INTEGRATED DEVICE TECHNOLOGY INC, 424A, 1994-11-16

INTEGRATED DEVICE TECHNOLOGY INC
424A, 1994-11-16
SEMICONDUCTORS & RELATED DEVICES

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED NOVEMBER 15, 1994

3,400,000 SHARES

IDT LOGO GOES HERE

COMMON STOCK

Of the 3,400,000 shares of Common Stock offered hereby, 3,300,000 shares are
being sold by the Company and 100,000 shares are being sold by the Selling
Stockholders. See "Selling Stockholders." The Company will not receive any of
the proceeds from the sale of shares by the Selling Stockholders.

The Company's Common Stock is quoted on the Nasdaq National Market under
the trading symbol "IDTI." On November 14, 1994, the last reported sale price
of the Common Stock on the Nasdaq National Market was $28.625 per share. See
"Price Range of Common Stock."

SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.

----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

===============================================================================

PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- ------------ -------------- ---------------- --------------- ----------------
Per Share ... $ $ $ $
Total(3) .... $ $ $ $

==============================================================================
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $310,000.
(3) The Company and one of the Selling Stockholders have granted to the
Underwriters a 30-day option to purchase up to 510,000 additional shares of
Common Stock solely to cover over-allotments, if any. If the Underwriters
exercise this option in full, the Price to Public will total $ ,
the Underwriting Discount will total $ , the Proceeds to Company will
total $ and the Proceeds to Selling Stockholders will total $ .

The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about November , 1994.

MONTGOMERY SECURITIES
LEHMAN BROTHERS
SMITH BARNEY INC.

November , 1994

<PAGE>
AVAILABLE INFORMATION
Integrated Device Technology, Inc. ("IDT" or the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549.

The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock being offered
pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are contained in or incorporated
by reference as exhibits to the Registration Statement as permitted by the rules
and regulations of the Commission. For further information, reference is made to
the Registration Statement including the exhibits filed or incorporated by
reference therein. Statements contained herein concerning the provisions of
documents filed with, or incorporated by reference in, the Registration
Statement as exhibits are necessarily summaries of such documents and each such
statement is qualified in its entirety by reference to the copy of the
applicable documents filed with the Commission.

INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
April 3, 1994;

2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 3, 1994;

3. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 2, 1994;

4. The description of the Company's Common Stock as set forth in its
Registration Statement on Form 8-B dated September 23, 1987, as amended by the
Company's Form 8 dated March 28, 1989, and the Company's Registration Statement
on Form 8-A dated December 20, 1988, as amended by the Company's Form 8 dated
February 27, 1992; and

5. All other documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Common Stock.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or the Registration
Statement.

The Company will provide without charge, upon written or oral request of any
person to whom a copy of this Prospectus is delivered, a copy of any or all of
the documents which have been or may be incorporated by reference in this
Prospectus, other than exhibits to such documents. Requests for such copies
shall be directed to Integrated Device Technology, Inc., 2975 Stender Way, Santa
Clara, CA 95054, Attention: Chief Financial Officer, telephone (408) 727-6116.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF
THE COMPANY IN THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

The following is qualified in its entirety by reference to the more
detailed information and consolidated financial statements, including the notes
thereto, appearing elsewhere or incorporated by reference in this Prospectus.
The Company's fiscal year ends on the Sunday closest to March 31 and the first,
second and third fiscal quarters end on the Sunday closest to June 30, September
30 and December 31, respectively. As a result, there were 53 weeks in fiscal
1994 and 14 weeks in the fourth quarter of fiscal 1994. For ease of reference,
month-end dates are used herein except in the Consolidated Financial Statements
and related notes thereto. Except as otherwise noted, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option.

THE COMPANY

Integrated Device Technology, Inc. ("IDT" or the "Company") designs,
develops, manufactures and markets a broad range of high-performance
semiconductor products for the workstation/server, desktop computer, office
automation and communications markets. The Company focuses its development
efforts on providing proprietary and enhanced industry-standard products that
improve the performance of systems incorporating high-performance
microprocessors. The Company offers over 5,000 product configurations in four
product families: SRAM components and modules, specialty memory products, logic
circuits and RISC microprocessors and subsystems.

The Company has introduced 33 new products in a variety of configurations
since the beginning of fiscal 1994, including the ORION 64-bit microprocessor
and a family of 3.3 volt SRAMs. The Company believes that its ability to
introduce new, higher-performance products has resulted in its becoming a market
leader in SRAMs, SRAM cache modules, FIFO and multi-port specialty memory
products and high-speed CMOS logic circuits. The Company has made significant
investments and commitments in becoming a supplier of RISC based microprocessors
and now offers a family of 20 microprocessor and related peripheral products for
the desktop computing and embedded systems markets.

IDT operates sub-micron wafer fabrication facilities in San Jose and
Salinas, California. The Company's Salinas facility includes a 24,000 square
foot, class 3 fabrication line that is being converted from five-inch to
six-inch wafers. The Company's San Jose facility includes a 24,000 square foot,
class 1, six-inch wafer fabrication line. The Company is also building a 192,000
square foot facility containing a 48,000 square foot, class 1, eight-inch wafer
fabrication line in Hillsboro, Oregon. The Company continues to make significant
investments to advance its proprietary CMOS process technologies in order to
improve product performance and lower product costs through increased yields.
The majority of IDT's current products are manufactured using 0.65 micron
process technologies and a 0.5 micron CMOS process technology is under
development. IDT believes that maintaining its own wafer fabrication capability
facilitates the implementation of advanced process technologies and new
higher-performance product designs, provides it with a reliable source of supply
of semiconductors and allows it to be more flexible in shifting production
according to product demand.

The Company markets its products on a worldwide basis primarily to OEMs
through a variety of channels, including a direct sales force, distributors and
independent sales representatives. The Company's end-user customers include
Alcatel, AT&T, Apple Computer, Bay Networks, Canon, Cisco Systems, Compaq
Computer, Dell Computer, Digital Equipment, FORE Systems, Hewlett-Packard, IBM,
Intel, Motorola, Nokia, Olivetti, Radius, Siemens Nixdorf, Silicon Graphics, Sun
Microsystems and Tektronix.

The Company was incorporated in California in 1980 and reincorporated in
Delaware in September 1987. Its principal offices are located at 2975 Stender
Way, Santa Clara, California 95054 and its telephone number is (408) 727-6116.

3
<PAGE>
THE OFFERING

Common Stock offered by the Company................ 3,300,000 shares
Common Stock offered by the Selling Stockholders... 100,000 shares
Common Stock to be outstanding after the offering.. 37,084,376 shares(1)
Use of proceeds.................................... For construction of a new
wafer fabrication facility,
expansion of existing wafer
fabrication facilities,
acquisition of capital
equipment and general
corporate purposes,
including working capital.

Nasdaq National Market symbol...................... IDTI

- ----------
(1)Excludes 5,293,537 shares of Common Stock subject to stock options
outstanding at September 30, 1994 and an additional 3,593,731 shares of
Common Stock reserved for issuance under the Company's stock option and
purchase plans. See "Capitalization."

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------------------ ---------------------
1990 1991 1992(1) 1993 1994 1993 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues....................... $209,475 $198,559 $202,734 $236,263 $330,462 $153,061 $190,628
Gross profit................... 111,303 98,611 75,915 103,978 170,835 73,915 110,206
Operating income (loss)........ 29,956 4,138 (29,316) 11,006 52,269 17,427 44,302
Income (loss) before provision
(benefit) for income taxes..... 27,871 836 (34,768) 6,278 50,206 15,444 45,169
Net income (loss)(2)........... 17,007 1,226 (32,808) 5,336 40,165 12,361 33,884
Net income (loss) per share(2). $ .66 $ .05 $ (1.25) $ .18 $ 1.21 $ .39 $ .94
Shares used in computing net
income (loss) per share........ 25,668 26,070 26,255 29,701 33,116 31,953 36,040
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
--------------------------
ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital ............................................................... $ 152,611 $242,513
Total assets .................................................................. 397,566 487,468
Total debt .................................................................... 42,924 42,924
Stockholders' equity .......................................................... 260,373 350,275

<FN>
- ----------

(1) In fiscal 1992, the Company recorded restructuring and other charges of
$24.8 million. See Note 2 of Notes to Consolidated Financial Statements.

(2) The Company's exemption from Malaysian income taxes expired in fiscal
1994. See Note 2 to the table under "Selected Consolidated Financial Data"
and Note 11 of Notes to Consolidated Financial Statements.

(3) Adjusted to give effect to the sale by the Company of 3,300,000 shares of
Common Stock offered hereby at an assumed public offering price of $28.625
per share and the receipt of the estimated net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
</TABLE>
4

<PAGE>

RISK FACTORS

In addition to the other information contained in or incorporated by
reference in this Prospectus, the following risk factors should be considered
carefully in evaluating the Company and its business before purchasing the
shares of Common Stock offered hereby.

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS; DEPENDENCE ON COMPUTER AND
COMMUNICATIONS INDUSTRIES

IDT's past operating results have been, and its future operating results
may be, subject to quarterly fluctuations due to a wide variety of factors
including the timing of new product and process technology announcements and
introductions by the Company or its competitors, competitive pricing pressures,
fluctuations in manufacturing yields, changes in the mix of products sold,
availability and costs of raw materials, the cyclical nature of the
semiconductor industry, industry-wide wafer-processing capacity, economic
conditions in various geographic areas and costs associated with other events,
such as an expansion of production capability or litigation. For example, the
Company's results in fiscal 1991 were adversely affected by a delay in the
introduction of a higher-speed 256K (kilobit) SRAM (Static Random Access Memory)
and a 1 Meg (megabit) SRAM, an industry-wide decrease in demand for logic
products and, in late 1991, significant price competition in the SRAM market. In
addition, due primarily to the write-down of excess inventory and underutilized
capital assets, accruals for patent litigation defense costs and charges related
to closure of an older wafer fabrication facility, the Company incurred a
significant loss in fiscal 1992. Since the end of fiscal 1992, as a result of
the introduction of new higher-margin products, improvement of production
processes and expansion of capacity, as well as the general improvement in the
semiconductor market and other factors, the Company has achieved improved
quarterly operating results. However, any unfavorable changes in manufacturing
yields, product mix, supply or costs of raw materials, delays in new product or
process technology introductions, underutilization of manufacturing capacity,
unfavorable market conditions, increased price competition or other factors
could adversely affect the Company's operating results. In recent periods the
pricing environment for SRAMs has been favorable, notwithstanding the long term
trend of price declines in the market. Significant price declines for SRAM
products in the future could adversely affect the Company's operating results.

The Company's operating results are also affected by the market's
acceptance of the Company's and its customers' products and the level and timing
of orders received. The Company ships a substantial portion of its quarterly
sales in the last month of a quarter. If anticipated shipments in any quarter do
not occur, the Company's operating results for that quarter could be adversely
affected. In addition, a substantial percentage of the Company's products are
incorporated into computer and computer-related products, which have
historically been characterized by significant fluctuations in demand which in
turn have affected the demand for components used in these computers. In
addition, demand for certain of the Company's products is dependent upon growth
in the communications market. A slowdown in the computer and related peripherals
or communications markets could adversely affect the Company's operating
results. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

The Company's operating results will be impacted by a number of risks
associated with the Company's current and planned facilities expansion programs.
See "--Current Capacity Limitations and Risks Associated with Planned Expansion"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

CURRENT CAPACITY LIMITATIONS AND RISKS ASSOCIATED WITH PLANNED EXPANSION

The Company is operating its wafer fabrication facilities in Salinas and
San Jose and its assembly operations in Malaysia near installed equipment
capacity. As a result, the Company has not been able to take advantage of all
market opportunities presented to it. Due to long production lead times and
current capacity constraints, any failure by the Company to adequately forecast
the mix of product demand could adversely affect the Company's sales and
operating results. For example, the Company's second quarter fiscal 1995 results
were relatively flat compared to its prior quarter results due to a slowing in
demand from networking customers and an inability to shift production to other
product areas where demand exceeded supply.

<PAGE>

To address its capacity requirements, the Company is currently converting
its Salinas wafer fabrication facility from five-inch to six-inch wafers, adding
incremental production equipment to its San Jose wafer fabrication facility and
building an additional 40,000 square foot test and assembly facility in Penang,
Malaysia. In addition, the Company recently commenced construction of a 192,000
square foot facility containing a 48,000 square foot, class 1, eight-inch wafer
fabrication line in Hillsboro, Oregon. Conversion of the Salinas facility, while
operating near installed equipment capacity, constrains production scheduling
and could impact production output. In addition, delays in the delivery of wafer
fabrication or test equipment to the Company's Salinas, San Jose, Penang or
Oregon facilities could delay planned increases in the Company's production
capacity. In connection with the construction, equipping and commencement of
operations at the new Oregon facility, the Company faces a number of substantial
additional risks including, but not limited to, delays in construction, cost
overruns, equipment delays or shortages and manufacturing startup or process
problems. In addition, the Company has never operated an eight-inch wafer
fabrication facility and eight-inch facilities and production equipment are
relatively new to the industry. Accordingly, the Company could incur
unanticipated process or production problems.

The Company's capacity additions will result in a significant increase in
fixed and operating expenses. If revenue levels do not increase sufficiently to
offset these additional expense levels, the Company's operating results could be
adversely impacted in future periods. In this regard, IDT has historically
expensed as period costs, rather than capitalized, the operating expenses
associated with bringing a fabrication facility to commercial production.
Although the Company does not expect to generate significant revenues from its
new Oregon fabrication facility until fiscal 1997 at the earliest, the Company
will recognize substantial operating expenses associated with the facility in
fiscal 1996 and 1997. In addition, in fiscal 1997, the Company will begin to
recognize substantial depreciation expenses before production of commercial
volume is achieved.

The extensive production expansion programs, including, in particular, the
construction of the new facility in Oregon, could strain the Company's
management and engineering resources. This strain on resources could be
exacerbated by the geographic distance between the Company's Oregon and
California facilities. There can be no assurance that the Company will be able
to hire additional management, engineering and other personnel, as needed, to
manage these expansion programs effectively and to implement new production
capacity in a timely manner and within budget.

The Company believes other manufacturers are also expanding or planning to
expand their fabrication capacity over the next several years. There can be no
assurance that expansion by the Company and its competitors will not lead to
overcapacity in the Company's target markets, which could cause declines in
product prices that would adversely affect the Company's operating results.

MANUFACTURING RISKS

The Company's CMOS (Complementary Metal Oxide Silicon) and BiCMOS (Bipolar
CMOS) manufacturing processes are highly complex, require advanced and costly
equipment and are continuously being modified in an effort to improve yields and
product performance. Minute impurities or other difficulties in the
manufacturing process can lower yields. From time to time, IDT has experienced
production difficulties that have caused delivery delays and quality problems.
There can be no assurance that the Company will not experience manufacturing
problems and product delivery delays in the future as a result of, among other
things, changes to its process technologies, ramping production, installing new
equipment at its San Jose and Salinas facilities, converting its Salinas
facility from five-inch to six-inch wafers and constructing its new facilities
in Penang and Oregon. See "Current Capacity Limitations and Risks Associated
with Planned Expansion." Further, the Company's existing wafer fabrication
facilities are located relatively near each other in northern California. If the
Company were unable to use these facilities, as a result of a natural disaster
or otherwise, the Company's operations would be materially adversely affected
until the Company were able to obtain other production capability. See
"Business-Manufacturing."

<PAGE>

INVENTORY VALUATION ISSUES

In connection with the Company's fiscal 1993 audit, the Company's auditors
identified a material weakness in the Company's internal controls with respect
to its inventory management system as it relates to determining the cost of
inventory. A material weakness indicates that a material error or irregularity
may occur in the Company's quarterly financials and may not be timely detected
by the Company's employees in the normal course of performing their assigned
functions, thereby possibly resulting in a misstatement of the Company's
quarterly financial statements. There were no adjustments to the Company's
financial statements in connection with the fiscal 1993 audit and no
restatements of any quarterly periods in that year. Beginning in fiscal 1994,
the Company implemented programs aimed at improving its inventory management and
costing systems. The Company's auditors did not identify a material weakness
with respect to these systems in their audit for fiscal 1994, but did indicate
to IDT that the Company's systems continue to have significant limitations.
While the Company continues to devote resources to the improvement of its
systems, there can be no assurance that the Company will successfully implement
systems which will completely resolve these issues. Failure to devote adequate
resources to address limitations in the Company's inventory management and
costing systems or to improve such systems could result in a misstatement of
operating results.

DEPENDENCE ON NEW PRODUCTS AND TECHNOLOGIES

The market for the Company's products is characterized by significant price
competition, frequent new product introductions, rapidly changing technology and
evolving industry standards. Average selling prices of the Company's products
have historically declined over time and this trend is expected to continue. To
offset these decreases, the Company relies on manufacturing cost reductions and
on timely introductions of new products that meet customers' needs. From time to
time the Company has experienced delays in product introductions. For example,
IDT's operating results were adversely affected in fiscal 1991 due to the delay
in the introduction of a higher-speed 256K SRAM and a 1 Meg SRAM. To remain
competitive the Company also must continue to devote significant resources to
advancing process technologies to reduce semiconductor die size, increase
performance and improve manufacturing yields. IDT is currently converting the
manufacture of several products to its newer generation process technologies.
Often in the past, such conversions have temporarily adversely affected yields.
In particular, as process geometries become smaller, implementation becomes more
difficult. There can be no assurance that the Company will be able to develop
and introduce new products in a timely manner, that new products will gain
market acceptance or that new process technologies can be successfully
implemented. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Research and Development."

COMPETITION

The Company competes with a number of manufacturers in each of its major
product areas. Several of the Company's competitors have substantially greater
technical, marketing, manufacturing and financial resources than the Company. In
addition, several of the Company's foreign competitors receive assistance from
their respective governments, which may give them a competitive advantage. The
Company competes principally on the basis of technical innovation and product
performance, as well as on quality, price and product availability. The ability
of IDT to compete successfully depends upon a number of factors, including new
product and process technology introductions by IDT and its competitors,
customer acceptance of the Company's products, cost effective manufacturing,
assertion of intellectual property rights and general market and economic
conditions. Some of these factors are outside the Company's control. There can
be no assurance that the Company will be able to compete successfully in the
future against existing or potential competitors or that the Company's operating
results will not be adversely affected by increased price competition. See
"Business--Competition."

CAPITAL NEEDS

The semiconductor industry is extremely capital intensive. To remain
competitive, the Company must continue to invest in advanced manufacturing and
test equipment. During the past three fiscal years,

<PAGE>

cash flow from operations has been insufficient to fund fully the Company's
needs for capital equipment, mandatory debt repayment and working capital. The
Company currently plans to make approximately $60 to $70 million in capital
expenditures during the second half of fiscal 1995. In addition, the
construction and purchase of equipment for the Company's new Oregon facility,
together with ongoing capital expenditures, are expected to require $200 million
in fiscal 1996, with significant continuing expenditures in the following years.
The Company may consider additional forms of financing to help meet its
anticipated capital needs for the construction and equipping of its new Oregon
facility, including a possible bond financing through the State of Oregon and/or
a leasing transaction, which could yield aggregate proceeds of up to $70 million
or more. While the Company believes that the proceeds from this offering,
together with existing cash and cash equivalents, cash flow from operations,
existing credit facilities and possible other financing arrangements for the
Oregon facility, will be adequate to fund its anticipated capital expenditures
and working capital needs, including mandatory debt repayments through fiscal
1996, there can be no assurance that the Company will not be required to seek
other financing sooner or that such financing, if required, would be available
on terms satisfactory to the Company. In this regard, any adverse effect upon
the Company's operating results due to a significant downturn in industry
pricing or otherwise could accelerate the Company's need to seek additional
outside capital. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

INTELLECTUAL PROPERTY RISKS

The Company has been notified that it may be infringing patents or other
intellectual property rights of others. The semiconductor industry is
characterized by vigorous protection and pursuit of intellectual property rights
or positions, which have resulted in significant and often protracted and
expensive litigation. During fiscal 1993, IDT settled outstanding patent
litigation with both AT&T and Texas Instruments and obtained five-year
cross-licenses from both parties. Costs associated with these litigation matters
adversely affected IDT's results of operations for fiscal 1992. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 3 and 13 of Notes to Consolidated Financial Statements.
There can be no assurance that additional claims alleging infringement of
intellectual property rights, including infringement of patents that have been
or may be issued in the future, will not be asserted in the future. Any
assertions of intellectual property claims could require IDT to discontinue the
use of certain processes or cease the manufacture, use and sale of infringing
products, to incur significant litigation costs and damages, and to develop
noninfringing technology or to acquire licenses to the alleged infringed
technology. There can be no assurance that the Company would be able to obtain
such licenses on acceptable terms or to develop noninfringing technology. IDT
has received patent licenses from a number of companies. The failure to renew
certain of these licenses or significant increases in amounts payable under
these licenses could have an adverse effect on the Company. In addition, there
can be no assurance that any patents issued to the Company will not be
challenged, invalidated or circumvented or that rights granted thereunder will
provide competitive advantages to the Company. Furthermore, the laws of certain
countries do not protect the Company's intellectual property rights to the same
extent as do the laws of the United States. See "Business--Intellectual Property
and Licensing."

CYCLICALITY OF SEMICONDUCTOR INDUSTRY

The semiconductor industry is highly cyclical and has been subject to
significant downturns at various times that have been characterized by
diminished product demand, production overcapacity and accelerated erosion of
average selling prices. During fiscal 1992, the Company's operating results were
adversely affected by a general decline in demand for semiconductor products and
significant price competition. While semiconductor demand has been strong in
recent periods, and the Company's existing manufacturing equipment capacity is
operating near installed equipment capacity, there can be no assurance that IDT
will not be adversely affected in the future by cyclical conditions in the
semiconductor industry.

MANAGEMENT OF GROWTH

The Company has experienced, and expects to experience in the future,
growth in the number of employees, the scope of its operations and the
geographic area of its operations. This growth has resulted in new and increased
reponsibilities for management personnel and has placed added pressures on the

<PAGE>

Company's operating and financial systems. To manage future growth effectively,
the Company must hire additional management and technical personnel, integrate
its new employees into its overall operations and continue to improve its
operational, financial and management systems. If the Company is unable to
manage growth effectively or hire or retain qualified personnel, the Company's
business and results of operations could be materially and adversely affected.
See "Business--Employees."

DEPENDENCE ON THIRD PARTIES

The Company's manufacturing operations depend upon obtaining adequate raw
materials on a timely basis. The number of vendors of certain raw materials,
such as silicon wafers, ultra-pure metals and certain chemicals and gases, is
very limited. In addition, certain packages used by the Company require long
lead times and are available from only a few suppliers. From time to time,
vendors have extended lead times or limited supply to the Company due to
capacity constraints. The Company's results of operations would be adversely
affected if it were unable to obtain adequate supplies of raw materials in a
timely manner or if there were significant increases in the costs of raw
materials. IDT has been dependent on the design capabilities of Quantum Effect
Design, Inc. ("QED"), a majority-owned subsidiary, for the design and
development of derivatives of MIPS RISC based microprocessors, including the
ORION R4600. There can be no assurance that the Company will be able to maintain
this design relationship with QED or that QED will continue to be successful in
developing new microprocessors. See "Business--Manufacturing" and "--Research
and Development."

INTERNATIONAL OPERATIONS

Substantially all of the Company's test operations and a significant
portion of its assembly operations are performed at IDT's facility in Penang,
Malaysia. IDT also uses subcontractors in Korea, the Philippines and Malaysia
for certain assembly operations. The Company's reliance on these facilities
entails certain risks generally associated with doing business abroad, such as
foreign governmental regulations, currency fluctuations, political unrest and
disruptions or delays in shipments. The Company's operations in Penang are
subject to other specific risks. There is currently a very low unemployment
rate, and accordingly a limited pool of skilled workers, in Penang. There can be
no assurance that the Company will be able to hire sufficient skilled personnel
as it expands its operations in Penang. In addition, due to current limitations
on electrical power availability in Penang, certain large consumers of power
have been subject to brief shutdowns on a weekly basis. While the Company is not
a large consumer of power and therefore has not been affected by such scheduled
shutdowns, there can be no assurance that, as IDT's and other manufacturers'
operations in Penang expand, electrical power shortages will not adversely
affect the Company's Malaysian operations. The Company's tax rate in fiscal 1996
will increase as a result of the expiration of the Company's exemption from
Malaysian income taxes. This will contribute to an increase in the Company's
overall income tax rate in the future. See Note 2 to the table under "Selected
Consolidated Financial Data" and Note 11 of Notes to Consolidated Financial
Statements. If the Company were unable to assemble or test products offshore, or
if air transportation to these foreign facilities were curtailed, the Company's
operations could be materially adversely affected.

A substantial percentage of the Company's revenues are derived from export
sales. In fiscal 1994 and the first six months of fiscal 1995, export sales
accounted for 32% and 38%, respectively, of IDT's revenues. See Note 12 of Notes
to Consolidated Financial Statements. Export sales are generally denominated in
local currencies. The Company's offshore assembly and test operations and export
sales are subject to risks associated with foreign operations, including
currency controls and fluctuations, changes in local economic conditions, import
and export controls, as well as changes in tax laws, tariffs and freight rates.
The Company attempts to hedge against a portion of its short-term exposure to
currency fluctuations. There can be no assurance that the above factors will not
adversely affect the Company's operations in the future or that the Company will
be successful in its hedging efforts. See "Business--Marketing and Sales" and
"--Manufacturing" and Note 1 of Notes to Consolidated Financial Statements.

<PAGE>
ENVIRONMENTAL REGULATIONS

The Company is subject to a variety of foreign, federal, state and local
governmental regulations related to the discharge and disposal of toxic,
volatile or otherwise hazardous materials used in its manufacturing process.
While the Company believes that it has all environmental permits necessary to
conduct its business and that its activities conform to present environmental
regulations, increasing public attention has been focused on the environmental
impact of semiconductor operations. Any failure by the Company to control the
use of, or to restrict adequately the discharge of, hazardous materials under
present or future regulations could subject it to substantial liability or could
cause its manufacturing operations to be suspended. In addition, IDT could be
held financially responsible for remedial measures if its properties were found
to be contaminated whether or not the Company was responsible for such
contamination.

VOLATILITY OF STOCK PRICE

The Company's Common Stock has experienced substantial price volatility and
such volatility may occur in the future, particularly as a result of quarter to
quarter variations in the actual or anticipated financial results of the Company
or other companies in the semiconductor industry or in the markets served by the
Company, or announcements by the Company or its competitors regarding new
product introductions. In addition, the stock market has experienced extreme
price and volume fluctuations that have affected the market price of many
technology companies' stocks in particular and that have often been unrelated or
disproportionate to the operating performance of these companies. These factors
may adversely affect the market price of the Common Stock. See "Price Range of
Common Stock."

<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,300,000 shares of
Common Stock offered by the Company are estimated to be approximately
$89,902,000 ($103,843,000 if the Underwriters' over-allotment option is
exercised in full and the shares subject thereto are sold in the entirety by the
Company) assuming a public offering price of $28.625 per share and after
deducting the estimated underwriting discount and offering expenses payable by
the Company.

The Company intends to use the net proceeds of the offering for construction
of a new wafer fabrication facility in Hillsboro, Oregon, expansion of existing
wafer fabrication facilities in San Jose and Salinas, California, acquisition of
capital equipment and general corporate purposes, including working capital. The
Company believes that the proceeds of this offering, together with existing cash
and cash equivalents, cash flow from operations, existing credit facilities and
possible other financing arrangements for the construction and equipping of its
Oregon facility, will be adequate to fund its anticipated capital expenditures
and working capital needs through fiscal 1996. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources." Pending their application, the proceeds will be invested in
short-term, interest bearing instruments.

The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Stockholders. See "Selling Stockholders."

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the Nasdaq National Market under the symbol
"IDTI." The following table sets forth the high and low last reported sale
prices for the Common Stock as reported by the Nasdaq National Market during the
fiscal quarters indicated.

HIGH LOW
-------- -------

Fiscal 1993:
First Quarter ................................. $ 5 3/4 $ 3 7/8
Second Quarter ................................ 5 3 5/8
Third Quarter ................................. 6 3/4 4 1/8
Fourth Quarter ................................ 8 3/8 6 1/4
Fiscal 1994:
First Quarter ................................. 11 1/8 6 1/2
Second Quarter ................................ 19 5/8 10 1/2
Third Quarter ................................. 18 7/8 12 3/8
Fourth Quarter ................................ 33 5/8 16 3/4
Fiscal 1995:
First Quarter ................................. 31 3/8 23 7/8
Second Quarter ................................ 28 7/8 16 1/4
Third Quarter (through November 14, 1994) ..... 29 11/16 18 1/2

On November 14, 1994, the last reported sale price of the Common Stock was
$28.625 per share. As of November 8, 1994, there were approximately 965 record
holders of the Common Stock.

DIVIDEND POLICY

The Company intends to retain any future earnings for use in its business
and, accordingly, does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future.

<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of IDT at September 30,
1994 and as adjusted to reflect the sale by the Company of the 3,300,000 shares
of Common Stock offered hereby assuming a public offering price of $28.625 per
share and the receipt of the estimated net proceeds therefrom.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
--------------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long term obligations(1) .......................................... $ 8,608 $ 8,608
========= =========
Long-term obligations excluding current portion(1) ................................... $ 34,316 $ 34,316
--------- ---------
Stockholders' equity:
Preferred Stock; $.001 par value: 5,000,000 shares authorized;
no shares issued ................................................................... -- --
Common Stock; $.001 par value: 65,000,000 shares authorized;
33,652,361 shares issued and outstanding; 36,952,361 shares
issued and outstanding as adjusted(2) .............................................. 34 37
Additional paid-in capital ........................................................... 162,109 252,008
Retained earnings .................................................................... 98,401 98,401
Cumulative translation adjustment .................................................... (171) (171)
Total stockholders' equity ........................................................... $ 260,373 $ 350,275
---------- ---------
Total capitalization ................................................................. $ 294,689 $ 384,591
========== =========

<FN>
- ---------
(1) See Notes 4 and 5 of Notes to Consolidated Financial Statements.
(2) Excludes 5,293,537 shares of Common Stock subject to stock options
outstanding at September 30, 1994 and an additional 3,593,731 shares of
Common Stock reserved for issuance under the Company's stock option and
stock purchase plans. See Note 9 of Notes to Consolidated Financial
Statements.

</TABLE>
12

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data as of March 31, 1993 and 1994 and for
each of the years in the three-year period ended March 31, 1994 have been
derived from IDT's Consolidated Financial Statements included elsewhere in this
Prospectus, which have been audited by Price Waterhouse LLP, independent
accountants, as indicated in their report thereon appearing elsewhere herein.
The following selected financial data as of March 31, 1990, 1991 and 1992 and
for each of the years in the two-year period ended March 31, 1991 have been
derived from audited consolidated financial statements not included herein. The
consolidated financial data as of September 30, 1994 and for the six months
ended September 30, 1993 and 1994 have been derived from unaudited condensed
consolidated financial statements, which, in the opinion of management of IDT,
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for the fair statement of the financial data for such periods. The
results of operations for the six months ended September 30, 1994 are not
necessarily indicative of results that may be expected for any other period or
for the full year. The data set forth below are qualified in their entirety by
reference to, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and related notes thereto included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------------------- ---------------------
1990 1991 1992(1) 1993 1994 1993 1994
---------- ---------- ----------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues ............................$209,475 $198,559 $202,734 $236,263 $330,462 $153,061 $190,628
Cost of revenues .................... 98,172 99,948 126,819 132,285 159,627 79,146 80,422
---------- ---------- ----------- ---------- ---------- ---------- ----------
Gross profit......................... 111,303 98,611 75,915 103,978 170,835 73,915 110,206
---------- ---------- ----------- ---------- ---------- ---------- ----------
Operating expenses:
Research and development........... 41,644 50,848 52,044 53,461 64,237 31,182 35,536
Selling, general and administrative 39,703 43,625 48,721 39,511 54,329 25,306 30,368
Restructuring charge............... -- -- 4,466 -- -- -- --
---------- ---------- ----------- ---------- ---------- ---------- ----------
Total operating expenses........... 81,347 94,473 105,231 92,972 118,566 56,488 65,904
---------- ---------- ----------- ---------- ---------- ---------- ----------
Operating income (loss).............. 29,956 4,138 (29,316) 11,006 52,269 17,427 44,302
Interest expense .................... (3,519) (6,507) (7,045) (5,855) (5,165) (2,778) (1,854)
Interest income and other, net....... 1,434 3,205 1,593 1,127 3,102 795 2,721
---------- ---------- ----------- ---------- ---------- ---------- ----------
Income (loss) before provision
(benefit) for income taxes ........ 27,871 836 (34,768) 6,278 50,206 15,444 45,169
Provision (benefit) for income taxes. 10,864 (390) (1,960) 942 10,041 3,083 11,285
---------- ---------- ----------- ---------- ---------- ---------- ----------
Net income (loss)(2) ................$ 17,007 $ 1,226 $(32,808) $ 5,336 $ 40,165 $ 12,361 $ 33,884
========== ========== =========== ========== ========== ========== ==========
Net income (loss) per share(2).......$ .66 $ .05 $ (1.25) $ .18 $ 1.21 $ .39 $ .94
========== ========== =========== ========== ========== ========== ==========
Shares used in computing net
income (loss) per share ........... 25,668 26,070 26,255 29,701 33,116 31,953 36,040
========== ========== =========== ========== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
------------------------------------------------------ SEPTEMBER 30,
1990 1991 1992 1993 1994 1994
---------- ---------- --------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital .............................. $ 68,139 $ 63,539 $ 40,493 $ 50,885 $143,248 $152,611
Total assets ................................. 261,538 258,626 229,730 239,994 349,571 397,566
Total debt.................................... 78,733 73,858 66,100 62,295 51,646 42,924
Stockholders' equity ......................... 130,704 134,524 104,602 117,760 224,367 260,373

<FN>
- ---------
(1) In fiscal 1992, the Company recorded restructuring and other charges of
$24.8 million. See Note 2 of Notes to Consolidated Financial Statements.
(2) As described in Note 11 of Notes to Consolidated Financial Statements, the
Company's Malaysian subsidiary was granted a tax holiday which extended
through June 30, 1993. Such status had the effect of reducing the Company's
provision for taxes by approximately $0.8 million, $0.9 million, $1.0
million, and $1.5 million, or $0.03, $0.04, $0.04 and $0.05 per share, for
the years ended March 31, 1990, 1991, 1992 and 1993, respectively.
Management believes it is likely that carryovers of depreciation from the
tax holiday period along with expected additional depreciation grants will
defer the time beyond March 31, 1995 when the Malaysian subsidiary will
first begin to pay local taxes. The corporate income tax rate in Malaysia
which would otherwise be applicable for the Company's fiscal year ending
April 2, 1995 and for subsequent periods is 34%.

</TABLE>
13

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

IDT designs, develops, manufactures and markets a broad range of
high-performance semiconductor products for the workstation/server, desktop
computer, office automation and communications markets. The Company's revenues
have increased from $203 million in fiscal 1992 to $236 million in fiscal 1993
and to $330 million in fiscal 1994. This growth has been due to increasing
market acceptance of new products, the expansion of production output through
additions of capital equipment and improved manufacturing processes and
associated die shrinks and yield improvements, and improvements in overall
market conditions. In particular, the Company has introduced 33 new products in
a variety of configurations since the beginning of fiscal 1994, including the
ORION 64-bit microprocessor and the Company's family of 3.3 volt SRAMs. During
these periods, the Company has achieved unit volume growth across all of its
market segments.

The Company's gross profit and operating profit margins have improved
significantly from 43.5% and 3.5%, respectively, in the first quarter of fiscal
1993 to 58.1% and 23.1%, respectively, in the second quarter of fiscal 1995.
These improvements have been attributable to economies of scale associated with
increased unit shipments, higher utilization of manufacturing capacity, wafer
fabrication process improvements, and a mix shift to higher margin products,
including microprocessors.

The Company is currently operating near installed equipment capacity. To
address this situation, the Company initiated a significant capacity expansion
program, including conversion of the Company's Salinas wafer fabrication
facility from five-inch to six-inch wafers, the purchase of incremental wafer
fabrication equipment for the Company's San Jose facility, expansion of assembly
and test facilities in Penang, Malaysia, and construction of a new eight-inch
wafer fabrication facility in Oregon. These programs will require substantial
capital expenditures in the balance of fiscal 1995, in fiscal 1996 and beyond.
See "Business--Manufacturing." The Company expects that the equipment conversion
in the Salinas facility will be completed near the end of fiscal 1995 and the
addition of equipment to the San Jose facility and the expansion of the Penang
facility will be completed in fiscal 1996. It is expected that the Oregon
facility will commence production during fiscal 1996; however, the Oregon
facility is not expected to achieve significant revenues until fiscal 1997 at
the earliest and will not achieve commercial volume production until fiscal 1998
at the earliest.

The increased operating expenses associated with the Company's capacity
expansion programs will adversely affect operating results until the Company
achieves volume production utilizing the new facilities and equipment. Although
the Company does not expect to generate significant revenues from its new Oregon
fabrication facility until fiscal 1997 at the earliest, the Company will
recognize substantial operating expenses associated with the facility in fiscal
1996 and 1997. In addition, in fiscal 1997 the Company will begin to recognize
substantial depreciation expenses before production in commercial volumes is
achieved.

<PAGE>
<TABLE>
<CAPTION>
The following table sets forth certain amounts, as a percentage of
revenues, from the Company's consolidated statements of operations for the three
fiscal years ended March 31, 1992, 1993 and 1994 and for the six months ended
September 30, 1993 and 1994.
SIX MONTHS
ENDED SEPTEMBER 30,
FISCAL YEAR ENDED MARCH 31,
--------------------------- ------------------
1992 1993 1994 1993 1994
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues .............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues ...................... 62.6 56.0 48.3 51.7 42.2
--------- -------- -------- -------- --------
Gross margin........................... 37.4 44.0 51.7 48.3 57.8
--------- -------- -------- -------- --------
Operating expenses:
Research and development.............. 25.7 22.6 19.4 20.4 18.6
Selling, general and administrative... 24.0 16.7 16.5 16.5 15.9
Restructuring charge.................. 2.2 -- -- -- --
--------- -------- -------- -------- --------
Total operating expenses ............ 51.9 39.3 35.9 36.9 34.6
--------- -------- -------- -------- --------
Operating income (loss)................ (14.5) 4.7 15.8 11.4 23.2
Net interest (expense) income.......... (2.7) (2.0) (0.6) (1.3) 0.5
--------- -------- -------- -------- --------
Income (loss) before provision (benefit)
for income taxes....................... (17.2) 2.7 15.2 10.1 23.7
Provision (benefit) for income taxes... (1.0) 0.4 3.0 2.0 5.9
--------- -------- -------- -------- --------
Net income (loss)...................... (16.2)% 2.3% 12.2% 8.1% 17.8%
========= ======== ======== ======== ========
</TABLE>
Set forth below are selected financial data from the Company's consolidated
statements of operations for the last ten fiscal quarters, reflecting continued
improvements in the Company's operating results:

<TABLE>
<CAPTION>
FISCAL 1993 FISCAL 1994 FISCAL 1995
--------------------------------------- --------------------------------------- -------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...... $53,758 $57,479 $60,590 $64,436 $72,766 $80,295 $85,330 $92,071 $95,043 $95,585
Gross profit.. 23,366 24,734 27,234 28,645 33,948 39,967 45,419 51,501 54,632 55,574
Net income.... 475 838 1,493 2,530 4,628 7,733 11,625 16,179 16,878 17,006
Net income per
share........ $ .02 $ .03 $ .05 $ .08 $ .15 $ .24 $ .35 $ .45 $ .47 $ .47
</TABLE>

RESULTS OF OPERATIONS
Six months ended September 30, 1993 and 1994. Revenues for the first six
months of fiscal 1995 increased 24.5% to $190.6 million as compared to revenues
of $153.1 million for the first six months of fiscal 1994. This increase was
attributable to higher unit volumes across most product families, geographic
regions and sales channels. Significant unit volume growth was experienced in
SRAM memories, particularly 3.3 volt devices, RISC based microprocessors, logic
circuits and specialty memory products. The higher unit volumes were offset in
part by lower average unit selling prices on certain products due to competitive
pricing and the maturation of certain products. In the second quarter of fiscal
1995, revenues were relatively flat compared to the first quarter of fiscal 1995
due to a slowing in demand from networking customers and an inability to shift
production to other product areas where demand exceeded supply.

Gross profit for the first six months of fiscal 1995 increased 49.1% to
$110.2 million, or 57.8% of revenues, as compared to $73.9 million, or 48.3% of
revenues, for the comparable period of the prior year. The improvements in gross
profit and gross margins were primarily attributable to higher capacity
utilization and increased unit volumes. In addition, the Company continued a
shift to more advanced designs and wafer fabrication processes which resulted in
increased die per wafer yields and therefore lower unit costs. More efficient
test and burn-in procedures also contributed to improved yields and reduced
manufacturing costs. In addition, selective acceptance of new orders as a result
of continued strong demand
15
<PAGE>

allowed the Company to shift manufacturing capacity to higher-margin products.
Due primarily to the Company reaching a cap on certain royalty obligations,
gross profit also benefited in the first six months of fiscal 1995 compared to
the first six months of fiscal 1994 from a $1 million reduction in patent and
royalty expenses relating to cross-license agreements. However, the Company's
industry is characterized by patent claims and license agreements, and there can
be no assurance royalty expenses will not increase in the future.

Research and development ("R&D") expenses for the first six months of
fiscal 1995 increased 14.0% to $35.5 million, but decreased as a percentage of
revenues to 18.6% from 20.4% in the corresponding period of the prior year. The
Company continues to invest in the development of new products and process
technologies. In the first six months of fiscal 1995, the Company introduced 11
new products and continued to develop its 0.5 micron CMOS processes. The Company
expects that it will continue to increase R&D spending in the future, although
such expenses may vary as a percentage of revenues.

Selling, general and administrative ("SG&A") expenses increased 20.0% to
$30.4 million for the first six months of fiscal 1995, but declined as a
percentage of revenues to 15.9% from 16.5% in the comparable period of the prior
year. The increase in SG&A expenses was attributable to higher costs associated
with the higher level of sales, including higher sales commissions, employee
profit sharing and management bonuses, although SG&A expenses did not increase
as rapidly as sales. The Company anticipates that SG&A expenses will continue to
increase, but may vary as a percentage of revenues.

Interest expense for the first six months of fiscal 1995 decreased 33.3% to
$1.9 million. The decrease was the result of lower debt balances coupled with
lower interest rates. Interest income and other, net, increased to $2.7 million
for the six-month period as compared to $0.8 million for the same period of the
prior year. The increase in interest income was attributable to significantly
higher average cash balances, partially offset by lower interest rates.

Income taxes for the first six months of fiscal 1995 were provided at an
effective rate of 25%. This compares to an effective rate of 20% in the
corresponding period of fiscal 1994. The increase in the effective tax rate in
fiscal 1995 as compared to fiscal 1994 is primarily due to higher utilization in
fiscal 1994 of certain deferred tax benefits. The Company believes that its
effective tax rate will increase in the future as the tax holiday associated
with the Company's Malaysia facility expires and the Company will have exhausted
its deferred tax benefits.

Fiscal Years 1992, 1993 and 1994. Revenues increased 39.9% to $330.5
million in fiscal 1994, as compared to revenues of $236.3 million in fiscal
1993, which in turn represented a 16.6% increase over revenues of $202.7 million
in fiscal 1992. Growth in fiscal 1994 was due to increased unit sales across all
product segments, with the largest percentage increase in the microprocessor
segment, as well as favorable pricing during the fiscal year on certain
products, offset in part by lower selling prices for some products. Revenue
growth in fiscal 1993 was attributed to increases in product shipments across
all market segments, offset in part by price reductions on several major
products. Toward the end of fiscal 1993, pricing firmed in the memory business
segment, reversing a trend of steady price erosion over several years, which had
been driven in part by increased demand across all market segments.

Gross profit increased 64.3% to $170.8 million, or 51.7% of revenues in
fiscal 1994 as compared to $104.0 million or 44.0% of revenues in fiscal 1993.
Gross profit increased 37.0% in fiscal 1993 from $75.9 million or 37.4% of
revenues in fiscal 1992. The improvement in fiscal 1994 was primarily
attributable to greater capacity utilization, which lowered average wafer
manufacturing costs, significant increases in die per wafer due to wafer
fabrication process improvements, and a mix shift to products with higher
average selling prices, particularly microprocessors. In fiscal 1992, gross
profit was negatively impacted principally by write-offs of inventory, including
approximately $14.9 million of charges to operations in the second quarter, and
underutilization of capital assets.

Research and development expenses increased 20.2% to $64.2 million or 19.4%
of revenues in fiscal 1994, as compared to $53.5 million or 22.6% of revenues in
fiscal 1993. In fiscal 1992, R&D expenses were $52.0 million or 25.7% of
revenues. The increases in R&D expenses were due primarily to continued
investments by the Company in both process technology and new product design and
development.

16
<PAGE>

Selling, general and administrative expenses increased 37.5% to $54.3
million in fiscal 1994 or 16.5% of revenues, as compared to $39.5 million or
16.7% of revenues in fiscal 1993. In fiscal 1992, SG&A expenses were $48.7
million or 24.0% of revenues. The fiscal 1994 increase was primarily due to
increases in management bonuses, employee profit sharing and the variable
selling expenses associated with the revenue increase. Fiscal 1992 SG&A expenses
were significantly impacted by patent litigation expenses and an increase in the
provision for bad debt. Patent litigation expenses accrued in fiscal 1992 were
resolved in fiscal 1993 and, as a consequence, the reversal of a portion of the
1992 accruals benefited fiscal 1993 results.

IDT incurred approximately $4.5 million of restructuring charges in fiscal
1992 associated with the closing of its oldest wafer fabrication line and a
reduction in workforce.

Interest expense totaled $5.2 million in fiscal 1994, compared to $5.9
million in fiscal 1993 and $7.0 million in fiscal 1992. Interest expense has
decreased as IDT's asset-secured debt has declined. IDT continues to incur
interest on a long-term obligation associated with a patent cross-license which
did not exist in fiscal 1992 and was insignificant in fiscal 1993.

Interest income and other, net, increased to $3.1 million in fiscal 1994
compared to $1.1 million and $1.6 million in fiscal years 1993 and 1992,
respectively. Fiscal 1994 was favorably impacted by higher cash balances
available for investment, gains on the disposition of assets and royalty income.

The Company adopted Statement of Financial Accounting Standards No. 109
(FAS 109) during fiscal 1993, retroactively to March 30, 1991. The effective tax
rates for fiscal 1994 and 1993 of 20% and 15%, respectively, differed from the
U.S. statutory rate of 34% primarily due to earnings of foreign subsidiaries
being taxed at lower rates, as well as the utilization of research and
development credits. In addition, fiscal 1994 benefited from the realization of
certain deferred tax benefits for which a valuation allowance was previously
required. The tax benefit for fiscal 1992 reflected the ability of the Company
to apply fiscal 1992 pretax losses against taxes paid for prior years

LIQUIDITY AND CAPITAL RESOURCES

The Company's financial condition improved during fiscal 1994 and the first
six months of fiscal 1995. Cash and cash equivalents and short-term investments
increased from $24.4 million at the end of fiscal 1993 to $121.8 million at the
end of fiscal 1994 and to $125.9 million at September 30, 1994. Working capital
increased from $51.4 million at March 31, 1993 to $143.2 million at March 31,
1994 and to $152.6 million at September 30, 1994. These increases were due to
improved profitability, as well as a public stock offering in fiscal 1994
yielding net proceeds of approximately $46.8 million. As of September 30, 1994,
the Company had $4.4 million available under unsecured lines of credit, all of
which are overseas. See Note 6 of Notes to Consolidated Financial Statements.

During fiscal 1992, 1993 and 1994 and the first six months of fiscal 1995,
the Company generated $31.9 million, $37.2 million, $100.1 million and $51.5
million, respectively, of cash flow from operations. The largest single factor
influencing cash flow from operations during fiscal 1992 and 1993 was the
depreciation resulting from the Company's San Jose wafer fabrication facility.
The improved operating results in fiscal 1993, 1994 and the first six months of
fiscal 1995 also had a significant impact on cash flow during those periods.
Cash flow during fiscal 1992 was affected negatively by the operating loss for
the year. The Company anticipates that significant depreciation relating to the
San Jose facility will continue through at least fiscal 1996.

During fiscal 1992, 1993 and 1994, and the first six months of fiscal 1995,
the Company's net cash used in investing activities was $16.1 million, $28.8
million, $68.9 million and $45.0 million, respectively, of which $25.7 million,
$28.2 million, $38.1 million and $40.6 million, respectively, were used for
capital equipment and property and plant improvements. During fiscal 1992 and
1993, the Company's net cash used in financing activities was $7.4 million and
$5.9 million, respectively, due primarily to net repayments of $9.8 million and
$8.8 million, respectively, related primarily to capital equipment financing.
For fiscal 1994, financing activities provided net cash of $34.8 million as a
result of the Company's public offering, offset by net repayments of equipment
financing of $20.5 million. For the six months ended September 30, 1994 the
Company used $7.2 million in net cash for financing activities, including net
repayments of
17

<PAGE>

$9.1 million. See Notes 4, 5, 6 and 7 of Notes to Consolidated Financial
Statements for information regarding the Company's various financing
arrangements. IDT expects capital equipment financing to be reduced and
borrowing and repayment levels to decrease over the next few years as a portion
of the proceeds of this offering is used to purchase capital equipment.

In view of current and anticipated capacity requirements, the Company
anticipates capital expenditures of $60 to $70 million for the last six months
of fiscal 1995 and approximately $200 million in fiscal 1996, principally in
connection with its capacity expansion programs. The Company may consider
additional forms of financing to help meet its anticipated capital needs for the
construction and equipping of its new Oregon facility, including a possible bond
financing through the State of Oregon and/or a leasing transaction, which could
yield aggregate proceeds of up to $70 million or more. See "Risk
Factors--Current Capacity Limitations and Risks Associated with Planned
Expansion."

The Company believes that the proceeds from this offering, together with
existing cash and cash equivalents, cash flow from operations, existing credit
facilities and possible other financing arrangements for the Oregon facility,
will be adequate to fund its anticipated capital expenditures and working
capital needs through fiscal 1996. There can be no assurance, however, that the
Company will not be required to seek other financing sooner or that such
financing, if required, will be available on terms satisfactory to the Company.

18
<PAGE>

BUSINESS

IDT designs, develops, manufactures and markets a broad range of
high-performance semiconductor products for the workstation/server, desktop
computer, office automation and communications markets. The Company focuses its
development efforts on providing proprietary and enhanced industry-standard
products that improve the performance of systems incorporating high-performance
microprocessors. The Company offers over 5,000 product configurations in four
product families: SRAM components and modules, specialty memory products, logic
circuits and RISC microprocessors and subsystems. The Company has made
significant investments and commitments in becoming a supplier of RISC based
microprocessors and now offers a family of 20 microprocessor and related
peripheral products for the desktop computing and embedded systems markets. For
example, the Company offers the 64-bit ORION R4600 microprocessor and recently
announced ORION derivatives.

BACKGROUND

Virtually all electronic systems--whether in personal computers, telephone
switches or automobiles--are designed around microprocessors. Memory and
input/output devices surround and control the flow of data to and from the
microprocessor. Continuing improvements in the speed and performance of
microprocessors have facilitated a trend toward making electronic systems
smaller, faster, more powerful and more accessible to users. However, in order
to take advantage of the full capabilities of the new generations of
microprocessors, electronic systems require faster and higher performance memory
and logic devices. In addition, the decreasing size of electronic systems has
led in many cases to the use of modules or subsystems that integrate a number of
semiconductor components. The foregoing trends are driving the demand for the
Company's four product families.

o RISC Microprocessors and Subsystems. Microprocessors manipulate and
control data in electronic systems through a fixed set of instructions.
Some microprocessor architectures use complex instruction set computing
("CISC") while other architectures focus on a reduced number, or subset,
of instructions ("RISC"). Substantially all personal computer systems
today use CISC microprocessors based on the Intel x86 architecture. RISC
microprocessors, however, generally operate at higher speeds than CISC
microprocessors, which has led to the increasing acceptance of RISC
microprocessors in workstations, servers and other high-performance
computers as well as in embedded controllers for printers, copiers,
facsimile machines and other electronic products.

o SRAM Components and Modules. Today's higher-performance microcomputers
that use advanced microprocessors and more complex operating systems and
applications software require more memory, including SRAM cache memory,
DRAM (Dynamic Random Access Memory) main memory and disk memory. SRAM
cache memory provides intermediate storage between fast microprocessors
and relatively slow DRAM main memory. By serving as an intermediate
high-speed memory, SRAM cache memory significantly increases overall
system speed and performance. Personal computers based on Intel
microprocessor architectures through the 386 family generally did not
utilize SRAM cache memory. The high-performance 32-bit Intel 486 family
of microprocessors and new 64-bit microprocessors, such as the Intel
Pentium microprocessor and the PowerPC microprocessor, have some on-chip,
or internal, SRAM cache memory. The increased speed of these newer
microprocessors, however, will continue to require additional external
SRAM cache memory for enhanced performance. The Company believes that a
large portion of Intel 486-based PCs require SRAM cache memory and that
substantially all Intel Pentium-based PCs will require such memory. In
addition, low voltage (3.3 volt) SRAM cache memories are increasingly
being used to reduce power consumption in desktop and laptop computers.

19
<PAGE>

o Specialty Memory Products. Complex electronic systems that have different
data transfer rates within the system or use multiple microprocessors may
utilize specialty memory products, such as FIFOs (First In/First Out
memory products) and multi-port memory devices, to enhance performance.
For example, communications systems increasingly use specialty memory
products to improve the flexibility and throughput of the systems. The
trend toward linking computer users within an office or an enterprise so
that they can share data and peripherals has led to the rapid growth of
high-performance local area networks ("LANs") and wide area networks
("WANs") and therefore the increased use of specialty memory products.

o Logic Circuits. The increasing speed, complexity and reduced size of
microprocessor-based systems often require the use of high-speed,
high-performance logic devices to interconnect the various elements in a
system. While many general logic functions are increasingly being
integrated through the use of programmable logic devices, many
specialized logic elements, such as buffers, clock drivers and memory
drivers, continue to be implemented as discrete functions.

STRATEGY

IDT's strategy is to be a leading supplier of products that improve the
performance of microprocessor-based systems. The Company seeks to offer
innovative products with superior cost/performance by utilizing its expertise in
memory design and process technologies. Key elements of the Company's strategy
are:

o Develop High Performance Solutions for Growing Markets. IDT focuses its
development efforts on providing proprietary products and enhanced
industry-standard products for use in applications in the growing
workstation/server, desktop computer, office automation and
communications markets. Since the beginning of fiscal 1994, the Company
has introduced 33 new products in a variety of configurations to meet the
needs of these markets. The Company believes that its emphasis on
high-performance, innovative products has resulted in its becoming a
market leader in SRAMs, SRAM cache modules, FIFOs, multi-port memory
products and high-speed CMOS logic circuits.

o Leverage Expertise in SRAM and Subsystem Design. IDT uses the extensive
experience it has gained in the design of SRAMs and subsystems since its
founding in 1980 to develop new memory products that provide higher
value-added solutions to IDT's customers. The Company is increasingly
integrating components from its various product families into single
devices or modules that provide increased functionality and can in turn
be more easily integrated into its customers' systems. For example, IDT
offers cache memory modules that include cache controller, cache tag SRAM
and cache SRAM components for personal computer applications, and the
SARAM device that incorporates both logic and memory functions for
enhanced functionality in network applications.

o Maintain Process Technology Leadership. The Company is committed to
continuously improving its CMOS process technologies in order to improve
product performance and lower product costs through improved yields. The
Company invests a substantial portion of its research and development
expenditures in order to advance its process technologies. The majority
of IDT's current products are manufactured using its 0.65 micron process
technologies and a 0.5 micron CMOS process technology is under
development. IDT believes that its advanced process technology capability
allows it to design and manufacture state-of-the-art products, thereby
providing it with a competitive advantage.

o Control and Expand Production Capability. IDT believes that maintaining
its own wafer fabrication capability facilitates the implementation of
advanced process technologies and new higher-performance product designs,
provides it with a reliable source of supply of semiconductors and allows
it to be more flexible in shifting production according to product
demand. In addition, the Company has a greater ability to lower costs at
production volumes by matching manufacturing flow to the process
technology being used. The Company has undertaken a significant program
to invest in new capital equipment and facilities in order to increase
and improve its capacity, including the construction of the new Oregon
facility. Through operating its own test facilities, the Company believes
it is able to maintain quality while controlling costs.

<PAGE>
PRODUCTS AND MARKETS

IDT offers over 5,000 product configurations in four product families: SRAM
components and modules, specialty memory products, logic circuits, and RISC
microprocessors and subsystems. During fiscal 1994, these product families
accounted for 33%, 29%, 21% and 17%, respectively, of total revenues. The
Company markets its products primarily to OEMs in the workstation/server,
desktop computer, office automation and communications markets. IDT's product
design efforts are focused on developing proprietary components and integrating
its components into single devices, modules or subsystems to meet the needs of
customers.

SRAMs. SRAMs are memory circuits used for storage and retrieval of data
during a computer system's operation. SRAMs do not require electrical
refreshment of the memory contents to ensure data integrity, allowing them to
operate at high speeds. SRAMs include substantially more circuitry than DRAMs,
resulting in higher production costs for a given amount of memory, and generally
command higher selling prices than the equivalent density DRAM. The market for
SRAMs is fragmented by differing demands for speed, power, density, organization
and packaging. As a result, there are a number of niche markets for SRAMs.

The Company's SRAM product strategy is to offer high-performance 5 volt and
3.3 volt SRAM components and modules that have differentiated features optimized
to work with specified microprocessors, such as the Intel 486 and Pentium
families of microprocessors, the PowerPC microprocessor and the MIPS RISC
microprocessors. The Company is focused primarily on the cache memory segment of
the SRAM market. Cache memory provides an intermediate storage solution between
fast microprocessors and relatively slow DRAM main memory. Cache memory operates
at the speed of the microprocessor and increases the microprocessor's efficiency
by temporarily storing the most frequently used instructions and data. Special
cache tag SRAMs provide a look-up table function that tells the cache controller
which blocks of data are currently stored in the cache SRAMs.

IDT is a leading supplier of cache SRAM components and modules to personal
computer manufacturers. The Company offers a range of cache SRAMs, including
burst-mode cache SRAMs that support the Intel and PowerPC microprocessors, and
cache tag SRAMs . The Company's cache SRAM components are often integrated into
cache memory modules. These modules include the cache controller, cache tag SRAM
and cache SRAM components and are ready to plug into sockets on a computer
system's motherboard. IDT offers a series of standard and custom cache memory
modules for IBM and IBM-compatible PCs and PowerPC-based personal computers as
well as for certain RISC microprocessor-based systems.

The Company continues to develop its next generation SRAM products to meet
the growing cache memory needs of increasingly faster microprocessors. IDT's new
products are being designed to operate at higher speeds and provide greater
levels of integration.

In order to provide SRAM products that meet the varying needs of its
customers, IDT uses both CMOS and BiCMOS process technologies and offers 16K,
64K, 256K and 1 Meg density SRAMs in a number of speed, power and packaging
configurations.

Specialty Memory Products. The Company's proprietary specialty memory
products include FIFOs and multi-port memory products that offer
high-performance features which allow communications and computer systems to
operate more effectively. FIFOs are used as rate buffers to transfer large
amounts of data at high speeds between separate devices or pieces of equipment
operating at different speeds within a system. Multi-port memory products are
used to speed data transfers and act as the link between multiple
microprocessors or between microprocessors and peripherals when the order of the
data to be transferred needs to be controlled. These products are currently used
primarily in peripheral interface, communications and networking products,
including hubs, bridges and routers.

21
<PAGE>

IDT is a leading supplier of both synchronous and asynchronous FIFOs and
has increasingly focused its resources on the design of synchronous FIFOs.
Synchronous FIFOs have been gaining greater market acceptance because they are
faster and provide an easier user interface. IDT's family of 9-bit SyncFIFOs are
being used in many of the newer networking products.

The Company is a leading supplier of multi-port memory products. IDT's
family of multi-port memory products is composed primarily of dual-port
asynchronous devices. The Company also offers four-port products, a synchronous
dual-port device and a new device, known as a SARAM, that combines the
flexibility of a multi-port product with the ease of a FIFO. In addition, the
Company is developing a family of specialty memory products for the emerging
asynchronous transfer mode ("ATM") market. The first members of this ATM family
will be a highly integrated, low cost interface device for ATM network cards and
two transceiver chip sets providing low-cost physical media interface to ATM
networks.

Logic Circuits. IDT is a leading manufacturer of high-speed byte-wide and
double-density 16-bit CMOS logic circuits for high-performance applications.
Logic circuits control data communication between various elements of electronic
systems, such as between a microprocessor and a memory circuit. IDT offers a
wide range of logic circuit products, which support bus and backplane
interfaces, memory interfaces and other logic support applications where
high-speed, low power and high-output drive are critical. IDT's logic circuits
are used in a broad range of markets.

IDT's 16-bit family of logic products is available in small packages,
enabling board area to be reduced, and has gained increasing market acceptance.
These products are designed for new applications in which small size, low power
and extra low noise are as important as high speeds. IDT also supplies a series
of 8-bit and 16-bit 3.3 volt logic products and a 3.3 volt to 5 volt translator
circuit directed at the growing requirements for 3.3 volt systems in the
notebook and laptop computer and other markets. The Company also offers a family
of clock drivers and clock generators. These devices, placed at critical
positions in a system, correct the degradation of timing that occurs the further
the impulses travel from the main system clock.

RISC Microprocessor Components and Subsystems. IDT is a licensed
manufacturer of MIPS RISC microprocessors. IDT now manufactures MIPS
architecture 32-bit and 64-bit standard microprocessors and IDT derivative
products for the office automation, communications, server/workstation and
desktop computer markets.

The Company focuses its RISC microprocessor design and marketing efforts
primarily on the embedded controller market. Embedded controllers are
microprocessors that control a single device such as a printer, copier or
network router. The Company sells several proprietary 32-bit derivative products
for the embedded controller market, including devices with on-circuit SRAM cache
memory and floating point functions.

In 1993, the Company introduced its ORION R4600 microprocessor, which is
capable of clock speeds of up to 150 MHz. The R4600 is a higher performance,
lower cost version of the 64-bit R4000 and R4400 microprocessors developed by
MIPS Computer Systems, which was acquired by Silicon Graphics in 1992 ("MIPS"),
and introduced by the Company and other MIPS licensees in 1992 and 1993,
respectively. The R4600 was developed for the Company and to the Company's
specifications by Quantum Effect Design, Inc. ("QED"), a consolidated
subsidiary. Systems based on the ORION family of microprocessors are targeted at
applications that require high speed computing and complex graphics, such as
scientific research, engineering design and advanced visual computing.

The Company also manufactures RISC subsystems, which are board level
products that contain MIPS RISC architecture microprocessors, cache SRAMs, logic
circuits and supporting software. These products are used in development systems
for the evaluation and design of hardware and software or are integrated into
customers' end-user systems, thereby reducing design cycle time.

CUSTOMERS

The Company markets and sells its products primarily to OEMs in the
workstation/server, desktop computer, office automation and communications
markets. Customers often purchase products from more than one of the Company's
product families.

<PAGE>

The following is an alphabetical listing of current representative end-user
customers of the Company, by market:

WORKSTATION/SERVER DESKTOP COMPUTER OFFICE AUTOMATION COMMUNICATIONS
- ------------------ ----------------- ----------------------- ---------------
<S> <C> <C> <C>
Digital Equipment Apple Computer AGFA Alcatel
EMC AST Research Canon AT&T
Pyramid Technology Compaq Computer Electronics For Imaging Bay Networks
NEC Dell Computer Hewlett-Packard Cabletron
Siemens Nixdorf Gateway Computers QMS Cisco Systems
Silicon Graphics Groupe Bull Radius Ericsson
Sun Microsystems IBM Samsung FORE Systems
Tandem Computers ICL Tektronix Fujitsu
Intel Texas Instruments Motorola
Olivetti Toshiba Nokia
Xerox Siemens
</TABLE>

MARKETING AND SALES

IDT markets and sells its products primarily to OEMs through a variety of
channels, including a direct sales force, distributors and independent sales
representatives.

The Company had 58 direct sales personnel in the United States at September
30, 1994. They are located at the Company's headquarters and in 17 sales offices
in Alabama, California, Colorado, Florida, Illinois, Maryland, Massachusetts,
Minnesota, New Jersey, New York, Oregon and Texas, and are primarily responsible
for marketing and sales in those areas. IDT also utilizes three national
distributors, Hamilton Hallmark, Future Electronics and Wyle Laboratories, and
several regional distributors in the United States. Hamilton Hallmark accounted
for 15% and 14% of the Company's revenues in fiscal 1994 and the first six
months of fiscal 1995, respectively. In addition, IDT uses independent sales
representatives, which generally take orders on an agency basis while the
Company ships directly to the customer. The representatives receive commissions
on all products shipped to customers in their geographic area.

The Company had 41 direct sales personnel and eight sales offices located
outside of the United States at September 30, 1994. Sales activities outside
North America are generally controlled by IDT's subsidiaries located in France,
Germany, Hong Kong, Italy, Japan, Sweden, Taiwan and the United Kingdom. The
Company has recently increased its direct marketing efforts to OEMs in Europe
and to United States companies with operations in the Asia/Pacific area. The
majority of export sales, however, continues to be made through international
distributors, which tend not to carry inventory or carry significantly smaller
levels compared to domestic distributors. During fiscal 1992, 1993, 1994 and the
first six months of fiscal 1995, export sales accounted for 30%, 36%, 32% and
38% of total revenues. Sales outside the United States are generally denominated
in local currencies. Export sales are subject to certain risks, including
currency controls and fluctuations, changes in local economic conditions, import
and export controls, and changes in tax laws, tariffs and freight rates.

The Company's distributors typically maintain an inventory of a wide
variety of products, including products offered by IDT's competitors, and often
handle small or rush orders. Pursuant to distribution agreements, the Company
grants distributors the right to return slow-moving products for credit against
other products and offers protection to the distributors against inventory
obsolescence or price reductions. Revenue recognition of sales to distributors
is deferred until the products are resold by the distributor.

MANUFACTURING

IDT believes that maintaining its own wafer fabrication capability
facilitates the implementation of advanced process technologies and new
higher-performance product designs, provides it with a reliable source of supply
of semiconductors and allows it to be more flexible in shifting production
according to product demand. The Company operates sub-micron wafer fabrication
facilities in San Jose and Salinas, California. The Salinas facility, first
placed in production in fiscal 1986, includes a 24,000 square foot, class

<PAGE>

3 fabrication line. The Company is converting this facility from five-inch to
six-inch wafers. The San Jose facility includes a 24,000 square foot, class 1
(less than one particle 0.5 micron or greater in size per cubic foot), six-inch
wafer fabrication line that was first placed in production in March 1991. IDT
also operates a 100,000 square foot component assembly and test facility in
Penang, Malaysia. Substantially all of the Company's test operations and a
significant portion of its assembly operations are performed at its Malaysian
facility. IDT also uses subcontractors, principally in Korea, the Philippines
and Malaysia, to perform certain assembly operations. If IDT were unable to
assemble or test products offshore, or if air transportation to these locations
were curtailed, the Company's operations could be materially adversely affected.
Additionally, foreign manufacturing exposes IDT to certain risks generally
associated with doing business abroad, including foreign governmental
regulations, currency controls and fluctuation, changes in local economic
conditions and changes in tax rates, tariffs and freight rates. In addition to
this offshore assembly and test capability, the Company has the capacity for
low-volume, quick-turn assembly in Santa Clara as well as limited test
capability in Santa Clara, San Jose and Salinas. Assembly and test of memory
modules and RISC subsystems takes place in both San Jose and Santa Clara.

The Company is operating its wafer fabrication facilities in Salinas and
San Jose and its assembly operations in Malaysia near installed equipment
capacity. To address its capacity requirements, the Company is currently
converting its Salinas wafer fabrication facility from five-inch to six-inch
wafers, adding incremental production equipment to its San Jose facility and
building an additional 40,000 square foot test and assembly facility in Penang,
Malaysia. In addition, the Company recently commenced construction of a 192,000
square foot facility containing a 48,000 square foot, class 1, eight-inch wafer
fabrication line in Hillsboro, Oregon. The Company also believes the
construction of a facility in Oregon reduces the Company's risk of a natural
disaster affecting all of its wafer fabrication facilities which are currently
located in northern California. The Company faces a number of risks in order to
accomplish its goals to increase production in its existing plants and to
construct, equip and commence operations of its new Oregon facility. See "Risk
Factors--Current Capacity Limitations and Risks Associated with Planned
Expansion" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

The Company utilizes proprietary CMOS and BiCMOS process technologies
permitting sub-micron geometries. BiCMOS is a combination of bipolar and CMOS
technologies and is used for applications requiring higher speeds. The majority
of IDT's current products are manufactured using its proprietary 0.65 micron
process technologies and the Company is currently developing 0.5 micron process
technologies.

Wafer fabrication involves a highly sophisticated, complex process that is
extremely sensitive to contamination. Integrated circuit manufacturing costs are
primarily determined by circuit size because the yield of good circuits per
wafer generally increases as a function of smaller die. Other factors affecting
costs include wafer size, number of process steps, costs and sophistication of
manufacturing equipment, packaging type, process complexity and cleanliness.
IDT's manufacturing process is complex, involving a number of steps including
wafer fabrication, plastic or ceramic packaging, burn-in and final test. The
Company continuously makes changes to its manufacturing process to lower costs
and improve yields. From time to time the Company has experienced manufacturing
problems that have caused delays in shipments or increased costs. There can be
no assurance that IDT will not experience manufacturing problems in the future.

The Company generally has been able to arrange for multiple sources of raw
materials, but the number of vendors capable of delivering certain raw
materials, such as silicon wafers, ultra-pure metals and certain chemicals and
gases is very limited. Some of the Company's packages, while not unique, have
very long lead times and are available from only a few suppliers. While IDT has
not experienced any difficulties recently, from time to time vendors have
extended lead times or limited supply to the Company due to capacity
constraints. These circumstances could reoccur and could adversely affect IDT.

BACKLOG

IDT manufactures and markets primarily standard products. Sales are
generally made pursuant to standard purchase orders, which are frequently
revised during the agreement term to reflect changes in

<PAGE>

the customer's requirements. The Company has also entered into master purchase
agreements with several of its OEM customers. These agreements do not require
the OEMs to purchase minimum quantities of the Company's products. Product
deliveries are scheduled upon the Company's receipt of purchase orders under the
related OEM agreements. Generally, these purchase orders and OEM agreements also
allow customers to reschedule delivery dates and cancel purchase orders without
significant penalties. Orders are frequently rescheduled, revised or cancelled.
In addition, distributor orders are subject to price adjustments both prior to,
and occasionally after, shipment. For these reasons, IDT believes that its
backlog, while useful for scheduling production, is not necessarily a reliable
indicator of future revenues.

RESEARCH AND DEVELOPMENT

IDT's competitive position has been established, to a large extent, through
its emphasis on the development of proprietary and enhanced performance
industry-standard products, and the development of advanced CMOS and BiCMOS
process technologies. IDT believes that its focus on continually advancing its
process technologies has allowed the Company to achieve cost reductions in the
manufacture of most of its products. The Company believes that a continued high
level of research and development expenditures is necessary to retain its
competitive position. Research and development expenditures as a percentage of
revenues were 26%, 23%, 19% and 19% in fiscal 1992, 1993 and 1994 and the first
six months of fiscal 1995, respectively.

The Company's product development activities are focused on the design of
new circuits and modules that provide enhanced performance for growing
applications. In the SRAM family, IDT is utilizing its 5 volt and 3.3 volt SRAM
and subsystem design expertise to develop advanced SRAM cache memories and
modules for microcomputer systems based on Intel's 486 and Pentium families of
microprocessors and the PowerPC microprocessors, as well as MIPS RISC
microprocessors. IDT's efforts in the specialty memory products area are
concentrated on the development for the communications market of advanced
synchronous FIFOs and more sophisticated multi-port memory products. The Company
is also developing a family of specialty memory products for the emerging ATM
market, and a family of lower voltage logic devices for a broad range of
applications. In the RISC component and subsystems product family, the Company
is designing products for embedded control applications, such as printers and
telecommunications switches. The Company also continues to refine its CMOS and
BiCMOS process technologies to increase the speed and density of circuits in
order to provide customers with advanced products at competitive prices, thus
enhancing their competitive positions. The Company is currently refining its
CMOS process technology to achieve 0.5 micron geometries and converting the
production of many products, particularly 3.3 volt devices, to newer generation
process technologies.

In fiscal 1992, the Company purchased an equity interest in QED, a newly
formed corporation. Pursuant to a development agreement between QED and the
Company, QED developed the ORION R4600 microprocessor for IDT. The Company
recently announced two new ORION derivative products being designed for IDT by
QED, the R4700 microprocessor targeted to desktop systems running WindowsNT or
UNIX operating systems, and the R4650 microprocessor targeted to embedded
applications. The Company owns such products, subject to the payment of
royalties and other fees to QED. IDT has licensed Toshiba and NKK to manufacture
and market certain of these products. There can be no assurance that QED will
continue to design products for the Company or be successful in developing such
products.

COMPETITION

The semiconductor industry is intensely competitive and is characterized by
rapid technological advances, cyclical market patterns, price erosion, evolving
industry standards, occasional shortages of materials and high capital equipment
costs. Many of the Company's competitors have substantially greater technical,
marketing, manufacturing and financial resources than IDT. In addition, several
foreign competitors receive assistance from their governments in the form of
research and development loans and grants and reduced capital costs, which could
give them a competitive advantage. The Company competes in different product
areas, to varying degrees, on the basis of technical innovation and performance
of its products, as well as quality, price and product availability.

<PAGE>

IDT's competitive strategy is to differentiate its products through
high-performance, innovative configurations and proprietary features or to offer
industry-standard products with higher speeds and/or lower power consumption.
There can be no assurance that price competition, introductions of new products
by IDT's competitors, delays in product introductions by IDT or other
competitive factors will not have a material adverse effect on the Company in
the future.

INTELLECTUAL PROPERTY AND LICENSING

IDT has obtained 44 patents in the United States and several abroad and has
numerous inventions in various stages of the patent application process. The
Company intends to continue to increase the scope of its patents. There can be
no assurance that any patents issued to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
competitive advantages to the Company. The Company also relies on trade secret,
copyright and trademark laws to protect its products, and a number of the
Company's circuit designs are registered pursuant to the Semiconductor Chip
Protection Act of 1984. This Act gives protection similar to copyright
protection for the patterns which appear on integrated circuits and prohibits
competitors from making photographic copies of such circuits.

In recent years, there has been a growing trend of companies to resort to
litigation to protect their semiconductor technology from unauthorized use by
others. IDT has been notified that it may be infringing patents issued to others
and in the past has been involved in patent litigation, which adversely affected
its operating results. There can be no assurance that additional intellectual
property claims will not be made against the Company in the future. The Company
believes that licenses, to the extent required, will be available in connection
with intellectual property claims. No assurance can be given, however, that the
Company will be able to obtain such a license on acceptable terms. Should
licenses from any such claimant be unavailable, the Company may be required to
discontinue its use of certain processes or the manufacture, use and sale of
certain of its products or to develop noninfringing technology. If IDT is unable
to obtain any necessary licenses, pass any increased cost of patent licenses on
to its customers or develop noninfringing technology, the Company could be
materially adversely affected. In addition, IDT has received patent licenses
from several companies, and the failure to renew certain of these licenses as
they expire or significant increases in amounts payable under these licenses
could have an adverse effect on the Company.

On January 16, 1988, IDT entered into a manufacturing, marketing and
purchase agreement with MIPS that allows IDT to manufacture and market the
complete MIPS family of RISC microprocessors and related software and to modify
the MIPS microprocessors to create subsets and supersets.

On May 1, 1992, IDT and AT&T entered into a five-year royalty-free patent
cross-license agreement. As part of this agreement, patent litigation instituted
by AT&T was settled and dismissed. Under the agreement, IDT made a lump sum
payment and issued shares of its Common Stock to AT&T, granted a discount on
future purchases, and gave credit for future purchases of technology on a
nonexclusive basis.

On December 10, 1992, IDT and Texas Instruments ("TI") entered into a
five-year patent cross- license agreement. As part of this agreement, patent
litigation instituted by TI was dismissed. Under the agreement, IDT granted to
TI a license to certain IDT technology and products and guaranteed TI that it
will realize certain revenues from the technology and products, and IDT will
develop certain products which will be manufactured and sold by both IDT and TI.
See Note 13 of Notes to Consolidated Financial Statements.

EMPLOYEES

At September 30, 1994, IDT and its subsidiaries employed approximately
2,750 people worldwide, of whom approximately 980 were in Penang. IDT's success
depends in part on its ability to attract and retain qualified personnel, who
are generally in great demand. Since its founding, the Company has implemented
policies enabling its employees to share in IDT's success. Examples are stock
option, stock purchase, profit sharing and special bonus plans for key
contributors. IDT has never had a work stoppage, no employees are represented by
a collective bargaining agreement, and the Company considers its employee
relations to be good.

<PAGE>
PROPERTIES

The Company presently occupies six major facilities in California and
Malaysia as follows:

LOCATION FACILITY USE SQUARE FEET
-------- ------------- -----------
Salinas ............ Wafer fabrication, SRAM and multi- 98,000
port memory operations

Santa Clara ........ Logic and RISC microprocessor 62,000
operations

Santa Clara......... Administration and sales 43,700

Santa Clara ........ Administration and RISC subsystems 50,000
operations

Penang, Malaysia ... Assembly and test 100,000

San Jose ........... Wafer fabrication, process technology 135,000
development, FIFO and memory
subsystems operations, and research
and development

The Company leases its Salinas facility from Carl E. Berg, a director, and in
October 1994 purchased a 5.5 acre parcel adjacent to its Salinas facility for
$653,000 from Mr. Berg. IDT leases its Salinas and Santa Clara facilities under
leases expiring in 1999 through 2005. The lease for the Salinas facility has two
five-year renewal options. The Company owns its Malaysian and San Jose
facilities, although the Malaysian facility is subject to long-term ground
leases and the San Jose facility is subject to a mortgage. IDT leases offices
for its sales force in 17 domestic locations as well as Hong Kong, London,
Milan, Munich, Paris, Stockholm, Taipei and Tokyo. See Note 7 of Notes to
Consolidated Financial Statements for information concerning IDT's obligations
under operating and capital leases. The Company is building an additional 40,000
square foot facility in Malaysia in order to add additional assembly and test
capacity. This expansion is planned to be completed in early fiscal 1996. The
Company has purchased a 23 acre parcel in Hillsboro, Oregon and has commenced
construction of a 192,000 square foot facility containing a 48,000 square foot,
class 1, eight-inch wafer fabrication line, which the Company plans to be
operational in fiscal 1997. See "Risk Factors--Current Capacity Limitations and
Risks Associated With Planned Expansion."

<PAGE>
MANAGEMENT

The executive officers and directors of the Company, and their respective
ages as of October 31, 1994, are as follows:

NAME AGE POSITION
- ----- ----- ----------
D. John Carey ......... 58 Chairman of the Board
Leonard C. Perham...... 51 Chief Executive Officer, President and Director
William B. Cortelyou... 38 Vice President, Wafer Operations
Robin H. Hodge......... 54 Vice President, Assembly and Test
Alan H. Huggins........ 41 Vice President, Memory Division
Larry T. Jordan........ 50 Vice President, Marketing
Daniel L. Lewis........ 45 Vice President, Sales
Chuen-Der Lien......... 38 Vice President, Technology Development
Jack Menache........... 51 Vice President, General Counsel and Secretary
Richard R. Picard...... 46 Vice President, Logic and Microprocessor
Products
William D. Snyder...... 50 Vice President, Finance and Chief Financial
Officer
Carl E. Berg(1)........ 57 Director
John C. Bolger(1)...... 48 Director
Federico Faggin........ 52 Director
- -----------
(1) Member of the Audit, Compensation and Stock Option Committees.

Mr. Carey was elected to the Board of Directors in 1980 and has been Chairman
of the Board since 1982. He served as Chief Executive Officer from 1982 until
his resignation in April 1991 and was President from 1982 until 1986. Mr. Carey
was a founder of Advanced Micro Devices ("AMD") in 1969 and was an executive
officer there until 1978.

Mr. Perham joined IDT in October 1983 as Vice President and General
Manager, SRAM Division. In October 1986, Mr. Perham was appointed President and
Chief Operating Officer and a director of the Company. In April 1991, Mr. Perham
was elected Chief Executive Officer. Prior to joining IDT, Mr. Perham held
executive positions at Optical Information Systems Incorporated and Zilog Inc.

Mr. Cortelyou joined IDT in 1982. In January 1990, he was elected Vice
President, Wafer Operations, Salinas. Mr. Cortelyou currently serves as Vice
President, Wafer Operations. Prior to joining IDT, Mr. Cortelyou was an engineer
at AMD.

Mr. Hodge joined IDT as Director of Assembly Operations in March 1989. In
January 1990, Mr. Hodge was elected Vice President, Assembly Operations. Mr.
Hodge currently serves as Vice President, Assembly and Test. From 1983 until
joining IDT, Mr. Hodge was Director of Assembly Operations for Maxim Integrated
Products.

Mr. Huggins joined IDT in 1983 and was elected Vice President in 1987. Mr.
Huggins currently serves as Vice President, Memory Division. Prior to joining
the Company, Mr. Huggins held various engineering positions at AMD.

Mr. Jordan joined IDT in July 1987 as Vice President, Marketing. Prior to
joining the Company, Mr. Jordan held management positions in marketing and sales
at SEEQ Technology, Inc. and Intel Corporation.

Mr. Lewis joined IDT in 1984 as Eastern Area Sales Manager. In June 1991,
he was elected Vice President, Sales. Prior to joining IDT, Mr. Lewis held
management positions at Avatar Technologies, Inc., Data General and Zilog.

<PAGE>

Dr. Lien joined IDT in 1987 and was elected Vice President, Technology
Development in April 1992. Prior to joining the Company, he held engineering
positions at Digital Equipment Corporation and AMD.

Mr. Menache joined IDT as Vice President, General Counsel and Secretary in
September 1989. From April 1989 until joining IDT, he was General Counsel of
Berg & Berg Developers. From 1986 until April 1989, he was Vice President,
General Counsel and Secretary of The Wollongong Group Inc.

Mr. Picard joined IDT in 1985. In 1989 he was elected Vice President,
Static RAM Product Line. In April 1990 he was appointed Vice President and
General Manager, Logic Products. He was elected Vice President, Logic and
Microprocessor Products in May 1993. Prior to joining IDT, Mr. Picard held
management positions at International Micro Circuits, Zilog and AMD.

Mr. Snyder joined the Company as Treasurer in 1985. In May 1990, he was
elected Vice President, Corporate Controller, and in September 1990 Mr. Snyder
was elected Vice President, Finance and Chief Financial Officer. Prior to
joining the Company, Mr. Snyder held financial management positions at Actrix
Computer, Zilog and Digital Equipment Corporation.

Mr. Berg has been a director of the Company since 1982. Mr. Berg has been a
partner of Berg & Berg Developers, a real estate development partnership, since
1979. He is a director of Valence Technology.

Mr. Bolger has been a director of the Company since January 1993. Mr.
Bolger is a private investor. He was Vice President--Finance and Administration
of Cisco Systems, Inc., an internetworking systems manufacturer, from 1989 to
1992 and Vice President--Finance and Administration of KLA Instruments, Inc., an
optical inspection equipment manufacturer, from 1988 to 1989. Mr. Bolger is a
director of Data Race, Inc., Integrated Systems, Inc., Sanmina Corporation and
Teknekron Communications Systems, Inc.

Mr. Faggin has been a director of the Company since 1992. Mr. Faggin has
been President, Chief Executive Officer and Director of Synaptics, Inc., a
neural network research and development company, since 1986. He is a director of
Aptix, Inc., Atesla, Inc. and Orbit Semiconductor.

CERTAIN TRANSACTIONS

The Company leases its Salinas facility from Carl E. Berg, a director and,
prior to this offering, a more than 5% shareholder of the Company. The Company
paid rental expense of $1,396,000 during fiscal 1994, under a lease agreement
that expires in July 1995, with options to renew for successive five-year
periods through 2015. In September 1994 the Company exercised its option to
renew the lease at an annual rental expense of $927,000 from July 1995 through
July 2005. In connection with the lease renewal, the Company was granted a right
of first refusal to purchase the Salinas facility on the same terms as a third
party offeree and an option to purchase the facility for a purchase price of
approximately $8,509,000 in a tax-free stock exchange. IDT's option is
exercisable for six months beginning on July 1, 2000.

In October 1994, the Company purchased from Mr. Berg a 5.5 acre parcel of
undeveloped land adjacent to its Salinas facility for $653,000.

The Company holds an approximately 57% equity interest in QED, a
corporation formed in 1991. Leonard C. Perham, the President and Chief Executive
Officer and a director of the Company, and Carl E. Berg are members of the board
of directors of QED. Mr. Berg also holds a minority equity interest in QED.
Pursuant to a development agreement between the Company and QED, QED is
developing for the Company derivative products based on MIPS' 64-bit
microprocessor architecture. During fiscal 1994, the Company paid QED a total of
$3,075,000 for product development and nonrecurring engineering. During the
first six months of fiscal 1995, the Company paid QED a total of $2,025,000 for
product development and nonrecurring engineering and $232,450 in royalties. See
"Business--Research and Development."

The Company holds an approximately 16% equity interest in Monolithic System
Technology, Inc. ("MoSys"). Leonard C. Perham and Carl E. Berg are members of
the board of directors of MoSys. Mr. Berg also holds an equity interest of
approximately 18% of MoSys. MoSys is developing certain technology that, if
successfully reduced to practice, could relate to the Company's business. During
fiscal

<PAGE>

1993 and 1994, the Company purchased a total of 333,500 shares of MoSys
preferred stock for a total of $667,000. During the first six months of fiscal
1995, the Company purchased 400,000 shares of MoSys preferred stock for a total
of $2,000,000 and paid MoSys $125,000 for technical support.

The Company has from time to time retained Phillip Perham, a contractor and
the brother of Leonard C. Perham, as an independent contractor to perform
certain construction services in connection with improvements and repairs to
various Company facilities. The Company paid Phillip Perham an aggregate of
approximately $177,570 and $9,160 for such services in fiscal 1994 and the first
six months of fiscal 1995, respectively.

SELLING STOCKHOLDERS

The following table and notes thereto set forth certain information
regarding beneficial ownership of the Company's Common Stock as of October 31,
1994, and as adjusted to reflect the sale of the shares offered by this
Prospectus, by each Selling Stockholder. The over-allotment option for up to
510,000 shares will be granted to the Underwriters by either the Company or Mr.
Berg. The table below shows the number of shares held by Selling Stockholders
before and after the offering assuming the over-allotment option is exercised in
full and such shares are sold by Mr. Berg.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING OFFERING
---------------------------- SHARES TO ------------------------
SELLING STOCKHOLDERS(1) NUMBER PERCENT BE SOLD NUMBER PERCENT
- -------------------------------------------------------- ------------ ----------- --------- ---------- ---------

<S> <C> <C> <C> <C> <C>
Carl E. Berg ..................................... 1,798,354(2) 5.3% 510,000 1,288,354 3.5%
c/o Berg and Berg Developers
10050 Bandley Drive
Cupertino, California

D. John Carey .................................... 867,308(3) 2.6 50,000 817,308 2.2

Leonard C. Perham ................................ 279,546(4) * 50,000 229,546 *

------------ ----- -------- ---------- -------

Total........................................ 2,945,208(5) 8.6% 610,000 2,335,208 6.2%
============ ===== ======= ========== =======

</TABLE>

- -----------
* Less than one percent.
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them, subject
to community property laws where applicable and the information contained
in the footnotes to the table.
(2) Includes 859,500 shares held by West Coast Venture Capital Ltd, of which
Mr. Berg is President of the general partner, and 20,000 shares subject to
options exercisable within 60 days of October 31, 1994. Also includes
78,900 shares held in trust for his child and 27,500 shares held by his
spouse, as to which Mr. Berg disclaims beneficial ownership. The shares
being sold pursuant to the over-allotment option, if any, by Mr. Berg are
held of record by West Coast Venture Capital Ltd.
(3) Includes 245,962 shares subject to options exercisable within 60 days of
October 31, 1994.
(4) Includes 269,903 shares subject to options exercisable within 60 days of
October 31, 1994.
(5) Includes the 535,865 shares subject to options as described in footnotes
(2)-(4) above.

<PAGE>
UNDERWRITING

Montgomery Securities, Lehman Brothers Inc. and Smith Barney Inc. (the
"Underwriters") have severally agreed, subject to the terms and conditions set
forth in the Underwriting Agreement, to purchase from the Company and the
Selling Stockholders the number of shares of Common Stock indicated below
opposite their respective names at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all of such shares if any are purchased.

NUMBER
UNDERWRITER OF SHARES
------------- ---------
Montgomery Securities ................................
Lehman Brothers Inc. .................................
Smith Barney Inc. ....................................
---------
Total ............................................. 3,400,000
=========

The Underwriters have advised the Company and the Selling Stockholders that the
Underwriters propose initially to offer the Common Stock to the public on the
terms set forth on the cover page of this Prospectus. The Underwriters may allow
to selected dealers a concession of not more than $ per share,
and the Underwriters may allow, and such dealers may reallow, a concession of
not more than $ per share to certain other dealers. After the initial
public offering, the offering price and other selling terms may be changed by
the Underwriters. The Common Stock is offered subject to receipt and acceptance
by the Underwriters and to certain other conditions, including the right to
reject orders in whole or in part.

The Company and one of the Selling Stockholders have granted an option to the
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to a maximum of 510,000 additional shares of Common
Stock to cover over-allotments, if any, at the same price per share as the
initial 3,400,000 shares to be purchased by the Underwriters. To the extent that
the Underwriters exercise this option, the Underwriters will be committed,
subject to certain conditions, to purchase such additional shares in the same
proportion as set forth in the table above. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this offering.

The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments that the Underwriters may be required to make in respect thereof.

All of the Company's executive officers and directors and the Selling
Stockholders have agreed that, for a period of 90 days after the date of this
Prospectus, they will not, without the prior written consent of Montgomery
Securities, directly or indirectly offer to sell, sell or otherwise dispose of
Common Stock of the Company (except for shares offered hereby by the Selling
Stockholders), or any securities convertible or exchangeable for shares of
Common Stock, owned by them. Notwithstanding the foregoing, officers of the
Company may sell up to an aggregate of 150,000 shares of Common Stock of the
Company without the prior written consent of Montgomery Securities. In addition,
the Company has agreed that for a period of 90 days after the date of this
Prospectus, it will not, without the prior written consent of Montgomery
Securities, directly or indirectly offer to sell, issue, distribute or otherwise
dispose of any equity securities or securities convertible into or exchangeable
for equity securities or any options, rights or warrants with respect to any
equity securities except for shares of Common Stock offered hereby or shares of
Common Stock or options issued pursuant to existing benefit plans of IDT.

In connection with this offering, the Underwriters and selling group members
may engage in passive market making transactions in the Company's Common Stock
on the Nasdaq National Market immediately prior to the commencement of the sale
of the shares in this offering, in accordance with Rule 10b-6A under the
Exchange Act. Passive market making consists of displaying bids on the Nasdaq
National Market limited by the bid prices of market makers not connected with
this offering and purchases limited by such prices and effected in response to
order flow. Net purchases by a passive market maker on each

<PAGE>

day are limited in amount to a specified percentage of the passive market
maker's average daily trading volume in the Common Stock during a specified
period prior to the filing with the Commission of the Registration Statement of
which this Prospectus is a part and must be discontinued when such limit is
reached. Passive market making may stabilize the market price of the Common
Stock at a level above that which might otherwise prevail and, if commenced, may
be discontinued at any time.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock will be passed upon
for the Company and the Selling Stockholders by Fenwick & West, Palo Alto,
California. Certain legal matters will be passed upon for the Underwriters by
Wilson, Sonsini, Goodrich & Rosati, P.C., Palo Alto, California.

EXPERTS

The consolidated financial statements of IDT as of April 3, 1994 and March
28, 1993 and for each of the three years in the period ended April 3, 1994
included in this Prospectus have been audited by Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

<PAGE>

REPORT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of Integrated Device Technology, Inc.

In our opinion, the accompanying balance sheets and the related consolidated
statements of operations, cash flows and stockholders' equity present fairly, in
all material respects, the financial position of Integrated Device Technology,
Inc. and its subsidiaries at March 28, 1993 and April 3, 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended April 3, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsiblity is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP
San Jose, California
April 27, 1994

F-1

<PAGE>

INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

MARCH 28, APRIL 3, OCTOBER 2,
1993 1994 1994
----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................ $ 22,529 $ 88,490 $ 87,774
Short-term investments ................................................... 1,877 33,351 38,120
Accounts receivable, net of allowance for returns and
doubtful accounts of $2,994, $4,129 and $3,728 .......................... 43,190 40,643 59,872
Inventory ................................................................ 27,237 29,855 32,755
Deferred tax assets ...................................................... 15,270 26,276 24,068
Prepayments and other current assets ..................................... 2,825 3,858 4,382
----------- ---------- ---------
Total current assets .................................................... 112,928 222,473 246,971
----------- ---------- ---------
Property, plant and equipment, net ........................................ 118,837 120,838 143,170
Other assets .............................................................. 8,229 6,260 7,425
----------- ---------- ---------
Total assets ............................................................ $ 239,994 $ 349,571 $ 397,566
=========== ========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................................... $ 15,819 $ 15,925 $ 25,954
Accrued compensation and related expense ................................. 7,399 16,528 15,851
Deferred income on shipments to distributors ............................. 10,450 17,592 25,829
Income taxes payable ..................................................... 878 1,964 8,052
Other accrued liabilities ................................................ 7,524 13,032 10,066
Current portion of long-term obligations ................................. 19,467 14,184 8,608
----------- ---------- ---------
Total current liabilities ............................................... 61,537 79,225 94,360
----------- ---------- ---------
Long-term obligations ..................................................... 48,987 37,462 34,316
----------- ---------- ---------
Deferred tax liabilities .................................................. 11,710 8,517 8,517
----------- ---------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.001 par value: 5,000,000 shares
authorized; no shares issued
Common stock; $.001 par value: 65,000,000 shares
authorized; 28,377,721, 33,405,552 and 33,652,361
shares issued and outstanding ........................................... 28 33 34
Additional paid-in capital ............................................... 93,731 160,221 162,109
Retained earnings ........................................................ 24,352 64,517 98,401
Cumulative translation adjustment ........................................ (351) (404) (171)
----------- ---------- ---------
Total stockholders' equity ............................................... 117,760 224,367 260,373
----------- ---------- ---------
Total liabilities and stockholders' equity ............................... $ 239,994 $ 349,571 $ 397,566
=========== ========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-2

<PAGE>

<TABLE>
<CAPTION>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

FISCAL YEAR ENDED SIX MONTHS ENDED
-------------------------------------------- --------------------------
MARCH 29, MARCH 28, APRIL 3, SEPTEMBER 26, OCTOBER 2,
1992 1993 1994 1993 1994
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues ........................................... $ 202,734 $ 236,263 $ 330,462 $ 153,061 $ 190,628
Cost of revenues ................................... 126,819 132,285 159,627 79,146 80,422
---------- --------- --------- ---------- ---------
Gross profit ....................................... 75,915 103,978 170,835 73,915 110,206
---------- --------- --------- ---------- ---------
Operating expenses:
Research and development .......................... 52,044 53,461 64,237 31,182 35,536
Selling, general and administrative ............... 48,721 39,511 54,329 25,306 30,368
Restructuring charge .............................. 4,466 -- -- -- --
---------- --------- --------- ---------- ---------
Total operating expenses .......................... 105,231 92,972 118,566 56,488 65,904
---------- --------- --------- ---------- ---------
Operating income (loss) ............................ (29,316) 11,006 52,269 17,427 44,302
Interest expense ................................... (7,045) (5,855) (5,165) (2,778) (1,854)
Interest income and other, net ..................... 1,593 1,127 3,102 795 2,721
---------- --------- --------- ---------- ---------
Income (loss) before provision (benefit)
for income taxes .................................. (34,768) 6,278 50,206 15,444 45,169
Provision (benefit) for income taxes ............... (1,960) 942 10,041 3,083 11,285
---------- --------- --------- ---------- ---------
Net income (loss) .................................. $ (32,808) $ 5,336 $ 40,165 $ 12,361 $ 33,884
========== ========= ========= ========== =========
Net income (loss) per share ........................ $ (1.25) $ .18 $ 1.21 $ .39 $ .94
========== ========= ========= ========== =========
Shares used in computing net income
(loss) per share .................................. 26,255 29,701 33,116 31,953 36,040
========== ========= ========= ========== =========
<FN>

The accompanying notes are an integral part of these financial statements.
</TABLE>
F-3

<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
------------------------------------------- --------------------------
MARCH 29, MARCH 28, APRIL 3, SEPTEMBER 26, OCTOBER 2,
1992 1993 1994 1993 1994
----------- ---------- -------------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss) ...................................... $ (32,808) $ 5,336 $ 40,165 $ 12,361 $ 33,884
Adjustments:
Depreciation and amortization ......................... 40,787 37,140 37,594 18,809 19,089
Provision for losses on accounts receivable ........... 1,222 (742) 476 392 290
Restructuring charges ................................. 4,466 -- -- -- --
Changes in assets and liabilities:
Accounts receivable ................................... (1,926) (6,167) 2,071 (668) (19,519)
Inventory ............................................. 8,670 (3,843) (2,618) (1,882) (2,900)
Deferred tax assets ................................... 2,324 2,616 (10,897) -- --
Other assets .......................................... 2,180 (391) (1,247) (1,417) (2,874)
Accounts payable ...................................... 5 (804) 106 385 10,029
Accrued compensation and related expense .............. (157) 3,158 9,799 2,559 (677)
Deferred income to distributors ....................... 610 1,093 7,142 1,695 8,237
Income taxes payable .................................. 722 477 11,574 2,940 8,296
Other accrued liabilities ............................. 5,816 (679) 5,885 143 (2,348)
---------- ---------- ---------- ---------- ----------
Net cash provided by operating activities .............. 31,911 37,194 100,050 35,317 51,507
---------- ---------- ---------- ---------- ----------
Investing activities:
Additions to property, plant and equipment ............. (25,706) (28,188) (38,083) (16,061) (40,636)
Proceeds from sale of equipment ........................ 416 178 671 591 400
Purchases of short-term investments .................... (18,458) (4,927) (40,221) (2,007) (24,456)
Proceeds from sales of short-term
investments ........................................... 27,624 4,110 8,747 460 19,687
---------- --------- --------- ----------- ---------
Net cash used for investing activities ................. (16,124) (28,827) (68,886) (17,017) (45,005)
---------- --------- --------- ----------- ---------
Financing activities:
Issuance of common stock, net .......................... 2,358 2,981 55,337 3,946 1,889
Proceeds from borrowings ............................... 11,665 32,161 2,731 2,731 --
Payment on capital leases and other debt ............... (21,423) (41,006) (23,271) (12,744) (9,107)
---------- --------- --------- ----------- ---------
Net cash provided by (used for) financing
activities ............................................ (7,400) (5,864) 34,797 (6,067) (7,218)
---------- --------- --------- ----------- ---------
Net increase (decrease) in cash and cash
equivalents ........................................... 8,387 2,503 65,961 12,233 (716)
Cash and cash equivalents at beginning of
period ................................................. 11,639 20,026 22,529 22,529 88,490
---------- --------- --------- ----------- ---------
Cash and cash equivalents at end of period .............. $ 20,026 $ 22,529 $ 88,490 $ 34,762 $ 87,774
========== ========= ========= =========== =========
Supplemental disclosure of cash flow information:
Interest paid .......................................... $ 6,876 $ 5,893 $ 4,713 $ 2,711 $ 1,526
Income taxes paid (refunded) ........................... (5,638) (2,050) 9,163 151 2,841
Issuance of common stock for acquisition of
technology ............................................ -- 7,738 -- -- --
Tax benefits from exercise of stock options ............ 477 582 10,488 -- --

<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>

F-4

INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
----------------------- PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT EQUITY
------------ ----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1991 ........................... 25,889,601 $ 26 $ 82,834 $ 51,824 $ (160) $ 134,524
Issuance of common stock ......................... 664,130 1 2,358 -- -- 2,359
Tax benefits of stock option
transactions .................................... -- -- 477 -- -- 477
Translation adjustment ........................... -- -- -- -- 50 50
Net loss ......................................... -- -- -- (32,808) -- (32,808)
----------- ---------- ---------- ---------- ----------- ----------
Balance, March 29, 1992 ........................... 26,553,731 27 85,669 19,016 (110) 104,602
Issuance of common stock ......................... 1,823,990 1 7,480 -- -- 7,481
Tax benefits of stock option
transactions .................................... -- -- 582 -- -- 582
Translation adjustment ........................... -- -- -- -- (241) (241)
Net income ....................................... -- -- -- 5,336 -- 5,336
----------- ---------- ---------- ---------- ----------- ----------
Balance, March 28, 1993 ........................... 28,377,721 28 93,731 24,352 (351) 117,760
Issuance of common stock ......................... 2,027,831 2 9,241 -- -- 9,243
Issuance of common stock at $15.71 per
share, pursuant to public offering, net
of expenses of $366 ............................. 3,000,000 3 46,761 -- -- 46,764
Tax benefits of stock option
transactions .................................... -- -- 10,488 -- -- 10,488
Translation adjustment ........................... -- -- -- -- (53) (53)
Net income ....................................... -- -- -- 40,165 -- 40,165
----------- ---------- ---------- ---------- ----------- ----------
Balance, April 3, 1994 ............................ 33,405,552 33 160,221 64,517 (404) 224,367
Issuance of common stock (unaudited) ............. 246,809 1 1,888 -- -- 1,889
Translation adjustment (unaudited) ............... -- -- -- -- 233 233
Net income (unaudited) ........................... -- -- -- 33,884 -- 33,884
----------- ---------- ---------- ---------- ----------- ----------
Balance, October 2, 1994 (unaudited) .............. 33,652,361 $ 34 $ 162,109 $ 98,401 $ (171) $ 260,373
=========== ========== ========== ========== =========== ==========

<FN>

The accompanying notes are an integral part of these financial statements.
</TABLE>
F-5

<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. The consolidated financial statements include the
accounts of Integrated Device Technology, Inc. (IDT or "the Company") and all of
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated.

Fiscal Year. The Company's fiscal year ends on the Sunday nearest March 31.
Fiscal years 1993, 1992 and 1991 each included 52 weeks. The fiscal year ended
on April 3, 1994 was a 53-week year. The fiscal year-end of certain of the
Company's foreign subsidiaries is March 31, and the results of their operations
as of their fiscal year end have been combined with the Company's results of
operations as of April 3, 1994. Transactions during the intervening period were
not significant.

Cash, Cash Equivalents and Short-term Investments. Cash equivalents are
highly liquid investments with original maturities of three months or less at
the time of acquisition or with guaranteed on-demand buy-back provisions.
Short-term investments are valued at amortized cost, which approximates market
and consist primarily of time deposits, corporate notes and treasuries. Cash
equivalents and short-term investments included certificates of deposit totaling
$9,349,000 and $10,603,000 at March 28, 1993 and April 3, 1994, respectively.

The Company adopted Statement of Financial Accounting Standards (FAS) 115,
"Accounting for Certain Investments in Debt and Equity Securities" effective
April 4, 1994 as required by that pronouncement. The Statement requires
reporting of investments as either held to maturity, trading or available for
sale. The Company's investments are classified as available for sale. The effect
of adoption was not material.

Inventory. Inventory is stated at the lower of standard cost (which
approximates actual cost on a first-in, first-out basis) or market. Market is
based upon estimated realizable value reduced by normal gross margin. Inventory
at March 28, 1993, April 3, 1994 and October 2, 1994 was:

OCTOBER 2,
MARCH 28, 1993 APRIL 3, 1994 1994
-------------- -------------- --------------
(IN THOUSANDS) (UNAUDITED)
Inventory:
Raw materials .................. $ 3,117 $ 2,834 $ 3,076
Work-in-process ................ 13,494 10,201 15,056
Finished goods ................. 10,626 16,820 14,621
-------- ------- -------
$27,237 $29,855 $32,755
======== ======== =======

Property, Plant and Equipment. Property, plant and equipment are stated at
cost. Depreciation is computed for property, plant and equipment using the
straight-line method over estimated useful lives of the assets. Leasehold
improvements and leasehold interests are amortized over the shorter of the
estimated useful lives of the assets or the remaining term of the lease.
Accelerated methods of depreciation are used for tax computations. Property,
plant and equipment at March 28, 1993 and April 3, 1994 were:

MARCH 28, 1993 APRIL 3, 1994
-------------- ---------------
(IN THOUSANDS)
Property, plant and equipment:
Land ............................................ $ 4,382 $ 4,382
Machinery and equipment ......................... 217,167 248,095
Building and leasehold improvements ............. 39,896 40,063
Construction-in-progress ........................ 10 76
---------- ---------
261,455 292,616
Accumulated depreciation and amortization ....... (142,618) (171,778)
---------- ---------
$ 118,837 $ 120,838
========== =========

F-6

<PAGE>

INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Income Taxes. The Company adopted Statement of Financial Accounting Standards
(FAS) 109, "Accounting for Income Taxes," in fiscal 1993, electing to apply the
provisions of FAS 109 retroactively to the beginning of fiscal 1992. The
adoption of FAS 109 changed the Company's method of accounting for income taxes
from the deferred method to an asset and liability approach. The asset and
liability approach requires that the expected future tax consequences of
temporary differences between book and tax bases of assets and liabilities be
recognized as deferred tax assets and liabilities.

Net Income (Loss) Per Share. Net income (loss) per share is computed using
the weighted average number of shares of common stock outstanding during the
year, plus incremental common equivalent shares, if dilutive. Common stock
equivalents consist of stock options (using the treasury stock method).

Revenue Recognition. Revenue from product sales is generally recognized upon
shipment and a reserve is provided for estimated returns and discounts. A
portion of the Company's sales is made to distributors under agreements which
allow certain rights of return and price protection on products unsold by the
distributors; such sales and profits thereon are deferred until the products are
resold by the distributors.

Reclassifications. Certain amounts in prior fiscal years' consolidated
financial statements and notes have been reclassified to conform with fiscal
1994 presentation.

Translation of Foreign Currencies. Accounts denominated in foreign currencies
have been translated in accordance with Statement of Financial Accounting
Standard (FAS) 52. The functional currency for the Company's sales operations is
the applicable local currency with the exception of the Hong Kong sales
subsidiary whose functional currency and reporting currency is the U.S. dollar.
For subsidiaries whose functional currency is the local currency, gains and
losses resulting from translation of these foreign currencies into U.S. dollars
are accumulated in a separate component of stockholders' equity. For the
Malaysian manufacturing and the Hong Kong sales subsidiaries, where the
functional currency is the U.S. dollar, gains and losses resulting from the
process of remeasuring foreign currency financial statements into U.S. dollars
are included in income. Aggregate net foreign currency transaction gains
(losses) totaled $(141,000), $(93,000) and $(232,000) in fiscal 1992, 1993 and
1994, respectively. The effect of foreign currency exchange rate fluctuations on
cash balances held in foreign currencies have not been material.

Foreign Exchange Contracts. The Company enters into forward exchange
contracts to hedge against the short-term impact of foreign currency
fluctuations on certain assets denominated in foreign currencies. The total
amount of these contracts is offset by the underlying assets denominated in
foreign currencies. The gains or losses on these contracts are included in
income as the exchange rates change and are offset by gains and losses on the
underlying assets being hedged. At April 3, 1994, the Company had $12 million of
forward exchange contracts outstanding, with maturity dates through July 1994.
The Company does not anticipate non-performance by the counterparties to these
contracts.

Concentration of Credit Risk and Off-Balance-Sheet Risk. The Company markets
high-speed integrated circuits to OEMs and distributors primarily in the United
States, Europe and the Far East. The Company performs on-going credit
evaluations of its customers' financial conditions and limits the amount of
credit extended when deemed necessary but generally does not require collateral.
Management believes that any risk of loss is significantly reduced due to the
diversity of its products, customers and geographic sales areas. The Company
maintains a provision for potential credit losses.

The Company sells a significant portion of its products through third-party
distributors. As a result of the merger of two of the Company's national
distributors, the receivable balance from the merged company is significant in
aggregate for fiscal 1994. If the financial condition and operations of this
distributor deteriorate below critical levels, the Company's operating results
could be adversely affected. This distributor's receivable balance represented
9% of total accounts receivable at March 28, 1993 on a pro forma combined basis
and 11% of total accounts receivable at April 3, 1994, following the merger.

F-7

<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company invests its cash and cash equivalents in cash deposits, money
market funds and commercial paper. Securities comprising cash equivalents and
short-term investments are maintained with high quality institutions, the
composition and maturities of which are regularly monitored by management.
Generally, a highly liquid market exists for these securities and they may be
redeemed upon demand and, therefore, bear minimal risk. The Company has not
experienced any material losses on its investments.

Unaudited Interim Information. The accompanying consolidated balance sheet at
October 2, 1994 and the consolidated statements of operations, cash flows and
stockholders' equity for fiscal quarters ended September 26, 1993 and October 2,
1994 are unaudited. In the opinion of management these financial statements have
been prepared on the same basis as the audited consolidated financial statements
and reflect all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the financial data of IDT and its subsidiaries for
such periods. The results of operations and cash flows for the fiscal quarters
are not necessarily indicative of the results to be expected for any other
fiscal quarter or for the year ending April 2, 1995. The data disclosed in the
notes to the consolidated financial statements for these periods is unaudited.

NOTE 2--RESTRUCTURING AND SIGNIFICANT OTHER EVENTS

In fiscal year 1992, the Company recorded $4.5 million of charges to net
income relating to the abandonment of IDT's original wafer processing facility
and product line reorganizations. The Company has substantially completed this
restructuring.

Also in fiscal 1992, due to changes in the market, the Company revised its
estimated useful lives and future realizable values of several assets. These
charges included a $7.2 million writeoff of excess inventory and $5.4 million of
writeoffs and changes in useful lives of underutilized capital assets. Also, due
to specific events during the second fiscal quarter, the Company provided a $1.3
million reserve for doubtful accounts and recorded $6.4 million of accrued legal
expenses. Subsequent developments and resolution of one of these legal matters
led the Company to recognize a $1 million benefit during fiscal 1993.

NOTE 3--OTHER ASSETS--INTANGIBLES

During fiscal 1993, IDT entered into various royalty-free patent
cross-license agreements. The patents licenses granted to IDT under these
agreements have been recorded at their cost of approximately $8,200,000 and will
be amortized on a straight-line basis over five years. The amortization relating
to patents licenses was $780,000 and $1,647,000 at March 28, 1993 and April 3,
1994, respectively.

NOTE 4--LONG-TERM OBLIGATIONS

The Company leases certain equipment under long-term leases or finances
purchases of equipment under bank financing agreements. Leased assets and assets
pledged under financing agreements which are included under property, plant and
equipment are as follows:

MARCH 28, 1993 APRIL 3, 1994
-------------- -------------
(IN THOUSANDS)
Building improvements ...................... $ 6,907 $ 6,907
Machinery and equipment .................... 86,091 65,403
--------- --------
Accumulated depreciation and
amortization .............................. (49,001) (43,949)
--------- --------
$ 43,997 $ 28,361
========= ========

The capital lease agreements and equipment financings are collateralized by
the related leased equipment and contain certain restrictive covenants.

F-8

<PAGE>

INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Future minimum payments under capital leases and equipment financing
agreements, at varying interest rates (4.9%-11.0%) are as follows:

FISCAL YEAR (IN THOUSANDS)
----------- --------------
1995 .................................. $14,339
1996 .................................. 5,898
1997 .................................. 3,075
1998 .................................. 1,486
1999 .................................. 3
--------
Total minimum payments ................ 24,801
Less interest ......................... 2,420
--------
Present value of net minimum payments.. 22,381
Less current portion................... 12,878
--------
$ 9,503
========

During fiscal 1993, IDT recorded a long-term obligation in connection with
the dismissal of certain litigation and entering into a patent cross-license
agreement. Under this cross license/technology agreement, the Company recorded,
at March 28, 1993, a long-term obligation of $7,041,000 representing the present
value discounted at 8% of amounts due at the end of the five-year license. The
present values of the amount due at the end of the license term were $7,041,000
and $7,471,000 at March 28, 1993 and April 3, 1994, respectively. During the
year, this amount payable has been reduced by an amount of royalty income
pursuant to certain guaranteed revenues realized on sales of IDT's products. The
Company is accreting $3.3 million in future interest charges from the recorded
amount at April 3, 1994 to the amount due at the end of the term using the
effective interest method.

NOTE 5--LONG-TERM DEBT

Long-term debt consists of the following:

MARCH 28, 1993 APRIL 3, 1994
-------------- -------------
(IN THOUSANDS)
Mortgage payable bearing interest at 9.625%
due in monthly installments of $142,000
including interest through April 1, 2005.
The note is secured by property and
improvements in San Jose, California ............ $12,152 $11,543
Term loan payable to a Malaysian bank at 8%
due in monthly installments of $54,000 .......... 1,448 791
------- --------
13,600 12,334
Less current portion ............................. 1,188 1,306
------- --------
$12,412 $11,028
======= ========

Principal payments required in the next five years are as follows (in
thousands): $1,306 (1995), $790 (1996), $752 (1997), $828 (1998) and $8,658
(beyond 1998).

NOTE 6--LINES OF CREDIT

The Company's Malaysian subsidiary has unsecured revolving lines of credit
that allow borrowings up to $2,500,000 with three local banks. These lines have
no expiration date. At April 3, 1994 there were no outstanding borrowings
against these lines. The borrowing rate for these lines would be incurred at the
local bank's cost of funds plus 0.75% to 1% (8.80%-9.25% on April 3, 1994).

F-9

<PAGE>

INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In fiscal 1994, the Company's Japanese subsidiary had a secured revolving
line of credit that allowed borrowings up to approximately $1,940,000. The line
of credit automatically extends until the Company requests termination. As of
April 3, 1994, no amounts were outstanding under this line of credit. The
borrowing rate for this line of credit is the local bank's short-term prime rate
existing at the borrowing date plus 0.2%. At April 3, 1994 this short-term
borrowing rate was 3.2%.

The Company also has foreign exchange facilities with several banks that
allow the Company to enter into foreign exchange contracts of up to $30,000,000,
of which $18,026,000 was available at April 3, 1994.

NOTE 7--COMMITMENTS

Lease Commitments. The Company leases most of its administrative and
manufacturing facilities under operating lease agreements which expire through
1996. Two facilities were leased from a principal shareholder. The annual rent
paid to this shareholder totaled approximately $1,995,000, $1,396,000 and
$1,396,000 in fiscal 1992, 1993 and 1994, respectively. One stockholder lease
expired during fiscal 1992 and the other will expire in June 1995.

The aggregate minimum rent commitments under all operating leases are as
follows:

(FISCAL YEAR) (IN THOUSANDS)
------------------- ------------
1995 ................. $ 4,122
1996 ................. 2,902
1997 ................. 2,217
1998 ................. 1,924
1999 ................. 1,933
2000 and thereafter... 1,980
--------
$ 15,078
========

Rent expense for the years ended March 29, 1992, March 28, 1993 and April 3,
1994 totaled approximately $3,839,000, $3,303,000 and $3,488,000, respectively.

As of April 3, 1994, four secured standby letters of credit were outstanding
totaling $1,937,000. Three letters of credit are held in connection with the
Company's workers compensation insurance and mature on June 30, 1994, June 30,
1995 and June 30, 1996. The fourth letter of credit secures the credit facility
for the Company's Japanese subsidiary and matured on April 4, 1994.

NOTE 8--FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

The estimated fair value of financial instruments has been determined by
the Company, using available market information and valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that the Company could realize in
a current market exchange. The use of different market assumptions and/or
estimation methodologies could have a material effect on the estimated fair
value amounts.

The amount reported for cash and cash equivalents, short-term investments,
foreign exchange contracts and the Malaysian term loan were considered to be
reasonable estimates of their fair value.

The fair values of short-term and long-term debt were based upon estimated
interest rates available to the Company for issuance of debt with similar terms
and remaining maturities for existing asset-secured equipment loans and capital
leases. The estimated fair value of the Company's short-term and long-term debt
at April 3, 1994 was $20,784,000. The fair value for the mortgage loan is
$10,748,000 estimated using discounted cash flow analysis based on an estimated
interest rate of 7.5 percent for similar types of borrowing arrangements.

F-10

<PAGE>

INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The fair value estimates presented herein were based upon information
available to management as of April 4, 1994. Although management is not aware of
any factors that would materially affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes of the consolidated
financial statements since that date, and current estimates of fair value may
differ significantly from the amounts presented herein.

NOTE 9--STOCKHOLDERS' EQUITY

Stock Option Plans. The Company has stock option plans under which key
employees, officers, directors and consultants may be granted options to
purchase shares of the Company's common stock at prices which are not less than
fair market value at the date of grant. Options granted are generally
exercisable in 25% increments each year beginning one year after the grant date.

At April 3, 1994, options for 1,172,000 shares were exercisable at an
aggregate exercise price of $4,856,000. At March 28, 1993, options for 2,093,853
shares were exercisable at an aggregate exercise price of $7,692,000.

Activity under the plans is summarized as follows:

OPTIONS OUTSTANDING
--------------------------------------------
AVAILABLE AGGREGATE
FOR ISSUANCE NUMBER PRICE PER SHARE PRICE
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Balance, March 31, 1991 .............. 1,463,734 4,391,764 $ 3.25-$ 14.25 $ 16,832,000
Additional authorization ............ 1,500,000
Granted ............................. (2,697,815) 2,697,815 $ 3.75-$ 9.50 14,459,000
Surrendered, canceled or expired..... 1,807,581 (1,809,971) $ 3.25-$ 14.25 (11,321,000)
Exercised ........................... -- (464,036) $ 3.25-$ 5.13 (1,683,000)
-------------- ------------- --------------
Balance, March 29, 1992............... 2,073,500 4,815,572 $ 3.25-$ 13.25 18,287,000
Additional authorization.............
Granted ............................. (1,358,323) 1,358,323 $3.625-$ 8.25 6,701,000
Surrendered, canceled or expired..... 254,930 (447,625) $ 3.25-$ 13.25 (1,810,000)
Exercised ........................... -- (529,371) $ 3.25-$ 7.50 (1,933,000)
-------------- ------------- --------------
Balance, March 28, 1993............... 970,107 5,196,899 $ 3.25-$12.125 21,245,000
Additional authorization............. 975,000
Granted.............................. (1,850,234) 1,850,234 $ 7.00-$25.375 26,599,000
Surrendered, canceled or expired..... 284,010 (287,423) $ 3.25-$22.125 (1,738,000)
Exercised............................ -- (1,780,613) $ 3.25-$17.625 (6,695,000)
-------------- ------------- -------------
Balance, April 3, 1994................ 378,883 4,979,097 $ 3.25-$25.375 $ 39,411,000
============== ============= =============
</TABLE>

Stock Purchase Plan. The Company has a stock purchase plan under which
employees and officers may purchase shares of the Company's common stock. The
purchase price at which shares may be purchased under this plan is 85% of the
lower of the fair market value on the first or last day of each quarterly plan
period. As of March 28, 1993 and April 3, 1994, 1,277,328 and 1,457,771 shares,
respectively, had been purchased by employees, net of repurchases by the
Company, under the terms of the plan agreements. At April 3, 1994, 567,229
shares were reserved and available for issuance under this plan.

Stockholder Rights Plan. In February 1992, the Board approved certain amendments
to the Company's Stockholder Rights Plan. Under the plan, the Company declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of common stock. Each Right entitles the holder, under certain
circumstances, to purchase common stock of the Company with a value of twice the
exercise

F-11

<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

price of the Right. In addition, the Board of Directors may, under certain
circumstances, cause each Right to be exchanged for one share of common stock or
substitute consideration. The Rights are redeemable by the Company and expire in
1998.

NOTE 10--EMPLOYEE BENEFITS PROFIT SHARING PLAN

Prior to September 24, 1993, under the Company's Profit Sharing Plan, the
Board of Directors could authorize semiannual contributions for the benefit of
employees of up to 10% of pre-tax earnings, before profit sharing. Half of the
annual contribution, net of expenses, was in the form of cash payments directly
to all domestic and Malaysian employees meeting certain service criteria, and
the residual half was contributed directly to the Company's Long-Term Incentive
Plan for the purchase of IDT Common Stock on behalf of the Company's employees.

The Company received approval from the IRS to terminate the Long-Term
Incentive Plan effective September 24, 1993. Effective this date, all shares
were 100% vested and no additional shares of IDT stock will be added to this
account. Beginning September 27, 1993, all IDT employees will receive an
increase in their cash profit sharing from 5% to 7% and the Company will
contribute an additional 1% of pre-tax profits to the Company's 401(k) plan.

Administrative expenses are netted against the Profit Sharing Plan
contribution. Contributions for the years ended March 28, 1993 and April 3, 1994
for this plan were $477,000 and $5,128,000, respectively. There were no
contributions for the year ended March 29, 1992.

NOTE 11--INCOME TAXES

The components of income before provision (benefit) for income taxes are as
follows:

MARCH 29, MARCH 28, APRIL 3,
1992 1993 1994
------------ ----------- ----------
(IN THOUSANDS)
United States.......... $ (37,858) $ 2,240 $44,808
Foreign................ 3,090 4,038 5,398
---------- ----------- ----------
$ (34,768) $ 6,278 $50,206
========== =========== ==========

The provisions (benefits) for income taxes consist of the following:

MARCH 29, MARCH 28, APRIL 3,
1992 1993 1994
----------- ------------ -----------
(IN THOUSANDS)
Current income taxes (benefits):
United States .......................... $ 242 $ (2,467) $ 14,699
State .................................. -- -- 4,039
Foreign ................................ 161 102 798
--------- --------- --------
403 (2,365) 19,536
--------- --------- --------
Deferred (prepaid) income taxes:
United States .......................... (2,363) 3,307 (5,379)
State .................................. -- -- (4,116)
--------- --------- --------
(2,363) 3,307 (9,495)
--------- --------- --------
Provision (benefit) for income taxes .... $ (1,960) $ 942 $ 10,041
========= ========= ========

F-12

<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of deferred assets and liabilities are as follows:

MARCH 28, APRIL 3,
1993 1994
---------- ---------
(IN THOUSANDS)
Deferred tax assets:
Deferred income on shipments to distributors ...... $ 4,330 $ 7,466
Non-deductible accruals and reserves .............. 8,313 13,527
Capitalized inventory and other expenses .......... 6,014 4,071
Capitalized research and development .............. 752 825
Other ............................................. 746 273
Refund receivables ................................ 3,560 2,451
--------- --------
Total deferred tax asset .......................... 23,715 28,613
Valuation allowance ............................... (8,445) (2,337)
--------- --------
Net deferred tax asset ............................ 15,270 26,276
--------- --------
Deferred tax liabilities:

Depreciation ...................................... (11,710) (8,517)
--------- --------
Total deferred tax liability ...................... (11,710) (8,517)
--------- --------
Net deferred tax asset ............................ $ 3,560 $ 17,759
========= ========

The provision (benefit) for income taxes differs from the amount computed by
applying the U.S. statutory income tax rate of 35% for the year ended April 3,
1994 (34% for the years ended March 28, 1993 and March 29, 1992) to income
before the provision (benefit) for income taxes as follows:

MARCH 29, MARCH 28, APRIL 3,
1992 1993 1994
------------ ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision at U.S. statutory rate of 34%........ $ (11,821) $ 2,134 $ 17,572
Earnings of foreign subsidiaries considered
permanently reinvested, less foreign taxes.... (232) (1,701) (951)
General business credits ...................... (660) 0 (2,710)
Tax rate differential.......................... 3,220 574 (1,167)
State tax...................................... -- -- 3,558
Valuation allowance ........................... 8,031 414 (6,108)
Other ......................................... $ (498) (479) (153)
---------- ----------- ----------
Provision (benefit) for income taxes .......... $ (1,960) $ 942 $ 10,041
========== =========== ==========
</TABLE>

The Company's Malaysian subsidiary operates under a tax holiday which
extended through July 1993. Management believes it is likely that carryovers of
depreciation from the tax holiday period along with expected additional
depreciation grants will defer the time when the Malaysian subsidiary will first
begin to pay local taxes beyond its year ended April 3, 1994.

The provision for income taxes for the six month period ended October 2, 1994
reflects the estimated annualized effective tax rate of 25%. This rate differs
from the U.S. statutory rate of 35% primarily due to earnings of foreign
subsidiaries being taxed at lower rates, utilization of research and development
credits and utilization of certain deferred tax benefits for which a valuation
allowance was previously required.

F-13

<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company's intention is to permanently reinvest its earnings in all of its
foreign subsidiaries. Accordingly, U.S. taxes have not been provided on
approximately $19,700,000 of unremitted earnings, of which approximately
$17,100,000 were earned by the Company's Malaysian subsidiary. Upon distribution
of those earnings in the form of dividends or otherwise, the Company will be
subject to both U.S. income taxes and various foreign country withholding taxes.

NOTE 12--INDUSTRY SEGMENT, FOREIGN OPERATIONS

IDT operates predominantly in one industry segment and is engaged in the
design, development, manufacture and marketing of high-performance integrated
circuits. No single customer or distributor accounted for more than 10% of net
revenues in fiscal 1992 and 1993. During fiscal 1994, two of the Company's
national distributors became one entity and accounted for 15% of net revenues.
If these two distributors had been a single entity during fiscal 1992 and 1993,
it would have accounted for 17% and 16%, respectively, of IDT's total revenues.

Major operations outside the United States include manufacturing facilities
in Malaysia and sales subsidiaries in Japan, the Pacific Rim, and throughout
Europe.

At March 28, 1993 and April 3, 1994, total liabilities for operations outside
of the United States were $20,152,000 and $20,704,000, respectively.

F-14

<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following is a summary extract of IDT's foreign operations by
geographic areas for fiscal 1992, 1993 and 1994:

TRANSFERS
SALES TO BETWEEN OPERATING
UNAFFILIATED GEOGRAPHIC INCOME IDENTIFIABLE
CUSTOMERS AREAS NET REVENUE (LOSS) ASSETS
-------------- ------------ ------------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Fiscal year ended March 29, 1992
United States ...................... $ 140,999 $ 21,616 $ 162,615 $ (4,800) $ 190,801
Japan............................... 23,018 23,018 41 6,192
Europe ............................. 26,861 2,838 29,699 303 5,703
Asia-Pacific........................ 11,856 15,230 27,086 3,234 18,838
Eliminations ....................... -- (39,684) (39,684) (71) (26,172)
Corporate .......................... -- -- -- (28,023) 34,368
-------------- ------------ ------------- ------------ --------------
Consolidated ....................... $ 202,734 $ -- $ 202,734 $ (29,316) $ 229,730
============== ============ ============= ============ ==============
Fiscal year ended March 28, 1993
United States ...................... $ 152,303 $ 23,585 $ 175,888 $ 22,159 $ 198,993
Japan............................... 23,022 23,022 (419) 5,651
Europe.............................. 33,907 2,847 36,754 374 8,028
Asia-Pacific........................ 27,031 20,566 47,597 4,715 24,155
Eliminations........................ -- (46,998) (46,998) (94) (24,081)
Corporate........................... -- -- -- (15,729) 27,248
-------------- ------------ ------------- ------------ --------------
Consolidated........................ $ 236,263 $ -- $ 236,263 $ 11,006 $ 239,994
============== ============ ============= ============ ==============
Fiscal year ended April 3, 1994
United States ...................... $ 223,600 $ 42,500 $ 266,100 $ 70,788 $197,385
Japan .............................. 29,959 29,959 (257) 8,033
Europe ............................. 60,064 3,274 63,338 677 8,182
Asia-Pacific........................ 16,839 24,869 41,708 5,146 27,202
Eliminations ....................... -- (70,643) (70,643) (408) (24,470)
Corporate .......................... -- -- -- (23,677) 133,239
-------------- ------------ ------------- ------------ --------------
Consolidated........................ $ 330,462 $ -- $ 330,462 $ 52,269 $349,571
============== ============ ============= ============ ==============
</TABLE>

Transfers between geographic areas are accounted for at amounts which are
generally above cost and consistent with the rules and regulations of governing
tax authorities. Such transfers are eliminated in the consolidated financial
statements. Operating income by geographic areas reflect foreign earnings
reported by the foreign entities and does not include an allocation of general
corporate expenses. Identifiable assets are those assets that can be directly
associated with a particular foreign entity and thus do not include assets used
for general corporate purposes: cash and cash equivalents, short-term
investments and prepaid income taxes.

F-15

<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 13--CROSS-LICENSE AGREEMENT

During fiscal 1993, the Company entered into a patent cross-license agreement
which obligated the payment of an amount of royalties dependent upon the level
of the Company's profitability. The amount of royalties accrued during fiscal
1994 was approximately $4.4 million and has been included in other accrued
liabilities. The Company will not be negatively impacted by any further royalty
payment from this agreement beginning fiscal 1995.

F-16

<PAGE>

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No dealer, sales representative or 3,400,000 SHARES
any other person has been authorized
to give any information or to make any
representation not contained in this
Prospectus in connection with the
offer made by this Prospectus and, if
given or made, such information or
representation must not be relied upon
as having been authorized by the IDT LOGO GOES HERE
Company, any Selling Stockholder or
any Underwriter. This Prospectus does
not constitute an offer to sell or a
solicitation of an offer to buy any
securities other than the registered
securities to which it relates or an
offer to sell or a solicitation of an
offer to buy such securities in any COMMON STOCK
circumstances in which such offer or
solicitation is unlawful. Neither the
delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create any implication
that there has been no change in the
affairs of the Company since the date
hereof or that the information
contained herein is correct as of any ----------
time subsequent to the date hereof.
PROSPECTUS
----------
TABLE OF CONTENTS ----------
----------

PAGE
----
Available Information .......... 2
Information Incorporated by
Reference...................... 2
Prospectus Summary.............. 3
Risk Factors ................... 5
Use of Proceeds ................ 11
Price Range of Common Stock .... 11 MONTGOMERY SECURITIES
Dividend Policy ................ 11
Capitalization.................. 12
Selected Consolidated Financial LEHMAN BROTHERS
Data .......................... 13
Management's Discussion
and Analysis of Financial SMITH BARNEY INC.
Condition and Results of
Operations .................... 14
Business ....................... 19
Management ..................... 28
Certain Transactions............ 29
Selling Stockholders............ 30
Underwriting.................... 31
Legal Matters .................. 32
Experts ........................ 32
Report of Independent
Accountants ................... F-1
Consolidated Financial
Statements ................... F-2 November , 1994

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