Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 13

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 13
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 decline in the demand for their products as a result of the prevailing economic environment or other factors, the products or services that we provide to them could be reduced or even terminated. The loss of any of our major customers or a substantial reduction in orders from any of them would adversely impact our sales and operating results unless and until we were able to increase sales from other existing customers or add sales from new customers.

Our sales are based on purchase orders and we have no long-termcontracts with any of our customers and the percentage of sales to any of our customers has fluctuated in the past and may fluctuate in future. We cannot assure you that present or future customers will not cease using us as the source of the injection-moldedplastic parts and components we manufacture, for electronic manufacturing services of electrical products and subassemblies or significantly change, reduce or delay the amount of products and services ordered from us.

Table of Contents

Our gross margins fluctuate from year to year and may be adversely affected by a number of factors.

The following chart shows, for the years indicated, our gross margins from our two principal operating segments and for our Company as a whole:

Gross Margins Percentage

We expect gross margins generally and for specific products to continue to fluctuate from year to year. Fluctuations in our margins have been affected, often adversely, and may continue to be affected, by numerous factors, including:

•our cost of raw materials, especially our cost of electronic components due to changes in the prices, availability and long lead time of components and parts needed for the manufacturing of electronic products;

•costs of labor, particularly in recent years, when the costs have increased substantially as a consequence of increasing governmental regulation directed at labor practices and policies;

•the appreciation of the exchange rate of the RMB, in which we pay our labor and manufacturing costs, against the U. S. dollar, in which we present our financial statements;

•changes in our customer mix or the mix of higher and lower margin products, or a combination of both in any year;

•price increases for products which, for competitive reasons, we choose to allow as concessions in an effort to maintain our customer base;

•increases in value-addedtaxes as result of changes in the value-addedtax policy of the Chinese government for various categories of export products;

•increased costs to conform our products to consumer and product safety laws and regulations of the various countries in which our products are sold; and

•rising costs due to disrupted global supply resources as a result of