RORZE CORPORATION

The Group's mainstay products, transfer systems, depend on the capital expenditure plans of device makers and equipment manufacturers in the semiconductor and FPD industries. Fluctuations in industry technology trends and the supply-demand balance directly affect orders and business performance. If capital expenditure plans are scaled back or postponed, this could lead to a sharp decline in orders and a deterioration in business results. As countermeasures, the Group regularly monitors and verifies customers' capital expenditure trends, and has established a flexible production system capable of responding to sudden demand fluctuations.

As the Group operates globally, it faces the risk that geopolitical conflicts and changes to laws and regulations in various countries (commercial transactions, product liability, environmental protection, import/export, transfer pricing taxation, etc.) may result in unforeseeable events and substantial response costs. It is explicitly noted that trends in U.S. tariff policy in particular may affect business performance. As a countermeasure, the Group has established a system for advance information gathering on legal regulations and consultation with external experts.

The Group procures a wide range of items including materials such as aluminum, processed parts, and purchased components, and due to their specialized nature, it can be difficult to quickly switch suppliers or subcontractors. If sudden market fluctuations or significant changes in procurement prices cause procurement delays, quantity shortages, or cost increases, this could affect business performance and financial condition. As a countermeasure, the Group strives to maintain appropriate inventory levels by strengthening relationships with suppliers and monitoring procurement risks.

While raw materials are secured in advance as a countermeasure to procurement risk, if a deterioration in order trends causes raw material consumption to stall, excess inventory may arise, potentially adversely affecting business performance. Balancing demand fluctuations with procurement policy is a challenge. Disclosure of specific countermeasures in the securities report is limited, and monitoring of order trends appears to be the primary management measure.

The Group conducts foreign currency-denominated transactions in purchases and sales with overseas subsidiaries and in sales to overseas customers, and fluctuations in exchange rates could affect business performance and financial condition. As overseas transactions increase alongside the expansion of business activities, the absolute amount of foreign exchange risk is also on an increasing trend. As a countermeasure, the Group enters into forward foreign exchange contracts as necessary for large foreign currency-denominated orders.

While the Group actively promotes product development and patent acquisition based on proprietary technology, intellectual property protection may not be sufficiently available in certain regions. In addition, if unexpected patent infringement lawsuits are filed by competitors or third parties, litigation response costs and damages could affect business performance and financial condition. As a countermeasure, the Group has established a system centered on its intellectual property management department to monitor the market and take necessary measures.

The Group holds a large amount of customer information and technical information in the course of its business activities, and if unauthorized access or an unforeseen event causes information leakage, this could affect business performance and financial condition. In particular, technical information in the advanced semiconductor field is a critical competitive asset, and the impact of any leak could be significant. As a countermeasure, the Group has established information security regulations and strives to properly handle, manage, protect, and maintain information.

Diverse competitors exist in the semiconductor business field, and competition may intensify due to the rise of local manufacturers. If competitors surpass the Group in quality, cost, or delivery time, this could lead to a decline in competitiveness and erosion of profitability. As a countermeasure, the Group seeks to strengthen its competitiveness through expanded local production, although the risk of being overtaken technologically also exists in parallel.

Products for advanced fields contain many newly developed elements, and if unexpected serious defects occur, substantial costs such as free-of-charge repairs may arise, potentially affecting business performance and financial condition. For the Group, which provides high value-added, high-reliability products, quality issues are a risk directly linked to the trust relationship with customers. As a countermeasure, the Group pursues continuous improvement of its management system through ISO9001 certification, and thoroughly investigates root causes and implements recurrence prevention measures when defects occur.

Regarding Nanoverse Technologies, Ltd., which became a consolidated subsidiary in June 2024, if its business performance falls short of initial expectations due to changes in the business environment or other factors, goodwill impairment or similar measures may occur, potentially affecting the Group's business performance and financial condition. As the company is expected to make a significant contribution to future business performance, the financial impact in the event of underperformance could be correspondingly large. Disclosure of specific quantitative impairment risk in the securities report is limited.