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corresp

July 15, 2005

BY EDGAR AND OVERNIGHT DELIVERY

Ms. Angela Crane

Mail Stop 6010

Accounting Branch Chief

Division of Corporation Finance

United States Securities and Exchange Commission

450 Fifth Street N.W.

Washington, D.C. 20549-0306

    Re:

    FSI International, Inc.

    Response letter dated June 30, 2005

    Form 10-K for fiscal year ended August 28, 2004

    Filed November 9, 2004

    File No. 000-17276

Dear Ms. Crane:

On behalf of FSI International, Inc. (“the Company”), we hereby submit our response to comments
received from the Staff of the Commission by letter dated June 30, 2005. Responses to the Staff’s
comments are set forth below and are keyed to the numbered comments in the comment letter. For
your convenience, we have included the text of the Staff’s comments.

Form 10-K for the year ended August 28, 2004

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation —
Page 16

Wind Down of Microlithography Business — Page 20

    1.

    Please refer to prior comment 1. In future filings, please disclose the amount of inventory
you scrapped in each period presented and the remaining inventory to be disposed.

In future filings, we will disclose the amount of inventory scrapped in
each period presented. We will also disclose the remaining balance to be
disposed.

    2.

    Please refer to prior comment 2. In future filings, discuss the circumstances that resulted
in the $7 million gain on sale of the Texas facility, as outlined in your response.

In future filings, we will discuss the circumstances that resulted in the
$7 million gain on the sale of the Texas facility.

July 15, 2005

Securities and Exchange Commission

Page 2

Consolidated Financial Statements

Note 1. Description of Business and Summary of Significant Accounting Policies, page 40

    3.

    We note that you offer system upgrade packages under your Equipment Upgrade Program. Please
tell us how you account for this program and demonstrate your accounting complies with GAAP.
If material, revise future filings to discuss.

We recognize revenue on upgrades under our Equipment Upgrade Program when
persuasive evidence of an arrangement exists, delivery has occurred or
services have been rendered, the purchase price is fixed or determinable
and collectibility is reasonably assured. We believe that the revenue on
upgrades has been accounted for in compliance with GAAP. We supplementally
inform the Staff that the amount of revenue on upgrades under our
Equipment Upgrade Program has not been material. In future filings, we
will include a discussion on how we recognize revenue on upgrades under
our Equipment Upgrade Program if the revenue is material.

Note 8. Property, Plant and Equipment, page 52

    4.

    Please refer to prior comment 5, which addressed your accounting for evaluation systems
included in inventory. Your policy of amortizing the carrying value of the units over
18 months if not sold within 12 months, does not appear to be consistent with Statement 6 of
ARB 43, which requires you to record inventory at the lower of cost or market and further
states that “market should not exceed the net realizable value.” Please revise your financial
statements to correctly apply that guidance.

Our policy to amortize demonstration equipment that is outstanding
longer than 12 months was intended to be our estimate of applying ARB 43
Statement 6. We believe that this policy of consistently recording
reductions in the carrying costs of the equipment would provide a
practical and consistent estimation of the decline in market value below
cost. In the future, we will no longer amortize the carrying amount over
18 months if the system is not sold within 12 months. We will review our
outstanding evaluation systems on a machine-by-machine basis for
evidence that clearly indicates a loss has been sustained before
recording any future expense in accordance with Statement 6 of ARB 43.

With respect to your request that we revise our financial statements, we
supplementally inform the Staff that the amount of amortization expense
related to evaluation systems has not been material as the majority of
these systems are sold within 12 months. The amortization expense was
less than one percent of total sales and less than one percent of cost
of sales for the first nine months of fiscal 2005 and for fiscal years
2004, 2003 and 2002. The amount of amortization expense was $147,000 for
the first nine months of fiscal 2005, $42,000 in fiscal 2004, $632,000
in fiscal 2003 and $439,000 in fiscal 2002. Therefore,

July 15, 2005

Securities and Exchange Commission

Page 3

due to immateriality of the amortization expense amounts, we propose not
to revise our financial statements.

    5.

    In addition, please tell us where you currently present your amortization costs. The
estimated reduction of the realizable value of the inventory should be classified as part of
cost of sales. Please revise your financial statements as necessary.

The amortization costs have been included in cost of sales; therefore, no
financial statement revisions are required.

Note 9. Investments in Affiliates, page 52

    6.

    Please refer to prior comment 6. Because your equity in income from continuing operations
before taxes for m ·FSI LTD was 237% of your loss from continuing operations before taxes for
2004, full financial statements under Rule 3-09 of Regulation S-X appear to be required.
Please revise to provide these financial statements.

We supplementally advise the Staff that we will be submitting a letter to
the Office of the Chief Accountant requesting a waiver of filing the
fiscal 2004 financial statements of m•FSI LTD. We will advise the Staff
of the final determination of the Office of the Chief Accountant.

In connection with this response, the Company acknowledges the following:

    •

    the Company is responsible for the adequacy and accuracy of the disclosure in the filings;

    •

    staff comments or changes to disclosure in response to Staff comments in the filings
reviewed by the staff do not foreclose the Commission from taking any action with respect to
the filing; and

    •

    the Company may not assert staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States.

Please contact us if you have further questions or comments.

Very truly yours,

/s/ Patricia M. Hollister

Patricia M. Hollister

Chief Financial Officer