Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 15

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 15
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 Additional Information beginning on page 58 of this Report.

Changes in currency exchange rates have and could continue to influence our financial results significantly.

Our sales are mainly in United States dollars and Hong Kong dollars and our expenses are mainly in United States dollars, Hong Kong dollars and Chinese RMB.

The Hong Kong dollar has been pegged to the U. S. dollar at a range between 7.75 and 7.85, and which is relatively stable. The Hong Kong government may not continue to maintain the present currency exchange mechanism, which fixes the Hong Kong dollar at approximately 7.850 to each United States dollar (based on the average exchange rate for June 30, 2025 reported at http://www. oanda. com/currency-converter) and has not in the past presented a material currency exchange risk. Although announcements by Hong Kong’s central bank indicate its intention to maintain the currency peg between the Hong Kong dollar and the U. S. dollar, if Hong Kong changes its policy and follows China to a floating currency system or otherwise changes the exchange rate system of Hong Kong dollars to U. S. dollars, our margins and financial results could be adversely affected.

Between 1994 and July 2005, the market and official RMB rates were unified and the value of the RMB was essentially pegged to the U. S. dollar and was relatively stable. On July 21, 2005, the People’s Bank of China adjusted the exchange rate of RMB to the U. S. dollar by linking the RMB to a basket of currencies and simultaneously setting the exchange rate of RMB to U. S. dollars, from 1:8.27, to a narrow band of around 1:8.11.

Table of Contents

The chart below illustrates the fluctuations in the exchange ratio of the RMB to the U. S. dollar at the end of each of Deswell’s fiscal years from March 31, 2015 to March 31, 2025. Because most of the Company’s labor costs are incurred in China and therefore paid in RMB, the adverse effect on Deswell’s business and financial results from increasing labor costs has in previous years been exacerbated by the appreciation in the exchange rate to the U. S. dollar, especially during 2013 to 2015.

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(1)RMB (yuan) to U. S. dollar data presented in this chart are the average exchange rate on March 31 of the year indicated as reported at