1003214--3/1/2007--SILICON_IMAGE

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{customer, product, revenue}

{product, market, service}

{property, intellectual, protect}

{financial, litigation, operation}

{operation, natural, condition}

{acquisition, growth, future}

{operation, international, foreign}

{cost, operation, labor}

{personnel, key, retain}

{interest, director, officer}

{provision, law, control}

{cost, regulation, environmental}

{stock, price, operating}

Our future annual and quarterly operating results are highly dependent upon how well we manage our business. The licensing component of our business strategy increases business risk and volatility. We face intense competition in our markets, which may lead to reduced revenue from sales of our products and increased losses. Our success depends in part on demand for our new products. Demand for our consumer electronics products is dependent on continued adoption and widespread implementation of the HDMI specification. We will have difficulty selling our products if customers do not design our products into their product offerings or if our customers product offerings are not commercially successful. Our products typically have lengthy sales cycles. A customer may decide to cancel or change its product plans, which could cause us to lose anticipated sales. In addition, our average product life cycles tend to be short and, as a result, we may hold excess or obsolete inventory that could adversely affect our operating results. Our customer may not purchase anticipated levels of products, which can result in increased inventory levels We depend on a few key customers and the loss of any of them could significantly reduce our revenue. We sell our products through distributors, which limits our direct interaction with our customers, therefore reducing our ability to forecast sales and increasing the complexity of our business. Our success depends on the development and introduction of new products, which we may not be able to do in a timely manner because the process of developing high-speed semiconductor products is complex and costly. There are risks to our global strategy We have made acquisitions in the past and may make acquisitions in the future, if advisable, and these acquisitions involve numerous risks. Our acquisition of sci-worx GmbH exposes us to a variety of risks. Industry cycles may strain our management and resources. The cyclical nature of the semiconductor industry may create constrictions in our foundry, test and assembly capacity. We depend on third-party sub-contractors to manufacture, assemble and test nearly all of our products, which reduce our control over the production process. The complex nature of our production process, which can reduce yields and prevent identification of problems until well into the production cycle or, in some cases, after the product has been shipped. We face foreign business, political and economic risks because a majority of our products and our customers products are manufactured and sold outside of the United States. The success of our business depends upon our ability to adequately protect our intellectual property. Our participation in working groups for the development and promotion of industry standards in our target markets, including the Digital Visual Interface, HDMI, and UDI specifications, requires us to license some of our intellectual property for free or under specified terms and conditions, which may make it easier for others to compete with us in such markets. Our success depends in part on our relationships with Sunplus and other strategic partners. Our success depends on managing our relationship with Intel. We have granted Intel rights with respect to our intellectual property, which could allow Intel to develop products that compete with ours or otherwise reduce the value of our intellectual property. We may become engaged in additional intellectual property litigation that could be time-consuming, may be expensive to prosecute or defend, and could adversely affect our ability to sell our product. We have entered into, and may again be required to enter into, patent or other intellectual property cross-licenses. We indemnify certain of our licensing customers against infringement. We must attract and retain qualified personnel to be successful, and competition for qualified personnel is increasing in our market. We have experienced transitions in our management team, our board of directors and our independent registered public accounting firm in the past and may continue to do so in the future. We have completed a voluntarily-initiated internal review of our historical stock option compensation practices and the SEC is conducting an informal inquiry into our past option-granting practices. This inquiry may not be resolved favorably and may require a significant amount of management time and attention and accounting and legal resources, which could adversely affect our business, financial condition, results of operations and cash flows. We have been and may continue to become the target of securities class action suits and derivative suits which could result in substantial costs and divert management attention and resources. Our operations and the operations of our significant customers, third-party wafer foundries and third-party assembly and test subcontractors are located in areas susceptible to natural disasters. Continued terrorist attacks or war could lead to further economic instability and adversely affect our operations, results of operations and stock price. Changes in environmental rules and regulations could increase our costs and reduce our revenue. Provisions of our charter documents and Delaware law could prevent or delay a change in control, and may reduce the market price of our common stock.

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1003214--3/1/2007--SILICON_IMAGE_INC