HONG KONG (January 20, 1998) - Deswell Industries, Inc. (the "Company") (NASDAQ NM symbols "DSWLF" and "DSWWF") today announced plans to redeem its outstanding Common Share Purchase Warrants (the "Warrants"). The Warrants were issued in the Company's initial public offering that was completed on July 24, 1995. Two Warrants are exercisable to purchase one Common Share at $9.056 at any time until July 18, 2000, unless earlier redeemed. The Common Shares and the Warrants trade separately on the Nasdaq National Market under the symbols DSWLF and DSWWF, respectively.

Pursuant to the terms under which they were issued, the Warrants may be redeemed by the Company, at $0.05 per Warrant, at any time on or after July 19, 1996 if the average market price of the Company's Common Shares equals or exceed $12.075 per share for a period of 20 consecutive trading days within the 30-day period preceding the date the notice to redeem is given by the Company. The market price of the Company's Common Shares has exceeded $12.075 per share for more than 20 consecutive trading days and accordingly, the conditions to permit early redemption have been satisfied.

The Company mailed to Warrantholders notice of the redemption on January 16, 1998 and set the date fixed for redemption (the "Redemption Date") for February 18, 1998, which will give Warrantholders until 5:00 p.m. New York Time February 17, 1998 to exercise the Warrants or they will expire and be redeemed. The Company has established a broken three-day protect period.

Richard Lau, Chairman and Chief Executive Officer of Deswell, stated, "We are pleased about the opportunity to redeem our outstanding Common Stock Purchase Warrants. This redemption generates proceeds for the Company, simplifies our capital structure and increases liquidity of our Common Stock."

Information concerning the exercise of the Warrants can be directed to U.S. Stock Transfer Corporation, as Warrant Agent, (818) 502-1404, fax (818) 502-0674; or the Syndicate Departments of either Barington Capital Group, L.P. (800) 695-2584, fax (212) 586-7684, or Joseph Charles & Associates, Inc. (310) 278-4950, fax (310) 859-2877.

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 ("PTH") 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 (Shenzhen) Co. Ltd., Inter-Tel Incorporated, Behringer spezeiller studytechnik GMBH, and Shakespeare (H.K.) Limited.