HONG KONG (February 20, 1998) - Deswell Industries, Inc. (NASDAQ NM: DSWLF) ( the "Company") today announced the completion of the redemption of its outstanding Common Share Purchase Warrants. As a result of its Warrant redemption on February 18, 1998, 898,540 Warrants were exercised for total gross proceeds of US$4,068,589.

The Warrants were issued as part of and in conjunction with Company¹s initial public offering of Common shares and Common Shares Purchase Warrants that was completed in July 1995. The balance of 9,384 Warrants which were not exercised by 5:00 p.m. New York Time on February 17, 1998 were redeemed by the Company at $0.05 per Warrant. As a result of the exercises of the Warrants, the Company issued an aggregate of 449,270 new Common Shares and had 5,480,077 Common Shares outstanding on February 18, 1998.

Deswell manufactures injection-molded plastic parts and components and electronic products and subassemblies and metallic products for original equipment manufacturers ("OEMs") and contract manufacturers at its factories in the People¹s 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 Company¹s customers include Mita Industries (H.K.) Limited, Nam Tai Electronics (Shenzhen) Co. Ltd., Inter-Tel Incorporated, Behringer spezeiller studiotechnik GMBH, Prod-Art Company Limited and Shakespeare (H.K.) Limited.