RS Technologies Co., Ltd.

Since its establishment, the Group's sales to TSMC, one of the world's leading semiconductor foundries, have remained at a high level, and the company's sales trends and capital expenditure trends may directly affect the Group's short-term business performance. High dependence on a single customer poses the risk of a sharp decline in sales in the event of a policy change or investment contraction by the customer. Although the Group strives to maintain smooth ongoing transactions, no specific measures to reduce this dependence are explicitly disclosed in the securities report.

The Group's principal demand comes from the semiconductor industry, and if supply-demand fluctuations in the industry cause a decrease in silicon wafer usage or a decline in selling prices, this may adversely affect business performance. The semiconductor market is highly cyclical, and a sharp drop in demand could directly hit the Group's earnings. The Group is working to secure revenue sources and expand its customer base and product fields in the Wafer Reclaim Business by handling a diverse range of monitor wafers.

The semiconductor market is in a fiercely competitive environment both domestically and internationally, with multifaceted competition in price, quality, customer responsiveness, and new product development capability. If the Group's market dominance in high-share products declines, this may affect the Group's business, business performance, and financial position. The Group seeks to maintain its competitive position by handling a diverse range of monitor wafers with high price competitiveness, but there is a risk that its advantage could be undermined by the rise of competitors.

In the semiconductor market, product prices tend to continuously decline, and while the Group is working to improve production efficiency through reviews of its production processes, there are generally limits to how much production efficiency can be improved. If continuous efficiency improvement becomes difficult amid ongoing price declines, profits may be squeezed. Additionally, if processing operations are interrupted for any reason during the processing stage, this could result in reduced production capacity or delivery delays, making wafer supply difficult. These factors could affect the Group's business, business performance, and financial position.

When making large-scale capital investments, it takes a certain amount of time to reach full-scale production due to production line adjustments and other factors, and start-up costs and depreciation expenses are incurred in advance, which may significantly worsen profit margins. In addition, if orders anticipated at the time of the capital investment are not obtained as expected, business performance may be materially affected. Furthermore, when raising funds, it may become difficult to procure funds at the desired timing or terms due to factors such as financial position, interest rate levels, and market conditions, creating a risk that necessary capital investments cannot be implemented.

The Group's overseas sales have remained at a high level, and the valuation of foreign currency-denominated assets and liabilities is affected by fluctuations in exchange rates. Sharp fluctuations in exchange rates may affect the Group's business performance. The securities report does not explicitly disclose specific hedging measures or other countermeasures.

The Group primarily raises business funds through borrowings from financial institutions and carries a substantial amount of interest-bearing debt. As funding needs increase along with business expansion, the proportion of interest-bearing debt may rise, and higher interest rate levels may affect business performance. While the Group monitors interest rate trends and strives to maintain and build flexible fundraising methods, the risk of increased costs due to changes in the interest rate environment continues to exist.

Fang Yongyi, the Representative Director and President, plays an important role in developing new sales channels and global business expansion, leveraging his management experience and network from previous positions. If he becomes unable to perform his duties during the process of management structure transformation, this could have a significant impact on the Group's business performance. It is noted, however, that management consists of eight directors including himself, and the organization is explained as not being dependent on him as an individual.

The Group's production facilities include furnaces that operate at high temperatures and high pressures and handle large quantities of chemicals, and if a serious accident occurs, it may affect the Group's business, business performance, and financial position. There is also a risk that operations at domestic and overseas manufacturing sites could be disrupted by large-scale natural disasters such as earthquakes and typhoons, infectious diseases such as COVID-19, and other uncontrollable events. While the Group states that it takes thorough measures to prevent accidents, it is difficult to completely eliminate such risks.

The Group positions M&A and business alliances as important strategies for expanding its business scope, but there is a possibility that unrecognized liabilities, such as contingent liabilities, may be discovered after an acquisition. In addition, if goodwill arises, and if changes in the business environment or competitive landscape after the acquisition impede the execution of business plans, impairment losses on goodwill and other items may occur, potentially having a material impact on business performance and financial position. Although the Group has a policy of conducting detailed due diligence on target companies, it is difficult to completely avoid such risks.