3 2002 to be approximately flat compared with Q2 2002.

For Q2 2002, our selling, general and administrative (SG&A) expenses decreased by $2.8 million and $11.1 million compared to Q1 2002 and Q2 2001, respectively. The $2.8 million decrease from Q1 2002 related primarily to lower personnel-related costs and lower discretionary spending on travel, entertainment and marketing communications. The $11.1 million decrease from Q2 2001 reflects lower sales-commission and profit-dependent personnel expenses in addition to the generally lower level of personnel-related and discretionary spending in Q2 2002.

For the first six months of fiscal 2002, SG&A expenses decreased by $19.2 million compared to the same period in fiscal 2001, due mainly to the same factors as described above.

We expect that SG&A spending in Q3 2002 will be approximately flat compared with Q2 2002.

In connection with our acquisition of Newave (see Note 5 to the Condensed Consolidated Financial Statements), we recorded a $16.0 million charge for acquired in-process research and development (IPR&D) in Q1 2002. The $16.0 million allocation of the purchase price to IPR&D was determined by identifying technologies that (1) had not been proved to be technologically feasible, (2) had been developed to a point where future value could be associated with them and (3) did not have future alternative uses.

Residual goodwill related to the Newave transaction is being amortized over an estimated useful life of seven years using the straight-line method. Other identified intangibles are being amortized over estimated useful lives of two to seven years, also using the straight-line method.

We expect to record $2.5 million in quarterly amortization during the remainder of fiscal 2002, including $0.8 million of acquired existing technology which is being amortized to cost of goods sold.

Interest expense in Q2 2002 decreased by $0.4 million compared to Q1 2002, mainly related to an early payment penalty in Q1 2002 on the payoff of a mortgage (see Note 6 to the Condensed Consolidated Financial Statements). For the first six months of fiscal 2002, interest expense was $1.3 million lower than in the same period in fiscal 2001. The decrease is due mainly to the conversion of substantially all of our 5.5% Convertible Subordinated Notes to common stock (see Note 6) and, to a lesser extent, the payoff of certain leases. Our remaining interest-bearing liabilities consist mainly of secured equipment financing agreements, which amortize over the terms of the agreements.

For Q2 2002, interest income and other, net, increased by $1.7 million and $2.3 million compared to Q1 2002 and Q2 2001, respectively.

	Q2 2002		Q1 2002		Q2 2001
	(in thousands)
Interest income	$	8,967	$	11,453	$	10,204
Other income, net		4,453		276		938

Total	$	13,420	$	11,729	$	11,142

Interest income declined by $2.5 million in Q2 2002 compared to Q1 2002 due to lower average interest rates and, to a lesser extent, decreased investment balances. Interest income declined by $1.2 million in Q2 2002 compared to Q2 2001, mainly due to lower average interest rates.

Other income for Q2 2002 includes a gain of $5.1 million related to our exercise of an option to purchase land adjacent to our wafer manufacturing facility in Hillsboro, Ore. Immediately following the option exercise, we sold most of the underlying property and recognized a pretax gain of $5.1 million.

The increase in interest income and other, net for the first half of fiscal 2002 compared to the same period in fiscal 2001 is attributable to the same factors as described above.

	6 months fiscal 2002		6 months fiscal 2001
	(in thousands)
Interest income	$	20,420	$	17,445
Other income, net		4,729		1,647

Total	$	25,149	$	19,092

We expect interest income to decline further in Q3 2002, as existing investments mature and proceeds are reinvested in a lower-rate environment.

During Q2 2001, as a result of the merger between PMC-Sierra, Inc. (PMC) and Quantum Effect Devices, Inc. (QED), we exchanged our QED shares for shares of PMC. As required by current accounting standards, we recorded a pretax net gain of $240.9 million based on the difference between the $238.06 closing price of PMC on August 24, 2000, the date of the merger, and our prior carrying value for each QED share, which was zero. There were no realized gains or losses on equity investments in Q1 2002 or Q2 2002.

For both Q1 2002 and Q2 2002, we applied a rate of 20% to pretax income, exclusive of non-cash, merger-related costs. Our estimate is based on existing tax laws and our projections of income and distributions of income among different entities and tax jurisdictions, and is subject to change, based primarily on varying levels of profitability.

Total cash and cash equivalents and short- and long-term investments, excluding IDT's equity investments in PMC and Monolithic System Technology, Inc. (MoSys), decreased from $713.9 million at the end of Q1 2002 to $676.6 million at the end of Q2 2002.

We used $6.0 million in cash for operating activities during the first six months of fiscal 2002; operating activities provided $259.6 million during the comparable period in fiscal 2001. In addition to lower net income in fiscal 2002, major factors in the year-to-year change in cash flows related to operating activities included the following:

The above factors were partially offset by the effects of lower accounts receivable balances due to collections and lower sales. As a result of the cost reduction measures implemented at the beginning of Q3 2002 (see "Gross Profit," above), we believe that cash operating expenses are likely to decline in Q3 2002.

During the first six months of fiscal 2002, we used $147.6 million in net cash for investing activities, including $74.2 million related to the Newave cash acquisition. Purchases of short- and long-term investments were partially offset by sales of maturing investments. We have curtailed capital spending, and purchases of property, plant and equipment were only $24.2 million in the first half of fiscal 2002, compared to $51.1 million in the first half of fiscal 2001.

We used $53.8 million in net cash for financing activities during the first six months of fiscal 2002. Primary uses of cash during the six-month period included $54.4 million for repurchases of our common stock.

We now anticipate capital expenditures of approximately $50-55 million during all of fiscal 2002, which may vary depending on business conditions, to be financed primarily through cash generated from operations and existing cash and investments balances.

We believe that existing cash and cash equivalents, together with cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs through fiscal 2002 and 2003. We may also investigate other financing alternatives; however, we cannot be certain that additional financing will be available on satisfactory terms.

Our operating results can fluctuate dramatically. For example, we had net income of $415.2 million and $130.6 million for fiscal 2001 and 2000, respectively, compared to a net loss of $298.9 million for fiscal 1999. For the first half of fiscal 2002, we had a net loss of $26.4 million. Fluctuations in operating results can result from a wide variety of factors, including:

In addition, many of these factors also impact the recoverability of the cost of manufacturing, tax, goodwill and other intangibles and other assets. As business conditions change, future writedowns or abandonment of these assets may occur. Also, we ship a substantial portion of our products throughout each quarter. If anticipated shipments in any month do not occur, our operating results for that quarter would be harmed. Further, we may be unable to compete successfully in the future against existing or potential competitors, and our operating results could be harmed by increased competition. Our operating results are also impacted by changes in overall economic conditions, both domestically and abroad. Should economic conditions deteriorate, domestically or overseas, our sales and business results could be harmed.

The cyclicality of the semiconductor industry exacerbates the volatility of our operating results. The semiconductor industry is highly cyclical. Market conditions characterized by excess supply relative to

demand and resultant pricing declines have occurred in the past and may occur in the future. Such pricing declines adversely affect our operating results and force us and our competitors to modify capacity expansion programs. As an example, in prior years, a significant increase in manufacturing capacity allocated to industry standard SRAM components caused significant downward trends in pricing, which adversely affected our gross margins and operating results. We are unable to accurately estimate the amount of worldwide production capacity dedicated to or planned for the industry- standard products, such as SRAM, that we produce. Our operating results can be adversely affected by such factors in the semiconductor industry as: a material increase in industry-wide production capacity; a shift in industry capacity toward products competitive with our products; and reduced demand or other factors that may result in material declines in product pricing.

Although we are continuing to try to reduce our dependence on revenue derived from the sale of industry-standard products, and while we carefully manage costs, these efforts may not be sufficient to offset the adverse effect the above or other industry related factors can have on our results.

Demand for our products depends on demand in the communications, and to a lesser extent, computer markets. The majority of our products are incorporated into customers' systems in enterprise/carrier class network, wireless infrastructure and access network applications. A percentage of our products, including high-performance logic components, serve in customers' computer storage, computer-related, and other applications. Customer applications for our products have historically been characterized by rapid technological change and significant fluctuations in demand. Demand for most of our products, and therefore potential increases in revenue, depends upon growth in the communications market, particularly in the data networking and wireless telecommunications infrastructure markets and, to a lesser extent, the computer-related markets. Any slowdown in these communications or computer-related markets could materially adversely affect our operating results. In addition, when all channels of distribution are considered, one customer in the communications market, Cisco Systems, Inc., represents more than 10% of our total revenues.

Our product manufacturing operations are complex and subject to interruption. From time to time, we have experienced production difficulties, including reduced manufacturing yields or products that do not meet our or our customers' specifications, that have caused delivery delays and quality problems. While production delivery delays have been infrequent and generally short in duration, we could experience manufacturing problems, capacity constraints and/or product delivery delays in the future as a result of, among other things, complexity of manufacturing processes, changes to our process technologies (including die size reduction efforts), and ramping production and installing new equipment at our facilities.

We have wafer fabrication facilities in Hillsboro, Ore. and Salinas, Calif. Substantially all of our revenues are derived from products manufactured at facilities which are exposed to the risk of natural disasters. Approximately 50% of our total revenues in Q2 2002 were derived from products manufactured at our fabrication facility in Salinas, which is located near an active earthquake fault. If we were unable to use our facilities, as a result of a natural disaster or otherwise, our operations would be materially adversely affected until we were able to obtain other production capability. We do not carry earthquake insurance on our California facilities or related to our business operations, as we do not believe that adequate protection is available at economically justifiable rates.

We are dependent upon electric power generated by public utilities where we operate our manufacturing facilities. Utility power interruptions can occur at any time in any location. We have periodically experienced electrical power interruptions in the Philippines and California because utilities in these geographies have failed to provide adequate power infrastructure. We maintain limited backup generating capability, but the amount of electric power that we can generate on our own is insufficient to fully operate these facilities and prolonged power interruptions at any of our locations could have a significant adverse impact on our business. We do not maintain insurance coverage that would help

protect against the impact of power interruptions, because we do not believe that such coverage is available on cost-effective terms.

Historically, we have utilized subcontractors for the majority of our incremental assembly requirements, typically at higher costs than at our own Malaysian and Philippines assembly and test operations. We expect to continue utilizing subcontractors extensively to supplement our own production volume capacity. Due to production lead times and potential subcontractor capacity constraints, any failure on our part to adequately forecast the mix of product demand could adversely affect our operating results.

Our results are dependent on the success of new products. New products and process technology associated with the Hillsboro fabrication facility will continue to require significant R&D expenditures.

However, we may not be able to develop and introduce new products in a timely manner, our new products may not gain market acceptance, and we may not be successful in implementing new process technologies. If we are unable to develop new products in a timely manner, and to sell them at gross margins comparable to or better than our current products, our future results of operations could be adversely impacted.

We are dependent on a limited number of suppliers. Our manufacturing operations depend upon obtaining adequate raw materials on a timely basis. The number of vendors of certain raw materials, such as silicon wafers, ultra-pure metals and certain chemicals and gases, is very limited. In addition, certain packages used by us require long lead times and are available from only a few suppliers. From time to time, vendors have extended lead times or limited supply to us due to capacity constraints. Our results of operations would be adversely affected if we were unable to obtain adequate supplies of raw materials in a timely manner or if there were significant increases in the costs of raw materials.

We may require additional capital on satisfactory terms to remain competitive. The semiconductor industry is extremely capital intensive. To remain competitive, we continue to invest in advanced manufacturing and test equipment. We could be required to seek financing to satisfy our cash and capital needs, and such financing might not be available on terms satisfactory to us. If such financing is required but unavailable on satisfactory terms, our operations could be adversely affected.

Intellectual property claims could adversely affect our business and operations. The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights, which have resulted in significant and often protracted and expensive litigation. In recent years, there has been a growing trend by companies to resort to litigation to protect their semiconductor technology from unauthorized use by others. We have been involved in patent litigation in the past, which adversely affected our operating results. Although we have obtained patent licenses from certain semiconductor manufacturers, we do not have licenses from a number of semiconductor manufacturers that have a broad portfolio of patents. Claims alleging infringement of intellectual property rights could be asserted against us in the future and could require us to discontinue the use of certain processes or cease the manufacture, use and sale of infringing products, to incur significant litigation costs and damages and to develop non-infringing technology. We might not be able to obtain such licenses on acceptable terms or to develop non-infringing technology. Further, the failure to renew or renegotiate existing licenses on favorable terms, or the inability to obtain a key license, could adversely affect us.

International operations add increased volatility to our operating results. A substantial percentage of our revenues are derived from non-U.S. sales, as summarized below:

Percentage of total revenues	First six months of fiscal 2002		Twelve months of fiscal 2001		Twelve months of fiscal 2000
North America	47	%	58	%	62	%
Asia Pacific	15	%	11	%	10	%
Japan	16	%	12	%	11	%
Europe	22	%	19	%	17	%

Total	100	%	100	%	100	%

In addition, our offshore assembly and test facilities in Malaysia and the Philippines incur payroll, facility and other expenses in local currencies. Accordingly, movements in foreign currency exchange rates can impact our cost of goods sold, as well as both pricing and demand for our products. Our offshore manufacturing sites and export sales are also subject to risks associated with foreign operations, including:

Contract pricing for raw materials used in the fabrication and assembly processes, as well as for subcontract assembly services, can also be impacted by currency exchange rate fluctuations. We also purchase certain semiconductor manufacturing tools, such as photolithography equipment, from overseas vendors. Such tools are typically quoted at a foreign-currency price, often equivalent to several million U.S. dollars per unit. Although we seek to mitigate currency risks through the use of hedge instruments, currency exchange rate fluctuations can have a substantial impact on our net U.S.-dollar cost for these tools.

Current global economic and political factors, including terrorism, could harm our business. Weak economic conditions, terrorist actions, and the effects of ongoing military actions against terrorists could lead to significant business disruptions. If such disruptions result in cancellations of customer orders, a general decrease in corporate spending on information technology, or direct impacts on IDT's marketing, manufacturing, financial and logistics functions, our results of operations and financial condition could be adversely affected.

We are subject to a variety of environmental and other regulations related to hazardous materials used in our manufacturing processes. Any failure by us to control the use or discharge of hazardous materials under present or future regulations could subject us to substantial liability or cause our manufacturing operations to be suspended.

Our common stock has experienced substantial price volatility. Such volatility may occur in the future, particularly as a result of quarter-to-quarter variations in the actual or anticipated financial results of our company, other semiconductor companies, or customers. Announcements by us or by our competitors regarding new product introductions may also lead to volatility. In addition, our stock price can fluctuate due to price and volume fluctuations in the stock market, especially in the technology sector. Our product portfolio includes a mix of proprietary or limited-source products, and industry-standard or multiple-source products. Our products also employ a variety of semiconductor design technologies. Stock price volatility may also result from changes in perceptions about the various types of products we manufacture and sell.

We are exposed to fluctuations in the market price of our investments in Monolithic System Technology, Inc. and PMC-Sierra, Inc. In fiscal 2000, PMC-Sierra, Inc. (PMC) completed a merger with Quantum Effect Devices (QED). As a result of the merger, we exchanged our QED ownership interest for PMC common stock, which is highly volatile. In connection with the merger, as required under generally accepted accounting principles, we recorded a pretax, unrealized gain of $240.9 million during the second quarter of fiscal 2001. During the third quarter of fiscal 2001, we sold a portion of our PMC holdings, resulting in a realized, pretax loss of $11.9 million. In the fourth quarter of fiscal 2001, we recorded a $141.9 million impairment charge for certain equity investments, principally our investment in PMC, that we judged to have experienced an other than temporary decline in value. The amount of income and cash flow that we ultimately realize from this investment in future periods may vary materially from the previously recognized gain and the current unrealized amount.

In June 2001, Monolithic System Technology (MoSys) completed an initial public offering at approximately $10 per share. Our carrying value for the 2.6 million MoSys shares held in our investment portfolio was previously zero. We are currently restricted from selling or hedging our MoSys shares until late December 2001, and the shares may be subject to significant market volatility.

We are continuing to monitor and evaluate the impact of the introduction of the Single European Currency (euro). During the transition period ending December 31, 2001, public and private parties may pay for goods and services using either the euro or the legacy currency of the participating country. Beginning January 1, 2002, euro-denominated bills and coins will be issued, with the legacy currencies being completely withdrawn from circulation on June 30, 2002.

The euro currency has been integrated into our systems and operations with minimal impact. We will continue to monitor and evaluate the impact of the introduction of the euro but do not expect material adverse effects on our business activities, financial condition or overall trends in results of operations.

For a discussion of interest rate and foreign currency risks, please refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," in our Annual Report on Form 10-K for the year ended April 1, 2001. For information on our derivative instruments and hedging activities, also see Note 8 to the Consolidated Condensed Financial Statements of this Form 10-Q.

On September 14, 2001, we held our 2001 Annual Meeting of Stockholders. On the record date, 105,035,686 shares of our Common Stock were outstanding and entitled to be voted. Tabulated proxies at the meeting represented 94,970,815 shares, or 90% of the total eligible. Voting results are summarized below:

Proposal I—To elect two Class II directors for a term to expire at the 2004 Annual Meeting of the Stockholders;

Name		Votes For		Withheld
Federico Faggin		94,737,253		233,562
John C. Bolger		94,729,457		241,358

Proposal II—To ratify the selection of PricewaterhouseCoopers LLP as IDT's independent accountants for the fiscal year ended March 31, 2002.

Votes For		Against		Abstained
94,171,768		762,980		36,067

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.

DELAWARE		94-2669985
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
2975 STENDER WAY, SANTA CLARA, CALIFORNIA		95054
(Address of Principal Executive Offices)		(Zip Code)

		Three months ended						Six months ended
		Sep. 30, 2001			Oct. 1, 2000			Sep. 30, 2001			Oct. 1, 2000
Revenues		$	97,117		$	268,748		$	213,025		$	500,003
Cost of revenues			60,190			106,153			134,424			203,992

Gross profit			36,927			162,595			78,601			296,011

Operating expenses:
	Research and development		32,569			33,036			65,642			62,756
	Selling, general and administrative		21,136			32,195			45,104			64,273
	Acquired in-process research and development		—			—			16,000			—
	Amortization of intangibles		1,681			—			3,362			—

Total operating expenses			55,386			65,231			130,108			127,029

Operating income (loss)			(18,459	)		97,364			(51,507	)		168,982
Gain on equity investments, net			—			240,870			—			240,870
Interest expense			(227	)		(568	)		(882	)		(2,147	)
Interest income and other, net			13,420			11,142			25,149			19,092

Income (loss) before income taxes			(5,266	)		348,808			(27,240	)		426,797
Provision (benefit) for income taxes			(329	)		57,718			(814	)		73,316

Net income (loss)		$	(4,937	)	$	291,090		$	(26,426	)	$	353,481

Basic net income (loss) per share		$	(0.05	)	$	2.78		$	(0.25	)	$	3.45
Diluted net income (loss) per share		$	(0.05	)	$	2.60		$	(0.25	)	$	3.22
Weighted average shares:
	Basic		104,836			104,638			104,890			102,453
	Diluted		104,836			112,033			104,890			109,830

		Sep. 30, 2001			Apr. 1, 2001
ASSETS
Current assets:
	Cash and cash equivalents	$	190,261		$	397,709
	Short-term investments—equity investments		29,987			17,510
	Other short-term investments		268,651			263,110
	Accounts receivable, net		33,312			94,362
	Inventories, net		76,687			75,614
	Deferred tax assets		76,330			81,370
	Prepayments and other current assets		15,378			25,542

Total current assets			690,606			955,217
Property, plant and equipment, net			258,984			284,702
Long-term investments			217,683			160,273
Goodwill and other intangibles			62,215			—
Other assets			78,096			70,209

TOTAL ASSETS		$	1,307,584		$	1,470,401

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable	$	18,453		$	45,915
	Accrued compensation and related expenses		15,369			53,543
	Deferred income on shipments to distributors		50,390			91,374
	Income taxes payable		18,457			24,122
	Other accrued liabilities		33,013			39,532

Total current liabilities			135,682			254,486
Other liabilities			83,148			76,018

Total liabilities			218,830			330,504
Stockholders' equity:
	Preferred stock		—			—
	Common stock and additional paid-in capital		785,294			759,341
	Deferred stock compensation		(7,334	)		—
	Treasury stock		(127,612	)		(73,216	)
	Retained earnings		428,425			454,851
	Accumulated other comprehensive income		9,981			(1,079	)

Total stockholders' equity			1,088,754			1,139,897

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	1,307,584		$	1,470,401

			Six Months Ended
			Sep. 30, 2001			Oct. 1, 2000
OPERATING ACTIVITIES:
	Net income (loss)		$	(26,426	)	$	353,481
	Adjustments:
		Depreciation and amortization		45,756			44,743
		Amortization of intangible assets		4,934			—
		Acquired in-process research and development		16,000			—
		Merger-related stock compensation		2,235			—
		Gain on sale of property, plant and equipment		(4,600	)		(710	)
		Gain on equity investments, net		—			(240,870	)
	Changes in assets and liabilities:
		Accounts receivable		61,050			(28,176	)
		Inventories		(1,073	)		1,236
		Prepayments and other assets		2,794			(1,579	)
		Accounts payable		(27,462	)		15,327
		Accrued compensation and related expenses		(38,174	)		11,742
		Deferred income on shipments to distributors		(40,984	)		35,720
		Income taxes payable		(5,665	)		69,469
		Other accrued liabilities		5,625			(813	)

NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES				(5,990	)		259,570

INVESTING ACTIVITIES:
	Purchases of property, plant and equipment			(24,190	)		(51,137	)
	Proceeds from sales of property, plant and equipment			8,665			1,199
	Acquisition, net of acquired cash			(74,249	)		—
	Purchases of investments			(367,952	)		(209,840	)
	Proceeds from sales of investments			310,101			65,867

NET CASH USED FOR INVESTING ACTIVITIES				(147,625	)		(193,911	)

FINANCING ACTIVITIES:
	Issuance of common stock, net			13,894			27,864
	Repurchases of common stock			(54,396	)		—
	Payments on capital leases and other debt			(13,331	)		(5,928	)

NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES				(53,833	)		21,936

Net (decrease) increase in cash and cash equivalents				(207,448	)		87,595
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				397,709			372,606

CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	190,261		$	460,201

Supplemental schedule of non-cash activities:
	Conversion of subordinated notes to equity			—		$	183,436

	Three months ended						Six months ended
	Sep. 30, 2001			Oct. 1, 2000			Sep. 30, 2001			Oct. 1, 2000
				(in thousands)
Net income (loss)	$	(4,937	)	$	291,090		$	(26,426	)	$	353,481
Currency translation adjustments		530			(321	)		468			1,890
Change in unrealized (loss) on foreign exchange contracts		(121	)		—			(7	)		—
Unrealized investment gain (loss)		(10,651	)		30,309			10,599			(33,116	)
Less: Reclassification adjustment, net		—			204,739			—			204,739

Net gain (loss) on investments		(10,651	)		(174,430	)		10,599			(237,855	)

Comprehensive income (loss)	$	(15,179	)	$	116,339		$	(15,366	)	$	117,516

		INTEGRATED DEVICE TECHNOLOGY, INC.

Date: November 12, 2001		/s/ JERRY G. TAYLOR Jerry G. Taylor President and Chief Executive Officer (duly authorized officer)

Date: November 12, 2001		/s/ ALAN F. KROCK Alan F. Krock Vice President, Chief Financial Officer (principal accounting officer)