Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 37

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 37
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 elsewhere have heightened geopolitical tensions across the world and have led to market disruptions, including significant instability in commodity prices, credit and capital markets, and supply chain disruptions, which has further fueled inflation. There have also been concerns about the relationship between China and other countries, which may have potential economic effects. Economic conditions in China are sensitive to global economic conditions, as well domestic economic and political policies and the expected or perceived overall economic growth rate in China. Sanctions imposed against third-partycountry suppliers and networks that materially support Russia’s war in Ukraine may further affect potential impacts of the conflict.

Additionally, any future escalation of these conflicts or other volatile situations could affect both diplomatic and economic tensions among various nations. Heightened tensions could reduce levels of trade, investment, technological exchanges, and other economic activities between major economies. Existing tensions, and any future deterioration

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in the relationship between the United States and China, may negatively impact the economic, political, and social conditions in both countries. Given our reliance on the Chinese market, this could adversely impact our business, financial condition, and results of operations.

Actual or threatened war, terrorist activities, political unrest, civil strife, and other geopolitical uncertainties could have similar adverse effects. Any one or more of these events may hinder our operations and affect our sales results, potentially for a prolonged period of time, which could materially and adversely affect our business, financial conditions, and results of operations.

The economy of China has been experiencing significant growth, leading to inflation and increased labor costs. Increases in labor costs of workers in the PRC generally, and in the Province where our manufacturing facilities are located particularly, have had and can be expected to continue to have a material and adverse effect on our operating results.

We generate all revenues from sales of products that we manufacture at our facilities located in Dongguan, Guangdong Province, in the PRC. The economy in China has grown significantly over the past 20 years, which has resulted in an increased inflation and the average cost of labor. In recent years, the PRC government has raised interest rates and adjusted deposit reserve ratios for commercial banks and implemented other measures designed to tighten credit and liquidity. These measures have contributed to a slowdown of the PRC economy. According to the National Bureau of Statistics of China, China’s GDP growth rate was 8.1% year-on-yearover 2000. Should this slowdown continue or become more expansive, such slowdown could significantly reduce domestic commerce in China.

According to the National Bureau of Statistics of China, the year-over