Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 77

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 5
Chunk 77
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 Despite the global economy’s softening, the RMB has weakened more than 10% against the U. S. dollar since the Federal Reserve began raising rates in March 2022.

At the outset of the trade war during the US President Trump’s second administration in February 2025, the USD/RMB traded at 7.26 at the end of March 2025. The abrupt escalation of tariffs sent yuan depreciation pressure to a new peak, with the USD/RMB eclipsing 7.35 in mid-April2025 when the US tariffs on Chinese goods was 135%. The People’s Bank of China realized that intentional devaluation of the RMB would have done little to offset 135%

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tariffs, and would also have significant implications on purchasing power, confidence, and RMB internationalization goals. The Bank’s solution was to maintain a policy of currency stability, which has sharply lowered the depreciation pressure. The Chinese government has also continued to maintain consumer confidence and domestic purchasing power to boost domestic demand. During the three-monthperiod ending June 30, 2025, the USD/RMB traded at 7.17.

In addition, the war in Ukraine has increased sanctions risks on China and further deteriorated the U. S. -Chinarelationship leading to an abrupt slowdown for foreign inflows to China, which further reduced demand for RMB. With the ongoing Russia-Ukrainewar, capital investment into China has evolved as a complex issue. While some investors are reducing their exposure due to increased risk aversion and geopolitical concerns, others see opportunities in China’s economic strength and potential to benefit from global shifts.

In conclusion, it is difficult to predict how the situation between the United States and Chinese government will develop, which in turn affects the exchange rate between the dollar and RMB.

We did not hedge our currency risk during the years ended March 31, 2023, 2024 and 2025 and at March 31, 2025, we had no open forward currency contracts. We continually review our hedging strategy and there can be no assurance that hedging techniques we may implement will be successful or will not result in charges to our results of operations.

Liquidity and Capital Resources

Capital resources

To date, we have financed our operations primarily through cash generated by operating activities and historical equity financing activities. As of March 31, 2023, 2024 and 2025, we had cash and cash equivalents of, $22.2 million