NOTE

GENERAL

DSP Group, Inc., a Delaware corporation, and its subsidiaries (collectively, the “Company”), are a fabless semiconductor company offering advanced chipset solutions for a variety of applications. The Company is a worldwide leader in the short-range wireless communication market, enabling home networking convergence for voice, audio, video and data.

The Company sells its products primarily through distributors and directly to OEMs and original design manufacturers (ODMs) that incorporate the Company

’s products into consumer and enterprise products. The Company’s future performance will depend, in part, on the continued success of its distributors in marketing and selling its products. The loss of the Company’s distributors and the Company’s inability to obtain satisfactory replacements in a timely manner

may

harm the Company’s sales and results of operations. In addition, the Company expects that a limited number of customers, varying in identity from period-to-period, will account for a substantial portion of its revenues in any period. The loss of, or reduced demand for products from, any of the Company’s major customers could have a material adverse effect on the Company’s business, financial condition and results of operations.

The following table represents the Company

’s sales, as a percentage of the Company’s total revenues, for the years ended

December 31, 2017,

2016

and

2015:

	Year ended December 31,
Major Customers/ Distributors	2017		2016		2015
VTech Holdings Ltd.		27%		29%		31%

Shenzhen Guo Wei Electronics Ltd.		*		*%		12%

Tomen Electronics Corporation (“Tomen Electronics”) ¹ ²		12%		12%		16%

Ascend Technology Inc. (“Ascend Technology”) ¹ ³		23%		16%		15%

Samsung Electronics Ltd.		*		12%		-

*Less than

10%.

¹ Distributor

² Tomen Electronics sells the Company

’s products to a limited number of customers. One customer, Panasonic Communications Co., Ltd. (“Panasonic”) has continually accounted for a majority of the sales of Tomen Electronics. Sales to Panasonic through Tomen Electronics generated approximately

10%,

10%

and

13%

of the Company’s total revenues for

2017,

2016

and

2015,

respectively.

³ Ascend Technology sells the Company

’s products to a limited number of customers; however

none

of those customers accounted for more than

10%

of the Company’s total revenues for

2017,

2016

and

2015.

The Japanese and Hong Kong markets and the OEMs that operate in those markets are among the largest suppliers in the world with significant market share in the U.S. market for residential wireless products.

All of the Company

’s integrated circuit products are manufactured and tested by independent foundries and test houses. While these foundries and test houses have been able to adequately meet the demands of the Company’s business, the Company is and will continue to be dependent upon these foundries and test houses to achieve acceptable manufacturing yields, quality levels and costs, and to allocate to the Company a sufficient portion of foundry and test capacity to meet the Company’s needs in a timely manner. Revenues could be materially and adversely affected should any of these foundries and test houses fail to meet the Company’s request for product manufacturing due to a shortage of production capacity, process difficulties, low yield rates or financial instability. Additionally, certain of the raw materials, components, and subassemblies included in the products manufactured by the Company’s original equipment manufacturer (OEM) customers, which incorporate the Company’s products, are obtained from a limited group of suppliers. Disruptions, shortages, or termination of certain of these sources of supply could occur and could negatively affect the Company’s financial condition and results of operations.