J.E.T. Co., LTD.

The semiconductor market is exposed to waves of price declines and market contraction caused by deteriorating supply-demand balance, and supply chain disruption risk has become apparent due to U.S.-China conflict, tightening export regulations, and uncertainty over the Taiwan situation. Unforeseen market contraction or geopolitical disruption may lead to order cancellations, inventory increases, bad debt losses, and supply shortages. The Company responds by closely monitoring customer investment trends, strengthening relationships with major customers and developing new customers, and expanding into businesses other than semiconductor cleaning equipment.

Sales dependence on the Samsung Electronics Group has been on an increasing trend, at 30.5% in FY2023 (ended December 2023), 30.0% in FY2024 (ended December 2024), and 36.9% in FY2025 (ending December 2025), and profit pressure is increasing due to changes in the group's capital investment plans and price discount requests on large orders. Geopolitical risks such as U.S. export regulations toward China and restrictions on technology transfer to Korean companies may also affect customers' investment plans. The Company aims to reduce risk by diversifying its customer base while maintaining relationships with major customers and acquiring new customers simultaneously.

The Group continues to actively pursue research and development in cutting-edge technologies such as cleaning technology, heat treatment technology, and drying technology, and early market introduction of new products is a source of competitiveness. If delays in R&D cause new product launch timing to slip, this may affect market share and profit margins. A timely R&D structure has been established through a two-tier system consisting of the Technology Planning Office and the Technology Development Department, but the increase in unknown technology areas is heightening this risk.

The Group conducts trade control operations based on the Foreign Exchange and Foreign Trade Act and has obtained a Special General Comprehensive Export License (License No. HBIT-GL-23-S100005, valid until February 5, 2027), but legal amendments or tightened regulations may increase management workload and costs and create export constraints. If economic security policies are strengthened worldwide and customers become subject to sanctions, there is a risk of export restrictions, extended lead times, and delays in fund settlement. The Company has established an internal control system to respond, but continuous response is required given the rapidly changing regulatory environment.

Intensifying international competition in advanced semiconductor technology has led to more complex patent disputes and cross-licensing negotiations, and if unintended infringement of third-party rights or technology-sharing constraints due to export regulations occur, this may cause R&D delays and increased litigation costs. The Company has established an Intellectual Property Committee to eliminate such risks, but the risk is increasing as technological competition intensifies.

The Group concentrates production at its head office plant in Satosho-cho, Asakuchi-gun, Okayama Prefecture, and if a natural disaster such as an earthquake or an accident such as a fire or explosion occurs, there is a risk of production delay or suspension. In addition, rapid demand fluctuations in the semiconductor market or geopolitical tensions could tighten the production capacity of partner companies or affect them through export regulations. The Company is pursuing regional diversification of partner companies and securing alternative supply networks, but if supply constraints become prolonged, this may affect operating results and financial condition.

The Group outsources many processes in product production, and if an outsourcing partner is affected by a natural disaster or accident, or if outsourcing partners cannot be secured as planned, there is a risk that production activities will be temporarily suspended or delayed. For critical processes, the Company is promoting multi-vendor arrangements by developing new outsourcing partners in different regions, but similar risk arises if it becomes difficult to continue contracts with existing outsourcing partners.

Some of the Company's loan agreements contain financial covenants relating to consolidated and non-consolidated net assets and ordinary income (loss). If the Company breaches these covenants and a claim is made by the lending financial institution, it may lose the benefit of time and be obligated to repay the loan in a lump sum. In this case, this may have a material impact on the Group's financial condition.

ZEUS Co., Ltd. (listed on the Korean KOSDAQ) holds 66.3% of the Company's voting rights and is in a position to influence the Company's management decisions through the appointment and dismissal of directors at shareholders' meetings, among other means. If changes in the parent company's management policy or deterioration in its business condition result in demands being placed on the Group, this may affect operating results and financial condition. The Company strives to protect the interests of minority shareholders through the execution of agreements and deliberation of transaction terms by a special committee.

The Group has a high ratio of overseas exports, and if foreign exchange fluctuations exceeding expectations occur, particularly in the Korean won or Chinese yuan, this may affect operating results and financial condition. While the Company principally conducts transactions in yen and hedges through forward exchange contracts and other means, it may be difficult to respond to sudden fluctuations. In addition, if it becomes difficult to recruit, train, and retain excellent personnel in the highly specialized semiconductor cleaning equipment business, this may also affect business performance, and the Company is working to develop an environment where employees can continue to work.