DESWELL INDUSTRIES, INC. ANNOUNCES FIRST QUARTER RESULTS

HONG KONG (August 13, 1999) - Deswell Industries, Inc. (NASDAQ NM Symbol: DSWL) today announced its results for the first quarter ended June 30, 1999.

Net sales for the quarter ended June 30, 1999 were $12.1 million, a decrease of 22% compared to net sales of $15.4 million for the quarter ended June 30, 1998. Operating income decreased 47% to $1.9 million for the most recent quarter, compared to $3.6 million for the same quarter in 1998. Net income for the quarter decreased 33% to $2.1 million compared to $3.2 million for the year-ago quarter. Basic earnings per share and diluted earnings per share decreased to $0.39 (based on 5,476,000 weighted average shares outstanding), compared to $0.58 and $0.56 respectively (based on 5,479,000 and 5,623,000 weighted average shares outstanding, respectively), in the first quarter ended June 30, 1998.

The Company reported a continued strong financial position. Working capital was $39.1 million as of June 30, 1999, compared to $41.0 million at March 31, 1999. The Company has no short term or long term debt.

The Company also announced that the Company's 1999 Annual General Meeting will be held at 10:00 a.m. (California time) on September 21, 1999 at the Burgundy Room of the Regent Beverly Wilshire Hotel, 9500 Wilshire Boulevard, Beverly Hills, CA 90212.

Mr Lau, Chairman and Chief Executive Officer, commented, "Though the Company reported a 22% decrease in net sales in the first quarter compared to the first quarter last year, we are beginning to see some recovery in our business. While the electronic business is still weak in the current market conditions, our core plastic injection molding business should experience growth this year that will outperform our prior years. Furthermore, the plastic division was able to maintain its profit margins for the quarter as compared with prior periods. Moreover, the Company continues to invest in new and updated machinery, including an additional $1.5 millions for a total of 21 sets of "Toshiba", "Nissei" and "Jetmaster" double, vertical and traditional injection molding machines. These machines were ordered in partial shipments with the last shipment expected to be completed by the end of October. In addition to the existing factory space, the Company has leased an additional 20,000 square feet and soon will be ready for renovations."

Mr. Lau continued, "With the strong performance of our plastic business, there is currently a need for 40,000 square feet of additional factory space and 25 sets of new injection machines. In fact, the Government party, landlord of Wing Village, Shekou, our existing factory location, has agreed verbally to supply the additional space to Jetcrown. After the installation of 31 sets of injection molding machines as previously reported, our manufacturing capacity for the plastic division will increase significantly to meet the requirements of both new and existing customers. Depending on the progress of business development, the Company will acquire the 25 sets of new injection machines gradually to compliment the ancillary engineer development."

Mr. Lau concluded, "Kwanasia, the electronic assembly operation, continued to experience soft sales due to the stagnant audio business. The division needs at least two to three quarters to recover."

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 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.

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