TOKYO ELECTRON DEVICE LIMITED

Because major customers are large electronics manufacturers, changes in semiconductor demand and capital expenditure trends directly affect business performance. In particular, if market fluctuations in Japan, Asia, and North America become significant, the risk of impact on performance increases. As countermeasures, the company is expanding handling of high value-added products and writing down the book value of long-inventoried products.

There is a high degree of concentration among the three major suppliers—Infineon Technologies (22.8%), Texas Instruments (20.4%), and NXP Semiconductors (15.8%)—which together accounted for approximately 59% of total purchases in FY2026 (ending March 2026). Since sales agency agreements are non-exclusive, if switching to other leading distributors or consolidation/restructuring among suppliers occurs, it could have a material impact on performance. In response, the company strives to maintain good business relationships and diversify suppliers and product lineups.

The company is exposed to foreign exchange fluctuation risk in import/export transactions and foreign-currency-denominated transactions (mainly US dollar-denominated) with some domestic customers, and sharp fluctuations in the USD/JPY exchange rate could affect business performance. The company seeks to minimize the impact through forward foreign exchange contracts and sales price revisions that take exchange rate fluctuations into account.

Part of working capital is procured through borrowings from financial institutions and commercial paper issuance, so a sharp fluctuation in Japanese yen or US dollar interest rates increases the risk of impact on business performance. The company works to mitigate this risk by fixing a portion of borrowings on a long-term basis and diversifying funding methods.

Advanced development, technical, and support capabilities are required to respond to the rapid technological innovation and changing business environment of the electronics industry, but if the company fails to secure desired talent or experiences turnover exceeding expectations, it may become difficult to provide products and services according to business plans. The company strengthens recruitment through the use of internships and recruitment agency services, and implements measures to enhance motivation through a fair compensation system, a transfer request declaration system, and enhanced training programs.

The company has established sales offices mainly in Asia and North America in response to trends of customers relocating production bases overseas, but relocation to regions where the group has no sales offices, or production and sales constraints in local markets, could make sales activities difficult. The company addresses this by closely monitoring production and demand trends through information exchange with customers and making decisions on opening or closing sales offices as appropriate.

Because the business model involves collecting payment after selling products and providing services to domestic and overseas customers, if bad debt losses occur due to customers' credit problems or other issues, business performance could be affected. The company seeks to reduce this risk through thorough credit management utilizing external credit research firms, use of receivables guarantee services, and receipt of business collateral deposits.

The company records goodwill and intangible assets associated with share acquisitions and business transfers through M&A, and if business development does not proceed as planned, impairment may become necessary, affecting business performance. In addition, if investment securities and other assets held for business purposes suffer value impairment due to deteriorating profitability, impairment processing could affect business performance.

The company operates businesses both domestically and overseas and is subject to various laws and regulations, including import/export regulations and antitrust laws. Failure to comply with these could restrict business activities and affect performance. The company strives to ensure thorough compliance by obtaining the latest legal and regulatory information and conducting awareness and education activities for employees.

The company holds confidential information and personal information of customers and business partners, and if information leakage or similar incidents occur, it could result in loss of social credibility and substantial costs from liability for damages, affecting business performance. The company recognizes the appropriate handling, management, protection, and maintenance of information as a major social responsibility and strives to establish appropriate systems.