Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 47

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 47
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 that such entity complies with the relevant economic substance requirements with respect to that relevant activity.

General Risk Factors

Uncertainty and adverse changes in the economy and financial markets have had, and could continue to have, an adverse impact on our business and operating results.

With the lingering prolonged effects of the COVID-19pandemic, inflation, trade conflicts, rising interest rates, and the worsened impact of climate change, the global growth outlook looks weak and is well below the average growth rate in the two decades before the pandemic. The global economy is projected to expand at 2.4% in 2025 and 2.5% in 2026, based on the World Economic Situation and Prospects as of Mid-2025, published by the United Nations on May 15, 2025, compared to the projected growth of 2.9% in 2024 and 2.7% in 2023.

According to the National Bureau of Statistics of China, currently the inflation rate is low and remains subdued. Producer prices have been experiencing deflation, with a 3.3% year-on-yeardecline in May. This was the fourth straight month of consumer deflation, highlighting challenges from ongoing trade risks with the United States, sluggish domestic demand and concerns over job stability. Although the Chinese government agencies have implemented stimulus measures to boost domestic consumption, their effectiveness in combating deflationary pressures is still being assessed.

The inflation rate for the United States in May was 2.4%, according to the Bureau of Labor Statistics of the United States. May 2025’s inflation rate remains as positive, though with price growth increasing less than expected. With this steady inflation picture, it is expected that the United States Federal Reserve will hold interest rates steady to wait and see how the tariff rates will eventually impact consumer prices and the labor market. The outlook for U. S. inflation in 2025 remains uncertain with mixed forecasts. There are expectations that there is potential rise in inflation, peaking in the latter half of the year, while there is a possibility of a more moderate increase and subsequent slowdown. Either way, the key drivers for the impact are tariff rates and/or export control policy, labor shortages due to immigration restrictions, and the possibility of easing of supply chain disruptions.

China’s consumer price index decreased to 103.00 in May, down by 0.1% year-on-yearin May, marking the fourth consecutive month of decline. The decline in CPI was affected by falling energy prices and weak domestic