HONG KONG (August 4, 1997) - Deswell Industries, Inc. (NASDAQ/DSWLF and DSWWF) ( the "Company" ) today announced its results for the first quarter ended June 30, 1997.

Net sales for the quarter were $14.6 million, an increase of 70% compared to sales of $8.6 million in the first quarter ended June 30, 1996. Operating income increased 60% to $3.3 million, compared to $2.0 million in the previous year, and net income increased 61% to $2.7 million, compared to $1.7 million in the previous year. Earnings per share and fully diluted earnings per share increased 38% to $0.51 (based on 5,279,000 and 5,302,000 weighted average shares outstanding respectively), compared to $0.37 (based on 4,550,000 weighted average shares outstanding) in the first quarter ended June 30, 1996.

Mr. Richard Lau, Chief Executive Officer stated "I am pleased to report that our strong growth continued this quarter. This growth is mainly attributable to a continued steady increase in orders as our existing customers grow, as well as new customers. Over the past twelve months we have invested in facility expansion as well as state-of-the-art machinery in order to provide our customers with superior service for their injection molding, electronic assembly and metals needs. Generally, operations are running smoothly and our production capabilities are broader and more flexible as a result of last year's capacity expansion."

Mr. Lau concluded, "Our financial position remains strong. Working capital was $23.1 million as of June 30, 1997 as compared to $21.4 million as of March 31, 1997, and the current ratio was 4.6 with no long term debt."

Deswell manufactures injection-molded plastic parts and components, electronic products and subassemblies and metallic products for the original equipment manufactures ("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. Metal products manufactured by the Company include metallic molds and accessory parts used in audio equipment, telephones and copying machines. The Company's customers include Mita Industries (H.K.) Limited, Nam Tai Electronics (Shenzen) Co. Ltd., Inter-Tel Incorporated, Behringer spezeiller studytechnik GMBH, and Shakespeare (H.K.) Limited.