ULVAC, Inc.

The Group's core business is vacuum equipment for manufacturing processes in semiconductors, electronic components, FPDs and other fields, and under the new medium- to long-term management plan "Value Up Plan," the Group has positioned business concentration in the semiconductor and electronics field as a key strategy. As a result, the Group's structure is highly susceptible to sudden changes in demand in this market or reductions in customers' capital expenditure. Should market conditions deteriorate due to geopolitical risks or economic fluctuations, this could materially affect the Group's business results and financial condition. As countermeasures, the Group is strengthening its capability to respond to technological innovation through R&D investment, expanding and differentiating its product lineup, and diversifying its revenue base by creating new businesses that leverage synergies across business segments.

The Group has a high ratio of overseas sales and provides products to customers around the world, but in addition to existing globally operating competitors, new entrants are also increasing, intensifying competition not only in product performance but also in pricing. Deterioration of the competitive environment could affect business results and financial condition through declines in sales and profit margins. The Group works to maintain and enhance its competitiveness by accurately identifying customer needs and launching products that reflect these needs in a timely manner.

The Group's growth strategy is centered on the continuous launch of new products using cutting-edge technology, but should significant development delays occur, this could reduce competitiveness due to delayed product launches, thereby affecting business results and financial condition. The Group is working to accelerate development through selection and concentration of development investment, and has established a management system that conducts regular monitoring of progress to prevent significant delays.

Because the Group provides products using cutting-edge technology, there is a significant developmental element involved, and unexpected defects could result in additional costs, damage claims, and reduced sales due to loss of trust. In addition, product safety issues could lead to damages to customers and a decline in social credibility. As countermeasures, the Group is promoting the establishment of a quality assurance system including ISO9001 certification, the use of value engineering, horizontal deployment of nonconformity information and thorough recurrence prevention measures, and the strengthening of upstream processes.

Should tight supply-demand conditions for parts lead to sharp price increases or supply delays, or should supply chain disruptions occur due to large-scale disasters or other causes, this could halt or delay production activities, affecting business results and financial condition. The Group strives to secure necessary parts through building cooperative relationships with suppliers and arranging for parts procurement in advance.

The Group conducts business globally and is subject to a wide range of laws and regulations, including export and import controls, competition law, anti-corruption and anti-bribery laws, labor law, environmental law, and transfer pricing taxation. Should violations of these be found, there is a risk of fines, liability for damages, restrictions on business activities, and a decline in social credibility. The Group has established corporate ethics and codes of conduct and promotes awareness of them, utilizes an internal reporting system, maintains a monitoring system through the Compliance Committee and Risk Management Committee, and has established a reporting system to the management meeting.

If the Group is unable to continuously secure the human resources necessary for sustained growth in the global business environment, this could lead to a decline in competitiveness, affecting business results and financial condition. The Group is promoting the recruitment and development of talent, and is working to create an environment in which diverse talent can maximize their capabilities through activities that focus on employee engagement and well-being.

The Group holds important business information, personal information, and confidential information of business partners, and should information leakage, data destruction, or shutdown of information systems occur due to cyberattacks, theft, loss, or other causes, this could result in loss of customers, decline in social credibility, and liability for damages. The Group addresses this through security measures such as regular risk assessments and network monitoring, establishment of an appropriate management system based on information management regulations, and thorough employee education.

The Group procures funds through borrowings from financial institutions and other means, but deterioration in market conditions or a decline in creditworthiness could make fund procurement difficult. In addition, should the Group violate financial covenants attached to loan agreements, there is a risk that fund procurement could be hindered. The Group has established a system to secure additional funds by leveling annual repayment amounts to reduce refinancing risk, maintaining sufficient liquidity on hand, and setting up commitment lines.

The Group strives to comply with domestic and international environmental laws and regulations related to prevention of global warming, water pollution, air pollution, and waste disposal, but should events occur that make it difficult to adapt to future tightening of environmental regulations, this could result in increased environmental response costs, suspension of business activities, and a decline in social credibility. The Group has endorsed the TCFD recommendations and conducts forecasting of risks and opportunities based on scenario analysis, and conducts regular monitoring and progress management toward its targets of a 50% reduction in greenhouse gas emissions by 2030 (compared to 2023) and net zero by 2050.