DESWELL INDUSTRIES, INC. ANNOUNCES 47% INCREASE IN FIRST QUARTER REVENUES

HONG KONG (August 14, 2000) - Deswell Industries, Inc. (Nasdaq NM Symbol: DSWL) today announced its results for the first quarter ended June 30, 2000.

Net sales for the quarter ended June 30, 2000 were $17.8 million, an increase of 47% compared to net sales of $12.1 million for the quarter ended June 30, 1999. Operating income increased 47% to $2.8 million for the most recent quarter, compared to $1.9 million for the same quarter in 1999. Net income for the quarter increased 31% to $2.8 million compared to $2.1 million for the year-ago quarter. Basic earnings per share and diluted earnings per share increased to $0.52 and $0.51 respectively (based on 5,348,000 and 5,407,000 weighted average shares outstanding, respectively), compared to $0.39 and $0.39 respectively (based on 5,476,000 and 5,476,000 weighted average shares outstanding, respectively), in the first quarter ended June 30, 1999.

The Company's balance sheet remains strong. Working capital was $47.2 million as of June 30, 2000, compared to $44.7 million at March 31, 2000. The Company has no short-term or long-term debt.

The Company also announced that the Company's 2000 Annual General Meeting will be held at 11:00 a.m. E.D.T. on September 27, 2000 at La Suite Fragonard of The Plaza Hotel, Fifth Avenue at Central Park South, New York, New York.

Mr. Lau, Chairman and Chief Executive Officer, commented, "We are very pleased to announce that the Company reported a 47% increase in net sales together with a 31% increase in net income in the first quarter compared to last year. Though the fluctuation in global oil prices in the past six months affected resin prices and tightened the supply, the Company had effectively hedged against it, and was not significantly affected. For the plastics operation, Jetcrown will commence another stage of investment starting next quarter. The investment plan will comprise of the upgrade of our tooling section and the purchase of plant and machinery. Moreover, our Dongguan Plastic Plant II is expected to commence operation in October of this year. Business with existing customers remains robust; we expect business with Epson, a relatively new customer, to increase approximately 250% for fiscal 2001. We are also increasingly optimistic about our new business development efforts. We expect that all these developments shall drive substantial revenue growth in the coming year."

Mr. Lau continued, "Our electronics operation reported 80% growth in revenue in the first quarter compared to a weak quarter last year. This increase was driven by the commencement of business with a few new customers. We expect results will continue their turn-around in the coming months. The addition of Mr. Dickson Lam should also strengthen the management and marketing performance of our electronics business."

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.

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