Sharp Corporation

Trade friction arising from U.S. trade policy and retaliatory measures by other countries, together with the prolonged geopolitical tensions including the situation in the Middle East, are causing supply chain disruptions and instability in the supply of resources and energy, heightening uncertainty in the global economy. These factors could adversely affect the business results and financial position of the Group. In response, the business divisions overseeing overseas subsidiaries collect risk information in cooperation with local operations, and management determines necessary risk responses through regular business performance reporting.

The ratio of overseas sales to consolidated net sales reached 54.8% in FY2026 (ending March 2026), and the Company also sells products manufactured overseas domestically, meaning that exchange rate fluctuations directly affect business results. In a yen appreciation phase, the yen-converted value of overseas sales decreases, creating a risk of pressure on earnings. In response, the Group implements risk hedging through foreign exchange forward contracts and expansion and strengthening of optimal-location production.

The ratio of borrowings to total assets reached 30.3% at the end of the consolidated fiscal year, and due to negative net worth at certain consolidated subsidiaries, the Company breached financial covenants under its loan agreements. Although the Company obtained consent from lending financial institutions not to demand acceleration of the loans, and secured stability in funding through the renewal of syndicated loan agreements and extension of commitment lines through March 31, 2028, deterioration in financial condition could work to the Company's disadvantage in business relationships and competition with competitors. Although the equity ratio has recovered to 19.6%, continued financial improvement remains a challenge.

Due to the nature of the Display Devices business, which involves supplying products customized to customer specifications, there is a high degree of dependence on major customers, creating a risk that a decline in demand, specification changes, or changes in sales strategy by such customers could directly lead to a decline in the Group's sales. In response, the Group is working to strengthen its technological capabilities and expand its customer base, while in the brand businesses (Smart Life and Smart Workplace), it is accelerating the expansion of the sales ratio of high value-added products and the launch of new businesses.

Investment from the Hon Hai Precision Industry group has enabled the pursuit of growth investments and business synergies, but changes in the parent company group's strategy or the emergence of competitive relationships could adversely affect the Group's business, results of operations, and financial position. There is also a risk that independence and autonomy in decision-making on important matters could be compromised due to the influence of the parent company group. In response, the Group works closely with the parent company group while respecting mutual independence and autonomy, identifying areas for synergy creation and appropriately verifying and realizing them.

Prolonged geopolitical risks, progressing international fragmentation, restructuring of business partners, natural disasters and accidents, as well as the rapid tightening of supply and demand for AI-related components (such as memory), create a risk that stable procurement of components will become difficult. This could lead to increased product costs and delivery delays to customers, adversely affecting business results and financial position. In response, the Group is strengthening its stable supply system through multi-vendor purchasing, diversification of procurement sources, and long-term forecast provision and inventory measures for critical components.

Insufficient response to rapid technological evolution creates a risk of declining competitiveness of products and services and adverse effects on growth potential and business results. In addition, the strengthening of export controls on advanced technologies from an international security perspective is progressing, and export restrictions on products including covered technologies could have an indirect impact on business operations. In response, the Group is promoting the use of its proprietary AI technology

If a third party asserts infringement of intellectual property rights, there is a risk of incurring substantial costs and being forced to discontinue use of technology. There is also a risk that competitive advantage could be undermined if rights are not granted for the Company's own patent applications or through unauthorized use by third parties. In response, the Group is pursuing strong rights acquisition centered on Sharp IP Infinity Co., Ltd., thorough intellectual property rights clearance prior to product launch, and standardization of the clearance process.

Amid the increasing sophistication and complexity of cyberattacks such as targeted email attacks and ransomware, the occurrence of business system outages, business interruptions, or leakage of customer information could affect business activities, operating results, and financial position. There is also a risk of expanded damage due to inadequate incident response, loss of social trust, and loss of business opportunities due to non-conformance with business partners' security requirements and third-party certifications. In response, the Group is operating an information security management system compliant with international standards, conducting employee education and training, and working to ensure controls across the entire supply chain, including group companies and outsourcing partners.

Increased energy costs due to strengthened greenhouse gas emission regulations and the introduction of carbon taxes could affect business results and financial position. In addition, natural disasters caused by climate change, such as larger typhoons and increased precipitation, pose a risk of causing production site shutdowns and disruptions to component supply. In response, the Group continuously monitors regulatory trends and participates in policy formulation, reduces costs through improved production efficiency and energy conservation, and formulates, periodically reviews, and trains for business continuity plans.