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    June 3, 2005

    Hsinya Shen

    (650) 614-7340

    hshen@orrick.com

Securities and Exchange Commission

Division of Corporate Finance

Room 6111

100 F Street, N.E.

Washington, D.C. 20549

Attention: Ms. Angela Crane

    Re:
    Response to Staff’s Letter dated May 3, 2005 regarding

ESS Technology, Inc.’s Form 10-K for the

fiscal year ended December 31, 2004

File No. 0-26660

Ladies and Gentlemen:

This letter responds to Ms. Crane’s letter dated May 3, 2005, setting forth the Staff’s comments
regarding the Form 10-K for the fiscal year ended December 31, 2004 of ESS Technology, Inc. (“ESS”
or the “Company”) filed on March 15, 2005. For your convenience, we have restated in bold the
comments contained in Ms. Crane’s letter. Set forth below each comment is the Company’s
corresponding response to such comment.

Comment No. 1

Note 8. Inventory Provision – Page 63

Please supplementally tell us more about the events and circumstances that resulted in the
inventory impairment charges in 2004. Describe the nature of the inventory written-down or
off. How did you determine the amounts and timing of these write-downs? Are all items
completely written-off? If so, when were they discarded or when and how will they be
disposed of? For any items retained, what consideration have you given to the fact that
subsequent sales of these items could materially impact future gross profit margins? Please
advise supplementally.

Response to Comment No. 1

In response to the Staff’s comment, the Company supplementally advises the Staff that as
disclosed in the section entitled “Factors that May Affect Future Results” of the Form 10-K
MD&A, the Company operates in highly competitive markets subject to rapid

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June 3, 2005

Page 2

technological change, significant price reductions and short product life cycles. One of the
specific risks noted in that section is that the Company places non-cancelable orders to
purchase products from independent foundries and other vendors on an approximately
three-month rolling basis, while customers generally place purchase orders (frequently with
short lead times) that may be canceled without significant penalty. Consequently, if the
Company’s sales forecasts on which purchases are based do not materialize, then the Company
is subject to significant inventory losses.

Sales forecast for purchasing products

Each quarter, the Company prepares a sales forecast by product line reflecting the expected
unit volume of sales and the expected average selling price. The Company purchases products
based on the forecasts. If the Company underestimates the demand, then the Company will not
have sufficient products on hand to meet the customers’ purchase orders and the customers
are likely to move their orders to the Company’s competitors. If the Company proves to be an
unreliable source of supply, then the long-term relationship with the customer would be
damaged. In the event the Company overestimates demand, then inventory levels will increase
and the quantity of products on hand will exceed the quantity that the Company expects to
sell.

Sales forecast for setting inventory reserves

In addition to using the sales forecast as the basis for purchasing products from the
independent foundries and other vendors, the Company uses the sales forecast for setting
inventory reserves. The Company provides for two types of lower of cost or market reserves.
The first type of lower of cost or market reserve is for products that the Company expects
to sell, but at a loss. This reserve is calculated using the average selling price by
product based on the sales forecast and the per unit carrying value in inventory, in
accordance with ARB 43. The second type of lower of cost or market reserve is for excess
products that the Company does not expect to sell at any price. For this reserve, the
quantity in the forecast is compared to the quantity of inventory on hand at the end of the
quarter. If the quantity on hand exceeds the quantity in the forecast, then the excess is
fully reserved. Given the rapid rate of technological change, if a product is not sold
within its life cycle (which can be less than one year due to the introduction of new
products by competitors), then it is unlikely that the product will ever sell. The scrap
value of the products is inconsequential. The Company ensures that there is no duplication
caused by the two types of reserves. Once established, reserves for inventory are only
released when the reserved products are scrapped or sold, in accordance with SAB 104.

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June 3, 2005

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Volatility of unit volumes and average selling prices

The volatility of the demand for the Company’s products is shown by the changes in sales of
the three parts with the greatest revenues in the quarter ended December 31, 2003 (parts
#3890, #6628 and #MK00-D250-082) compared with the sales of the same three parts in the
quarter ended December 31, 2004. During that quarter, the Company sold a combined total of
17.2 million units of those parts at an average selling price of $2.20 per unit for revenues
of $37.8 million. For the quarter ended December 31, 2004, combined units sales for those
three parts had decreased by 62% and the average selling price had decreased by 37%, so that
those three parts only contributed $9.0 million to revenues.

Inventory impairment charges in 2004

The inventory impairment charges in 2004 were the result of significant shortfalls in the
actual average selling prices and quantities of products sold relative to the sales
forecasts on which the purchases were based. As disclosed in the Company’s Form 10-K, net
revenues decreased from $82.9 million for the quarter ended December 31, 2003 to $43.1
million for the quarter ended December 31, 2004. Moreover, the fourth quarter of 2003 was
the quarter with the highest level of sales for that year whereas the fourth quarter of 2004
was the quarter with the lowest sales for 2004. The Company had originally expected that
sales would increase during the year, but instead, sales actually decreased. The charges
were determined using the methodology described above, which was applied consistently.

Recovery on discarded inventories

During the quarter ended December 31, 2004, the Company scrapped inventory with an original
cost of $4.6 million that had previously been fully reserved. An independent company crushed
the semiconductors and salvaged the precious metals. The Company received $215,000
(representing less than 0.5% of the original cost). In most cases, the Company continues to
hold inventories that have been fully reserved because the costs of storing semiconductors
are minimal, and there is a possibility, albeit small, that the inventories could be sold
for some amount at some point. The Company believes that it is required under GAAP to
provide reserves on inventories when it is unlikely that any value will be realized, even if
there is a small possibility that the inventories will be sold.

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June 3, 2005

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Impact on margins of sales of previously reserved products

The Company determines whether any inventories previously reserved have been sold at a price
in excess of the revised basis (after deducting the inventory reserves). For the year ended
December 31, 2004, the benefit to the gross margin of sales of inventories previously
reserved was only 0.4 %, which was not material. The Company will disclose the effect on the
gross margins of such sales if material.

Comment No. 2.

Note 9. Non-Operating Income, net – Page 64

Supplementally advise us why the classification of the $45 million related to the MediaTek
settlement outside of operations is appropriate. Generally, the costs incurred in defending
the rights and privileges of one’s intellectual properties, patents, etc. is an ordinary
expense of doing business and is presented in operations. Consistent with the expense
classification, this type of recovery or award is also presented in operations. Please
revise or advise.

Response to Comment No. 2

In response to the Staff’s comment, the Company supplementally advises the Staff that the
Company decided to present the settlement as non-operating income so that it would have more
prominent disclosure on the face of the income statement for the following reasons:

    •
    The settlement was larger than cost of revenues, research and development and
selling, general and administrative expenses for the quarter combined. The Company
believed that including the amount in operating income was a fundamental
misrepresentation of what was actually happening in the Company’s business at that
time. It would have changed an operating loss to operating income during a period when
the Company’s revenues and operating income, excluding the settlement, had declined 64%
and 131%, respectively, for the quarter compared to the prior year quarter. Changing
an operating loss to a strong operating income which the Company knew was not
indicative of its current operating results did not meet the Company’s objectives of
fair and transparent financial reporting. While the matter is fully disclosed in the
footnotes and MD&A, the Company believed that such disclosures alone would not be as
effective in communicating the impact of this unusual and (likely) nonrecurring item on
the Company’s operating results. In fact, the disclosures would have focused on why
such an item should be excluded from its operating results for purposes of trend
analysis, etc. because its operating results were

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June 3, 2005

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    actually an operating loss excluding the settlement and that was the most important
message it had to communicate. By presenting the settlement as other income, the
Company reported an operating loss on the face of the income statement which, the
Company continues to believe, is the clearest presentation of the matter and the best
representation of the Company’s true operating results for the quarter and the year.

    •
    With this gain, the Company reported pre-tax income for the year of $41 million.
Without the gain, the Company would have reported a pre-tax loss for the year of $4
million.

    •
    The settlement is very unusual in nature, and the Company does not expect that it
will ever have a similar gain.

    •
    The gain is recorded in the proper period, the period of settlement, but the gain
relates to events and activities of prior periods.

    •
    The settlement is fully disclosed in the Form 10-K, both in the MD&A section and in
the notes to the financial statements. The more sophisticated readers of the Company’s
financial statements will have sufficient information to make their own assessments of
the settlement and the impact on current and future earnings. By presenting the
settlement gain as non-operating income, the Company believes that there is a lower
possibility that other readers would misunderstand the nature of the results of its
operations.

Comment No. 3

Note 15. Commitments and Contingencies – Page 74

We note the disclosure that you are currently engaged in certain shareholder class action
and derivative lawsuits, which could have a “material adverse effect on your financial
position.” Please note that under SFAS 5 you should disclose the nature of any significant
accrual, and in some circumstances disclose the amount accrued. Even if there is no accrual
for a loss contingency because one or both of the conditions in paragraph 8 of SFAS 5 are
not met, or if an exposure to loss exists in excess of the amount accrued pursuant to the
provisions of paragraph 8, you should disclose the contingency when there is at least a
reasonable possibility that a loss or an additional loss may have been incurred. You should
disclose the nature of the

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June 3, 2005

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contingency and give an estimate of the possible loss or range of loss or state that such an
estimate cannot be made. Also see SAB Topic 5:Y. Please revise or advise.

Response to Comment No. 3

In response to the Staff’s comment, based on current facts and circumstances, in the
“Commitments and Contingencies” footnote of the Company’s future Forms 10-K and 10-Q, the
Company will repeat the disclosures regarding any material legal proceedings included in
Part I, Item 3 of the Form 10-K or Part II, Item 1 of the Form 10-Q, as applicable. In
addition, in future filings on the Forms 10-K and

10-Q, the Company will include in the
“Commitments and Contingencies” footnote the following disclosure, if applicable:

“From time to time, we are subject to various claims and legal proceedings. If
management believes that a loss arising from these matters is probable and can reasonably be
estimated, we record the amount of the loss, or the minimum estimated liability when the
loss is estimated using a range, and no point within the range is more probable than
another. As additional information becomes available, any potential liability related to
these matters is assessed and the estimates are revised, if necessary. Based upon
consultation with the outside counsel handling our defense in these matters and an analysis
of potential results, we have not accrued any amounts for potential losses related to these
proceedings. Based on currently available information, management believes that the ultimate
outcome of these matters, individually and in the aggregate, will not have a material
adverse effect on the Company’s financial position, cash flows or overall trends in results
of operations. However, litigation is subject to inherent uncertainties, and unfavorable
rulings could occur. An unfavorable ruling could include monetary damages or an injunction
prohibiting us from selling one or more products. If an unfavorable ruling were to occur,
there exists the possibility of a material adverse impact on the results of operations of
the period in which the ruling occurs, or future periods.”

Comment No. 4.

Form 8-K filed April 27, 2005

We note that you present your non-GAAP measures in the form of a non-GAAP statement of
operations. That format may be confusing to investors as it also reflects several non-GAAP
measures, including non-GAAP gross profit, non-GAAP SG&A and R&D expenses, non-GAAP net
income (loss), non-GAAP income (loss)

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June 3, 2005

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before provisions for income taxes and non-GAAP net income (loss) per share, which have not
been described to investors. In fact, it appears that management does not use these
non-GAAP measures but they are shown here as a result of the presentation format. Please
note that Instruction 2 to Item 2.02 of Form 8-K requires that when furnishing information
under this item you must provide all the disclosures required by paragraph (e)(1)(i) of Item
10 of Regulation S-K, including a reconciliation to the directly comparable GAAP measure of
each non-GAAP measure presented and explain why you believe the measures provide
useful information to investors.

    •
    In future filings, to eliminate investor confusion please remove the non-GAAP
Statements of Operations and disclose only those non-GAAP measures used by management
with the appropriate reconciliations.

    •
    Otherwise, confirm that you will revise your Forms 8-K in future periods to provide
all the disclosures required by Item 10(e)(1)(i) of Regulation S-K for each
non-GAAP measure presented in the statement, and provide us with a sample of your
proposed disclosure. We may have further comment.

Response to Comment No. 4

In response to the Staff’s comment, based on current facts and circumstances, the Company
expects to revise its Forms 8-K in future periods to remove the non-GAAP Statements of
Operations to disclose only those non-GAAP measures used by management and to provide all
the