HONG KONG (October 16, 1998) - Deswell Industries, Inc. (NASDAQ NM: DSWLF) today announced that its Board of Directors has approved a stock repurchase program to buy up to an aggregate of 500,000 Common Shares in the open market from time to time at prevailing market prices in accordance with SEC Rule 10b-18. The Company plans to use existing cash balances to finance the repurchases.

Richard Lau, Chairman and CEO of Deswell Industries stated, "Considering our strong cash position and book value per share, coupled with management's confidence in the long term performance of Deswell, we believe that the repurchase of common shares provides an attractive investment for the Company and is in the best interest of our shareholders."

Deswell manufactures injection-molded plastic parts and components and electronic products and subassemblies and metallic products for original equipment manufactures ("OEM's) and contract manufactures 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. The Company's customers include Mita Industries (H.K.) Limited, Namtai Electronic (Shenzhen) Co. Ltd., Inter-Tel Incorporated, Behringer Holdings (Pte) Ltd., Vtech Communications Ltd., Prod-Art Company Limited and Shakespeare (H.K.) Limited.