HONG KONG (May 12, 1997) - Deswell Industries, Inc. (NASDAQ NM: DSWLF and DSWWF) (the "Company") today announced that it has expanded the facilities and capabilities of its plastics molding, electronics and metal products subsidiaries.

Jetcrown Industrial Ltd., Deswell's plastics molding subsidiary, recently leased an additional 55,000 square foot factory space in Shenzhen, China. The newly leased space is adjacent to Jetcrown's existing 225,000 square foot facility, thereby increasing Jetcrown's available space by almost 25%. This space will be used to meet the growing demand for the Company's injection molded plastic products and will also accommodate its tooling department.

Kwanasia Electronics Co., Ltd., Deswell's electronics subsidiary, has relocated its original 22,000 square foot factory space to a facility in Dongguan. In addition, Kwanasia has acquired two advanced "Panasert MVIIF" Surface Mount Technology (SMT) versatile placement machines at a cost of approximately US$1 million. The new machines, combined with the existing 14 sets of SMT machines, will provide Kwanasia with the capability to place three million printed circuit board components daily.

Kwanta Precision Metal Co., Ltd., Deswell's metal products subsidiary, plans to occupy a newly constructed and leased 60,000 square foot facility in Dongguan. Most of Kwanta's machinery and equipment will be installed into the new location by mid May 1997.

Mr. Richard Lau, Chief Executive Officer of Deswell, said, "The Company's aggressive capacity expansion ensures that we can continue to meet the increasing orders from our customers. Our additional space and state-of-the-art equipment should enable Deswell to capitalize on continued demand for our products and services."

Deswell manufactures injection-molded plastic parts and components and electronic products and subassemblies 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 ("PTH") 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 Industries (H.K.) Limited, Nam Tai Electronics (Shenzhen) Co. Ltd., Inter-Tel Incorporated, Behringer spezeiller studiotechnik GmbH and Shakespeare (H.K.) Limited.

This release, other than historical financial information, may consist of forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by the Company with the SEC, which identify important risk factors that could cause actual results to differ from those contained in forward-looking statements.