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):

• projected growth rates in the overall semiconductor industry, the semiconductor assembly equipment market, and the market for semiconductor packaging materials; and

• projected continuing demand for wire and die bonder equipment and packaging materials.

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, 2008 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 prediction of actual results.

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.

Kulicke and Soffa Industries, Inc. ("K&S") designs, manufactures and markets capital equipment and packaging materials as well as services, maintains, repairs and upgrades equipment, all used to assemble semiconductor devices. Our customers primarily consist of Integrated Device Manufacturers ("IDM") and subcontractor assembly facilities. According to VLSI Research, Inc., we are currently the world's leading supplier of semiconductor ball bonding assembly equipment.

Our goal is to be the technology leader and the lowest cost supplier in our main business segments which are:

• equipment; and

• packaging materials.

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, 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 maintaining overall product quality.

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, on September 29, 2008, we completed the sale of our Wire business for $155.0 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 sale of the Wire business, we improved our working capital position. Our Wire business had been previously reported within our Packaging Materials segment, but is now reported as 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 recognized in the first quarter of fiscal 2009.

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 on October 3, 2008, we completed the acquisition of substantially all of the assets 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 of $46.2 million and paid $82.5 million in cash including working capital. A total of 15% of 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 the semiconductor market, and in the attractive power management and hybrid module markets. We expect wedge bonding will benefit from increased focus 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 in 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 IConnPS and ConnXPS ball bonders. The Power Series is setting new standards for performance, productivity, upgradeability, and ease of use. Sales of the IConnPS machines began during the quarter ended June 28, 2008, and sales of the ConnXPS 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 IConnPS machine 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 Discovery 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, such as inverters for hybrid cars. Wedge bonds 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 and financial performance is impacted, 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' expectation of capacity requirements for future IC demand, as well as their demand for new semiconductor manufacturing technologies. During the first quarter of fiscal 2009, our bookings slowed as customers respond to the weakening economic conditions.

Our Equipment 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 subcontractor customers in any period, since subcontractors tend purchase larger volumes in less predictable patterns. Variance in the mix of sales to IDMs and subcontractors can also affect our average selling price due to differences in volume purchases and different machine configurations required by each type of customer.

Packaging Materials sales tend to be less volatile than equipment sales as these products represent consumable purchases for our customers and volumes follow the trend of total semiconductor interconnect unit production.

Balance Sheet Strength

We continually seek ways to maintain the strength of our balance sheet. Fiscal 2008 cash and investments of $186.1 million reflect 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 stronger cash position allows us to manage volatile buying patterns of our customers, service our debt and continue to invest in research and development through downturns in the global economy and our industry.

Macroeconomic Factors: Foreign Currency

We are exposed to fluctuations in foreign currency exchange rates. Certain of our assets and liabilities are denominated in foreign currencies and are affected by changes in exchange rates for those currencies which impact our business. For fiscal year 2008, our foreign exchange transaction loss was $1.8 million compared to $0.1 million for fiscal 2007. The higher foreign exchange loss was due to the unfavorable exchange rates primarily driven by the Swiss Franc and Israeli Shekel. During fiscal 2008, we restructured our Swiss entity, which reduced our exposure to US Dollar/Swiss Franc fluctuations. To mitigate our market risk, we periodically adjust our subsidiaries' holdings of foreign currency denominated working capital, and we may enter into foreign exchange forward contracts or other hedging instruments.

Products and Services

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



                                                                           Fiscal
                                            2006                            2007                            2008
                                                  % of Total                      % of Total                      % of Total
                                                     Net                             Net                             Net
(dollar amounts in thousands)     Net Revenues     Revenues       Net Revenues     Revenues       Net Revenues     Revenues
Equipment                        $      319,788         84.1 %   $      316,718         85.5 %   $      271,019         82.6 %
Packaging Materials                      60,508         15.9 %           53,808         14.5 %           57,031         17.4 %

                                 $      380,296        100.0 %   $      370,526        100.0 %   $      328,050        100.0 %

See Note 11 to our Consolidated Financial Statements included in Item 8 of this report for financial results by business segment.

Equipment

We manufacture and market a line of ball bonders and die bonders which are sold to many of the same customers. 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. Die bonders are used to attach a die to the package which will house the device. We believe our equipment offers competitive advantages by providing customers with high productivity/throughput and superior package quality/process control. In particular, 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 represent a significant portion of our semiconductor equipment business. As part 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.

• In March 2008, we introduced the Power Series IConnPS ball bonder, which replaced our Maxum Ultra ball bonder and improves IC inter-connect performance with expanded technology that addresses advanced packaging requirements, copper wire bonding, and ultra fine pitch capability.

• In July 2008, the new ConnXPS ball bonder replaced our Maxum Elite ball bonder. The ConnXPS is engineered to provide optimal manufacturing capabilities for the lower pin count IC market and the rapidly growing LED market.

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 broad portfolio of wedge bonding products.

• The 3600plus and 7200plus wedge bonders are currently the leading choices for power interconnects in both the power hybrid and semiconductor markets. The products were launched by Orthodyne in late 2007 and early 2008, respectively, and were rapidly accepted by customers.

• The PowerRibbon® is a leading-edge interconnect for power packages, and is continuing to gain market acceptance. Further extension of our PowerRibbon® range towards both larger and smaller sizes is expected to continue throughout 2009. We believe this will help further establish PowerRibbon® as a premier interconnect technology for small power packages and high power applications, including automotive hybrid modules or other high current applications.

Packaging Materials

Our 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:

• Capillaries and wedge tools- attach the wire to the semiconductor chip, guide the wire during loop formation, attach the wire to the package substrate and cut the wire allowing the bonding process to be repeated.

• Clamp tooling - holds the lead frame securely in place during the bonding process and are typically custom-designed to meet individual customer needs.

• Cutter blades- cut a large-diameter of wire in wedge bonding applications.

• Wire guides - precisely guide the wire during the loop formation.

• Wafer saw blades - cut silicon wafers into individual semiconductor die.

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 blades 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 frame in place during the bonding process, and are typically custom-designed to meet individual customer needs. Orthodyne's expendable products business is well positioned to benefit from future synergies with our existing Packaging Materials business.

Critical Accounting Policies

The preparation of consolidated financial statements requires us to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. On an on-going basis, we evaluate 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. 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.

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

We recognize revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition ("SAB 104"). 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 satisfied equipment installation obligations and received

customer acceptance, or are otherwise released from our installation or customer acceptance obligations. In the event terms of the sale provide for a lapsing customer acceptance period, we recognize revenue based upon the expiration of the lapsing acceptance period or customer acceptance, whichever occurs first. Our standard terms are Ex Works (Kulicke & Soffa 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. 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:

• Right of Return: A large portion of our revenue comes from the sale of machines used in the semiconductor assembly process. Other product sales relate to consumable products, which are sold in high-volume quantities, and are generally maintained at low stock levels at our customer's facility. Customer returns have historically represented a very small percentage of customer sales on an annual basis. Our policy is to provide an allowance for customer returns based upon our historical experience and management assumptions.

• Warranties: Our equipment is generally shipped with a one-year warranty against manufacturer's defects. We recognize a liability for estimated warranty expense when revenue for the related product is recognized. The estimated liability for warranty expense is based upon historical experience and our estimates of future expenses.

• Conditions of Acceptance: Sales of our consumable products generally do not have customer acceptance terms. In certain cases, sales of our equipment have customer acceptance clauses which may require the equipment to perform in accordance with customer specifications or when installed at the customer's facility. In such cases, if the terms of acceptance are satisfied at our facility prior to shipment, the revenue for the equipment will be recognized upon shipment. If the terms of acceptance are satisfied at our customers' facilities, the revenue for the equipment will be not be recognized until acceptance, which typically consists of installation and testing, is received from the customer.

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 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 equipment, twelve months historical consumption for packaging materials and twenty-four months historical consumption for spare parts. 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-lived Assets

Our long-lived assets are primarily property, plant and equipment and goodwill. In accordance with the provisions of Statements of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), our goodwill is not amortized. SFAS 142 also requires that, at least annually, we perform an impairment test to support the carrying value of goodwill. In addition, whenever events occur that may impact the carrying value of 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 SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets ("SFAS 144"), 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 144 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 . . .