Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 33

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 33
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 operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

The enforcement and extent of oversight of laws and rules and regulations in China, and those that apply or are to be applied to Hong Kong or Macao, or in offerings conducted overseas by, and/or foreign investment in, China-based issuers like us, can change quickly with little or no advance notice.

Our manufacturing operations are located in China through our PRC subsidiaries. Our operations in China are governed by PRC laws and regulations. Our PRC subsidiaries are subject to laws and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value. The PRC legal system is evolving rapidly, and the interpretation of many laws, regulations and rules may contain inconsistencies and enforcement of these laws, regulations and rules involves uncertainties.

When our PRC subsidiaries encounter business disputes with other parties, we may have to resort to administrative and court proceedings to enforce our legal rights. If our administrative and court proceedings in China are protracted, it may result substantial costs and diversion of management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into and could materially and adversely affect our business and results of operations. Furthermore, the PRC legal system is based, in part, on government policies and internal rules, some of which are not published in a timely manner, or at

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all, but which may have retroactive effect. As a result, we may not always be aware of any potential violation of these policies and rules. Such unpredictability towards our contractual, property and procedural rights could adversely affect our operations.

Permissions required from the PRC authorities for our operations could change requiring us to obtain additional licenses or abide by new regulations.

We conduct our business primarily through our PRC subsidiaries in China. Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries have obtained the required licenses and permits from the PRC government authorities that are material for the business operations in China, including business certificates, plants safety certificates and pollutant discharge permits. Given the uncertainties