FUJI ELECTRIC CO.,LTD.

In the semiconductor field, product cycles are short and fluctuations in product supply-demand and intense competition may result in the inability to recover large-scale capital investments. Investment decisions are made based on negotiations with customers regarding volume and pricing, and the R&D roadmap is reviewed on an ongoing basis; however, if investments cannot be recovered, this may affect business performance and financial condition.

Fuji Electric operates business sites around the world, centered on China and Asia, and heightened geopolitical risk and disruption to the international order-driven social, economic, and political turmoil may constrain business activities, cause factory shutdowns, or restrict business travel. Unforeseen changes in laws and regulations, unfavorable changes to tax systems, and social unrest, terrorism, and war are also recognized as risks that may affect business performance and financial condition. The company is addressing this through diversification of production and sales sites.

A contraction in private capital investment and public investment in domestic and overseas markets, sharp fluctuations in product supply and demand, intensifying competition, and the resulting significant decline in price levels may affect business performance. In particular, because the company is focusing on expanding sales in the China and Asia markets, the impact of a deteriorating market environment in these regions is significant. The company is working to minimize the impact through cost reduction and overall expense reduction.

Fluctuations in foreign exchange rates against the yen, primarily the US dollar, may affect business performance and financial condition. The company seeks to mitigate this risk by conducting forward foreign exchange contracts based on certain standards; however, in a weak-yen environment, this is also linked to rising prices of raw materials and parts, which may give rise to compound financial effects.

In addition to rising raw material and parts prices due to the weak yen, tight supply-demand conditions for materials and raw materials are expected due to sharp increases in demand in emerging countries, and if prices rise significantly, this may affect business performance and financial condition. The company strives to mitigate this risk through commodity swap transactions and other means, but depending on changes in circumstances, an adequate response may become difficult.

In response to increasingly diverse and sophisticated cybersecurity threats, the company has established a CSIRT/SOC to monitor and control attacks; however, if a malfunction or information leak occurs due to an external attack (such as cyberterrorism), this may result in a loss of social trust and affect business performance and financial condition. The company continuously strengthens its defense and detection systems and conducts cyber training.

If a large-scale disaster or accident occurs at business sites around the world, this may result in damage to production facilities, operational suspension, delays in product shipment, and other issues, significantly affecting business performance and financial condition. The company is working to strengthen business continuity capabilities through the establishment of a dedicated crisis management department, formulation of BCPs, and obtaining necessary insurance; however, events exceeding expectations may be difficult to address.

If unforeseen circumstances restrict the movement of people and goods and disrupt the logistics network, the supply chain may fail to function, resulting in delivery delays and other issues that may affect business performance and financial condition. The company is addressing this through the promotion of "regionally self-sufficient" manufacturing based on local production for local consumption and the promotion of global procurement; however, delayed responses to sudden changes in product demand also carry the risk of inventory shortages or excesses.

The company conducts business activities subject to a variety of laws and regulations around the world, and if a legal violation occurs, this may affect social trust as well as business performance and financial condition. There is also litigation risk of being ordered to pay unexpectedly large damages, as well as intellectual property rights dispute risk associated with accelerating technological innovation and global expansion. The company has established systems such as a compliance promotion committee, compliance programs, and a whistleblower system to address these risks.

If criticism intensifies toward certain businesses, such as coal-fired power generation, due to strengthened environmental regulations such as the Paris Agreement and evaluations by ESG rating agencies, this may affect Fuji Electric's reputation as well as its business performance and financial condition. The company has expressed support for the TCFD and is promoting efforts toward decarbonization, a circular economy, and a nature-positive society across the entire supply chain based on the "Environmental Vision 2050," but there is a risk that its response may not keep pace depending on the speed of regulatory tightening.