Deswell maintains strict quality-control procedures for its products. At hourly intervals, the Company's quality-control personnel monitor machines and molds to assure that plastic parts are free from defects.

For electronic operations, the Company's quality control personnel check all incoming components. Moreover, during the production stage, Deswell's quality-control personnel check all work-in-progress at several points in the production process. Finally, after the assembly stage, the Company randomly checks finished products.

Plastic, electronic and metal products manufactured and assembled at Deswell's facilities have a low level of product defects, and aggregate returns represented less than 3% of total net sales.

In 1995, Deswell earned ISO 9002 certifications for both its plastic and electronic products manufacturing operations. The "ISO" or International Organization for Standardization is a Geneva-based organization dedicated to the development of worldwide standards for quality management guidelines and quality assurance. ISO 9000, which is the first quality system standard to gain worldwide recognition, requires a company to gather, analyze, document and monitor, and to make improvements where needed. ISO 9002 is the ISO level appropriate for manufacturers like Deswell. The Company's receipt of ISO 9002 certification demonstrates that the Company's manufacturing operations meet the established world standards.