DESWELL INDUSTRIES, INC. ANNOUNCES THIRD QUARTER RESULTS

HONG KONG (February 23, 2000) - Deswell Industries, Inc. (NASDAQ NM Symbol: DSWL) today announced its results for the third quarter and nine months ended December 31, 1999.

Net sales for the quarter were $17.8 million, an increase of 41% compared to sales of $12.6 million in the third quarter ended December 31, 1998. Operating income increased 40% to $3.2 million, compared to $2.3 million in the previous year, and net income increased 37% to $2.9 million, compared to $2.1 million in the previous year. Basic earnings per share and diluted earnings per share increased 40% and 39% to $0.55 and $0.54 respectively (based on 5,348,000 and 5,415,000 weighted average shares outstanding, respectively), compared to $0.39 and $0.39 respectively (based on 5,478,000 and 5,487,000 weighted average shares outstanding, respectively), in the third quarter ended December 31, 1998.

Net sales for the nine months ended December 31, 1999 were $46.0 million, an increase of 5% compared to sales of $43.9 million for the corresponding period in 1998. Operating income decreased 13% to $8.6 million, compared to $9.9 million in the previous year, and net income decreased 3% to $8.4 million, compared to $8.6 million in the previous year. Basic earnings per share and diluted earnings per share decreased 2% to $1.54 and $1.54 respectively (based on 5,433,000 and 5,451,000 weighted average shares outstanding, respectively), compared to $1.58 and $1.56 respectively (based on 5,478,000 and 5,525,000 weighted average shares outstanding, respectively), for the nine months ended December 31, 1998.

The Company reported a continued strong financial position with book value per share of $9.56 and cash per share of $5.36. The Company has no short term or long term debt.

Mr. Richard Lau, Chief Executive Officer, commented, "The third quarter ended December 31, 1999 continued to reflect a sustained recovery in our business. Jetcrown, our plastic division, recorded a 69% and 28% increase in net revenue for the quarter and for the nine months respectively over the prior year. The substantial improvement is mainly attributed to expanded business with our existing strong customer base as well as the increasing business from our new customers. Though there is an increase in oil prices, management has securely hedged its resin supply to help ensure that our business will not be affected by pricing. The purchase of $2 million worth of resin has resulted in a substantial increase in inventory as of December 31, 1999."

"With regards to the recent purchase of the 35.1% minority interest in our metal operation," Mr. Lau continued, "the metal operation and management was reorganized after the acquisition. We expect to see an improvement in that business over the next three to six months. We anticipate expanding capacity at our metallic manufacturing facility based on our anticipation of increased order flow to this division. We are pleasedto see that the electronic & metallic business recorded a 9% increase in net revenue for the quarter despite a decrease of 22% in net revenue for the nine months. Kwanasia, our electronic operation, has not recovered as substantially as our plastic operation since it is undergoing a strategic change in its product mix. While we will continue our OEM and subcontract business, Kwanasia's research and development team in Shenzhen has been working on development and production of our own security and telecommunication products. We anticipate introducing the new product into the marketplace over the next two years."

Deswell manufactures injection-molded plastic parts and components and electronic products and subassemblies and metallic products for original equipment manufacturers ("OEMs") and contract manufacturers at its factories in the People's Republic of China. The Company produces a wide variety of plastic parts and components used in the manufacture of consumer and industrial products; printed circuit board assemblies using surface mount ("SMT"), and pin-through hole ("PHT") interconnection technologies; and finished products such as telephones, telephone answering machines, sophisticated studio-quality audio equipment and computer peripherals. The Company's customers include Mita Industrial (H.K.) Limited, Namtai Electronic (Shenzhen) Co. Ltd., Inter-Tel Incorporated, Behringer Holdings (Pte) Ltd., Vtech Communications Ltd., Prod-Art Company Limited and Shakespeare (H.K.) Limited.

To learn more about Deswell Industries, Inc., please visit the Company's web site at www.deswellindustries.com.