Deswell’s two main manufacturing factories for its plastic
and electronic products are located at Houjie, and Chang An, Dongguan, China

The Houjie site was first acquired in January 2000, when the Company paid approximately $2.6 million for a 1.3 million square foot plot of land. Its aim was to build a state-of-the-art manufacturing plant for its plastics division there. A four-phase construction plan was developed, the first phase of which began around seven years ago.

The following is a basic timeline showing completion dates for the different phases of the new plastic production plant:

Start of	Construction October 2001	Phase I August 2003	Phase II July 2004	Phase III October 2005	Phase IV Planned

Phase I construction began in October 2001: this involved the construction of 466,000 square feet of production space, along with over 116,000 square feet of dormitories and 91,000 square feet of amenities for employees. By August 2003, Deswell had spent approximately $35 million on Phase I, which included spending on construction, investment in machinery and equipment, and the installation of fixtures and furniture. Phase II, which took another year to finish, was completed in July 2004 and involved further spending of around $14 million.

Phase III construction was completed in October 2005, and became fully operational in early 2006. This Phase included construction of an additional 377,000 square feet of factory space and 133,000 square feet of office space. By March 31, 2008, Deswell has completed Phase III and the total investment in this brand-new plastic injection molding facility was about $58 million, most of which was channeled into plant construction, infrastructure development, and investment in plant machinery. As a result, the Company now enjoys a superb modern production facility that not only gives it a significant competitive edge within the industry, but also stands as a symbol of the pride and confidence in the future it has for its plastics operations.

The current plant facility is sufficient for the existing capacity requirements. The final Phase IV of the plastics plant development is planned for the long term. Deswell’s plans are to inaugurate Phase IV as additional production capacity is required in the future.

Below are details of the manufacturing plant constructed for the Plastics Division:

The Company’s Chang An manufacturing plant is used primarily to manufacture electronic products and carry out electronic assemblies for OEMs. It was acquired in July 2003 at a purchase price of around $4.2 million. Finished products produced at the factory include sophisticated studio-quality and consumer audio equipment, commercial telephone units, network education platforms, IP switches, along with a wide range of other products.
The facility has ISO9001 and ISO14001 accreditation and is fully RoHS compliant, and as a result is completely capable of meeting any production requirements to the highest levels of quality.

Below are details of the manufacturing plant purchased for the Electronics Division:

Electronic Plant (Chang An)		Electronic Plant (Chang An)

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