MICRON TECHNOLOGY INC (Form: 10-Q, Received: 01/13/2009 15:01:19)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 4, 2008

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 1-10658

Micron Technology, Inc.

(Exact name of registrant as specified in its charter)

Delaware	75-1618004
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

8000 S. Federal Way, Boise, Idaho	83716-9632
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code	(208) 368-4000

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 o

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer x	Accelerated Filer o
Non-Accelerated Filer o (Do not check if a smaller reporting company)	Smaller Reporting Company o

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

The number of outstanding shares of the registrant’s common stock as of January 8, 2009 was 763,793,881.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions except per share amounts)

(Unaudited)

Quarter ended	December 4, 2008			November 29, 2007


Net sales	$	1,402		$	1,535
Cost of goods sold		1,851			1,530
Gross margin		(449	)		5

Selling, general and administrative		102			112
Research and development		178			163
Restructure		(66	)		13
Other operating (income) expense, net		9			(23	)
Operating loss		(672	)		(260	)

Interest income		10			30
Interest expense		(30	)		(21	)
Other non-operating income (expense), net		(14	)		(1	)
Loss before taxes and noncontrolling interests		(706	)		(252	)

Income tax (provision)		(13	)		(7	)
Noncontrolling interests in net (income) loss		13			(3	)
Net loss	$	(706	)	$	(262	)

Loss per share:
Basic	$	(0.91	)	$	(0.34	)
Diluted		(0.91	)		(0.34	)

Number of shares used in per share calculations:
Basic		773.3			771.9
Diluted		773.3			771.9

See accompanying notes to consolidated financial statements.

MICRON TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(in millions except par value)

(Unaudited)

As of	December 4, 2008			August 28, 2008

Assets
Cash and equivalents	$	1,025		$	1,243
Short-term investments		3			119
Receivables		1,031			1,032
Inventories		883			1,291
Other current assets		95			94
Total current assets		3,037			3,779
Intangible assets, net		354			364
Property, plant and equipment, net		8,460			8,811
Equity method investments		432			84
Other assets		393			392
Total assets	$	12,676		$	13,430

Liabilities and shareholders’ equity
Accounts payable and accrued expenses	$	943		$	1,111
Deferred income		192			114
Equipment purchase contracts		157			98
Current portion of long-term debt		343			275
Total current liabilities		1,635			1,598
Long-term debt		2,523			2,451
Other liabilities		332			338
Total liabilities		4,490			4,387

Commitments and contingencies

Noncontrolling interests in subsidiaries		2,702			2,865

Common stock, $0.10 par value, authorized 3,000 shares, issued and outstanding 763.8 and 761.1 shares, respectively		76			76
Additional capital		6,574			6,566
Accumulated deficit		(1,162	)		(456	)
Accumulated other comprehensive (loss)		(4	)		(8	)
Total shareholders’ equity		5,484			6,178
Total liabilities and shareholders’ equity	$	12,676		$	13,430

See accompanying notes to consolidated financial statements.

MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

Quarter ended	December 4, 2008			November 29, 2007

Cash flows from operating activities
Net loss	$	(706	)	$	(262	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		594			504
Provision to write down inventories to estimated market values		369			62
Noncash restructure charges (credits)		(83	)		6
(Gain) loss from disposition of equipment, net		14			(10	)
Change in operating assets and liabilities:
(Increase) decrease in receivables		138			(80	)
Decrease in inventories		39			27
Decrease in accounts payable and accrued expenses		(67	)		(6	)
Increase in deferred income		78			2
Other		(17	)		33
Net cash provided by operating activities		359			276

Cash flows from investing activities
Acquisition of equity method investment		(409	)		--
Expenditures for property, plant and equipment		(270	)		(765	)
Purchases of available-for-sale securities		(2	)		(123	)
Proceeds from maturities of available-for-sale securities		123			365
Proceeds from sales of property, plant and equipment		6			64
Proceeds from sales of available-for-sale securities		--			19
Other		63			34
Net cash used for investing activities		(489	)		(406	)

Cash flows from financing activities
Proceeds from debt		285			--
Cash received from noncontrolling interests		--			150
Repayments of debt		(163	)		(212	)
Distributions to noncontrolling interests		(150	)		--
Payments on equipment purchase contracts		(64	)		(122	)
Other		4			2
Net cash used for financing activities		(88	)		(182	)

Net decrease in cash and equivalents		(218	)		(312	)
Cash and equivalents at beginning of period		1,243			2,192
Cash and equivalents at end of period	$	1,025		$	1,880

Supplemental disclosures
Income taxes paid, net	$	(8	)	$	(6	)
Interest paid, net of amounts capitalized		(29	)		(21	)
Noncash investing and financing activities:
Equipment acquisitions on contracts payable and capital leases		153			152

See accompanying notes to consolidated financial statements.

MICRON TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All tabular amounts in millions except per share amounts)

(Unaudited)

Business and Significant Accounting Policies

Basis of presentation: Micron Technology, Inc. and its subsidiaries (hereinafter referred to collectively as the “Company”) manufacture and market DRAM, NAND Flash memory, CMOS image sensors and other semiconductor components. The Company has two segments, Memory and Imaging. The Memory segment’s primary products are DRAM and NAND Flash and the Imaging segment’s primary product is CMOS image sensors. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its consolidated subsidiaries. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company and its consolidated results of operations and cash flows.

The Company’s fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. The Company’s fiscal 2009 contains 53 weeks and the Company’s first quarter of fiscal 2009, which ended on December 4, 2008, contained 14 weeks. The Company’s fiscal 2008, which ended on August 28, 2008, contained 52 weeks and the Company’s first quarter of fiscal 2008 contained 13 weeks. All period references are to the Company’s fiscal periods unless otherwise indicated. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended August 28, 2008.

Risks and uncertainties: The Company’s liquidity is highly dependent on average selling prices for its products and the timing of capital expenditures, both of which can vary significantly from period to period. Depending on conditions in the semiconductor memory market, the Company’s cash flows from operations and current holdings of cash and investments may not be adequate to meet the Company’s needs for capital expenditures and operations. Historically, the Company has used external financing to fund these needs. Due to conditions in the credit markets, many financing instruments used by the Company in the past are currently not available on terms acceptable to the Company. The Company has significantly reduced its capital expenditures for 2009. In addition, the Company is pursuing further financing alternatives, further reducing capital expenditures and implementing further cost-cutting initiatives.

Recently issued accounting standards: In December 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. FAS 140-1 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.” FSP No. FAS 140-1 and FIN 46(R)-8 requires public entities to provide additional disclosures about transfers of financial assets and their involvement with variable interest entities. The Company is required to adopt FSP No. FAS 140-1 and FIN 46(R)-8 effective in the second quarter of 2009.

In May 2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” FSP No. APB 14-1 requires that issuers of convertible debt instruments that may be settled in cash upon conversion separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate as interest cost is recognized in subsequent periods. The Company is required to adopt FSP No. APB 14-1 at the beginning of 2010. On adoption, the Company will retrospectively account for its $1.3 billion of 1.875% convertible senior notes issued in May of 2007 under the provisions of FSP No. APB 14-1. The Company estimates that debt recognized on issuance of the $1.3 billion convertible senior notes would be approximately $400 million lower under FSP No. APB 14-1. The difference of approximately $400 million would be accreted to interest expense over the approximate seven-year term of the notes. The Company is continuing to evaluate the full impact that the adoption of FSP No. APB 14-1 will have on its financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), “Business Combinations ” (“SFAS No. 141(R)”), which establishes the principles and requirements for how an acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in the acquiree, (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (3) determines what information to disclose. The Company is required to adopt SFAS No. 141(R) effective at the beginning of 2010. The impact of the adoption of SFAS No. 141(R) will depend on the nature and extent of business combinations occurring on or after the beginning of 2010.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” SFAS No. 160 requires that (1) noncontrolling interests be reported as a separate component of equity, (2) net income attributable to the parent and to the noncontrolling interest be separately identified in the income statement, (3) changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions, and (4) any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value. The Company is required to adopt SFAS No. 160 effective at the beginning of 2010. The Company is evaluating the impact that the adoption of SFAS No. 160 will have on its financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115.” Under SFAS No. 159, the Company may elect to measure many financial instruments and certain other items at fair value on an instrument by instrument basis, subject to certain restrictions. The Company adopted SFAS No. 159 effective at the beginning of 2009. The Company did not elect to measure any existing items at fair value upon the adoption of SFAS No. 159.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 (as amended by subsequent FSP’s) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The Company adopted SFAS No. 157 effective at the beginning of 2009 for financial assets and financial liabilities. The adoption did not have a significant impact on the Company’s financial statements. The Company is required to adopt SFAS No. 157 for all other assets and liabilities at the beginning of 2010 and it is evaluating the impact that the adoption will have on its financial statements.

Supplemental Balance Sheet Information

Receivables	December 4, 2008		August 28, 2008

Trade receivables (net of allowance of $3 and $2, respectively)	$	643	$	741
Income and other taxes		31		43
Other		357		248
	$	1,031	$	1,032

As of December 4, 2008, other receivables included amounts due from Intel Corporation (“Intel”) of $208 million in connection with the termination of a supply agreement for NAND Flash memory produced at the Company’s Boise facility and $36 million related to NAND Flash product design and process development activities. (See “Restructure” note.) Other receivables as of December 4, 2008 also included $77 million due from settlement of litigation. As of August 28, 2008, other receivables included $71 million due from Intel for amounts related to NAND Flash product design and process development activities, $75 million due from settlement of litigation and $58 million due from settlements of pricing adjustments with certain suppliers.

Other noncurrent assets as of August 28, 2008 included receivables of $39 million due from settlement of litigation.

Inventories	December 4, 2008		August 28, 2008

Finished goods	$	328	$	444
Work in process		395		671
Raw materials and supplies		160		176
	$	883	$	1,291

The Company’s results of operations for the first quarter of 2009 and fourth, second and first quarters of 2008 included charges of $369 million, $205 million, $15 million and $62 million, respectively, to write down the carrying value of work in process and finished goods inventories of memory products (both DRAM and NAND Flash) to their estimated market values.

Intangible Assets and Goodwill

Intangible Assets:
	December 4, 2008					August 28, 2008
	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization

Product and process technology	$	580	$	(327	)	$	577	$	(320	)
Customer relationships		127		(39	)		127		(35	)
Other		29		(16	)		29		(14	)
	$	736	$	(382	)	$	733	$	(369	)

During the first quarters of 2009 and 2008, the Company capitalized $12 million and $11 million, respectively, for product and process technology with weighted-average useful lives of 10 years.

Amortization expense for intangible assets was $22 million and $20 million for the first quarters of 2009 and 2008, respectively. Annual amortization expense for intangible assets is estimated to be $73 million for 2009, $63 million for 2010, $57 million for 2011, $48 million for 2012 and $45 million for 2013.

Goodwill: As of December 4, 2008 and August 28, 2008, the Company had goodwill of $58 million related to its Imaging segment.

Property, Plant and Equipment	December 4, 2008			August 28, 2008

Land	$	99		$	99
Buildings		4,370			3,829
Equipment		12,934			13,591
Construction in progress		143			611
Software		282			283
		17,828			18,413
Accumulated depreciation		(9,368	)		(9,602	)
	$	8,460		$	8,811

Depreciation expense was $569 million and $484 million for the first quarters of 2009 and 2008, respectively.

Equity Method Investments

The Company has a partnering arrangement with Nanya Technology Corporation (“Nanya”) pursuant to which the Company and Nanya jointly develop process technology and designs to manufacture stack DRAM products. Each party generally bears its own development costs and the Company’s development costs are expected to exceed Nanya’s development costs by a significant amount. In addition, the Company has transferred and licensed certain intellectual property related to the manufacture of stack DRAM products to Nanya and licensed certain intellectual property from Nanya. The Company is to receive an aggregate of $207 million from Nanya through 2010. Further, the Company will receive royalties from Nanya for stack DRAM products manufactured by or for Nanya.

The Company has concluded that both Inotera and MeiYa are variable interest entities as defined in FIN 46(R), “Consolidation of Variable Interest Entities – an interpretation of ARB No. 51,” and that the Company is not the primary beneficiary of either Inotera or MeiYa. The Company’s exposure to losses on its equity investments in these entities is limited to the carrying value of such investments. The creditors of Inotera and MeiYa have recourse only to the assets of these two entities and do not have recourse to any other assets of the Company.

Inotera and MeiYa each have fiscal years that end on December 31. As these fiscal years differ from that of the Company’s fiscal year, the Company recognizes its share of Inotera and MeiYa quarterly earnings or losses for the calendar quarter that ends within the Company’s fiscal quarter. This results in the recognition of the Company’s share of earnings or losses from these entities for a period that lags the Company’s fiscal periods by approximately two months.

Inotera: In the first quarter of 2009, the Company acquired a 35.5% ownership interest (or approximately 1.2 billion shares) in Inotera, a publicly traded entity in Taiwan, from Qimonda AG (“Qimonda”) for approximately $400 million. The interest in Inotera was acquired for cash, a portion of which was funded from loan proceeds of $200 million received by the Company from Nan Ya Plastics Corporation, an affiliate of Nanya, and $85 million received from Inotera. The loans were recorded at their fair values, which reflect an aggregate discount of $31 million from their face amounts. The aggregate discount was recorded as a reduction of the Company’s basis in the investment in Inotera. The Company also capitalized $10 million of costs and other fees incurred in connection with the acquisition. As a result of the above transactions, as of December 4, 2008 the carrying value of the Company’s equity investment in Inotera was $378 million. Because the Company did not acquire its interest in Inotera until October and November of 2008, the Company’s results of operations for the first quarter of 2009 do not include any share of Inotera’s results of operations for the quarterly period ended September 30, 2008. The Company is in the process of determining any difference between the carrying value of its investment in Inotera and its proportionate interest in the underlying equity of Inotera and expects to complete such analysis in the second quarter of 2009. The closing trading price of Inotera on December 4, 2008 was equivalent to approximately $0.20 per share. (See “Debt” note.)

The Company has rights and obligations to purchase 50% of the 120,000 per month 300mm DRAM wafer production of Inotera. Inotera’s actual wafer production will vary from time to time based on market and other conditions. In connection with the acquisition of the shares in Inotera, the Company and Nanya entered into a Supply Agreement with Inotera (the "Supply Agreement") pursuant to which Inotera will sell to the Company and Nanya trench and stack DRAM products manufactured by Inotera. Inotera's current trench production capacity is expected to transition to the Company's stack process technology. Inotera will sell to the Company and Nanya all of the trench DRAM products manufactured by it other than trench DRAM products that are sold by Inotera to Qimonda pursuant to a separate supply agreement between Inotera and Qimonda (the "Qimonda Supply Agreement"). Under the Qimonda Supply Agreement, Qimonda is obligated to purchase trench DRAM products started for it by Inotera for approximately eight months following the Company’s acquisition of the shares in Inotera in accordance with a ramp down schedule specified in the Qimonda Supply Agreement. Initially, (a) with respect to trench DRAM products, the Company will purchase the products resulting from 50% of Inotera's aggregate trench DRAM production less the trench DRAM products contemplated to be purchased by Qimonda pursuant to the Qimonda Supply Agreement and (b) with respect to stack DRAM products, the Company will purchase the products resulting from 50% of the aggregate stack DRAM production. The pricing formula that determines the amounts to be paid by the Company for DRAM products under the Supply Agreement includes manufacturing costs and margins associated with the products purchased.

MeiYa: In the fourth quarter of 2008, the Company and Nanya formed MeiYa to manufacture stack DRAM products and sell such products exclusively to the Company and Nanya. As of December 4, 2008 and August 28, 2008, the carrying value of the Company’s equity investment in MeiYa was $54 million and $84 million, respectively. In the first quarter of 2009, the Company recognized $2 million of losses for its share of MeiYa’s results of operations for the quarterly period ended September 30, 2008. In addition, during the first quarter of 2009, the Company received $50 million from MeiYa which was accounted for as a technology transfer fee and a reduction of the Company’s investment in MeiYa. In connection with the purchase of the ownership interest in Inotera, the Company entered into a series of agreements with Nanya which contemplated the restructuring of MeiYa and pursuant to which both parties will cease future funding of, and resource commitments to, MeiYa.

Accounts Payable and Accrued Expenses	December 4, 2008		August 28, 2008

Accounts payable	$	513	$	597
Salaries, wages and benefits		199		244
Customer advances		100		130
Income and other taxes		34		27
Other		97		113
	$	943	$	1,111

As of December 4, 2008 and August 28, 2008, customer advances included $99 million and $129 million, respectively, for the Company’s obligation to provide certain NAND Flash memory products to Apple Computer, Inc. (“Apple”) until December 31, 2010 pursuant to a prepaid NAND Flash supply agreement. As of December 4, 2008 and August 28, 2008, other accounts payable and accrued expenses included $18 million and $16 million, respectively, for amounts due to Intel for NAND Flash product design and process development and licensing fees pursuant to a research and development cost-sharing arrangement.

As of December 4, 2008 and August 28, 2008, other noncurrent liabilities included $83 million pursuant to the supply agreement with Apple.

Debt	December 4, 2008			August 28, 2008

Convertible senior notes payable, interest rate of 1.875%, due June 2014	$	1,300		$	1,300
Notes payable in periodic installments through July 2015, weighted-average effective interest rate of 8.3% and 4.5%, respectively, net of unamortized discount of $33 and $3, respectively		852			699
Capital lease obligations payable in monthly installments through February 2023, weighted-average imputed interest rate of 6.5 % and 6.6%, respectively		644			657
Convertible subordinated notes payable, interest rate of 5.6%, due April 2010		70			70
		2,866			2,726
Less current portion		(343	)		(275	)
	$	2,523		$	2,451

In connection with the purchase of its 35.5% interest in Inotera, the Company entered into a two-year variable rate term loan with Nan Ya Plastics and a six-month variable rate term loan with Inotera. On November 26, 2008, the Company received loan proceeds of $200 million from Nan Ya Plastics and $85 million from Inotera, which are payable at the end of each loan term. Under the terms of the loan agreements, interest is payable quarterly at LIBOR plus 2%. The interest rates reset quarterly and were 4.2% per annum as of December 4, 2008. The Company recorded the debt net of aggregate discounts of $31 million, which will be recognized as interest expense over the respective lives of the loans, resulting in an effective interest rate of 12.1% for the Nan Ya Plastics loan and 11.6% for the Inotera loan. The Nan Ya Plastics loan is collateralized by a first priority security interest in the Inotera shares owned by the Company (approximate carrying value of $378 million as of December 4, 2008). (See “Equity Method Investments” note.)

TECH Semiconductor Singapore Pte. Ltd. (“TECH”), the Company’s joint venture subsidiary, has a credit facility that is collateralized by substantially all of the assets of TECH, which had an approximate carrying value of $1,744 million as of December 4, 2008.

Contingencies

The Company has accrued a liability and charged operations for the estimated costs of adjudication or settlement of various asserted and unasserted claims existing as of the balance sheet date, including those described below. The Company is currently a party to other legal actions arising out of the normal course of business, none of which is expected to have a material adverse effect on the Company’s business, results of operations or financial condition.

In the normal course of business, the Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party. It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these types of agreements have not had a material effect on the Company’s business, results of operations or financial condition.

The Company is involved in the following patent, antitrust and securities matters.

Patent Matters: As is typical in the semiconductor and other high technology industries, from time to time, others have asserted, and may in the future assert, that the Company’s products or manufacturing processes infringe their intellectual property rights. In this regard, the Company is engaged in litigation with Rambus, Inc. (“Rambus”) relating to certain of Rambus’ patents and certain of the Company’s claims and defenses. Lawsuits between Rambus and the Company are pending in the U.S. District Court for the District of Delaware, U.S. District Court for the Northern District of California, Germany, France, and Italy. In the U.S. District Court for the Northern District of California, trial is scheduled to begin on January 21, 2009 on a patent phase of the case alleging that certain Company memory products infringe Rambus patents. The Company also is engaged in patent litigation with Mosaid Technologies, Inc. (“Mosaid”) in the U.S. District Court for the Northern District of California. Among other things, the above lawsuits pertain to certain of the Company’s SDRAM, DDR SDRAM, DDR2 SDRAM, DDR3 SDRAM, RLDRAM and image sensor products, which account for a significant portion of net sales.

The Company is unable to predict the outcome of assertions of infringement made against the Company and therefore cannot estimate the range of possible loss. A court determination that the Company’s products or manufacturing processes infringe the intellectual property rights of others could result in significant liability and/or require the Company to make material changes to its products and/or manufacturing processes. Any of the foregoing could have a material adverse effect on the Company’s business, results of operations or financial condition.

Antitrust Matters: At least sixty-eight purported class action price-fixing lawsuits have been filed against the Company and other DRAM suppliers in various federal and state courts in the United States and in Puerto Rico on behalf of indirect purchasers alleging price-fixing in violation of federal and state antitrust laws, violations of state unfair competition law, and/or unjust enrichment relating to the sale and pricing of DRAM products during the period from April 1999 through at least June 2002. The complaints seek treble damages sustained by purported class members in addition to restitution, costs and attorneys’ fees. A number of these cases have been removed to federal court and transferred to the U.S. District Court for the Northern District of California for consolidated proceedings. On January 29, 2008, the Northern District of California court granted in part and denied in part the Company’s motion to dismiss plaintiffs’ second amended consolidated complaint. Plaintiffs subsequently filed a motion seeking certification for interlocutory appeal of the decision. On February 27, 2008, plaintiffs filed a third amended complaint. On June 26, 2008, the United States Court of Appeals for the Ninth Circuit accepted plaintiffs’ interlocutory appeal.

In addition, various states, through their Attorneys General, have filed suit against the Company and other DRAM manufacturers. On July 14, 2006, and on September 8, 2006 in an amended complaint, the following Attorneys General filed suit in the U.S. District Court for the Northern District of California: Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Hawaii, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and the Commonwealth of the Northern Mariana Islands. Thereafter, three states, Ohio, New Hampshire, and Texas, voluntarily dismissed their claims. The remaining states filed a third amended complaint on October 1, 2007. Alaska, Delaware, Kentucky, and Vermont subsequently voluntarily dismissed their claims. The amended complaint alleges, among other things, violations of the Sherman Act, Cartwright Act, and certain other states’ consumer protection and antitrust laws and seeks damages, and injunctive and other relief. Additionally, on July 13, 2006, the State of New York filed a similar suit in the U.S. District Court for the Southern District of New York. That case was subsequently transferred to the U.S. District Court for the Northern District of California for pre-trial purposes. The State of New York filed an amended complaint on October 1, 2007. On October 3, 2008, the California Attorney General filed a similar lawsuit in California Superior Court, purportedly on behalf of local California government entities, alleging, among other things, violations of the Cartwright Act and state unfair competition law.

Three purported class action DRAM lawsuits also have been filed in Quebec, Ontario, and British Columbia, Canada, on behalf of direct and indirect purchasers, alleging violations of the Canadian Competition Act. The substantive allegations in these cases are similar to those asserted in the cases filed in the United States. In May and June 2008 respectively, plaintiffs’ motion for class certification was denied in the British Columbia and Quebec cases. Plaintiffs subsequently filed an appeal of each of those decisions.

In February and March 2007, All American Semiconductor, Inc., Jaco Electronics, Inc., and the DRAM Claims Liquidation Trust each filed suit against the Company and other DRAM suppliers in the U.S. District Court for the Northern District of California after opting-out of a direct purchaser class action suit that was settled. The complaints allege, among other things, violations of federal and state antitrust and competition laws in the DRAM industry, and seek damages, injunctive relief, and other remedies.

On October 11, 2006, the Company received a grand jury subpoena from the U.S. District Court for the Northern District of California seeking information regarding an investigation by the DOJ into possible antitrust violations in the “Static Random Access Memory” or “SRAM” industry. In December 2008, the Company was informed that the DOJ closed its investigation of the SRAM industry.

Subsequent to the issuance of subpoenas to the SRAM industry, a number of purported class action lawsuits have been filed against the Company and other SRAM suppliers. Six cases have been filed in the U.S. District Court for the Northern District of California asserting claims on behalf of a purported class of individuals and entities that purchased SRAM directly from various SRAM suppliers during the period from November 1, 1996 through December 31, 2005. Additionally, at least seventy-four cases have been filed in various U.S. District Courts asserting claims on behalf of a purported class of individuals and entities that indirectly purchased SRAM and/or products containing SRAM from various SRAM suppliers during the time period from November 1, 1996 through December 31, 2006. In September 2008, a class of direct purchasers was certified, and plaintiffs were granted leave to amend their complaint to cover Pseudo-Static RAM or “PSRAM” products as well. The complaints allege price fixing in violation of federal antitrust laws and state antitrust and unfair competition laws and seek treble monetary damages, restitution, costs, interest and attorneys’ fees.

Three purported class action SRAM lawsuits also have been filed in Canada, on behalf of direct and indirect purchasers, alleging violations of the Canadian Competition Act. The substantive allegations in these cases are similar to those asserted in the SRAM cases filed in the United States.

In addition, three purported class action lawsuits alleging price-fixing of Flash products have been filed in Canada, asserting violations of the Canadian Competition Act. These cases assert claims on behalf of a purported class of individuals and entities that purchased Flash memory directly and indirectly from various Flash memory suppliers.

On May 5, 2004, Rambus filed a complaint in the Superior Court of the State of California (San Francisco County) against the Company and other DRAM suppliers. The complaint alleges various causes of action under California state law including conspiracy to restrict output and fix prices on Rambus DRAM (“RDRAM”) and unfair competition. Trial is currently scheduled to begin in March 2009. The complaint seeks treble damages, punitive damages, attorneys’ fees, costs, and a permanent injunction enjoining the defendants from the conduct alleged in the complaint.

The Company is unable to predict the outcome of these lawsuits and investigations and therefore cannot estimate the range of possible loss. The final resolution of these alleged violations of antitrust laws could result in significant liability and could have a material adverse effect on the Company’s business, results of operations or financial condition.

Securities Matters: On February 24, 2006, a putative class action complaint was filed against the Company and certain of its officers in the U.S. District Court for the District of Idaho alleging claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. Four substantially similar complaints subsequently were filed in the same Court. The cases purport to be brought on behalf of a class of purchasers of the Company’s stock during the period February 24, 2001 to February 13, 2003. The five lawsuits have been consolidated and a consolidated amended class action complaint was filed on July 24, 2006. The complaint generally alleges violations of federal securities laws based on, among other things, claimed misstatements or omissions regarding alleged illegal price-fixing conduct. The complaint seeks unspecified damages, interest, attorneys’ fees, costs, and expenses. On December 19, 2007, the Court issued an order certifying the class but reducing the class period to purchasers of the Company’s stock during the period from February 24, 2001 to September 18, 2002.

In addition, on March 23, 2006, a shareholder derivative action was filed in the Fourth District Court for the State of Idaho (Ada County), allegedly on behalf of and for the benefit of the Company, against certain of the Company’s current and former officers and directors. The Company also was named as a nominal defendant. An amended complaint was filed on August 23, 2006 and subsequently dismissed by the Court. Another amended complaint was filed on September 6, 2007. The amended complaint is based on the same allegations of fact as in the securities class actions filed in the U.S. District Court for the District of Idaho and alleges breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment, and insider trading. The amended complaint seeks unspecified damages, restitution, disgorgement of profits, equitable and injunctive relief, attorneys’ fees, costs, and expenses. The amended complaint is derivative in nature and does not seek monetary damages from the Company. However, the Company may be required, throughout the pendency of the action, to advance payment of legal fees and costs incurred by the defendants. On January 25, 2008, the Court granted the Company’s motion to dismiss the second amended complaint without leave to amend. On March 10, 2008, plaintiffs filed a notice of appeal to the Idaho Court of Appeals.

The Company is unable to predict the outcome of these cases and therefore cannot estimate the range of possible loss. A court determination in any of these actions against the Company could result in significant liability and could have a material adverse effect on the Company’s business, results of operations or financial condition.

Fair Value Measurements

SFAS No. 157 establishes three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), observable inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly (referred to as Level 2) and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).

Fair value measurements on a recurring basis: Assets measured at fair value on a recurring basis as of December 4, 2008 were as follows:

	Level 1		Level 2		Total Balance

Money market (1)	$	513	$	--	$	513
Commercial paper (1)		--		112		112
U.S. government and agencies (1)		184		--		184
Certificates of deposit (1)		--		133		133
Corporate notes and bonds (2)		3		--		3
Marketable equity investments (3)		6		--		6
	$	706	$	245	$	951

(1) Included in cash and equivalents
(2) Included in short-term investments
(3) Included in other assets

Level 2 assets are valued using observable inputs in active markets for similar assets or alternative pricing sources and models utilizing market observable inputs. During the first quarter of 2009, the Company recognized an other-than-temporary impairment of $7 million for marketable equity instruments.

Fair value measurements on a nonrecurring basis: As of December 4, 2008, non-marketable equity investments of $13 million were valued at fair value using Level 3 inputs. In the first quarter of 2009, the Company identified events and circumstances that indicated the fair value of a non-marketable equity investment sustained an other-than-temporary loss in value. The Company recognized an impairment charge of $2 million to write down the carrying value of this investment to its estimated fair value. The fair value measurement was determined using market multiples derived from industry-comparable companies which were classified as Level 3 inputs, as they were unobservable and require management’s judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such investments.

During the first quarter of 2009, the Company recorded the loans with Nan Ya Plastics and Inotera at fair value because the stated interest rates were substantially lower than the prevailing rates for loans with comparable terms and collateral and for borrowers with similar credit ratings. The fair values of these loans were determined based on discounted cash flows using inputs that are observable in the market or that could be derived from or corroborated with observable market data, as well as significant unobservable inputs (Level 3), including interest rates based on published rates for transactions involving borrowers with similar credit ratings as the Company. (See “Debt” note.)

Equity Plans

As of December 4, 2008, the Company had an aggregate of 189.7 million shares of its common stock reserved for issuance under various equity plans, of which 121.5 million shares were subject to outstanding stock awards and 68.2 million shares were available for future grants. Awards are subject to terms and conditions as determined by the Company’s Board of Directors.

Stock options: The Company granted 6.8 million and 0.2 million stock options during the first quarters of 2009 and 2008, respectively, with weighted-average grant-date fair values per share of $2.31 and $4.10, respectively.

The fair values of option awards are estimated as of the date of grant using the Black-Scholes option valuation model. The Black-Scholes model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable and requires the input of subjective assumptions, including the expected stock price volatility and estimated option life. The expected volatilities utilized by the Company are based on implied volatilities from traded options on the Company’s stock and on historical volatility. The expected life of options granted in 2009 was based, in part, on historical experience and on the terms and conditions of the options. The expected life of options granted prior to 2009 was based on the simplified method provided by the Securities and Exchange Commission. The risk-free rates utilized by the Company are based on the U.S. Treasury yield in effect at the time of the grant. No dividends have been assumed in the Company’s estimated option values. Assumptions used in the Black-Scholes model are presented below:

	Quarter ended
	December 4, 2008			November 29, 2007

Average expected life in years		4.75			4.25
Weighted-average expected volatility		60	%		38	%
Weighted-average risk-free interest rate		2.6	%		4.0	%

Restricted stock: The Company awards restricted stock and restricted stock units (collectively, “Restricted Awards”) under its equity plans. During the first quarter of 2009, the Company granted 1.7 million shares of service-based Restricted Awards and 1.7 million shares of performance-based Restricted Awards. During the first quarter of 2008, the Company granted 1.3 million shares of service-based Restricted Awards and 1.3 million shares of performance-based Restricted Awards. The weighted-average grant-date fair values per share were $4.48 and $10.76 for Restricted Awards granted during the first quarters of 2009 and 2008, respectively.

Stock-based compensation expense: Total compensation costs for the Company’s equity plans were as follows:

	Quarter ended
	December 4, 2008		November 29, 2007

Stock-based compensation expense by caption:
Cost of goods sold	$	4	$	3
Selling, general and administrative		2		6
Research and development		3		4
	$	9	$	13

Stock-based compensation expense by type of award:
Stock options	$	7	$	6
Restricted stock		2		7
	$	9	$	13

As of December 4, 2008, $96 million of total unrecognized compensation costs related to non-vested awards was expected to be recognized through the first quarter of 2013, resulting in a weighted-average period of 1.3 years. Stock-based compensation expense in the above presentation does not reflect any significant income taxes, which is consistent with the Company’s treatment of income or loss from its U.S. operations. (See “Income Taxes” note.)

Restructure

In the first quarter of 2009, in response to a challenging global environment for technology products, the Company announced a restructuring of its memory operations. As part of the restructure, the Company’s IM Flash joint venture between the Company and Intel terminated its agreement with the Company to obtain NAND Flash memory supply from the Company’s Boise facility, reducing the Company’s NAND Flash production by approximately 35,000 200mm wafers per month. In addition, the Company and Intel agreed to suspend tooling and the ramp of production at IM Flash’s Singapore wafer fabrication facility. The Company has also undertaken additional cost savings measures to increase its competitiveness, including reductions in executive and employee salary and bonuses, a continued hiring freeze, and reduction of other discretionary costs such as outside services, travel and overtime. As a result of these actions, the Company recorded a net $66 million credit to restructure in the first quarter of 2009, attributable to the Company’s Memory segment. The amount includes a $144 million gain in connection with the termination of the NAND Flash supply agreement. As of December 4, 2008, the Company expected to incur additional restructure costs of approximately $40 million through 2010. The components of the restructure charges and credits were as follows:

Restructure charge (credit):
Gain from termination of NAND Flash supply agreement	$	(144	)
Write-down of equipment		56
Severance and other termination benefits		22
Total restructure credit	$	(66	)

As of December 4, 2008, $6 million of the restructure costs remained unpaid and were included in accounts payable and accrued expenses.

In the first quarter of 2008, the Company recorded a restructure charge of $13 million, primarily to the Memory segment, for employee severance and related costs and a write-down of certain facilities.

Other Operating (Income) Expense, Net

Other operating (income) expense for the first quarter of 2009 included losses of $14 million on disposals of semiconductor equipment. Other operating (income) expense for the first quarter of 2008 included $38 million in receipts from the U.S. government in connection with anti-dumping tariffs, losses of $27 million from changes in currency exchange rates, and gains of $10 million on disposals of semiconductor equipment.

Income Taxes

Income taxes for 2009 and 2008 primarily reflect taxes on the Company’s non-U.S. operations and U.S. alternative minimum tax. The Company has a valuation allowance for its net deferred tax asset associated with its U.S. operations. The benefit for taxes on U.S. operations in 2009 and 2008 was substantially offset by changes in the valuation allowance.

Earnings Per Share

Basic earnings per share is computed based on the weighted-average number of common shares and stock rights outstanding. Diluted earnings per share is computed based on the weighted-average number of common shares outstanding plus the dilutive effects of stock options, warrants and convertible notes. Potential common shares that would increase earnings per share amounts or decrease loss per share amounts are antidilutive and are therefore excluded from earnings per share calculations. Antidilutive potential common shares that could dilute basic earnings per share in the future were 219.1 million and 251.0 million for the first quarters of 2009 and 2008, respectively.

	Quarter ended
	December 4, 2008			November 29, 2007

Net loss available to common shareholders	$	(706	)	$	(262	)

Weighted-average common shares outstanding		773.3			771.9

Loss per share:
Basic	$	(0.91	)	$	(0.34	)
Diluted		(0.91	)		(0.34	)

Comprehensive Income (Loss)

Comprehensive loss for the first quarter of 2009 was ($702) million and included $4 million, net of tax, of unrealized gains on investments. Comprehensive loss for the first quarter of 2008 was ($263) million and included de minimis amounts of unrealized gains and losses on investments.

Consolidated Joint Ventures

NAND Flash joint ventures with Intel (“IM Flash”): The Company has formed two joint ventures with Intel (IM Flash Technologies, LLC and IM Flash Singapore LLP) to manufacture NAND Flash memory products for the exclusive benefit of the partners. As of December 4, 2008, the Company owned 51% and Intel owned 49% of IM Flash. The Company has determined that both of the IM Flash joint ventures are variable interest entities as defined in FIN 46(R), and that the Company is the primary beneficiary of both. Accordingly, IM Flash’s financial results are included in the consolidated financial statements of the Company and all amounts pertaining to Intel’s interests in IM Flash are reported as noncontrolling interests in subsidiaries.

IM Flash manufactures NAND Flash memory products based on NAND Flash designs developed by the Company and Intel and licensed to the Company. Product design and other research and development (“R&D”) costs for NAND Flash are generally shared equally between the Company and Intel. As a result of reimbursements received from Intel under this NAND Flash R&D cost-sharing arrangement, the Company’s R&D expenses were reduced by $32 million and $53 million in the first quarters of 2009 and 2008, respectively.

IM Flash sells products to the joint venture partners generally in proportion to their ownership at long-term negotiated prices approximating cost. IM Flash sales to Intel were $318 million and $223 million for the first quarters of 2009 and 2008, respectively. As of December 4, 2008 and August 28, 2008, IM Flash had receivables from Intel primarily for sales of NAND Flash products of $161 million and $144 million, respectively. In addition, as of December 4, 2008, the Company had receivables from Intel of $208 million in connection with the termination of a supply agreement for NAND Flash memory produced at the Company’s Boise facility and $36 million related to NAND Flash product design and process development activities. As of December 4, 2008 and August 28, 2008, IM Flash had payables to Intel of $1 million and $4 million, respectively, for various services.

Under the terms of a wafer supply agreement, the Company manufactured wafers for IM Flash in its Boise, Idaho facility. In the first quarter of 2009, the Company discontinued production of NAND flash memory for IM Flash at its Boise facility. Also in the first quarter of 2009, IM Flash substantially completed construction of a new 300mm wafer fabrication facility structure in Singapore and the Company and Intel agreed to suspend tooling and the ramp of production at this facility.

In the first quarter of 2009, IM Flash distributed $145 million to Intel. In the first quarter of 2008, Intel contributed $150 million to IM Flash. The Company’s ability to access IM Flash’s cash and marketable investment securities ($249 million as of December 4, 2008) to finance the Company’s other operations is subject to agreement by the joint venture partners. The creditors of IM Flash have recourse only to the assets of IM Flash and do not have recourse to any other assets of the Company.

TECH Semiconductor Singapore Pte. Ltd. (“TECH”): Since 1998, the Company has participated in TECH, a semiconductor memory manufacturing joint venture in Singapore among the Company, Canon Inc. and Hewlett-Packard Company (“HP”). As of December 4, 2008, the Company owned an approximate 73% interest in TECH.

TECH’s cash and marketable investment securities ($91 million as of December 4, 2008) are not anticipated to be available to finance the Company’s other operations. In March, 2008, TECH entered into a credit facility, which is guaranteed, in part, by the Company.

MP Mask Technology Center, LLC (“MP Mask”): In 2006, the Company formed a joint venture, MP Mask, with Photronics, Inc. (“Photronics”) to produce photomasks for leading-edge and advanced next generation semiconductors. As of December 4, 2008, the Company owned 50.01% and Photronics owned 49.99% of MP Mask.

In 2008, the Company completed the construction of a facility to produce photomasks and leased the facility to Photronics under a build to suit lease agreement. Under the terms of the lease agreement, the Company will receive quarterly lease payments through January 2013. As of December 4, 2008, other receivables included $12 million and other noncurrent assets included $43 million for this lease.

Segment Information

The Company’s segments are Memory and Imaging. The Memory segment’s primary products are DRAM and NAND Flash memory and the Imaging segment’s primary product is CMOS image sensors. Segment information reported below is consistent with how it is reviewed and evaluated by the Company’s chief operating decision makers and is based on the nature of the Company’s operations and products offered to customers. The Company does not identify or report depreciation and amortization, capital expenditures or assets by segment.

	Quarter ended
	December 4, 2008			November 29, 2007

Net sales:
Memory	$	1,222		$	1,366
Imaging		180			169
Total consolidated net sales	$	1,402		$	1,535

Operating income (loss):
Memory	$	(675	)	$	(251	)
Imaging		3			(9	)
Total consolidated operating loss	$	(672	)	$	(260	)

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

The following discussion contains trend information and other forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements include, but are not limited to, statements such as those made in “Overview” regarding the costs of restructure plans, the Company’s DRAM development costs relative to Nanya, Inotera's transition to the Company's stack process technology, the supply of DRAM wafers from Inotera Memories, Inc. and manufacturing plans for CMOS image sensors; in “Net Sales” regarding production levels for the second quarter of 2009, future increases in NAND production and demand for Imaging products in the second quarter of 2009; in “Gross Margin” regarding the effects of temporary production slowdowns for the second quarter of 2009 and future charges for inventory write-downs; in “Restructure” regarding the remaining costs of restructure plans; in “Stock-based Compensation” regarding future stock-based compensation costs; in “Liquidity and Capital Resources” regarding capital spending in 2009, future distributions from IM Flash to Intel and capital contributions to TECH; and in “Recently Issued Accounting Standards” regarding the impact from the adoption of new accounting standards. The Company’s actual results could differ materially from the Company’s historical results and those discussed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those identified in “PART II. OTHER INFORMATION – Item 1A. Risk Factors.” This discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes and with the Company’s Annual Report on Form 10-K for the year ended August 28, 2008. All period references are to the Company’s fiscal periods unless otherwise indicated. The Company’s fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. The Company’s fiscal 2009, which ends on September 3, 2009, contains 53 weeks. All production data reflects production of the Company and its consolidated joint ventures.

Overview

The Company is a global manufacturer of semiconductor devices, principally semiconductor memory products (including DRAM and NAND Flash) and CMOS image sensors. The Company operates in two segments: Memory and Imaging. Its products are used in a broad range of electronic applications including personal computers, workstations, network servers, mobile phones and other consumer applications including Flash memory cards, USB storage devices, digital still cameras, MP3/4 players and in automotive applications. The Company markets its products through its internal sales force, independent sales representatives and distributors primarily to original equipment manufacturers and retailers located around the world. The Company’s success is largely dependent on the market acceptance of a diversified portfolio of semiconductor memory products, efficient utilization of the Company’s manufacturing infrastructure, successful ongoing development of advanced process technologies and generation of sufficient return on research and development investments.

The Company has made significant investments to develop proprietary product and process technology that is implemented in its worldwide manufacturing facilities and through its joint ventures to enable the production of semiconductor products with increasing functionality and performance at lower costs. The Company generally reduces the manufacturing cost of each generation of product through advancements in product and process technology such as its leading-edge line-width process technology and innovative array architecture. The Company continues to introduce new generations of products that offer improved performance characteristics, such as higher data transfer rates, reduced package size, lower power consumption and increased memory density and megapixel count. To leverage its significant investments in research and development, the Company has formed strategic joint ventures under which the costs of developing memory product and process technologies are shared with its joint venture partners. In addition, from time to time, the Company has also sold and/or licensed technology to other parties. The Company is pursuing additional opportunities to recover its investment in intellectual property through partnering and other arrangements.

The semiconductor memory industry is experiencing a severe downturn due to a significant oversupply of products. The downturn has been exacerbated by global economic conditions which have adversely affected demand for semiconductor memory products. Average selling prices per gigabit for the Company’s DRAM and NAND Flash products for the first quarter of 2009 decreased 34% and 24%, respectively, compared to the fourth quarter of 2008. Average selling prices per gigabit for the Company’s DRAM and NAND Flash products in 2008 were down 51% and 67%, respectively, compared to 2007 and down 63% and 85%, respectively, compared to 2006. These declines significantly outpaced the long-term historical trend. As a result of these market conditions, the Company and other semiconductor memory manufacturers have reported negative gross margins and substantial losses in recent periods. In the first quarter of 2009, the Company reported a net loss $706 million after reporting a net loss of $1.6 billion for 2008. In response to these market conditions, on October 9, 2008 the Company announced a plan to restructure its Memory operations. In the first quarter of 2009, the Company discontinued production of NAND flash memory for IM Flash at its Boise facility reducing the Company’s NAND flash production by approximately 35,000 200mm wafers per month. In addition, the Company and Intel agreed to suspend tooling and the ramp of NAND Flash production at IM Flash’s Singapore wafer fabrication plant. The Company has also undertaken additional cost savings measures to increase its competitiveness, including reductions in executive and employee salary and bonuses, a continued hiring freeze, and reduction of other discretionary costs such as outside services, travel and overtime. As of December 4, 2008, the Company expected to incur additional restructure costs of approximately $40 million through 2010.

The effects of the worsening global economy and the tightening credit market are also making it increasingly difficult for semiconductor memory manufacturers to obtain external sources of financing to fund their operations. Although the Company believes that it is better positioned than some of its peers, it faces challenges in the current and near term that require it to continue to make significant improvements in its competitiveness. Additionally, the Company is pursuing financing alternatives, delaying capital expenditures and implementing further cost-cutting initiatives.

DRAM joint ventures with Nanya Technology Corporation (“Nanya”): The Company has a partnering arrangement with Nanya Technology Corporation (“Nanya”) pursuant to which the Company and Nanya jointly develop process technology and designs to manufacture stack DRAM products. Each party generally bears its own development costs and the Company’s development costs are expected to exceed Nanya’s development costs by a significant amount. In addition, the Company has transferred and licensed certain intellectual property related to the manufacture of stack DRAM products to Nanya and licensed certain intellectual property from Nanya. The Company is to receive an aggregate of $207 million from Nanya through 2010. Further, the Company will receive royalties from Nanya for stack DRAM products manufactured by or for Nanya.

The Company has partnered with Nanya in investments in two Taiwan DRAM memory manufacturers: Inotera Memories, Inc. (“Inotera”) and MeiYa Technology Corporation (“MeiYa”). As of December 4, 2008, the Company owned 35.5% of Inotera and 50% of MeiYa and Nanya owned 35.6% of Inotera and 50% of MeiYa. The Company’s investments in Inotera and MeiYa are accounted for under the equity method because of the Company’s ability to exercise significant influence over the operating and financial policies of these entities. As of December 4, 2008 and August 28, 2008, the Company’s aggregate carrying value of these equity method investments in the accompanying consolidated balance sheet was $432 million and $84 million, respectively. Inotera and MeiYa each have fiscal years that end on December 31. As these fiscal years differ from that of the Company’s fiscal year, the Company recognizes its share of Inotera and MeiYa quarterly earnings or losses for the calendar quarter that ends within the Company’s fiscal quarter. This results in the recognition of the Company’s share of earnings or losses from these entities for a period that lags the Company’s fiscal periods by approximately two months.

MeiYa: In the fourth quarter of 2008, the Company and Nanya formed MeiYa to manufacture stack DRAM products and sell such products exclusively to the Company and Nanya. In connection with the purchase of the ownership interest in Inotera, the Company entered into a series of agreements with Nanya which contemplate the restructuring of MeiYa and pursuant to which both parties will cease future funding of, and resource commitments to, MeiYa.

(See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Supplemental Balance Sheet Information – Equity Method Investments”)

Aptina Imaging Business: The Company is exploring partnering arrangements with outside parties regarding the sale of Aptina in which the Company could retain a minority ownership interest. To that end, the Company began operating Aptina as a separate wholly-owned subsidiary in October 2008. Under the arrangements being considered, the Company expects that it will continue to manufacture CMOS image sensors for some period of time.

Inventory Write-Downs: The Company’s results of operations for the first quarter of 2009 and the first, second and fourth quarters of 2008 included charges of $369 million, $62 million, $15 million and $205 million, respectively, to write down the carrying value of work in process and finished goods inventories of Memory products (both DRAM and NAND Flash) to their estimated market values.

Results of Operations

	First Quarter														Fourth Quarter
	2009			% of net sales				2008			% of net sales				2008			% of net sales
Net sales:
Memory	$	1,222			87		%	$	1,366			89		%	$	1,271			88		%
Imaging		180			13		%		169			11		%		178			12		%
	$	1,402			100		%	$	1,535			100		%	$	1,449			100		%

Gross margin:
Memory	$	(502	)		(41	)	%	$	(39	)		( 3	)	%	$	(115	)		(9	)	%
Imaging		53			29		%		44			26		%		50			28		%
	$	(449	)		(32	)	%	$	5			0		%	$	(65	)		(4	)	%

Selling, general and administrative	$	102			7		%	$	112			7		%	$	107			7		%
Research and development		178			13		%		163			11		%		167			12		%
Restructure		(66	)		(5	)	%		13			1		%		4			--
Other operating (income) expense, net		9			1		%		(23	)		(1	)	%		(5	)		--
Net loss		(706	)		(50	)	%		(262	)		(17	)	%		(344	)		(24	)	%

The Company’s first quarter of 2009, which ended December 4, 2008, contained 14 weeks as compared to 13 weeks for the fourth and first quarters of 2008.

Net Sales

Total net sales for the first quarter of 2009 decreased 3% as compared to the fourth quarter of 2008 primarily due to a 4% decrease in Memory sales. Memory sales for the first quarter of 2009 reflect significant declines in per gigabit average selling prices as compared to the fourth quarter of 2008 partially offset by increases in gigabits sold. Memory sales were 87% of total net sales for the first quarter of 2009 as compared to 88% and 89% for the fourth and first quarters of 2008. Imaging sales for the first quarter of 2009 were stable as compared to the fourth quarter of 2008. Total net sales for the first quarter of 2009 decreased 9% as compared to the first quarter of 2008 primarily due to an 11% decrease in Memory sales partially offset by a 7% increase in Imaging sales.

In response to market conditions, the Company implemented temporary production slowdowns at some of its manufacturing facilities during the second quarter of 2009. The slowdowns and the shutdown of NAND production for IM Flash at the Company’s Boise fabrication facility are expected to reduce production output for Memory and Imaging products in the second quarter of 2009.

The Company has formed partnering arrangements under which it has sold and/or licensed technology to other parties. The Company recognized royalty revenue of $36 million in the first quarter of 2009, $38 million in the fourth quarter of 2008 and $5 million in the first quarter of 2008.

Memory: Memory sales for the first quarter of 2009 decreased 4% from the fourth quarter of 2008 as sales of DRAM products decreased by 10% partially offset by a 6% increase in sales of NAND Flash products.

Sales of DRAM products for the first quarter of 2009 decreased from the fourth quarter of 2008 primarily due to a 34% decline in average selling prices mitigated by a 35% increase in gigabit sales as a result of production increases and inventory reductions. Gigabit production of DRAM products increased approximately 23% for the first quarter of 2009 as compared to the fourth quarter of 2008, primarily due to production efficiencies from improvements in product and process technologies as well as the additional week in the quarter. Sales of DDR2 and DDR3 DRAM products were 25% of the Company’s total net sales in the first quarter of 2009 as compared to 28% for the fourth quarter of 2008 and 32% for the first quarter of 2008.

Sales of NAND Flash products for the first quarter of 2009 increased from the fourth quarter of 2008 primarily due to a 40% increase in gigabits sold as a result of production increases and inventory reductions partially offset by a 24% decline in average selling prices per gigabit. Gigabit production of NAND Flash products increased 17% for the first quarter of 2009 as compared to the fourth quarter of 2008, primarily due to transitions to higher density, advanced geometry devices as well as the additional week in the quarter. The Company expects that its gigabit production of NAND Flash products will increase at a slower rate in 2009 than in 2008 primarily due to the completion of production ramps at new 300mm manufacturing facilities in 2008 and the shutdown of 200mm wafer NAND Flash production at the Company’s Boise fabrication facility in the first quarter of 2009. Sales of NAND Flash products represented 38% of the Company’s total net sales for the first quarter of 2009 as compared to 35% for the fourth quarter of 2008 and 33% for the first quarter of 2008.

Memory sales for the first quarter of 2009 decreased 11% from the first quarter of 2008 primarily due to a 20% decrease in sales of DRAM products partially offset by a 6% increase in sales of NAND Flash products. The decrease in sales of DRAM products for the first quarter of 2009 from the first quarter of 2008 was primarily the result of a 47% decline in average selling prices mitigated by a 43% increase in gigabits sold. Gigabit production of DRAM products increased 56% for the first quarter of 2009 as compared to the first quarter of 2008, primarily due to production efficiencies from improvements in product and process technologies as well as the additional week in the quarter. Sales of NAND Flash products for the first quarter of 2009 increased 6% from the first quarter of 2008 primarily due to a 206% increase in gigabits sold partially offset by a 65% decline in average selling prices. The significant increase in gigabit sales of NAND Flash products was primarily due to a 152% increase in production primarily as a result of the continued ramp of NAND Flash products at the Company’s 300mm fabrication facilities and transitions to higher density, advanced geometry devices.

Imaging: Imaging sales for the first quarter of 2009 were stable as compared to the fourth quarter of 2008 reflecting relatively stable average selling prices and unit sales. Imaging sales for the first quarter of 2009 increased by 7% from the first quarter of 2008 primarily due to increased units sales of products with 3-megapixel or higher resolution partially offset by declines in average selling prices. Imaging sales were approximately 13% of the Company’s total net sales for the first quarter of 2009 as compared to 12% for the fourth quarter of 2008 and 11% for the first quarter of 2008. The Company expects that unit sales for Imaging will decrease in the second quarter of 2009 due to lower sales of cell phones and other devices incorporating the Company’s Imaging products.

Gross Margin

The Company’s overall gross margin percentage declined from negative 4% for the fourth quarter of 2008 to negative 32% for the first quarter of 2009 due to a decline in the gross margin percentages for Memory primarily as a result of significant decreases in average selling prices and inventory write-downs for Memory products. The Company’s overall gross margin percentage declined from 0% for the first quarter of 2008 due to a decline in the gross margin percentages for Memory primarily as a result of significant decreases in average selling prices and inventory write-downs for Memory products. Temporary production slowdowns that the Company implemented at some of its manufacturing facilities during the second quarter of 2009 are expected to adversely affect per megabit and per unit costs of Memory and Imaging products.

Memory: The Company’s gross margin percentage for Memory products declined from negative 9% for the fourth quarter of 2008 to negative 41% for the first quarter of 2009 primarily due to declines in the gross margin for both DRAM and NAND Flash products. Gross margins for DRAM and NAND Flash products for the first quarter of 2009 were adversely affected by declines in average selling prices and inventory write-downs, mitigated by reductions in manufacturing costs.

The Company’s gross margins for Memory in 2009 and 2008 were impacted by charges to write down inventories to their estimated market values as a result of the significant decreases in average selling prices for both DRAM and NAND Flash products. The impact of inventory write-downs on gross margins for all periods reflects the period-end inventory write-down less the estimated net effect of prior period write-downs. The effects of inventory write-downs on gross margin for the first quarter of 2009 and fourth and first quarters of 2008 were as follows:

	First Quarter 2009			First Quarter 2008			Fourth Quarter 2008

Period-end inventory write-downs	$	(369	)	$	(62	)	$	(205	)
Estimated net effect of previous write-downs		157			14			13
Net effect of inventory write-downs	$	(212	)	$	(48	)	$	(192	)

As charges to write down inventories are recorded in advance of when inventories are sold, gross margins in subsequent periods are higher than they would be absent the effect of the previous write-downs. In future periods, the Company will be required to record additional inventory write-downs if estimated average selling prices of products held in finished goods and work in process inventories at a quarter-end date are below the manufacturing cost of those products.

The Company’s gross margin for DRAM products for the first quarter of 2009 declined from the fourth quarter of 2008, primarily due to the 34% decrease in average selling prices per gigabit and inventory write-downs mitigated by a reduction in production costs per gigabit. The Company achieved manufacturing cost reductions for DRAM products through transitions to higher-density, advanced-geometry devices. DRAM production cost reductions for the first quarter of 2009 were offset by the inventory write-downs. The Company reduced its DRAM manufacturing costs (which exclude inventory write-downs) per gigabit by 12% for the first quarter of 2009 as compared to the fourth quarter of 2008.

The Company’s gross margin for NAND Flash products for the first quarter of 2009 declined from the fourth quarter of 2008 primarily due to the 24% decrease in average selling prices per gigabit and inventory write-downs. In addition, results for the fourth quarter of 2008 reflected reduced costs from the recovery of $70 million for pricing adjustments for NAND Flash products purchased from other suppliers in prior periods. The decline in gross margin was mitigated by a reduction in manufacturing costs per gigabit for NAND Flash products primarily achieved through increased production of higher-density, advanced-geometry devices. Costs of NAND Flash products were also reduced as a result of lower prices for products purchased for sale under the Company’s Lexar brand. Excluding the inventory write-downs and the effect of pricing adjustments from other suppliers in the fourth quarter of 2008, the Company reduced its NAND Flash costs per gigabit by 14%. Sales of NAND Flash products include sales from IM Flash to Intel at long-term negotiated prices approximating cost. IM Flash sales to Intel were $318 million for the first quarter of 2009, $293 million for the fourth quarter of 2008 and $223 million for the first quarter of 2008.

The Company’s gross margin percentage for Memory products declined to negative 41% for the first quarter of 2009 from negative 3% for the first quarter of 2008 primarily due to lower gross margins on sales of DRAM and NAND Flash products. Declines in gross margins on sales of DRAM products for the first quarter of 2009 as compared to the first quarter of 2008 were primarily due to the 47% decline in average selling prices and inventory write-offs mitigated by per gigabit cost reductions. The Company reduced its DRAM production costs (which exclude inventory write-downs) per gigabit by 35% for the first quarter of 2009 as compared to the first quarter of 2008. Gross margins on NAND Flash products for the first quarter of 2009 declined from the first quarter of 2008 primarily due to the 65% decline in average selling prices and inventory write-offs mitigated by per gigabit cost reductions of 55% (excluding inventory write-offs).

In the first quarter of 2009, the Company’s TECH Semiconductor Singapore Pte. Ltd. (“TECH”) joint venture accounted for approximately 13% of the Company’s total wafer production. TECH primarily produced DDR and DDR2 products in 2009 and 2008. Since TECH utilizes the Company’s product designs and process technology and has a similar manufacturing cost structure, the gross margin on sales of TECH products approximates gross margins on sales of similar products manufactured by the Company’s wholly-owned operations. (See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Consolidated Joint Ventures – TECH Semiconductor Singapore Pte. Ltd.”)

Imaging: The Company’s gross margin percentage for Imaging for the first quarter of 2009 improved to 29% from 28% for the fourth quarter of 2008 primarily due to cost reductions. The Company’s gross margin for Imaging products for the first quarter of 2009 improved to 29% from 26% for first quarter of 2008, primarily due to cost reductions partially offset by declines in average selling prices.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses for the first quarter of 2009 decreased 5% from the fourth quarter of 2008 despite increased costs associated with the additional week in the quarter, primarily due to lower legal expenses and lower payroll expenses and other costs as a result of the Company’s restructure initiatives. SG&A expenses for the first quarter of 2009 decreased 9% from the first quarter of 2008 despite increased costs associated with the additional week in the quarter, primarily due to lower payroll expenses and other costs as a result of the Company’s restructure initiatives. Future SG&A expense is expected to vary, potentially significantly, depending on, among other things, the number of legal matters that are resolved relatively early in their life-cycle and the number of matters that progress to trial.

For the Company’s Memory segment, SG&A expenses as a percentage of sales were 7% for the first quarter of 2009 and the fourth and first quarters of 2008. For the Imaging segment, SG&A expenses as a percentage of sales were 8% for the first quarter of 2009, 11% for the fourth quarter of 2008 and 8% for the first quarter of 2008.

Research and Development

Research and development (“R&D”) expenses vary primarily with the number of development wafers processed, the cost of advanced equipment dedicated to new product and process development, and personnel costs. Because of the lead times necessary to manufacture its products, the Company typically begins to process wafers before completion of performance and reliability testing. The Company deems development of a product complete once the product has been thoroughly reviewed and tested for performance and reliability. R&D expenses can vary significantly depending on the timing of product qualification as costs incurred in production prior to qualification are charged to R&D.

R&D expenses for the first quarter of 2009 increased 7% from the fourth quarter of 2008 and 9% from the first quarter of 2008 primarily due to increased costs associated with the additional week in the first quarter of 2009. As a result of reimbursements received from Intel Corporation under a NAND Flash R&D cost-sharing arrangement, R&D expenses were reduced by $32 million for both the first quarter of 2009 and for the fourth quarter of 2008 and $53 million for the first quarter of 2008.

For the Company’s Memory segment, R&D expenses as a percentage of sales were 11% for the first quarter of 2009, 10% for the fourth quarter of 2008 and 9% for the first quarter of 2008. For the Imaging segment, R&D expenses as a percentage of sales were 22% for the first quarter of 2009, 19% for the fourth quarter of 2008, 22% for the first quarter of 2008.

The Company’s process technology R&D efforts are focused primarily on development of successively smaller line-width process technologies which are designed to facilitate the Company’s transition to next-generation memory products and CMOS image sensors. Additional process technology R&D efforts focus on advanced computing and mobile memory architectures and new manufacturing materials. Product design and development efforts are concentrated on the Company’s 1 Gb and 2 Gb DDR2 and DDR3 products as well as high density and mobile NAND Flash memory (including multi-level cell technology), CMOS image sensors and specialty memory products.

Restructure

Restructure charge (credit):
Gain from termination of NAND Flash supply agreement	$	(144	)
Write-down of equipment		56
Severance and other termination benefits		22
Total restructure credit	$	(66	)

As of December 4, 2008, $6 million of the restructure costs remained unpaid and were included in accounts payable and accrued expenses.

Other Operating (Income) Expense, Net

Income Taxes

Noncontrolling Interests in Net (Income) Loss

Noncontrolling interests for 2009 and 2008 primarily reflects the share of income or losses of the Company’s TECH joint venture attributable to the noncontrolling interests in TECH. (See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Consolidated Joint Ventures – TECH Semiconductor Singapore Pte. Ltd.”)

Losses and Earnings from Equity Method Investments

In connection with its DRAM partnering arrangements with Nanya, the Company has two equity method investments: MeiYa and Inotera. Because MeiYa and Inotera each have fiscal years that end on December 31 which differs from the Company’s fiscal year, the Company recognizes its share of MeiYa and Inotera quarterly earnings or losses for the calendar quarter that ends within the Company’s fiscal quarter. This results in the recognition of results from these entities for a period that lags the Company’s fiscal periods by approximately two months. In the first quarter of 2009, the Company recognized $2 million of losses from MeiYa for the quarterly period ended September 30, 2008. The Company will recognize its share of Inotera’s losses or earnings from the acquisition date through December 31, 2008 (Inotera’s year end) in the Company’s second quarter of 2009. (See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Supplemental Balance Sheet Information – Equity Method Investments.”)

Stock-Based Compensation

Total compensation cost for the Company’s equity plans for the first quarter of 2009, the fourth quarter of 2008 and first quarter of 2008 was $9 million, $8 million and $13 million, respectively. Stock compensation expenses fluctuate based on assessments of whether performance conditions will be achieved for the Company’s performance-based stock grants. As of December 4, 2008, $96 million of total unrecognized compensation cost related to non-vested awards was expected to be recognized through the first quarter of 2013.

Liquidity and Capital Resources

As of December 4, 2008, the Company had cash and equivalents and short-term investments totaling $1.0 billion compared to $1.4 billion as of August 28, 2008. The balance as of December 4, 2008, included $249 million held at the Company’s IM Flash joint venture and $91 million held at the Company’s TECH joint venture. The Company’s ability to access funds held by joint ventures to finance the Company’s other operations is subject to agreement by the joint venture partners. Amounts held by TECH are not anticipated to be available to finance the Company’s other operations.

The Company’s liquidity is highly dependent on average selling prices for its products and the timing of capital expenditures, both of which can vary significantly from period to period. Depending on conditions in the semiconductor memory market, the Company’s cash flows from operations and current holdings of cash and investments may not be adequate to meet the Company’s needs for capital expenditures and operations. Historically, the Company has used external financing to fund these needs. Due to conditions in the credit markets, many financing instruments used by the Company in the past are currently not available on terms acceptable to the Company. The Company has significantly reduced its capital expenditures for 2009. In addition, the Company is pursuing further financing alternatives, further reducing capital expenditures and implementing further cost-cutting initiatives.

Operating activities: The Company generated $359 million of cash from operating activities in the first quarter of 2009, which primarily reflects the Company’s $706 million of net loss adjusted by $594 million for noncash depreciation and amortization expense, a $369 million noncash charge to write-down inventories to estimated market value and a $138 million decrease in receivables.

Investing activities: Net cash used by investing activities was $489 million in the first quarter of 2009, which included cash expenditures of $409 million for the Company’s 35.5% interest in Inotera and cash expenditures of $270 million for property, plant and equipment partially offset by the net effect of maturities and purchases of marketable investment securities of $121 million. A significant portion of the capital expenditures relate to the ramp of IM Flash facilities and 300mm conversion of manufacturing operations at TECH. The Company believes that to develop new product and process technologies, support future growth, achieve operating efficiencies and maintain product quality, it must continue to invest in manufacturing technologies, facilities and capital equipment and research and development. The Company expects 2009 capital spending to approximate $650 million to $750 million. As of December 4, 2008, the Company had commitments of approximately $125 million for the acquisition of property, plant and equipment, nearly all of which are expected to be paid within one year.

In the first quarter of 2009, the Company acquired a 35.5% ownership interest in Inotera, a Taiwanese DRAM memory manufacturer, from Qimonda AG for approximately $400 million in cash and incurred $10 million of costs and other fees in connection with the acquisition. (See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Supplemental Balance Sheet Information – Equity Method Investments.”)

Financing activities: Net cash used by financing activities was $88 million in the first quarter of 2009, which primarily reflects $163 million in debt payments, $150 million of distributions paid to joint venture partners and $64 million in payments on equipment purchase contracts partially offset by $285 million in proceeds from borrowings.

During the first quarter of 2009, in connection with the purchase of its 35.5% interest in Inotera, the Company entered into a two-year variable rate term loan with Nan Ya Plastics and a six-month variable rate term loan with Inotera. On November 26, 2008, the Company received loan proceeds of $200 million from Nan Ya Plastics and $85 million from Inotera, which are payable at the end of each loan term. Under the terms of the loan agreements, interest is payable quarterly at LIBOR plus 2%. The interest rates reset quarterly and were 4.2% per annum as of December 4, 2008. The Company recorded the debt net of aggregate discounts of $31 million, which will be recognized as interest expense over the respective lives of the loans, resulting in an effective interest rate of 12.1% for the Nan Ya Plastics loan and 11.6% for the Inotera loan. The Nan Ya Plastics loan is collateralized by a first priority security interest in the Inotera shares owned by the Company (approximate carrying value of $378 million as of December 4, 2008). (See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Supplemental Balance Sheet Information – Debt.”)

Joint ventures: In the first quarter of 2009, IM Flash distributed $145 million to Intel and the Company estimates that it will make additional distributions to Intel of approximately $360 million through the remainder of 2009. Timing of these distributions and any future contributions, however, is subject to market conditions and approval of the partners.

The Company expects to make additional capital contributions to TECH in 2009. The timing and amount of these contributions is subject to market conditions and partner participation.

Contractual obligations: As of December 4, 2008, contractual obligations for notes payable, capital lease obligations and operating leases were as follows:

	Total		Remainder of 2009		2010		2011		2012		2013		2014 and thereafter
	(amounts in millions)
Notes payable 1	$	2,489	$	183	$	335	$	443	$	179	$	24	$	1,325
Capital lease obligations 1		755		159		152		265		50		19		110
Operating leases		85		12		15		13		11		10		24

1 Includes interest

Recently Issued Accounting Standards

In December 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. FAS 140-1 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.” FSP No. FAS 140-1 and FIN 46(R)-8 requires public entities to provide additional disclosures about transfers of financial assets and their involvement with variable interest entities. The Company is required to adopt FSP No. FAS 140-1 and FIN 46(R)-8 effective in the second quarter of 2009.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 (as amended by subsequent FSP’s) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The Company adopted SFAS No. 157 effective at the beginning of 2009 for financial assets and financial liabilities. The adoption did not have a significant impact on the Company’s financial statements. The Company is required to adopt SFAS No. 157 for all other assets and liabilities in 2010 and it is evaluating the impact that the adoption will have on its financial statements.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Estimates and judgments are based on historical experience, forecasted future events and various other assumptions that the Company believes to be reasonable under the circumstances. Estimates and judgments may vary under different assumptions or conditions. The Company evaluates its estimates and judgments on an ongoing basis. Management believes the accounting policies below are critical in the portrayal of the Company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments.

Acquisitions and consolidations: Determination and the allocation of the purchase price of acquired operations significantly influences the period in which costs are recognized. Accounting for acquisitions and consolidations requires the Company to estimate the fair value of the individual assets and liabilities acquired as well as various forms of consideration given, which involves a number of judgments, assumptions and estimates that could materially affect the amount and timing of costs recognized. The Company typically obtains independent third party valuation studies to assist in determining fair values, including assistance in determining future cash flows, appropriate discount rates and comparable market values.

Contingencies: The Company is subject to the possibility of losses from various contingencies. Considerable judgment is necessary to estimate the probability and amount of any loss from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. The Company accrues a liability and charges operations for the estimated costs of adjudication or settlement of asserted and unasserted claims existing as of the balance sheet date.

Goodwill and intangible assets: The Company tests goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred, such as a significant adverse change in the business climate (including declines in selling prices for products) or a decision to sell or dispose of a reporting unit. Goodwill is tested for impairment using a two-step process. In the first step, the fair value of each reporting unit is compared to the carrying value of the net assets assigned to the unit. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its fair value, then the second step of the impairment test must be performed in order to determine the implied fair value of the reporting unit’s goodwill. Determining the implied fair value of goodwill requires valuation of all of the Company’s tangible and intangible asset and liabilities. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference.

Determining when to test for impairment, the Company’s reporting units, the fair value of a reporting unit and the fair value of assets and liabilities within a reporting unit, requires judgment and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. The Company bases fair value estimates on assumptions it believes to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, judgments and assumptions are required to allocate assets and liabilities to reporting units.

The Company tests other identified intangible assets with definite useful lives and subject to amortization when events and circumstances indicate the carrying value may not be recoverable by comparing the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset. The Company tests intangible assets with indefinite lives annually for impairment using a fair value method such as discounted cash flows. Estimating fair values involves significant assumptions, especially regarding future sales prices, sales volumes, costs and discount rates.

Income taxes: The Company is required to estimate its provision for income taxes and amounts ultimately payable or recoverable in numerous tax jurisdictions around the world. Estimates involve interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscal year. The Company is also required to evaluate the realizability of its deferred tax assets on an ongoing basis in accordance with U.S. GAAP, which requires the assessment of the Company’s performance and other relevant factors when determining the need for a valuation allowance with respect to these deferred tax assets. Realization of deferred tax assets is dependent on the Company’s ability to generate future taxable income.

Inventories: Inventories are stated at the lower of average cost or market value and the Company recorded a charge to write down the carrying value of inventories of memory products to their estimated market values of $369 million for the first quarter of 2009 and $282 million in aggregate for 2008. Cost includes labor, material and overhead costs, including product and process technology costs. Determining market value of inventories involves numerous judgments, including projecting average selling prices and sales volumes for future periods and costs to complete products in work in process inventories. To project average selling prices and sales volumes, the Company reviews recent sales volumes, existing customer orders, current contract prices, industry analysis of supply and demand, seasonal factors, general economic trends and other information. When these analyses reflect estimated market values below the Company’s manufacturing costs, the Company records a charge to cost of goods sold in advance of when the inventory is actually sold. 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 product inventories and accordingly the amount of write-down recorded. For example, a 5% variance in the estimated selling prices would have changed the estimated market value of the Company’s semiconductor memory inventory by approximately $50 million at December 4, 2008. Due to the volatile nature of the semiconductor memory industry, actual selling prices and volumes often vary significantly from projected prices and volumes and, as a result, the timing of when product costs are charged to operations can vary significantly.

U.S. GAAP provides for products to be grouped into categories in order to compare costs to market values. The amount of any inventory write-down can vary significantly depending on the determination of inventory categories. The Company’s inventories have been categorized as Memory products or Imaging products. The major characteristics the Company considers in determining inventory categories are product type and markets.

Product and process technology: Costs incurred to acquire product and process technology or to patent technology developed by the Company are capitalized and amortized on a straight-line basis over periods currently ranging up to 10 years. The Company capitalizes a portion of costs incurred based on its analysis of historical and projected patents issued as a percent of patents filed. Capitalized product and process technology costs are amortized over the shorter of (i) the estimated useful life of the technology, (ii) the patent term or (iii) the term of the technology agreement.

Property, plant and equipment: The Company reviews the carrying value of property, plant and equipment for impairment when events and circumstances indicate that the carrying value of an asset or group of assets may not be recoverable from the estimated future cash flows expected to result from its use and/or disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the estimated fair value of the assets. The estimation of future cash flows involves numerous assumptions which require judgment by the Company, including, but not limited to, future use of the assets for Company operations versus sale or disposal of the assets, future selling prices for the Company’s products and future production and sales volumes. In addition, judgment is required by the Company in determining the groups of assets for which impairment tests are separately performed.

Research and development: Costs related to the conceptual formulation and design of products and processes are expensed as research and development when incurred. Determining when product development is complete requires judgment by the Company. The Company deems development of a product complete once the product has been thoroughly reviewed and tested for performance and reliability.

Stock-based compensation: Under the provisions of SFAS No. 123(R), stock-based compensation cost is estimated at the grant date based on the fair-value of the award and is recognized as expense ratably over the requisite service period of the award. For stock-based compensation awards with graded vesting that were granted after 2005, the Company recognizes compensation expense using the straight-line amortization method. For performance-based stock awards, the expense recognized is dependent on the probability of the performance measure being achieved. The Company utilizes forecasts of future performance to assess these probabilities and this assessment requires considerable judgment.

Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires considerable judgment, including estimating stock price volatility, expected option life and forfeiture rates. The Company develops its estimates based on historical data and market information which can change significantly over time. A small change in the estimates used can result in a relatively large change in the estimated valuation. The Company uses the Black-Scholes option valuation model to value employee stock awards. The Company estimates stock price volatility based on an average of its historical volatility and the implied volatility derived from traded options on the Company’s stock.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

As of December 4, 2008, $2,002 million of the Company’s $2,866 million of debt was at fixed interest rates. As a result, the fair value of the debt fluctuates based on changes in market interest rates. The estimated fair value of the Company’s debt was $1,876 million as of December 4, 2008 and was $2,167 million as of August 28, 2008. The Company estimates that as of December 4, 2008, a 1% decrease in market interest rates would change the fair value of the fixed-rate debt by approximately $29 million. As of December 4, 2008, $864 million of the Company’s debt was at variable interest rates and an increase of 1% would increase annual interest expense by approximately $9 million.

Foreign Currency Exchange Rate Risk

The information in this section should be read in conjunction with the information related to changes in the exchange rates of foreign currency in “Item 1A. Risk Factors.” Changes in foreign currency exchange rates could materially adversely affect the Company’s results of operations or financial condition.

The functional currency for substantially all of the Company’s operations is the U.S. dollar. The Company held aggregate cash and other assets in foreign currencies valued at U.S. $252 million as of December 4, 2008 and U.S. $425 million as of August 28, 2008. The Company also had aggregate foreign currency liabilities valued at U.S. $542 million as of December 4, 2008 and U.S. $580 million as of August 28, 2008. Significant components of the Company’s assets and liabilities denominated in foreign currencies were as follows (in U.S. dollar equivalents):

	December 4, 2008									August 28, 2008
	Singapore Dollars			Yen			Euro			Singapore Dollars			Yen			Euro

Cash and equivalents	$	30		$	16		$	20		$	84		$	130		$	25
Net deferred tax assets		--			100			1			--			85			2
Accounts payable and accrued expenses		(88	)		(198	)		(46	)		(105	)		(127	)		(61	)
Debt		(78	)		(7	)		(4	)		(49	)		(108	)		(4	)
Other liabilities		(8	)		(54	)		(36	)		(8	)		(45	)		(43	)

The Company estimates that, based on its assets and liabilities denominated in currencies other than the U.S. dollar as of December 4, 2008, a 1% change in the exchange rate versus the U.S. dollar would result in foreign currency gains or losses of approximately U.S. $1 million for the yen, the Singapore dollar and the euro.

Item 4. Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that those disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, to allow timely decision regarding disclosure.

During the quarterly period covered by this report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Patent Matters

On August 28, 2000, the Company filed a complaint against Rambus, Inc. (“Rambus”) in the U.S. District Court for the District of Delaware seeking monetary damages and declaratory and injunctive relief. Among other things, the Company’s complaint (as amended) alleges violation of federal antitrust laws, breach of contract, fraud, deceptive trade practices, and negligent misrepresentation. The complaint also seeks a declaratory judgment (a) that certain Rambus patents are not infringed by the Company, are invalid, and/or are unenforceable, (b) that the Company has an implied license to those patents, and (c) that Rambus is estopped from enforcing those patents against the Company. On February 15, 2001, Rambus filed an answer and counterclaim in Delaware denying that the Company is entitled to relief, alleging infringement of the eight Rambus patents (later amended to add four additional patents) named in the Company’s declaratory judgment claim, and seeking monetary damages and injunctive relief. In the Delaware action, the Company subsequently added claims and defenses based on Rambus’s alleged spoliation of evidence and litigation misconduct. The spoliation and litigation misconduct claims and defenses were heard in a bench trial before Judge Robinson in October 2007. On January 9, 2009, Judge Robinson entered an opinion in favor of the Company holding that Rambus had engaged in spoliation and that the twelve Rambus patents in the suit were unenforceable against the Company.

A number of other suits involving Rambus are currently pending in Europe alleging that certain of the Company’s SDRAM and DDR SDRAM products infringe various of Rambus’ country counterparts to its European patent 525 068, including: on September 1, 2000, Rambus filed suit against Micron Semiconductor (Deutschland) GmbH in the District Court of Mannheim, Germany; on September 22, 2000, Rambus filed a complaint against the Company and Reptronic (a distributor of the Company’s products) in the Court of First Instance of Paris, France; on September 29, 2000, the Company filed suit against Rambus in the Civil Court of Milan, Italy, alleging invalidity and non-infringement. In addition, on December 29, 2000, the Company filed suit against Rambus in the Civil Court of Avezzano, Italy, alleging invalidity and non-infringement of the Italian counterpart to European patent 1 004 956. Additionally, on August 14, 2001, Rambus filed suit against Micron Semiconductor (Deutschland) GmbH in the District Court of Mannheim, Germany alleging that certain of the Company’s DDR SDRAM products infringe Rambus’ country counterparts to its European patent 1 022 642. In the European suits against the Company, Rambus is seeking monetary damages and injunctive relief. Subsequent to the filing of the various European suits, the European Patent Office (the “EPO”) declared Rambus’ 525 068 and 1 004 956 European patents invalid and revoked the patents. The declaration of invalidity with respect to the '068 patent was upheld on appeal. The original claims of the '956 patent also were declared invalid on appeal, but the EPO ultimately granted a Rambus request to amend the claims by adding a number of limitations.

On January 13, 2006, Rambus filed a lawsuit against the Company in the U.S. District Court for the Northern District of California. The complaint alleges that certain of the Company’s DDR2, DDR3, RLDRAM, and RLDRAM II products infringe as many as fourteen Rambus patents and seeks monetary damages, treble damages, and injunctive relief. On June 2, 2006, the Company filed an answer and counterclaim against Rambus alleging among other things, antitrust and fraud claims. The Northern District of California Court subsequently consolidated the antitrust and fraud claims and certain equitable defenses of the Company and other parties against Rambus in a jury trial that began on January 29, 2008. On March 26, 2008, a jury returned a verdict in favor of Rambus on the Company’s antitrust and fraud claims. On November 24, 2008, the Court granted partial summary judgment of infringement in favor of Rambus on one of the patent claims at issue in the case. Trial on the patent phase of that case relating to twelve claims in ten Rambus patents is currently scheduled to begin January 26, 2009.

On July 24, 2006, the Company filed a declaratory judgment action against Mosaid Technologies, Inc. (“Mosaid”) in the U.S. District Court for the Northern District of California seeking, among other things, a court determination that fourteen Mosaid patents are invalid, not enforceable, and/or not infringed. On July 25, 2006, Mosaid filed a lawsuit against the Company and others in the U.S. District Court for the Eastern District of Texas alleging infringement of nine Mosaid patents. On August 31, 2006, Mosaid filed an amended complaint adding three additional Mosaid patents. On October 23, 2006, the California Court dismissed the Company’s declaratory judgment suit based on lack of jurisdiction. The Company appealed that decision to the U.S. Court of Appeals for the Federal Circuit. On February 29, 2008, the U.S. Court of Appeals for the Federal Circuit issued an order reversing the dismissal of the Company’s declaratory judgment action filed in the U.S. District Court for the Northern District of California and remanding the suit to that Court. The Texas action was subsequently transferred to the Northern District of California. Mosaid alleges that certain of the Company’s DRAM and CMOS image sensor products infringe up to twelve Mosaid patents and seeks monetary damages, treble damages, and injunctive relief. The accused products account for a significant portion of our net sales. Trial is currently scheduled for June 5, 2009.

The Company is unable to predict the outcome of these suits. A court determination that the Company’s products or manufacturing processes infringe the product or process intellectual property rights of others could result in significant liability and/or require the Company to make material changes to its products and/or manufacturing processes. Any of the foregoing results could have a material adverse effect on the Company’s business, results of operations or financial condition.

Antitrust Matters

A number of purported class action price-fixing lawsuits have been filed against the Company and other DRAM suppliers. Four cases have been filed in the U.S. District Court for the Northern District of California asserting claims on behalf of a purported class of individuals and entities that indirectly purchased DRAM and/or products containing DRAM from various DRAM suppliers during the time period from April 1, 1999 through at least June 30, 2002. The complaints allege price fixing in violation of federal antitrust laws and various state antitrust and unfair competition laws and seek treble monetary damages, restitution, costs, interest and attorneys’ fees. In addition, at least sixty-four cases have been filed in various state courts asserting claims on behalf of a purported class of indirect purchasers of DRAM. Cases have been filed in the following states: Arkansas, Arizona, California, Florida, Hawaii, Iowa, Kansas, Massachusetts, Maine, Michigan, Minnesota, Mississippi, Montana, North Carolina, North Dakota, Nebraska, New Hampshire, New Jersey, New Mexico, Nevada, New York, Ohio, Pennsylvania, South Dakota, Tennessee, Utah, Vermont, Virginia, Wisconsin, and West Virginia, and also in the District of Columbia and Puerto Rico. The complaints purport to be on behalf of a class of individuals and entities that indirectly purchased DRAM and/or products containing DRAM in the respective jurisdictions during various time periods ranging from April 1999 through at least June 2002. The complaints allege violations of the various jurisdictions’ antitrust, consumer protection and/or unfair competition laws relating to the sale and pricing of DRAM products and seek treble monetary damages, restitution, costs, interest and attorneys’ fees. A number of these cases have been removed to federal court and transferred to the U.S. District Court for the Northern District of California (San Francisco) for consolidated proceedings. On January 29, 2008, the Northern District of California Court granted in part and denied in part the Company’s motion to dismiss plaintiff’s second amended consolidated complaint. Plaintiffs subsequently filed a motion seeking certification for interlocutory appeal of the decision. On February 27, 2008, plaintiffs filed a third amended complaint. On June 26, 2008, the United States Court of Appeals for the Ninth Circuit accepted plaintiffs’ interlocutory appeal.

Additionally, three cases have been filed in the following Canadian courts: Superior Court, District of Montreal, Province of Quebec; Ontario Superior Court of Justice, Ontario; and Supreme Court of British Columbia, Vancouver Registry, British Columbia. The substantive allegations in these cases are similar to those asserted in the cases filed in the United States. In May and June 2008 respectively, plaintiffs’ motion for class certification was denied in the British Columbia and Quebec cases. Plaintiffs have filed an appeal of each of those decisions.

On February 28, 2007, February 28, 2007 and March 8, 2007, cases were filed against the Company and other manufacturers of DRAM in the U.S. District Court for the Northern District of California by All American Semiconductor, Inc., Jaco Electronics, Inc. and DRAM Claims Liquidation Trust, respectively, that opted-out of a direct purchaser class action suit that was settled. The complaints allege, among other things, violations of federal and state antitrust and competition laws in the DRAM industry, and seek damages, injunctive relief, and other remedies.

On October 11, 2006, the Company received a grand jury subpoena from the U.S. District Court for the Northern District of California seeking information regarding an investigation by the DOJ into possible antitrust violations in the “Static Random Access Memory” or “SRAM” industry. . In December 2008, the Company was informed that the DOJ closed its investigation of the SRAM industry.

On May 5, 2004, Rambus filed a complaint in the Superior Court of the State of California (San Francisco County) against the Company and other DRAM suppliers. The complaint alleges various causes of action under California state law including a conspiracy to restrict output and fix prices on Rambus DRAM (“RDRAM”) and unfair competition. Trial is currently scheduled to begin in March 2009. The complaint seeks treble damages, punitive damages, attorneys’ fees, costs, and a permanent injunction enjoining the defendants from the conduct alleged in the complaints.

The Company is unable to predict the outcome of these lawsuits and investigations. The final resolution of these alleged violations of antitrust laws could result in significant liability and could have a material adverse effect on the Company’s business, results of operations or financial condition.

Securities Matters

On February 24, 2006, a putative class action complaint was filed against the Company and certain of its officers in the U.S. District Court for the District of Idaho alleging claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. Four substantially similar complaints subsequently were filed in the same Court. The cases purport to be brought on behalf of a class of purchasers of the Company’s stock during the period February 24, 2001 to February 13, 2003. The five lawsuits have been consolidated and a consolidated amended class action complaint was filed on July 24, 2006. The complaint generally alleges violations of federal securities laws based on, among other things, claimed misstatements or omissions regarding alleged illegal price-fixing conduct or the Company’s operations and financial results. The complaint seeks unspecified damages, interest, attorneys’ fees, costs, and expenses. On December 19, 2007, the Court issued an order certifying the class but reducing the class period to purchasers of the Company’s stock during the period from February 24, 2001 to September 18, 2002.

In addition, on March 23, 2006 a shareholder derivative action was filed in the Fourth District Court for the State of Idaho (Ada County), allegedly on behalf of and for the benefit of the Company, against certain of the Company’s current and former officers and directors. The Company also was named as a nominal defendant. An amended complaint was filed on August 23, 2006 and was subsequently dismissed by the Court. Another amended complaint was filed on September 6, 2007. The amended complaint is based on the same allegations of fact as in the securities class actions filed in the U.S. District Court for the District of Idaho and alleges breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment, and insider trading. The amended complaint seeks unspecified damages, restitution, disgorgement of profits, equitable and injunctive relief, attorneys’ fees, costs, and expenses. The amended complaint is derivative in nature and does not seek monetary damages from the Company. However, the Company may be required, throughout the pendency of the action, to advance payment of legal fees and costs incurred by the defendants. On January 25, 2008, the Court granted the Company’s motion to dismiss the second amended complaint without leave to amend. On March 10, 2008, plaintiffs filed a notice of appeal to the Idaho Court of Appeals.

The Company is unable to predict the outcome of these cases. A court determination in any of these actions against the Company could result in significant liability and could have a material adverse effect on the Company’s business, results of operations or financial condition.

(See “Item 1A. Risk Factors.”)

Item 1A. Risk Factors

In addition to the factors discussed elsewhere in this Form 10-Q, the following are important factors which could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of the Company.

We have experienced dramatic declines in average selling prices for our semiconductor memory products which have adversely affected our business.

For the first quarter of 2009, average selling prices of DRAM and NAND Flash products decreased 34% and 24%, respectively, as compared to the fourth quarter of 2008. For 2008, average selling prices of DRAM and NAND Flash products decreased 51% and 67%, respectively, as compared to 2007. For 2007, average selling prices of DRAM and NAND Flash products decreased 23% and 56%, respectively, as compared to 2006. Currently, and at times in the past, average selling prices for our memory products have been below our costs. We recorded aggregate inventory write-downs of $369 million for the first quarter of 2009, $282 million in 2008 and $20 million in 2007 as a result of the significant decreases in average selling prices for our semiconductor memory products. If the estimated market values of products held in finished goods and work in process inventories at a quarter end date are below the manufacturing cost of these products, we recognize charges to cost of goods sold to write down the carrying value of our inventories to market value. Future charges for inventory write-downs could be larger than the amount recorded in 2009 and 2008. If average selling prices for our memory products remain depressed or decrease faster than we can decrease per gigabit costs, as they recently have, our business, results of operations or financial condition could be materially adversely affected.

We may be unable to generate sufficient cash flows or obtain access to external financing necessary to fund our operations and make adequate capital investments.

Our cash flows from operations depend primarily on the volume of semiconductor memory sold, average selling prices and per unit manufacturing costs. To develop new product and process technologies, support future growth, achieve operating efficiencies and maintain product quality, we must make significant capital investments in manufacturing technology, facilities and capital equipment, research and development, and product and process technology. We currently estimate our capital spending to approximate between $650 million to $750 million for 2009. Cash and investments of IM Flash and TECH are generally not available to finance our other operations. In the past we have utilized external sources of financing when needed and access to capital markets has historically been very important to us. As a result of the severe downturn in the semiconductor memory market, the downturn in general economic conditions, and the adverse conditions in the credit markets, financing instruments that we have used in the past are currently not available on terms acceptable to us and may not be available to us for extended periods. We significantly reduced our capital expenditures for 2009. In addition, we are pursuing further financing alternatives, further reducing capital expenditures and implementing further cost-cutting initiatives. There can be no assurance that we will be able to generate sufficient cash flows or find other sources of financing to fund our operations; make adequate capital investments to remain competitive in terms of technology development and cost efficiency; or access capital markets. Our inability to do the foregoing could have a material adverse effect on our business and results of operations.

We may be unable to reduce our per gigabit manufacturing costs at the rate average selling prices decline.

Our gross margins are dependent upon continuing decreases in per gigabit manufacturing costs achieved through improvements in our manufacturing processes, including reducing the die size of our existing products. In future periods, we may be unable to reduce our per gigabit manufacturing costs at sufficient levels to increase gross margins due to factors including, but not limited to, strategic product diversification decisions affecting product mix, the increasing complexity of manufacturing processes, changes in process technologies or products that inherently may require relatively larger die sizes. Per gigabit manufacturing costs may also be affected by the relatively smaller production quantities and shorter product lifecycles of certain specialty memory products. Temporary production slowdowns that we implemented at some of our manufacturing facilities during the second quarter of 2009 are expected to adversely affect per megabit costs of Memory products.

An adverse result in our litigation matters could materially adversely affect our business, results of operations or financial condition.

On January 13, 2006, Rambus, Inc. (“Rambus”) filed a lawsuit against us in the U.S. District Court for the Northern District of California. Rambus alleges that certain of our DDR2, DDR3, RLDRAM, and RLDRAM II products infringe as many as fourteen Rambus patents and seeks monetary damages, treble damages, and injunctive relief. The accused products account for a significant portion of our net sales. On June 2, 2006, we filed an answer and counterclaim against Rambus alleging, among other things, antitrust and fraud claims. Trial on the patent phase of that case relating to twelve claims in ten Rambus patents is currently scheduled to begin January 26, 2009.

On May 5, 2004, Rambus filed a lawsuit in the Superior Court of the State of California (San Francisco County) against us and other DRAM suppliers. The complaint alleges various causes of action under California state law including conspiracy to restrict output and fix prices on Rambus DRAM ("RDRAM"), and unfair competition. The complaint seeks treble damages, punitive damages, attorneys’ fees, costs, and a permanent injunction enjoining the defendants from the conduct alleged in the complaint. Trial is currently scheduled to begin in March 2009. (See “Item 3. Legal Proceedings” for additional details on these cases and other Rambus matters pending in Europe and Delaware.)

We are unable to predict the outcome of these lawsuits. The adverse resolution of these lawsuits could result in significant liability and could have a material adverse effect on our business, results of operations or financial condition.

Our joint ventures and strategic partnerships involve numerous risks.

We have entered into partnering arrangements to manufacture products and develop new manufacturing process technologies and products. These arrangements include our IM Flash NAND flash joint ventures with Intel, our DRAM joint ventures with Nanya, our TECH DRAM joint venture and our MP Mask joint venture with Photronics. These strategic partnerships and joint ventures are subject to various risks that could adversely affect the value of our investments and our results of operations. These risks include the following:

·	our interests could diverge from our partners in the future or we may not be able to agree with partners on the amount, timing or nature of further investments in our joint venture;

·	due to financial constraints, our partners may be unable to meet their commitments to us or our joint ventures and may pose credit risks for our transactions with them;

·	the terms of our arrangements may turn out to be unfavorable;

·	cash flows may be inadequate to fund increased capital requirements;

·	we may experience difficulties in transferring technology to joint ventures;

·	we may experience difficulties and delays in ramping production at joint ventures; and

·	political or economic instability may occur in the countries where our joint ventures and/or partners are located.

If our joint ventures and strategic partnerships are unsuccessful, our business, results of operations or financial condition may be adversely affected.

Economic conditions may harm our business.

Economic and business conditions, including a continuing downturn in the semiconductor memory industry or the overall economy is having an adverse effect on our business. Adverse conditions affect consumer demand for devices that incorporate our products such as personal computers, mobile phones, Flash memory cards and USB devices. Reduced demand for our products could result in continued market oversupply and significant decreases in our selling prices. A continuation of current conditions in credit markets would limit our ability to obtain external financing to fund our operations and capital expenditures. In addition, we may experience losses on our holdings of cash and investments due to failures of financial institutions and other parties. Difficult economic conditions may also result in a higher rate of losses on our accounts receivables due to credit defaults. As a result, our business, results of operations or financial condition could be materially adversely affected.

The semiconductor memory industry is highly competitive.

We face intense competition in the semiconductor memory market from a number of companies, including Elpida Memory, Inc.; Hynix Semiconductor Inc.; Qimonda AG; Samsung Electronics Co., Ltd.; SanDisk Corporation; Toshiba Corporation and from emerging companies in Taiwan and China, who have significantly expanded the scale of their operations. Some of our competitors are large corporations or conglomerates that may have greater resources to withstand downturns in the semiconductor markets in which we compete, invest in technology and capitalize on growth opportunities.

Our competitors seek to increase silicon capacity, improve yields, reduce die size and minimize mask levels in their product designs. The transitions to smaller line-width process technologies and 300mm wafers in the industry have resulted in significant increases in the worldwide supply of semiconductor memory and will likely lead to future increases. Increases in worldwide supply of semiconductor memory also result from semiconductor memory fab capacity expansions, either by way of new facilities, increased capacity utilization or reallocation of other semiconductor production to semiconductor memory production. We and several of our competitors have significantly increased production in recent periods through construction of new facilities or expansion of existing facilities. Increases in worldwide supply of semiconductor memory, if not accompanied with commensurate increases in demand, would lead to further declines in average selling prices for our products and would materially adversely affect our business, results of operations or financial condition.

Our NAND Flash memory operations involve numerous risks.

As a result of severe oversupply in the NAND Flash market, our average selling prices of NAND Flash products decreased 24% as compared to the fourth quarter of 2008 after decreasing 67% for 2008 as compared to 2007 and 56% for 2007 as compared to 2006. As a result, we experienced negative gross margins on sales of our NAND Flash products in 2009 and 2008. In the first quarter of 2009, we discontinued production of NAND flash memory for IM Flash at our Boise facility. The NAND Flash production shutdown reduces IM Flash’s NAND flash production by approximately 35,000 200mm wafers per month. In addition, we and Intel agreed to suspend tooling and the ramp of production NAND Flash at IM Flash’s Singapore wafer fabrication plant. A continuation of the challenging conditions in the NAND Flash market will materially adversely affect our business, results of operations and financial condition.

We may incur additional restructure charges or not realize the expected benefits of new initiatives to reduce costs across our operations.

In the first quarter of 2009, in response to a challenging global environment for technology products, we announced a restructuring of our memory operations. As part of the restructure, our IM Flash joint venture between us and Intel terminated its agreement with us to obtain NAND Flash memory supply from the our Boise facility, reducing our NAND Flash production by approximately 35,000 200mm wafers per month. In addition, we and Intel agreed to suspend tooling and the ramp of production at IM Flash’s Singapore wafer fabrication facility. We have also undertaken additional cost savings measures to increase our competitiveness, including reductions in executive and employee salary and bonuses, a continued hiring freeze, and reduction of other discretionary costs such as outside services, travel and overtime. As a result of these actions, we recorded a net $66 million credit to restructure in the first quarter of 2009, attributable to our Memory segment. The amount includes a $144 million gain in connection with the termination of the NAND Flash supply agreement. The restructure credit also includes a $56 million charge to write down equipment and costs of $22 million for severance and other employee-related items. As of December 4, 2008, we expected to incur additional restructure costs of approximately $40 million through 2010. We may incur additional restructure costs or not realize the expected benefits of these new initiatives. As a result of these initiatives, we expect to lose production output, incur restructuring or other infrequent charges and we may experience disruptions in our operations, loss of key personnel and difficulties in delivering products timely.

Our acquisition of a 35.5% interest in Inotera Memories, Inc. involves numerous risks.

In the first quarter of 2009, we acquired a 35.5% ownership interest in Inotera Memories, Inc., a Taiwanese DRAM memory manufacturer, for approximately $400 million in cash. As a result of this acquisition, we have rights and obligations to purchase 50% of the 120,000 per month 300mm DRAM wafer production of Inotera. Our acquisition of an interest in Inotera involves numerous risks including the following:

·	Inotera’s ability to meet its ongoing obligations;

·	uncertainties relating to Qimonda’s purchase of certain agreed quantities of products made using Qimonda’s trench technology during the transition period.

·	difficulties in converting Inotera production from Qimonda’s trench technology to our stack technology;

·	difficulties in obtaining financing for capital expenditures necessary to convert Inotera production to our stack technology;

·	increasing debt to finance the acquisition;

·	uncertainties around the timing and amount of wafer supply received;

·	obligations during the technology transition period to procure product based on a competitor’s technology which may be difficult to sell and provide product support for due to our limited understanding of the technology;

·	recognition in our results of operation of our share of potential Inotera losses; and

·	a further decline in margins associated with potentially purchasing product utilizing Qimonda’s trench technology at a relatively higher cost than other products manufactured by us and selling them potentially at a lower price than other products produced us.

An adverse determination that our products or manufacturing processes infringe the intellectual property rights of others could materially adversely affect our business, results of operations or financial condition.

We are engaged in patent litigation with Mosaid Technologies, Inc. ("Mosaid") in the U.S. District Court for the Northern District of California. Mosaid alleges that certain of our DRAM and CMOS image sensor products infringe up to twelve Mosaid patents and seeks monetary damages, treble damages, and injunctive relief. The accused products account for a significant portion of our net sales. Trial is currently scheduled for June 5, 2009. (See “Item 3. Legal Proceedings” for additional details.)

We are unable to predict the outcome of assertions of infringement made against us. A court determination that our products or manufacturing processes infringe the intellectual property rights of others could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes. Any of the foregoing results could have a material adverse effect on our business, results of operations or financial condition.

We have a number of patent and intellectual property license agreements. Some of these license agreements require us to make one time or periodic payments. We may need to obtain additional patent licenses or renew existing license agreements in the future. We are unable to predict whether these license agreements can be obtained or renewed on acceptable terms.

Allegations of anticompetitive conduct.

A number of purported class action price-fixing lawsuits have been filed against us and other DRAM suppliers. Numerous cases have been filed in various state and federal courts asserting claims on behalf of a purported class of individuals and entities that indirectly purchased DRAM and/or products containing DRAM from various DRAM suppliers during the time period from April 1, 1999 through at least June 30, 2002. The complaints allege violations of the various jurisdictions’ antitrust, consumer protection and/or unfair competition laws relating to the sale and pricing of DRAM products and seek treble monetary damages, restitution, costs, interest and attorneys’ fees. A number of these cases have been removed to federal court and transferred to the U.S. District Court for the Northern District of California (San Francisco) for consolidated proceedings. On January 29, 2008, the Northern District of California Court granted in part and denied in part our motion to dismiss the plaintiff’s second amended consolidated complaint. The District Court subsequently certified the decision for interlocutory appeal. On February 27, 2008, plaintiffs filed a third amended complaint. On June 26, 2008, the United States Court of Appeals for the Ninth Circuit accepted plaintiffs’ interlocutory appeal. (See “Item 3. Legal Proceedings” for additional details on these cases and related matters.)

Various states, through their Attorneys General, have filed suit against us and other DRAM manufacturers alleging violations of state and federal competition laws. The amended complaint alleges, among other things, violations of the Sherman Act, Cartwright Act, and certain other states’ consumer protection and antitrust laws and seeks damages, and injunctive and other relief. On October 3, 2008, the California Attorney General filed a similar lawsuit in California Superior Court, purportedly on behalf of local California government entities, alleging, among other things, violations of the Cartwright Act and state unfair competition law. (See “Item 3. Legal Proceedings” for additional details on these cases and related matters.)

A number of purported class action lawsuits have been filed against us and other SRAM suppliers asserting claims on behalf of a purported class of individuals and entities that purchased SRAM directly or indirectly from various SRAM suppliers. The complaints allege price fixing in violation of federal antitrust laws and state antitrust and unfair competition laws and seek treble monetary damages, restitution, costs, interest and attorneys' fees. The first trial in these cases is currently scheduled for September 2010. (See “Item 3. Legal Proceedings” for additional details on these cases and related matters.)

Three purported class action lawsuits alleging price-fixing of Flash products have been filed in Canada asserting violations of the Canadian Competition Act. These cases assert claims on behalf of a purported class of individuals and entities that purchased Flash memory directly and indirectly from various Flash memory suppliers. (See “Item 3. Legal Proceedings” for additional details on these cases and related matters.)

We are unable to predict the outcome of these lawsuits. An adverse court determination in any of these lawsuits alleging violations of antitrust laws could result in significant liability and could have a material adverse effect on our business, results of operations or financial condition.

Covenants in our debt instruments may obligate us to repay debt, increase contributions to our TECH joint venture and limit our ability to obtain financing.

Our ability to comply with the financial and other covenants contained in our debt may be affected by economic or business conditions or other events. As of December 4, 2008, our 73% owned TECH Semiconductor Singapore Pte. Ltd., (“TECH”) subsidiary, had $600 million outstanding under a credit facility with covenants that, among other requirements, establish certain liquidity, debt service coverage and leverage ratios for TECH and restrict TECH’s ability to incur indebtedness, create liens and acquire or dispose of assets. If TECH does not comply with these debt covenants and restrictions, this debt may be deemed to be in default and the debt declared payable. Additionally, if TECH is unable to repay its borrowings when due, the lenders under TECH’s credit facility could proceed against substantially all of TECH’s assets. We have guaranteed approximately 73% of the outstanding amount of TECH’s credit facility, and our obligation increases to 100% of the outstanding amount of the facility upon the occurrence of certain conditions. If TECH’s debt is accelerated, we may not have sufficient assets to repay amounts due. Existing covenant restrictions may limit our ability to obtain additional debt financing and to avoid covenant defaults we may have to pay off debt obligations and make additional contributions to TECH, which could adversely affect our liquidity and financial condition.

Allegations of violations of securities laws.

On February 24, 2006, a number of purported class action complaints were filed against us and certain of our officers in the U.S. District Court for the District of Idaho alleging claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The cases purport to be brought on behalf of a class of purchasers of our stock during the period February 24, 2001 to February 13, 2003. The five lawsuits have been consolidated and a consolidated amended class action complaint was filed on July 24, 2006. The complaint generally alleges violations of federal securities laws based on, among other things, claimed misstatements or omissions regarding alleged illegal price-fixing conduct. The complaint seeks unspecified damages, interest, attorneys' fees, costs, and expenses. On December 19, 2007, the Court issued an order certifying the class but reducing the class period to purchasers of our stock during the period from February 24, 2001 to September 18, 2002. (See “Item 3. Legal Proceedings” for additional details on these cases and related matters.)

We are unable to predict the outcome of these cases. An adverse court determination in any of the class action lawsuits against us could result in significant liability and could have a material adverse effect on our business, results of operations or financial condition.

Products that fail to meet specifications, are defective or that are otherwise incompatible with end uses could impose significant costs on us.

Products that do not meet specifications or that contain, or are perceived by our customers to contain, defects or that are otherwise incompatible with end uses could impose significant costs on us or otherwise materially adversely affect our business, results of operations or financial condition.

Because the design and production process for semiconductor memory is highly complex, it is possible that we may produce products that do not comply with customer specifications, contain defects or are otherwise incompatible with end uses. If, despite design review, quality control and product qualification procedures, problems with nonconforming, defective or incompatible products occur after we have shipped such products, we could be adversely affected in several ways, including the following:

·	we may replace product or otherwise compensate customers for costs incurred or damages caused by defective or incompatible product, and

·	we may encounter adverse publicity, which could cause a decrease in sales of our products.

Our debt level is higher than compared to historical periods.

We currently have a higher level of debt compared to historical periods. As of December 4, 2008, we had $2.9 billion of debt. We may need to incur additional debt in the future. Our debt level could adversely impact us. For example it could:

·	make it more difficult for us to make payments on our debt;

·	require us to dedicate a substantial portion of our cash flow from operations and other capital resources to debt service;

·	limit our future ability to raise funds for capital expenditures, acquisitions, research and development and other general corporate requirements;

·	increase our vulnerability to adverse economic and semiconductor memory industry conditions;

·	expose us to fluctuations in interest rates with respect to that portion of our debt which is at variable rate of interest; and

·	require us to make additional investments in joint ventures to maintain compliance with financial covenants.

New product development may be unsuccessful.

We are developing new products that complement our traditional memory products or leverage their underlying design or process technology. We have made significant investments in product and process technologies and anticipate expending significant resources for new semiconductor product development over the next several years. The process to develop NAND Flash, Imaging and certain specialty memory products requires us to demonstrate advanced functionality and performance, many times well in advance of a planned ramp of production, in order to secure design wins with our customers. There can be no assurance that our product development efforts will be successful, that we will be able to cost-effectively manufacture these new products, that we will be able to successfully market these products or that margins generated from sales of these products will recover costs of development efforts.

The future success of our Imaging business will be dependent on continued market acceptance of our products and the development, introduction and marketing of new Imaging products.

We face competition in the image sensor market from a number of suppliers of CMOS image sensors including OmniVision Technologies, Inc.; Samsung Electronics Co., Ltd; Sony Corporation; STMicroelectronics NV; Toshiba Corporation and from a number of suppliers of CCD image sensors including Matsushita Electric Industrial Co., Ltd.; Sharp Corporation and Sony Corporation. In recent periods, a number of new companies have entered the CMOS image sensor market. Competitors include many large domestic and international companies that have greater presence in key markets, better access to certain customer bases, greater name recognition and more established strategic and financial relationships than the Company.

In recent years, our Imaging net sales and gross margins decreased and we faced increased competition. There can be no assurance that we will be able to grow or maintain our market share or gross margins for Imaging products in the future. We expect that unit sales for Imaging will decrease in the second quarter of 2009 due to lower sales of cell phones and other devices incorporating the our Imaging products. Temporary production slowdowns that we implemented at some of our manufacturing facilities during the second quarter of 2009 are expected to adversely affect per unit costs of Imaging products. The success of our Imaging business will depend on a number of factors, including:

·	development of products that maintain a technological advantage over the products of our competitors;

·	accurate prediction of market requirements and evolving standards, including pixel resolution, output interface standards, power requirements, optical lens size, input standards and other requirements;

·	timely completion and introduction of new Imaging products that satisfy customer requirements;

·	timely achievement of design wins with prospective customers, as manufacturers may be reluctant to change their source of components due to the significant costs, time, effort and risk associated with qualifying a new supplier; and

·	efficient, cost-effective manufacturing as we transition to new products and higher volumes.

Our efforts to restructure our Aptina Imaging business may be unsuccessful.

We are exploring partnering arrangements with outside parties regarding the sale of Aptina in which we could retain a minority ownership interest. To that end, we began operating our Imaging business as a separate, wholly-owned, subsidiary in October 2008. To the extent we form a partnering arrangement, the resulting business model may not be successful and the Imaging operations revenues and margins could be adversely affected. We may incur significant costs to convert Imaging operations to a new business structure and operations could be disrupted. In addition, we may lose key personnel. If our efforts to restructure the Imaging business are unsuccessful, our business, results of operations or financial condition could be materially adversely affected.

We expect to make future acquisitions and alliances, which involve numerous risks.

Acquisitions and the formation of alliances such as joint ventures and other partnering arrangements, involve numerous risks including the following:

·	difficulties in integrating the operations, technologies and products of acquired or newly formed entities;

·	increasing capital expenditures to upgrade and maintain facilities;

·	increasing debt to finance any acquisition or formation of a new business;

·	difficulties in protecting our intellectual property as we enter into a greater number of licensing arrangements;

·	diverting management’s attention from normal daily operations;

·	managing larger or more complex operations and facilities and employees in separate geographic areas; and

·	hiring and retaining key employees.

Acquisitions of, or alliances with, high-technology companies are inherently risky, and any future transactions may not be successful and may materially adversely affect our business, results of operations or financial condition.

Changes in foreign currency exchange rates could materially adversely affect our business, results of operations or financial condition.

Our financial statements are prepared in accordance with U.S. GAAP and are reported in U.S. dollars. Across our multi-national operations, there are transactions and balances denominated in other currencies, primarily the euro, yen and Singapore dollar. We recorded a net loss of $25 million from changes in currency exchange rates for 2008. We estimate that, based on its assets and liabilities denominated in currencies other than the U.S. dollar as of December 4, 2008, a 1% change in the exchange rate versus the U.S. dollar would result in foreign currency gains or losses of approximately U.S. $1 million for the yen, Singapore dollar or euro. In the event that the U.S. dollar weakens significantly compared to the yen, Singapore dollar and euro, our results of operations or financial condition will be adversely affected.

We face risks associated with our international sales and operations that could materially adversely affect our business, results of operations or financial condition.

Sales to customers outside the United States approximated 80% of our consolidated net sales for the first quarter of 2009. In addition, we have manufacturing operations in China, Italy, Japan, Puerto Rico and Singapore. Our international sales and operations are subject to a variety of risks, including:

·	currency exchange rate fluctuations;

·	export and import duties, changes to import and export regulations, and restrictions on the transfer of funds;

·	political and economic instability;

·	problems with the transportation or delivery of our products;

·	issues arising from cultural or language differences and labor unrest;

·	longer payment cycles and greater difficulty in collecting accounts receivable; and

·	compliance with trade and other laws in a variety of jurisdictions.

These factors may materially adversely affect our business, results of operations or financial condition.

Our net operating loss and tax credit carryforwards may be limited.

We have significant net operating loss and tax credit carryforwards. We have provided significant valuation allowances against the tax benefit of such losses as well as certain tax credit carryforwards. Utilization of these net operating losses and credit carryforwards is dependent upon us achieving sustained profitability. As a consequence of prior business acquisitions, utilization of the tax benefits for some of the tax carryforwards is subject to limitations imposed by Section 382 of the Internal Revenue Code and some portion or all of these carryforwards may not be available to offset any future taxable income. The determination of the limitations is complex and requires significant judgment and analysis of past transactions.

If our manufacturing process is disrupted, our business, results of operations or financial condition could be materially adversely affected.

We manufacture products using highly complex processes that require technologically advanced equipment and continuous modification to improve yields and performance. Difficulties in the manufacturing process or the effects from a shift in product mix can reduce yields or disrupt production and may increase our per gigabit manufacturing costs. Additionally, our control over operations at our IM Flash, TECH, Inotera, MeiYa and MP Mask joint ventures may be limited by our agreements with our partners. From time to time, we have experienced minor disruptions in our manufacturing process as a result of power outages, improperly functioning equipment and equipment failures. If production at a fabrication facility is disrupted for any reason, manufacturing yields may be adversely affected or we may be unable to meet our customers' requirements and they may purchase products from other suppliers. This could result in a significant increase in manufacturing costs or loss of revenues or damage to customer relationships, which could materially adversely affect our business, results of operations or financial condition.

Disruptions in our supply of raw materials could materially adversely affect our business, results of operations or financial condition.

Our operations require raw materials that meet exacting standards. We generally have multiple sources of supply for our raw materials. However, only a limited number of suppliers are capable of delivering certain raw materials that meet our standards. Various factors could reduce the availability of raw materials such as silicon wafers, photomasks, chemicals, gases, lead frames and molding compound.

Shortages may occur from time to time in the future. In addition, disruptions in transportation lines could delay our receipt of raw materials. Lead times for the supply of raw materials have been extended in the past. If our supply of raw materials is disrupted or our lead times extended, our business, results of operations or financial condition could be materially adversely affected.

Item 2. Issuer Purchases of Equity Securities, Unregistered Sales of Equity Securities and Use of Proceeds

During the first quarter of 2009, the Company acquired, as payment of withholding taxes in connection with the vesting of restricted stock and restricted stock unit awards, 153,205 shares of its common stock at an average price per share of $4.16. The Company retired the 153,205 shares in the first quarter of 2009.

Period

(a) Total number of shares purchased

(b) Average price paid per share

(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs

August 29, 2008 – October 2, 2008

78,427

4.34

N/A

October 3, 2008 – October 30, 2008

71,885

3.95

N/A

October 31, 2008 – December 4, 2008

2,893

4.38

N/A

153,205

4.16

Item 4. Submission of Matters to a Vote of Security Holders

The Company’s 2008 Annual Meeting of Shareholders was held on December 11, 2008. At the meeting, the following items were submitted to a vote of the shareholders:

(a) The following nominees for Directors were elected. Each person elected as a Director will serve until the next annual meeting of shareholders or until such person’s successor is elected and qualified.

Name of Nominee	Votes Cast For		Votes Cast Against/Withheld

Teruaki Aoki		508,733,764		115,522,925
Steven R. Appleton		595,510,929		28,745,760
James W. Bagley		589,125,503		35,131,186
Robert L. Bailey		603,672,439		20,584,250
Mercedes Johnson		568,543,305		55,713,384
Lawrence N. Mondry		515,754,651		108,502,038
Robert E. Switz		602,203,922		22,052,767

(b) The proposal by the Company to approve an amendment to the Company’s 2007 Equity Incentive Plan to increase the number of shares reserved for issuance thereunder by 10,000,000 was approved with 272,872,836 votes in favor, 223,415,211 votes against, 684,556 abstentions and 127,284,086 broker non-votes.

(c) The ratification of the appointment of PricewaterhouseCoopers LLP as the Independent Registered Public Accounting Firm of the Company for the fiscal year ending September 3, 2009, was approved with 607,039,348 votes in favor, 16,298,304 votes against, and 919,037 abstentions.

Item 6. Exhibits

	Exhibit
	Number		Description of Exhibit

	3.1		Restated Certificate of Incorporation of the Registrant (1)
	3.2		Bylaws of the Registrant, as amended (2)
	10.1		Executive Officer Performance Incentive Plan, as Amended
	10.3		1994 Stock Option Plan, as Amended
	10.5		1997 Nonstatutory Stock Option Plan, as Amended
	10.6		1998 Non-Employee Director Stock Incentive Plan, as Amended
	10.7		1998 Nonstatutory Stock Option Plan, as Amended
	10.8		2001 Stock Option Plan, as Amended
	10.10		2002 Employment Inducement Plan, as Amended
	10.11		2004 Equity Incentive Plan, as Amended
	10.13		Nonstatutory Stock Option Plan, as Amended
	10.15		Lexar Media, Inc. 2000 Equity Incentive Plan, as Amended
	10.48		2007 Equity Incentive Plan, as Amended
	10.64		Lexar Media, Inc. 1996 Stock Option Plan, as Amended
	10.65*		Boise Supply Termination and Amendment Agreement, dated October 10, 2008, by and among Intel Corporation, Micron Technology, Inc. and IM Flash Technologies, LLC
	10.66*		Loan Agreement, dated November 26, 2008, by and among Micron Semiconductor B.V., Micron Technology, Inc., and Nan Ya Plastics Corporation
	10.67		Loan Agreement, dated November 26, 2008, by and between Micron Technology, Inc. and Inotera Memories, Inc.
	10.68		Transition Agreement, dated October 11, 2008, by and among Nanya Technology Corporation, Qimonda AG, Inotera Memories, Inc. and Micron Technology, Inc.
	10.69		Micron Guaranty Agreement, dated November 26, 2008, by Micron Technology, Inc. in favor of Nanya Technology Corporation
	10.70		Share Purchase Agreement by and among Micron Technology, Inc. as the Buyer Parent, Micron Semiconductor B.V., as the Buyer, Qimonda Ag as the Seller Parent and Qimonda Holding B.V., as the Seller Sub dated as of October 11, 2008
	10.71*		Master Agreement, dated November 26, 2008, among Micron Technology, Inc., Micron Semiconductor B.V., Nanya Technology Corporation, MeiYa Technology Corporation and Inotera Memories, Inc.
	10.72*		Joint Venture Agreement, dated November 26, 2008, by and between Micron Semiconductor B.V. and Nanya Technology Corporation
	10.73*		Facilitation Agreement, dated November 26, 2008, by and between Micron Semiconductor B.V., Nanya Technology Corporation and Inotera Memories, Inc.
	10.74*		Supply Agreement, dated November 26, 2008, by and among Micron Technology, Inc., Nanya Technology Corporation and Inotera Memories, Inc.
	10.75*		Amended and Restated Joint Development Program Agreement, dated November 26, 2008, by and between Nanya Technology Corporation and Micron Technology, Inc.
	10.76*		Amended and Restated Technology Transfer and License Agreement, dated November 26, 2008, by and between Micron Technology, Inc. and Nanya Technology Corporation
	10.77*		Technology Transfer Agreement, dated November 26, 2008, by and among Nanya Technology Corporation, Micron Technology, Inc. and Inotera Memories, Inc.
	10.78*		Technology Transfer Agreement for 68-50nm Process Nodes, dated October 11, 2008, by and between Micron Technology, Inc. and Inotera Memories, Inc.
	31.1		Rule 13a-14(a) Certification of Chief Executive Officer
	31.2		Rule 13a-14(a) Certification of Chief Financial Officer
	32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350
	32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350

_____________________

(1)	Incorporated by reference to Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2001
(2)	Incorporated by reference to Current Report on Form 8-K dated October 1, 2008
*	Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the U.S. Securities and Exchange Commission.

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.

	Micron Technology, Inc.
	(Registrant)


Date: January 13, 2009	/s/ Ronald C. Foster
	Ronald C. Foster Vice President of Finance and Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT 10.70

SHARE PURCHASE AGREEMENT

by and among

MICRON TECHNOLOGY, INC.

as the Buyer Parent,

MICRON SEMICONDUCTOR B.V.,

as the Buyer,

QIMONDA AG

as the Seller Parent

and

QIMONDA HOLDING B.V.,

as the Seller Sub

_______________________________________

Dated as of October 11, 2008

_______________________________________

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS		3
1.1	Defined Terms	3
1.2	Interpretation	7
ARTICLE II PURCHASE AND SALE OF SHARES; PURCHASE PRICE		8
2.1	1st Closing; Sale and Purchase of 1st Close Shares	8
2.2	1st Closing Date	8
2.3	Deliveries at 1st Closing	9
2.4	2nd Closing; Sale and Purchase of 2nd Close Shares	9
2.5	2nd Closing Date	10
2.6	Deliveries at 2nd Closing	10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS		10
3.1	Title to the Shares	10
3.2	Due Incorporation	11
3.3	Sellers Right, Power and Authority	11
3.4	Enforceability	11
3.5	No Consents Required	12
3.6	Due Organization of the Company	12
3.7	Capitalization	12
3.8	Subsidiaries	13
3.9	Financial Statements	13
3.10	Contracts and Relationships	13
3.11	Legal Proceedings; Orders	14
3.12	Brokers	14
3.13	Insolvency; Stand Alone Viability	14
3.14	Company Assets and Revenue	14
3.15	Disclosure	14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER PARENT AND THE BUYER		15
4.1	Due Incorporation and Authority	15
4.2	Buyer Right, Power and Authority	15
4.3	Enforceability	15
4.4	No Consents Required	15
4.5	Financing	16
ARTICLE V COVENANTS AND AGREEMENTS		16
5.1	Voting of Shares	16
5.2	Conduct of Business	16

TABLE OF CONTENTS

(Continued)

5.3	No Transfer of the Shares	18
5.4	Expenses	18
5.5	Publicity	18
5.6	Required Consents	18
5.7	Change in Membership of Company Board	20
5.8	Sellers Non-Solicit	20
5.9	Further Assurances	20
5.10	Buyer Financing.	21
5.11	New JV Agreements; Patent Cross License.	21
5.12	Notification	21
5.13	Buyer Parent Financing Information Assistance	21
5.14	Sale of FINI Shares	22
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PARTIES TO CLOSE		22
6.1	1st Closing Conditions to All Parties’ Obligations	22
6.2	1st Closing Conditions to the Buyer Parent and the Buyer’s Obligations	23
6.3	1st Closing Conditions to the Sellers’ Obligations	24
6.4	2nd Closing Conditions to All Parties’ Obligations	24
6.5	2nd Closing Conditions to the Buyer Parent and the Buyer’s Obligations	25
6.6	2nd Closing Conditions to the Sellers’ Obligations	27
ARTICLE VII SURVIVAL		28
ARTICLE VIII INDEMNIFICATION		28
8.1	Obligation of the Sellers to Indemnify	28
8.2	Obligation of the Buyer Parent to Indemnify	29
8.3	Indemnification Procedure	29
8.4	Measure of and Limitations upon Indemnification	30
8.5	Exclusivity of Indemnity	30
ARTICLE IX TERMINATION OF AGREEMENT		30
9.1	Termination	30
9.2	Survival After Termination	32
ARTICLE X MISCELLANEOUS		32
10.1	Governing Law; Venue	32
10.2	Notices	33
10.3	Entire Agreement	34
10.4	Waivers and Amendments	34
10.5	Binding Effect; Assignment	34
10.6	Construction	34
10.7	Severability of Provisions	35
10.8	Counterparts; Delivery by Fax or E mail	35
10.9	Transfer Taxes	35
10.10	Language	35
10.11	No Third Party Beneficiaries	35

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EXHIBITS

Exhibit A Transition Agreement

Exhibit B Buyer/Seller TLA

Exhibit C Infineon/Buyer TLA

Exhibit D Company/Buyer PTLA

Exhibit E Company/Buyer TTA

Exhibit F Nanya/Seller Termination Agreement

Exhibit G Release Agreement

Exhibit H Supply Agreement

SCHEDULES

Schedule 1 Seller Shares

Schedule 2 1st Close Shares; Sellers’ Payment Schedule and

2nd Close Shares; Sellers’ Payment Schedule

Schedule 3.6(a) Articles of Incorporation

Schedule 3.6(b) Companies Register Extract

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Confidential

SHARE PURCHASE AGREEMENT

Share Purchase Agreement, dated October 11, 2008 (this “ Agreement ”), by and among Micron Technology, Inc., a Delaware corporation (the “ Buyer Parent ”), Micron Semiconductor B.V., a private limited company organized under the Laws of the Netherlands and a Subsidiary of the Buyer Parent (the “ Buyer ”), Qimonda AG, a German stock corporation ( Aktiengesellschaft ) with its seat in Munich, registered in the commercial register at the local court of Munich under HRB 152545 (the “ Seller Parent ”) and Qimonda Holding B.V., a private limited company organized under the Laws of the Netherlands and a Subsidiary of the Seller Parent (the “ Seller Sub ” and, each of the Seller Sub and the Seller Parent, individually, a “ Seller ” and the Seller Sub, together with the Seller Parent, the “ Sellers ”).

WHEREAS, Inotera Memories, Inc., a company limited by shares under the Laws of the ROC (the “ Company ”) was established by Nanya Technology Corporation, a company limited by shares legally established under the Laws of the ROC (“ Nanya ”) and Infineon Technologies AG, a company legally established under the Laws of Germany (“ Infineon ”), pursuant to that certain Joint Venture Agreement, dated November 13, 2002 (such agreement, as amended by the first through fifth amendments thereto through the date hereof, the Letter of Undertaking dated December 3, 2003 and the Letter of Agreement re Assignment dated July 28, 2006, the “ JV Agreement ”);

WHEREAS, in connection with the entry into the JV Agreement and the operation of the Company, Nanya, Infineon and the Company entered into certain agreements, including (i) the Joint Product Development and Product Swap Agreement between Nanya and Infineon, as predecessor in interest to the Seller Parent, dated November 17, 2003 (including two Amendments and Letter Agreement re Assignment dated July 31, 2006), (ii) the Technical Information Exchange Agreement between Nanya and the Seller Parent dated September 24, 2007, (iii) the (110nm) License and (90/70 nm) Technical Cooperation Agreement for DRAM Process Technology between Nanya and Infineon, as predecessor in interest to the Seller Parent, dated November 13, 2002 (including fourteen Amendments, two Engineering Sample Agreements and Letter Agreement re Assignment dated July 31, 2006), (iv) the 60nm Technical Cooperation Agreement between Nanya and Infineon, as predecessor in interest to the Seller Parent, for DRAM Process Technology dated September 29, 2005 (including three Amendments of Letter Agreement re Assignment dated July 31, 2006), (v) the Product Purchase and Capacity Reservation Agreement among Nanya, Infineon, as predecessor in interest to the Seller Parent, and the Company dated July 15, 2003 (including three Amendments and one Supplement), (vi) the Know How Transfer Agreement among Nanya, Infineon, as predecessor in interest to the Seller Parent, and the Company initially dated November 13, 2002 (including two Amendments) and (vii) the Service Agreement between Nanya and the Company dated July 15, 2003 (the “ Ancillary JV Agreements ”);

WHEREAS, in accordance with the terms of the JV Agreement, Infineon assigned all of its rights and, with certain exceptions, its obligations under the JV Agreement and the Ancillary JV Agreements to the Seller Parent in connection with the transfer by Infineon of all of its shareholdings in the Company to the Seller Parent;

WHEREAS, the Sellers are the owners of the number of shares of common stock (“ Common Stock ”) of the Company, set forth on Schedule 1 hereto (as such shares may be adjusted, increased or decreased as a result of a stock split, reverse stock split or reclassification, the “ Seller Shares ”), representing approximately 35.61% of the issued and outstanding shares of Common Stock and 100% of the shares of Common Stock owned by the Sellers and their Subsidiaries;

WHEREAS, of the Seller Shares, 4,483,800 shares (as such shares may be adjusted, increased or decreased as a result of a stock split, reverse stock split or reclassification, the “ FINI Shares ”) are held by the Sellers as foreign institutional investors under applicable ROC law and 1,184,088,059 shares (as such shares may be adjusted, increased or decreased as a result of a stock split, reverse stock split or reclassification, the “ Shares ”) were acquired by the Sellers under the Statute for Investment by Foreign Nationals of the ROC pursuant to foreign investment approved status granted by the Investment Commission, Ministry of Economic Affairs, ROC;

WHEREAS, the Sellers desire to sell the Shares to the Buyer (the “ Share Purchase ”) and to deliver to the Buyer the proceeds from Seller Parent’s disposal of the FINI Shares in exchange for the Consideration, in each case in accordance with the terms of this Agreement;

WHEREAS, in connection with and conditioned upon the transfer of the 2nd Close Shares, effective as of the 2nd Closing, the JV Agreement and the Ancillary JV Agreements will terminate, subject to the survival of certain provisions agreed upon by the parties;

WHEREAS, it is a condition to the 2nd Closing that the Buyer Parent and Nanya will enter into a new joint venture agreement with respect to the Company (the “ New JV Agreement ”), and that the Buyer Parent, Nanya and/or the Company will enter into certain related agreements and modify certain existing agreements in connection therewith (the “ New JV Ancillary Agreements ”);

WHEREAS, on the date hereof, the Buyer Parent, the Buyer and Nanya have entered into a Memorandum of Understanding (the “ New JV MOU ”), a copy of which has been provided to the Seller Parent, which sets forth the current expectations of the parties with respect to the principal terms of the New JV Agreement and the New JV Ancillary Agreements;

WHEREAS, it is a condition to the 1st Closing that the Buyer Parent and the Seller Parent will enter into a patent cross license agreement mutually agreeable to the parties (the “ Patent Cross License ”), which shall become effectively immediately upon the 2nd Closing;

WHEREAS, concurrently with the execution and delivery hereof, and as an inducement for the parties to enter into this Agreement:

1. the Buyer Parent, the Seller Parent, Nanya and the Company have entered into that certain Transition Agreement, in the form attached hereto as Exhibit A (the “ Transition Agreement ”), which shall become effective immediately upon the 1st Closing;

2. the Buyer Parent and the Seller Parent have entered into that certain Technology License Agreement, in the form attached hereto as Exhibit B (the “ Buyer/Seller

- 2 -

TLA ”), which shall become effective immediately upon the later of (A) the 1st Closing and (B) the receipt of the 2nd Close FCO Approval;

3. Infineon and the Buyer Parent have entered into that certain Technology License Agreement, in the form attached hereto as Exhibit C (the “ Infineon/Buyer TLA ”), which shall become effective immediately upon the later of (A) the 1st Closing and (B) the receipt of the 2nd Close FCO Approval;

4. the Company and the Buyer Parent have entered into that certain Patent and Technology License Agreement, in the form attached hereto as Exhibit D (the “ Company/Buyer PTLA ”) which shall become effective immediately upon the later of (A) the 1st Closing and (B) the receipt of the 2nd Close FCO Approval;

5. the Company and the Buyer Parent have entered into that certain Technology Transfer Agreement for 68-50nm Process Nodes, in the form attached hereto as Exhibit E (the “ Company/Buyer TTA ”), which shall become effective immediately upon the 2nd Closing;

6. Nanya and the Seller Parent have entered into that certain Termination Agreement, in the form attached hereto as Exhibit F (the “ Nanya/Seller Termination Agreement ”), dated as of the date hereof, which shall become effective immediately upon the 2nd Closing;

7. Nanya, Seller Parent and the Company have entered into that certain Release Agreement, in the form attached hereto as Exhibit G (the “ Release Agreement ”), dated as of the date hereof, which shall become effective upon the 2nd Closing; and

8. the Seller Parent and the Company have entered into that certain Supply Agreement, in the form attached hereto as Exhibit H (the “ Supply Agreement ”), which shall become effective immediately upon the 2nd Closing; and

WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Share Purchase;

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements entered into herein, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

DEFINITIONS

1.1 Defined Terms

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(a) For all purposes of this Agreement, the following terms shall have the respective meanings set forth in this Section 1.1:

“ 1st Close FIA Approval ” means the foreign investment approval by the Investment Commission for the transfer of at least the 1st Close Shares from the Sellers to the Buyer contemplated hereby.

“ 2nd Close FIA Approval ” means the foreign investment approval by the Investment Commission for the transfer of the 2nd Close Shares (or, as the case may be, all of the Shares) from the Sellers to the Buyer contemplated hereby.

“ Acquisition Documents ” means this Agreement, the Transition Agreement, the Patent Cross License and the Buyer/Seller TLA.

“ Acquisition Other Documents ” means the Infineon/Buyer TLA, the Company/Buyer PTLA, the Company/Buyer TTA, the Nanya/Seller Termination Agreement, the Supply Agreement and the Release Agreement.

“ Acquisition Total Documents ” means the Acquisition Documents and the Acquisition Other Documents.

“ Affiliate ” means, with respect to any Person, any other Person controlling, controlled by or under common control with such Person. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“ Articles of Incorporation ” means the 11th Revised Articles of Incorporation of the Company, dated June 26, 2008.

“ Business Day ” means a day other than Saturday, Sunday or any day on which banks located in New York, New York, Taipei, Taiwan or Munich, Germany are authorized or obligated by Law to close.

“ Contracts ” means all agreements, contracts, indentures, deeds, and other legally binding instruments of any kind, oral or written.

“ Data Room ” means the electronic data room established through Intralinks and available for review by the Buyer Parent and its representatives on or prior to the Business Day prior to the date of this Agreement.

“ FCO ” means the German Federal Cartel Office ( Bundeskartellamt ).

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“ Governmental Body ” means any court, tribunal, authority, ministry, commission, or other governmental or quasi-governmental regulatory or adjudicative body or authority of any kind.

“ Investment Commission ” means the Investment Commission of the Ministry of Economic Affairs of the ROC.

“ Knowledge ” of the Sellers means the actual knowledge of any of the members of the Management Board ( Vorstand ) of the Seller Parent and any of the following individuals: Daniel Wong, Frank Tillner, Klaus Fleischmann and Jessica Chin.

“ Laws ” means laws, statutes, rules of the common law, regulations, rules, codes, ordinances, or other legal requirements of any Governmental Body.

“ Lien ” means any lien, mortgage, deed of trust, pledge, hypothecation, right of others, claim, security interest, encumbrance, lease, sublease, license, interest, option, charge, easement, servitude, proxy, voting trust or agreement or other restriction or limitation of any nature whatsoever.

“ Material Adverse Effect ” means any change, effect, event, circumstance or development, individually or in the aggregate, that is or would reasonably be expected to (i) be materially adverse to the business, assets, properties, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, (ii) have a material adverse effect on the ability of the Sellers to perform any of their obligations under this Agreement, or (iii) have a material adverse effect on the Buyer’s rights in and to the Shares or upon the Buyer’s ability to exercise rights as a shareholder of the Company after the 1st Closing or the 2nd Closing; provided that no change, effect, event, circumstance or development, individually or in the aggregate, resulting from any of the following shall be deemed to be or constitute a “Material Adverse Effect” or taken into account when determining whether a “Material Adverse Effect” has occurred or would reasonably be expected to occur: (A) general economic conditions (or changes therein) in the industry in which the Company operates, to the extent that such conditions do not have a substantially disproportionate impact on the Company, relative to other companies operating in the same industry in which the Company operates, (B) reduction in production by the Company directly related to the implementation of the transactions contemplated by the Company/Buyer TTA and (C) the effect of the provisions of any of the Acquisition Total Documents that become effective prior to the 2ndClosing.

“ Orders ” means orders, judgments, injunctions, awards, decrees or writs of a Governmental Body.

“ Person ” means any individual, corporation, partnership, limited liability company, limited liability partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

“ Proceeding ” shall mean any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

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“ ROC ” means the Republic of China.

“ Subsidiary ” means, in relation to any Person, any corporation or other entity of which the securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are owned directly or indirectly by such Person.

(b) The following capitalized terms are defined in the following Sections of this Agreement:

Term	Section
1st Closing	2.1(b)
1st Close Cash Consideration	2.1(a)
1st Close Shares	2.1(a)
1st Close Acquisition Documents	6.2(h)
1st Closing Date	2.2
1st Share Purchase	2.1(a)
2nd Close FCO Approval	6.4(a)
2nd Closing	2.4(a)
2nd Close Shares	2.4(a)
2nd Closing Cash Consideration	2.4(a)
2nd Closing Date	2.5
2nd Share Purchase	2.6
Agreement	Preamble
Antitrust Authorities	5.6(b)
Ancillary JV Agreements	Recitals
Audited Financial Statements	3.9
Buyer	Preamble
Buyer Parent	Preamble
Buyer/Seller TLA	Recitals
Claim Notice	8.3(a)
Closing Location	2.1(b)
Closing Time	2.1(b)
Commitment Letters	4.5
Common Stock	Recitals
Company	Recitals
Company/Buyer PTLA	Recitals
Company/Buyer TTA	Recitals
Company Financial Statements	3.9
Consideration	2.4(a)
Equity Interests	3.1
Financing	5.13
FINI Shares	Recitals

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GAAP	3.9
GWB	6.1(a)
Indemnified Party	8.3(a)
Indemnifying Party	8.3(a)
Infineon	Recitals
Infineon/Buyer TLA	Recitals
JV Agreement	Recitals
Limited Reps	8.4(a)
Losses	8.1
Most Recent Balance Sheet Date	3.9
Nanya	Recitals
Nanya Waiver	3.1
Nanya/Seller Termination Agreement	Recitals
New JV Agreement	Recitals
New JV Ancillary Agreements	Recitals
New JV MOU	Recitals
Non-Solicitation Period	5.8
Opinion	6.2(e)
Ordinary Course of Business	5.2(a)
Outside Date	9.1(b)
Patent Cross License	Recitals
Release Agreement	Recitals
Seller Parent/Inotera Contracts	3.10
Seller Parent	Preamble
Seller Parent/Nanya Contracts	3.10
Seller Sub	Preamble
Seller Shares	Recitals
Seller (or Sellers)	Preamble
Share Purchase	Recitals
Shares	Recitals
Sellers’ Disclosure Letter	Article III
Share Purchase	Recitals
Supply Agreement	Recitals
Threshold Amount	8.4(a)
Transfer Taxes	10.9
Transition Agreement	Recitals
Unaudited Financial Statements	3.9

1.2 Interpretation

. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. All terms defined in this Agreement in their singular or plural forms have correlative meanings when used herein in their plural or singular forms, respectively. Unless otherwise expressly provided, the words “include,” “includes” and “including” do not limit

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the preceding words or terms and shall be deemed to be followed by the words “without limitation.” Any Law defined or referred to herein (or in any agreement or instrument that is referred to herein) means such Law as it may from time to time be amended, modified or supplemented, including by succession of comparable successor statutes. All references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. All references in this Agreement to “$” shall mean to United States Dollars. The Article and Section headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement. Any reference to a date or time shall, unless otherwise expressly provided, mean such date or time in Taipei, Taiwan.

ARTICLE II

PURCHASE AND SALE OF SHARES; PURCHASE PRICE

2.1 1st Closing; Sale and Purchase of 1st Close Shares

(a) At the 1st Closing, upon the terms and subject to the conditions of this Agreement, the Sellers shall sell, transfer, assign, convey and deliver (the “ 1st Share Purchase ”) to the Buyer, free and clear of all Liens, and the Buyer shall purchase from the Sellers, the number of Shares set forth opposite each Seller’s name on Schedule 2 hereto (the “ 1st Close Shares ”) for aggregate consideration consisting of $200,000,000 in cash (the “ 1st Close Cash Consideration ”), with the amounts payable for the account of each Seller set forth opposite its name on Schedule 2 hereto. For purposes of the 1st Close FIA Approval application and calculation of the ROC securities transaction tax, the parties hereto agree that the 1st Close Cash Consideration shall be deemed to represent NT$ equivalent to NT$6,460,000,000 at the exchange rate of US$1 to NT$32.30.

(b) The closing of the purchase and sale of the 1st Close Shares contemplated by Section 2.1(a) (the “ 1st Closing ”) shall take place at the offices of Jones Day (Taipei), located at 6F, 2 Tun Hwa S. Road, Sec. 2 Taipei 106, Taiwan, R.O.C. (the “ Closing Location ”), at 3:00 p.m. local time (the “ Closing Time ”), on the second Business Day after the conditions to the 1st Closing set forth in Article VI have been satisfied or (if permissible) waived (except for those conditions to be satisfied at the 1st Closing, but subject to the satisfaction or waiver thereof at the 1st Closing), or such other time or date as the parties may mutually agree in writing; provided that that the parties agree to use their reasonable best efforts to cause the 1st Closing to occur on the first Business Day following the satisfaction and waiver of such conditions to the 1st Closing.

2.2 1st Closing Date

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. The date upon which the 1st Closing occurs is referred to herein as the “ 1st Closing Date ”, and the 1st Closing shall be deemed to have occurred at 12:01 a.m. (Taipei time) on the 1st Closing Date.

2.3 Deliveries at 1st Closing

. At the 1st Closing:

(a) the Seller Parent shall deliver a copy of an extract from the Company’s shareholders register showing the Buyer as a shareholder of the Company holding the number of the 1st Close Shares,

(b) the Sellers shall take such other actions as may be required under the Laws of the ROC and other Laws to register the 1st Close Shares in the name of the Buyer, and

(c) the Buyer shall deliver to the Sellers, by wire transfer of immediately available funds pursuant to the instructions delivered by the Sellers to the Buyer Parent at least two Business Days prior to the 1st Closing, an amount equal to (i) the 1st Close Cash Consideration, less (ii) the applicable ROC securities transaction tax (which tax shall be withheld by the Buyer and remitted by the Buyer to the applicable taxing authority on behalf of the Sellers).

2.4 2nd Closing; Sale and Purchase of 2nd Close Shares

(a) At the 2nd Closing, upon the terms and subject to the conditions of this Agreement, the Sellers shall sell, transfer, assign, convey and deliver (the “ 2nd Share Purchase ”) to the Buyer, free and clear of all Liens, and the Buyer shall purchase from the Sellers, the number of shares set forth opposite each Seller’s name on Schedule 2 hereto (the “ 2nd Close Shares ”), for aggregate consideration consisting of $200,000,000 in cash (the “ 2nd Closing Cash Consideration ” and, together with the 1st Close Cash Consideration, the “ Consideration ”), with the amounts payable for the account of each Seller set forth opposite its name on Schedule 2 hereto. For the avoidance of doubt, the Consideration paid by Buyer to the Sellers pursuant to the terms of this Agreement shall be for the Shares and for the right to receive the proceeds from the sale of the FINI Shares pursuant to Section 5.14 hereof, and no additional consideration shall be paid or payable by Buyer in exchange for the proceeds from the FINI Shares. For purposes of the 2nd Close FIA Approval application (it being understood that the 2nd Close FIA Approval application is subsumed in the 1st Close FIA Approval application) and calculation of the ROC securities transaction tax, the parties hereto agree that the 2nd Closing Cash Consideration shall be deemed to represent NT$ equivalent to NT$6,460,000,000 at the exchange rate of US$1 to NT$32.30.

(b) The closing of the purchase and sale of the 2nd Close Shares (the “ 2nd Closing ”) shall take place at the Closing Location at the Closing Time, on the second Business Day after the conditions to the 2nd Closing set forth in Article VI have been satisfied or (if permissible) waived (except for those conditions to be satisfied at the 2nd Closing, but subject to the satisfaction or waiver

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thereof at the 2nd Closing), or such other time or date as the parties may mutually agree in writing; provided that that the parties agree to use their reasonable best efforts to cause the 2nd Closing to occur on the first Business Day following the satisfaction and waiver of the conditions to the 2nd Closing; provided further, however, that unless the Buyer has received the 2nd Close FIA Approval, the 2nd Closing shall not occur prior to the 51st day following the 1st Closing Date.

2.5 2nd Closing Date

. The date upon which the 2ndClosing occurs is referred to herein as the “ 2nd Closing Date ”, and the 2nd Closing shall be deemed to have occurred at 12:01 a.m. (Taipei time) on the 2nd Closing Date.

2.6 Deliveries at 2nd Closing

. At the 2ndClosing:

(a) the Sellers shall

(i) deliver a copy of an extract of the Company’s shareholders register showing the Buyer as a shareholder of the Company holding the number of the 1st Close Shares and the 2nd Close Shares,

(ii) take such other actions as may be required under the Laws of the ROC and other Laws to register the 2nd Close Shares in the name of the Buyer, and

(iii) deliver resignations from each member of the Board of Directors and Supervisors of the Company that is a corporate representative or designee of any Seller with effect as of the 2nd Closing, and

(b) the Buyer shall deliver to the Sellers, by wire transfer of immediately available funds pursuant to the instructions delivered by the Sellers to the Buyer Parent at least two Business Days prior to the 2nd Closing, an amount equal to (i) the 2nd Closing Cash Consideration, less (ii) the applicable ROC securities transaction tax (which tax shall be withheld by the Buyer and remitted by the Buyer to the applicable taxing authority on behalf of the Sellers).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

The Sellers represent and warrant as of each of (i) the date hereof, (ii) the 1st Closing Date and (iii) the 2nd Closing Date that, except as set forth in the disclosure letter delivered to the Buyer Parent concurrently herewith (the “ Sellers’ Disclosure Letter ”):

3.1 Title to the Shares

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. The Sellers have good and valid title to the Seller Shares, free and clear of any and all Liens, and upon consummation of the Share Purchase contemplated hereby, the Buyer will acquire from the Sellers good and marketable title to the Shares, free and clear of any and all Liens. The rights of Nanya arising as a result of the Share Purchase under the JV Agreement and the Ancillary JV Agreements have been waived per that certain waiver agreement between the Seller Parent and Nanya, a signed copy of which has been previously provided to the Buyer Parent (the “ Nanya Waiver ”). Other than the JV Agreement and the Acquisition Total Documents, neither of the Sellers nor any of their Affiliates is a party to any voting trust or voting agreement with respect to, or granted any proxy to represent, the Seller Shares. The only shares of the Company owned by the Sellers and their Subsidiaries are the Seller Shares. Upon the full consummation of the Share Purchase contemplated hereby at the 2nd Closing Date, neither of the Sellers nor any of their Affiliates will (i) directly or indirectly own any shares of Common Stock (other than the FINI Shares) or shares, options, warrants, calls, stock appreciation rights, or other rights or commitments or any other agreements of any character relating to dividend rights or to the sale, issuance or voting of, or the granting of rights to acquire, any shares of capital stock or voting securities of the Company, or any securities or obligations convertible into, exchangeable for or evidencing the right to purchase any shares of capital stock or voting securities of the Company (collectively “ Equity Interests ”), or (ii) have the right or authority, contractual or otherwise, to directly or indirectly direct or participate in the vote of any share of Common Stock or Equity Interests in the Company or the business, management and policies of the Company.

3.2 Due Incorporation

. The Seller Parent is a stock corporation duly incorporated, validly existing under the Laws of Germany. The Seller Sub is a private limited company duly organized under and validly existing under the Laws of The Netherlands.

3.3 Sellers Right, Power and Authority

. Each of the Sellers has the full right, power and authority to enter into the Acquisition Documents to which it is, or is intended to be, a party and all other instruments contemplated by or related thereto, to transfer, convey and sell the Shares to the Buyer in accordance with this Agreement (in the case of the Sellers) and to perform its obligations under the Acquisition Documents.

3.4 Enforceability

. Each of the Sellers has duly executed and delivered this Agreement (and, as applicable, at or prior to the 1st Closing, each of the Sellers will have duly executed and delivered the other Acquisition Documents to which it is intended to be a party), and this Agreement constitutes (and, as applicable, as of the date of effectiveness of each of the other Acquisition Documents to which it is intended to be a party will constitute) a legal, valid and binding obligation, enforceable against each of the Sellers in accordance with its terms, except as the same may be limited by bankruptcy,

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insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditors’ rights generally now or hereafter in effect, and by general equitable principles.

3.5 No Consents Required

. The execution, delivery and performance by each of the Sellers of this Agreement, and the execution, delivery and performance by each of the Sellers of the other Acquisition Documents to which it is or is intended to be a party, do not and will not (i) violate, in any material respect, any Law, (ii) other than the clearances required from the applicable competition law authorities and the foreign investment approval by the Investment Commission, require any filing with, or any permit, consent or approval of, or the giving of any notice to (including under any right of first refusal or similar provision), any Person (including filings, consents or approvals required under any Contracts to which the either of the Sellers, any of their Affiliates or the Company is a party or is bound), (iii) result in a material violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default under, or give rise to any right of termination, cancellation or acceleration of, any charter document of or any right or obligation of either of the Sellers, any of its Affiliates or the Company or to a loss of any benefit to which either of the Sellers, any of their Affiliates or the Company is entitled, or create or trigger any right of any counterparty under any material Contract binding upon the any Seller, any of its Affiliates or the Company, or (iv) result in the creation or imposition of any Lien, (A) on any material asset of the Company, (B) on any of the Shares, or (C) that could adversely affect any of the Sellers or the Company’s ability to perform its obligations under any of the Acquisition Total Documents in any material respect.

3.6 Due Organization of the Company

. The Company is a company-limited-by-shares duly incorporated and validly existing under the Laws of the ROC and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to have such power and authority would not have a Material Adverse Effect. The Company’s Articles of Incorporation as attached to this Agreement as Schedule 3.6(a) represent the current version of such Articles of Incorporation as of the date of this Agreement. The Shares have been validly issued and are fully paid up. All facts relating to the Company that can be registered in the companies register of the ROC Ministry of Economic Affairs are actually registered in such companies register. Schedule 3.6(b) contains a print-out from the companies register, up-to-date, complete and correct as of the date hereof. There exist no agreements outside the Articles of Incorporation, the JV Agreement and the Nanya/Seller Termination Agreement that affect the governance and organization of the Company in any material respect.

3.7 Capitalization

. The authorized share capital of the Company consists of a total of 4,000,000,000 authorized Common Stock, par value NT$10 per share of which 3,337,512,000 are issued and outstanding. The rights and privileges of the Common Stock are as stated in the Company’s Articles of Incorporation. There are no other authorized classes of equity interests of any type other than the

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Common Stock. The Company does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments, agreements or other obligations of any character calling for the purchase or issuance of any Common Stock or subscription rights or any equity security of the Company or any securities representing the right to purchase or otherwise receive any Common Stock or any other equity security of the Company other than (i) 100,000 options (at 1,000 shares per option) granted pursuant to the Company’s “Rules of 2007 IMI Employee Stock Option Issuance and Subscription” in 2007 and (ii) 80,000 options (at 1,000 shares per option) granted pursuant to the Company’s “Rules of 2008 IMI Employee Stock Option Issuance and Subscription” in 2008. All 180,000 options granted and issued have not yet been vested or converted, and some may have been forfeited because of termination of employment.

3.8 Subsidiaries

. To the Sellers’ Knowledge, the Company has no Subsidiaries.

3.9 Financial Statements

. The (i) audited balance sheets of the Company as of December 31, 2007 and the audited statements of income, stockholders’ equity and cash flows, for the fiscal year then ended, together with all related notes and schedules thereto (collectively, the “ Audited Financial Statements ”), accompanied by the audit report of KPMG, independent auditors of the Company, and (ii) the unaudited balance sheet of the Company as of June 30, 2008 (the “ Most Recent Balance Sheet Date ”) and the unaudited statements of income, stockholders’ equity and cash flows for the six month period then ended (the “ Unaudited Financial Statements ” and, together with the Audited Financial Statements, the “ Company Financial Statements ”), fairly present in all material respects the financial position of the Company as of the respective dates thereof, and the results of the operations of the Company for the periods covered thereby, in each case in accordance with generally accepted accounting principles in the ROC (“ GAAP ”) consistently applied during the periods involved, except as indicated in any notes thereto (and except in the case of the Unaudited Financial Statements, for the absence of footnotes and subject to year-end audit adjustments).

3.10 Contracts and Relationships

. Section 3.10(a) of the Sellers’ Disclosure Letter lists, and the Sellers have provided to the Buyer Parent in the Data Room true and complete copies of, all Contracts between any Seller and any of its Subsidiaries (excluding the Company) and the Company (the “ Seller Parent/Inotera Contracts ”). Section 3.10(b) of the Sellers’ Disclosure Letter lists, and the Sellers have provided to the Buyer Parent in the Data Room true and complete copies of, all Contracts between any Seller and any of its Subsidiaries (excluding the Company) and Nanya and any of its Subsidiaries that relate to the Company (the “ Seller Parent/Nanya Contracts ”). After the 2nd Closing Date, (i) the relationships between the Seller and any of its Subsidiaries, on the one hand, and the Company, on the other hand, will be governed exclusively by the Acquisition Total Documents to which they are parties, and (ii) the Sellers and their Subsidiaries will not be party to any other Contracts with respect to the Company.

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3.11 Legal Proceedings; Orders

(a) There is no Proceeding that has been commenced by or against any Seller that challenges, or that could reasonably be expected to have the effect of preventing, delaying, or making illegal, any of the transactions contemplated hereby.

(b) There is no Order to which any Seller, or any of the assets owned by any Seller, is subject that has or could reasonably be expected to have the effect of preventing, delaying, or making illegal any of the transactions contemplated hereby.

3.12 Brokers

. Neither of the Sellers nor any of their Subsidiaries has paid or agreed to pay, or received any claim with respect to, any brokerage commissions, finders’ fees or similar compensation (it being understood that the foregoing does not include the fees, commissions and expenses payable by Seller Parent to its financial advisor with respect to the transactions contemplated hereby and any fees, commissions and expenses payable in connection with the sale of the Seller Shares, which fees, commissions and expenses shall be paid solely by the Sellers) in connection with the transactions contemplated hereby.

3.13 Insolvency; Stand Alone Viability

. The Management Board of the Seller Parent has obtained external legal and business advice regarding relevant insolvency considerations and has determined that the Seller Parent is neither “illiquid” ( zahlungsunfähig ) nor “over-indebted” ( überschuldet ) within the meaning of the relevant sections of the German Insolvency Code ( Insolvenzordnung ), and no third party has applied for the opening of insolvency proceedings ( Insolvenzverfahren ) with respect to the Seller Parent.

3.14 Company Assets and Revenue

. The Company does not hold assets located in the United States having an aggregate total value of over $63.1 million, and did not make aggregate sales in or into the United States of over $63.1 million in its most recent fiscal year, within the meaning of 16 C.F.R. 802.51 of the Rule promulgated under the Hart-Scott-Rodino Act, as amended.

3.15 Disclosure

. To Sellers’ Knowledge, none of this Agreement, the Company Financial Statements, the Sellers’ Disclosure Letter, any other Acquisition Document or any certificate delivered in accordance with the terms of any such agreement or document, contains any untrue statement of material fact, or omits any statement of material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE BUYER PARENT AND THE BUYER

The Buyer Parent and the Buyer represent and warrant that as of each of (i) the date hereof, (ii) the 1st Closing Date and (iii) the 2nd Closing Date that:

4.1 Due Incorporation and Authority

. The Buyer Parent is a corporation duly organized, validly existing and in good standing under the Laws of Delaware. The Buyer Parent has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Buyer is a private limited company duly organized under and validly existing under the Laws of The Netherlands. The Buyer has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted.

4.2 Buyer Right, Power and Authority

. Each of the Buyer Parent and the Buyer has the full right, power and authority to enter into the Acquisition Documents to which it is or is intended to be a party and all other instruments contemplated by or related thereto and to perform its obligations under the Acquisition Documents.

4.3 Enforceability

. Each of the Buyer Parent and the Buyer has duly executed and delivered this Agreement, and this Agreement constitutes (and, as applicable, as of the effective date of each of the other Acquisition Documents to which it is intended to be a party will constitute) a legal, valid and binding obligation, enforceable against each of the Buyer Parent and the Buyer, as applicable, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditors’ rights generally now or hereafter in effect, and by general equitable principles.

4.4 No Consents Required

. The execution, delivery and performance by each of the Buyer Parent and the Buyer of this Agreement, and the execution, delivery and performance of the other Acquisition Documents to which they are to be a party, do not and will not (i) violate, in any material respect, any Law, (ii) other than the clearances required from the applicable competition law authorities and the foreign investment approval by the Investment Commission, require any material filing with, or any material permit, consent or approval of, or the giving of any material notice to (including under any right of first refusal or similar material provision), any Person (including material filings, consents or approvals required under any material Contracts to which the Buyer Parent or the Buyer, any of their Affiliates is a party or is bound), (iii) result in a violation or breach of, or conflict with, any charter document of the Buyer Parent or the Buyer.

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4.5 Financing

. The Buyer Parent has, as of the date hereof and as of the 1st Closing Date, sufficient cash, available lines of credit or other sources of immediately available funds to enable it to pay the 1st Close Cash Consideration. The Buyer Parent also has, as of the date hereof and as of the 1st Closing Date, commitment letters executed by the Buyer Parent, the Buyer and prospective lenders regarding proposed financing sufficient to fund the 2nd Closing Cash Consideration, copies of which has been provided to the Seller Parent (the “ Commitment Letters ”). As of the date hereof, the Commitment Letters have not been revoked or amended.

ARTICLE V

COVENANTS AND AGREEMENTS

5.1 Voting of Shares

. Between the date of this Agreement and the 2nd Closing Date, except as contemplated by this Agreement or otherwise agreed to in writing by the Buyer Parent, the Sellers shall not:

(a) vote the Seller Shares in favor of the amendment of, or otherwise permit the Company to amend the Company’s Articles of Incorporation;

(b) resolve on any increase in the paid-in capital of the Company;

(c) vote the Seller Shares to approve or otherwise permit the declaration, setting aside or payment of any dividend or other distribution on or in respect of the Common Stock or other shares of the Company; or

(d) vote the Seller Shares in favor of the amendment of any Acquisition Total Document or any agreement listed in Section 3.10 of the Sellers’ Disclosure Letter; or

(e) enter into any voting agreement or voting trust, grant any proxy, or otherwise grant or transfer any voting rights with respect to any of the Seller Shares.

5.2 Conduct of Business

. From and after the date hereof and until the 2nd Closing, unless the Buyer Parent shall have given its prior written consent to Seller Parent to do otherwise, the Sellers shall not exert their influence, through the voting of Company securities or otherwise, to cause the Company to take any of the following actions (provided, however, that nothing in this Agreement shall require any member of the Board of Directors of the Company to violate his or her duties to the Company under applicable corporate or other Laws):

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(a) operate the business of the Company other than in the ordinary and usual course of normal day-to-day operations of such business as conducted prior to the date hereof (the “ Ordinary Course of Business ”) or fail to maintain all of the facilities, assets and properties of the Company in their condition as of the date hereof, normal wear and tear excepted;

(b) eliminate or reduce the insurance coverage of the Company’s facilities, assets, properties or interests;

(c) (i) disrupt the Company’s business organizations, (ii) terminate the services of the Company’s present employees and other service providers, or (iii) terminate the Company’s present relationships with its material vendors, suppliers and customers and other Persons having business relationships with it;

(d) (i) solicit, encourage, cooperate with or facilitate (by way of furnishing information or otherwise) any inquiries or proposals (other than the transactions contemplated hereby) for the acquisition of the stock, assets or business of the Company or (ii) acquire any material assets, properties or interests other than in the Ordinary Course of Business;

(e) merge or consolidate with any other Person, amend or modify its organizational documents or effect any issuance of securities, stock split, reverse stock split or reclassification;

(f) enter into, or become obligated under, any material Contract;

(g) terminate or change, amend or otherwise modify any material Contract;

(h) take any action to implement, or decide to implement in the future, any material technology or process not in use by the Company on the date hereof;

(i) incur or guarantee any indebtedness or suffer or permit the creation of any Lien outside the Ordinary Course of Business upon any facilities, assets, properties or interests of the Company;

(j) retain or hire any new senior management employee, increase or otherwise change the rate or nature of compensation and benefits (including wages, salaries and bonuses and benefits under pension profit sharing, deferred compensation and other employee benefit plans and programs) which is paid or payable to any employee of the Company or enter into or amend any employment, consulting or similar Contract, in each case outside the Ordinary Course of Business;

(k) release, settle or compromise any material claim, or waive any material right, of the Company or settle or compromise any pending or threatened material claim against the Company; and

(l) agree to take any action which would breach or violate clauses (a)-(k) of this Section 5.2.

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5.3 No Transfer of the Shares

. Between the date of this Agreement and the 2nd Closing Date, the Sellers shall not voluntarily or involuntarily offer, sell, grant any option on or interest in, transfer any rights with respect to, create or permit any Lien on or otherwise transfer (or make any exchange, gift, assignment or pledge of) all or any part of its interest in the Seller Shares.

5.4 Expenses

. Other than the filing fees in respect of the regulatory filings contemplated by Section 5.6(a), which shall be shared equally by the Buyer Parent and the Seller Parent, and except as otherwise specifically provided herein, each of the Buyer Parent and the Buyer, on the one hand, and the Sellers, on the other hand, shall bear their respective expenses incurred in connection with the preparation, execution and performance of this Agreement and the transactions contemplated hereby, including all fees and expenses of agents, representatives, counsel, investment bankers and accountants.

5.5 Publicity

. Promptly following the execution and delivery of this Agreement by each of its parties, the Seller Parent and the Buyer Parent shall each issue a press release in the forms previously agreed between them. Except as may be required by Law or the rules and regulations of any exchange on which a party’s securities are listed or quoted, the parties hereto agree that, between the date hereof and the 2nd Closing Date, no further publicity release or announcement concerning this Agreement and the transactions contemplated hereby shall be made without advance consultation between the Seller Parent and the Buyer Parent, and (except to the extent that compliance with this requirement would result in a violation of applicable Law or the rules or regulations of any exchange on which a party’s securities are listed or quoted), prior to making such announcement, the announcing party will deliver a draft of such announcement to the other parties and shall give the other parties reasonable opportunity to comment thereon.

5.6 Required Consents

(a) The Buyer Parent and the Seller Parent shall take all reasonable steps necessary to cause all filings that are required to be made with respect to the consummation of the 1st Share Purchase and the 2nd Share Purchase with all competent merger control authorities and Governmental Bodies to be made as soon as practicable after the date hereof, and (i) in respect of filings required for the 1st Closing, on or prior to the later of (x) one (1) Business Day of the date hereof, and (y) one (1) Business Day from the date that the Buyer Parent receives from Nanya all information and documentation required to make such a filing and any required approvals from Nanya in respect of making any joint filings; and (ii) in respect of filings required for the 2nd Closing, on or prior to the later of (x) three (3) Business Days from the date hereof, and (y) one (1) Business Day from the date that the Buyer Parent receives from Nanya all information and

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documentation required to make such a filing and any required approvals from Nanya in respect of making any joint filings. Such filings shall (unless otherwise required by Law) be made by the Buyer Parent on behalf of all parties, but the contents of such filings shall require prior written approval of the Seller Parent, which shall not unreasonably be withheld or delayed.

(b) In connection with the efforts referenced in Section 5.6(a), each of the Buyer Parent and the Seller Parent shall (i) use its reasonable efforts to cooperate in all respects with the other in connection with any filing or submission and in connection with any investigation or other inquiry, including any Proceeding initiated by a private party, (ii) keep the other party informed of any material communication received by such party from, or given by such party to, the antitrust or competition law authorities of any jurisdiction (collectively, the “ Antitrust Authorities ”), or any other Governmental Body and of any material communication received or given in connection with any Proceeding by a private party, in each case regarding any of the transactions contemplated hereby, and (iii) to the extent permissible by applicable Laws, permit the other party or its external counsel to review any material communication given by it to, and consult with each other in advance of any meeting or conference with, any Antitrust Authority, or any such other Governmental Body or, in connection with any Proceeding by a private party, with any other Person.

(c) Each of the Buyer Parent and the Seller Parent shall exercise reasonable efforts to prevent the entry in any claim, action, suit, audit, assessment arbitration or inquiry, or any Proceeding, by or before any Governmental Body by any Antitrust Authority or any other Person of any Order which would prohibit, make unlawful or delay the consummation of the transactions contemplated by this Agreement.

(d) Each of the parties hereto shall cooperate in good faith with the Antitrust Authorities, consent to the sharing of confidential information among Antitrust Authorities, and undertake promptly any and all reasonable action required to complete lawfully the transactions contemplated by this Agreement. Notwithstanding the foregoing or any other provision of this Agreement, no party shall be required to agree to (a) any license, sale or other disposition or holding separate (through establishment of a trust or otherwise) of any shares of its capital stock or of any of its businesses, assets or properties, its Subsidiaries or Affiliates, (b) the imposition of any limitation on the ability of the Buyer Parent, its Subsidiaries or Affiliates or the Company to conduct their respective businesses or own any capital stock or assets or to acquire, hold or exercise full rights of ownership of their respective businesses and, in the case of the Buyer Parent and the Buyer, the businesses of the Company, or (c) the imposition of any impediment on the Buyer Parent, its Subsidiaries or Affiliates or the Company under any Law governing competition, monopolies or restrictive trade practices. Nothing herein shall require the Buyer Parent or the Buyer to litigate with any Governmental Body.

(e) Each of the Sellers, the Buyer Parent and the Buyer shall exercise reasonable efforts to obtain or make all other required consents and notices.

(f) At all times prior to the 2nd Closing, the parties hereto shall cooperate and coordinate with each other, as appropriate, with respect to filings and notifications to Governmental

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Bodies in connection with obtaining or making the required consents and notices. Without limiting the generality of the foregoing, the Seller Parent, on the one hand, and the Buyer Parent, on the other hand, shall make or cause to be made available all information reasonably requested by the other party to permit all necessary filings and notices to be made with or to Governmental Bodies as promptly as practicable after the date hereof. Each party shall promptly furnish or cause to be furnished all information and documents reasonably required by the relevant Governmental Bodies as may be appropriate in order to obtain or make any required consents and notices.

5.7 Change in Membership of Company Board

. The Sellers shall cause their representatives, as well as representatives of any Seller’s Affiliate, on the Board of Directors and Supervisors of the Company to resign from their position with effect as of the end of the 2nd Closing Date. Prior to the 2nd Closing, the Seller Parent agrees to take all actions as may be necessary and shall cause the members of the Board of Directors of the Company appointed by the Seller Parent to vote and take such other actions as may be necessary, to call a meeting of the shareholders of the Company to be held as promptly as possible following the anticipated 2nd Closing for purposes of electing the nominees appointed by Buyer Parent to the Board of Directors and supervisors of the Company as contemplated by the New JV Agreement, and in the event the 2nd Closing is delayed for any reason beyond such anticipated 2nd Closing, to take such steps as are necessary to postpone or adjourn the meeting from time to time so that it occurs as promptly as possible following the new anticipated 2nd Closing. In the alternative, to the extent necessary to ensure such meeting occurs as promptly as practicable following the 2nd Closing, if reasonably feasible to do so, such meeting shall be called for the purpose of full re-election of all directors of the Board and the supervisors.

5.8 Sellers Non- Solicit

. For a period of three (3) years from the 2nd Closing Date (the “ Non-Solicitation Period ”), the Sellers shall not, and shall not permit any of the Sellers’ Affiliates or any representatives, advisors or agents of the Sellers or any of its Affiliates to, directly or indirectly, contact, approach or solicit for the purpose of offering employment to or hiring (whether as an employee, consultant, agent, independent contractor or otherwise), or actually hire, any Person employed by or seconded by any Person other than the Seller or any of the Seller’s Affiliates to the Company at any time before the 2nd Closing Date or employed by or seconded by any Person other than the Seller or any of the Seller’s Affiliates to the Company during the Non-Solicitation Period, without the prior written consent of the Buyer Parent. During the Non-Solicitation Period, the Sellers shall not, and shall not permit any of the Sellers’ Affiliates or any representatives, advisors or agents of the Sellers or any of its Affiliates to, directly or indirectly, induce or attempt to induce any Person that has a business relation with the Company to terminate or modify that business relationship.

5.9 Further Assurances

. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its reasonable efforts to take or cause to be taken all reasonable action and to do or cause to be done

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all things reasonably necessary, proper or advisable under applicable Laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including (a) contesting any Proceeding relating to the transactions contemplated hereby and (b) executing any additional instruments necessary to consummate the transactions contemplated hereby. If at any time after the date hereof any further reasonable action is necessary to carry out the purposes of this Agreement, the proper officers and directors of each party hereto shall take all such necessary action.

5.10 Buyer Financing.

The Buyer Parent shall use its reasonable efforts to take, or cause to be taken, such actions and to do, or cause to be done, such things as are reasonably necessary, proper or advisable to arrange and obtain financing on the terms and conditions described in the Commitment Letters or alternate financing on terms and conditions reasonably acceptable to the Buyer Parent.

5.11 New JV Agreements; Patent Cross License.

(a) The Buyer Parent shall use its reasonable efforts to take, or cause to be taken, such actions and to do, or cause to be done, such things as are reasonably necessary, proper or advisable to negotiate and enter into the New JV Agreement and New JV Ancillary Agreements on the terms and conditions contemplated by the New JV MOU or such other terms and conditions as are reasonably acceptable to the Buyer Parent.

(b) The Buyer Parent and the Seller Parent shall negotiate in good faith and use their reasonable efforts to take, or cause to be taken, such actions and to do, or cause to be done, such things as are reasonably necessary, proper or advisable to negotiate and enter into the Patent Cross License on terms and conditions as are reasonably acceptable to the parties.

5.12 Notification

. From the date hereof, the Sellers shall promptly notify the Buyer Parent in writing of any event, condition, fact or circumstance that would make the satisfaction of any of the conditions set forth in Article VI hereof on the 1st Closing Date or the 2nd Closing Date impossible or reasonably unlikely. Each such notification shall include a certification of an officer of each Seller that such notification is being delivered in accordance with this Section 5.12.

5.13 Buyer Parent Financing Information Assistance

. The Sellers will use all reasonable efforts to provide to the Buyer Parent upon request, or to cause the Company to provide to the Buyer Parent upon request, all cooperation reasonably requested by the Buyer Parent in connection with the arrangement of any financing proposed by the Buyer Parent in connection with the transactions contemplated hereby (a “ Financing ”), including (i) participation in a reasonable number of meetings, presentations, road shows, due diligence sessions and sessions with rating agencies, and (ii) assisting with the preparation of materials for rating agency presentations, offering documents, private placement memoranda, bank information

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memoranda, prospectuses, business projections and similar documents required in connection with the Financing.

5.14 Sale of FINI Shares

. Promptly after the 2nd Closing Date, the Seller Parent shall sell the FINI Shares on the Taiwan Stock Exchange and shall remit the proceeds of such sale, net of brokerage fees and commissions and taxes (if any), to the Buyer.

ARTICLE VI

CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PARTIES TO CLOSE

6.1 1st Closing Conditions to All Parties’ Obligations

. The obligation of the Buyer Parent, the Buyer and the Sellers to consummate the 1st Closing is subject to the fulfillment on or prior to the 1st Closing Date of the following conditions:

(a) German Merger Control . The FCO shall have cleared the purchase of at least the 1st Close Shares by the Buyer. This condition shall be deemed satisfied if the FCO (i) has declared that the concentration does not meet the requirements for prohibition pursuant to Section 36(1) of the Act Against Restraints of Competition ( Gesetz gegen Wettbewerbsbeschränkungen , the “ GWB ”) (either unconditionally or subject to the fulfillment of certain conditions or obligations) or (ii) the concentration is deemed to be cleared by the FCO pursuant to Section 41(1) and 40(1) GWB.

(b) Governmental Bodies Approvals . All required consents, approvals and authorizations of all relevant Governmental Bodies necessary for the 1st Share Purchase, in addition to the FCO clearance referred to in clause (a), shall have been obtained and all required waiting periods required by such authorities shall have expired, including the 1st Close FIA Approval. For the avoidance of doubt, the parties are aware of no such consents, approvals or authorizations other than the 1st Close FIA Approval.

(c) No Orders . No temporary restraining Order, preliminary or permanent injunction or other Order which restrains, prohibits, or renders this Agreement or the consummation of the Share Purchase as contemplated by this Agreement illegal shall be in effect. No Law shall have been promulgated, enacted, entered, enforced or deemed applicable by a Governmental Body, which (i) would make illegal the Share Purchase as contemplated by this Agreement or (ii) has had or could reasonably be expected to have a Material Adverse Effect.

(d) Commitment Letters . The Commitment Letters shall not have been revoked or shall have been superseded by an alternative commitment obtained pursuant to Section 5.10.

(e) Nanya Waiver . The Nanya Waiver shall not have been revoked or modified.

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6.2 1st Closing Conditions to the Buyer Parent and the Buyer’s Obligations

. The obligation of the Buyer Parent and the Buyer to consummate the 1st Closing is subject to the following additional conditions, any of which may be waived by the Buyer Parent in its sole discretion:

(a) Representations of the Sellers True . The representations and warranties of the Sellers set forth in Article III (disregarding all qualifications and exceptions contained therein regarding materiality or a Material Adverse Effect) shall have been true and correct when made and shall be true and correct as of the 1st Closing as if made as of the 1st Closing (other than those representations and warranties made as of a specific date, which shall be true and correct as of such date), subject only to exceptions that would not, individually or in the aggregate, have a Material Adverse Effect.

(b) Covenant Compliance . The Sellers shall have complied in all material respects with their covenants set forth herein and in the other Acquisition Documents.

(c) Certificate of the Sellers . The Buyer Parent shall have received a certificate from each Seller, validly executed by an authorized officer of each Seller, to the effect that, as of the 1st Closing, the conditions specified in Sections 6.2(a), 6.2(b), 6.2(d) and 6.2(g) have been satisfied.

(d) Solvency . The Management Board of the Seller Parent shall have obtained external legal and business advice regarding relevant insolvency considerations and has determined that the Seller Parent is neither “illiquid” ( zahlungsunfähig ) nor “over-indebted” ( überschuldet ) within the meaning of the relevant sections of the German Insolvency Code ( Insolvenzordnung ), and no third party shall have applied for the opening of insolvency proceedings ( Insolvenzverfahren ) with respect to the Seller Parent.

(e) Fair Value Opinion . The Management Board of the Seller Parent shall have received the opinion of Citigroup Global Markets Limited (the “ Opinion ”) to the effect that, as of the date hereof, and based upon and subject to the factors and assumptions set forth therein, (i) the 1st Close Cash Consideration is fair with respect to the 1st Close Shares from a financial point of view to the Sellers and (ii) the Consideration, when taken as a whole, is fair from a financial point of view to the Sellers. A true and complete copy of the Opinion shall have been delivered to the Buyer Parent, and such opinion shall not have been amended or rescinded as of the 1st Closing Date.

(f) Pending Proceedings . No Proceeding shall be pending which could reasonably be expected to restrain or prohibit the consummation of the Share Purchase as contemplated by this Agreement.

(g) Material Adverse Effect . There shall not have occurred a Material Adverse Effect.

(h) Acquisition Documents . Each of (i) the Transition Agreement, (ii) the Buyer/Seller TLA, (iii) the Infineon/Buyer TLA, and (iv) the Company/Buyer PTLA (collectively,

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the “ 1st Close Acquisition Documents ”), shall be in full force and effect concurrent with the 1st Closing.

(i) TDCC Book-Entry Share Transfer . To enable Buyer’s designated securities agent to file appropriate and complete application with the TDCC to effect book-entry transfer of the 1st Close Shares, at least two (2) Business Days prior to the 1st Closing Date, the Sellers shall have delivered to Buyer’s designated securities agent: (1) a share transfer application form duly completed and chopped or signed, as appropriate, by each Seller for transfer of its portion of the 1st Close Shares to the Buyer, (2) each Seller’s TDCC securities passbook and relevant securities chop, (3) original filing record of the Sellers with the ROC and Future Bureau for transfer of shares by the Seller Parent as a major shareholder and director of the Company and by the Seller Sub as supervisor of the Company, (4) the 1st Close FIA Approval letter issued by the Investment Commission approving Sellers’ transfer of the 1st Close Shares to the Buyer, and (5) any other instruments and documents necessary for the application to the TDCC to effect book-entry transfer of the 1st Close Shares. Promptly after the book-entry transfer of the 1st Close Shares has been completed, the Buyer shall cause its designated securities agent to return the securities passbooks and chops referred to in clause (2) above to the Sellers.

(j) Patent Cross License . Each of the Buyer Parent and the Seller Parent shall have entered into the Patent Cross License, which shall become effective upon the 2nd Closing.

6.3 1st Closing Conditions to the Sellers’ Obligations

. The obligation of the Sellers to consummate the 1st Closing is subject to the following additional conditions, any of which may be waived by the Sellers in their sole discretion:

(a) Representations of the Buyer Parent and the Buyer True . The representations and warranties of the Buyer Parent and the Buyer set forth in Article IV (disregarding all qualifications and exceptions contained therein regarding materiality) shall have been true and correct when made and shall be true and correct as of the 1st Closing as if made as of the 1st Closing (other than those representations and warranties made as of a specific date, which shall be true and correct as of such date), subject only to exceptions that would not, individually or in the aggregate, have a material adverse effect on the ability of the Buyer Parent and the Buyer to perform any of their respective obligations under this Agreement.

(b) Covenant Compliance . The Buyer Parent and the Buyer shall have complied in all material respects with their covenants set forth herein.

(c) Certificate of the Buyer Parent . The Sellers shall have received a certificate from the Buyer Parent, validly executed by an authorized officer of the Buyer Parent, to the effect that, as of the 1st Closing, the conditions specified in Sections 6.3(a) and 6.3(b) have been satisfied.

6.4 2nd Closing Conditions to All Parties’ Obligations

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. The obligation of the Buyer Parent, the Buyer and the Sellers to consummate the 2nd Closing is subject to the fulfillment on or prior to the 2nd Closing Date of the following conditions:

(a) German Merger Control . The FCO shall have cleared the purchase of the 2nd Close Shares (or, as the case may be, have cleared the purchase of the 2nd Close Shares concurrently with its approval of the purchase of the 1st Close Shares in the 1st Close FCO Approval) by the Buyer (the “ 2nd Close FCO Approval ”). This condition shall be deemed satisfied if the FCO (i) has declared that the concentration does not meet the requirements for prohibition pursuant to Section 36(1) of the GWB (either unconditionally or subject to the fulfillment of certain conditions or obligations) or (ii) the concentration is deemed to be cleared by the FCO pursuant to Section 41(1) and 40(1) GWB.

(b) ROC Competition Authorities Approvals . The ROC Competition Authorities shall have cleared the purchase of the 2nd Close Shares.

(c) Governmental Bodies Approvals . All required consents, approvals and authorizations of all relevant Governmental Bodies necessary for the 2nd Share Purchase shall have been obtained, in addition to the 2nd Close FCO Approval, and all required waiting periods required by such authorities shall have expired, including the 2nd Close FIA Approval. For the avoidance of doubt, the parties are aware of no such consents, approvals or authorizations other than the 2nd Close FIA Approval.

(d) No Orders . No temporary restraining Order, preliminary or permanent injunction or other Order which restrains, prohibits, or renders this Agreement or the consummation of the Share Purchase as contemplated by this Agreement illegal shall be in effect. No Law shall have been promulgated, enacted, entered, enforced or deemed applicable by a Governmental Body, which (i) would make illegal the Share Purchase as contemplated by this Agreement or (ii) has had or could reasonably be expected to have a Material Adverse Effect.

(e) Nanya Waiver . The Nanya Waiver shall have not been revoked or modified.

6.5 2nd Closing Conditions to the Buyer Parent and the Buyer’s Obligations

. The obligation of the Buyer Parent and the Buyer to consummate the 2nd Closing is subject to the following additional conditions, any of which may be waived by the Buyer Parent in its sole discretion:

(a) Representations of the Sellers True . The representations and warranties of the Sellers set forth in Article III (disregarding all qualifications and exceptions contained therein regarding materiality or a Material Adverse Effect) shall have been true and correct when made and shall be true and correct as of the 2nd Closing as if made as of the 2nd Closing (other than those representations and warranties made as of a specific date, which shall be true and correct as of such date), subject only to exceptions that would not, individually or in the aggregate, have a Material Adverse Effect.

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(b) Covenant Compliance . The Sellers shall have complied in all material respects with their covenants set forth herein and in the other Acquisition Documents.

(c) Certificate of the Sellers . The Buyer Parent shall have received a certificate from each Seller, validly executed by an authorized officer of each Seller, to the effect that, as of the 2nd Closing, the conditions specified in Sections 6.5(a), 6.5(b), 6.5(d), 6.5(e), 6.5(g) and 6.5(i)(B) have been satisfied.

(e) Fair Value Opinion . The Management Board of the Seller Parent shall have received the Opinion, and the Opinion shall not have been amended or rescinded as of the 2nd Closing Date.

(f) Pending Proceedings . No Proceeding shall be pending which could reasonably be expected to restrain or prohibit the consummation of the Share Purchase as contemplated by this Agreement.

(g) Material Adverse Effect . There shall not have occurred a Material Adverse Effect.

(h) Financing . The Buyer Parent or the Buyer shall have obtained financing in an amount and on terms no less favorable to the Buyer Parent or the Buyer as those of the Commitment Letters.

(i) Third-Party Consents . (A) The Buyer Parent shall have been furnished with evidence reasonably satisfactory to it that the Company and/or each Seller, as applicable, have obtained or delivered consents, waivers, amendments and notices, in form and substance reasonably satisfactory to Buyer Parent, with respect to (a) the US$260,000,000 Five-Year Syndicate Term Loan Agreement, dated as of January 14, 2004, by and among the Company, as Borrower, and the other parties thereto, (b) the US$672,000,000 and NT$5,700,000,000 Five-Year Syndicate Term Loan Agreement, dated as of October 14, 2004, by and among the Company, as Borrower, and the other parties thereto, and (c) US$400,000,000 and NT$27,000,000,000 Five-Year Syndicated Term Loan Agreement, dated as of March 5, 2007, by and among the Company, as Borrower, and the other parties thereto, and (B) the transactions contemplated by this Agreement shall not result in a default or event of default under any of the Company's outstanding public bonds, or any such incipient or prospective default or event of default.

(j) Company Board . The Sellers shall have secured resignations from each member of the Board of Directors and Supervisors of the Company that is a corporate representative

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or designee of any Seller or its Affiliates with effect as of the 2nd Closing, and shall deliver copies of said resignations to the Buyer Parent.

(k) TDCC Book-Entry Share Transfer . To enable Buyer’s designated securities agent to file appropriate and complete application with the TDCC to effect book-entry transfer of the 2nd Close Shares, at least two (2) Business Days prior to the 2nd Closing Date, the Sellers shall have delivered to Buyer’s designated securities agent: (1) a share transfer application form duly completed and chopped or signed, as appropriate, by each Seller for transfer of its portion of the 2nd Close Shares to the Buyer, (2) each Seller’s TDCC securities passbook and relevant securities chop, if not already delivered, (3) original filing record of each of the Sellers with the ROC Securities and Futures Bureau for transfer of shares by the Seller Parent as a major shareholder and director of the Company and by the Seller Sub as supervisor of the Company, (4) the 2nd Close FIA Approval letter issued by the Investment Commission approving the Sellers’ transfer of the 2nd Close Shares to the Buyer, and (5) any other instruments and documents necessary for the application to the TDCC to effect book-entry transfer of the 2nd Close Shares.

(l) Acquisition Documents . Each of the 1st Close Acquisition Documents shall have become effective concurrent with the 1st Closing and shall continue to be in full force and effect in accordance with its terms. The Company/Buyer TTA shall have become effective concurrent with the later of (A) the receipt of the 2nd Close FCO Approval and (B) the 1st Closing and shall continue to be in full force and effect in accordance with its terms. The Nanya/Seller Termination Agreement shall be in full force and effect concurrent with the 2nd Closing.

(m) New JV Agreements . Each of the Buyer Parent and Nanya shall have entered into the New JV Agreement and each of the Buyer Parent and Nanya shall have entered into the New JV Ancillary Agreements on terms consistent with the New JV MOU and such agreements shall be effective in accordance with their terms as of no later than the 2nd Closing.

(n) Patent Cross License. The Patent Cross License shall be effective in accordance with its terms as of the 2nd Closing.

6.6 2nd Closing Conditions to the Sellers’ Obligations

. The obligation of the Sellers to consummate the 2nd Closing is subject to the following additional conditions, any of which may be waived by the Sellers in their sole discretion:

(a) Representations of the Buyer Parent and the Buyer True . The representations and warranties of the Buyer Parent and the Buyer set forth in Article IV (disregarding all qualifications and exceptions contained therein regarding materiality) shall have been true and correct when made and shall be true and correct as of the 2nd Closing as if made as of the 2nd Closing (other than those representations and warranties made as of a specific date, which shall be true and correct as of such date), subject only to exceptions that would not, individually or in the aggregate, have a material adverse effect on the ability of the Buyer Parent and the Buyer to perform any of their respective obligations under this Agreement.

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(b) Covenant Compliance . The Buyer Parent and the Buyer shall have complied in all material respects with their covenants set forth herein.

(c) Certificate of the Buyer Parent . The Sellers shall have received a certificate from the Buyer Parent, validly executed by an authorized officer of the Buyer Parent, to the effect that, as of the 2nd Closing, the conditions specified in Sections 6.6(a) and 6.6(b) have been satisfied.

ARTICLE VII

SURVIVAL

The Limited Reps and the representations and warranties of the Buyer Parent and the Buyer contained in Article IV shall survive until the first anniversary of the Date hereof or, if the 1st Closing or the 2nd Closing occurs, the later of the first anniversary of 1st Closing or the first anniversary of the 2nd Closing. Thereafter all such representations and warranties of the parties referred to in the immediately preceding sentence shall be extinguished and no claim for the recovery of any Losses may be asserted against any party in respect thereof, except that claims first asserted in a Claim Notice within the applicable period referred to above shall not thereafter be barred. The representations and warranties of the Sellers other than the Limited Reps and the covenants of the Buyer Parent, the Buyer and the Sellers contained in this Agreement which are not explicitly covered by the extinction pursuant to the two immediately preceding sentences shall survive beyond the date hereof, the 1st Closing and the 2nd Closing, except for those covenants that are expressly limited by their terms to other dates or times, which shall survive only to such dates or times. For the avoidance of doubt, the agreements of the Sellers contained in Section 5.2 shall terminate upon the 2nd Closing Date.

ARTICLE VIII

INDEMNIFICATION

8.1 Obligation of the Sellers to Indemnify

. From and after the 1st Closing Date, subject to Sections 8.3, 8.4 and 8.5, the Sellers shall indemnify, defend and hold harmless the Buyer Parent and the Buyer and each of their directors, officers and representatives, from and against all liabilities, losses and damages and reasonable attorneys’ fees, court costs and other out-of-pocket expenses (collectively, “ Losses ”) that arise out of, or result from, the breach of any representation, warranty, covenant or agreement of any Seller contained in this Agreement (or any representation, warranty, covenant or agreement in any certificate delivered pursuant to this Agreement) that survives the 1st Closing or the 2nd Closing pursuant to Article VII above.

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8.2 Obligation of the Buyer Parent to Indemnify

. From and after the date hereof, subject to Sections 8.3, 8.4 and 8.5, the Buyer Parent shall indemnify, defend and hold harmless the Sellers and their directors, officers and representatives, from and against all Losses that arise out of or result from, the breach of any representation, warranty, covenant or agreement of the Buyer Parent or the Buyer contained in this Agreement (or any representation, warranty, covenant or agreement in any certificate delivered pursuant to this Agreement) that survives the date hereof, the 1st Closing and the 2nd Closing pursuant to Article VII above.

8.3 Indemnification Procedure

(a) Any indemnified party seeking indemnification under this Agreement (each, an “ Indemnified Party ”) shall, within the relevant limitation period provided in Article VII, promptly give the indemnifying party or parties (collectively, the “ Indemnifying Party ”) written notice (a “ Claim Notice ”) describing in reasonable detail the facts giving rise to any claims for indemnification hereunder and shall include in the Claims Notice (if then known) the amount or method of computation of the amount of such claim and a reference to the provision of this Agreement or any agreement, certificate or instrument delivered pursuant to this Agreement upon which such claim is based; provided , that a Claim Notice in respect of any action at law or in equity by or against a third party as to which indemnification will be sought shall be given promptly after the action or suit is commenced; provided, further, any delay or failure to so notify the Indemnifying Party shall only relieve the Indemnifying Party of its obligations hereunder to the extent, if at all, that it is prejudiced by reason of such delay or failure.

(b) The Indemnifying Party shall have the right, at its own cost, to participate jointly in the defense of any claim or demand in connection with which the Indemnified Party has claimed indemnification hereunder, and may elect to take over the defense of such claim or demand through counsel of its own choosing by so notifying the Indemnified Party within thirty (30) days of receipt of the Indemnified Party’s Claim Notice. If the Indemnifying Party makes such an election:

(i) it shall keep the Indemnified Party reasonably informed as to the status of such matter and shall promptly send copies of all pleadings to the Indemnified Party;

(ii) with respect to any issue involved in such claim or demand, it shall have the sole right to settle or otherwise dispose of such claim or demand on such terms as it, in its sole discretion, shall deem appropriate; provided , however , that the consent of the Indemnified Party to the settlement or disposition of any claim or demand shall be required if such settlement or disposition shall result in any liability to, or equitable relief against, the Indemnified Party; and

(iii) the Indemnified Party shall have the right to participate jointly in the defense of such claim or demand, but shall do so at its own cost not subject to reimbursement under Section 8.1 or 8.2.

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(c) If the Indemnifying Party does not elect to take over the defense of a claim or demand, the Indemnified Party shall have the right to contest, compromise or settle such claim or demand in the exercise of its reasonable judgment; provided , however , that the consent of the Indemnifying Party to any compromise or settlement of such claim or demand shall be required, which consent shall not be unreasonably withheld.

(d) Each party agrees that it shall cooperate with the other parties in the defense of any claim or action.

8.4 Measure of and Limitations upon Indemnification

(a) The Sellers’ liability for any Losses under this Article VIII shall be subject to the following limitations: (i) the Sellers shall have no liability for any Losses that arise directly or indirectly under Section 3.8, 3.9, 3.10, 3.11, 3.14 and 3.15 (the “ Limited Reps ”) unless and until the aggregate amount of such Losses for which the Sellers are obligated to indemnify pursuant to Section 8.1 exceeds $1,000,000 (the “ Threshold Amount ”), in which case the Sellers shall be liable only for the aggregate amount of such Losses related to the Limited Reps, as finally determined, that exceeds the Threshold Amount; and (ii) the aggregate liability of the Sellers for all such Losses related to the Limited Reps shall not exceed, in the aggregate, 25% of the Consideration actually paid to Sellers.

(b) IN NO EVENT SHALL ANY INDEMNIFYING PARTY BE LIABLE TO ANY INDEMNIFIED PARTY FOR ANY PUNITIVE DAMAGES (OTHER THAN INDEMNIFICATION FOR AMOUNTS PAID OR PAYABLE TO THIRD PARTIES IN RESPECT OF ANY THIRD PARTY CLAIM FOR WHICH INDEMNIFICATION HEREUNDER IS OTHERWISE REQUIRED) .

8.5 Exclusivity of Indemnity

. The indemnification provided in this Article VIII shall be the sole and exclusive remedy after the 1st Closing Date and the 2nd Closing Date for damages available to the parties to this Agreement for breach of any of the representations, warranties, covenants and agreements contained herein or any right, claim or action arising from the transactions contemplated hereby that were by their terms to have been effected as of the 1st Closing Date or the 2nd Closing Date, respectively.

ARTICLE IX

TERMINATION OF AGREEMENT

9.1 Termination

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(a) This Agreement may not be terminated prior to the 1st Closing, except as follows:

(i) by mutual agreement of the Buyer Parent and the Sellers;

(ii) by the Sellers, if there has been a breach by the Buyer Parent or the Buyer of any covenant, representation or warranty contained in this Agreement that has prevented the satisfaction of any condition to the obligations of the Sellers to consummate the 1st Closing, and such breach has not been waived by the Sellers or cured, if capable of cure, by the Buyer Parent or the Buyer, within thirty (30) days after written notice thereof from the Sellers;

(iii) by the Buyer Parent, if there has been a breach by any Seller of any covenant, representation or warranty contained in this Agreement that has resulted in a Material Adverse Effect or has prevented the satisfaction of any condition to the obligations of the Buyer Parent and the Buyer to consummate the 1st Closing, and such breach has not been waived by the Buyer Parent or, if capable of cure, cured by the Sellers, within thirty (30) days after written notice thereof from the Buyer Parent;

(iv) by the Buyer Parent, if after the date hereof the Seller Parent has applied (or is in violation of German Laws by having failed to have applied) for the opening of insolvency proceedings, or a third party has applied for the opening of insolvency proceedings ( Insolvenzverfahren ) with respect to the Seller Parent; and

(v) at the election of the Buyer Parent or the Sellers upon prior written notice, if any court of competent jurisdiction or other competent Governmental Body shall have issued a final Order restraining, enjoining or otherwise prohibiting the consummation of the 1st Share Purchase or the 2nd Share Purchase and such Order is or shall have become non-appealable.

(b) Following the 1st Closing, the obligations of the parties to consummate the 2nd Closing (whether or not the conditions under Section 6.4, Section 6.5 and Section 6.6 have been satisfied) may be terminated:

(i) by mutual agreement of the Buyer Parent and the Sellers;

(ii) at the election of the Buyer Parent or the Sellers upon prior written notice, if any one or more of the conditions set forth in Section 6.4, Section 6.5 and Section 6.6 has not been fulfilled (or waived by the party whose benefit such condition is for) as of the close of business on January 31, 2009 (the “ Outside Date ”), except that any party whose conduct is in breach of this Agreement and substantially results in the failure of such condition to be fulfilled may not be the terminating party under this clause;

(iii) at the election of the Seller Parent upon written notice, if all of the conditions set forth in Sections 6.4 and 6.5 other than any one or more of those set forth in Sections 6.5(h) and 6.5(m) have been fulfilled but the 2nd Closing has not been consummated as of the close of business on the day that is the later of (i) December 15, 2008 and (ii) five days after the first date

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on which all of such conditions other than those set forth in Sections 6.5(h) and 6.5(m) are first fulfilled;

(iv) by Sellers, if there has been a breach by the Buyer Parent or the Buyer of any covenant, representation or warranty contained in this Agreement that has prevented the satisfaction of any condition to the obligations of the Sellers to consummate the 2nd Closing, and such breach has not been waived by the Sellers or cured, if capable of cure, by the Buyer Parent or the Buyer, within thirty (30) days after written notice thereof from the Sellers;

(v) by the Buyer Parent, if there has been a breach by any Seller of any covenant, representation or warranty contained in this Agreement that has resulted in a Material Adverse Effect or has prevented the satisfaction of any condition to the obligations of the Buyer Parent and the Buyer to consummate the 2nd Closing, and such breach has not been waived by the Buyer Parent or, if capable of cure, cured by the Sellers, within thirty (30) days after written notice thereof from the Buyer Parent;

(vi) by the Buyer Parent, if after the date hereof the Seller Parent has applied (or is in violation of German Laws by having failed to have applied) for the opening of insolvency proceedings, or a third party has applied for the opening of insolvency proceedings ( Insolvenzverfahren ) with respect to the Seller Parent; and

(vii) at the election of the Buyer Parent or the Sellers upon prior written notice, if any court of competent jurisdiction or other competent Governmental Body shall have issued a final Order restraining, enjoining or otherwise prohibiting the consummation of the 1st Share Purchase or the 2nd Share Purchase and such Order is or shall have become non-appealable.

9.2 Survival After Termination

(a) In the event of the termination of this Agreement pursuant to Section 9.1(a), the provisions of this Agreement shall immediately become void and of no further force or effect (other than Section 5.4, this Section 9.2, Article VII and Article X which shall survive the termination of this Agreement in accordance with their terms), and no party hereto will have any further obligations or liabilities hereunder except for obligations or liabilities arising under such surviving provisions or from a breach of this Agreement prior to such termination.

(b) In the event of the termination of the obligations of the parties to consummate the 2nd Closing pursuant to Section 9.1(b), the covenants and obligations of the parties under Sections 5.1, 5.2, 5.3, 5.5, 5.6 (but only with respect to the 2nd Closing), 5.7, 5.9 (but only with respect to the 2nd Closing), 5.10, 5.11, 5.12, 5.13 and 5.14 shall expire effective as of the termination of the obligations to consummate the 2nd Closing, and no party hereto will have any further obligations or liabilities under such provisions except for obligations or liabilities arising from a breach of any such provisions prior to such termination.

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ARTICLE X

MISCELLANEOUS

10.1 Governing Law; Venue

. EXCEPT TO THE EXTENT THAT ROC LAW IS MANDITORILY APPLICABLE TO THE COMPANY, THE TRANSFER IN REM OF THE SHARES IN THE COMPANY AND THE RIGHTS OF THE SHAREHOLDERS OF THE COMPANY, THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURTS LOCATED IN THE CITY OF NEW YORK IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. EACH PARTY HEREBY WAIVES AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION AND ENFORCEMENT HEREOF, OR ANY SUCH DOCUMENT OR IN RESPECT OF ANY SUCH TRANSACTION, THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SUCH COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS. EACH PARTY HEREBY CONSENTS TO AND GRANTS ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY SUCH DISPUTE.

10.2 Notices

. Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given (a) on the day of delivery if delivered in Person, or if delivered by facsimile upon confirmation of receipt, (b) on the first Business Day following the date of dispatch if delivered by a nationally recognized express courier service, or (c) on the tenth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated by notice given in accordance with this Section 10.2 by the party to receive such notice:

(a) if to the Buyer Parent or the Buyer, to:

Micron Technology, Inc.

8000 South Federal Way

Boise, Idaho 83716-9632

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Attn: General Counsel

Facsimile: (208) 363-1309

with a copy to:

Wilson Sonsini Goodrich & Rosati, Professional Corporation

650 Page Mill Road

Palo Alto, CA 94304

Attention: John A. Fore

Facsimile: (650) 493-6811

(b) if to any Seller, to:

Qimonda AG

Gustav-Heinemann-Ring 123

81739 Munich

Germany

Attention: Legal Department

Facsimile: (49-89) 60088-442450

with copies to:

Cleary Gottlieb Steen & Hamilton LLP

Main Tower

Neue Mainzer Strasse 52

60311 Frankfurt am Main

Germany

Attention: Ward A. Greenberg

Facsimile: (49-69) 97103-199

10.3 Entire Agreement

. This Agreement and any other collateral agreements executed in connection with the consummation of the transactions contemplated hereby, contain the entire agreement among the parties with respect to the sale and purchase of the 1st Close Shares and 2nd Close Shares and supersede all prior agreements, written or oral, with respect thereto.

10.4 Waivers and Amendments

. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Buyer Parent and the Sellers or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial

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exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.

10.5 Binding Effect; Assignment

. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. This Agreement is not assignable by any party without the prior written consent of the other parties; provided , however , that the Buyer can assign its obligations under this Agreement to the Buyer Parent or any of the Buyer Parent’s wholly owned Subsidiaries. The Buyer Parent shall be jointly and severally liable with the Buyer or any successor or assignee of the Buyer or the Buyer Parent for all obligations arising under this Agreement of any such Person to or for the benefit of any of the Sellers.

10.6 Construction

. The parties acknowledge and agree that (a) each party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision, (b) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement, and (c) the terms and provisions of this Agreement shall be construed fairly as to all parties, regardless of which party was generally responsible for the preparation of this Agreement.

10.7 Severability of Provisions

. If any provision or any portion of any provision of this Agreement shall be held invalid or unenforceable, the remaining portion of such provision and the remaining provisions of this Agreement shall not be affected thereby. If the application of any provision or any portion of any provision of this Agreement to any Person or circumstance shall be held invalid or unenforceable, the application of such provision or portion of such provision to Persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby. Furthermore, the parties shall use reasonable efforts to negotiate and include in this Agreement, in lieu of such illegal, invalid or unenforceable provision, a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

10.8 Counterparts; Delivery by Fax or E-mail

. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, of the parties hereto. Delivery of an executed counterpart of this Agreement by facsimile or electronic mail transmission shall be equally as effective as delivery of an executed hard copy of the same. Any party doing so shall also deliver an executed hard copy of same, but the failure by such party to deliver an executed hard copy shall not affect the validity, enforceability and binding effect of this Agreement.

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10.9 Transfer Taxes

. Other than as expressly provided in Sections 2.3(c) and 2.6(b), the Sellers shall (a) be responsible for any and all sales, use, stamp, documentary, filing, recording, transfer, real estate transfer, gross receipts, registration, duty or similar fees or taxes or governmental charges (together with any interest or penalty, addition to tax or additional amount imposed) as levied by any taxing authority in connection with the transactions contemplated by this Agreement (collectively, “ Transfer Taxes ”), and (b) timely file or caused to be filed all necessary documents (including all tax returns) with respect to Transfer Taxes

10.10 Language

. This Agreement shall be prepared in the English language, and the English language version shall be official. No translation into German, Chinese or any other language shall be taken into consideration in the interpretation of this Agreement.

10.11 No Third Party Beneficiaries

. No provision of this Agreement is intended to, or shall, confer any third party beneficiary or other rights or remedies upon any Person other than the parties hereto.

[Signature page follows]

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Confidential

IN WITNESS WHEREOF, the parties have executed this Share Purchase Agreement as of the date first above written.

	BUYER:

	MICRON SEMICONDUCTOR B.V.

	By:	/s/ Thomas L. Laws
		Name: Thomas L. Laws
		Title: Managing Director A

	By:	/s/ Patrick van Maurik
		Name: Patrick van Maurik
		Title: Managing Director B

	BUYER PARENT:

	MICRON TECHNOLOGY, INC.

	By:	/s/ D. Mark Durcan
		Name: D. Mark Durcan
		Title: President and Chief Operating Officer

	SELLER PARENT:

	QIMONDA AG
	By:	/s/ Kin Wah Loh
		Name: Kin Wah Loh
		Title: Chief Executive Officer

	By:	/s/ Nicole Lau
		Name: Nicole Lau
		Title: Vice President and Corporate Legal
		Counsel

	SELLER SUB:

	QIMONDA HOLDING B.V.

	By:	/s/ Nicole Lau
		Name: Nicole Lau
		Title: Attorney in Fact

(Signature Page of Share Purchase Agreement)

If to Intel :	with a copy to :
Intel Corporation 1900 Prairie City Road FM3-63 Folsom, CA 95630 Attention: NPG General Manager Facsimile: 916-377-2756	Intel Corporation 2200 Mission College Blvd. Mail Stop SC4-203 Santa Clara, CA 95054 Attention: General Counsel Facsimile: (408) 653-8050

If to Micron :

NAN YA PLASTICS CORPORATION



By:	/s/ C. J. Wu
Name:	C. J. Wu
Title:	Chairman

	NANYA TECHNOLOGY CORPORATION


	By:	/s/ Jih Lien
		Jih Lien
		President

	NANYA TECHNOLOGY CORPORATION


	By:	/s/ Jih Lien
		Jih Lien
		President

	MEIYA TECHNOLOGY CORPORATION


	By:	/s/ David Tsou
		Name: David Tsou
		Title: Supervisor

Micron Technology, Inc. 8000 S. Federal Way Mail Stop 1-507 Boise, ID 83716 Attention: General Counsel Facsimile: (208) 368-4537

If to the Joint Venture Company
IM Flash Technologies, LLC 2550 East 3400 North Lehi, UT 84043 Attention: David A. Baglee; Rodney Morgan Facsimile: (801) 767-5370

INTEL CORPORATION

By:	/s/ Robert J. Baker
Name:	Robert J. Baker
Title:	Senior Vice President


MICRON TECHNOLOGY, INC.

By:	/s/ D. Mark Durcan
Name:	D. Mark Durcan
Title:	President and COO


IM FLASH TECHNOLOGIES, LLC

By:	/s/ David Baglee
Name:	David Baglee
Title	Executive Officer

MICRON SEMICONDUCTOR B.V.



By:	/s/ Thomas L. Laws, Jr.
Name:	Thomas L. Laws, Jr.
Title:	Managing Director A


By:	/s/ S. Boermans / /s/ A.M.L. Kuijpers
Name:	S. Boermans / A.M.L. Kuijpers
Title:	Trust International Management (T.I.M.) B.V.

INOTERA MEMORIES, INC.



By:	/s/ Charles Kau
Name:	Charles Kau
Title:	President

	NANYA TECHNOLOGY CORPORATION

	By:	/s/ Jih Lien
		Name: Jih Lien
		Title: President


	QIMONDA AG

	By:	/s/ Kin Wah Loh
		Name: Kin Wah Loh
		Title: Chief Executive Officer

	By:	/s/ Nicole Lau
		Name: Nicole Lau
		Title: Vice President and Corporate Legal Counsel


	INOTERA MEMORIES, INC.

	By:	/s/ Joseph Hsieh
		Name: Joseph Hsieh
		Title: Supervisor

	By:	/s/ Jessica Chin
		Name: Jessica Chin
		Title: Supervisor


	MICRON TECHNOLOGY, INC.

	By:	/s/ D. Mark Durcan
		Name: D. Mark Durcan
		Title: President and Chief Operating Officer

	MICRON SEMICONDUCTOR B.V.


	By:	/s/ Thomas L. Laws
		Thomas L. Laws
		Managing Director A


	By:	/s/ Stefan Boermans / /s/ Clemens van den Broek
		Name: Stefan Boermans / Clemens van den Broek
		Title Trust International Management(T.I.M.) B.V.
		Managing Director B

	INOTERA MEMORIES, INC.
	By: /s/ Joseph Hsieh
	Name: Joseph Hsieh
	Title: Supervisor


	MICRON TECHNOLOGY, INC.
	By: /s/ D. Mark Durcan
	D. Mark Durcan
	President and Chief Operating Officer


	NANYA TECHNOLOGY CORPORATION
	By: /s/ Jih Lien
	Jih Lien
	President

	MICRON TECHNOLOGY, INC
	By:	/s/ D. Mark Durcan
	Name:	D. Mark Durcan
	Title:	President and Chief Operating Officer



	INOTERA MEMORIES, INC.
	By:	/s/ Charles Kau
	Name:	Charles Kau
	Title:	President

	By:	/s/ Peter Bailey
	Name:	Peter Bailey
	Title:	Executive Vice President

Date: January 13, 2009	/s/ Steven R. Appleton
	Steven R. Appleton Chairman and Chief Executive Officer