EIZO Corporation

In addition to intensifying competition from the emergence of competitive products from other companies and new market entrants, if the Group's response to the rapidly advancing AI technology in recent years is delayed, this could lead to a decline in the competitiveness of products and services and a delay in responding to market needs. The Group seeks to differentiate itself through the active development of advanced technologies and the enhancement of product value-added, but given the rapid pace of technological innovation, there is a risk that delayed responses could affect business performance.

The proportion of sales to Europe in consolidated net sales for the fiscal year under review was high at 38.6% (39.8% in the previous fiscal year), meaning that a downturn in the European economy or the emergence of new tariffs or export barriers would have a significant impact on business performance. Because of the high degree of sales dependence on the single European market, region-specific economic and political risks are a factor causing fluctuations in business performance.

While the proportion of sales to Europe is high and euro-denominated sales account for a large share, US dollar-denominated payments for parts procurement exceed sales revenue, resulting in an asymmetric foreign exchange exposure in which yen appreciation against the euro has a positive effect while yen depreciation against the dollar has a negative effect (i.e., euro appreciation is positive and dollar appreciation is negative relative to the yen). The Group seeks to mitigate this risk through forward exchange contracts and expansion of US dollar-denominated sales, but exchange rate fluctuations may affect transaction prices, net sales, and profit at each stage.

The Group procures all components, including LCD panels, semiconductors, and structural materials, from external sources, and procurement could be made difficult by global supply-demand tightness, rising prices of DRAM and NAND flash memory driven by expanding AI-related demand, geopolitical risk, natural disasters, cyberattacks, infectious diseases, and other supply chain disruptions. In addition, rising prices of petroleum-derived materials due to fluctuations in crude oil prices and increased logistics costs could also lead to higher procurement costs, potentially causing production stoppages or delays in sales. The Group takes measures such as securing multiple suppliers and holding strategic inventories, but these risks cannot be completely eliminated.

If a serious quality problem occurs in a product, it could damage the brand, undermine trust, result in damages claims, loss of market share, and decreased sales, thereby affecting business performance. The Group promotes consistent quality assurance activities from planning and development through to sales and after-sales service under ISO quality management system certification, but the risk of quality problems occurring cannot be reduced to zero.

If system outages, loss of information, leakage, or tampering occur due to computer virus infection, unauthorized access, or new cyber threats, business activities could be disrupted, potentially affecting business performance. The Group operates an information security management system based on ISO/IEC 27001 certification and implements product and service security responses through its PSIRT, but complete protection is difficult given the increasing sophistication and diversification of threats.

As the Group operates globally with development, manufacturing, and sales sites overseas, it is constantly exposed to political and social unrest, geopolitical risks such as international conflicts and terrorism, and economic instability. Depending on the degree of risk, the Group may be forced to suspend or restrict business activities, which could affect business performance.

The implementation of new environmental regulations could result in additional costs for regulatory compliance or delays in the development and market launch of compliant products, potentially affecting business performance. The Group promotes the development of environmentally conscious products through the reduction of hazardous chemical substances, energy-saving design, and participation in industry associations, but there is a risk that the Group may be unable to keep pace depending on the speed and content of regulatory tightening.

In the video equipment-related industry, where technological innovation is remarkable, unexpected patent infringement warnings, lawsuits, damages claims, and license agreements could result in the incurrence of substantial legal fees, settlement costs, and licensing fees. The Group has strengthened its management through active patent filings, gathering information on other companies' patents, and entering into license agreements for industry standards, but these risks cannot be completely eliminated.

The Company's monitors for the amusement market are used incorporated into gaming machines, but the market has continued to shrink due to the ongoing decline in the number of pachinko halls accompanying a decrease in the gaming population. Further market contraction, revisions to laws and regulations related to gaming machines, and the business trends of the Sanyo Bussan Group, a major sales customer, could reduce sales volume going forward, potentially affecting business performance.