SINFONIA TECHNOLOGY CO., LTD.

The Group has a high proportion of business related to public and social infrastructure and defense, and if demand from government agencies decreases or price competition intensifies due to an increase in the number of entrant companies, there is a possibility of a decline in orders and sales or a decline in profitability. As a countermeasure, the Group is expanding its business to a wide range of industries among private companies and expanding into new fields, but the concentration risk inherent in the business structure continues.

Since the Group supplies products to a wide range of fields both in Japan and overseas, changes such as economic downturns, decreased demand, export regulations, and tariff policies in various countries may lead to a decline in orders and sales or a decline in profitability. With China, ASEAN, and the United States as major markets, geopolitical risks and fluctuations in trade policy can directly affect business performance. As countermeasures, the Group is reviewing production items and promoting flexible staff allocation and production line efficiency improvements.

The Group deals with customers in industries such as semiconductors, automobiles, precision machinery, and electronic components, where technological innovation is rapid and production plans fluctuate significantly. There is a risk that orders and sales may decline if the provision of new technologies and products is delayed, or if customers' production plans change significantly. In addition to in-house R&D, the Group continues to collaborate with universities, research institutions, and companies outside the Group, strengthen marketing through dedicated organizations, and explore M&A opportunities.

Most of the Group's products compete with other companies, and intensifying price competition or price reduction demands from customers may lead to declines in selling prices and sales volumes. Fields with low entry barriers are particularly susceptible to the impact of competitors, which could lead to deteriorating profitability. As countermeasures, the Group is working on product development, cost reduction, and value-added enhancement (systemization, adding new functions) to secure competitive advantage.

The Group uses a wide variety of raw materials and purchased components in manufacturing its products, some of which include special materials, so shortages or supply disruptions caused by social conditions or unforeseen circumstances may lead to production stoppages or shipment delays. The Group strives to reduce risk through visualization of procurement risk, securing multiple suppliers, and considering alternative materials, but the risk of continued instability in the global supply chain remains.

Raw material costs, purchased component costs, and transportation costs are constantly fluctuating, and if the increase is significant, profitability may decline. The Group strives to switch to alternative products, explore new procurement sources in collaboration with overseas Group companies, and reduce production costs, but if such increases cannot be absorbed, the Group also plans to review selling prices.

If a product defect related to recalls or product liability occurs, it may lead to significant costs and loss of customer trust, potentially resulting in a decline in orders and sales or a decline in profitability. The Group has strengthened quality confirmation and production line management and improvement through dedicated organizations, and has established a system for prompt investigation of causes and review of work and inspection standards when problems occur.

With respect to fixed assets such as investment securities, land, and buildings and facilities, if the recovery of the invested amount becomes unlikely due to a decline in market value or profitability, impairment losses may occur, affecting business performance. Regarding investment securities, the necessity of holding them is verified annually by the Management Committee and the Board of Directors, and reviews are conducted for each individual security.

If important information such as customer and business partner information, trade secrets related to R&D, and personal information is leaked, there is a risk of loss of social trust and liability for damages. The Group has established a company-wide management system centered on the Information Security Committee, and strives to maintain and improve security levels through continuous education, audits, and evaluations.

The Group's domestic production bases are concentrated in the Tokai region, where a Tokai earthquake is predicted to occur, and if a large-scale disaster exceeding expectations occurs, it may have a significant impact on business performance. The Group systematically implements building inspections and reinforcement, formulation and continuous review of business continuity plans (BCP), and safety confirmation drills and evacuation drills, but the structural risk of geographic concentration remains.