Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 41

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 41
---
 communicate with the labor union of our Company and report to the District Labor Bureau. Deswell’s entire staff, who are employed to work exclusively within the PRC, is covered by the law. In response to prevailing business conditions, we decreased our workforce further by

Table of Contents

127 in the fiscal year ended March 31, 2025 after decreasing our workforce by 20 and 47 in the fiscal years ended March 31, 2024 and 2023, respectively. However, we may incur much higher costs under China’s Labor Contract Law if we are forced to downsize our workforce in the future. Accordingly, this law can be expected to exacerbate the adverse effect of unfavorable economic conditions on our results of operations and financial condition.

Power shortages in China could affect our business.

We consume substantial amounts of electricity in our manufacturing processes at our production facilities in China. In the past, we have experienced a number of power shortages at our production facilities in China, though we are sometimes given advance notice of such power shortages. In relation to these power shortages we have a backup power system. However, there can be no assurance that in the future our backup power system will be completely effective in the event of a power shortage, particularly if that power shortage is over a sustained period of time and/or we are not given advance notice of it. Any power shortage, brownout or blackout for a significant period of time may disrupt our manufacturing, and as a result, may have an adverse impact on our business.

China’s U. S. stock market issues may raise investors’ concerns.

Since 2017, a series of Chinese companies listed on the New York Stock Exchange and NASDAQ saw their share prices substantially drop after going public, as compared to non-Chinesecompanies. The difference in performance is thought to be due to heightened concerns over standards of corporate governance. The SEC made repeated mention of emerging markets, including China, in a warning to investors over the book-keepingstandards of foreign companies listed in the U. S., that there could be substantially great risk that disclosures will be incomplete or misleading.

The recent escalation in trade tensions between the U. S. and China, including new tariffs imposed on Chinese imports by the Trump administration, has led to increased volatility in the share prices of Chinese companies listed on the New York Stock Exchange and NASDAQ.

These issues and the past performances of Chinese companies could make the U. S. stock markets less attractive to all sorts of companies from China or could lead to possible decreases in Chinese concept