Shin-Etsu Chemical Co., Ltd.

Deterioration in the economic environment in the major markets of the Group's products, or significant price fluctuations in key products caused by changes in the global supply-demand environment, may affect business performance. Particular concerns include a decline in product demand and intensifying price competition. Although the Group seeks to hedge such risks through business diversification and globalization, complete avoidance is difficult.

The ratio of overseas sales to consolidated net sales for FY2026 (ending March 2026) reached 79%, and is expected to remain at a high level going forward. Since the yen-converted amounts of the financial statements of overseas consolidated subsidiaries are affected by exchange rates, significant fluctuations may have a material impact on overall business performance. Although the Group seeks to mitigate risk on foreign-currency-denominated transactions through forward exchange contracts and other means, complete avoidance is not guaranteed.

If manufacturing facilities suffer damage due to sudden disasters, natural calamities, or unforeseen accidents, or if the supply chain is disrupted, production activities may be interrupted, potentially having a significant impact on business performance. Although the Group seeks to mitigate risk through regular disaster prevention inspections, equipment maintenance, investment in safety equipment, and diversification of production sites, complete preparedness for events exceeding expectations is difficult.

The future spread of infectious diseases and accompanying measures by various countries to restrain economic activity may significantly reduce demand for the Group's products and also cause damage to the supply chain. Although the Group thoroughly implements health and safety measures at its business sites, there are limits to its ability to respond to widespread infection outbreaks.

The Group is subject to various laws and regulations in each country and region where it conducts business, including investment licensing, import/export regulations, commercial transactions, labor, patents, taxation, and foreign exchange. If these laws and regulations are amended, restrictions on business activities and additional costs may arise, potentially having a significant impact on business performance.

If there is a tightening or delay in the supply of various raw materials used in production activities, or changes in the trade policies of supplier countries and accompanying price increases, this may lead to increased manufacturing costs and stagnation of production activities, potentially having a significant impact on business performance. Although the Group strives for stable procurement through diversification of raw material sources, there are limits to its ability to respond to sudden supply disruptions caused by geopolitical risks and other factors.

The electronics industry, a major customer segment, experiences rapid technological advancement, and failure to respond appropriately to changes in the industry and market could lead to a decline in product competitiveness, potentially having a significant impact on business performance. Similar risks also exist for products destined for industries other than electronics, due to the emergence of highly competitive alternative products. The Group seeks to mitigate this risk by continuously working on the development of cutting-edge materials.

The Group, which handles various chemical substances, actively works to comply with environment-related laws and regulations and to promote energy conservation and reduce emissions of environmentally hazardous substances. However, if environmental regulations become stricter than anticipated, this may make technical responses more difficult and necessitate large-scale new capital investment, potentially having a significant impact on business performance.

The Group makes every effort to ensure optimal quality assurance appropriate to the characteristics of its products; however, if quality issues arise due to unforeseen circumstances, this may lead to damage claims based on product liability or product recalls, potentially having a significant impact on business performance. Although the Group strives to prevent such occurrences through strengthening its quality control system, complete elimination of this risk is difficult.