TAIYO TECHNOLEX CO.,LTD.

The Group's head office plant is designated as an area for the promotion of disaster prevention measures against the Nankai Trough earthquake, and in the event of a large-scale earthquake, significant restoration costs and a substantial decline in sales and production functions are anticipated, which could have a material impact on operating results. As countermeasures, the Group has formulated a Business Continuity Plan (BCP), obtained

The Group does not hold intellectual property rights such as patents or utility model rights related to FPC (Flexible Printed Circuit) manufacturing, and competition may intensify due to the emergence of new entrants or the invention of groundbreaking new manufacturing methods. In addition, if FPC manufacturers, feeling that their own production lines have spare capacity, internalize prototype production, or strengthen sales efforts by taking on prototype orders at low prices in order to secure mass-production orders, orders placed with the Group may decrease, posing a risk of reduced profitability. As a countermeasure, the Group is working to rebuild its business model leveraging its strengths and to establish unique competitive advantages through the deepening and integration of diverse technologies.

There is a correlation between domestic FPC (Flexible Printed Circuit) production value and the Group's FPC-related net sales, and if significant fluctuations occur in FPC supply and demand due to trends in the electronic components industry or technological innovation, operating results may be affected. In fact, domestic FPC production value declined sharply by 12.6% from ¥30.67 billion in 2022 to ¥26.82 billion in 2023, and the Group's Electronic Circuit Board Business-related net sales also decreased from ¥2,619,085 thousand to ¥2,220,634 thousand over the same period. As a countermeasure, the Group is working to strengthen its business portfolio through the deepening and integration of diverse technologies across multiple businesses.

There is no standard inspection method for circuit board testing, and if an inspection method different from the one the Company aims for becomes the market mainstream, the Group's operating results may be affected. There is also a risk that the inspection equipment market itself could shrink if electronic circuit board manufacturers omit inspections due to reduced defect rates, or if an increasing number of manufacturers internalize the production of inspection equipment. As a countermeasure, the Group is working to rebuild its business model and establish unique competitive advantages through the deepening and integration of technology.

In the Industrial Machinery System Business, there are risks of impact on operating results from price competition with competitors, difficulty in maintaining cooperative relationships with manufacturers, declining capital expenditure demand, and failure to maintain close relationships with customers. Inspection systems are mainly sold on an order basis according to customer specifications, and poor performance by customer companies or intensified price competition are similarly risk factors. While the Group pursues a differentiation strategy through customized proposals for high-end products and maintaining close customer relationships, vulnerability to changes in the external environment remains.

In the Group's business fields, numerous patents and utility models have been filed, and if the Group becomes involved in legal disputes with third parties regarding intellectual property rights, this could result in restrictions on business operations, loss of reputation, claims for damages, and other impacts on operating results. In addition, in business areas where the Group itself does not hold intellectual property rights (FPC (Flexible Printed Circuit) manufacturing, mirror surface polishing machines), there is also a risk of third parties imitating or applying the Group's technology. As countermeasures, the Group has established a process for investigating third-party intellectual property rights when developing new businesses and products, and adopts a policy of actively filing for and acquiring patents and other rights. It is recognized that there is a reasonable likelihood of this risk materializing.

If the research and product development departments of set makers, which are the Group's main customers for FPC (Flexible Printed Circuit) prototyping, relocate overseas, the Group, which does not have overseas production sites, risks losing its competitive advantage in responding to short lead times. The Group's net sales have a high proportion of FPC-related sales (¥2,367,291 million out of net sales of ¥3,751,667 million in the 65th fiscal year), and the loss of this advantage would have a direct impact on operating results. At present, no specific countermeasures such as establishing overseas facilities have been disclosed.

If the acquisition, development, and retention of the excellent personnel needed for technical improvement and R&D, centered on the Electronic Circuit Board Business and Test System Business, do not proceed as planned, business operations may be hindered. There is also a risk of personnel with specialized technical expertise leaving the Company. As countermeasures, the Group addresses this through active recruitment activities (regardless of age, gender, or nationality), enhanced internal and external training and employee benefits, and the introduction of a merit-based personnel evaluation system, and assesses that the likelihood of this risk materializing is low.

If important confidential information such as technical information, or personal information of customers and related parties, is leaked, this could result in loss of social credibility, significant damages compensation costs, and reduced competitiveness due to the leakage of technical information. As countermeasures, the Group implements physical and personnel security measures through continuous improvement of information security systems, development of internal regulations, and thorough employee training, and assesses that the likelihood of this risk materializing is low.

If the market value of held assets declines significantly, or if business profitability deteriorates, impairment losses may occur; and if the estimated amount of future taxable income decreases due to economic fluctuations or other factors, it may become necessary to write down deferred tax assets, either of which could affect performance and financial position. Over the past five fiscal years, in the 63rd fiscal year (fiscal year ended December 2023), the Group recorded an operating loss of ¥141,873 thousand and a net loss attributable to owners of the parent of ¥126,536 thousand, indicating that the risk of earnings volatility has already materialized. As countermeasures, the Group carefully examines the feasibility of its business plans and conducts impairment recognition assessments based on future cash flows.