1126741--6/4/2010--GSI_TECHNOLOGY

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Unpredictable fluctuations in our operating results could cause our stock price to decline. Cisco Systems, our largest OEM customer, accounts for a significant percentage of our net revenues. If Cisco Systems, or any of our other major customers reduce the amount they purchase or stop purchasing our products, our operating results will suffer. We have incurred significant losses in prior periods and may incur losses in the future. We depend upon the sale of our Very Fast SRAMs for most of our revenues, and a downturn in demand for these products could significantly reduce our revenues and harm our business. We are subject to the highly cyclical nature of the networking and telecommunications markets. The average selling prices of our products are expected to decline, and if we are unable to offset these declines, our operating results will suffer. Current unfavorable economic and market conditions, domestically and internationally, may adversely affect our business, financial condition, results of operations and cash flows. We are dependent on a number of single source suppliers, and if we fail to obtain adequate supplies, our business will be harmed and our prospects for growth will be curtailed. Because we outsource our wafer manufacturing and independent wafer foundry capacity is limited, we may be required to enter into costly long-term supply arrangements to secure foundry capacity. If we are unable to offset increased wafer fabrication costs by increasing the average selling prices of our products, our gross margins will suffer. We rely heavily on distributors and our success depends on our ability to develop and manage our indirect distribution channels. We may be unable to accurately predict future sales through our distributors, which could harm our ability to efficiently manage our resources to match market demand. A small number of customers generally account for a significant portion of our accounts receivable in any period, and if any one of them fails to pay us, our operating results will suffer. Our acquisition of companies or technologies could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results. If the recent worsening of credit market conditions continues or increases, it could have a material adverse impact on our investment portfolio. We could become subject to claims and litigation regarding intellectual property rights, which could seriously harm our business and require us to incur significant costs. Our business will suffer if we are unable to protect our intellectual property. The market for Very Fast SRAMs is highly competitive. We may experience difficulties in transitioning to smaller geometry process technologies and other more advanced manufacturing process technologies, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses. Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development. Our products are complex to design and manufacture and could contain defects, which could reduce revenues or result in claims against us. Demand for our products may decrease if our OEM customers experience difficulty manufacturing, marketing or selling their products. Downturns in the semiconductor industry may harm our revenues and margins. If we do not successfully develop new products to respond to rapid market changes due to changing technology and evolving industry standards, particularly in the networking and telecommunications markets, our business will be harmed. Our products have lengthy sales cycles that make it difficult to plan our expenses and forecast results. Any significant order cancellations or order deferrals could adversely affect our operating results. As our business grows, such growth may place a significant strain on our management and operations and, as a result, our business may suffer. Our international business exposes us to additional risks. TSMC, our other independent suppliers and many of our OEM customers have operations in the Pacific Rim, an area subject to significant earthquake risk and adverse consequences related to the potential outbreak of contagious diseases such as the H1N1 Flu. Changes in Taiwan's political, social and economic environment may affect our business performance. Proposed changes in US international tax laws could cause our operating results to suffer. We are substantially dependent on the continued services and performance of our senior management and other key personnel. If we are unable to recruit or retain qualified personnel, our business and product development efforts could be harmed. We may need to raise additional capital in the future, which may not be available on favorable terms or at all, and which may cause dilution to existing stockholders. Our products are incorporated into advanced military electronics, and changes in international geopolitical circumstances and domestic budget considerations may hurt our business. If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements could be impaired, which could adversely affect our operating results, our ability to operate our business and investors' views of us. Our operations involve the use of hazardous and toxic materials, and we must comply with environmental laws and regulations, which can be expensive, and may affect our business and operating results. The trading price of our common stock is subject to fluctuation and is likely to be volatile. Our executive officers, directors and entities affiliated with them hold a substantial percentage of our common stock. The provisions of our charter documents might inhibit potential acquisition bids that a stockholder might believe are desirable, and the market price of our common stock could be lower as a result. We do not expect to pay any cash dividends for the foreseeable future.

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1126741--6/4/2010--GSI_TECHNOLOGY_INC