HONG KONG (November 8, 1999) - Deswell Industries, Inc. (NASDAQ NM Symbol: DSWL) ) today announced results for the second quarter and six months ended September 30, 1999.

Net sales for the quarter were $16.1 million, an increase of 2.0% compared to sales of $15.8 million in the second quarter ended September 30, 1998. Operating income decreased 12.5% to $3.45 million, compared to $3.94 million in the previous year, and net income increased 0.2% to $3.34 million, compared to $3.33 million in the previous year. Diluted earnings per share increased 1.7 % to $0.61 (based on 5,481,000 weighted average shares outstanding), compared to $0.60 (based on 5,511,000 weighted average shares outstanding), in the second quarters ended September 30, 1998.

Net sales for the six months ended September 30, 1999 were $28.2 million, a decrease of 9.8% compared to sales of $31.2 million for the corresponding period in 1998. Operating income decreased 29.1% to $5.4 million, compared to $7.6 million in the previous year, and net income decreased 16.1% to $5.4 million, compared to $6.5 million in the previous year. Diluted earnings per share decreased 16.1% to $0.99 (based on 5,477,000 weighted average shares outstanding), compared to $1.18 (based on 5,523,000 weighted average shares outstanding), for the six months ended September 30, 1998.

The Company reported a continued strong financial position with book value per share of $9.34 and cash per share of $5.23. The Company has no short tem or long term debt.

Mr. Richard Lau, Chief Executive Officer, said, "We have begun to see what we believe to be a sustainable recovery in our business. Jetcrown, our plastic division, recorded a 39% and 11% increase in net revenue for the quarter and for the six months respectively over the prior year. This improved performance is mainly attributed to expanded business with our existing strong customer base. It is important to note that the improved performance for the quarter only includes one month of meaningful revenues from Epson, our new customer. We continue to aggressively pursue new customer relationships. Though the electronic & metallic business recorded a 36% and 35% decrease in net revenues for the quarter and six months respectively, this quarter's results showed significant improvement over the first quarter."

Acquisition of Minority Interest of Metallic Operation

Kwanasia Electronics Co., Ltd., Deswell's 51% owned electronic division, acquired from individual shareholders the remaining 35.1% minority interest in Kwanta Precision Metal Products Co., Ltd. Kwanta is now a wholly owned subsidiary of Kwanasia.

Mr. Lau commented " We are also very pleased with the recent purchase of the minority interest in our metals operation. Kwanta is strategically important for us by providing customers with a high quality metal making operation which complements our plastics and electronics assembly offerings. This division, however, has consistently underperformed. As 100% owners we will be able to more aggressively work to improve the performance and returns of the metal subsidiary for our shareholders."

Interim Dividend

The Company also announced that on November 5, 1999, its board of directors declared an interim cash dividend of $0.33 per share (1999 interim dividend $0.33 per share). The dividend will be payable on December 7, 1999 to shareholders of record as of November 23, 1999.

Share Buyback

The Company repurchased 128,200 shares during the quarter under its share repurchase program which was approved by the Board of Directors on October 10, 1998. Deswell has repurchased and cancelled a total of 131,200 shares.

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 Industrial (H.K.) Co. 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.

To learn more about Deswell Industries, Inc., please visit the Company's web site at www.deswellindustries.com

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