SANYO DENKI CO., LTD.

The Company Group, whose primary markets are machine tools, robots, and semiconductor manufacturing equipment, is susceptible to economic conditions, and there is a risk that orders could decline significantly due to restrained capital expenditure during domestic and overseas economic downturns. The Group is strengthening its business structure by expanding sales into a wide range of fields and regions, but if orders decline beyond forecasts, this could have a material impact on business performance.

In the markets for cooling fans, power supply equipment, and servo products, technological innovation and changes in customer needs are occurring rapidly, increasing the risk of existing products becoming obsolete. The Group aims to achieve industry-leading performance, quality, and reliability through design and development, improved production technology, and enhanced quality control, but if the Group falls behind in responding to change, its competitive advantage over rivals could be impaired, potentially affecting business performance.

In expanding business into North America, Europe, East Asia, and Southeast Asia, there are potential risks arising from regulations related to geopolitical factors, language, customs, legal systems, and tax systems. The Group conducts thorough prior research on target regions and continuously monitors local conditions, but if it becomes difficult to address risks as they materialize or if substantial costs arise, this could affect global expansion and business performance.

The Company Group, which holds important business information and personal information, faces the risk that cyberattacks, infrastructure failures, and other incidents could cause the loss, tampering, or leakage of critical data, or system downtime. The Group conducts regular information security education for all employees and implements cyberattack countermeasures, email attack drills, and enhanced IT governance, but if attacks occur that exceed expectations, this could lead to compensation to affected parties, damage to corporate value, and loss of social credibility.

The Company Group, which has production, sales, procurement, and R&D facilities around the world, faces the risk that facility damage, business interruption, and delays in production and shipment could occur due to major typhoons, large earthquakes, river flooding, volcanic eruptions, infectious disease outbreaks, and other events. The Group strives to minimize damage through the establishment of a crisis management committee, an employee safety confirmation system, disaster prevention plans, and business continuity plans, but damage from natural disasters cannot be completely avoided, and this could affect business performance through a reduction in business activities.

The Group procures many parts and raw materials from Japan and overseas, and if market conditions fluctuate beyond forecasts, this could affect business performance and financial condition. The Group promotes diversification of suppliers, product design changes, evaluation of alternative parts, and conversion to in-house production, and reflects significant market fluctuations in sales prices, but if these measures cannot be implemented, this could affect business performance.

The Company Group, which operates globally, conducts procurement and sales activities with consideration for the balance of foreign-currency-denominated assets and liabilities, but when preparing consolidated financial statements, translation into yen is performed using the average rate for each fiscal year, so fluctuations in exchange rates affect the translated value. Business performance could be affected by movements in either the appreciation or depreciation of the yen.

The Group strives to accumulate technology and know-how and hold intellectual property rights to maintain competitive advantage, but in some regions legal restrictions mean rights are not sufficiently protected, potentially resulting in unauthorized use by third parties. In addition, if the Group is deemed to infringe on other companies' intellectual property rights due to differences in interpretation or other reasons, this could result in the inability to use important technology and substantial liability for damages, potentially having a material impact on business performance.

The Group has established a strict quality control system and provides high-quality products and services to domestic and overseas customers, but if defects occur in products or services, the Group could be held liable for damages and incur substantial costs to address the issue. Furthermore, media coverage of such defects could damage corporate value and lead to a loss of social credibility, potentially affecting business performance.

Amid growing social demands for consideration of human rights, the Company Group established the "Sanyo Denki Group Human Rights Policy" in April 2025 and is promoting initiatives to respect human rights. However, if human rights issues arise due to unforeseen circumstances within the supply chain, this could affect business performance.