ELECOM CO., LTD.

Since the majority of product purchases are settled in US dollars, a weaker yen leads to higher yen-denominated purchase prices. Although the Company hedges through forward exchange contracts, if yen depreciation exceeds expectations or the Chinese yuan is revalued upward, the Company may be unable to pass on the resulting increase in purchase costs to selling prices, which could affect business performance. It is explicitly stated that it is impossible to eliminate all foreign exchange risks, including indirect effects.

Raw material suppliers and production contractors are concentrated in Asian countries such as China and Taiwan, and changes in political and economic conditions, terrorism, conflicts, and changes in legal or tax systems may disrupt production. As countermeasures, the Company is working to understand production locations, implement stock measures, and diversify production countries, but the risk cannot be completely eliminated.

In the personal computer and digital device-related product market, intense price competition with competitors occurs on a daily basis, which may force the Company to lower selling prices against its intentions. There are cases where increases in purchase costs due to soaring raw material prices, etc. cannot be passed on to selling prices, and while the Company continues to work on reducing material procurement costs and manufacturing costs, if price competition intensifies beyond expectations, it will affect business performance.

In the personal computer and digital device-related product market, technological innovation is rapid and product life cycles are short, and major technological innovations may significantly change end-consumer demand, leading to obsolescence of held inventory. The Company prepares for this risk through monthly disposal and quarterly write-downs, but if obsolescence progresses beyond expectations or delays in launching new products occur due to changes in the external environment, it will affect business performance.

As a fabless manufacturer, the Company depends on production contractors, and due to the multi-product, small-lot production format, quality defects or time losses may occur, making timely supply to the market difficult. Additionally, depending on sales trends for specific products, dependence on specific suppliers may arise, and if such a supplier restricts or halts supply, business performance will be affected. The Company addresses this through diversification of suppliers and the operation of management standards by a dedicated quality control department.

Products are subject to regulations under the Product Liability Act, the Radio Act, and the Electrical Appliance and Material Safety Act, and upon export may also be subject to the Wassenaar Arrangement, requiring permission from the Ministry of Economy, Trade and Industry. Products destined for Europe must comply with the RoHS Directive, and those for China must comply with China RoHS, among other regulations. Unforeseen regulatory violations or increased costs of responding to legal amendments may affect business performance.

The Company acquires personal information through e-commerce site sales and direct product delivery operations, and falls under the category of a personal information handling business operator under the Act on the Protection of Personal Information. While the Company strives to protect personal information through the establishment of a personal information protection policy and internal regulations, if an unforeseen external leak occurs, it may affect business performance through loss of credibility, claims for damages, and other consequences.

While the Company holds intellectual property rights related to numerous products, it also uses intellectual property rights licensed from third parties, and there is a possibility of license cancellation, unfavorable changes in terms, or new licensing demands. The Company has dedicated personnel for intellectual property rights management and responds through investigation requests to patent firms, but if the Company becomes involved in unrecognized disputes or receives patent infringement warnings, business performance will be affected through resolution costs, damages, and license fee payments.

Natural disasters such as earthquakes, tsunamis, and typhoons, or the spread of infectious diseases, may cause significant disruption to social infrastructure, and if business sites, logistics sites, or production contractors are affected, part or all of operations may be suspended. Measures such as establishing business sites nationwide, diversifying logistics sites, and using highly earthquake-resistant data centers have been implemented, but the impact on business performance cannot be excluded in the event of a major external factor occurring.

As part of its growth strategy, the Company is expanding its business scale through M&A and capital/business alliances, but there is a possibility that the expected results will not be achieved after implementation. The basic policy is to carefully consider relevance across multiple functions such as marketing, product development, sales channels, logistics, and IT infrastructure with existing businesses, but there is a risk of impact on the overall group performance, including deterioration in the performance of overseas subsidiaries. Additionally, a Risk Management Committee is scheduled to be newly established from October 2026 to develop a systematic risk management framework.