AIMECHATEC, Ltd.

The Group's manufacturing equipment sales are highly dependent on supply-demand trends in the display and semiconductor markets and on customers' capital investment demand, creating a risk that sudden changes in demand could result in order cancellations or shifts in the timing of revenue recognition. Since the majority of sales are directed overseas, concentrated in China, Taiwan, and South Korea, the Group is also susceptible to the effects of political, economic, natural disaster, and social disruption in these regions. As a countermeasure, the Group is pursuing expansion of its three core businesses—the IJP Solutions Business, Semiconductor-Related Business, and LCD Business—along with strengthening profitability through fixed and variable cost reductions.

Due to business customs in markets such as China, collection of approximately 10% of contract payments can be delayed for extended periods, with the contract structure providing that the remaining balance is paid after the warranty period (up to approximately one year) following final acceptance upon the full operation of the production line. Delays in customers' equipment operation schedules or extended acceptance inspection processes could have a material impact on the Group's financial condition and cash flow. In response, the Group is working to clarify acceptance inspection conditions at the time of contracting and to expedite acceptance inspections in cooperation with subsidiaries and distributors.

With the rapid expansion of the semiconductor business, semi-finished products for which manufacturing of general-purpose components has been started in advance in consideration of customer delivery schedules are on an increasing trend. If orders for these products are delayed or cancelled, inventory could become stagnant, adversely affecting business performance and financial condition. The increase in products for which manufacturing has been started in advance represents a risk that is likely to manifest as a downside of business expansion.

Technological innovation is progressing rapidly in the field of display and semiconductor manufacturing equipment, and a delayed response to changes in market needs could cause existing products and services to rapidly become obsolete, resulting in a loss of competitive advantage. In addition, there is a risk that upfront investments such as research and development may fail to generate returns due to the emergence of innovative technologies exceeding expectations or sudden changes in the macroeconomic environment. In response, the Group is continuously investigating technology trends and promoting research and development of new technologies and products in collaboration with research and development institutions.

In response to fluctuations in manufacturing equipment demand, the Group outsources some product assembly to partner companies, creating a risk of leakage of proprietary know-how and technical information outside the company. In certain countries and regions, such as China, intellectual property protection may be insufficient, raising concerns about reduced competitiveness due to the manufacture of similar products by others. Conversely, there is also a risk that infringement of third parties' intellectual property rights could result in substantial litigation costs and damages. The Group addresses these risks by concluding confidentiality agreements with partner companies and actively filing for patents and utility model registrations.

In the display and semiconductor markets, which are the Group's primary customer base, prices fluctuate significantly in response to supply-demand trends, and excessive price competition could affect business performance and financial condition. The Group is focused on maintaining prices through cost reduction, development of automated and labor-saving equipment, and achieving customer cost reductions through equipment packaging; however, the risk of competition based solely on price with other companies cannot be denied.

Changes in delivery schedules due to customer circumstances may force sudden revisions to production plans, sales plans, and business performance forecasts. Delays in customers' factory construction or revisions to their capital investment plans may cause shifts in the timing of revenue recognition, potentially affecting business performance and financial condition. Given the characteristics of the manufacturing equipment business as a build-to-order business, changes in a single customer's plans can have a significant impact on business performance.

The Group's production bases—both the head office factory and the Moriya satellite factory—are concentrated in Ibaraki Prefecture, and the occurrence of a large-scale disaster in this region could severely impact the production system, including damage to production equipment, paralysis of logistics functions, and suspension of operations. In addition, in the event of a pandemic caused by an infectious disease, there is a risk that it could become difficult to continue business activities such as development, manufacturing, sales, procurement, and maintenance. The geographic concentration of production bases is a structural factor that heightens business continuity risk.

While the Group procures materials and components from multiple suppliers for product manufacturing, tight supply-demand conditions, supply delays, supply stoppages, or price surges could cause delays in product manufacturing or supply stoppages, potentially affecting business performance and financial condition. Procurement risk for certain materials, such as semiconductor-related components, is more likely to become apparent during phases of business expansion.

Tokyo Ohka Kogyo Co., Ltd. and Optorun are major shareholders of the Company, and each has entered into a collaboration agreement and a capital and business alliance agreement with the Company in the equipment business. A change in policy by these major shareholders or a change in shareholder composition could adversely affect the Company's stock price, business performance, and financial condition. In addition, the Company was established through an incorporation-type company split from Hitachi, Ltd., and continues to maintain a business relationship with Hitachi High-Tech, including a sales agreement; however, no license agreement or technical support agreement currently exists.