2004 BONUS PLAN

Exhibit 10.7

Silicon Laboratories Inc.

2004 Bonus Plan

Overview

Silicon Laboratories Inc. (“Silicon Labs”) is committed to sharing its success with the people who make it possible – the Silicon Labs employees.  The Compensation Committee of the Board of Directors approved this 2004 Bonus Plan (the “Plan”) to encourage participation by Silicon Labs employees in achieving company goals and to permit Silicon Labs employees to share in the rewards of our success.  The term of this Plan is for the 2004 fiscal year.

Eligible Employees

To be eligible to participate in the Plan, a person must be a regular full-time or part-time employee of Silicon Labs or one of its wholly-owned subsidiaries and not a participant in any other bonus plan or cash incentive plan (including any sales commission plan).

Bonus Calculation

Our business strategy has always been for Silicon Labs to be a growth company with strong profitability.  Accordingly, bonuses under the Plan will be largely dependent on Silicon Labs’ adjusted operating income as a percentage of revenue, rounded to the nearest tenth of a percent with 0.05% rounded up (the “Adjusted Operating Income %”).  Adjustments will be made from time to time at the sole discretion of the Compensation Committee to include or exclude certain items.  An example of a potential adjustment would be the exclusion of an expense item such as the amortization of deferred stock compensation.  Bonuses may also be made dependent on individual performance criteria or other company financial performance criteria as established by the Compensation Committee (or its designee).

Unless an eligible employee receives written notice from the CEO of Silicon Labs that different bonus criteria is applicable to such employee, such employee’s bonus will be determined on a quarterly basis as follows: