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 through distributors and directly to OEMs and original design manufacturers (ODMs) that incorporate the Company’s products into consumer and enterprise products. 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, 2018,

2017

and

2016:

	Year ended December 31,
Major Customers/ Distributors	201 8		2017		2016
VTech Holdings Ltd.		24%		27%		29%
Nexty Electronics Ltd. (“Nexty Electronics”) ¹ ²		11%		12%		12%
Ascend Technology Inc. (“Ascend Technology”) ¹ ³		26%		23%		16%
Samsung Electronics Ltd.		*		*		12%

*Less than

10%.

¹ Distributor

² Nexty 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 Nexty Electronics. Sales to Panasonic through Nexty Electronics generated approximately

9%,

10%

and

10%

of the Company’s total revenues for

2018,

2017

and

2016,

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

2018,

2017

and

2016.

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.