Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 16

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 16
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 http://www. oanda. com/currency-converter.

The appreciation and depreciation in the exchange ratio of the RMB to the U. S. dollar increases and decreases, respectively, our costs and expenses to the extent paid in RMB. Of all of the costs and expenses for the PRC entities, which accounted for 94.1% of the Company total, about 29.6%, 29.9% and 31.8% were in RMB during the years ended March 31, 2023, 2024 and 2025, respectively.

With the PRC government’s enacted reform of its RMB exchange rate regime, the RMB appreciated against the U. S. dollar between 2007 and 2015, resulting in an adverse effect on the Company’s financial results. However, this trend became unstable between 2015 and 2018. The RMB then became depreciated against the U. S. dollar from 2018 to early 2020. The Company’s financial results have benefited from this depreciation trend. Nonetheless, there was the onset of U. S. -Chinatrade war and the outbreak of the COVID-19virus in 2020. As the virus spread to the rest of the world, China was able to get the situation under control. The COVID-19outbreak led to global demand for goods, which made China the leader of global exports, resulting in a softening of the depreciation of RMB. However, with the Omicron variant and China’s three-yearfight of zero-COVIDtolerance policy which led to lockdowns in major Chinese cities, China’s economic activity significantly reduced. This slower growth in China will push down Chinese yields, leading to depreciation of RMB. Additionally, even though China’s exports appear to have rebounded in early 2024, it appears that it is still experiencing weak export orders and its manufacturing sector is struggling. With the recent trade war imposed on Chinese goods and export control restrictions to China by the United States during President Trump’s 2 ndadministration, there is further depreciation of the RMB. However, China’s main policy is the stability of the Yuan currency to boost consumer confidence and local purchasing power.

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. It is difficult to predict how the situation