HONG KONG (December 15, 1997) - Deswell Industries, Inc. (NASDAQ NM: DSWLF and DSWWF) (the "Company") today announced that the Company has expanded the facilities and capabilities of its plastics molding operations.

Deswell's plastics molding subsidiary, Jetcrown Industrial Ltd., has leased an additional 20,000 square feet of factory space in Shenzhen, China. The newly leased space is adjacent to its existing premises and will be used to meet the growing demand for the Company's injection molded telecommunications products. The new production space will be ready for occupation by the end of January 1998.

Furthermore, Jetcrown has also purchased 20 state-of-the-art injection molding machines from Toshiba for approximately US$2 million. These machines, expected to be delivered in mid-March 1998 and installed in the newly leased 20,000 square foot space, will be used for the injection of telecommunications products. Upon installation, the production capacity of these machines will be fully utilized.

Finally, Jetcrown has recently upgraded its tool-making software. The new "Pro/Engineering" software system is one of the most advanced tool-making packages available and will improve the Company's mold-making capabilities and shorten its production lead-times.

Mr. Richard Lau, Chief Executive Officer of Deswell, said, "This facility expansion was necessary to meet increases in customer demand, particularly for the Company's telecommunication products. Over the next few years it is anticipated that telecommunications products will become an increasingly major component of Deswell's growth. With the addition of the newly purchased Toshiba injection machines and powerful new software, the Company has increased its production capacity and increased its quality, enabling Deswell to meet the growing demands of its customers. It is important to note that the increasing demand for our services provides optimism regarding future growth at the Company and reinforces the need to continue seeking additional production space for future expansion."

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.