DISCO CORPORATION

Because the semiconductor market is affected by the silicon cycle, if customers freeze capital expenditures or reduce production due to a downturn or unexpected market fluctuations, this could adversely affect the business performance of the Company Group. Since the Company Group's customers are semiconductor manufacturers and electronic component manufacturers worldwide, its business performance is highly sensitive to changes in the supply-demand balance. As countermeasures, the Company Group is working to reduce costs and improve profit margins through continuous improvement activities based on Will accounting and PIM (Performance Innovation Management), and is fostering a corporate culture that can respond flexibly to change.

If a processing technology emerges that could replace precision diamond wheels, the Company Group's main product, business performance could be affected. Precision diamond wheels are a core product for processing semiconductor silicon wafers, and the spread of alternative technologies could damage sales and competitiveness. As a countermeasure, the Company Group is advancing the development of processing technologies using lasers and plasma for materials that are difficult to cut with precision diamond wheels.

If a large-scale disaster or infectious disease outbreak occurs at the head office and R&D Center (Ota-ku, Tokyo / Haneda) or at production sites (Hiroshima and Nagano Prefectures), this could affect head office functions and product production. Since production sites are concentrated in specific regions, the risk in the event of a wide-area disaster is high. As countermeasures, the Company Group has established and operates a BCM Committee chaired by the Representative Executive Officer President, established a dedicated BCM department, put in place a production system for all products in seismic-isolated structure buildings, and mandates action standards based on its own pandemic level classifications.

Procurement difficulties arising from tight supply-demand conditions or disasters affecting raw materials and components could affect production activities. Specific raw materials and components are essential for manufacturing semiconductor production equipment and Precision Processing Tools, and any disruption in procurement could lead to delays in production and shipment. As countermeasures, the Company Group implements policy-based inventory stockpiling focused mainly on critical raw materials and components, and strengthens relationships with suppliers.

Since the Company Group adopts a business model of domestic manufacturing and overseas export, involving settlements denominated in foreign currencies such as the US dollar, exchange rate fluctuations could affect business performance. Risks exist in both directions: a stronger yen worsens export profitability, while a weaker yen raises raw material costs. As a countermeasure, the Company Group continuously analyzes exchange rate sensitivity and has established a system for making swift decisions when risks materialize.

Environmental laws and regulations relating to climate change, water quality, chemical substances, waste, and other matters are becoming stricter year by year, creating a risk of additional obligations and increased costs. An increase in regulatory compliance costs could adversely affect the financial condition. As a countermeasure, the Company Group strives to reduce environmental risk beyond mere legal compliance, and has formulated medium-term environmental targets under its

Threats such as cyberattacks, information leaks, and business email fraud are becoming increasingly serious, and if an incident occurs, it could affect the financial condition through damage to competitiveness and technological advantage, suspension of operations including production and shipment, loss of social credibility, and the occurrence of damages claims. Since the Company Group possesses advanced technical information related to semiconductor production equipment, the impact of information leaks would be particularly significant. As countermeasures, the Company Group has established a standing Information Security Committee under the Board of Directors, and thoroughly implements the formulation, dissemination, and education of policies and regulations, as well as internal audits of information security.

Deterioration of economic conditions globally and in various regions, wars, terrorism, and turmoil in financial and capital markets could adversely affect the business performance of the Company Group. Since the Company Group sells products globally to semiconductor manufacturers and electronic component manufacturers, political and economic risks in specific regions could directly affect sales and earnings. This is listed as a comprehensive risk in the Annual Securities Report, and no specific countermeasures are indicated.

Risks related to intellectual property rights, such as infringement claims from third parties or the leakage of the Company's own technology, could adversely affect business performance. Precision Processing Equipment and precision diamond wheels are products requiring advanced technology, and the protection of intellectual property is directly linked to maintaining competitive advantage. This is listed as an other risk in the Annual Securities Report, but no specific countermeasures are described.

If a product defect occurs, it could adversely affect the business performance of the Company Group through impacts on customers' production lines, claims for damages, and loss of social credibility. Since semiconductor production equipment and Precision Processing Tools are directly incorporated into customers' manufacturing processes, the scope of impact from defects is broad and the risk of damages claims is significant. This is listed as an other risk in the Annual Securities Report, but no specific countermeasures are described.