This report and certain information incorporated herein by reference contain forward-looking statements, which are provided under the "safe harbor" protection of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this report, other than statements that are purely historical in nature, are forward-looking statements. Forward-looking statements are generally written in the future tense and/or are preceded by words such as "will," "may," "should," "could," "expect," "suggest," "believe," "anticipate," "intend," "plan," or other similar words. Forward-looking statements include statements regarding:

• Our belief that sales of our DECT and 2.4GHz products will continue to represent a substantial percentage of our revenues for the rest of 2012;

• Our belief that the rapid deployment of new communication access methods, as well as the decline in fixed-line telephony, will reduce our total revenues derived from, and unit sales of, cordless telephony products, including our DECT and 2.4GHz products, for the long term;

• Our belief that the market will remain price sensitive for the rest of 2012 and that price erosion and the decrease in our average selling prices of our products will continue;

• Our belief that annualized revenues generated from our next generation products to increase significantly in 2012 as compared to 2011;

• Our belief that the shift in focus to help our customers in bringing into production end-products based on our XpandR platform will enable us to meet customers' expectations and help us realize revenues faster from projects which are in advanced stages of development and target launch dates for end-products based on our XpandR platform in the second and third quarters of 2012;

• Our belief that the shift in focus relating to the XpandR platform will result in a $4 million decrease in our operating expenses for 2012;

• Our belief that revenues from the second half of 2012 will be higher than the first half of 2012;

• Our focus on generating positive operating cash flows in 2012 and implementing additional cost cutting measures whenever necessary to ensure we achieve this objective;

• Our belief that international sales will continue to account for a significant portion of our net product sales for the foreseeable future; and

• Our belief that our available cash and cash equivalents at March 31, 2012 should be sufficient to finance our operations for both the short and long term.

All forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement. Many factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements contained in this report. These factors include, but are not limited to, our dependence on one primary distributor, our OEM relationships and competition, as well as those risks described in Part II - Item 1A - "Risk Factors" of this Form 10-Q.

Overview

The following discussion and analysis is intended to provide investors with a narrative of our financial results and an evaluation of our financial condition and results of operations. The discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto.

Business Overview

DSP Group is a leading global provider of wireless chipset solutions for converged communications at home, delivering system solutions that combine semiconductors and software with reference designs. We provide a broad portfolio of wireless chipsets integrating DECT, Wi-Fi, PSTN and VoIP technologies with state-of-the-art application processors. We also enable converged voice, audio, video and data connectivity across diverse consumer products - from cordless and VoIP phones to home gateways and connected multimedia screens. Our current primary focus is digital cordless telephony with sales of our in-house developed DECT, CoIP, 2.4GHz and 5.8GHz chipsets representing approximately 94% of our total revenues for the first quarter of 2012.

Our revenues were $43.5 million for the first three months of 2012, a decrease of 11% in comparison to the same period of 2011. The decrease in our revenues for the first quarter of 2012, in comparison to the same period of 2011, was mainly due to a decrease in sales of DECT products for the European market. Revenues derived from the sale of DECT products represented 81% of our total revenues for the first three months of 2012, as compared to 82% of our total revenues for the first three months of 2011. Our gross margin increased to 36.7% of our total revenues for the three months of 2012 from 35.3% for the first three months of 2011, primarily due to (i) a decrease in the provision for slow or obsolete inventories, (ii) an improvement in the production yield of certain of our products and (iii) a decrease in certain production costs such as gold due to the replacement of gold with copper in certain of our products. Our operating loss decreased to $3.7 million for the first quarter of 2012, as compared to $5.7 million for the first quarter of 2011, mainly as a result of a decrease in research and development expenses and a decrease in amortization of intangible assets expenses, offset to some extent by a decrease in our revenues for the first quarter of 2012 as compared to 2011.

Nonetheless, our business operates in a highly competitive environment. Competition has historically increased pricing pressures for our products and decreased our average selling prices, and we believe this trend will continue. As a result, we expect the market to remain price sensitive and expect price erosion to continue. Various other factors, including increases in the cost of raw materials and commodities and our suppliers passing such increases onto us, increases in silicon wafer costs and increases in production, assembly and testing costs, and shortage of capacity to fulfill

our fabrication, assembly and testing needs, all may decrease our gross profit and could harm our ability to grow our revenues in future periods. Moreover, the continued uncertainty about the sustainability of the global economic recovery and outlook has resulted in accelerated erosion of prices, longer product cycles and decision-making processes at our customers' organizations, and general adverse business conditions.

In addition to general market competitiveness and weakness in consumer demands, the cordless telephony market, from which we derive most of our revenues, is undergoing a challenging period of transition. With the rapid deployment of new communication access methods, including mobile, wireless broadband, cable and other connectivity, the traditional cordless telephony market using fixed-line telephony is declining, which may reduce our revenues derived from, and unit sales of, cordless telephony products. Furthermore, our business also may be significantly affected by the outcome of the competition between cellular phone operators and fixed-line operators for the provision of residential communication. A significant majority of our revenues are currently generated from sales of chipsets used in cordless phones that are based on fixed-line telephony. If we are unable to develop new technologies to address alternative connectivity methods, our business could be materially adversely affected.

In response to market trends, we have concentrated our development efforts on new products, also referred to as next generation products, and opportunities to leverage our strong technology base and customer relationships to address evolving market opportunities and take advantage of the current market trends in our domain. Our next generation products include three main groups of products:
(i) DECT/CAT-iq ICs targeted for residential gateway devices supplied by telecommunication service providers and which integrate the DECT/CAT-iq functionality and address the newly evolving market of smart home phones and home automation applications; (ii) VoIP products for enterprise, home and SoHo; and (iii) products for the mobile market in the form of fixed-mobile convergence solutions and products targeted for mobile headsets.

We are seeing strong evidence that our past research and development investments in new technologies are beginning to materialize. We have achieved a number of design wins for these new products, including multimedia products based on our XpandR-III platform, and commercial shipments for some products have begun with more shipments to occur during the rest of 2012. Based on a strong pipeline of design wins, our current mix of next generation products and anticipated commercialization schedules of customers incorporating our next generation products, we anticipate annualized revenues generated from our next generation products to increase significantly in 2012 as compared to 2011. In order to better support our leading customers and effectively leverage our investment in the XpandR platform, we have recently shifted our focus from the development of future generations of products based on XpandR and will now focus our efforts on supporting our customers in bringing into production end-products based on our XpandR platform. We believe this transition will enable us to meet customers' expectations and help us realize revenues faster from projects which are in advanced stages of development and target launch dates for end-products based on our XpandR platform in the second and third quarters of this year. This shift in focus is expected to significantly reduce our expenses and as such we expect a $4 million decrease in our operating expenses for 2012.

However, we can provide no assurances about our success in introducing new products and penetrating new markets, as well as predictions about market trends. Although next-generation products targeted at the convergence of voice, audio, video and data connectivity and at enterprise VoIP solutions are gradually being introduced into the market, market adoption of such products is at early stages. Although we have achieved a number of design wins with top-tier OEMs for next-generation products, revenue generated from the commercialization of new products is a measured process as there is generally a long lead time from a design win to commercialization. From initial product design win to volume production, many factors could impact the timing and/or amount of sales actually realized from the design win. The introduction of next-generation productions also may lead to price erosion of older products. As a result, we expect the market to remain price sensitive for the rest of 2012 for our traditional cordless telephony products and expect that price erosion and the decrease in the average selling prices of such products to continue, both of which would negatively affect our revenues and gross margins for 2012.

Furthermore, in the short term, mainly the second quarter of 2012, we are observing a slower than anticipated recovery in two main end markets, Europe and Korea. In Europe, the economic recovery is lagging and the consumer electronics market continues to face difficulties amid ongoing macroeconomic concerns, exacerbated by the ongoing debt crisis. This has resulted in softer demand from our original design manufacturer (ODM) and original equipment manufacturer customers for products targeting the European markets. This includes lower demand for European models of cordless telephony products from most of our customers and a reduction in demand for home gateways/fixed-mobile convergence (FMC) products for Europe by one Chinese ODM customer. In Korea, which for us is mainly a service provider driven market rather than a retail driven market, we are seeing a reduction in incentives, in the form of promotions or subsidies for customer premises equipments (CPEs) and terminals offered by service providers to consumers. This has resulted in a lower demand for cordless phones, Wi-Fi phones and home gateways. We anticipate that the challenges associated with the European and Korea markets would negatively impact our revenues for the first half of 2012 and result in greater operating losses for the first half of 2012. We also are observing our customers being reluctant in placing orders with normal lead times, with a shift to shorter lead-times and rush orders. This trend makes it very difficult to us to forecast our annual 2012 financial results. Bearing in mind the above trend and the usual seasonality in the cordless business but taking into account sequential revenue growth from new market verticals, we nonetheless believe revenues from the second half of 2012 will be higher than the first half of 2012. Finally, we remain focused on meeting our objective to generate positive operating cash flows in 2012, and will continue to closely monitor market trends and implement additional cost cutting measures whenever necessary to ensure we achieve this objective.

As of March 31, 2012, our principal source of liquidity consisted of cash and cash equivalents of $18.7 million and marketable securities and short term deposits of $95.2 million, totaling $113.8 million.

RESULTS OF OPERATIONS

Total Revenues. Our total revenues were $43.5 million for the first quarter of 2012, as compared to $48.8 million for the same period in 2011. This decrease was primarily as a result of decreased sales of our 2.4GHz and DECT products. Sales of 2.4GHz products were $3.5 million and $5.1 million for the first quarter of 2012 and 2011, respectively, representing 8% and 10% of our total revenues for the first quarter of 2012 and 2011, respectively, representing a decrease of 30% in absolute dollars for the comparable periods. Sales of DECT products were $35.3 million and $40.1 million for the first quarter of 2012 and 2011, respectively, representing approximately 81% and 82% of our total revenues for the first quarter of 2012 and 2011, respectively, a decrease of 12% in absolute dollars for the comparable periods.

The following table shows the breakdown of revenues for all product lines for the periods indicated by geographic location based on the geographic location of our customers (in thousands):

                                        Period ended March 31,
                                          2012             2011
                     United States    $        275       $    484
                     Japan            $     15,624       $ 14,562
                     Europe           $      2,336       $  2,302
                     Hong Kong        $     21,192       $ 25,152
                     Korea            $        768       $  1,829
                     China            $      1,685       $  2,248
                     Taiwan           $      1,180       $  1,529
                     Other            $        444       $    670

                     Total revenues   $     43,504       $ 48,776

Sales to our customers in Hong Kong decreased for the first quarter of 2012, as compared to the same period of 2011, representing a 16% decrease in absolute dollars. The decrease in our sales to Hong Kong for the comparable periods resulted from a decrease in sales to VTech Holdings Ltd. ("VTech"), representing a 6% decrease in absolute

dollars and a decrease in sales to CCT Telecom Holdings Ltd. ("CCT Telecom"), representing a 55% decrease in absolute dollars. The increase in our sales to Japan for the comparable periods resulted from an increase in sales to Uniden America Corporation ("Uniden"), representing a 20% increase in absolute dollars.

As our products are generally incorporated into consumer products sold by our OEM customers, our revenues are affected by seasonal buying patterns of consumer products sold by our OEM customers that incorporate our products. The fourth quarter in any given year is usually the strongest quarter of sales for our OEM customers and, as a result, the third quarter in any given year is usually the strongest quarter for our revenues as our OEM customers request increased shipments of our products in anticipation of the fourth quarter holiday season. By contrast, the first quarter in any given year is usually the weakest quarter for us. This trend can be generally observed from reviewing our quarterly information and results of operations. However, the magnitude of this trend varies annually and is affected by macro-economic trends. For example, we anticipate that the challenges associated with the European and Korea markets, discussed earlier, would negatively impact our revenues for the first half of 2012 and result in greater operating losses for the first half of 2012.

Significant Customers. VTech is a significant OEM customer based in Hong Kong. Sales to VTech represented 34% and 32% of our total revenues for the three months ended March 31, 2012 and 2011, respectively. Sales to CCT Telecom, another Hong Kong based customer, represented 6% and 12% of our total revenues for the first three months of 2012 and 2011, respectively. Sales to Uniden, a Japanese based customer, represented 16% and 12% of our total revenues for the first three months of 2012 and 2011, respectively.

The Japanese market and the OEMs that operate in that market are among the largest suppliers of residential wireless products with significant market share in the U.S. market. Revenues derived from sales through our largest distributor, Tomen Electronics Corporation ("Tomen Electronics"), accounted for 20% of our total revenues for the first three months of 2012, as compared to 18% for the comparable period of 2011.

Tomen Electronics sells our products to a limited number of customers. One customer, Panasonic Communications Co., Ltd ("Panasonic"), has continually accounted for a majority of sales through Tomen Electronics. Sales to Panasonic through Tomen Electronics generated approximately 14% and 12% of our total revenues for the first three months of 2012 and 2011, respectively. The loss of Tomen Electronics as a distributor and our inability to obtain a satisfactory replacement in a timely manner would harm our sales and results of operations. Additionally, the loss of Panasonic and Tomen Electronics' inability to thereafter effectively market our products would also harm our sales and results of operations.

In addition to Tomen Electronics and Panasonic, the loss of any of our other significant customers or distributors, including VTech, or reduced demand for products from, or the reduction in purchasing capability of, one of our other significant customers, could have a material adverse effect on our business, financial condition and results of operations.

Significant Products. Revenues from our DECT products represented 81% of our total revenues for the first quarter of 2012. Revenues from our 2.4GHz products represented 8% of our total revenues for the first quarter of 2012. We believe that sales of DECT and 2.4GHz products will continue to represent a substantial percentage of our revenues for 2012. We believe that the rapid deployment of new communication access methods, as well as the lack of growth in fixed-line telephony, will reduce our total revenues derived from, and unit sales of, cordless telephony products, including our DECT and 2.4GHz products, for the long term.

Gross Profit. Gross profit as a percentage of revenues was 36.7% for the first quarter of 2012 and 35.3% for the first quarter of 2011. The increase in our gross profit was primarily due to (i) a decrease in the provision for slow or obsolete inventories, (ii) an improvement in the production yield of certain of our products, and (iii) a decrease in certain production costs such as gold due to the replacement of gold with copper in certain of our products.

As gross profit reflects the sale of chips and chipsets that have different margins, changes in the mix of products sold have impacted and will continue to impact our gross profit in future periods. Our gross profit may decrease in the future due to a variety of factors, including the continued decline in the average selling prices of our products, changes in the mix of products sold, our failure to achieve cost reductions, roll-out of new products in any given period, our success

in introducing new engineering processes to reduce manufacturing costs, increases in the cost of raw materials such as gold, copper, oil and silicon wafers, and increases in production, assembly and testing costs. Moreover, our suppliers may pass the increase in the cost of raw materials and commodities onto us which would further reduce the gross margins of our products. We cannot guarantee that our ongoing efforts in cost reduction and yield improvements will be successful or that they will keep pace with the anticipated continuing decline in average selling prices of our products. Steps we are taking include the implementation of cost improvement plans to reduce testing costs and offering our customers more cost effective products by, for example, replacing gold wiring with copper wiring. However, we can provide no assurance that any alternative solutions we provide to our customers will be acceptable to them or that these steps will help us offset the continued decrease in gross margins of our products.

Cost of goods sold consists primarily of costs of wafer manufacturing and fabrication, assembly and testing of integrated circuit devices and related overhead costs, and compensation and associated expenses related to manufacturing and testing support and logistics personnel.

Research and Development Expenses. Our research and development expenses decreased to $12.0 million for the first quarter of 2012 from $14.2 million for the first quarter of 2011. The decrease for the first quarter of 2012 in research and development expenses, as compared to 2011, was mainly due to
(i) the restructuring of our U.S. operations, which was implemented during the third quarter of 2011 and reduced our research and development expenses for the first quarter of 2012, (ii) a decrease in subcontractor and materials expenses, and (iii) a decrease in labor and employees related expenses.

Our research and development expenses as a percentage of our total revenues were 28% for the three months ended March 31, 2012 and 29% for the three months ended March 31, 2011. This decrease in research and development expenses as a percentage of our total revenues was due to a decrease in absolute dollars of research and development expenses for the first quarter of 2012 as compared to 2011, offset to some extent by the decrease in total revenues for the first quarter of 2012, as compared to 2011.

Research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, expenses related to tapeout and mask work, subcontracting, labor contractors and engineering expenses, depreciation and maintenance fees related to equipment and software tools used in research and development, and facilities expenses associated with and allocated to research and development activities.

Sales and Marketing Expenses. Our sales and marketing expenses were $4.0 million for both the first quarter of 2012 and 2011.

Our sales and marketing expenses as a percentage of total revenues were 9% for the three months ended March 31, 2012 and 8% for the three months ended March 31, 2011. This increase in sales and marketing expenses as a percentage of our total revenues was due to a decrease in absolute dollars of our total revenues for the first quarter of 2012 as compared to 2011.

Sales and marketing expenses consist mainly of sales commissions, payroll expenses to direct sales and marketing employees, travel, trade show expenses, and facilities expenses associated with and allocated to sales and marketing activities.

General and Administrative Expenses. Our general and administrative expenses decreased to $3.0 million for the first quarter of 2012 as compared to $3.1 million for the first quarter of 2011. The decrease for the first quarter of 2012 in general and administrative expenses, as compared to the comparable period for 2011, was mainly due to a decrease in equity-based compensation expenses in the amount of $0.2 million, which were offset to some extent by an increase in other general and administrative expenses, such as accounting and stockholders and investors relations expenses.

General and administrative expenses as a percentage of our total revenues were 7% and 6% for the first quarters of 2012 and 2011, respectively. This increase in general and administrative expenses as a percentage of our total revenues was due to a decrease in absolute dollars of our total revenues for the first quarter of 2012 as compared to 2011.

Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, accounting and legal fees, expenses related to investor relations, as well as facilities expenses associated with general and administrative activities.

Amortization of Intangible Assets. During the first quarter of 2012, we recorded an expense of $0.6 million, as compared to $2.2 million for the three month ended March 31, 2011, relating to the amortization of intangible assets associated mainly with the acquisition of the CIPT business of NXP B.V. (the "Acquisition") The decrease is consistent with, and is based on, the original amortization schedule determined following the impairment of goodwill and other intangible assets that took place in 2008.

Restructuring costs and other. During the first quarter of 2011, we recorded an income of $0.6 million in connection with a restructuring plan that was initiated during the third quarter of 2010. The referenced income resulted mainly from the closure of our Swiss facilities and the termination of employment of the employees of our Swiss subsidiary, which resulted in a curtailment and settlement of the Swiss pension plan during the first quarter of 2011.

Financial and Other Income, net. Financial and other income, net, was $0.5 million for both the three months ended March 31, 2012 and 2011.

Provision for Income Taxes. During the first quarter of 2012, we recorded a tax expense of $0.1 million, as compared to income tax benefit of $0.6 million recorded for the first quarter of 2012. The income tax benefit for the first quarter of 2011 was mainly attributed to an approval that was received from the Israeli governmental authorities with respect to the recognition for tax purposes of our research and development expenses for previous years.

As of March 31, 2012 and December 31, 2011, we did not record any significant changes to the net deferred tax assets due to our current estimation of future taxable income.

DSP Group Ltd., our Israeli subsidiary, was granted "Approved Enterprise" status by the Israeli government with respect to six separate investment plans. Approved Enterprise status allows our Israeli subsidiary to enjoy a tax holiday for a period of two or four years, and a reduced corporate tax rate of 10% to 25% (based on the percentage of foreign ownership) for an additional six or . . .