Tera Probe, Inc.

Changes in trends across a wide range of end-product markets—including smartphones, PCs, digital home appliances, automotive applications, and AI-related equipment—as well as customer production trends, competition with other companies in the same industry, trade friction, and fluctuations in foreign exchange rates may affect the Company's financial position and business results. As countermeasures, the Company is actively pursuing business acquisition in the AI and advanced device fields, while promoting productivity improvement and cost reduction through smart factory conversion and the utilization of AI technology.

Sales of the consolidated subsidiary TPW (Taiwan) account for approximately 75% of the Group's total sales. If regional conflict, deterioration of political and economic conditions, customer reconsideration of production systems in response to the advance of protectionism, or changes in laws and regulations occur in Taiwan, this could cause a material disruption to business activities. As countermeasures, in addition to close cooperation with TPW to gather local information, the Company is promoting the standardization of test platforms across the Group, and has established a system enabling the Kyushu Office to accept outsourced work in the event TPW's production is halted.

If test operations outsourced by major customers decrease significantly, or if a major change occurs in the business environment of customers, this may affect the Company's financial position and business results. As countermeasures, the Company is working to diversify its customer base and develop new customers, while seeking to maintain and deepen medium- to long-term business relationships with customers through the enhancement of quality assurance systems in the advanced products and automotive fields and the provision of high-value-added technical solutions.

The Company holds a large amount of fixed assets due to upfront investment in semiconductor testing equipment and other assets, resulting in a structure where depreciation expense, a fixed cost, accounts for a high proportion of total expenses, making it difficult to flexibly reduce costs when customer demand is sluggish. In addition, if projected future cash flows or the discount rate (weighted average cost of capital) fluctuate due to a decline in the utilization rate or other factors, recognition of impairment losses may become necessary, which could affect business results. As countermeasures, the Company is exercising greater caution in investment decisions, continuously verifying the utilization status of owned equipment, and considering measures such as acquiring other customers or early disposal of equipment in the event utilization rates decline.

In addition to a business structure requiring substantial capital expenditure, funding needs may arise in connection with loan repayments and M&A activity. If the Company is unable to secure necessary funds due to sudden changes in the economic environment or if fundraising costs rise, this could affect its business development, financial position, and business results. The Annual Securities Report states that the likelihood of this risk materializing at present is considered low, and the Company is working to ensure financial soundness by maintaining a certain level of cash on hand and exercising greater caution in investment decisions.

The semiconductor industry is characterized by an extremely rapid pace of technological innovation, with the sophistication of products and diversification of applications advancing rapidly, creating a risk that owned equipment and technology may become obsolete due to new technological developments or changes in product specifications. If obsolescence occurs, costs associated with equipment disposal and new investment will arise, which may affect business development, financial position, and business results. As a countermeasure, the Company is promoting equipment investment and technology development in line with its business strategy based on accurate understanding of technology trends.

The Company's main business sites are concentrated in Kohoku-ku, Yokohama City, Kanagawa Prefecture; Ashikita-machi, Ashikita-gun, Kumamoto Prefecture; and Hukou Township, Hsinchu County, Taiwan. If a natural disaster such as an earthquake or typhoon, an accident, or an epidemic occurs, the Company may suffer significant damage such as suspension of operations. The Company seeks to mitigate the impact through business continuity management (BCM) activities and the purchase of casualty insurance, but there is no guarantee that all losses will be covered by insurance.

Securing excellent human resources is essential for smooth business operations. If intensifying competition for talent prevents new hiring from proceeding as planned or leads to employee turnover, this may affect business development and business results. In particular, in Kumamoto Prefecture, the supply-demand balance for human resources has become tight against the backdrop of expanding semiconductor-related investment, and increased difficulty in securing personnel and rising personnel costs are expected. As countermeasures, the Company is promoting the recruitment of diverse talent, enhancement of education and training, improved operational efficiency through the use of AI, and the development of a workplace environment that is easy to work in.

The Company handles important information such as test programs in the course of outsourced work from customers, and if unauthorized access leads to information leakage or a system failure, this may affect the Company's financial position and business results. As countermeasures, in addition to raising employee security awareness through the development of internal regulations and employee training, the Company has introduced mechanisms for restricting network access, encrypting communications, and detecting and responding to suspicious programs at an early stage, and has also taken out insurance to prepare for cyberattacks and similar incidents.

The parent company, the Powertech Technology Inc. (PTI) Group, holds 60.70% of the Company's voting rights, and there is a possibility that the exercise of shareholder rights by the PTI Group may not align with the interests of other shareholders. In addition, three officers and employees of the PTI Group concurrently serve as directors of the Company. As a countermeasure, the Company strives to make decisions that give due consideration to the independence of management and the protection of the interests of minority shareholders, through the deliberation and determination of important matters at the Board of Directors, which includes independent outside directors.