<PAGE>

                                                                 EXHIBIT 10.22

                                 CONFIDENTIAL

                     ASSEMBLY AND TEST SERVICES AGREEMENT

This Package and Test Agreement (the "Agreement"), is dated and effective as of
February 28th, 2000 (the "Effective Date"), by and between. ST Assembly and Test
Services Ltd a Singapore Corporation with offices at 5 Yishun Street, 768442,
Singapore (STATS), and Centillium Communications, Inc., a Delaware corporation
with offices at 47211 Lakeview Blvd., Fremont, California, 94538("Centillium").

                                    RECITALS
     WHEREAS, Centillium desires to purchase from STATS and STATS desires to
supply to Centillium Assembly and Test Services on the terms and conditions of
this Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:

1.0  DEFINITIONS

     1.1  "Assembly Cycle Time" means the period of time required to manufacture
           -------------------
          the Products, commencing upon wafer start and ending on the day when
          STATS ships out (ex-factory) the ordered quantity of Products. The
          Assembly and Test Cycles Times for Prototype Production and Volume
          Production shall be as set forth in Exhibit A. Cycle Time does not
          include local national holidays and other factory holidays and
          shutdowns.

     1.2  "Lead Time" means the period of time, in calendar days, from the
           ---------
          placement of a particular order of a Product until the date of first
          shipment (ex-factory) of the ordered quantity of the Product.

     1.3  "Products" means the name of the package technology.

     1.4  "Affiliate" means any corporation or business entity, which is owned
           ---------
          or controlled by, owns or controls, or is under common ownership or
          control with, a party. For purposes of this definition, "control" of a
          corporation or business entity shall mean the right to exercise,
          directly or indirectly, more than fifty percent (50%) of the voting
          rights attributable to the shares of the corporation or business
          entity or the power to direct or cause the direction of the management
          or policies of the corporation or business entity.

                                 Page 1 of 25
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2.0  INTELLECTUAL PROPERTY RIGHTS

     2.1  Technical Information. All intellectual property and related rights in
          ---------------------
          and to technical information of either party including an affiliate or
          either party, which is provided to the other party in the course of
          the development of the Product(s) shall continue to belong to such
          providing party. This information shall be considered confidential and
          covered by a separate Non Disclosure Agreement.

                                 Page 2 of 25
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3.0  ASSEMBLY AND TEST SUPPLY

     3.1  Assembly Manufacturing
          3.1.1  On the terms and conditions of this Agreement, STATS will;
               manufacture packages, wafer sort silicon and test assembled
               packages

          3.1.2  Centillium will take ownership of the packages after all
               processing has been completed and electrical test continuity and
               Visual Mechanical results meet specification, see exhibit B.

          3.1.3  STATS will perform all Assembly and Test at its Singapore
               manufacturing facility. If STATS desires to change the location
               at which Assembly or Tests are being performed, STATS shall first
               define a qualification plan and obtain Centillium's written
               consent, more than 90 days prior to the location change.
               Centillium reserves the right to approve all changes to location.
               Centillium will notify STATS of approval or rejection within two
               weeks from receiving STATS notification and supporting
               documentation

          3.1.4  If STATS desires to change the form, fit, function or
               reliability STATS shall first define a qualification plan and
               obtain Centillium written consent, more than 90 days prior to
               such changes. Centillium reserves the right to approve all
               changes to form, fit, function or reliability. Centillium will
               notify STATS of approval or rejection within two weeks from STATS
               Centillium's notification and supporting documentation

          3.1.5  STATS will notify Centillium 90 days in advance, in writing, of
               any changes that are not form, fit, function or reliability
               related.
          3.1.6  STATS agrees to provide End-of-Life Notification to Centillium
               one year in advance of product discontinuance.
     3.2  STATS will treat Centillium as a Key Account and as such will continue
          to provide early access to newly developed processes during the period
          this agreement is in force.

     3.3  Qualification and Quality Control

          3.3.1  Qualification Centillium and STATS will cooperate fully to
               qualify jointly each product for which silicon is used in a
               package technology and will be manufactured hereunder
               ("Qualification"). Accordingly, the parties will cooperate to
               implement a Qualification procedure pursuant to which the parties
               will agree on parameters to monitor product quality and
               reliability. After qualification, Reliability Monitor data will
               be provided to Centillium on a quarterly basis detailing; Number
               of Lots, Number of devices, Number of passes/fails (cycles when
               failed), Test criteria. EXHIBIT C

          3.3.2  Changes After Qualification of any Product, STATS shall not
               make any major and/or critical Process change which will impact
               the performance, reliability or construction of the Products,
               without Centillium prior written consent, which consent shall not
               be unreasonably withheld. STATS shall notify Centillium in
               writing in advance of major Process changes, including but not
               limited to any changes which may:

                                 Page 3 of 25
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               3.3.2.1 Degrade Product quality or reliability;
               3.3.2.2 Result in failure of the Product to meet Centillium
                    specifications
               3.3.2.3 Substantially stow lead times
               3.3.2.4 Change Process control variables, ranges or method;
               3.3.2.5  Result in leadframe or substrate revisions or changes to
                    test methods/limits;
          3.3.3  Problem Notification

          STATS will classify and notify Centillium promptly (EXHIBIT D) upon
               discovering major process problems in its manufacturing lines
               that may affect the delivery capability of packages or package
               yields or that it has caused via the use of returned material.

          3.3.4  Yield Improvement Help STATS will notify Centillium of yield
               trends on a quarterly basis and what action is being performed to
               resolve the issues.

     3.4  Capacity and Forecasts.
          3.4.1  Capacity Agreement (EXHIBIT E)

          In order to ensure capacity. Centillium will provide a 12 month
               forecast with upside potential. STATS will agree to fulfill the
               capacity requirement of the 12 month forecast. This forecast is
               to be used for capacity planning only and the forecast on section
               (3.4.2) will be used to purchase wafers. If Centillium has
               unexpected demand above and beyond its upside forecast STATS
               agrees to meet this upside 100%, within the specified cycle times
               (EXHIBIT A) provided at least five (5) weeks notice is provided.

          3.4.2  Three (3) Month Rolling Forecasts

          Each month, Centillium will provide STATS a rolling forecast
               ("Forecast") of the number of packages and test time, which
               Centillium intends to purchase weekly during the next three- (3)
               months. The Forecast will be based on "packages out," i.e., on
               deliveries expected to be made by STATS each week

          3.4.3  Forecast Acknowledgment.
          All Forecasts shall be mutually agreed in writing (e-mail) with PO
               number and acknowledged package builds for each month of the
               three- (3) month forecast
          3.4.4  Required Orders

          Upon mutual agreement by the parties regarding the forecast,
               Centillium shall issue a "blanket" purchase order for those units
               identified in the initial Forecast and each subsequent weekly
               Forecast issued in accordance with this Agreement. Authorization
               for payment against the forecast will be given upon the
               determination of the quantity within 30 days of the shipment
               date.

          3.4.5  Purchase Order Process

          A blanket purchase order and the forecast process as stated in section
               3.4.4, 3.4.2 will initiate all purchases under this Agreement.
               Forecast shall state unit quantities, unit descriptions,
               requested delivery dates and shipping instructions. This
               Agreement, any prices agreed upon by the parties pursuant to this
               Agreement, unit quantities, unit descriptions, requested delivery
               dates and shipping instructions, shall constitute the complete
               agreement between the parties with respect to the purchase and
               sale of the Products and shall

                                 Page 4 of 25
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               supersede all prior oral or written agreements, representations
               and other communications between the parties relating to the
               subject matter of this Agreement. This Agreement shall also
               supersede any standard terms and conditions or pre-printed terms
               and conditions found on any Purchase Order issued under this
               Agreement.

          3.4.6  Cancellation
                 ------------

          Centillium may cancel product purchase order(s) or any portions
               thereof for any reason by notifying STATS in writing 48 hours
               prior to the scheduled start date on the forecast, provided that
               Centillium shall be liable for the costs of any direct or
               indirect raw materials incurred by STATS in reliance of the
               forecasts notwithstanding the cancellation or if Centillium's
               confirmed orders are less than Centillium's forecasts orders.

          3.4.7  Delivery Commitments.
                 --------------------

          STATS will deliver products to the carrier for shipment, within one
               (1) day. Upon Centillium request, STATS will halt production
               during manufacture, the foregoing delivery commitments will be
               extended by the number of days that the products are held.

          3.4.8  Shipping
                 --------

          All assembled units shall be delivered to Centillium, its designated
               airport or Customers freight forwarder in the case of drop ship.
               Pre-alerts are required to be sent from STATS to Centillium's
               freight forwarder at least 24 hr. in advance. Products shall be
               suitably packed for shipment in STATS JEDEC compliant standard
               containers, marked for shipment as specified in Centillium's
               purchase order, and delivered to a carrier or forwarding agent
               chosen by Centillium. However, should Centillium fail to
               designate a carrier, forwarding agent or type of conveyance,
               STATS shall contact Centillium's shipping department.

     3.5  Test and Inspection
          3.5.1  Inspection Results
                 ------------------

          STATS will supply to Centillium, with each shipment, quality control
               results, visual quality inspection results as agreed by the
               parties and a certificate of compliance to show the assembly and
               quality control steps were all completed

          3.5.2  Regular Reports
                 ---------------

          STATS will supply Centillium with reliability and statistical quality
               data on the STATS standard processes, which is made for the same
               product line, at regular intervals to be agreed upon but no less
               than once a quarter. The format and the contents of these
               report(s) are to be mutually agreed upon. Upon reasonable notice,
               STATS will allow Centillium on-site inspection at reasonable
               intervals to ensure that STATS follows the reliability and
               testing procedures set forth in this Agreement.

          3.5.3  Incoming Inspection Packages and tested devices may be subject
                 -------------------
               to incoming inspection, electrical testing and reliability
               testing by Centillium in accordance with the acceptance criteria
               set forth in Exhibit B and C hereto. Packages meeting applicable
               initial acceptance criteria or updated acceptance criteria will
               be deemed

                                 Page 5 of 25
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               accepted by Centillium. If packages do not meet this criteria
               Centillium Communications will notify STATS within 72 hr.

          3.5.4  Test or Visual/Mechanical Failure
                 ---------------------------------

          If any packages or lot of packages fails incoming inspection or test,
               and if test failure is caused by any defect in the Process used
               by STATS, Centillium may reject such lot or package in writing as
               soon as possible but at least within forty-five (45) days after
               delivery. In such event, STATS may, at its option, either re-
               test, rework or refund Centillium the purchase price of STATS
               services. Centillium will explain the reasons for wishing to
               reject a lot, and STATS will be entitled to examine any lot that
               Centillium wishes to reject. The parties will seek in good faith
               to resolve any disagreement as to whether a lot is conforming.
               After mutual agreement for return shipment, Centillium shall use
               reasonable commercial efforts to use STATS original packing, but
               in any event shall use commercially reasonable packaging, and
               supply all identifying shipping documents in order to avoid any
               deterioration of the goods.

          3.5.5  Low Line Yield on Volume Production.
                 -----------------------------------

          If the output per lot (i.e., electrical or visual mechanical yield,
               which meets the inspection and test criteria, is less than yield
               defined in Exhibit F and if Centillium so requests, STATS will
               explain the reasons for the low line yield. Lots or packages with
               yields below a yield defined in Exhibit F may not be shipped
               unless Centillium prior approval is obtained. The Established
               Standard Yield will be reviewed in every quarterly strategic
               business review and mutually agreed upon to apply for the
               following quarter and placed in Exhibit F.

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4.0  COMPENSATION
     4.1  Purchase Price
          --------------

     The price of the services shall be determined from time to time by
          agreement and quotation. The fixed price for any quarter will be
          reviewed during the last month of the previous quarter and mutually
          agreed to by the parties in good faith. For example, the Q2 (May -
          July) price will be finalized by March. If an agreement cannot be
          made, the current price will continue to be valid for the products
          already ordered.

     4.2  Payment.
          -------

     STATS will invoice Centillium the (the "payer"), as specified in the
          relevant Purchase Order. Past due invoices of Centillium to the payer
          shall bear interest at the rate of US prime rate + 1.5%, however, this
          payment can be delayed without charge if a quality or other process
          issue causes a delay but not in excess of the maximum lawful rate,
          until paid in full. If the due date of the invoice of STATS is not a
          business day, the payer shall pay STATS on the next business day
          following such due date. STATS may submit invoices for services not
          earlier than the date of shipment to Centillium Payment shall be in
          United States dollars unless otherwise agreed.

     4.3  Taxes
          -----

     Purchase prices shall be exclusive of all taxes and customs duties
          including any applicable goods and services tax, and Centillium shall
          pay and be liable for all taxes and duties imposed by any taxing
          jurisdiction in "Country of Origin" or at the location of
          manufacturing.

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5.0  WARRANTY AND DISCLAIMER; LIABILITY

     5.1  LIMITED WARRANTY. Products sold by STATS are warranted to conform to
          ----------------
          specifications therefor at the time of delivery to Centillium and to
          remain free from defects in workmanship and material for a period of
          three (3) months from the date of shipment by STATS. Any products
          which fail to meet either such warranty shall, at upon mutual
          agreement, either be repaired or replaced by STATS at no charge to
          Centillium or STATS shall issue a credit therefor in the amount paid
          by Centillium on the said invoice. STATS warranty obligation shall be
          limited solely to such repair, replacement or credit. Such obligation
          shall be conditioned upon receipt by STATS of notice of any alleged
          non-conformance to specifications within thirty (30) days after
          delivery to Centillium and of any alleged defect in material or
          workmanship within thirty (30) days after discovery. Products, which
          STATS consents or directs in writing to be returned, shall be returned
          to STATS, freight prepaid, F.O.B. Centillium's facility in California
          or other destination directed by. STATS warranty shall only apply if
          the products have not been altered or repaired other than with
          authorization from STATS and according to its approved procedures, the
          products have not been subjects to misuse, abuse, improper
          installation, misapplication, maintenance, neglect or accident, the
          products have not been damaged by excessive physical or electrical
          stress and the products have not had their serial numbers, or other
          markings, if any, altered, defaced or removed. All Products or parts
          determined to be defective shall become the property of STATS upon
          replacement, and STATS reserves the right to utilize refurbished parts
          to repair or replace the warranted products. Warranty repairs or
          warranty replacements shall be subject to this warranty for the longer
          of (a) ninety (90) days following shipment of the repaired/replaced
          products, or (b) the remainder of the original warranty for the
          defective product, which has been repaired or replaced.

     THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
          EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY
          OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, COURSE OF
          DEALING OR USAGE OF TRADE. STATS SHALL HAVE NO RESPONSIBILITY FOR ANY
          PARTICULAR APPLICATION MADE OF ANY PRODUCT.

     5.2  LIMITATION OF LIABILITY
          -----------------------

     UNDER NO CIRCUMSTANCE SHALL STATS OR ANY OF ITS AFFILIATES BE LIABLE TO
          CENTILLIUM OR ANY OTHER PERSON OR ENTITY FOR ANY SPECIAL, PUNITIVE,
          INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED UPON LOST
          GOODWILL, LOST PROFITS, WORK STOPAGE, PRODUCT FAILURE, IMPAIRMENT OF
          OTHER GOODS OR OTHERWISE AND WHETHER ARISING OUT OF BREACH OF
          WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, TORT OR OTHERWISE.

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6.0  INTELLECTUAL PROPERTY INDEMNITY

     6.1  Indemnification by Centillium
          -----------------------------

     Centillium agrees to defend STATS and its Affiliates against any third-
          party actions or claims arising out of the manufacture, use, sale,
          offer for sale, or importation of Products and brought against STATS
          to the extent based upon a claim that Centillium's specifications,
          technology, or information made available to STATS, or the product
          thereof infringes any worldwide patent, trademark or copyright, trade
          secret or similar intellectual property right of any third party, and
          Centillium agrees to purchase any work-in-process for Products and to
          pay any settlement amounts or damages awarded against STATS and its
          Affiliates (including reasonable attorneys fees and court costs) to
          the extent based upon such a claim; provided that STATS and its
          Affiliates provides Centillium (i) prompt notice thereof, (ii)
          reasonable assistance in connection with the defense thereof (at
          Centillium's expense excluding STATS and its Affiliates employee
          expense), and (iii) full control of the defense and settlement
          thereof. Centillium shall not settle any such claim in a manner that
          has a material adverse effect on STATS and its Affiliates without
          STATS and its Affiliates prior written consent. Centillium agrees to
          keep STATS and its Affiliates apprised of the progress of any action
          or claims covered by this Section 6.1. Notwithstanding the foregoing,
          Centillium's obligation to indemnify STATS and its Affiliates under
          this Section 6.1 shall not apply to any actions or claims described in
          Section 6.2 below.

     6.2  Indemnification by STATS.
          -------------------------

          6.2.1  STATS agrees to defend Centillium and/or its Associated
               Companies against any third-party actions or claims arising out
               of the manufacture, use, sale, offer for sale, or importation of
               Products and brought against Centillium to the extent based upon
               a claim that the use of any Process used by STATS or any
               technology or information provided by STATS under this Agreement
               infringes or misappropriates (directly or indirectly, such as,
               without limitation, through the sale or importation of a wafer
               manufactured by any such Process) any worldwide patent,
               copyright, trade secret or other intellectual property right of
               any third party, and agrees to pay any settlement amounts or
               damages awarded against Centillium and/or its Associated
               Companies (including reasonable attorneys fees and court costs)
               to the extent based upon such a claim; provided that Centillium
               and/or its Associated Companies provides STATS (i) reasonably
               prompt notice thereof, (ii) reasonable assistance in connection
               with the defense thereof (at Centillium's expense excluding
               Centillium and/or Associated Company employee expense), and (iii)
               allows STATS full control of the defense and settlement thereof.
               STATS shall not settle any such claim in a manner that has a
               material adverse effect on Centillium without Centillium's prior
               written consent. STATS agrees to keep Centillium apprised of the
               progress of any action covered by this Section 6.2.

          6.2.2  STATS shall at all times have the right to: (i) obtain
               appropriate licenses to, or (ii) modify the Process provided that
               the resulting Product complies with the specifications set forth
               in Exhibit B and subject to Centillium's right to

                                 Page 9 of 25
<PAGE>

               approve such changes in advance, such pre-approval not to be
               unreasonably withheld.

          6.2.3  Exclusions. STATS shall not be obligated to indemnify and hold
                 ----------
               harmless Centillium where the infringement is caused by: (i) the
               use of Products by Centillium in combination with other circuits
               components, components, devices or products if both the
               infringement would not have occurred but for such combination and
               could have been avoided by a different commercially viable
               combination and such combination is not reasonably necessary to
               use the Product for its intended purpose; (ii) use of the
               Products by Centillium and/or its Associated Companies in
               applications or environments for which Products were not
               designed; or (iii) modifications to the Products by Centillium
               and/or its Associated Companies if such infringement would have
               been avoided absent such modifications, unless such modifications
               were authorized by STATS.

     6.3  Entire Liability. THE FOREGOING STATES EACH PARTY'S ENTIRE LIABILITY
          -----------------
          AND OBLIGATION (EXPRESS, STATUTORY, IMPLIED OR OTHERWISE) UNDER THIS
          AGREEMENT WITH RESPECT TO INFRINGEMENT OF THIRD PARTY INTELLECTUAL
          PROPERTY. IN NO EVENT SHALL STATS'S LIABILITY PURSUANT TO SECTION 6.2
          ARISING OUT OF ANY INFRINGEMENT CLAIM EXCEED THE AMOUNT PAD OR PAYABLE
          BY CENTILLIUM HEREUNDER FOR THE PRODUCTS THAT ARE THE SUBJECT OF SUCH
          CLAIM.

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7.0  GENERAL PROVISIONS

     7.1  Confidentiality. (5 years)

          7.1.1  Confidential Information. "Confidential Information" means any
                 ------------------------
               technical data, trade secret, know-how, or other information
               disclosed by any party (including the Associated Companies)
               hereunder, either directly or indirectly, in writing, orally, by
               drawing or by inspections, and which shall be marked by the
               disclosing party as "Confidential" or "Proprietary". If such
               information is disclosed orally, through demonstration or by
               inspection, in order to be deemed Confidential Information, it
               must be specifically designated as being of a confidential nature
               at the time of disclosure and confirmed in writing to be received
               by the receiving party within ten (10) days of such disclosure.

          7.1.2  Exclusions. Notwithstanding the foregoing, Confidential
               Information shall not include information which:
               7.1.2.1  is known to the receiving party at the time of
                    disclosure or becomes known to the receiving party without
                    breach of this Agreement;
               7.1.2.2  is or becomes publicly known through no wrongful act of
                    the receiving party or any affiliate of the receiving party;
               7.1.2.3  is rightfully received from a third party without
                    restriction on disclosure;
               7.1.2.4  is independently developed by the receiving party or any
                    of its affiliates by persons who had no access to the
                    information;
               7.1.2.5  is furnished to any third party by the disclosing party
                    without restriction on its disclosure; or
               7.1.2.6  is approved for release upon a prior written consent of
                    the disclosing party.

          7.1.3  Compelled Disclosure. Notwithstanding the foregoing, a
                 --------------------
               receiving party may disclose Confidential Information if such
               Confidential Information is disclosed pursuant to judicial order,
               requirement of a governmental agency or by operation of law;
               provided, however, that the receiving party shall provide prior
               notice to the disclosing party and thereafter use reasonable
               commercial efforts to assist the disclosing party in preventing
               or controlling such compelled disclosure.

          7.1.4  Nondisclosure. The receiving party agrees that it will not
                 -------------
               disclose any Confidential Information to any third party unless
               that third party agrees to be bound to the confidentiality
               obligations stated in this part VII and will not use Confidential
               Information of the disclosing party for any purpose other than
               for the performance of obligations hereunder during the term of
               this Agreement. The receiving party further agrees that
               Confidential Information shall remain the sole property of the
               disclosing party and that it will take all reasonable precautions
               to prevent any unauthorized disclosure of Confidential
               Information by its employees and independent contractors. No
               license shall be granted by the disclosing party to the receiving
               party with respect to Confidential Information disclosed
               hereunder unless otherwise expressly provided herein. Each party
               will disclose the other's Confidential Information

                                 Page 11 of 25
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               only to those of its employees and personnel of Affiliates that
               have a need to know and who are informed that such information is
               confidential.

          7.1.5  Return of Confidential Information. After expiration or
                 ----------------------------------
               termination of this Agreement upon the request of the disclosing
               party, the receiving party will promptly return all Confidential
               Information furnished hereunder and all copies thereof, and the
               receiving party will certify that al such confidential
               information has been returned or destroyed.

          7.1.6  Publicity. The parties agree that all publicity and public
                 ---------
               announcements concerning the formation and existence of this
               Agreement shall be jointly planned and coordinated by and among
               the parties. Neither party shall disclose any of the provisions
               of this Agreement, the existence of this Agreement, nor that the
               parties are doing business with one another to any third party
               without the prior written consent of the other party. Centillium
               will be responsible for all communications with Centillium's
               customers concerning the subject matter hereof, and STATS agrees
               to forward to Centillium any communications it receives from
               Centillium's customers. Notwithstanding the foregoing, any party
               may disclose information concerning this Agreement as required by
               the rules, orders, regulations, subpoenas or directives of a
               court, government or governmental agency, after giving prior
               notice to the other parties and either party may disclose this
               Agreement to its attorneys, accountants or like consultants that
               have a need to know or to potential investors or potential
               acquiring companies.

          7.1.7  Remedy for Breach of Confidentiality. If a party breaches any
                 ------------------------------------
               of its obligations with respect to confidentiality and
               unauthorized use of Confidential Information hereunder, the non-
               breaching party shall be entitled to equitable relief to protect
               its interest therein, including but not limited to injunctive
               relief, as well as money damages.

     7.2  Term and Termination
          --------------------

     This Agreement shall remain in force for five (5) years from the time the
          first product is released to production by Centillium unless it is
          terminated earlier as provided in this Agreement. At the end of five
          (5) years, this Agreement will be extended for another one (1) year
          under the same terms and conditions provided herein unless either
          party gives notice of termination twelve (12) months prior to the
          expiration date. Notwithstanding the foregoing, all existing orders
          and the provisions of Part 5.0, 6.0, and Section 7.6 (Export Controls)
          shall survive any termination or expiration of this Agreement. The
          obligations of confidentiality under Article 7.1 shall last during the
          specific period set forth in Article 7.1.

          7.2.1  Subject to Section 7.2(b), either party may terminate this
               Agreement with immediate effect, at its sole discretion, upon
               giving written notice to the other party, in case:

               7.2.1.1  the other party defaults in the performance of any
                    material obligation hereunder, and if any such default is
                    not corrected within ninety (90) days after the defaulting
                    party receives written notice of such default from the non-
                    defaulting party,

               7.2.1.2  the business of the other party as a commercial
                    enterprise ceases, or

                                 Page 12 of 25
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          7.2.1.3  The other party files a petition in bankruptcy, or is
               adjudicated bankrupt, or makes a general assignment for the
               benefit of creditors, or becomes insolvent, or is otherwise
               unable to meet its business obligations for a period of three (3)
               consecutive months.

          7.2.2  In the event that STATS terminates this Agreement pursuant to
               Section 7.2 above, STATS agrees to upon request to provide
               Centillium customers with a continued supply of Packages and test
               services. Centillium agrees to provide STATS with a list of such
               customers reasonably prior to the occurrence of the events
               specified in Sections 7.2.

     7.3  Force Majeure. The parties shall not be liable to one another for
          -------------
          failure to perform any part of this Agreement except for any payment
          obligation when such failure is due to fire, flood, strikes, labor
          troubles or other industrial disturbances, inevitable accidents, war
          (declared or undeclared), embargoes, blockades, legal restrictions,
          governmental regulations or orders, riots, insurrections, year 2000
          computer problems or any cause beyond the control of such party.
          However, the party so prevented from performance shall use
          commercially reasonable efforts to resume performance, and the parties
          shall proceed under this Agreement when the causes of such
          nonperformance have ceased or have been eliminated.

     7.4  Assignment. The parties shall not assign or transfer this Agreement,
          ----------
          in whole or in part, or any right or obligation hereunder to any third
          party without the prior written consent of the other party, provided
          that either party shall have the right to assign this Agreement to an
          entity that acquires all or substantially all of its assets, without
          the consent of the other party.

     7.5  Governing Law: Disputes.
          -----------------------

          7.5.1  Except as hereinafter provided, all disputes or controversies
               arising out of or in any manner relating to this Agreement which
               the parties do not resolve in good faith within ten days after
               either party notifies the other of its desire to arbitrate such
               disputes or controversies shall be settled by arbitration by a
               single arbitrator in accordance with the then standard prevailing
               commercial rules, as modified or supplemented by this article, of
               the American Arbitration Association ("AAA"). The arbitration
               shall be held in Santa Clara County, California. The arbitration
               award shall be in writing and shall specify the factual and legal
               bases of such award. The arbitration award shall be final and
               binding, and a judgment consistent therewith may be entered by
               any court of competent jurisdiction. The parties agree that the
               arbitration award shall be treated confidentially, and the
               parties shall not, except as otherwise required by law or court
               or, disclose the arbitration award to any third party, excluding
               personnel I their affiliated companies and their attorneys and
               accountants with a need to know, provided that such recipients
               agree to be bound by the same restrictions as are contained in
               this Agreement. The arbitrator shall not have the power to render
               an award of punitive damages. To the extent of any conflict, this
               article shall supersede and control AAA rules.

                                 Page 13 of 25
<PAGE>

          7.5.2  Nothing in this article shall be construed to preclude or in
               any way prohibit either party from: (1) seeking any provisional
               remedy, such as an injunction or a temporary restraining order;
               or (2) instituting or prosecuting to judgment any lawsuit in any
               court of competent jurisdiction to collect any money due.

          7.5.3  Except as provided in this subsection, neither party shall have
               the right to take depositions or obtain discovery of documents or
               other information. After the appointment of the arbitrator, the
               parties shall agree on (1) a reasonable number of and schedule
               for depositions which the parties may take and (2) a reasonable
               scope and schedule for the production of documents or other
               information which is relevant to the subject matter of the
               arbitration. If the parties cannot reach agreement on the number
               of depositions, the scope, of production of documents or other
               information and the schedule therefor, the arbitrator shall make
               such determination(s). All discoveries shall be completed no
               later than thirty (30) days prior to the arbitration hearing. The
               arbitrator shall have the power to enforce any discovery agreed
               upon by the parties or other wise required to be taken sanctions
               and penalties as can be or may be imposed in like circumstance in
               a civil actions by a California Superior Court, except the power
               to order the arrest or imprisonment of a person.

          7.5.4  No later than thirty (30) days prior to the arbitration
               hearing, each party shall produce to the other party and the
               arbitrator lists of the witnesses, documents and other
               information which such party intends to use at the arbitration
               hearing.

     7.6  Export Controls. STATS and Centillium acknowledge that they are each
          ---------------
          subject to regulation by agencies of the U.S. and "Country of Origin"
          Governments, including the U.S. Department of Commerce, which prohibit
          export or diversion of certain products and technology to certain
          countries. Any and all obligations of the parties to provide technical
          information, technical assistance, any media in which any of the
          foregoing is contained, training and related technical data
          (collectively, "Data") shall be subject in all respect to such United
          States and "California" laws and regulation as shall from time to time
          govern the license and delivery of technology and products abroad by
          persons subject to the jurisdiction of the United States, including
          the Export Administration Act of 1979, as amended, any successor
          legislation, and the Export Administration Regulations issued by the
          Department of Commerce, International Trade Administration, Bureau of
          Export Administration.

     Without in any way limiting the provisions of this Agreement, the parties
          agree that unless prior written authorization is obtained from the
          Bureau of Export Administration or unless the Export Administration
          Regulations explicitly permit the re-export without such written
          authorization, neither party will export, re-export, or transship,
          directly or indirectly, the Products or any technical data disclosed
          or provided to STATS, or the direct product of such technical data, to
          country groups Q, S, W, Y, or Z (as defined in the Export
          Administration Regulations and which currently consist of Albania,
          Bulgaria, Cambodia, Cuba, the Czech Republic, Estonia, Laos, Latvia,
          Libya, Lithuania, Mongolian People's Republic, North Korea, Poland,
          Romania, the geographic area of the former Union of Soviet Socialist
          Republics, the

                                 Page 14 of 25
<PAGE>

          Slovak Republic and Vietnam, or to the People's Republic of China
          (excluding Taiwan), Haiti, Iran, Iraq, Syria, Yugoslavia (Serbia and
          Montenegro), or to any other country, as to which the U.S. Governments
          have placed an embargo against the shipment of products, which is in
          effect during the term of this Agreement.

     7.7  Notice Any notice required or permitted to be given under this
          ------
          Agreement shall be delivered (i) by hand, (ii) by registered or
          certified mail, postage prepaid, return receipt requested, to the
          address of the other party first set forth above, or to such other
          address as a party may designated by written notice in accordance with
          this Section 7.7 by overnight courier, or (iii) by electronic
          transmission with conforming letter mailed under the conditions
          described in (ii). Notice so given shall be deemed effective when
          received, or if not received by reason of fault of addressee, when
          delivered.

          If to ST Assembly and Test Services Ltd, to:

          Exec. Vice President Sales
          Singapore Account Manager
          5 Yishun Street 23
          768442

          If to Centillium, to:

          Vice President of Operations and Manufacturing
          Centillium
          47211 Lakeview Blvd
          California, 94538

     7.8  Relationship of Parties The relationship between Centillium and STATS
          -----------------------
          under this Agreement is that of independent contractors and neither
          shall be, nor represent itself to be, the joint venture, franchiser,
          franchisee, partner, broker, employee, servant, agent, or
          representative of the other for any purpose whatsoever. No party is
          granted any right or authority to assume or create any obligation or
          responsibility, express or implied, on behalf of, or in the name of,
          another party or to bind another in any matter or thing whatsoever.

     7.9  Waiver
          ------

     Should any of the parties fail to exercise or enforce any provision of this
          Agreement or to waive any rights in respect thereto, such waiver or
          failure shall not be construed as constituting a continuing waiver or
          a waiver of any other right.

     7.10  Severability
           ------------

     In the event that any provision or provisions of this Agreement shall be
          held to be unenforceable, the parties shall re-negotiate those
          provisions in good faith to be valid, enforceable substitute
          provisions which provisions shall reflect as closely as possible the
          intent of the original provisions of this Agreement. If the parties
          fail to negotiate

                                 Page 15 of 25
<PAGE>

          a substitute provision, this Agreement will continue in full force and
          effect without said.

     7.11  Entire Agreement This Agreement, including the Exhibits referred to
           ----------------
          herein, contains the entire understanding of the parties, and
          supersedes any prior agreement between or among the parties with
          respect to its subject matter. In case of any conflicts between this
          Agreement and any purchase orders, acceptances, correspondence,
          memorandum, listing sheets and other documents forming part of any
          order for Products, this Agreement shall govern. This Agreement shall
          not be amended or modified except by written instrument signed by the
          duly authorized representatives of the parties hereto. IN WITNESS
          WHEREOF, the parties hereto have caused this Agreement to be signed by
          their duly authorized representatives or officers, effective as of the
          Effective Date.

STATS  Centillium

By: /s/                         By: /s/ WF Mackenzie
    ---                             ----------------

Name: JUNE CHIA                 Name: William F Mackenzie
      ----------                      -------------------

Title: EVP Sales & Marketing          Title: VP Operations and Manufacturing
       ---------------------
Services

                                 Page 16 of 25
<PAGE>

                                    EXHIBITS
                                    --------

A - Assembly and Test Cycle Times - Prototype and Production
B - Acceptance Criteria - Electrical and Visual Mechanical
C - Regular Data - SPC, Test and Reliability
D - Problem Resolution Procedures
E - Capacity Guarantee
F - Low yield limits
G - Specifications
H - WIP Reporting Format (minimum data set)

                                 Page 17 of 25
<PAGE>

      EXHIBIT A - Assembly and Test Cycle Times - Prototype and Production
      --------------------------------------------------------------------

<TABLE>
<S>                                    <C>                     <C>                     <C>
TECHNOLOGY                             PROTOTYPE               PRODUCTION               HOT-LOT
-------------------------------------------------------------------------------------------------------
LEADED ASSEMBLY                          3 Days                  5 Days                  3 Days
-------------------------------------------------------------------------------------------------------
NON-LEADED ASSEMBLY                      2 Days                  4 Days                  2 Days
-------------------------------------------------------------------------------------------------------
TEST                                     1 Day                   3 Days                  1 Day
-------------------------------------------------------------------------------------------------------
</TABLE>

                                 Page 18 of 25
<PAGE>

                        EXHIBIT B - ACCEPTANCE CRITERIA
                        -------------------------------

<TABLE>
<CAPTION>
TECHNOLOGY               PROTOTYPE             PRODUCTION               AOQ
                                                                    (PRODUCTION)
-----------------------------------------------------------------------------------
<S>                 <C>                   <C>                   <C>
-----------------------------------------------------------------------------------

LEADED ASSEMBLY      4 mil Coplanarity     3 mil Coplanarity          15 DPM
-----------------------------------------------------------------------------------
NON-LEADED           8 mil Coplanarity     6 mil Coplanarity          15 DPM
 ASSEMBLY
-----------------------------------------------------------------------------------
TEST                 Prototype Program       Latest Program           35 DPM
-----------------------------------------------------------------------------------
</TABLE>

                                 Page 19 of 25
<PAGE>

                            EXHIBIT C - REGULAR DATA
                            ------------------------

<TABLE>
<CAPTION>
Test                       Number of lots        Devices tested         Passes/Fails       Test Criteria
<S>                      <C>                  <C>                   <C>                   <C>
Autoclave                Number of lots       Devices tested        Passes/Fails          Test Criteria
HAST                     Number of lots       Devices tested        Passes/Fails          Test Criteria
Temp Cycle               Number of lots       Devices tested        Passes/Fails          Test Criteria
Thermal Shock            Number of lots       Devices tested        Passes/Fails          Test Criteria
Ball Shear               Number of lots       Devices tested        Passes/Fails          Test Criteria
Bond Pull                Number of lots       Devices tested        Passes/Fails          Test Criteria
Solderability            Number of lots       Devices tested        Passes/Fails          Test Criteria
Lead Strength            Number of lots       Devices tested        Passes/Fails          Test Criteria
Die Shear                Number of lots       Devices tested        Passes/Fails          Test Criteria
Mark Permanency          Number of lots       Devices tested        Passes/Fails          Test Criteria
SPC                      Number of lots       Devices tested        Cp                    Cpk
</TABLE>

Data is to be provided to the Centillium Reliability Engineer on a Monthly Basis
including FA Reports for all failures

                                 Page 20 of 25
<PAGE>

                    EXHIBIT D Problem Resolution Procedures

When STATS identifies current or potential problems or Centillium Notifies STATS
of a potential problem
a)                       Accept such notice and classify it in accordance with
  the following classifications:

     i.   Critical - Functional or Reliability failure resulting in missed
          deliveries or customer lines down
     ii.                 Major - Functional or Reliability failure which does
          not resulting in missed deliveries or customer lines down
     iii.                Minor - Cosmetic problem or feature enhancement

b)                       Resolve such Engineering Complaint according to the
  following classifications of the date of STATS's notice, unless the parties
  mutually agree upon a later date. If unable to resolve an Engineering
  Complaint within the specified period, STATS will issue an "interim report".

     i.   Critical - 1 day
     ii.                 Major  - 3 days
     iii.                Minor  - 2 weeks

b)                       For Critical and Major complaints, STATS agrees to
  acknowledge receipt of such Engineering Complaint and advise Centillium of
  their proposed organization responsible for containing it within one (1)
  working day of Centillium's receipt thereof.

c)                       For Minor complaints, STATS agrees to acknowledge
  receipt of such Engineering Complaint and advise furnish Centillium a weekly
  report of the status of open Engineering Complaints, in a mutually agreed upon
  medium, together with a proposed schedule for their resolution.

                                 Page 21 of 25
<PAGE>

                          EXHIBIT E Capacity Agreement

<TABLE>
<CAPTION>
MONTHS                LEADED PACKAGES    NON LEADED PACKAGES     TEST TIME/HR         TEST TIME/HR
                                                                   (DIGITAL)            (ANALOG)
------------------------------------------------------------------------------------------------------
<S>                 <C>                  <C>                  <C>                  <C>
March                             35000                75000                  611                  125
------------------------------------------------------------------------------------------------------
Apr                               35000                75000                  611                  125
------------------------------------------------------------------------------------------------------
May                               27500                67500                  528                  113
------------------------------------------------------------------------------------------------------
Jun                               30000                70000                  556                  117
------------------------------------------------------------------------------------------------------
Jul                               32500                62500                  528                  104
------------------------------------------------------------------------------------------------------
Aug                               35000                75000                  611                  125
------------------------------------------------------------------------------------------------------
Sept                              35000                75000                  611                  125
------------------------------------------------------------------------------------------------------
Oct                               40000                80000                  667                  133
------------------------------------------------------------------------------------------------------
Nov                               40000               100000                  778                  167
------------------------------------------------------------------------------------------------------
Dec                               40000               155000                 1083                  258
------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
 .                              This forecast is to be used for capacity planning only and the forecast on section (3.4.2) will be
used to purchase wafers.
<S>                          <C>
 .                            If Centillium has unexpected demand above and beyond its upside forecast STATS agrees to meet this
                             upside 100%, within the specified cycle times (EXHIBIT A) provided at least five (5) weeks notice is
                             provided for leaded and 8 weeks for non leaded
 .                            Test time for Digital includes Sort
</TABLE>

                                 Page 22 of 25
<PAGE>

                          EXHIBIT F LOW YIELD CRITERIA

<TABLE>
<CAPTION>
TECHNOLOGY                         DIGITAL TEST            ANALOG                 AOQ                  AOQ
                                                            TEST                 (V/M)            (ELECTRICAL)
-----------------------------------------------------------------------------------------------------------------
<S>                             <C>                  <C>                  <C>                  <C>
LEADED ASSEMBLY                                 90%                62.5%        35 DPM               15 DPM
-----------------------------------------------------------------------------------------------------------------
NON-LEADED ASSEMBLY                             80%         N/A                 35 DPM               15 DPM
-----------------------------------------------------------------------------------------------------------------
</TABLE>


 .    If the lot does not meet the limit page the relevant Centillium engineer

                                 Page 23 of 25
<PAGE>

                           EXHIBIT G - SPECIFICATIONS
<TABLE>
<CAPTION>

SPC monitoring of manufacturing sites     CSP-OPQR- 16
<S>                                       <C>
Reliability process monitoring program    CSP-OPQR- 17
Packing and Transportation of wafers      CSP-OPSH-1
Visual wafer inspection criteria          CSP-OPQR-18
</TABLE>

                                 Page 24 of 25
<PAGE>

              EXHIBIT H - WIP Reporting Format (minimum data set)

1. Location
2. Requested Ship Date
3. Date and time file sent
4. Forecast Ship date
5. Customer or MELCO Devices Number
6. Ship confirmation date
7. Process Stage
8. Lot number
9. Package quantity into process stage

 .  Reports to be generated daily

                                 Page 25 of 25