DESWELL  INDUSTRIES,  INC. EXPANDS ITS DOUBLE INJECTION MOLDING DIVISION

HONG KONG (September 5, 2000) - Deswell Industries, Inc. (Nasdaq Symbol: DSWL) today announced it has commenced expansion of its high precision double injection molding division. The Company is investing $3.5 million for 14 sets of double injection machines.  Seven machines have already been purchased and installed at the Company’s Shekou manufacturing plant and are operating at full capacity.  The remaining seven will be installed at its new Dongguan plastic manufacturing plant by November 2000.  Upon installation of these machines, the Company expects that the 20 sets of double injection molds currently being developed by their Tooling Division will be completed and ready for production.

Mr. Richard Lau, Chief Executive Officer of Deswell, said, “We are seeing increasing demand for high precision double injection products in the market.  Only approximately 2% of the plastic injection companies in China possess this capability since it requires substantial capital investment and specific quality expertise.  Double injection molding enables Deswell to efficiently produce different combined plastic parts, such as key caps for organizers, calculators and telephones, housings for telecommunication products, and knobs and switches for audio and video products, thereby expanding our addressable market.  The management believes that this is a good business decision as Jetcrown is well equipped and supported with significant financial and technical resources.  We are confident that we can gain market share in this high margin marketplace due to our well-regarded precision tooling expertise and expanding state-of-the-art manufacturing capabilities.”

Deswell manufactures injection-molded plastic parts and components, 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 Co. (H.K.) Limited, Epson Precision (H.K.) Ltd., Namtai Electronics (Shenzhen) Co. Ltd., Inter-Tel Incorporated and Vtech Communications Ltd.

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