Mipox Corporation

With generational shifts in semiconductor manufacturing processes, such as the emergence of EUV lithography equipment and next-generation High-NA EUV, the semiconductor memory market periodically experiences significant supply-demand imbalances. In recent years, there have been concerns about a sharp expansion in demand for advanced semiconductors for HBM and AI accelerators driven by generative AI and a surge in data center investment, as well as a subsequent reactionary decline. Since the Group's operating revenue is closely linked to demand trends in the electronics industry, an economic downturn or demand fluctuations could directly affect business performance and financial condition.

There is a risk that the electronics industry's supply chain could be disrupted due to the intensification of the situations in Ukraine and the Middle East, the tightening of export control regulations related to semiconductors (such as the U.S. EAR) amid the U.S.-China conflict, and geopolitical tensions in the Taiwan Strait. If energy price surges, disruptions to logistics networks, or difficulties in procuring raw materials occur, this could adversely affect the business through fluctuations in sales volume of the company's Polishing Film, significant changes to market areas, and increased procurement costs.

Technological change in the electronics industry is remarkable, and new technologies may emerge to replace conventional ones. If unforeseen alternative technologies become widespread, the competitiveness of the Group's existing products and services may decline, potentially adversely affecting business performance and financial condition. Although the Group pays close attention to technological innovation trends, complete foresight is considered difficult.

In the hard disk business, there are risks related to changes in storage media trends, such as the shift to NAND/SSD, and changes in materials used upon the release of new recording methods, while demand for leading-edge Contract Polishing Processing and precision processing related to generative AI consistently requires higher quality. If the company fails to meet customers' advanced requirements or if its own development schedule is significantly delayed, competitors may gain entry, which could adversely affect business performance. The company strives to monitor technological innovation trends, including the external environment, but cannot guarantee that such risks can be completely eliminated.

The Group holds a wide variety of inventory items and has established a system for immediate delivery, but rapid changes in market conditions could result in excess inventory. Recording of valuation losses on inventory could affect business performance and financial condition, potentially causing cash flow to stagnate.

In pursuing new businesses, including in the next-generation power semiconductor field, expenses for research and development, capital investment, and human resource acquisition may be incurred in advance. Since a certain period of time is required before stable earnings are achieved, the Group's business performance during that period may be affected.

Although the company implements measures to mitigate foreign exchange fluctuation risk for transactions denominated in foreign currencies, it is difficult to completely eliminate such risk. A prolonged period of yen depreciation or sharp exchange rate fluctuations resulting from shifts in monetary policy by various countries could lead to increased costs for importing raw materials, potentially adversely affecting business performance and financial condition. In addition, the translation into yen of figures reported in local currencies by overseas consolidated subsidiaries is also affected by exchange rates.

If a major disaster occurs at domestic or overseas operational sites, particularly factories, due to large-scale earthquakes, fires, wind or flood damage, or unknown infectious diseases, production activities could be suspended for a considerable period, adversely affecting business performance and financial condition. In response to these risks, the company has formulated a Business Continuity Plan (BCP) and crisis management regulations, and is working to build a highly effective disaster prevention system through regular drills and plan reviews.

Threats are increasing, including ransomware attacks targeting manufacturers, unauthorized access via supply chains, and cyberattacks on operational technology (OT) systems within factories. Should a system outage, data loss, or leakage of technical information occur, this could have a material impact on business performance through operational suspension or loss of social credibility. The company is working to strengthen legal protections, confidentiality management systems, and security measures.

In addition to physical risks associated with climate change (such as deterioration of the operating environment due to extreme heat or flood damage), there is increasing pressure from tightening environmental regulations in various countries (such as the introduction of carbon taxes) and demands from customers for decarbonization throughout the entire supply chain. If environmental response costs, such as capital investment and procurement of renewable energy to address these issues, increase beyond expectations, this could affect the company's financial condition and business results.