Manufacturing Services Collaboration Agreement

Exhibit 10.38

EXECUTION COPY

Manufacturing Services Collaboration Agreement

between

NXP SEMICONDUCTORS NETHERLANDS B.V.

and

DSP GROUP, INC.

and

DSP GROUP LTD.

Contents

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CONFIDENTIAL TREATMENT REQUESTED.

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Manufacturing Services Collaboration Agreement

THE UNDERSIGNED:

and

and

NXP and DSPG shall also be referred to as “Parties” or a “Party”, as the case may be,

WHEREAS:

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IT IS AGREED AS FOLLOWS:

In this Agreement, unless the context otherwise requires, the provisions in this clause 1 apply throughout.

Capitalised words, including those used in the preamble and recitals to this Agreement, shall have the following meaning ascribed to them:

“ Adjusted Binding Purchase Order ” shall have the meaning set forth in clause 8.3.1.

“ Affiliate ” shall have the meaning set forth in the SBSA;

“ Agreement ” shall mean this Manufacturing Services Collaboration Agreement by and among NXPBV, DSPG INC and DSPG, together with all schedules, annexes, exhibits and other documents referred to herein or therein, attached hereto separately.

“ Binding Purchase Order ” shall have the meaning set forth in clause 8.2.1.

“ Business Day ” shall mean a calendar day, other than a Saturday or a Sunday, on which commercial banks in Amsterdam, the Netherlands and New York, New York, United States of America are generally open for business.

“ Business Inventory ” shall mean the inventory in the NXP Die Banks, NXP Wafer Banks and Finished Goods Store.

“ Confirmed STP ” shall have the meaning set forth in clause 5.3.3.

“ Contract Year ” shall mean (i) in relation to the NXP Processes except for the NXP Processes named [*] , the First Contract Year, the Second Contract Year or the Third Contract Year, as the case may be, and (ii) in relation to the NXP Processes named [*] , the

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First Contract Year, the Second Contract Year, the Third Contract Year, the Fourth Contract Year, the Fifth Contract Year, the Sixth Contract Year or the Seventh Contract Year, as the case may be, and (iii) in the event of an extension of the Agreement, any Extended Contract Year.

“ Derivatives ” shall mean any commercial successors having the same process flows, steps and/or parameters and utilizing the identical manufacturing equipment tools.

“ Devices ” shall mean good products meeting the parametric and electrical specifications set forth in the TPS agreed between the Parties as the specifications may be amended from time to time by agreement of the Parties.

“ Dice ” shall have the meaning set forth in the recitals to this Agreement.

“ DSPG ” shall have the meaning set forth in the preamble to this Agreement.

“ DSPG INC ” shall have the meaning set forth in the preamble to this Agreement.

“ DSPG Third Party Provider ” shall mean the third party commercial foundry, test and/or assembly providers, which are currently and/or in the future directly contracted by DSPG.

“ EDI ” shall mean Electronic Data Interchange.

“ Effective Date ” shall mean the date of Closing under the SBSA.

“ Engineering Wafers ” shall have the meaning set forth in clause 4 of Schedule 3 .

“ Equipment ” shall mean the production equipment of NXP located at any NXP Facility, including any replacements, updates, or parts thereof, which shall be used for the manufacturing, pre-testing, assembling, final-testing and supply of the NXP Products pursuant to this Agreement.

“ Extended Contract Year ” shall have the meaning set forth in clause 2.3.2.

“ Fifth Contract Year ” shall mean the period commencing on the fourth anniversary of the Effective Date and ending on the fifth anniversary of the Effective Date.

“ Finished Goods Store means all Business Inventory (i) placed in a finished goods storage area maintained by Seller at its industrial warehouse located in Hong Kong, the Siemens consignment warehouse in Bocholt, Germany, or at any other NXP assembly and test facility or other location approved in writing after the Closing Date and subject to verification by Purchaser, (ii) delivered to another finished goods storage area designated by Purchaser in writing after the Closing Date, or (iii) delivered to a customer or other third party designated by Purchaser in writing after the Closing Date. For avoidance of doubt, Business Inventory located in a Finished Goods Store shall not include any work in process or any Business Inventory requiring modification or testing prior to being placed in a finished goods store or delivered to a third party. Anything to the contrary notwithstanding, the Finished Goods Inventory on the Closing Date shall be determined by a physical inventory taken at Seller’s industrial warehouse located in Hong Kong at the close of business in Hong Kong on 31

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August 2007 at 18:00 p.m., local time and at Siemens consignment warehouse in Germany at the close of business in Germany on 30 August 2007 at 18:00 p.m., local time.

“ First Contract Year ” shall mean the period commencing on the Effective Date and ending on the first anniversary of the Effective Date.

“ Force Majeure ” shall mean events beyond the reasonable control of a Party, which are not reasonably foreseeable and whose effects are not capable of being overcome without unreasonable expense or loss of time, and such events shall include (without limitation) civil war, strike, terrorism, acts of government, industrial espionage, terrorist activities, natural disasters, fire and explosion.

“ Fourth Contract Year ” shall mean the period commencing on the third anniversary of the Effective Date and ending on the fourth anniversary of the Effective Date.

“ Generic Risk-Start Agreement ” shall mean the generic risk-start agreement attached hereto as Schedule 8 .

“ Grace Period ” shall mean in respect of NXP Non-ROM-Coded Products and NXP ROM-Coded Products:

with regard to Purchase Order Type A: [*] ;

with regard to Purchase Order Type B: [*] ; and

with regard to Purchase Order Type C: [*] .

“ Hold ” shall have the meaning set forth in clause 8.6.1.

“ Hot Lot ” shall mean a Wafer manufacturing lot processed as provided in clause 1 of Schedule 7 at the cycle time set forth in Schedule 1 .

“ IPTLA ” shall mean the Intellectual Property Transfer and License Agreement between NXP B.V., DSPG INC and DSPG, effective as of the Effective Date.

“ IWH ” shall mean the industrial warehouses.

“ Late Delivery Penalties ” shall mean the penalties and related payments as set out in clauses 14.1, 14.2 and 14.3.

“ Line-Item ” shall mean any request for delivery related to quantities of 1 (one) specific NXP Product with an associated delivery date.

“ LTP ” shall have the meaning set forth in clause 5.1.1.

“ Main Capacity Bucket ” shall mean a group of similar capacities in wafer manufacturing, assembly or test, as set forth in Schedule 11 .

“ Management Review Meeting ” shall have the meaning set forth in clause 9 of Schedule 7 .

“ Masks ” shall mean masks or reticles used to pattern individual layers by means of photolithography.

“ MTP ” shall have the meaning set forth in clause 5.2.1.

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“ Non-Systematic Late Delivery ” shall mean (i) delivery by NXP of an individual (Adjusted) Binding Purchase Order beyond the applicable NXP Order Lead-time and the applicable Grace Period.

“ NXP ” shall mean NXPBV and its Affiliates.

“ NXP Assembly Services ” shall mean the assembly services to be provided by NXP to DSPG as listed in Schedule 9 .

“ NXP Back-end Services ” shall mean the NXP Assembly Services and the NXP Test Services.

“ NXPBV ” shall have the meaning set forth in the preamble to this Agreement.

“ NXP Capacity ” shall mean the capacity required at any NXP Facility to manufacture, pre-test, assemble and/or final-test the NXP Products for a given Contract Year.

“ NXP Die Bank ” shall mean a die bank maintained by NXP at one or more NXP Facilities for the storage of manufactured and pre-tested (but not yet assembled and final-tested) NXP Products.

“ NXP Facilities ” shall mean the NXP facilities which shall be used for the manufacturing, pre-testing, assembling and final-testing of NXP Products pursuant to this Agreement and “ NXP Facility ” shall mean any one of them.

“ NXP Final-Test Services ” shall mean the final test services to be provided by NXP to DSPG as listed in Schedule 9 .

“ NXP Information ” shall mean all design rules and parametric information, drawings, specifications, samples, models, processes, recipes, procedures, instructions, technology, data, reports, database tapes, specifications, test tapes and reports, mask reticles and supporting documentation and/or all other technical information of any kind whatsoever, all of which relates to the NXP Processes made available by NXP to DSPG under this Agreement and/or to the NXP Products manufactured by NXP for DSPG pursuant to this Agreement.

“ NXP Lead-time Catalogue ” shall mean the lead-time catalogue applicable in the relevant Contract Years as attached hereto as Schedule 10 .

“ NXP Manufacturing Services ” shall mean the manufacturing services to be provided by NXP to DSPG as listed in Schedule 9 .

“NXP Non-ROM-Coded Products” shall mean the non-ROM-coded NXP Products.

“NXP Order Lead-time” shall mean the number of calendar days between receipt of an order and the order being made available to DSPG in the Wafer Bank, Die Bank or Finished Goods Store as specified by the relevant NXP Order Lead-time as set out in the NXP Lead-time Catalogue.

“ NXP Planning Cycle ” shall mean the NXP planning cycle as described in clauses 5 and 8.

“ NXP Pre-Test Services ” shall mean the pre-test services to be provided by NXP to DSPG as listed in Schedule 9 .

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“ NXP Processes ” shall mean the manufacturing, pre-testing, assembling and final-testing processes relevant for the supply of the NXP Products to DSPG pursuant to this Agreement, as reflected in Schedule 1 .

“ NXP Products ” shall mean any products (i) which NXP currently manufactures for Dice, (ii) which a NXP Sub-contractor currently manufactures for Dice, (iii) which are currently under development within Dice and are intended to be manufactured by NXP or a NXP Sub-contractor and (iv) any Derivatives thereof. For the avoidance of doubt, NXP Products shall not mean any DSPG non-Dice products.

“NXP ROM-Coded Products ” shall mean the ROM-coded NXP Products.

“ NXP Services ” shall mean the NXP Manufacturing Services, the NXP Pre-Test Services, the NXP Assembly Services and the NXP Final-Test Services.

“ NXP Sub-contractors ” shall mean the product providers currently used an/or which will be used in the future by NXP to provide NXP Products to DSPG.

“ NXP Sub-contractor Order Lead-Time ” shall have the meaning as set out in clause 7.3.

“ NXP Test Services ” shall mean the NXP Pre-Test Services and the NXP Final-Test Services.

“ NXP Wafer Bank ” shall mean a wafer bank maintained by NXP at one or more NXP Facilities for the storage of partly manufactured (but not yet completed, pre-tested, assembled and final-tested) NXP ROM-Coded Products.

“ OFC ” shall mean the NXP Order Fulfilment Center.

“ OPC ” shall mean optical proximity correction.

“ PCM ” shall mean process control module.

“ Prices and Volumes Plan ” shall mean the prices and volumes plan in respect of the NXP Products, attached hereto as Schedule 1 .

“ Proprietary Information ” shall mean this Agreement and any information that is owned or controlled by a Party, including NXP Information in the case of NXP, and is identified as proprietary and confidential and that is disclosed by either Party to the other either orally, in writing or in machine readable format under this Agreement. Written Proprietary Information shall be clearly marked or labelled “PROPRIETARY” or “CONFIDENTIAL”. All oral disclosures of Proprietary Information shall be identified as such prior to disclosure and confirmed, in writing, by the disclosing Party within 30 (thirty) days of the oral disclosure.

“ Purchase Order ” shall mean any purchase order issued by DSPG to NXP in accordance with clause 8 and Schedule 4 .

“ Purchase Order Type A ” shall have the meaning as set out in clause 8.1.2(a)

“ Purchase Order Type B ” shall have the meaning as set out in clause 8.1.2(b)

“ Purchase Order Type C ” shall have the meaning as set out in clause 8.1.2(c)

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“ Ramp-up Phase ” shall have the meaning set forth in clause 6 of Schedule 3 .

“ RFP ” shall mean the final project milestone, where the NXP Process is fully qualified and Release for Production is granted by the Parties.

“ Risk Start ” shall mean start of manufacturing before completion of formal qualification.

“ Second Contract Year ” shall mean the period commencing on the first anniversary of the Effective Date and ending on the second anniversary of the Effective Date.

“ Seventh Contract Year ” shall mean the period commencing on the sixth anniversary of the Effective Date and ending on the seventh anniversary of the Effective Date.

“ Sixth Contract Year ” shall mean the period commencing on the fifth anniversary of the Effective Date and ending on the sixth anniversary of the Effective Date.

“ Specific Risk Start Agreement ” shall mean a specific risk start agreement for a specific NXP Product to be entered into by NXP and DSPG.

“ Statement ” shall have the meaning set forth in clause 20.4.

“ STP ” shall have the meaning set forth in clause 5.3.1.

“ Super Hot Lot ” shall mean a Wafer manufacturing lot processed at the cycle time set forth in clause 1 of Schedule 7 .

“ Systematic Late Delivery ” shall mean delivery by NXP of [*] of the aggregate of [*] in (Adjusted) Binding Purchase Orders in [*] beyond the applicable NXP Order Lead-Time.

“ Systematic Non-delivery ” shall mean delivery by NXP of:

“ Technical Incident ” shall mean Equipment failures and NXP Process incidents, which are not repetitive by nature (including but not limited to human errors).

“ Test Wafers ” shall have the meaning set forth in clause 3 of Schedule 3 .

“ Third Contract Year ” shall mean the period commencing on the second anniversary of the Effective Date and ending on the third anniversary of the Effective Date.

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“ TPS ” shall have the meaning set forth in Schedule 2 , or otherwise as agreed in writing between the Parties.

“ Units ” shall mean Devices which have been packed and marked in accordance with the requirements provided by DSPG.

“ Wafer ” shall mean the basic unit of production in semiconductor fabrication and a thin circular Wafer of silicon upon which the transistor and other circuit elements that comprise an integrated circuit are formed.

This Agreement shall be effective as from the Effective Date and shall remain in force for:

The term of this Agreement as set out in clauses 2.1.1 through 2.1.3 shall be (for all or part of the NXP Services and/or the manufacture of all or some of the NXP Products, as the case may be) reduced in the event that:

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The above NXP Capacity guarantee is subject to the NXP Planning Cycle and shall only apply to Dice volumes supplied by NXP or a NXP Subcontractor and not to any other volumes (including but not limited to the volumes of DSPG’s existing businesses).

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The Parties acknowledge and agree that a (re-)qualification may take place under the following circumstances:

The Parties acknowledge and agree that such (re-)qualification shall be performed in accordance with the following conditions: