SECURITIES AND EXCHANGE COMMISSION

                                Washington, D.C. 20549

                                      FORM 10-Q

(Mark One)

  (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the Quarterly Period Ended  MARCH 31, 1997

                                          or

  ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                For the transition period from ________ to ___________

                            Commission File Number 0-23006


                                   DSP GROUP, INC.
                (Exact name of registrant as specified in its charter)

              DELAWARE                                94-2683643
              --------                                ----------
    (State or other jurisdiction of    (I.R.S. employer identification number)
    incorporation or organization)

             3120 SCOTT BOULEVARD, SANTA CLARA, CALIFORNIA         95054
            ---------------------------------------------------------------
           (Address of Principal Executive Offices)              (Zip Code)

        Registrant's telephone number, including area code:     (408) 986-4300

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes X  No __

As of April 30, 1997 there were 9,562,528 shares of Common Stock ($.001 par
value per share) outstanding.




                                        INDEX

                                   DSP GROUP, INC. 

                                                                        PAGE NO.
PART I.   FINANCIAL INFORMATION
- -------------------------------

Item 1.  Financial Statements (Unaudited)

    Condensed consolidated balance sheets--March 31, 1997
         and December 31, 1996 ...........................................   3
    Condensed consolidated statements of income--Three months
         ended March 31, 1997 and 1996 ...................................   4

    Condensed consolidated statements of cash flows--Three
         months ended March 31, 1997 and 1996 ............................   5

    Notes to condensed consolidated financial statements--
         March 31, 1997...................................................   6


Item 2.  Management's Discussion and Analysis of Financial Condition 
         and Results of Operations ......................................   10


PART II.   OTHER INFORMATION
- ----------------------------

Item 1.      Legal Proceedings  .........................................   17
Item 2.      Changes in Securities ......................................   18
Item 3.      Defaults upon Senior Securities.............................   18
Item 4.      Submission of Matters to a Vote of Security Holders ........   18
Item 5.      Other Information ..........................................   18
Item 6.      Exhibits and Reports on Form 8-K ...........................   18


SIGNATURES...............................................................   19

EXHIBIT INDEX............................................................   20


                                    2



PART 1.  FINANCIAL INFORMATION
- ------------------------------
ITEM 1.  FINANCIAL STATEMENTS

                                                 DSP GROUP, INC.
                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 (In thousands)

                                            March 31,        December 31,
                                               1997               1996
                                            ---------        ------------
    ASSETS                                  (Unaudited)         (Note)
CURRENT ASSETS
    Cash and cash equivalents               $17,224             $12,172
    Marketable securities                    27,487              30,762
    Accounts receivable, net                  6,879               4,861
    Inventories                               2,634               2,957
    Deferred income taxes                       500                 500
    Prepaid expenses and other                1,628               1,357
                                           ---------           ---------
    Total current assets                     56,352              52,609

Property and equipment                        7,454               7,324
Accumulated depreciation and amortization    (4,110)             (4,033)
                                           ---------           ---------
                                              3,344               3,291

Investments in unconsolidated subsidiaries, 
    net                                       2,211               2,415
Other assets, net                               308                 388
Deferred income taxes                           504                 504

                                           ---------           ---------
    TOTAL ASSETS                            $62,719             $59,207
                                           ---------           ---------
                                           ---------           ---------

    LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
    Accounts payable                         $2,490              $1,428
    Other current liabilities                 3,642               3,330
                                           ---------           ---------
              Total current liabilities       6,132               4,758

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
    Preferred Stock                              --                  --
    Common Stock                                 10                  10
    Additional paid-in capital               66,903              66,781
    Accumulated deficit                     (10,326)            (12,342)
                                           ---------           ---------
                                             56,587              54,449
                                           ---------           ---------
    TOTAL LIABILITIES AND
         STOCKHOLDERS' EQUITY               $62,719             $59,207
                                           ---------           ---------
                                           ---------           ---------


Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.


                                    3



                                   DSP GROUP, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                       (In thousands, except per share amounts)

                                                 Three Months Ended
                                                     March 31, 
                                               ----------------------
                                                  1997       1996
                                               ---------    ---------

Revenues:
    Product sales                               $11,898     $ 7,655
    Licensing, royalties and other                2,280       3,542
                                               ---------    ---------
    Total revenues                               14,178      11,197

Cost of revenues:
    Cost of product sales                         7,530       5,200
    Cost of licensing, royalties and other          343         230
                                               ---------    ---------
    Total cost of revenues                        7,873       5,430
                                               ---------    ---------
    Gross profit                                  6,305       5,767

Operating expenses: 
    Research and development                      1,941       2,544
    Sales and marketing                           1,256       1,368
    General and administrative                    1,079       1,563
                                               ---------    ---------
    Total operating expenses                      4,276       5,475
                                               ---------    ---------
    Operating income                              2,029         292

Other income (expense):
    Interest and other income                       610         422
    Other expenses                                  (63)        (43)
    Equity in income (loss) of  
    unconsolidated subsidiaries, net               (204)        (33)
                                               ---------    ---------
    Income before income taxes                    2,372         638

Provision for income taxes                          356          64
                                               ---------    ---------
    Net income                                   $2,016       $ 574
                                               ---------    ---------
                                               ---------    ---------

Net income per share                             $ 0.21        $.06
                                               ---------    ---------
                                               ---------    ---------

Number of shares used in
      per share computation                       9,686       9,535
                                               ---------    ---------
                                               ---------    ---------

See notes to condensed consolidated financial statements.


                                    4




                                   DSP GROUP, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                    (In thousands)


                                                           Three Months Ended
                                                               March 31, 
                                                         ----------------------
                                                            1997       1996
                                                         ---------    ---------

CASH PROVIDED BY (USED IN)
    OPERATING ACTIVITIES                                  $ 2,081     $  ( 751)

INVESTING ACTIVITIES:
    Purchase of available-for-sale marketable securities  (12,766)      (3,925) 
    Sale and maturity of available-for-sale 
       marketable securities                               16,041        4,405
    Purchases of equipment                                   (543)        (159)
    Sale of equipment                                         118          --
    Capitalized software development costs                     --          (73)
                                                         ---------    ---------
                                                            2,850          248
                                                         ---------    ---------
FINANCING ACTIVITIES:
    Repayment of stockholders' notes receivable                --          313
    Sale of common stock for cash upon
       exercise of options and warrants                       121          161
                                                         ---------    ---------
                                                              121          474
                                                         ---------    ---------
INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                                      $5,052     $    (29)
                                                         ---------    ---------
                                                         ---------    ---------


See notes to condensed consolidated financial statements.


                                    5


                                   DSP GROUP, INC.
                NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
                                    March 31, 1997
                                     (UNAUDITED)
                                           
NOTE A - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of 
Regulation S-X.  Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included.  Operating results for the three months ended March 31,
1997, are not necessarily indicative of the results that may be expected for the
year ended December 31, 1997.  For further information, reference is made to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.


NOTE B - INVENTORIES

Inventory is valued at the lower of cost (first-in, first-out method) or 
market. The components of inventory consist of the following (in thousands):

                                  March 31,            December 31,
                                    1997                  1996
                                ---------------     ----------------
    Work-in-process                 $   76               $  217
    Finished goods                   2,558                2,740
                                   ---------            ----------
                                    $2,634               $2,957
                                   ---------            ----------
                                   ---------            ----------

NOTE C - NET INCOME PER SHARE

Net income per share is computed using the weighted average number of shares of
Common Stock and dilutive common equivalent shares from stock options and
warrants (using the treasury stock method). Dual presentation of primary and
fully diluted net income per share is not shown on the face of the income
statement because the differences are not significant.


                                    6



                              DSP GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In February 1997, the financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share,"
which is required to be adopted on December 31, 1997.  At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact of SFAS No. 128 on the calculations of primary
earnings per share and fully diluted earnings per share for the quarters ended
March 31, 1997 and March 31, 1996 is not expected to be material.


NOTE D - INVESTMENTS 

The following is a summary of the cost of available-for-sale securities (in
thousands):

                                        March 31,     December 31,
                                         1997             1996
                                       -----------     ----------
    Corporate obligations                $22,147         $19,301
    Obligations of states and
       political subdivisions             16,718          16,891
    Municipal auction rate preferred
       stock                                  --           2,200
                                       -----------     ----------
                                         $38,865         $38,392
                                       -----------     ----------
                                       -----------     ----------
    Amounts included in 
       marketable securities             $27,487         $30,762
    Amounts included in cash 
       and cash equivalents               11,378           7,630
                                       -----------     ----------
                                         $38,865         $38,392
                                       -----------     ----------
                                       -----------     ----------


At March 31, 1997 and at December 31,1996, the carrying amount of securities 
approximated their fair market value and the amount of unrealized gain or 
loss was not significant. Gross realized gains or losses for the three months 
ended March 31, 1997 and 1996, were not significant.  The amortized cost of 
available-for-sale debt securities at March 31, 1997, by contractual 
maturities, are shown below (in thousands):

                                    7



                                   DSP GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                                         Amortized cost
                                        ----------------
Due in one year or less                     $31,875
Due after one year to eighteen months         6,990
                                           ----------
                                            $38,865
                                           ----------
                                           ----------

NOTE E - INCOME TAXES

The effective tax rate used in computing the provision for income taxes is based
on projected fiscal year income before taxes, including estimated income by tax
jurisdiction. The difference between the effective tax rate and the statutory
rate is due primarily to the utilization of tax loss carryforwards, tax exempt
income in Israel and tax exempt interest income.

NOTE F - SIGNIFICANT CUSTOMERS

Product sales to one distributor accounted for 21% of total revenues for the
three months ended March 31, 1997. License fees from one customer accounted for
14% of total revenues for the three months ended March 31, 1996. The loss of one
or more major distributors could have an adverse effect on the Company's
business, financial condition and results of operations. 

NOTE G - EQUITY INVESTMENT 

The Company has investments in two companies which are accounted for under the
equity method.

AudioCodes, Ltd.: The Company owns 35% of the capital stock of AudioCodes, Ltd.
AudioCodes, Ltd., an Israeli corporation, is primarily engaged in DSP-related
contract engineering in connection with speech and algorithm technologies.
 
Aptel Ltd.: The Company made an initial investment in Aptel Ltd. ("Aptel") 
during the third quarter of 1996 and currently owns 40% of Aptel. Aptel, 
which is located in Netanya, Israel, is an emerging company in its product 
development stage.  Aptel has expertise in spread spectrum direct sequence 
modulation technology, which is applicable to the development of products for 
two-way paging systems and telemetry applications. The condensed consolidated 
statements of income for the quarter ended March 31, 1997, include a $183,000 
equity loss of the Company's proportionate share of Aptel's net loss in the 
same period.


                                    8




                                   DSP GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE H - CONTINGENCIES 

The Company is involved in certain claims arising in the normal course of 
business, including claims that it may be infringing patent rights owned by 
third parties. The Company is unable to foresee the extent to which these 
matters will be pursued by the claimants or to predict with certainty the 
eventual outcome.  However, the Company believes that the ultimate resolution 
of these matters will not have a material adverse effect on its financial 
position, results of operations or cash flows. 
The estimate of the potential impact on the Company's financial position or 
overall results of operations or cash flows for the above matter could 
change in the future.

In November 1995, after the Company's stock price declined, several lawsuits
were filed in the United States District Court for the Northern District of
California accusing the Company, its former Chief Executive Officer, and its
former Chief Financial Officer of issuing materially false and misleading
statements in violation of the federal securities laws.  These lawsuits were
consolidated into a single amended complaint in February 1996.  In the amended
complaint, plaintiffs sought unspecified damages on behalf of all persons who
purchased shares of the Company's Common Stock during the period June 6, 1995
through November 10, 1995.  On June 11, 1996, the Court granted the Company's
motion to dismiss the lawsuit, with leave to amend.  The plaintiffs filed an
amended complaint on July 11, 1996.  On March 7, 1997, the Court issued an order
dismissing with prejudice all claims based on statements issued by the Company. 
The Court is permitting plaintiffs to proceed with their claims regarding
statements the Company allegedly made to securities analysts, and is also
permitting plaintiffs to amend their complaint as to their claim that the
Company is responsible for the statements contained in analysts' reports.  The
Company believes the ultimate resolution of this matter will not have a material
adverse effect on the Company's financial position, results of operations, or
cash flows.  The Company believes the lawsuit to be without merit and intends to
defend itself vigorously.
The estimate of the potential impact on the Company's financial position or
overall results of operations or cash flows for the above matter could change in
the future.

                                    9





ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
                  CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

TOTAL REVENUES.  Total revenues increased to $14.2 million in the first quarter
of 1997 from $11.2 million in the first quarter of 1996 due primarily to
increased quantities of the Company's TAD speech processors, especially those
utilizing flash memory.  

Export sales, primarily consisting of TAD speech processors shipped to
manufacturers in Europe and Asia as well as license fees on DSP cores design
products, represented 88% and 89% of total revenues for the Company in the first
quarter of 1997 and 1996, respectively.  All export sales are denominated in
U.S. dollars.  

Revenues from Tomen Electronics (a distributor), accounted for 21% of total
revenues in the first quarter of 1997.  NEC (a core licensor), accounted for
14% of total revenues in the first quarter of 1996.

GROSS PROFIT.  Gross profit as a percentage of total revenues declined to 44% in
the first quarter of 1997 from  52% in the first quarter of 1996. The decrease
in gross margins is primarily due to the decrease in licensing revenues, which
have a higher gross margin, than product sales. Product gross profit as a
percentage of product sales increased to 37% in the first quarter of 1997
compared to 32% in the first quarter of 1996 due to lower costs of manufactured
products.

RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses decreased
to $1.9 million in the first quarter of 1997 from $2.5 million in the first
quarter of 1996 due primarily to a decrease in the cost of materials associated
with the Company's development of new speech processors for TAD products and
personal computer telephony applications, as well as reductions in engineering
personnel as a result of the consolidation of research and development
activities in Israel.

SALES AND MARKETING EXPENSES.  Sales and marketing expenses slightly decreased
to $1.3 in the first quarter of 1997 from $1.4 million in the first quarter of
1996. Sales and marketing expenses as a percentage of total revenues decreased
to 9% in the first quarter of 1997, compared to 12% in the first quarter of
1996.

GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
decreased to $1.1 million in the first quarter of 1997 from $1.6 in the first
quarter of 1996. General and administrative expenses as a percentage of total
revenues were 8% in the first quarter of 1997 and 14% in the first quarter of
1996. The expense decline is due primarily to the relocation of certain general
and administrative functions to Israel where salary and related costs are lower.

OTHER INCOME (EXPENSE) - NET.  Interest and other income (expense) - net was
$547,000 in the first quarter of 1997, compared to $379,000 in the first quarter
of 1996. The increase was 

                                    10




primarily the result of higher average cash equivalent and marketable 
securities in 1997 as compared with 1996.

EQUITY IN INCOME (LOSS) OF INVESTEES.  Equity in Income (loss) of investees 
was a $204,000 loss for the first quarter of fiscal 1997 as compared to a 
$33,000 loss in the first quarter of fiscal 1996. The condensed consolidated 
statements of income for the first quarter of fiscal 1997 include a $183,000 
equity loss for the Company's proportionate share of the results of 
operations of Aptel for the first quarter of 1997 and a loss of $21,000 on 
the Company's equity basis in AudioCodes, Ltd.  The Company's initial 
investment in Aptel was in the third quarter of fiscal 1996, and accordingly 
the Company's results of operations for the first quarter of 1996 do not 
include any amounts pertaining to Aptel.  For the first quarter of 1996, 
equity loss in AudioCodes, Ltd. was $33,000.

PROVISION FOR INCOME TAXES.  In 1997 and 1996 the Company benefited for federal
and state tax purposes from the utilization of its net operating loss
carryforwards, foreign tax holiday and tax exempt interest income, as well as
the recognition of certain other deferred tax assets in 1996.


LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES.  During the three months ended March 31, 1997, net cash
provided by operations was $2.1 million, primarily due to (i) $2.0 million of
net income, (ii) $367,000 of depreciation and amortization, (iii) a $323,000
decrease in inventories, (iv) and a $974,000 increase in accounts payable,
income taxes payable and accrued expenses. These were offset by a $2.0 million
increase in accounts receivable and a $271,000 increase in prepaid expenses and
other current assets. 

INVESTING ACTIVITIES.  The Company purchased $12.8 million and sold or had
maturities of $16.0 million of investments classified as marketable securities
in the first three months of 1997.  Capital equipment additions in the first
three months of 1997 totaled $543,000, primarily for leasehold improvements for
the Santa Clara facility. 

FINANCING ACTIVITIES.  During the first three months of 1997, the Company
received $121,000 upon the exercise of employee stock options. 

At March 31, 1997, the Company's principal source of liquidity consisted of 
cash and cash equivalents totaling $17.2 million, marketable securities of 
$27.5 million and amounts available under a domestic bank line of credit of 
$2.0 million. The Company's working capital at March 31, 1997 was $50.2 
million.

                                    11



The Company believes that its current cash and its available line of credit will
be sufficient to meet its cash requirements through at least the next twelve
months. As part of its business strategy, the Company occasionally evaluates
potential acquisitions of businesses, products and technologies. Accordingly, a
portion of its available cash may be used for the acquisition of complementary
products or businesses.  Such potential transactions may require substantial
capital resources, which may require the Company to seek additional debt or
equity financing.  There can be no assurance that the Company will consummate
any such transactions. See "Factors Affecting Future Operating Results --
Acquisition Strategy."


                                    12



                     FACTORS AFFECTING FUTURE OPERATING RESULTS. 

THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS CONCERNING THE COMPANY'S 
FUTURE PRODUCTS, EXPENSES, REVENUE, LIQUIDITY AND CASH NEEDS AS WELL AS THE 
COMPANY'S PLANS AND STRATEGIES.  THESE FORWARD-LOOKING STATEMENTS ARE BASED 
ON CURRENT EXPECTATIONS AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE THIS 
INFORMATION.  NUMEROUS FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER 
SIGNIFICANTLY FROM THE RESULTS DESCRIBED IN THESE FORWARD-LOOKING 
STATEMENTS, INCLUDING THE FOLLOWING RISK FACTORS.

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS.  The Company's revenues
are derived predominately from product sales and accordingly vary significantly
depending on the volume and timing of product orders.  The Company's quarterly
operating results also depend on the timing of recognition of license fees and
the level of per unit royalties. Through 1997, the Company expects that revenues
from its DSP core designs and TrueSpeech will be derived primarily from license
fees rather than per unit royalties.  The uncertain timing of these license fees
has caused, and may continue to cause, quarterly fluctuations in the Company's
operating results.  The Company's per unit royalties from licenses are entirely
dependent upon the success of its OEM licensees in introducing products
utilizing the Company's technology and the success of those OEM products in the
marketplace.  Royalties from the Company's DSP core designs and TrueSpeech have
not been significant to date.  

The Company's quarterly operating results may also fluctuate significantly as
demand for TADs varies during the year due to seasonal customer buying patterns,
and as a result of other factors such as the timing of new product introductions
by the Company or its customers, licensees or competitors; market acceptance of
new products and technologies; the mix of products sold; fluctuations in the
level of sales by OEMs and other vendors of products incorporating the Company's
products; and changes in general economic conditions.  

DECLINING AVERAGE SELLING PRICES AND GROSS MARGINS; DEPENDENCE ON DIGITAL TAD 
MARKET.  The Company has experienced a decrease in the average selling prices 
of its TAD speech processors, but has to date been able to offset this 
decrease on an annual basis through manufacturing cost reductions and the 
introduction of new products with higher performance.  The Company 
experienced a significant decline in the gross margin on TADs in the second 
and third quarters of 1996 due to competitive market pricing pressures and 
delays in ongoing cost reduction efforts.  Although significant cost 
reductions were achieved in the fourth quarter of 1996 and first quarter of 
1997, there is no guarantee that such on-going efforts will be successful or 
that they will keep pace with the anticipated, continuing decline in average 
selling prices.  The markets for the Company's products are extremely 
competitive, and the Company expects that competition will increase. The 
Company's existing and potential competitors in each of its markets include 
large and emerging domestic and foreign companies, many of which have 
significantly greater financial, technical, manufacturing, marketing, sale 
and distribution resources and management expertise than the Company. 

Any inability of the Company to respond to increased price competition for 
its TAD speech processors or its other products through the continuing and 
frequent introduction of new 


                                   13


products or reductions of manufacturing costs, or any significant delays by 
the Company in developing, manufacturing or shipping new or enhanced products 
would have a material adverse effect on the Company's business, financial 
condition and results of operations.  Sales of TAD products comprise a 
substantial portion of the Company's product sales.  Any adverse change in 
the digital TAD market or the Company's ability to compete and maintain its 
position in that market would have a material adverse effect on the Company's 
business, financial condition and results of operations. 

RELIANCE ON INDEPENDENT FOUNDRIES.  All of the Company's integrated circuit 
products are manufactured by independent foundries.  While these foundries 
have been able to adequately meet the demands of the Company's increasing 
business, the Company is and will continue to be dependent upon these 
foundries to achieve acceptable manufacturing yields and quality levels, and 
to allocate to the Company a sufficient portion of foundry capacity to meet 
the Company's needs in a timely manner.  To meet its increased wafer 
requirements, the Company has added additional independent foundries to 
manufacture its TAD speech processors. Revenues could be materially and 
adversely affected should any of these foundries fail to meet the Company's 
request for products due to a shortage of production capacity, process 
difficulties or low yield rates.

RELIANCE ON INTERNATIONAL OPERATIONS; RISK OF OPERATIONS IN ISRAEL.  The 
Company is subject to the risks of doing business internationally, including 
unexpected changes in regulatory requirements; fluctuations in the exchange 
rate for the United States dollar; imposition of tariffs and other barriers 
and restrictions; and the burdens of complying with a variety of foreign 
laws.  The Company is also subject to general geopolitical risks, such as 
political and economic instability and changes in diplomatic and trade 
relationships, in connection with its international operations.  In 
particular, the Company's principal research and development facilities are 
located in the State of Israel and, as a result, at March 31, 1997, 63 of the 
Company's 92 employees were located in Israel, including 90% of the Company's 
research and development personnel.  In addition, although the Company is 
incorporated in Delaware, approximately half of the Company's directors and 
executive officers are non-residents of the United States.  Therefore, the 
Company is directly affected by the political, economic and military 
conditions to which Israel is subject.  In addition, many of the Company's 
expenses in Israel are paid in Israeli currency, thereby also subjecting the 
Company to foreign currency fluctuations and to economic pressures resulting 
from Israel's generally high rate of inflation.  The rate of inflation in 
Israel for 1995 and 1996 was 8.1% and 10.6%, respectively.  While 
substantially all of the Company's sales and expenses are denominated in 
United States dollars, a portion of the Company's expenses are denominated in 
Israeli shekels.  The Company's primary expenses paid in Israeli currency are 
employee salaries and lease payments on the Israeli facility.  As a result, 
an increase in the value of Israeli currency in comparison to the United 
States dollar could increase the cost of technology development, research and 
development expenses and general and administrative expenses.

There can be no assurance that currency fluctuations, changes in the rate of
inflation in Israel or any of the other aforementioned factors will not have a
material adverse effect on the Company's business, financial condition and
results of operations.


                                    14



ACQUISITION STRATEGY.  The Company has pursued, and will continue to pursue, 
growth opportunities through internal development and acquisition of 
complementary businesses, products and technologies.  The Company is unable 
to predict whether or when any prospective acquisition will be completed. The 
process of integrating an acquired business may be prolonged due to 
unforeseen difficulties and may require a disproportionate amount of 
resources and management's attention.  There can be no assurance that the 
Company will be able to successfully identify suitable acquisition 
candidates, complete acquisitions, integrate acquired businesses into its 
operations, or expand into new markets. Once integrated, acquisitions may not 
achieve comparable levels of revenues, profitability or productivity as the 
existing business of the Company or otherwise perform as expected.  The 
occurrence of any of these events could have a material adverse effect on the 
Company's business, financial condition or results of operations.  Future 
acquisitions may require substantial capital resources, which may require the 
Company to seek additional debt or equity financing.

RELIANCE ON OEMs TO OBTAIN REQUIRED COMPLEMENTARY COMPONENTS.  Certain of the 
raw materials, components and subassemblies included in the products 
manufactured by the Company's OEM customers, which also 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.  For example, the Company's customers for TAD speech processors 
have in the past experienced difficulties obtaining sufficient timely 
supplies of ARAMs which are included in certain digital TADs.  These 
shortages are due to the increasing demand for ARAMs for TAD products, and 
fluctuations in ARAM production as ARAMs are a by-product in the fabrication 
of dynamic random access memories ("DRAMs") with ARAM yields varying 
inversely with the DRAM yield. Although such shortages were alleviated during 
most of 1996 and the first quarter of 1997, there is no guarantee that such 
favorable circumstances will continue.  In addition, there is a trend in the 
industry toward the production of 16 Mbit DRAMs, rather than 4 Mbit DRAMs, 
which may increase the cost of TAD systems because such systems mainly use 4 
Mbit ARAMs.  Supply disruptions, shortages or termination could have an 
adverse effect on the Company's business and results of operations due to its 
customers delay or discontinuance of orders for the Company's products until 
such components are available.

DEPENDENCE UPON ADOPTION OF INDUSTRY STANDARDS BASED ON TRUESPEECH.  The 
Company's prospects are partially dependent upon the establishment of 
industry standards for digital speech compression based on TrueSpeech 
algorithms in the computer telephony and personal computer markets.  The 
development of industry standards utilizing TrueSpeech algorithms would 
create an opportunity for the Company to develop and market speech 
co-processors that provide TrueSpeech solutions and enhance the performance 
and functionality of products incorporating these co-processors. In February 
1995, the ITU established G.723, which is predominately composed of a 
TrueSpeech algorithm, as the standard speech compression technology for use 
in video conferencing over public telephone lines.  However, the ITU failed 
to select TrueSpeech as the speech compression technology for DSVD 
applications and discussed adopting a proposed audio standard based on an 
existing standard (G.729) sponsored by the University of Sherbrooke.  The 
Company intends to license the compression standard selected by the ITU for 
inclusion in the Company's DSVD co-processors.  The failure to establish 
industry standards based on TrueSpeech algorithms or 


                                    15



to develop and market competitive speech co-processors would have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

INTELLECTUAL PROPERTY.  As is typical in the semiconductor and software 
industries, the Company has been and may from time to time be notified of 
claims that it may be infringing patents or intellectual property rights 
owned by third parties.  For example, AT&T has recently asserted that G.723, 
which is primarily composed of a TrueSpeech algorithm, includes certain 
elements covered by patents held by AT&T and has requested that video 
conferencing equipment manufacturers license such technology from AT&T.  If 
it appears necessary or desirable, the Company may seek licenses under such 
patents or intellectual property rights that it is allegedly infringing.  
Although holders of such intellectual property rights commonly offer such 
licenses, no assurances can be given that licenses will be offered or that 
the terms of any offered licenses will be acceptable to the Company.  The 
failure to obtain a license for key intellectual property rights from a third 
party for technology used by the Company could cause the Company to incur 
substantial liabilities and to suspend the manufacture of products utilizing 
the technology.  The Company believes that the ultimate resolution of these 
matters will not have a material adverse effect on the Company's business, 
financial position or results of operations.

ONGOING LITIGATION.  In November 1995, after the Company's stock price 
declined, several lawsuits were filed in the United States District Court for 
the Northern District of California accusing the Company, its former Chief 
Executive Officer, and its former Chief Financial Officer of issuing 
materially false and misleading statements in violation of the federal 
securities laws.  These lawsuits were consolidated into a single amended 
complaint in February 1996.  In the amended complaint, plaintiffs sought 
unspecified damages on behalf of all persons who purchased shares of the 
Company's Common Stock during the period June 6, 1995 through November 10, 
1995.  On June 11, 1996, the Court granted the Company's motion to dismiss 
the lawsuit, with leave to amend.  The plaintiffs filed an amended complaint 
on July 11, 1996.  On March 7, 1997, the Court issued an order dismissing 
with prejudice all claims based on statements issued by the Company.  The 
Court is permitting plaintiffs to proceed with their claims regarding 
statements the Company allegedly made to securities analysts, and is also 
permitting plaintiffs to amend their complaint as to their claim that the 
Company is responsible for the statements contained in analysts' reports.  
The Company believes the lawsuit to be without merit and intends to defend 
itself vigorously.  The Company believes the ultimate resolution of this 
matter will not have a material adverse effect on the Company's financial 
position, results of operations, or cash flows.  However, the Company 
anticipates that in the near term it may incur significant legal expense to 
defend itself.

The variety and uncertainty of the factors affecting the Company's operating
results, and the fact that the Company participates in a highly dynamic
industry, may result in significant volatility in the Company's Common Stock
price.

                                    16



PART II.  OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

In November 1995, after the Company's stock price declined, several lawsuits 
were filed in the United States District Court for the Northern District of 
California accusing the Company, its former Chief Executive Officer, and its 
former Chief Financial Officer of issuing materially false and misleading 
statements in violation of the federal securities laws.  These lawsuits were 
consolidated into a single amended complaint in February 1996.  In the 
amended complaint, plaintiffs sought unspecified damages on behalf of all 
persons who purchased shares of the Company's Common Stock during the period 
June 6, 1995 through November 10, 1995.  On June 11, 1996, the Court granted 
the Company's motion to dismiss the lawsuit, with leave to amend.  The 
plaintiffs filed an amended complaint on July 11, 1996.  On March 7, 1997, 
the Court issued an order dismissing with prejudice all claims based on 
statements issued by the Company. The Court is permitting plaintiffs to 
proceed with their claims regarding statements the Company allegedly made to 
securities analysts, and is also permitting plaintiffs to amend their 
complaint as to their claim that the Company is responsible for the 
statements contained in analysts' reports.  The Company believes the lawsuit 
to be without merit and intends to defend itself vigorously.

On February 12, 1997, BEKA Electronic GmbH ("BEKA") commenced an action in 
the United States District Court for the Northern District of California 
against the Company.  The action alleges breach of contract, breach of 
implied covenant of good faith and fair dealing and requests an accounting by 
the Company in connection with the Company's termination of the Sales 
Representative Agreement between BEKA and the Company.  The complaint seeks 
an unspecified amount of damages.  The Company believes the lawsuit to be 
without merit and intends to defend itself vigorously.


                                    17



ITEM 2.        CHANGES IN SECURITIES

    None.

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES

    None.

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.
    
ITEM 5.        OTHER INFORMATION

    None.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits

    11.1 Statement re: Computation of Per Share Earnings

    27.1 Financial Data Schedule

    (b)  Reports on Form 8-K

         The Company did not file any reports on Form 8-K during the three 
months ended March 31, 1997.

                                    18



SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


DSP GROUP, INC.
(Registrant)


By  /S/ AVI BASHER
  -------------------------------------------
Avi Basher, Vice President of Finance and Chief Financial Officer 
and Secretary (Principal Financial Officer and Principal Accounting Officer)


Date  MAY 13, 1997
    ---------------


                                    19



                                EXHIBIT INDEX


Exhibit 11.1  Statement re: Computation of Per Share Earnings
Exhibit 27.1  Financial Data Schedule


                                   20





Exhibit 11.1


                                   DSP GROUP, INC.
                    STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
                        (in thousands, except per share data)


                                                 Three Months
                                               Ended March 31,
                                         ---------------------------
                                            1997             1996
                                           -------          -------

Net income                                 $2,016             $ 574
                                           -------          -------
                                           -------          -------
PRIMARY:
Computation of weighted average
 common and common equivalent
 shares outstanding:

    Weighted average common shares
      outstanding                           9,559             9,459
    Common equivalent shares from
      stock options and warrants              127                76
                                           -------          -------
Shares used in per share computation        9,686             9,535
                                           -------          -------
                                           -------          -------
Net income per share                         $.21              $.06
                                           -------          -------
                                           -------          -------

FULLY DILUTED:
Computation of weighted average
  common and common equivalent
  shares outstanding:

    Weighted average common shares
      outstanding                           9,559             9,459
    Common equivalent shares from
      stock options and warrants              127               113
                                           -------          -------
Shares used in per share computation        9,686             9,572
                                           -------          -------
                                           -------          -------
Net income per share                         $.21              $.06
                                           -------          -------
                                           -------          -------


 


5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS IN THE QUARTERLY REPORT ON FORM 10-Q OF DSP GROUP, INC. FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 17,224 27,487 7,254 375 2,634 56,352 7,454 4,110 62,719 6,132 0 0 0 10 56,577 62,719 11,898 14,178 7,530 7,873 1,941 0 63 2,372 356 2,016 0 0 0 2,016 0.21 0.21