FUJIMI INCORPORATED

For some items, procurement is sourced from a single supplier, and there is a possibility that sufficient supply may not be secured due to quality issues at the supplier or a sudden surge in demand. Additionally, even for items procured from multiple suppliers, there are raw materials and consumables for which suppliers are concentrated in a single country, creating a risk that supply could be disrupted due to resource-holding countries' policies prioritizing domestic use, among other factors. As countermeasures, the company is promoting the qualification of alternative raw materials and expanding multi-sourcing.

While the company maintains a high share and profit margin in the ultra-precision abrasives field, there is a risk that future growth and profitability could decline if the company is unable to promptly provide products that meet customers' technical needs due to unexpected changes in technology and markets. The company has established research bases in Japan, the United States, and Taiwan to promote new product development in collaboration with customers, and is also actively pursuing external collaboration with universities, research institutions, and companies.

While the company holds the world's No. 1 share in ultra-precision abrasives for semiconductor substrates, there is a risk that its competitive advantage could be threatened by diverse domestic and overseas competitors, or that new products exceeding its performance could be developed and launched. As a countermeasure, the company is promoting improved polishing performance through proprietary chemical formulation based on scientific elucidation of the polishing mechanism, and pursuing a differentiation strategy that provides abrasives and processes covering the entire process from rough polishing to final polishing.

Some abrasives use natural resources imported from overseas as raw materials, and the prices of these raw materials have risen sharply in recent years. Further price increases could lead to reduced profits or impairment of fixed assets, potentially affecting business performance; the company is working to mitigate this impact through measures such as promoting multi-sourcing.

Significant deterioration in the business environment, surging raw material prices, intensifying competition, and similar factors could result in impairment losses that materially affect business performance. In the current consolidated fiscal year, the company actually recorded an impairment loss due to a significant divergence from the original plan caused by unforeseen changes in market conditions, as well as deteriorating profitability. The company is working to reduce this risk through measures such as strengthening R&D, maintaining competitiveness, and managing raw material costs.

The proportion of overseas sales in consolidated net sales was high, at 78.0% in the current consolidated fiscal year, and given that the company has four overseas consolidated subsidiaries, foreign exchange fluctuations could have a significant impact on business performance. For foreign currency-denominated transactions, the company hedges using forward foreign exchange contracts as needed, but this does not completely eliminate the risk.

The company operates broadly across Japan, North America, Asia, Europe, and other regions, and is inherently exposed to risks such as deteriorating political and economic conditions overseas, unexpected changes in laws and regulations, and worsening security conditions. The company has established communication channels for emergencies and built a global information-sharing system, while also holding a Global Risk Committee twice a year to identify local risks and implement countermeasures.

The company holds confidential information related to technology, sales, and business operations, as well as a large amount of corporate and personal information, and if information leakage or loss of information usability occurs due to computer viruses or similar causes, it could significantly impact business performance. The company is working to ensure the proper handling of information through the development and operation of various information security regulations and through education and training for officers and employees.

As a technology-driven company, the company positions intellectual property as an important source of competitiveness; however, there is a risk that the company's own intellectual property rights could be infringed, or that it could infringe on third parties' intellectual property rights, which could affect business execution and competitiveness. The company has established an intellectual property management system across the entire group, including overseas subsidiaries, and has established and maintains a collaborative network with intellectual property and legal experts both in Japan and overseas.

The company positions M&A as an effective means of accelerating business growth; however, if there is a significant change in the market or competitive environment after an acquisition, it may become difficult to recover the invested capital, which could significantly impact business performance. When considering M&A, the company comprehensively considers market trends, financial condition, technological superiority, synergy effects, and risk analysis, conducts due diligence by experts, and builds a post-acquisition management and governance structure.