UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended September 27, 2008October 3, 2009

OR

OR

¨
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to .

Commission file number 0-121

KULICKE AND SOFFA INDUSTRIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

PENNSYLVANIA		23-1498399
Pennsylvania		23-1498399
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1005 VIRGINIA DRIVE, FORT WASHINGTON, PENNSYLVANIA		19034
1005 Virginia Drive, Fort Washington, Pennsylvania		19034
(Address of principal executive offices)		(Zip Code)

(215) 784-6000

(Registrants telephone number,
including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
None

None

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, WITHOUT PAR VALUE

(Title of each class)Each Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  Act.Yes¨o Nox

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  Act.Yes¨o Nox

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  days.Yesx No¨o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yeso Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. xo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨		Accelerated filer  x
Large Accelerated FilerNon-accelerated filer  ¨o		Accelerated Filerx		Non-Accelerated FilerSmaller reporting company  ¨o
		Smaller Reporting Companyo
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  .Yes¨o Nox

As of March 29, 2008,28, 2009, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $247,631,429$154,570,908 based on the closing sale price as reported on The NASDAQ Global Market (Reference is made to Part II, Item 5 herein for a statement of assumptions upon which this calculation is based).

As of December 5, 200810, 2009 there were 60,881,34369,724,817 shares of the registrant’s common stock, without par value, outstanding.

Documents Incorporated by Reference

Portions of the registrant’s Proxy Statement for the 20092010 Annual Meeting of Shareholders to be filed on or about December 31, 20082009 are incorporated by reference into Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14 herein of this Report. Such Proxy Statement, except for the parts therein which have been specifically incorporated by reference, shall not be deemed “filed” for the purposes of this Report on Form 10-K.

						Page
Part I
Item 1. Business			1	Page
Part I
Item 1.1A. Risks Related to Our Business and Industry			Business10		2
Item 1A.2. Properties			Risk Factors21		11
Item 2.3. Legal Proceedings			Properties21		20
Item 3.		Legal Proceedings		20
Item 4.		Submission of Matters to a Vote of Security Holders		20
Part II
Item 5.			21
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		21
Item 6.			22
Item 6. Selected Consolidated Financial Data		22
Item 7.			23
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 7A.			25
Item 7A. Quantitative and Qualitative Disclosures about Market Risk		45
Item 8.			48
Item 8. Financial Statements and Supplementary Data		45
Item 9.			49
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		82
Item 9A.			88
Item 9A. Controls and Procedures		82
Item 9B.			Other Information88		83
Part III
Item 10.9B. Other Information			89
Part III
Item 10. Directors, Executive Officers and Corporate Governance		83
Item 11.			Executive Compensation89		83
Item 12.11. Executive Compensation			89
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		84
Item 13.			90
Item 13. Certain Relationships and Related Transactions and Director Independence		84
Item 14.			90
Item 14. Principal Accounting Fees and Services		84
Part IV
Item 15.			90
Part IV
Item 15. Exhibits and Financial Statement Schedules		85	91
Signatures			Signatures96		90

i

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Products and Services

We offersupply a range of bonding equipment and packaging materials.expendable tools. The following table reflects net revenue by business segment for fiscal 2006, 2007, 2008 and 2008:2009:

		Fiscal									Fiscal
(in thousands)		2006			2007			2008
(in thousands)											2007				2008				2009
Equipment		$	319,788		$	316,718		$	271,019		$	316,718			$	271,019			$	170,536
Packaging Materials			60,508			53,808			57,031
Expendable Tools												53,808				57,031				54,704
Total		$	380,296		$	370,526		$	328,050		$	370,526			$	328,050			$	225,240

See Note 13 to our Consolidated Financial Statements included in Item 8 of this report for our financial results by business segment.

Equipment

We aremanufacture and sell a global leader in the designline of ball bonders, heavy wire wedge bonders and manufacture of semiconductor assembly equipment. In recent years, we have expanded our product offerings beyond our core ball bonding products to include die bonders that are sold to semiconductor device manufacturers, their subcontract assembly suppliers, other electronics manufacturers and wedge bonders.automotive electronics suppliers. Ball bonders are used to connect very fine wires, typically made of gold aluminum or copper, between the bond pads of the semiconductor device, or die, and the leads on its package. Wedge bonders use either aluminum wire or ribbon to perform the same function in packages that cannot use gold or copper wire because of either high electrical current requirements or other package reliability issues. Die bonders are used to attach a die to the packagesubstrate or lead frame which will house the semiconductor device. We believe our equipment offers competitive advantages by providing customers with high productivity/throughput and superior package quality/process control.

Our principal Equipment segment products include:

Business Unit		Product Name		Served Market
Ball bonders		IConn-Power Series		Advanced, copper bonding and ultra fine pitch applications
		ConnX-Power Series		Cost performance, low pin count and copper applications
		ConnX-LED Power Series		Horizontal formatted LED applications
		ConnX-VLED Power Series		Vertical LED applications
		AT Premier		Stud bumping applications
Wedge bonders		3600 Plus		Power hybrid and automotive modules
		7200 Plus		Power semiconductors
		7600 Series		Smaller power packages
Die bonders		iStack Power Series		Advanced stack die and ball grid array applications

Ball Bonders

Automatic ball bonders represent the largest portion of our semiconductor equipment business. Our main product platform for ball bonding is the Power Series — a family of assembly equipment that is setting new standards for performance, productivity, upgradeability, and ease of use. Launched in 2008, the Power Series initially consisted of theIConn^PS high-performance andConnX_PS^TM cost-performance ball bonders.

In particular,fiscal 2009, we launched two extensions of ourConnX automatic ball bonder aimed specifically at LED applications — ConnX-LED_PS^TM and ConnX-VLED_PS^TM.Traditionally, we had not targeted the LED market with our product portfolio but through the technology leadership ofConnX_PS^TM and its variants, we now offer excellent cost performance bonding solutions in an area of the market where some of our competitors were once dominant.

Customers

Our major customers include large semiconductorIDM and subcontract assembly companies, industrial manufacturers and their subcontract assemblers and vertically integrated manufacturers of electronic systems. Customersautomotive electronics suppliers. Revenue from our customers may vary significantly from year-to-year based on their capital investment andinvestments, operating expense budgets, and overall industry trends.

The following chart reflects our top ten end-use customers, based on net revenue, for each of the last three fiscal years:

We believe developing long-term relationships with our customers is critical to our success. By establishing these relationships with semiconductor manufacturers, semiconductor subcontract assemblers,
Approximately 96.8%, 95.6% and vertically integrated manufacturers of electronic systems, we gain insight into our customers’ future IC packaging strategies. This insight assists us in our efforts to develop material, equipment, and process solutions that address our customers’ future assembly requirements.

International Operations

Our customers are primarily located or have operations in the Asia/Pacific region. Approximately 97%97.0% of our net revenue for fiscal 20062007, 2008 and 2007 and 96% for fiscal 20082009, respectively, were for shipments to customer locations outside of the United States, primarily in the Asia/Pacific region, and we expect sales outside of the United States to continue to represent a substantial majority of our future revenue.

For a discussion of our financial information about geographic areas, see our Consolidated Financial Statements and corresponding Notes included in Item 8 of this report.

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Sales and Customer Support

We believe providingmaintaining long term customer relationships is critical to our success, and comprehensive worldwide sales service, training, and customer support are an important competitive factors in the semiconductor equipment industry, andmeans of establishing those relationships. To maintain these relationships, we manage these functions throughutilize multiple distribution channels using either our global customer operations group. We rely onown employees, manufacturers’ representatives, distributors, or a combination of a direct sales force, manufacturers’ representatives and distributors for the sale ofthree, depending on the product, region, or application. In all cases, our various product lines. We provide timely customer service and sales support by positioninggoal is to position our sales service representativesand customer support resources near customerour customers’ facilities which providesso as to provide support for customers with the ability to place orders locally and to deal with service and support personnel who speak the customer’sin their own language and are familiarconsistent with local country practices. In order tocustoms. Our sales and customer support our customers whose semiconductor assembly operationsresources are located primarily outside of the United States, we have sales, service, and support personnel based in China, Japan, Korea, Malaysia, the Philippines, Singapore, Switzerland, Taiwan, Thailand, the United States, and throughout Europe, and applicationsin Germany. Supporting these local resources, we have application labs in China, Israel, Japan, Singapore and Switzerland that offer additional process expertise.

By establishing relationships with semiconductor manufacturers, their subcontract assembly suppliers, and Taiwan.

Backlog

The following table reflectsvertically integrated manufacturers of electronic systems, we gain insight into our backlog as of September 29, 2007customers’ future semiconductor packaging strategies. These insights assist us in our efforts to develop products and September 27, 2008:

Our backlog consists of customer ordersprocesses that are scheduled for shipment within the next 12 months. A majority ofaddress our orders are subjectcustomers’ future assembly requirements.

Backlog

We organize and manage our business to cancellation or deferral by the customer with limited or no penalties. Also, customer demand for our products can vary dramatically without prior notice.maintain a low backlog. Because of the volatility of customer demand, possibility of customer changes in delivery schedules, or cancellations and potential delays in product shipments, our backlog as of any particular date may not be indicative of revenue for any succeeding period. Our backlog consists of customer orders that are scheduled for shipment within the next 12 months. A majority of our orders are subject to cancellation or deferral by our customers with limited or no penalties.

The following table reflects our backlog as of September 27, 2008 and October 3, 2009:

		As of
(in thousands)		September 27, 2008				October 3, 2009
Backlog		$	49,508			$	42,181

Manufacturing

We believe excellence in manufacturing can create a competitive advantage, both throughfrom producing at lower costs and by providing superior responsiveness. In orderresponsiveness to changes in customer demand. To achieve these goals, we seek to manage our manufacturing operations through a single organization and believe that fewer, larger factories take advantage ofallow us to capture economies of scale and result ingenerate cost savings through lower manufacturing costs.

Equipment

Our equipment manufacturing activities consist primarily of integrating outsourced parts and subassemblies and testing finished products to customer specifications. During fiscal 2007 and 2008, most of our ball bonder manufacturing took place in Singapore. Our die bonder manufacturing took place in Switzerland and Suzhou, China. We believe the outsourcing manufacturingoutsource model enablesallows us to minimize our fixed costs and capital expenditures and focus on product differentiation through technology innovations in system design and manufacturing quality control.expenditures. Just-in-time inventory management has reduced our manufacturing cycle times and lowered our on-hand inventory requirements.

Our ball bonder and die bonder manufacturing and assembly is performed at our facility in Singapore. During fiscal 2009, we announced plans to move manufacturing of wedge bonders from Irvine, California to Singapore. This transition is underway and is expected to be completed in 2011. During the year, we also began investing in a subassembly manufacturing and supply management facility in Malaysia that will manufacture subassemblies currently manufactured in the U.S. and Singapore. We expect this facility to be fully operational in the second half of fiscal 2010. When these projects are completed, we will manufacture all of our equipment in Asia.

We have ISO 9001 certification for our equipment manufacturing facilities in Singapore, Switzerland (legacy model die bonders and China,spares manufacturing) and Irvine, California. In addition, we have ISO 14001 certifications for our equipment manufacturing facilities in Singapore and China.Irvine, California.

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Expendable Tools

We manufacture expendable tools at our facility in Yokneam, Israelsaw blades and expendable tools and blades for wafer sawingcapillaries at our facility in Suzhou, China. The capillaries are made using blanks produced at our facility in Yokneam, Israel. Historically, we also made a small percentage of capillaries in Yokneam; however, in fiscal 2009, we announced a plan to consolidate all capillary manufacturing in Suzhou, leaving only blank manufacturing in Yokneam. We outsource the production of our bonding wedges. Both the Suzhou and Yokneam facilities are ISO 9001 and ISO 14001 certificated.certified.

Research and Product Development

Many of our customers generate technology roadmaps describing the futuretheir projected manufacturing capability requirements needed to support their product development plans.technology requirements. Our research and product development activities are organized so that our products anticipate our customers’focused on delivering robust production solutions to those projected requirements. This happens through continuous improvementWe accomplish this by regularly introducing improved versions of our existing products through upgrades for products already installed in customers’ facilities or through the creation ofby developing next-generation products. Examples of our continuous improvement strategy include our copper kits for existing ball bonder models. In addition, our next-generation products include the Power Series IConn^PS ball bonder and ConnX^PS ball bonder, both introduced during fiscal 2008. In addition, aWe follow this product development program is underway for our next generation die bonders. Our goal is technology leadershipmethodology in each ofall our major product lines.

Research and development expense was $36.3 million, $49.1 million, $59.9 million and $59.9$53.5 million during fiscal 2006, 2007, 2008 and 2008,2009 respectively.

Intellectual Property

Where circumstances warrant, we seek to obtainapply for patents on inventions governing new products and processes developed as part of our ongoing research, engineering, and manufacturing activities. We currently hold a number of United States patents, somemany of which have foreign counterparts. We believe the duration of our patents generally exceeds the life cycles of the technologies disclosed and claimed in the patents. Additionally, we believe much of our important technology resides in our trade secrets and proprietary software.

Competition

The market for semiconductor equipment and packaging materials products is intensely competitive. Significant competitive factors in the semiconductor equipment market include price, as well as speed/throughput, production yield, process control, delivery time and customer support, each of which contribute to lower the overall cost per package being manufactured. Our major equipment competitors include:

Significant competitive factors in the semiconductor packaging materials industry include performance, price, delivery, product life, and quality. Our significant packaging materialsexpendable tools competitors include:

In each of the markets we serve, we face competition and the threat of competition from established competitors and potential new entrants, some of which may have greater financial, engineering, manufacturing, and marketing resources.

Environmental Matters

We are subject to various federal, state, local and foreign laws and regulations governing, among other things, the generation, storage, use, emission, discharge, transportation and disposal of hazardous materials and the health and safety of our employees. In addition, we are subject to environmental laws which may require investigation and cleanup of any contamination at facilities we own or operate or at third party waste disposal sites we use or have used.

We have in the past, and will in the future, incur costs to comply with environmental laws. We are not, however, currently aware of any material costs or liabilities relating to environmental matters, including any claims or actions under environmental laws or obligations to perform any cleanups at any of our facilities or

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any third party waste disposal sites, that we expect to have a material adverse effect on our business, financial condition or operating results. ItHowever, it is possible however, that material environmental costs or liabilities may arise in the future.

Employees

As of September 27, 2008,October 3, 2009, we had 2,4962,132 regular full-time employees and 7735 temporary and contract workers worldwide.

Subsequent to year end on November 12, 2008, we announced a headcount reduction of 240 positions and a cancellation of annual salary increases scheduled for January 1, 2009. We took these actions to reduce costs due to deteriorating conditions in the global economy and projected weaker demand for our products and services.

Executive Officers of the Company

The following table sets forthreflects certain information regarding theour executive officers of the Company as of September 27, 2008.October 3, 2009. Our executive officers are appointed by, and serve at the discretion of, the Board of Directors.

Name		Age		First Became an Officer (calendar year)		Position		Age		First Became an Officer (calendar year)		Position
C. Scott Kulicke		59		1976		Chairman of the Board of Directors and Chief Executive Officer		60		1976		Chairman of the Board of Directors and Chief Executive Officer
Maurice E. Carson		51		2003		Senior Vice President and Chief Financial Officer
Christian Rheault		43		2005		Senior Vice President, Equipment segment		44		2005		Senior Vice President, Marketing
Charles Salmons		53		1992		Senior Vice President, Engineering		54		1992		Senior Vice President, Engineering
Jagdish (Jack) Belani		55		1999		Senior Vice President, Packaging Materials segment and Corporate Marketing
Shay Torton								48		2005		Senior Vice President, Worldwide Operations
Ran Bareket								43		2009		Vice President and interim Principal Accounting Officer
Jason Livingston								39		2009		Vice President, Wedge Bonding business unit
Tek Chee (“TC”) Mak								55		2006		Vice President, Worldwide Sales
Michael J. Morris								40		2009		Vice President and interim Chief Financial Officer

C. Scott Kulickehas served as Chief Executive Officer since 19791980 and Chairman of the Board of Directors since 1984. His present term as a director expires in 2011. Mr. Kulicke earnedholds a Bachelor of Science degree in Economics from the Wharton School of Business of the University of Pennsylvania.

Maurice E. CarsonChristian Rheaultbecame has served as Senior Vice President, and Chief Financial Officer (“CFO”) in November 2007 after serving as Vice President, CFOMarketing since September 2003. From 1996 until 2003, Mr. Carson served in various finance positions culminating as the Vice President, Finance and Corporate Controller for Cypress Semiconductor Corporation. Mr. Carson earned a Bachelor of Science degree from the University of Colorado and a Masters in Business Administration degree from the University of Chicago.

Christian Rheault became Senior Vice President, Equipment segment in November 2007 after serving as Vice President, Equipment segment since 2006. Prior to that time, he served as Vice President and General Manager of our Ball Bonder Business Unit and Director of Strategic Marketing and Vice President, General Manager of the Microelectronics Business Unit. Mr. Rheault earnedholds an Electrical Engineering degree from Laval University, Canada and a DSA (Business Administration Diploma) from Sherbrooke University, Canada.

Charles Salmonshas served as Senior Vice President, Engineering since March 2008, after serving as Senior Vice President, Acquisition Integration (September 2006-March 2008), Senior Vice President, Wafer Test (November 2004-September 2006), Senior Vice President, Product Development (September 2002-November 2004), Senior Vice President Operations (1999 to 2004), General Manager, Ball Bonder operations (1998-1999), and Vice President of Operations (1994-1998). Mr. Salmons earnedholds a MastersBachelor of Arts degree in Economics from Temple University and a Master of Business Administration degree from LaSalle University.

Jagdish (Jack) G. BelaniShay Tortonhas served as Senior Vice President, of Packaging Materials segment and Corporate Marketing from November 2005 until the sale of our Wire business on September 29, 2008. From 1999 until November 2005, Mr. Belani servedWorldwide Operations since 2009 after serving as Vice President, of Wire BondingWorldwide Operations and Corporate Marketing;Supply Chain (2005-2009), Vice President, ofChina Operations and K&S Suzhou General Manager (2002-2005), Vice President and General Manager, Materials Business UnitsUnit (2001-2002), K&S Bonding Wire Business Unit Managing Director-Singapore (1997) and Marketing, President of the WireGeneral Manager, K&S Bonding Division and President of XLAM, our high density substrate group.Wire-U.S. (1996). Mr. Belani earnedTorton holds a Bachelor of Science degree in chemical engineeringIndustrial Engineering and Management from Indianthe Israel Institute of Technology, Madras, India;Technology.

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Ran Bareketwas appointed interim Principal Accounting Officer in August 2009. Prior to this appointment, Mr. Bareket served as our Vice President and Corporate Controller since July 2006. In addition, he served as Vice President of Financial Operations since 2005. Prior to 2005, Mr. Bareket served as our Director of Worldwide Financial Operations. Mr. Bareket holds a MastersBachelor of ScienceArts degree in metallurgical and materials engineeringAccounting/Management from Illinois Institute of TechnologyTel Aviv Management College in Israel and a Juris DoctorMaster of Business Administration from Pennsylvania State University.

Jason Livingstonwas appointed Vice President of the K&S Wedge Bonding Business Unit in October 2009, after serving as Vice President of Finance for the Wedge Bonding Business Unit. Mr. Livingston joined K&S through the acquisition of Orthodyne Electronics, where he served as Chief Financial Officer since April 1998. Prior to joining Orthodyne Electronics, Mr. Livingston was with McGladrey & Pullen, LLP. Mr. Livingston is a CPA and holds a Bachelor of Arts degree in Accounting from California State University.

Tek Chee (“TC”) Mak has served as Vice President of Worldwide Sales since September 2006 after serving as Vice President of Sales for the Equipment and Expendable Tools businesses since November 2004. Prior to that time, he served as Vice President of Asia Sales since February 2001. Mr. Mak holds a Higher Diploma of Electronic Engineering from Hong Kong Polytechnic University.

Michael J. Morriswas appointed interim Chief Financial Officer (“CFO”) in August 2009. Mr. Morris previously served as Vice President of Finance and Treasurer. Before joining K&S in October 2006, Mr. Morris was Assistant Treasurer at Constellation Energy Group. Prior to joining Constellation in 2005, Mr. Morris held various positions of increasing responsibility at the Treasurer’s Office of General Motors. Mr. Morris holds a Bachelor of Arts degree in Economics from the University of Santa Clara.Pennsylvania and a Master of Business Administration from the University of Michigan.

Item 1A.

Risks Related to Our Business and Industry

Item 1A. RISKS RELATED TO OUR BUSINESS AND INDUSTRY

Our operating results and financial condition are adversely impacted by the currentvolatile worldwide economic conditions.

In 2008, general worldwideGlobal economic conditions affect demand for semiconductor capital equipment and expendable tools. Accordingly, our business and financial performance is impacted, both positively and negatively, by fluctuations in the macroeconomic environment. Conditions in the global economy deteriorated sharply duedramatically in the first half of our fiscal 2009, leading to a sharp contraction in consumer and business electronics spending, which reduced demand throughout the sub-prime lending crisis, general credit market crisis, collateral effects onsemiconductor supply chain. Though industry conditions improved significantly in the financesecond half of the fiscal year, visibility continues to be limited and banking industries, decreased consumer confidence, reduced corporate profits and capital spending, and liquidity concerns. These conditions make it difficult for our customers, our vendors and us to accurately forecast and plan futureforecasting in the current business activities, and have caused customers to reduce spending on our products.environment remains extremely difficult. We cannot predict the timing or duration of the global economic crisis or the timing or strength of a subsequentan economic recovery. If the economy or markets in which we operate experience continuedfurther weakness, at current levels or deteriorate further, our business, financial condition and results of operations will be materially and adversely affected.

The semiconductor industry is volatile with sharp periodic downturns and slowdowns. The current downturn has beenCyclical industry downturns are made worse by deterioratingvolatile global economic conditions.

Our operating results are significantly affected by the capital expenditures of large semiconductor manufacturers, both IDMs and their subcontract assemblers and vertically integrated manufacturers of electronic systems.subcontractors. Expenditures by semiconductor manufacturers and their subcontract assemblers and vertically integrated manufacturers of electronic systemsour customers depend on the current and anticipated market demand for semiconductors and products that use semiconductors, including personal computers, telecommunications equipment, consumer electronics and automotive goods. Significant downturns in the market for semiconductor devices or in general economic conditions, such as the recent severe deterioration in worldwide economic conditions reduce demand for our products and materially and adversely affect our business, financial condition and operating results.

The semiconductor industry is volatile, with periods of rapid growth followed by industry-wide retrenchment. These periodic downturns and slowdowns have adversely affected our business, financial condition and operating results. TheyDownturns have been characterized by, among other things, diminished product demand, excess production capacity, and accelerated erosion of selling prices. TheseHistorically these downturns historically have severely and negatively affected the industry’s demand for capital equipment, including the assembly equipment and, to a lesser extent, the packaging materialsexpendable tools that we sell. The sharp deterioration in worldwideglobal economic conditions that beganoccurred in mid-2008 hasthe first half of fiscal 2009 made the current industry downturn during that same period more severe than any recent downturn.industry downturns. There can be no assurances regarding levels of demand

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for our products, especially in light of currentuncertain global economic conditions. In any case, we believe the historical volatility of our business, – both upward and downward, – will persist.

We may experience increasing price pressure.

Our business strategy focusesTypically our average selling prices have declined over time. We seek to offset this decline by continually reducing our cost structure by consolidating operations in lower cost areas, reducing other operating costs, and by pursuing product strategies focused on product performance, and customer service and price. We continually seek to reduce our cost structure including moving operations to lower cost areas and reducing other operating costs. Weservice. These efforts may not be able to continue to compete on the basis of performance, service, and price;fully offset price declines; therefore, our financial condition and operating results may be materially and adversely affected.

Our quarterly operating results fluctuate significantly and may continue to do so in the future.

In the past, our quarterly operating results have fluctuated significantly. We expect quarterly results will continue to fluctuate. Although these fluctuations are partly due to the volatile nature of the semiconductor industry, they also reflect other factors, many of which are outside of our control.

Some of the factors that may cause our net revenues and/orrevenue and operating margins to fluctuate significantly from period to period are:

Many of our expenses, such as research and development, selling, general and administrative expenses, and interest expense, do not vary directly with our net revenue. Our research and development efforts include long-term projects lasting a year or more, which require significant investments. In order to realize the benefits of these projects, we believe that we must continue to fund them during periods when our revenue has declined. As a result, a decline in our net revenue would adversely affect our operating results.results as we continue to make these expenditures. In addition, if we were to incur additional expenses in a quarter in which we did not experience comparable increased net revenue, our operating results would decline. In a downturn, we may have excess inventory, which is required tocould be written off. Some of the other factors that may cause our expenses to fluctuate from period-to-period include:

Because our net revenue and operating results are volatile and difficult to predict, we believe consecutive period-to-period comparisons of our operating results may not be a good indication of our future performance.

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We may not be able to rapidly develop, manufacture and gain market acceptance of new and enhanced products required to maintain or expand our business.

We believe our continued success depends on our ability to continuously develop and manufacture new products and product enhancements on a timely and cost-effective basis. We must introduce these products and product enhancements into the market in a timely manner in response to customers’ demands for higher performance assembly equipment and leading-edge materials customized to address rapid technological advances in integrated circuits, and capital equipment designs. Our competitors may develop new products or enhancements to their products that offer improved performance and features, andor lower prices thatwhich may render our products less competitive. The development and commercialization of new products requires significant capital expenditures over an extended period of time, and some products that we seek to develop may never become profitable. In addition, we may not be able to develop and introduce products incorporating new technologies in a timely manner that will satisfy our customers’ future needs or achieve market acceptance.

Substantially all of our sales and manufacturing operations are located outside of the United States, and we rely on independent foreign distribution channels for certain product lines; all of which subject us to risks, including risks from changes in trade regulations, currency fluctuations, political instability and war.

Approximately 97%96.8%, 95.6% and 97.0% of our net salesrevenues for fiscal 20062007, 2008 and 2007 and 96% for fiscal 20082009, respectively, were to customers located outside of the United States, in particular to customers locatedprimarily in the Asia/Pacific region.

Our future performance will depend on our ability to continue to compete in foreign markets, particularly in the Asia/Pacific region. TheseSome of these economies have been highly volatile, resulting in significant fluctuation in local currencies, and political and economic instability. These conditions may continue or worsen, which may materially and adversely affect our business, financial condition and operating results.

We also rely on non-United States suppliers for materials and components used in our products, and nearly allmost of our manufacturing operations are located in countries other than the United States. We manufacture our ball bonders in Singapore, bonding tools in Israel and China, and die bonders in SwitzerlandSingapore, and China.certain bonder subassemblies in Malaysia. In addition, we have sales, service and support personnel in China, Japan, Korea, Malaysia, the Philippines, Singapore, Switzerland, Taiwan, Thailand, United States and throughout Europe.Germany. We also rely on independent foreign distribution channels for certain of our product lines. As a result, a major portion of our business is subject to the risks associated with international, and particularly Asia/Pacific, commerce, such as:

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Difficulties in forecasting demand for our product lines may lead to periodic inventory shortages or excesses.

We typically operate our business with limited visibility of future demand. As a result, we sometimes experience inventory shortages or excesses. We generally order supplies and otherwise plan our production based on internal forecasts for demand. We have in the past, and may again in the future, fail to accurately forecast demand for our products. This has led to, and may in the future lead to, delays in product shipments or, alternatively, an increased risk of inventory obsolescence.obsolescence and contractual commitments to purchase excess inventory. If we fail to accurately forecast demand for our products, our business, financial condition and operating results may be materially and adversely affected.

Alternative packaging technologies may render some of our products obsolete.

Alternative packaging technologies have emerged that may improve device performance or reduce the size of an integrated circuit package, as compared to traditional die bonding. These technologies include flip chip and chip scale packaging. Some of these alternative technologies eliminate the need for wires to establish the electrical connection between a die and its package. The semiconductor industry may, in the future, shift a significant part of its volume into alternative packaging technologies, such as those discussed above, which do not employ our products. If a significant shift to alternative packaging technologies were to occur, demand for our equipment and related packaging materials may be materially and adversely affected.

Because a small number of customers account for most of our sales, our revenuesnet revenue could decline if we lose a significant customer.

The semiconductor manufacturing industry is highly concentrated, with a relatively small number of large semiconductor manufacturers and their subcontract assemblers and vertically integrated manufacturers of electronic systems purchasing a substantial portion of our semiconductor assembly equipment and packaging materials. Sales to a relatively small number of customers account for a significant percentage of our net sales. During fiscal 2006, salesrevenue. Sales as a percent of net revenue to STATS Chippac, our largest customer accountedwere 10.7%, 9.9%, and 17.7% for 10.7% of our net revenue. During fiscal 2007, 2008, and 2008, sales to Advanced Semiconductor Engineering, our largest customer accounted for 10.7% and 9.9% of our net revenue,2009, respectively.

We expect that sales of our products to a small number of customers will continue to account for a high percentage of our net salesrevenue for the foreseeable future. Thus, our business success depends on our ability to maintain strong relationships with our customers. Any one

of a number of factors could adversely affect these relationships. If, for example, during periods of escalating demand for our equipment, we were unable to add inventory and production capacity quickly enough to meet the needs of our customers, they may turn to other suppliers making it more difficult for us to retain their business. Similarly, if we are unable for any other reason to meet production or delivery schedules, particularly during a period of escalating demand, our relationships with our key customers could be adversely affected. If we lose orders from a significant customer, or if a significant customer reduces its orders substantially, these losses or reductions may materially and adversely affect our business, financial condition and operating results.

We depend on a small number of suppliers for raw materials, components and subassemblies. If our suppliers do not deliver their products to us, we would be unable to deliver our products to our customers.

Our products are complex and require raw materials, components and subassemblies having a high degree of reliability, accuracy and performance. We rely on subcontractors to manufacture many of these components and subassemblies and we rely on sole source suppliers for some importantmany components and raw materials. As a result, we are exposed to a number of significant risks, including:

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If we are unable to deliver products to our customers on time for these or any other reasons, or we are unable to meet customer expectations as to cycle time, or we may beare unable to maintain acceptable product quality or reliability, and our business, financial condition and operating results may be materially and adversely affected.

We may acquire or divest businesses or enter into joint ventures or strategic alliances, which may materially affect our business, financial condition and operating results.

We continually evaluate our portfolio of businesses and may decide to buy or sell businesses or enter into joint ventures or other strategic alliances. During fiscal 2007, we acquired Alphasem, a manufacturer of die bonders. During fiscal 2009, we both acquired the assets of Orthodyne, a manufacturer of heavy wire wedge bonders and heavy wire wedges, and sold our Wire business to Heraeus, a precious metals and technology group that has a leading position in its markets.group. We may be unable to successfully integrate Orthodyne with our existing businesses and successfully implement, improve and expand our systems, procedures and controls to accommodate the acquisition. In addition, we may not ultimately achieve anticipated benefits or cost reductions from the divestiture of our Wire business and may incur significant restructuring costs.business. These transactions may place additional constraints on our management and current labor force. TheseAdditionally, these transactions may also require significant resources from our legal, finance and business teams. If we fail to successfully manage the risks associated with these transactions, our business, financial condition and operating results may be materially and adversely affected.

We may from time to time in the future seek to acquire or divest other businesses or enter into alliances with other companies. Significant acquisitions and alliances may increase demands on management, engineering, and financial resources, and information and internal control systems. Our success with respect to acquisitions and alliances will depend, in part, on our ability to manage and integrate acquired businesses and alliances with our existing businesses and to successfully implement, improve and expand our systems, procedures and controls. In addition, we may divest existing businesses, which would cause a decline in revenues and may make our financial results more volatile. If we fail to integrate and manage acquired businesses successfully or to manage the risks associated with divestitures, joint ventures or other alliances, our business, financial condition and operating results may be materially and adversely affected.

The market price of our common shares and our earnings per share may decline as a result of any acquisitions or divestitures.

The market price of our common shares may decline as a result of any acquisitions or divestitures made by us, including among other things, the acquisition of Orthodyne, and the sale of our Wire business, if we do not achieve the perceived benefits of such acquisitionacquisitions or divestituredivestitures as rapidly or to the extent anticipated by financial or industry analysts or if the effect on our financial results is not consistent with the expectations of financial or industry analysts. In addition, the failure to achieve expected benefits and unanticipated costs relating to our acquisitions could reduce our future earnings per share.

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We may be unable to continue to compete successfully in the highly competitive semiconductor equipment and packaging materials industries.

The semiconductor equipment and packaging materials industries are very competitive. In the semiconductor equipment industry, significant competitive factors include performance, quality, customer support and price. In the semiconductor packaging materials industry, competitive factors include price, delivery and quality.

In each of our markets, we face competition and the threat of competition from established competitors and potential new entrants. In addition, established competitors may combine to form larger, better capitalized companies. Some of our competitors have or may have significantly greater financial, engineering, manufacturing and marketing resources. Some of these competitors are Asian and European companies that have had, and may continue to have, an advantage over us in supplying products to local customers who appear to prefer to purchase from local suppliers, without regard to other considerations.

We expect our competitors to improve their current products’ performance, and to introduce new products and materials with improved price and performance characteristics. Our competitors may independently develop technology that is similar to or better than ours. New product and materialsmaterial introductions by our competitors or by new market entrants could hurt our sales. If a particular semiconductor manufacturer or subcontract assembler selects a competitor’s product or materials for a particular assembly operation, we may not be able to sell products or materials to that manufacturer or assembler for a significant period of time. Manufacturers and assemblers sometimes develop lasting relationships with suppliers and assembly equipment providers in our industry and often go years without requiring replacement. In addition, we may have to lower our prices in response to price cuts by our competitors, which may materially and adversely affect our business, financial condition and operating results. If we cannot compete successfully, we could be forced to reduce prices and could lose customers and experience reduced margins and profitability.

Our success depends in part on our intellectual property, which we may be unable to protect.

Our success depends in part on our proprietary technology. To protect this technology, we rely principally on contractual restrictions (such as nondisclosure and confidentiality provisions) in our agreements with employees, subcontractors, vendors, consultants and customers and on the common law of trade secrets and proprietary “know-how.” We also rely, in some cases, on patent and copyright protection. We may not be successful in protecting our technology for a number of reasons, including the following:

In addition, our partners and alliances may also have rights to technology that we develop.developed by us. We may incur significant expense to protect or enforce our intellectual property rights. If we are unable to protect our intellectual property rights, our competitive position may be weakened.

Third parties may claim we are infringing on their intellectual property, which could cause us to incur significant litigation costs or other expenses, or prevent us from selling some of our products.

The semiconductor industry is characterized by rapid technological change, with frequent introductions of new products and technologies. Industry participants often develop products and features similar to those introduced by others, creating a risk that their products and processes may give rise to claims that they infringe on the intellectual property of others. We may unknowingly infringe on the intellectual property rights of others and incur significant liability for that infringement. If we are found to have infringed on the intellectual property rights of others, we could be enjoined from continuing to manufacture, market or use the affected product, or be required to obtain a license to continue manufacturing or using the affected product. A license

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could be very expensive to obtain or may not be available at all. Similarly, changing or re-engineering our products or processes to avoid infringing the rights of others may be costly, impractical or time consuming.

Occasionally, third parties assert that we are, or may be, infringing on or misappropriating their intellectual property rights. In these cases, we defend, and will continue to defend, against claims or negotiate licenses where we consider these actions appropriate. Intellectual property cases are uncertain and involve complex legal and factual questions. If we become involved in this type of litigation, it could consume significant resources and divert our attention from our business.

We may be materially and adversely affected by environmental and safety laws and regulations.

We are subject to various federal, state, local and foreign laws and regulations governing, among other things, the generation, storage, use, emission, discharge, transportation and disposal of hazardous material, investigation and remediation of contaminated sites and the health and safety of our employees. Increasingly, public attention has focused on the environmental impact of manufacturing operations and the risk to neighbors of chemical releases from such operations.

Proper waste disposal plays an important role in the operation of our manufacturing plants. In many of our facilities we maintain wastewater treatment systems that remove metals and other contaminants from process wastewater. These facilities operate under permits that must be renewed periodically. A violation of those permits may lead to revocation of the permits, fines, penalties or the incurrence of capital or other costs to comply with the permits, including potential shutdown of operations.

Compliance with existing or future, land use, environmental and health and safety laws and regulations may: (1) result in significant costs to us for additional capital equipment or other process requirements, (2) restrict our ability to expand our operations and/or (3) cause us to curtail our operations. We also could incur significant costs, including cleanup costs, fines or other sanctions and third-party claims for property damage or personal injury, as a result of violations of or liabilities under such laws and regulations. We cannot assure you that anyAny costs or liabilities to comply with or imposed under these laws and regulations will notcould materially and adversely affect our business, financial condition and operating results.

We may be unable to generate enough cash to repay our debt.

Our ability to make payments on our indebtedness and to fund planned capital expenditures and other activities will depend on our ability to generate cash in the future. If our convertible debt isSubordinated Convertible Notes are not converted to shares of our common shares,stock, we will be required to make annual cash interest payments of $1.7$1.5 million in fiscal 2009, $1.6 million in fiscal 2010 and $1.0 million in fiscal 2011 and $1.0 million in fiscal 2012 on an aggregate $204.4 million of convertible subordinated debt (assuming that we do not purchase any additional outstanding Subordinated Convertible Notes). As of September 27, 2008,October 3, 2009, principal payments of $72.4 million, $65.0$48.9 million and $110.0 million on the convertible subordinated debt wereSubordinated Convertible Notes are due in fiscal 2009, 2010 and 2012, respectively. During October 2008, $43.1 million of our 0.5% Subordinated Convertible Notes were repurchased. Accordingly as of December 1, 2008, we repaid the $29.3 million in principal payments that were due in fiscal 2009. Our ability to make payments on our indebtedness is affected by the volatile nature of our business, and general economic, competitive and other factors that are beyond our control, including deteriorating global economic conditions. Our indebtedness poses risks to our business, including that:

We cannot assure you that our business willmay not generate cash in an amount sufficient to enable us to service interest, principal and other payments on our debt, including the notes,Subordinated Convertible Notes, or to fund our other liquidity needs. We are not restricted under the agreements governing our existing indebtedness from incurring additional debt in the future. If new debt is added to our current levels, our leverage and our debt service obligations would increase and the related risks described above could intensify.

We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common shares.

The issuance of additional equity securities or securities convertible into equity securities will result in dilution of our existing shareholders’ equity interests in us. Our board of directors has the authority to issue,

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without vote or action of shareholders, preferred shares in one or more series, and has the ability to fix the rights, preferences, privileges and restrictions of any such series. Any such series of preferred shares could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of holders of our common shares. In addition, we are authorized to issue, without shareholder approval, up to an aggregate of 200 million common shares, of which approximately 60,881,34369.4 million shares were outstanding as of December 5, 2008.October 3, 2009. We are also authorized to issue, without shareholder approval, securities convertible into either common shares or preferred shares.

Weaknesses in our internal controls and procedures could result in material misstatements in our financial statements.

Pursuant to the Sarbanes-Oxley Act, management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal controls over financial reporting are processes designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. A material weakness is a control deficiency, or combination of control deficiencies, that results in a more than remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected.

Our internal controls may not prevent all potential errors or fraud, because any control system, no matter how well designed and implemented, can only provide reasonable and not absolute assurance that the objectives of the control system will be achieved. We cannot assure you that we or our independent registered public accountants will not in the futuremay identify other material weaknesses in our internal controls which could adversely affect our ability to insureensure proper financial reporting and could affect investor confidence in us and the price of our common shares.

Accounting methods, including but not limited to the accounting method for convertible debt securities with net share settlement, such as our 0.875% Subordinated Convertible Notes, are subject to change.

In calculating our diluted earnings per share, we currently account for the 0.875% Subordinated Convertible Notes in accordance with Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) Issue No. 90-19,Convertible Bonds with Issuer Option to Settle for Cash upon Conversion(“EITF 90-19”). The accounting method for a convertible debt security that meets the requirements of EITF 90-19 is similar to the accounting for non-convertible debt. We recognize interest expense at the stated coupon rate, and shares potentially issuable upon conversion of the debtour 0.875% Subordinated Convertible Notes are excluded from the calculation of diluted earnings per share until the market price of our common shares exceeds the conversion price (i.e., the conversion price is “in the money”). Once the conversion price is in the money, the shares that we would issue upon assumed conversion of the debt arewould be included in the calculation of fully diluted earnings per share using the “treasury stock” method. No separate value is attributed to the conversion feature of the debt at the time of issuance.

In May 2008, the FASBFinancial Accounting Standards Board (“FASB”) issued FASB Staff PositionAccounting Standards Codification (“FSP”ASC”) APB 14-1,No. 470.20, Debt, Debt With Conversion Options (“ASC 470.20”), which is effective for fiscal years beginning after December 15, 2008. FSP APB 14-1ASC 470.20 specifies that issuers of convertible debt instruments that may be settled in cash upon conversion should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.

As compared to the current accounting method, the proposalASC 470.20 would reduce the amount recognized as debt and increase the amount recognized as shareholder’sshareholders’ equity at the time of issuance. The amount of debt recognized at time of issuance would increase over the life of the notes, with a corresponding increase in non-cash interest expense and reduction of net income and earnings per share (net of tax), for the amortization of the original issue discount. We will adopt FSP APB 14-1ASC 470.20 beginning fiscal 2010, with retrospective application to financial statements for periods prior to the date of adoption.

This change in the accounting method for convertible debt securities will have an adverse impact on our reported and future results of operations, and could adversely affect the trading price of our common shares or the trading price of the notes.Subordinated Convertible Notes.

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Other Risks

Our ability to recognize tax benefits on future domestic U.S. tax losses and our existing U.S. net operating loss position may be limited.

We have generated net operating loss carryforwards and other tax attributes for U.S. tax purposes (“Tax Benefits”) that can be used to reduce our future federal income tax obligations. Under the Tax Reform Act of 1986, the potential future utilization of our Tax Benefits for U.S. tax purposes may be limited following an ownership change. An ownership change is generally defined as a greater than 50% point increase in equity ownership by 5% shareholders in any three-year period under Section 382 of the Internal Revenue Code. An ownership change may significantly limit our ability to fully utilize our net operating losses which could materially and adversely affect our financial condition and operating results.

Potential changes to U.S. and foreign tax laws could increase our income tax expense.

We are subject to income taxes in the United States and many foreign jurisdictions. There have been proposals to reform U.S. tax laws that would significantly impact how U.S. multinational corporations, such as us, are taxed on foreign earnings. It is unclear whether these proposed tax revisions will be enacted, or, if enacted, what the scope of the revisions will be. Changes in U.S. and foreign tax laws, if enacted, could materially and adversely affect our financial condition and operating results.

Anti-takeover provisions in our articles of incorporation and bylaws, and under Pennsylvania law may discourage other companies from attempting to acquire us.

Some provisions of our articles of incorporation and bylaws as well as Pennsylvania law may discourage some transactions where we would otherwise experience a fundamental change. For example, our articles of incorporation and bylaws contain provisions that:

Further, under the Pennsylvania Business Corporation Law, because our shareholders approved bylaw provisions that provide for a classified board of directors, shareholders may remove directors only for cause. These provisions and some other provisions of the Pennsylvania Business Corporation Law could delay, defer or prevent us from experiencing a fundamental change and may adversely affect our common shareholders’ voting and other rights.

Terrorist attacks, or other acts of violence or war may affect the markets in which we operate and our profitability.

Terrorist attacks may negatively affect our operations. There can be no assurance that there will not be further terrorist attacks against the United States or United States businesses.businesses, or in any other country we do business. Terrorist attacks or armed conflicts may directly impact our physical facilities or those of our suppliers or customers. Our primary facilities include administrative, sales and research and development facilities in the United States and manufacturing facilities in the United States, Singapore, Switzerland, China, Malaysia and Israel. We also have an administrative office in Malaysia. Additional terrorist attacks may disrupt the global insurance and reinsurance industries with the result that we may not be able to obtain insurance at historical terms and levels for all of our facilities. Furthermore, additional attacks may make travel and the transportation of our supplies and products more difficult and more expensive and ultimately affect the sales of our products in the United States and overseas. Additional attacks or any broader conflict, could negatively impact our domestic and international sales, our supply chain, our production capability and our ability to deliver products to our customers. Political and economic instability in some regions of the world could negatively impact our business. The consequences of terrorist attacks or armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business.

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Provisions of our Subordinated Convertible Notes could discourage an acquisition of us by a third party.

Certain provisions of our outstanding Subordinated Convertible Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change as defined in our Subordinated Convertible Notes, holders of the Subordinated Convertible Notes will have the right, at their option, to require us to repurchase all of their notes at a price equal to 100% of the principal amount of notes to be repurchased, plus accrued and unpaid interest, plus a premium, if applicable. In addition, pursuant to the terms of the 0.875% Subordinated Convertible Notes, we may not enter into certain mergers unless, among other things, the surviving entity assumes all of our obligations under the indenture and the notes.Subordinated Convertible Notes.

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Item 2. PROPERTIES

The following table reflects our major operating facilities:

Facility		Approximate Size		Function		Products Manufactured		Lease Expiration Date (4)
Facility		Approximate Size		Function		Products Manufactured		Lease Expiration Date
Fort Washington, Pennsylvania		88,000 sq. ft.(1)		Corporate headquarters, technology center, sales and service		Not applicable		September 2028(3)
Suzhou, China		136,386 sq. ft.(1)		Manufacturing, technology center		Capillaries, dicing blades		October 2022(4)
Irvine, California		121,805 sq. ft.(1)		Manufacturing, technology center		Wedge bonders		September 2013
Singapore		77,500 sq. ft.(1)		Manufacturing, technology center		Wire and die bonders		August 2011
Berg, Switzerland		61,896 sq. ft.(2)		Manufacturing, technology center		Die bonders, capillaries, dicing bladesbonder sub-assembly and spares		October 2022N/A
Singapore		77,500 sq. ft. (1)		Manufacturing, technology center		Wire bonders		August 2011
Yokneam, Israel		53,820 sq. ft.(2)		Manufacturing, technology center		Capillaries, wedges, die collets		N/A
Berg, Switzerland Petaling Jaya, Malaysia		61,896 sq. ft. (2)37,200 sq ft(1)		Manufacturing, technology centerSubassembly manufacturing and supply chain management		Die bondersEquipment subassembly(5)		N/AAugust 2012

In addition, we rent space for sales and service offices and administrative functions in: China, Germany, Japan, Korea, Malaysia, the Philippines, Taiwan, Thailand, and the United States.Thailand. We believe our facilities are generally are in good condition.condition and suitable to the extent of utilization needed.

Item 3. LEGAL PROCEEDINGS

From time to time, we may be a plaintiff or defendant in cases arising out of our business. We cannot assure yoube assured of the results of any pending or future litigation, but we do not believe resolution of these matters will materially or adversely affect our business, financial condition or operating results.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

Item 5.      MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND

                  ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on The Nasdaq Global Market (“Nasdaq”) under the symbol “KLIC.” The following table reflects the ranges of high and low sale prices for our common stock as reported on Nasdaq for the periods indicated:

		Fiscal year ended												Fiscal year ended
		September 29, 2007						September 27, 2008						September 27, 2008								October 3, 2009
		High			Low			High			Low			High				Low				High				Low
First Quarter		$	9.67		$	7.92		$	8.89		$	6.47		$	8.89			$	6.47			$	4.71			$	1.11
Second Quarter		$	10.19		$	8.17		$	6.93		$	4.55		$	6.93			$	4.55			$	2.67			$	1.15
Third Quarter		$	11.04		$	9.11		$	7.95		$	4.66		$	7.95			$	4.66			$	5.04			$	2.11
Fourth Quarter		$	12.46		$	7.34		$	7.49		$	4.53		$	7.49			$	4.53			$	6.68			$	3.00

On December 5, 2008,10, 2009, there were approximately 426406 holders of record of the shares of outstanding common stock. The payment of dividends on our common stock is within the discretion of our board of directors; however, we have not historically paid any dividends on our common stock. In addition, we do not expect to declare dividends on our common stock in the near future, since we intend to retain earnings to finance the growth of our business.

For the purpose of calculating the aggregate market value of shares of our common stock held by nonaffiliates, as shown on the cover page of this report, we have assumed all of our outstanding shares were held by nonaffiliates except for shares held by our directors and executive officers. However, this does not necessarily mean that all directors and executive officers of the Company are, in fact, affiliates of the Company, or there are no other persons who may be deemed to be affiliates of the Company. Further information concerning the beneficial ownership of our executive officers, directors and principal shareholders will be included in our Proxy Statement for the 20092010 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission on or about December 31, 2008.2009.

Equity Compensation Plan Information

The information required hereunder will appear under the heading “Equity Compensation Plans” in our Proxy Statement for the 20092010 Annual Meeting of Shareholders which information is incorporated herein by reference.

Recent Sales of Unregistered Securities and Use of Proceeds

None.

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Item 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table reflects selected historical consolidated financial data derived from the consolidated financial statements of Kulicke and Soffa Industries, Inc. and subsidiaries as of and for each of the five fiscal years ended 2004, 2005, 2006, 2007, 2008 and 2009. Fiscal 2009 includes Orthodyne which was acquired on October 3, 2008. AllIn addition, all periods have been reclassified to reflect our Wire business as a discontinued operation. Due to this change, fiscal 2004, 2005, 2006, and 2007 do not agree tofinancial data have been revised from our previously issued consolidated financial statements. This data should be read in conjunction with our consolidated financial statements, including notes and other financial information included elsewhere in this report or in annual reports or current reports on Form 8-K filed previously by us in respect of the fiscal years identified in the column headings of the tables below.

		Fiscal
(in thousands, except per share amounts)		2004				2005				2006				2007			2008
																					Fiscal
(in thousands, except per share amounts)																					2005				2006				2007				2008				2009
Statement of Operations Data:
Net revenue:
Equipment		$	361,244			$	201,608			$	319,788			$	316,718		$	271,019			$	201,608			$	319,788			$	316,718			$	271,019			$	170,536
Packaging Materials			62,887				58,394				60,508				53,808			57,031
Expendable Tools																						58,394				60,508				53,808				57,031				54,704
Total net revenue			424,131				260,002				380,296				370,526			328,050				260,002				380,296				370,526				328,050				225,240
Cost of sales:
Equipment			208,616				115,645				178,599				188,055			165,499				115,645				178,599				188,055				165,499				111,103
Packaging Materials			28,008				27,409				28,474				27,035			28,758
Expendable Tools																						27,409				28,474				27,035				28,758				25,294
Total cost of sales (1)			236,624				143,054				207,073				215,090			194,257				143,054				207,073				215,090				194,257				136,397
Operating expenses:
Equipment			79,674				70,628				89,684				113,444			122,302				70,628				89,684				113,444				122,302				135,465
Packaging Materials			18,236				22,578				23,316				24,480			26,971
Expendable Tools																						22,578				23,316				24,480				26,971				24,193
Impairment of goodwill																						—				—				—				—				2,709
U.S. pension plan termination			—				—				—				—			9,152				—				—				—				9,152				—
Gain on sale of assets			—				(1,690	)			(4,544	)			—			—				(1,690	)			(4,544	)			—				—				—
Total operating expenses (1)			97,910				91,516				108,456				137,924			158,425				91,516				108,456				137,924				158,425				162,367
Income (loss) from operations:
Equipment			72,954				15,335				51,505				15,219			(16,782	)
Packaging Materials			16,643				8,407				8,718				2,293			1,302
U.S. pension plan termination			—				—				—				—			(9,152	)
Segment income (loss) from operations:
Equipment including U.S. pension plan termination of $9,152 in 2008																						15,335				51,505				15,219				(25,934	)			(78,741)
Expendable Tools																						8,407				8,718				2,293				1,302				5,217
Gain on sale of assets			—				1,690				4,544				—			—				1,690				4,544				—				—				—
Interest income (expense), net			(9,357	)			(1,578	)			795				3,990			1,233				(1,578	)			795				3,990				1,233				(1,495)
Gain (loss) on extinguishment of debt (5)			(10,510	)			—				4,040				2,802			170
Income (loss) from continuing operations before taxes			69,730				23,854				69,602				24,304			(23,229	)
Provision for income taxes from continuing operations (2)			4,705				1,468				8,068				5,448			(3,610	)
Gain on extinguishment of debt																						—				4,040				2,802				170				3,965
Income (loss) from continuing operations before income taxes																						23,854				69,602				24,304				(23,229	)			(71,054)
Provision (benefit) for income taxes from continuing operations(2)																						1,468				8,068				5,448				(3,610	)			(13,029)
Income (loss) from continuing operations			65,025				22,386				61,534				18,856			(19,619	)			22,386				61,534				18,856				(19,619	)			(58,025)
Income (loss) from discontinued operations, net of tax (2)(3)			(9,145	)			(126,468	)			(9,364	)			18,874			23,441
Income (loss) from discontinued operations, net of tax(2)(3)																						(126,468	)			(9,364	)			18,874				23,441				22,011
Net income (loss)		$	55,880			$	(104,082	)		$	52,170			$	37,730		$	3,822			$	(104,082	)		$	52,170			$	37,730			$	3,822			$	(36,014)
Per Share Data:
Income (loss) per share from continuing operations (4)
Basic		$	1.28			$	0.43			$	1.12			$	0.34		$	(0.37	)		$	0.43			$	1.12			$	0.34			$	(0.37	)		$	(0.93)
Diluted		$	1.03			$	0.36			$	0.91			$	0.29		$	(0.37	)		$	0.36			$	0.91			$	0.29			$	(0.37	)		$	(0.93)
Discontinued operations, net of tax per share: (4)
Income (loss) per share from discontinued operations, net of tax:(4)
Basic		$	(0.18	)		$	(2.45	)		$	(0.17	)		$	0.33		$	0.44			$	(2.45	)		$	(0.17	)		$	0.33			$	0.44			$	0.35
Diluted		$	(0.07	)		$	(1.84	)		$	(0.14	)		$	0.28		$	0.44			$	(1.87	)		$	(0.14	)		$	0.28			$	0.44			$	0.35
Net income (loss) per share: (4)
Basic		$	1.10			$	(2.02	)		$	0.95			$	0.67		$	0.07			$	(2.02	)		$	0.95			$	0.67			$	0.07			$	(0.58)
Diluted		$	0.96			$	(1.48	)		$	0.78			$	0.57		$	0.07			$	(1.51	)		$	0.78			$	0.57			$	0.07			$	(0.58)
Weighted average shares outstanding: (4)
Basic			50,746				51,619				55,089				56,221			53,449				51,619				55,089				56,221				53,449				62,188
Diluted			68,582				67,662				68,881				68,274			53,449				67,662				68,881				68,274				53,449				62,188
Balance Sheet Data:
Cash, cash equivalents, investments and restricted stock		$	95,766			$	95,369			$	157,283			$	169,910		$	186,081
Cash, cash equivalents, investments and restricted cash																					$	95,369			$	157,283			$	169,910			$	186,081			$	144,841
Working capital excluding discontinued operations			108,573				105,764				156,237				219,755			165,543				105,764				156,237				219,755				165,543				172,401
Total assets excluding discontinued operations			221,053				241,134				261,109				384,713			336,270				241,134				261,109				384,713				336,270				413,076
Long-term debt (5)			270,000				270,000				195,000				251,412			175,000
Long-term debt																						270,000				195,000				251,412				175,000				110,000
Shareholders’ equity (deficit)			67,020				(31,748	)			79,306				83,255			102,467				(31,748	)			79,306				83,255				102,467				153,461

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During fiscal 2005, we recorded the following charges as operating expenses in continuing operations: severance charges of $0.9 million; China start-up costs of $1.2 million; and inventory write-downs of $1.0 million. We also recorded a gain on the sale of assets of $1.7 million within fiscal 2005 operating expenses.

During fiscal 2006, we recorded the following charges in continuing operations: $3.5 million in cost of sales and $0.8 million in operating expenses for the cumulative adjustment to correct immaterial errors in the consolidated financial statements; $0.6 million in cost of sales and $4.1 million in operating expenses for SFAS 123R equity compensation expense; $8.4 million in operating expenses for incentive compensation and a gain on the sale of assets of $4.5 million in operating expenses.

During fiscal 2007, 2008 and 2009, we recorded the following charges in continuing operations: $0.2$4.4 million, in cost of sales$2.2 million and $5.3$2.7 million, in operating expenses for SFAS 123R equity compensation expense; and $4.4 millionrespectively, in operating expense for incentive compensation.

DuringIn addition, during fiscal 2008,2009, we recorded the following charges in continuing operations: $0.3 million in cost of sales and $4.4 million in operating expenses for SFAS 123R equity compensation expense; and $2.2$7.4 million in operating expense for incentive compensation.

severance.

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Item 7.

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

In addition to historical information, this filing contains statements relating to future events or our future results. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the safe harbor provisions created by statute. Such forward-looking statements include, but are not limited to, statements that relate to our future revenue, product development, demand forecasts, competitiveness, operating expenses, cash flows, profitability, gross margins, product prices, and benefits expected as a result of (among other factors):

Generally, words such as “may,” “will,” “should,” “could,” “anticipate,” “expect,” “intend,” “estimate,” “plan,” “continue,” “goal” and “believe,” or the negative of or other variations on these and other similar expressions identify forward-looking statements. These forward-looking statements are made only as of the date of this filing. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Forward-looking statements are based on current expectations and involve risks and uncertainties. Our future results could differ significantly from those expressed or implied by our forward-looking statements. These risks and uncertainties include, without limitation, those described below and under the heading “Risk Factors” in this Annual Report on Form 10-K for the year ended September 27, 2008October 3, 2009 and our other reports and registration statements filed from time to time with the Securities and Exchange Commission. This discussion should be read in conjunction with the Consolidated Financial Statements and Notes included in this report, as well as our audited financial statements included in the Annual Report.

We operate in a rapidly changing and competitive environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. Future events and actual results, performance and achievements could differ materially from those set forth in, contemplated by or underlying the forward-looking statements, which speak only as of the date on which they were made. Except as required by law, we assume no obligation to update or revise any forward-looking statement to reflect actual results or changes in, or additions to, the factors affecting such forward-looking statements. Given those risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictionpredictions of actual results.

Introduction

Introduction

Unless otherwise indicated, amounts provided throughout this Form 10-K relate to continuing operations only and accordingly do not include amounts attributable to our Wire business.business, which we sold on September 29, 2008.In fiscal 2009, our Packaging Materials segment was renamed Expendable Tools.

Kulicke and& Soffa Industries, Inc. (“K(the “Company” or “K&S”) designs, manufactures and marketssells capital equipment and packaging materials as well as services, maintains, repairs and upgrades equipment, allexpendable tools used to assemble semiconductor devices.devices, including integrated circuits, high and low powered discrete devices, LEDs, and power modules. We also service, maintain, repair and upgrade our equipment. Our customers primarily consist of Integrated Device Manufacturers (“IDM”)semiconductor device manufacturers, their subcontract assembly suppliers, other electronics manufacturers and subcontractor assembly facilities. According to VLSI Research, Inc., we are currently the world’s leading supplier of semiconductor ball bonding assembly equipment.automotive electronics suppliers.

We operate two main business segments, Equipment and Expendable Tools. Our goal is to be the technology leader and the lowest cost supplier in each of our main business segments which are:

major product lines. Accordingly, we invest in research and engineering projects intended to enhance our position at the leading edge of semiconductor assembly technology. We also remain focused on our cost structure, through consolidating operations, moving certain manufacturing to Asia, moving a portion of our supply chain to lower cost suppliers and designing higher performing, lower cost equipment. Cost reduction efforts are an important part of our normal ongoing operations, and are expected to generate efficiencies while maintainingsavings without compromising overall product quality.quality and service levels.

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Our fiscal year end for fiscal 2006, 2007 and 2008 was September 30, 2006, September 29, 2007, and September 27, 2008, respectively.

Divesture of the Wire Business

Subsequent to year end, onOn September 29, 2008, we completed the sale of our Wire business for $155.0net proceeds of $149.9 million (subject to working capital adjustment) to W.C. Heraeus GmbH (“Heraeus”), a precious metals and technology company based in Hanau, Germany.. The working capital requirements of our Wire business had become significant in recent years, and we believe could no longer be justified. As a result of the salefinancial results of the Wire business we improved our working capital position. Our Wire business hadhave been previously reported within our Packaging Materials segment, but is now reported asincluded in discontinued operations. We expect the gain on the sale of our Wire business to be approximately $22.1 million to $25.1 million and will be recognizedoperations in the first quarter of fiscal 2009.consolidated financial statements for all periods presented.

The sale of our Wire business provided us with the financial resources and technical focus necessary to pursue growth opportunities within our Equipment segment. In addition, we will continue to have a strategic technical alliance with Heraeus in the development of wire bonding solutions.

Acquisition of Wedge Bonding Business

Subsequent to year end onOn October 3, 2008, we completed the acquisition of substantially all of the assets and assumption of certain liabilities of Orthodyne Electronics Corporation (“Orthodyne”), a privately held company based in Irvine, California. Orthodyne is the leading supplier of both wedge bonders and wedges (the consumable product used in wedge bonding) for the power management and hybrid module markets.. In connection with the Orthodyne acquisition, we issued 7.1 million common shares with an estimated value on that date of $46.2 million and paid $82.5$87.0 million in cash including working capital. A totalcapitalized acquisition costs. Orthodyne is the leading supplier of 15% ofboth heavy wire wedge bonders and heavy wire wedges (the expendable tools used in wedge bonding) for the purchase price was deposited into a third-party escrow account as partial security for Orthodyne’s indemnification obligations under the asset purchase agreement. In addition, we agreed to pay up to $40.0 million in cash, if certain significant objectives related to gross profit are met by the Orthodyne business over the next three years.

We believe the Orthodyne acquisition will benefit us strategically by providing deeper penetration into the discrete side of thepower semiconductor market, and in the attractive power management and hybrid module markets. We expect wedge bonding will benefit

Business Environment

The semiconductor business environment is highly volatile, driven by both internal, cyclical, dynamics as well as macroeconomic forces. Over the long term, semiconductor consumption has historically grown, and is forecast to continue to grow. This growth is driven, in part, by regular advances in device performance and by price declines that result from increased focusimprovements in manufacturing technology. In order to exploit these trends, semiconductor manufacturers, both integrated device manufacturers (“IDM”) and their subcontractors, periodically aggressively invest in latest generation capital equipment. This buying pattern often leads to periods of excess supply and reduced capital spending — the so called semiconductor cycle. Macroeconomic factors also affect the industry, primarily through their effect on energy efficient solutions in the years ahead, and that Orthodyne’s market leading position in this area will allow us to address a larger Total Available Market (“TAM”). We now offer a broad suite of interconnect technologies for a variety of semiconductor packaging applications, and we believe the acquisition of Orthodyne will enhance our position as the leading supplier of interconnect solutions. We believe that on a combined basis, the sale of our Wire business and the purchase of Orthodyne will provide us with both the financial resources and technical focus necessary to pursue growth opportunities inconsumer demand for electronic devices, as well as other areas of our business.

Technology Leadership

In March 2008, we launched a new generation of semiconductor assembly equipment—the Power Series which currently features the IConn^PS and ConnX^PS ball bonders. The Power Series is setting new standards for performance, productivity, upgradeability, and ease of use. Sales of the IConn^PS machines began during the quarter ended June 28, 2008, and sales of the ConnX^PS began in our first quarter of fiscal 2009. Initial customer response has been positive, and performance for these machines has met or exceeded our expectations. The improvement in productivity and reliability represented by the Power Series translates into lower cost of ownership for our customers, and we believe will give us competitive advantage going forward. In 2008, the IConn^PSmachine won the Advanced Packaging magazine award for top new product in its class, the second time in three years a K&S product received this recognition.

We are currently in the later development stages of the next addition to the Power Series—our next generation, die bonder machine, code named “Discovery”. Discovery will allow us to compete aggressively in the growing advanced packaging/stacked die market space. Alpha evaluations of Discoveryproducts that have been underway with a select customer since July 2008, and the initial customer feedback has been very positive. We anticipate launching this machine in the second quarter of fiscal 2009.

Copper wire bonding continues to gain market interest as an alternative to gold wire bonding as customers seek ways to reduce the cost of the wire bonding process. We believe that for copper to become viable alternative to gold, a solution spanning all

manufacturing materials and processes, not just those involved in wire bonding, will be needed. Accordingly, we launched a copper wire bonding initiative with the goal of working with our customers and partners to find an integrated solution from the front-end through the back-end of the integrated circuit (“IC”) manufacturing process. Currently, copper wire bonding represents a small but packaging technology, and we believe gold wire bonding will continue to be the dominant interconnect platform.

Through the purchase of Orthodyne, we now are the leaders in the design and manufacture of wedge bonders for the power semiconductor, automotive power module, and sensor markets. Wedge bonders use wire or ribbon bonds to attach high-current-capacity aluminum wire to power semiconductors in discrete power devices or in modules,significant electronic content such as inverters for hybrid cars. Wedge bondsautomobiles, white goods, and telecommunication equipment.

Our Equipment segment reflects the industry’s cyclical dynamics and is therefore also attach large-diameter wire to semiconductors when packaging or reliability constraints do not allow the use of ball bonds.

Business Environment

Global economic conditions affect demand for semiconductor capital equipment and packaging systems. Accordingly, our business andhighly volatile. The financial performance of this segment is impacted,affected, both positively and negatively, by fluctuations in the macroeconomic environment. Conditions in the global economy deteriorated dramatically near the end of our fiscal year and in subsequent weeks. Current industry forecasts for calendar 2009 point to significant weakening in consumer and business electronics spending. We expect demand to remain weak and visibility to be poor through at least the second quarter of fiscal 2009.

Our equipment business is cyclical and highly dependent on semiconductor manufacturers’ expectationexpectations of capacity requirements and their plans for future IC demand, as well asupgrading their demand for new semiconductor manufacturing technologies. During the first quarterproduction capabilities. Volatility of fiscal 2009, our bookings slowed as customers respond to the weakening economic conditions.

Our Equipmentthis segment sales have historically been highly volatile due to the semiconductor industry’s cyclical need for new capability and capacity. Volatility is further influenced by the relative mix of IDM and subcontractorsubcontract customers in any period, since subcontractors tend purchase larger volumes in less predictable patterns. Variancechanges in the mix of sales to IDMs and subcontractors can also affect our products’ average selling priceprices due to differences in volume purchases and different machine configurations required by each type of customer.

Packaging Materials sales tend to beOur Expendable Tools segment is less volatile than our Equipment Segment, since sales of expendable tools are directly tied to semiconductor unit consumption rather than their expected growth rate.

Though the semiconductor industry’s cycle can be independent of the general economy, global economic conditions may have direct impact on demand for semiconductor units and ultimately demand for semiconductor capital equipment sales as these products represent consumable purchasesand expendable tools. In the first half of fiscal 2009, conditions in the global economy deteriorated dramatically, leading to a sharp contraction in consumer and business electronics spending, which in turn reduced demand throughout the semiconductor supply chain. Business conditions began to improve near the end of our second fiscal quarter and continued to improve through the remainder of fiscal 2009. Customer orders have remained strong during the first quarter of fiscal 2010. However, our visibility into future demand is generally limited and forecasting is difficult. There can be no assurances regarding levels of demand for our customersproducts, and volumes follow the trendwe believe historic industry-wide volatility will persist.

To mitigate possible negative effects of total semiconductor interconnect unit production.

Balance Sheet Strength

We continually seek ways to maintain the strength ofthis industry-wide volatility on our financial position, we are de-leveraging and have strengthened our balance sheet. Fiscal 2008During fiscal 2009, we reduced our debt by $88.4 million to $159.0 million. We also completed a public equity offering of 8.0 million common shares which raised $38.7 million of net proceeds. We ended fiscal 2009 with cash and investments of $186.1 million reflectcash equivalents totaling $144.8 million. We believe a $16.2 million increase from fiscal 2007. Additionally, the impact of the Wire business divestiture and the Orthodyne acquisition, both of which closed after the year-end, was to add approximately $70.0 million in cash to our Consolidated Balance Sheet. Our strongerstrong cash position allows us to manage volatile buying patternscontinue making longer term investments in product development and in cost reduction activities throughout the semiconductor cycle.

Technology Leadership

We compete, largely by offering our customers the most advanced equipment and expendable tools available for both the wire and die bonding process. Our equipment is typically the fastest and has the highest levels of process control available in their respective categories. Our expendable tools are designed to optimize the

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performance of the equipment in which they are used. We believe our technology leadership contributes to the leading market share positions of our customers, servicevarious wire bonder and expendable tools products.

To maintain our debt and continue tocompetitive advantage, we invest in product development activities to produce a stream of improvements to existing products and to deliver next-generation products. These investments often focus as much on improvements in the semiconductor assembly process as on specific pieces of assembly equipment or expendable tools. In order to generate these improvements, we often work in close collaboration with customers, end users, and other industry members. In addition to producing technical advances, these collaborative development efforts strengthen customer relationships and enhance our reputation as a technology leader and solutions provider.

The rise of copper wire bonding technology as an alternative to gold wire is an example of our technology leadership and reflects the benefits of collaboration. Over the last several years, we led an informal working-group of customers and materials suppliers tasked with solving the technical challenges involved in substituting copper for gold in the ball bonding process. Working with customers and suppliers of equipment used upstream and downstream of the wire bonding process, we developed a robust, high-yielding production process that makes copper wire bonding commercially viable.

Driven by the rising cost of gold, conversion to copper wire bonding for a wide range of packaging applications has become a major focus of many semiconductor manufacturers. We believe this conversion process has the potential to drive a significant wire bonder replacement cycle, since we believe a significant portion of the industry’s installed base is not suitable for copper bonding. Through our research and development through downturns inefforts, we are well positioned with both leading products and the global economy and our industry.

Macroeconomic Factors: Foreign Currencyprocess expertise to capitalize on this potential replacement cycle.

We are exposed to fluctuations in foreign currency exchange rates. Certainalso maintain the technology leadership of our assets and liabilities are denominatedequipment by optimizing our products to serve high growth niches. For example, over the last two years we have developed extensions of our main ball bonding platforms to address opportunities in foreign currencies and are affected by changes in exchange ratesLED assembly. Industry analysts have estimated the annual growth rate for those currencies which impact our business. For fiscal year 2008, our foreign exchange transaction loss was $1.8 million comparedtotal shipments of LED devices to $0.1 million for fiscal 2007. The higher foreign exchange loss was due to the unfavorable exchange rates primarilybe approximately 15% annually through 2013, driven by the Swiss Francadoption of LED backlights for flat-screen displays as well as other LED applications in general lighting. In fiscal 2009, we launched two products optimized for these applications. These products represent our first product offerings specifically aimed at this high growth market, and Israeli Shekel. Duringsince their introduction we have captured significant market share.

Our focus on technology leadership also extends to die bonding. In fiscal 2008,2009, we restructuredlaunched a new die bonding platform, our Swiss entity, which reduced our exposure to US Dollar/Swiss Franc fluctuations. To mitigate our market risk, we periodically adjust our subsidiaries’ holdingsstate of foreign currency denominated working capital,the artiStackPS^TM die bonder for advanced stacked die applications.iStack offers best-in-class throughput and accuracy, and we may enter into foreign exchange forward contracts or other hedging instruments.

We bring the same technology focus to our expendable tools business driving tool design and manufacturing technology to optimize the performance and process capability of the equipment in which our tools are used. For all our equipment products, expendable tools are an integral part of their process capability. We believe our unique ability to simultaneously develop both equipment and tools is one of the reasons for our technology leadership position.

Products and Services

We offersupply a range of bonding equipment and packaging materials.expendable tools. The following table reflects the percentage of our net revenue by business segment for fiscal 2006, 2007, 2008 and 2008:2009:

		Fiscal																		Fiscal
		2006						2007						2008						2007								2008								2009
(dollar amounts in thousands)		Net Revenues			% of Total Net Revenues			Net Revenues			% of Total Net Revenues			Net Revenues			% of Total Net Revenues
(dollar amounts in thousands)																				Net Revenue				% of Total Revenue				Net Revenue				% of Total Revenue				Net Revenue				% of Total Revenue
Equipment		$	319,788		84.1	%		$	316,718		85.5	%		$	271,019		82.6	%		$	316,718				85.5	%		$	271,019				82.6	%		$	170,536				75.7	%
Packaging Materials			60,508		15.9	%			53,808		14.5	%			57,031		17.4	%
Expendable Tools																					53,808				14.5	%			57,031				17.4	%			54,704				24.3	%
																				$	370,526				100.0	%		$	328,050				100.0	%		$	225,240				100.0	%
		$	380,296		100.0	%		$	370,526		100.0	%		$	328,050		100.0	%

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Equipment

We manufacture and marketsell a line of ball bonders, heavy wire wedge bonders and die bonders whichthat are sold to many of the same customers.semiconductor device manufacturers, their subcontract assembly suppliers, other electronics manufacturers and automotive electronics suppliers. Ball bonders are used to connect very fine wires, typically made of gold aluminum or copper, between the bond pads of the semiconductor device, or die, and the leads on its package. Wedge bonders use either aluminum wire or ribbon to perform the same function in packages that cannot use gold or copper wire because of either high electrical current requirements or other package reliability issues. Die bonders are used to attach a die to the packagesubstrate or lead frame which will house the semiconductor device. We believe our equipment offers competitive advantages by providing customers with high productivity/throughput and superior package quality/process control.

Our principal Equipment segment products include:

Business Unit		Product Name		Served Market
Ball bonders		IConn-Power Series		Advanced, copper bonding and ultra fine pitch applications
		ConnX-Power Series		Cost performance, low pin count and copper applications
		ConnX-LED Power Series		Horizontal formatted LED applications
		ConnX-VLED Power Series		Vertical LED applications
		AT Premier		Stud bumping applications
Wedge bonders		3600 Plus		Power hybrid and automotive modules
		7200 Plus		Power semiconductors
		7600 Series		Smaller power packages
Die bonders		iStack Power Series		Advanced stack die and ball grid array applications

Ball Bonders

Automatic ball bonders represent the largest portion of our semiconductor equipment business. Our main product platform for ball bonding is the Power Series — a family of assembly equipment that is setting new standards for performance, productivity, upgradeability, and ease of use. Launched in 2008, the Power Series initially consisted of the IConn^PS high-performance and ConnX^PS cost-performance ball bonders.

In particular,fiscal 2009, we launched two extensions of ourConnX_PS^TM automatic ball bonder aimed specifically at LED applications — ConnX-LED_PS^TMandConnX-VLED_PS^TM. Traditionally, we had not targeted the LED market with our product portfolio but through the technology leadership ofConnX_PS^TM and its variants, we now offer excellent cost performance bonding solutions in an area of the market where some of our competitors were once dominant.

Our Power Series products have advanced industry performance standards. Our ball bonders are capable of performing very fine pitch bonding, as well as creating the sophisticated wire loop shapes that are needed in the assembly of advanced semiconductor packages. Our principal products are:

Integrated Circuit Ball Bonders

Automatic IC ball bonders representcan also be converted for use to copper applications through kits we sell separately, a significant portioncapability that is increasingly important as bonding with copper continues to grow as an alternative to gold.

Heavy Wire Wedge Bonders

Through the acquisition of ourOrthodyne, we are now the leaders in the design and manufacture of heavy wire wedge bonders for the power semiconductor equipment business. As partand automotive power module markets. Wedge bonders use either aluminum wire or aluminum ribbon to connect semiconductor chips in power packages, power hybrids and automotive modules for products such as motor control modules or inverters for hybrid cars. Wedge bonders also attach large-diameter wire or ribbon to semiconductors when high electrical current requirements or reliability constraints do not allow the use of our competitive strategy, we seek to continually improve our models and periodically introduce new or improved models of our IC ball bonders. Each new or improved model is designed to increase both productivity and process capability compared to the predecessor model.bonds.

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IC Die Bonders

We utilize the same competitive strategy for our IC die bonders as we use for our ball bonder business, including developing new models which both improve the productivity of the die bonders and increase the size of the market for our products.

Wedge Bonders

Beginning in fiscal 2009, we offer through the Orthodyne acquisition, a broadOur portfolio of wedge bonding products.

products includes:

We have also developed an advanced process for bonding power packages that utilizes ribbon rather than a round wire. Sold under the trade name PowerRibbon®, the process offers performance advantages over traditional round wire and is gaining acceptance in the market for power packages and automotive high current applications. This process is available on new wedge bonders or as a retrofit kit for some existing wedge bonders. We expect that our ribbon bonding capability will open new packaging opportunities for our customers.

Die Bonders

We entered the die bonder market through the fiscal 2007 acquisition of Alphasem. Our die bonder strategy included continuing to sell the existing Alphasem products while developing a family of next-generation die bonders. The first of those new machines, thePackaging MaterialsiStack, was launched in March of 2009. We are currently puttingiStack qualification machines in customers’ factories, and expect first purchase orders in the March 2010 fiscal quarter.

OuriStack is targeted at stacked die and high end BGA applications. In these applications, we expect up to 30% to 50% productivity increases compared to current generation machines. In addition,iStack has demonstrated superior accuracy and process control. We believeiStack represents a significant opportunity for us to expand our die bonder business.

During fiscal 2009 we announced the end of life of our older Alphasem die bonder products.

Other Equipment Products and Services

We also sell other equipment products including manual wire bonders and stud bump bonders.

We also offer spare parts, equipment repair, training services, and upgrades for our equipment through our Support Services business unit.

Expendable Tools Segment

We manufacture and sell a variety of expendable tools include a wide variety of capillaries, wedges tools, clamp tooling, cutter blades, wire guides, and wafer saw blades. These tools are developed for a broad range of semiconductor packaging applications such as:

applications. Our principal Expendable Tools segment products include:

In addition to the expandable tools discussed above, beginning in fiscal 2009 through the acquisition of Orthodyne, we will offer expendable wedge tools, clamp tooling, cutter bladesdie and wire guides used for wedge and ribbon bonders. The wedge tools are used to attach the wire to the die or lead frame, while a precision wire guide is used to guide the wire during the loop formation. For wedge bonding with large-diameter of wire, a cutter blade is used to cut the wire after the bonding process is complete and allow the process to be repeated. Clamp tooling products are used to securely hold the lead framesemiconductor devices that have been molded in place during the bonding process, and are typically custom-designed to meeta matrix configuration into individual customer needs. Orthodyne’s expendable products business is well positioned to benefit from future synergies with our existing Packaging Materials business.

units.

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estimates, including but not limited to, those related to accounts receivable, reserves for excess and obsolete inventory, carrying value and lives of fixed assets, goodwill and intangible assets, valuation allowances for deferred tax assets and deferred tax liabilities, repatriation of unremitted foreign subsidiary earnings, pension benefit liabilities, equity-based compensation expense, resizing, warranties, and litigation.warranties. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. As a result, we make judgments regarding the carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

In June 2009, the Financial Accounting Standards Board (“FASB”) issued revised accounting guidance which establishes the FASB Accounting Standards Codification (“ASC”) as the authoritative source for accounting principles of non-governmental entities to conform to United States Generally Accepted Accounting Principles (“GAAP”) used in the preparation of financial statements. The ASC is not intended to change existing guidance for public companies. The new guidance is effective for interim and annual reporting periods ending after September 15, 2009.

We believe the following critical accounting policies, which have been reviewed with the Audit Committee, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

In accordance with ASC No. 605,Revenue Recognition

We recognize revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 104,Revenue Recognition(“SAB 104”). We, we recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, the collectibility is reasonably assured, and we have satisfiedcompleted the equipment installation obligations and received

customer acceptance, when applicable, or areis otherwise released from ourits installation or customer acceptance obligations. In the event terms of the sale provide for a lapsing customer acceptance period, we recognize revenue basedis recognized upon the expiration of the lapsing acceptance period or customer acceptance, whichever occurs first. Our standard shipping terms are Ex Works (Kulicke & Soffa(our factory), with title transferring to our customer at our loading dock or upon embarkation. We have a small percentage of sales with other terms, and revenue is recognized in accordance with the terms of the related customer purchase order. Revenue related to services is recognized upon performance of the services requested by a customer.customer order. Revenue for extended maintenance service contracts with a term more than one month is recognized on a prorated straight-line basis over the term of the contract. We do not provide price protection to our customers.

Our business is subject to contingencies related to customer orders as follows:

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Shipping and handling costs billed to customers are recognized in net revenue. Shipping and handling costs are included in cost of sales.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from our customers’ failure to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. We are also subject to concentrations of customers and sales to a few geographic locations, which could also impact the collectbility of certain receivables. If global economic conditions continue to deteriorate or political conditions were to change in some of the countries where we do business, it could have a significant impact on the results of our operations, and our ability to realize the full value of our accounts receivable.

Inventories

Inventories are stated at the lower of standard cost (which approximates actual cost on(on a first-in first-out basis) or market value. We generally provide reserves for obsolete inventory and for inventory considered to be in excess of demand. In addition, we generally record as accrued expense inventory purchase commitments in excess of demand. Demand is generally defined as eighteen months forecasted future consumption for non-Wedge bonder equipment, twenty-four months consumption for Wedge bonder equipment and all spare parts, and twelve months historical consumption for packaging materials and twenty-four months historical consumption for spare parts.expendable tools. The forecasted demand is based upon internal projections, historical sales volumes, customer order activity and a review of consumable inventory levels at customers’ facilities. We communicate forecasts of our future demand to our suppliers and adjust commitments to those suppliers accordingly. If required, we reserve for the difference between the carrying value of our inventory and the lower of cost or market value, based upon assumptions about future demand, market conditions and the next cyclical market upturn. If actual market conditions are less favorable than our projections, additional inventory reserves may be required.

Valuation of Long-livedLong-Lived Assets

Our long-lived assets are primarily property, plant and equipment, intangible assets and goodwill. In accordance with the provisions of Statements of Financial Accounting Standards (“SFAS”)ASC No. 142,350,Intangibles, Goodwill and Other Intangible Assets(“SFAS 142” (“ASC 350”), our goodwill is not amortized. SFAS 142ASC 350 also requires that, at least annually, we perform an impairment test be performed to support the carrying value of goodwill. In addition, whenever events occur that may impactwould more likely than not reduce the carryingfair value of reporting unit below its carrying amount, a goodwill an impairment test will be performed. The fair value of our goodwill is based upon our estimates of future cash flows and other factors. We manage and value our intangible technology assets in the aggregate, as one asset group, not by individual technology.

In accordance with SFASASC No. 144,360,Accounting for Impairment or Disposal of Long-Lived AssetsProperty, Plant & Equipment(“SFAS 144” (“ASC 360”), our property, plant and equipment is tested for impairment based on undiscounted cash flows when triggering events occur, and if impaired, written-down to fair value based on either discounted cash flows or appraised values. SFAS 144ASC 360 also provides a single accounting model for long-lived assets to be disposed of by sale and establishes additional criteria that would have to be met to classify an asset as held for sale. The carrying amount of an asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. Estimates of future cash flows used to test the recoverability of a long-lived asset or asset group must incorporate the entity’s own assumptions about its use of the asset or asset group and must factor in all available evidence. SFAS 144

ASC 360 requires that long-lived assets be tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Such events include significant under-performance relative to the expected historical or projected future operating results; significant changes in the manner of use of the assets; significant negative industry or economic trends and significant changes in market capitalization.

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Income Taxes

Deferred income taxes are determined using the liability method in accordance with ASC No. 740,Income TaxesTaxes.