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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

or

COMMISSION FILE NO. 0-16538

MAXIM INTEGRATED PRODUCTS, INC.

Registrant’s telephone number, including area code:

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days:

Yes [x]    No [  ]

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MAXIM INTEGRATED PRODUCTS, INC.

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CONDENSED CONSOLIDATED BALANCE SHEETS

MAXIM INTEGRATED PRODUCTS, INC.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

MAXIM INTEGRATED PRODUCTS, INC.

                See accompanying Notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

MAXIM INTEGRATED PRODUCTS, INC.

See accompanying Notes to Condensed Consolidated Financial Statements.

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MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. The results of operations for the three and six months ended December 28, 2002 are not necessarily indicative of the results to be expected for the entire year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended June 29, 2002.

The Company has a 52-to-53-week fiscal year that ends on the last Saturday in June. Accordingly, every sixth or seventh fiscal year will be a 53-week fiscal year. Fiscal years 2002 and 2003 are 52-week fiscal years.

NOTE 2: BUSINESS COMBINATION

In the fourth quarter of fiscal year 2001, the Company acquired Dallas Semiconductor, a leading provider of specialty semiconductors. The Company issued approximately 41.0 million shares of its common stock in exchange for all the outstanding common stock of Dallas Semiconductor. In addition, the Company exchanged all options to purchase Dallas Semiconductor common stock for options to purchase approximately 5.9 million shares of the Company’s common stock. The transaction was accounted for as a pooling-of-interests and qualifies as a tax-free reorganization.

All financial data of the Company presented in these condensed consolidated financial statements was restated to include the historical financial data of Dallas Semiconductor in accordance with accounting principles generally accepted in the United States and pursuant to Regulation S-X of the Securities and Exchange Commission.

NOTE 3: INVENTORIES

Inventories consist of (in thousands):

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MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

NOTE 4: EARNINGS PER SHARE

Basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options. The number of incremental shares from the assumed issuance of stock options is calculated applying the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share.

Approximately 44.4 million and 10.1 million of the Company’s stock options were excluded from the calculation of diluted earnings per share for the three months ending December 28, 2002 and December 29, 2001, respectively. Approximately 45.3 million and 12.1 million of the Company’s stock options were excluded from the calculation of diluted earnings per share for the six months ending December 28, 2002 and December 29, 2001, respectively. These options were excluded, as they were antidilutive; however, such options could be dilutive in the future.

NOTE 5: SHORT-TERM INVESTMENTS

All short-term investments at December 28, 2002 are classified as available-for-sale and consist primarily of U.S. Treasury and Federal Agency debt securities with original maturities beyond three months. Unrealized gains and losses, net of tax, on securities in this category are included in accumulated other comprehensive income (loss) which is a separate component of stockholders’ equity. The cost of securities sold is based on the specific identification method. Interest earned on securities is included in “Interest income, net” in the condensed consolidated statements of income.

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MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

NOTE 6: SEGMENT INFORMATION

The Company operates and tracks its results in one operating segment. The Company designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by Statement of Financial Accounting Standard No. 131 (SFAS 131), “Disclosures about Segments of an Enterprise and Related Information.”

Enterprise-wide information is provided in accordance with SFAS 131. Geographical revenue information is based on the customer’s bill-to location. Long-lived assets consist of property, plant and equipment. Property, plant and equipment information is based on the physical location of the assets at the end of each fiscal period.

Net revenues from unaffiliated customers by geographic region were as follows:

Net long-lived assets by geographic region were as follows:

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MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

NOTE 7: COMPREHENSIVE INCOME

Comprehensive income consists of net income and net unrealized gains (losses) on available-for-sale investments and forward exchange contracts. The components of other comprehensive income (loss) and related tax effects were as follows:

Accumulated other comprehensive income (loss) presented in the condensed consolidated balance sheet at December 28, 2002 consists of net unrealized gains on available-for-sale investments of $2.3 million, net unrealized loss on forward exchange contracts of $(0.1) million, and foreign currency translation adjustments of $(1.5) million. Foreign currency translation adjustments are not tax affected.

NOTE 8: MERGER AND SPECIAL CHARGES

As a result of the merger with Dallas Semiconductor, during the fourth quarter of fiscal year 2001, the Company recorded merger costs of approximately $26.4 million. These costs consist of approximately $14.1 million intended to satisfy the change in control payments under previously existing employment contracts and other non-employee director arrangements for which there was no future economic benefit; a $5.8 million payment to be made under a change in control provision in a previously existing life insurance arrangement for which there was no future economic benefit; and $6.5 million for fees related to investment banking, legal, accounting, filings with regulatory agencies, financial printing, and other related costs. Substantially all of these direct transaction costs were paid out of existing cash reserves within 12 months of the consummation of the merger. The remaining unpaid direct transaction costs of approximately $1.7 million are related to change in control payments under previously existing employment contracts and other non-employee director arrangements that will be paid out in future periods according to the terms of the related agreement.

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MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

NOTE 8: MERGER AND SPECIAL CHARGES (CONT’D)
During the fourth quarter of fiscal year 2001, the Company recorded special charges of $137.0 million. These special charges resulted from the significant decrease in demand that occurred during the fourth quarter of fiscal year 2001 for Dallas Semiconductor’s products in combination with the Company’s intention to close Dallas Semiconductor’s 6-inch wafer manufacturing facility and dispose of the related equipment. At the time the merger between the Company and Dallas Semiconductor was consummated, the Company intended to complete construction of an 8-inch wafer manufacturing facility located in Dallas, Texas. Construction on this faculty was completed during the six months ended December 28, 2002. The 8-inch wafer manufacturing facility will serve as Dallas Semiconductor’s primary wafer manufacturing facility. In addition, in fiscal year 2001, the Company planned to concentrate a significant portion of its test operations of the combined company at the Company’s test facilities located in the Philippines and Thailand. The Company concluded that the above facts indicated that Dallas Semiconductor’s long-lived assets might be impaired, and as required by accounting principles generally accepted in the United States, performed a cash flow analysis of the related assets. Based on the cash flow analysis, the cash flows expected to be generated by Dallas Semiconductor’s long-lived assets during their estimated remaining useful lives were not sufficient to recover the net book value of the assets. Based on the cash flow analysis, an impairment charge of $124.4 million was recorded to reduce the net book value of Dallas Semiconductor’s long-lived assets to fair value. The Company continued construction of the 8-inch wafer manufacturing facility located in Dallas, Texas during fiscal year 2002 although at a slower pace than originally anticipated due to unforeseen complexities and resource constraints related to converting existing 6-inch processes to 8-inch processes. During the six months ended December 28, 2002, the Company completed construction of the 8-inch wafer manufacturing facility and began start up operations. The concentration of test operations of the combined company noted above was completed in fiscal year 2002 as planned.

In addition to the above, the Company recorded special charges of $12.6 million to reflect the reorganization of the Company’s sales organization, purchase order cancellation fees, and the reduction in the Company’s manufacturing workforce. The above actions directly impacted employees in the Company’s sales, marketing, and manufacturing organizations. During fiscal years 2001 and 2002, the Company terminated a total of 230 employees and paid $2.5 million in termination benefits related to the above actions.

During fiscal year 2002, the Company recorded additional special charges of $4.1 million related to additional reductions in the Company’s manufacturing workforce. These additional reductions were required to better match capacity with demand for the Company’s product and resulted in the Company terminating an additional 350 employees and paying an additional $4.0 million of termination benefits in fiscal year 2002. During the three months ended September 28, 2002, the Company paid the remaining $0.1 million severance liability related to the special charges recorded during fiscal year 2002.

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MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

NOTE 8: MERGER AND SPECIAL CHARGES (CONT’D)
The following table summarizes the activity related to the above actions.

NOTE 9: CONTINGENCIES

On June 26, 1997, a complaint was filed by Linear Technology Corporation (“LTC”) naming the Company and certain other unrelated parties as defendants. The complaint alleges that each of the defendants, including the Company, has willfully infringed, induced infringement and contributorily infringed LTC’s United States Patent 5,481,178 relating to control circuits and methods for maintaining high efficiencies over broad current ranges in a switching regulator circuit, all of which has allegedly damaged LTC in an unspecified amount. The complaint further alleges that the Company’s actions have been, and continue to be, willful and deliberate and seeks a permanent injunction against the Company as well as unspecified actual and treble damages including costs, expenses, and attorneys fees. The Company answered the complaint on October 20, 1997, denying all of LTC’s substantive allegations and counterclaiming for a declaration that LTC’s patent is invalid and not infringed.

On September 21, 2001, the Federal District Court for the Northern District of California issued an order dismissing the patent litigation action by LTC. The court found that the Company did not infringe any of the claims of the asserted patent. The Company had moved for summary judgment on a number of subjects, including noninfringement, invalidity and unenforceability of the patent. The court found that the Company’s remaining summary judgment motions were rendered moot by its noninfringement ruling. LTC has appealed the decision. While the Company continues to believe the claims are without merit, no assurance can be given as to the outcome of the appeal. The Company does not know if the ultimate outcome of these matters will have a material adverse

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MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

NOTE 9: CONTINGENCIES (CONT’D)

effect on the financial position or liquidity of the Company. If, however, the appellate court in the action brought by LTC were to reverse the trial court’s dismissal of the patent litigation claims brought by LTC against the Company, and were LTC to prevail in its claims against the Company, the Company’s operating results could be materially adversely affected.

On December 12, 2002, Qualcomm Inc. filed a complaint for patent infringement in the United States District Court, Southern District of California, claiming that certain of the Company’s products infringe one or all of three Qualcomm Inc.’s United States patents 5,722,063; 5,732,341; and 5,267,262. The complaint seeks preliminary and permanent injunction; damages, including lost profits, royalties, price erosion, and interest; trebling of damages; and attorneys’ fees. The Company is presently reviewing these claims and intends to defend itself vigorously. While the Company cannot predict the outcome of this lawsuit, the Company does not believe that the ultimate outcome will have a material adverse effect on the Company’s financial condition, liquidity or results of operations.

NOTE 10: COMMON STOCK REPURCHASE PROGRAM

In the third quarter of fiscal year 2002, the Board of Directors authorized the Company to repurchase up to 10 million shares of the Company’s common stock from time to time at the discretion of the Company’s management. During the fourth quarter of fiscal year 2002, the Board of Directors authorized the Company to repurchase an additional 10 million shares of the Company’s common stock, bringing the total shares authorized to be repurchased between the dates of such authorization and the end of the Company’s fiscal year 2003 to 20 million shares.

During the six months ended December 28, 2002, the Company repurchased approximately 2.5 million shares of its common stock for $87.3 million. As of December 28, 2002, approximately 8.4 million shares remained available under the repurchase authorization. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company’s common stock, general market and business conditions, and other factors.

NOTE 11: NEW ACCOUNTING PRONOUNCEMENT

In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148 (SFAS 148), “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123.” SFAS 148 amends Statement of Financial Accounting Standards No. 123 (SFAS 123), “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition provisions and pro forma disclosures of SFAS 148 are effective for fiscal years ending after December 15, 2002. The pro forma disclosures of SFAS 148 are effective for financial reports containing condensed consolidated financial statements for interim periods beginning after December 15, 2002.

The Company will continue to use the intrinsic value method of accounting for stock-based employee compensation. The Company will adopt the pro forma disclosure requirements of SFAS 148 effective with the filing of its Form 10-Q for the three months ended March 29, 2003. The adoption of SFAS 148 will not have a material impact on the Company’s financial condition, results of operation or liquidity.

NOTE 12: SUBSEQUENT EVENT

On January 23, 2003, the Board of Directors declared a cash dividend of $0.02 per share on the Company’s common stock payable on February 28, 2003 to stockholders of record on February 10, 2003.

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

RESULTS OF OPERATIONS

Net Revenues

Net revenues were $286.1 million and $247.1 million for the three months ended December 28, 2002 and December 29, 2001, respectively, an increase of 15.8%. Net revenues were $572.0 million and $486.5 million for the six months ended December 28, 2002 and December 29, 2001, respectively, an increase of 17.6%. The increase in net revenues for both the three and six months ended December 28, 2002 as compared to the three and six months ended December 29, 2001 is primarily due to higher unit shipments resulting from the introduction of new proprietary products and increased order rates on the Company’s already existing proprietary and second-source products.

During the three months ended December 28, 2002 and December 29, 2001, approximately 67% and 61%, respectively, of net revenues were derived from customers outside of the United States. During the six months ended December 28, 2002 and December 29, 2001, approximately 66% and 62%, respectively, of net revenues were derived from customers outside of the United States. While the majority of these sales are denominated in U.S. dollars, the Company enters into foreign currency forward contracts to mitigate its risks on firm commitments and net monetary assets denominated in foreign currencies. The impact of changes in foreign exchange rates on revenue and the Company’s results of operations for the three and six months ended December 28, 2002 and December 29, 2001 was immaterial.

Gross Margin

Gross margin as a percentage of net revenues was 69.7% and 70.1% for the three months ended December 28, 2002 and December 29, 2001, respectively. The gross margin percentage for the three months ended December 28, 2002 as compared to the three months ended December 29, 2001 decreased primarily due to revenue growth in lower margin products offset somewhat by cost saving measures implemented by the Company. Gross margins for the three months ended December 28, 2002 and December 29, 2001 were negatively impacted due to $3.0 million of inventory write downs recorded in each three month period.

Gross margin as a percentage of net revenues was 69.6 % and 70.0% for the six months ended December 28, 2002 and December 29, 2001, respectively. The gross margin percentage for the six months ended December 28, 2002 as compared to the six months ended December 29, 2001 decreased primarily due to revenue growth in lower margin products offset slightly by cost saving measures implemented as noted above. Gross margins for the six months ended December 28, 2002 and December 29, 2001 were negatively impacted due to $6.0 million and $6.5 million of inventory write downs, respectively.

Research and Development

Research and development expenses were $67.2 million and $68.6 million for the three months ended December 28, 2002, and December 29, 2001, respectively, which represented 23.5% and 27.7% of net revenues, respectively. The decrease in research and development expenses in absolute dollars for the three months ended December 28, 2002 as compared to the same period in the prior year is due to cost saving measures implemented by the Company.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT’D)

Research and development expenses were $138.3 million and $134.5 million for the six months ended December 28, 2002, and December 29, 2001, respectively, which represented 24.2% and 27.7% of net revenues, respectively. The increase in research and development expenses in absolute dollars for the six months ended December 28, 2002 as compared to the same period in the prior year is due to increased headcount and related employee expenses to continue development of new products offset somewhat by costs saving measures implemented as noted above.

The level of research and development expenditures as a percentage of net revenues will vary from period to period, depending, in part, on the level of net revenues and, in part, on the Company’s success in recruiting the technical personnel needed for its new product introductions and process development. The Company continuously attempts to control and, if possible, reduce expense levels in all areas including research and development.

However, the Company views research and development expenditures as critical to maintaining a high level of new product introductions, which in turn are critical to the Company’s plan for future growth.

Selling, General and Administrative

Selling, general and administrative expenses were $21.2 million and $22.9 million for the three months ended December 28, 2002, and December 29, 2001, respectively, which represented 7.4% and 9.2% of net revenues, respectively.

Selling, general and administrative expenses were $43.5 million and $47.9 million for the six months ended December 28, 2002, and December 29, 2001, respectively, which represented 7.6% and 9.9% of net revenues, respectively.

The decrease in selling, general, and administrative expenses in absolute dollars and as a percentage of net revenues for the three and six months ended December 28, 2002 as compared to the three and six months ended December 29, 2001 is primarily due to lower advertising costs combined with cost saving measures implemented during the three months ended December 28, 2002.

Interest Income, Net

Interest income, net was $3.9 million and $7.8 million for the three and six months ended December 28, 2002, respectively, compared to $11.6 million and $26.6 million for the three and six months ended December 29, 2001, respectively. The decrease in interest income, net for the three and six months ended December 28, 2002 as compared to the three and six months ended December 29, 2001 is a result of decreased interest rates on invested amounts compounded by lower levels of invested cash.

Income Taxes

The effective income tax rate for the three and six months ended December 28, 2002 and December 29, 2001 was 33.0%, respectively. The effective rates were lower than the U.S. federal and state combined statutory rate primarily due to tax benefits on export sales.

Realization of the net deferred tax asset of $93.9 million at December 28, 2002 is dependent primarily upon achieving future U.S. taxable income of $268 million. The Company believes it is more likely than not that the net deferred tax assets will be realized based on historical earnings and expected levels of future taxable income. Levels of future taxable income are subject

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT’D)

to the various risks and uncertainties as described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2002. An increase in the valuation allowance against net deferred tax assets may be necessary if it is more likely than not that all or a portion of the net deferred tax assets will not be realized. The Company periodically assesses the need for increases to the deferred tax asset valuation allowance.

OUTLOOK

Second quarter bookings were approximately $271 million, up slightly from first quarter bookings of approximately $270 million. Turns orders received in the second quarter were $139 million, an 8% increase over the $129 million received in the first quarter (turns orders are customer orders that are for delivery within the same quarter and may result in revenue within the same quarter if the Company has available inventory that matches those orders). Order cancellations continued to be below historical levels. Second quarter bookings increased in the Pacific Rim and Europe but decreased in the U.S. and Japan. Although overall booking levels were relatively unchanged from the previous quarter, the Company did see an increase in orders for products such as data converters that target the broad-based industrial market.

Second quarter ending backlog shippable within the next 12 months was approximately $201 million, including approximately $177 million requested for shipment in the third quarter of fiscal year 2003. The Company’s first quarter ending backlog shippable within the next 12 months was approximately $219 million, including approximately $193 million requested for shipment in the second quarter of fiscal year 2003.

The Company continues to hold a cautious view of any significant near-term upturn in the long-haul telecommunication industry, and has not seen an improvement in orders in that sector. Visibility at end customers remains limited. The trend over the past several quarters, with customers ordering for near-term needs resulting in a high level of turns, continued this quarter.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT’D)

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary sources of funds for the six months ended December 28, 2002 were from net cash generated from operating activities of $285.2 million and proceeds from the issuance of 4.8 million shares of the Company’s common stock in the amount of $40.0 million associated with the Company’s stock option programs.

Another source of cash from the Company’s stock option programs is the tax deductions that arise from exercise of stock options. These tax benefits amounted to $60.1 million in the six months ended December 28, 2002.

The principal uses of funds were the repurchase of 2.5 million shares of the Company’s common stock for $87.3 million, the purchase of $47.0 million in property, plant and equipment, and the payment of $6.4 million in dividends. The Company believes that it possesses sufficient liquidity and capital resources to fund its property, plant and equipment purchases, common stock repurchases, dividend payments, and operations for at least the next twelve months.

In the past, it was the Company’s policy to reduce the dilution effect from stock options by repurchasing its common stock from time to time in amounts based on estimates of proceeds from stock option exercises and of tax benefits related to such exercises. That stock repurchase policy was discontinued in the third quarter of fiscal year 2001. The Company will continue to repurchase its common stock in fiscal year 2003, however the number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company’s common stock, general market conditions, and other factors. See Note 10 of Notes to Condensed Consolidated Financial Statements regarding the status of the Company’s common stock repurchase program.

During the quarter, the Company’s perpetual inventory system reported inventories approximately $2.2 million greater than the general ledger. The Company’s balance sheet and results of operations at and for the quarter ended December 28, 2002 reflect the lower general ledger inventory level. We do not believe that the reconciliation of this difference had a material effect on the financial condition or results of operations of the Company for the quarter ended December 28, 2002 or will have any material effect for any future fiscal period.

The Company is subject to pending legal proceedings. For example, see Note 9 of Notes to Condensed Consolidated Financial Statements for information regarding pending patent litigation. Although the results of such legal proceedings are unpredictable, the Company does not believe that any pending legal proceedings will have a material adverse impact on its liquidity or financial position. If, however, the appellate court in the action brought by Linear Technology Corporation were to reverse the trial court’s dismissal of the patent litigation claims brought by Linear Technology Corporation against the Company, and were Linear Technology Corporation to prevail in its claims against the Company, the Company’s operating results could be materially adversely affected.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of the financial condition and results of operations is based upon the consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. The Company bases its estimates and judgments on its historical experience, knowledge of current conditions and its beliefs of what could occur in the future given available information. Actual results may differ from these estimates under different assumptions or conditions.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT’D)

The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its financial statements. The Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of the Company’s financial condition and results of operations, and require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include revenue recognition and accounts receivable allowances, which impacts the recording of revenues; valuation of inventories, which impacts costs of goods sold and gross margins; the assessment of recoverability of long-lived assets, which impacts write-offs of fixed assets; accounting for income taxes, which impacts the income tax provision; and assessment of contingencies, which impacts charges recorded in cost of goods sold and selling, general and administrative expenses. These policies and the estimates and judgments involved are discussed further below. The Company has other key accounting policies that either do not generally require estimates and judgments that are as difficult or subjective, or it is less likely that such accounting policies would have a material impact on the Company’s reported results of operations for a given period.

Revenue Recognition and Accounts Receivable Allowances

Revenue from product sales to the Company’s direct customers is recognized upon shipment, provided that persuasive evidence of a sales arrangement exists, the price is fixed and determinable, title has transferred, collection of resulting receivables is reasonably assured, there are no customer acceptance requirements, and there are no remaining significant obligations.

A portion of the Company’s sales is made to domestic distributors under agreements that provide the possibility of certain sales price rebates and limited product return privileges. Given the uncertainties associated with the levels of returns and other credits that will be issued to these distributors, the Company defers recognition of such sales until the product is sold by the domestic distributors to their end customers. Revenue on all shipments to international distributors is recognized upon shipment to the distributor, when the above criteria are met, with appropriate provision of reserves for returns and allowances, as these distributors generally do not have price rebate or product return privileges. The Company estimates the provision for returns and price rebates based on historical experience and known future returns and price rebates. Accounts receivable from both domestic and international distributors are recognized and inventory is relieved upon shipment as title to inventories generally transfers upon shipment at which point the Company has a legally enforceable right to collection under normal terms.

The Company must make estimates of potential future product returns and sales allowances related to current period product revenue. Management analyzes historical returns, changes in customer demand, and acceptance of products when evaluating the adequacy of sales returns and allowances. Estimates made by the Company may differ from actual product returns and sales allowances. These differences may materially impact reported revenue and amounts ultimately collected on accounts receivable.

In addition to the above, included in Other Assets in the Condensed Consolidated Balance Sheet at December 28, 2002 is $14.0 million of 4% senior secured convertible notes resulting from amounts loaned to a privately-held semiconductor company. The notes are secured by substantially all the assets, including intellectual property, of this company. The Company periodically assesses the recoverability of the notes, the fair market value that would be represented by any conversion of such notes into preferred and common stock of this company, and the fair market value of the collateralized assets. Should the Company determine that all or part of the $14.0 million of 4% senior secured convertible notes not be recoverable based on the assessment noted above, a provision for uncollectible notes would be recorded in the period such determination was made. This provision could materially adversely effect the Company’s results of operation in the period recorded. As of December 28, 2002, the Company believes the 4% senior secured convertible notes are fully recoverable.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT’D)

Inventories

Inventories are stated at the lower of cost, which approximates actual cost on a first-in-first-out basis, or market value. Because of the cyclicality of the market, inventory levels, obsolescence of technology, and product life cycles, the Company writes down inventories to net realizable value based on backlog, forecasted product demand, and historical sales levels. Backlog is subject to revisions, cancellations, and rescheduling. Actual demand and market conditions may be lower than those projected by the Company. This difference could have a material adverse effect on the Company’s gross margin should inventory write downs beyond those initially recorded become necessary. Alternatively, should actual demand and market conditions be more favorable than those estimated by the Company, gross margin could be favorably impacted.

The Company’s standard cost revision policy is to continuously monitor manufacturing variances and revise standard costs when necessary. The Company’s policy for recording a write down of inventory is generally to write down, at standard cost, finished goods inventory in excess of an estimate of twelve months of demand based on backlog and historical sales levels and work in process that is greater than 90 days old, which has no forecasted product demand.

Long-Lived Assets

The Company evaluates the recoverability of property, plant and equipment in accordance with Statement of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS 144, which superceded SFAS 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of”, requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. The Company adopted SFAS 144 effective June 30, 2002. The adoption of SFAS 144 did not have a material impact on the Company’s financial condition, results of operations or liquidity. The Company performs periodic reviews to determine whether facts and circumstances exist that would indicate that the carrying amounts of property, plant and equipment might not be fully recoverable. If facts and circumstances indicate that the carrying amount of property, plant and equipment might not be fully recoverable, the Company compares projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful life against their respective carrying amounts. In the event that the projected undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the assets. Evaluation of impairment of property, plant and equipment requires estimates in the forecast of future operating results that are used in the preparation of the expected future undiscounted cash flows. Actual future operating results and the remaining economic lives of the Company’s property, plant and equipment could differ from the Company’s estimates used in assessing the recoverability of these assets. These differences could result in additional impairment charges, which could have a material adverse impact on the Company’s results of operations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT’D)

Accounting for Income Taxes

The Company records a valuation allowance to reduce the net deferred tax asset to the amount that is more likely than not to be realized. In assessing the need for a valuation allowance, historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and practicable tax planning strategies are considered. In the event it is determined that the deferred tax assets to be realized in the future would be in excess of the net recorded amount, an adjustment to the deferred tax asset valuation allowance would be recorded. This adjustment would increase income in the period such determination was made. Likewise, should it be determined that all or part of the net deferred tax asset would not be realized in the future, an adjustment to increase the deferred tax asset valuation allowance would be charged to income in the period such determination would be made.

On a periodic basis the Company evaluates its deferred tax asset balance for realizability. To the extent the Company believes it is more likely than not that some portion of its deferred tax assets will not be realized, the Company will increase the valuation allowance against the deferred tax assets. Realization of the Company’s deferred tax assets is dependent primarily upon future U.S. taxable income. The Company’s judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. These changes, if any, may require possible material adjustments to these deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period when such determinations are made.

Contingencies

From time to time, the Company receives notices that its products or manufacturing processes may be infringing the patent or intellectual property rights of others. The Company periodically assesses each matter in order to determine if a contingent liability in accordance with Statement of Financial Accounting Standards No. 5 (SFAS 5), “Accounting for Contingencies,” should be recorded. In making this determination, management may, depending on the nature of the matter, consult with internal and external legal counsel and technical experts. Based on the information obtained combined with management’s judgment regarding all the facts and circumstances of each matter, the Company determines whether it is probable that a contingent loss may be incurred and whether the amount of such loss can be estimated. Should a loss be probable and estimable, the Company records a contingent loss in accordance with SFAS 5. In determining the amount of a contingent loss, the Company takes into consideration advice received from experts in the specific matter, current status of legal proceedings, settlement negotiations which may be ongoing, prior case history and other factors. Should the judgments and estimates made by management be incorrect, the Company may need to record additional contingent losses that could materially adversely impact the Company’s results of operations. Alternatively, if the judgments and estimates made by management are incorrect and a particular contingent loss does not occur, the contingent loss recorded would be reversed thus favorably impacting the Company’s results of operations. See Note 9 of Notes to Condensed Consolidated Financial Statements at page 11.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT’D)

FORWARD-LOOKING INFORMATION AND RISK FACTORS

This Report on Form 10-Q contains forward-looking statements that fall within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Report, other than statements that are purely historical, are forward-looking statements, including statements regarding or implicating the Company’s expectations, intentions, plans, goals and hopes regarding the future. Words such as “anticipates,” “expects,” “intends,” “plans,” believes,” “seeks,” “estimates,” variations of such words and similar expressions identify forward-looking statements. Forward-looking statements in this Report, including this Management’s Discussion and Analysis section, involve risk and uncertainty.

Forward-looking statements include, without limitation, the Company’s intention that the 8-inch wafer manufacturing facility in Dallas, Texas serve as Dallas Semiconductor’s primary wafer manufacturing facility, the Company’s belief that the ultimate outcome of the LTC and Qualcomm Inc., litigation and any pending legal proceedings will not have a material adverse effect on the financial position or liquidity of the Company, the Company’s belief that net deferred tax assets will be realized, the Company’s belief that the adoption of SFAS 148 will not have a material impact on the Company’s financial condition, results of operations or liquidity, the Company’s attempt to control and reduce expense levels, the Company’s assessment of its customers’ current ordering activities, demand for products and any upturn in the long-haul telecommunications industry, the Company’s assessment of the sufficiency of its capital resources and liquidity, the Company’s expectation that it will continue to repurchase its common stock in fiscal year 2003, the belief that the 4% senior secured convertible notes are recoverable, and the belief that the resolution of the perpetual inventory records to general ledger difference will not have a material adverse impact on the Company’s results of operations.

Actual results could differ materially from those forecasted based upon, among other things, unexpected outcomes in the Company’s pending litigation and legal proceedings, unexpected changes in earnings and taxable income that adversely affect the realizability of net deferred tax assets, the Company incorrectly assessing customer demand, customer willingness to commit to inventories and orders, and higher than expected order cancellation levels, the Company’s ability to control and reduce expenses, and the Company’s ability to repurchase its common stock at favorable prices. Given the Company’s backlog of orders at the end of December 2002, the Company’s ability to report unchanged revenues in the current quarter will depend on the amount of turns orders that it can generate and on its ability to match orders with available inventory.

In addition, future business could be adversely affected by technical difficulties in bringing new products and processes to market in a timely manner; market developments that could adversely affect the growth of the mixed-signal analog market; the Company being unable to sustain its success in recruiting and retaining high-quality personnel; the Company’s success in the markets its products are introduced in; whether, and the extent to which, demand for the Company’s products increases and reflects real end-user demand; customer cancellations and delays of outstanding orders; whether the Company is able to manufacture in a correct mix to respond to orders on hand and new orders received in the future; whether the Company is able to achieve its new product development and introduction goals; whether the Company is able to effectively and successfully manage manufacturing operations; whether the Company is able to successfully commercialize its new technologies; overall worldwide economic conditions; demand for electronic products and semiconductors generally; demand for the end-user products for which the Company’s semiconductors are suited; timely availability of raw materials, equipment, supplies and services; unanticipated manufacturing problems; technological and product development risks; competitors that may outperform the Company; and other risk factors described in the Company’s filings with

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT’D)

the Securities and Exchange Commission and in particular its report on Form 10-K for the fiscal year ended June 29, 2002.

In addition to the above, there are certain risks and uncertainties related to the Company’s acquisition of Dallas Semiconductor (see Notes 2 and 8 of Notes to Condensed Consolidated Financial Statements). No assurance can be given that products, technologies, distribution channels, customer support operations, management information systems, key personnel and businesses of Dallas Semiconductor will be effectively assimilated into the Company’s business or product offerings, that such integration will be completed according to the Company’s schedule, or that the results of the integration will be successful.

All forward-looking statements included in this document are made as of the date hereof, based on the information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement, whether as a result of new information relating to existing conditions, future events or otherwise.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risk has not changed significantly from the interest rate and foreign currency risks disclosed in Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2002.

ITEM 4: CONTROLS AND PROCEDURES

           (a)    Evaluation of disclosure controls and procedures. Within the 90 days prior to the filing of this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in this report. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

           (b)    Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the we carried out this evaluation Date.

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PART II. OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

On December 12, 2002, Qualcomm Inc. filed a complaint for patent infringement in the United States District Court, Southern District of California, claiming that certain of the Company’s products infringe one or all of three Qualcomm Inc.’s United States patents 5,722,063; 5,732,341; and 5,267,262. The complaint seeks preliminary and permanent injunction; damages, including lost profits, royalties, price erosion, and interest; trebling of damages; and attorneys’ fees. The Company is presently reviewing these claims and intends to defend itself vigorously. While the Company cannot predict the outcome of this lawsuit, the Company does not believe that the ultimate outcome will have a material adverse effect on the Company’s financial condition, liquidity or results of operations.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its Annual Meeting of Stockholders on November 14, 2002. The following proposals were voted on by the Company’s Stockholders and results obtained thereon:

Proposal 1: Election of Directors

The following directors were elected as directors by the votes indicated:

Proposal 2: Ratification and approval of the Company’s 1996 Stock Incentive Plan, as amended, and of an amendment to the Company’s 1987 Employee Stock Participation Plan, as amended, including amendments increasing the number of shares available for issuance.

The proposal was ratified and approved with 176,115,285 votes in favor, 112,717,166 against, and 1,487,504 abstentions.

Proposal 3: Ratification of Selection of Independent Auditors

The selection of Ernst & Young LLP as the Company’s independent auditors for fiscal year 2003 was ratified with 281,170,439 votes in favor, 7,759,104 votes against, and 1,393,413 abstentions.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

ITEMS 2, 3, AND 5 HAVE BEEN OMITTED AS THEY ARE NOT APPLICABLE.

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SIGNATURES

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

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CERTIFICATION

I, John F. Gifford, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Maxim Integrated Products, Inc.;
2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
		b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
		c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

		a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: February 11, 2003

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CERTIFICATION

I, Carl W. Jasper, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Maxim Integrated Products, Inc.;
2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
		b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
		c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

		a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: February 11, 2003

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EXHIBIT INDEX

	99.1		Section 906 Certification of Chief Executive Officer
	99.2		Section 906 Certification of Chief Financial Officer