DESWELL INDUSTRIES, INC. ANNOUNCES FOURTH QUARTER NET INCOME INCREASES 124 PERCENT
- Company Also Announces Dividend of $0.55 Per Share -

HONG KONG (June 8, 2000) - Deswell Industries, Inc. (NASDAQ NM Symbol: DSWL) (the "Company") today announced its results for the fourth quarter and year ended March 31, 2000.

Net sales for the fourth quarter increased 56% to $15.0 million compared to sales of $9.6 million in the fourth quarter ended March 31, 1999. Operating income increased 110% to $2.2 million for the most recent quarter, compared to $1.0 million for the year-ago quarter. Net income for the fourth quarter increased 124% to $1.9 million, compared to $0.9 million for the year-ago quarter. Basic earnings per share and diluted earnings per share increased to $0.36 and $0.35 respectively (based on 5,348,000 and 5,424,000 weighted average shares outstanding, respectively), compared to $0.16 and $0.16 respectively (based on 5,476,000 and 5,476,000 weighted average shares outstanding, respectively), in the fourth quarter ended March 31, 1999.

Net sales for the year ended March 31, 2000 were $61.0 million, an increase of 14%, compared to sales of $53.4 million for the year ended March 31, 1999. Operating income decreased 1.6% to $10.7 million, compared to $10.9 million in the previous year, and net income increased 8.5% to $10.3 million, compared to $9.5 million in the previous year. Basic earnings per share and diluted earnings per share increased to $1.90 and $1.89 respectively (based on 5,412,000 and 5,449,000 weighted average shares outstanding, respectively), compared to $1.73 and $1.72 respectively (based on 5,478,000 and 5,524,000 weighted average shares outstanding, respectively), for the year ended March 31, 1999.

The Company reported cash and cash equivalents of $27.2 million at March 31, 2000, compared to $27.6 million as of March 31, 1999. Working capital was $43.4 million as of March 31, 2000, versus $41.1 million as of March 31, 1999. The Company has no short-term and long-term debt.

The Company also announced that on June 3, 2000 its board of directors declared a dividend of $0.55 per share (compared to $0.55 per share in 1999). The dividends will be payable on July 6 to shareholders of record as of June 22, 2000.

Mr. Lau, chairman and chief executive officer, commented, "Though the market conditions were still weak in the first and second quarters, we are very pleased that the Company started to recover in the second quarter and had favorable results for the year ended March 31, 2000. Jetcrown, the Company's plastics manufacturing operation, had achieved stable growth this year. Looking forward, we anticipate growth in the plastics operation with increasing business from both existing and new customers. We are preparing molds for new customers and are confident that these orders will positively impact revenues this year. To meet our customers' needs, we continue to invest in and expand our production capacity for high-quality plastic injection products. We have purchased new equipment and software in our tooling section and improved our production flow."

"Kwanasia, the electronic assembly operation, was significantly impacted during the year by the loss of Behringer as a customer. However, the operation started to recover in the third quarter with increased business from several new customers. We are optimistic about the improved performance at Kwanasia and are confident in our ability to work closely with these new customers to sustain long-term relationships."

"In the past two years, Kwanta, the metal manufacturing division, mainly supplied metal casings and parts for our electronic and plastic divisions. In the coming year, as Kwanasia's business improves, we believe that Kwanta's business should also improve accordingly. However, our strategy is to expand our automated metal stamping operation to help this division attract business independent from that which is fed from Jetcrown and Kwanasia."

Mr. Lau concluded, "Despite the slight increase in net income, management declared a dividend per share that is the same as last year's due to near-term expansion needs. We will keep our investors informed as our expansion progresses."

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 Kyocera Mita Industrial (H.K.) Limited, Epson Precision (H.K.) Ltd., Namtai Electronics (Shenzhen) Co. Ltd., Inter-Tel Incorporated, Vtech Communications Ltd., Behringer Holdings (Pte) Ltd. and Shakespeare (H.K.) Limited.

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