Teikoku Tsushin Kogyo Co., Ltd.

As the Company's major customers are global set makers in the digital consumer electronics and automotive markets, economic conditions and market changes around the world directly or indirectly affect its business performance. The Company's structure is highly dependent on specific markets and is susceptible to demand fluctuations. The securities report does not describe specific countermeasures and merely recognizes and discloses this as a risk.

The Company's main products are custom products tailored to individual customer requirements, and changes in customers' design and development status or production plans directly affect the Group's production and shipments. Plan changes due to customer circumstances are a factor causing fluctuations in business performance, creating a risk that revenue stability may be impaired. The difficulty of acquiring alternative customers, which is inherent to custom products, also exists as a potential risk.

Competition with domestic and overseas peers continues, and business performance could be affected if competitors gain an advantage in technology or price. The electronic components industry undergoes rapid technological innovation, requiring continuous effort to maintain competitive advantage. The Group is working to maintain its competitive edge, but depending on competitors' actions, there is a risk of losing market share.

Since the financial statements of overseas locations, including China, ASEAN countries, and North America, are prepared in local currencies or US dollars and translated into yen when preparing consolidated financial statements, exchange rate fluctuations affect business performance and financial condition. In addition, US dollars and other currencies are used in overseas transactions at each business site, exposing the Group to fluctuation risk across multiple currencies. The securities report does not describe specific hedging measures, suggesting that countermeasures against foreign exchange risk are limited.

Financial information, confidential information, and personal information are accumulated and used in electronic form, creating a risk of system failure or information leakage due to computer viruses or unauthorized access. If an information leak occurs, the Group may face loss of credibility as well as claims for damages. Countermeasures are being taken through both hardware and software security measures and the use of virtual environments and cloud technology for core systems, but complete defense is recognized as difficult.

Various contingent risks, including terrorism, war, infectious disease, natural disasters, and disruption of lifelines, are latent at domestic and overseas business sites, potentially making it difficult to continue normal operations. The Group has established a business continuity plan (BCP) and defined measures for continuing operations, but if events beyond expectations occur, an impact on business performance is unavoidable. As the Group operates globally, this also includes geopolitical risks and unexpected changes in political and economic conditions.

Multifaceted risks stemming from climate change, such as increased costs for legal and regulatory compliance, increased investment in production facilities, higher costs for purchasing raw materials and environmental value, and reduced sales due to changes in customer behavior, may affect business performance and financial condition. The Group has set GHG emissions and the ratio of renewable energy electricity adoption as management indicators and is promoting initiatives toward realizing a decarbonized society. Delays in responding to climate change also carry the risk of reduced customer trust and loss of competitive advantage, leading to a contraction in business transactions.

The Group uses petroleum-related materials such as plastics, metal materials, and semiconductor components, creating a risk that procurement difficulties due to import/export restrictions, conflicts, natural disasters, or fires could lead to production stoppages or supply disruptions to customers. Increased procurement costs due to rising prices of raw materials, labor costs, energy prices, and logistics costs also affect business performance and financial condition. Specific countermeasures such as diversification of the supply chain are not explicitly stated in the securities report.

The electronic components industry undergoes rapid technological innovation, requiring responses to increasingly sophisticated and diverse customer demands, making continuous improvement of technological competitiveness essential. While the basic strategy is to expand existing areas and enter new fields, delays in responding to changes in the market environment or technology could lead to decreased sales and deteriorating financial condition. The Group is proceeding with initiatives while thoroughly evaluating capital investment, human resource investment, and legal regulations, but the speed of technological innovation is heightening the risk.

Due to its global business operations, the Group is subject to a wide range of laws and regulations both domestically and internationally, and if regulatory violations or misconduct by officers or employees occur, there is a risk of damages claims, litigation, penalties, fines, or production stoppages. The Group strives to prevent risks in advance through strengthening the compliance system across the Group, centered on the Compliance Committee, and by utilizing internal and external experts, but the occurrence of unforeseen events could also lead to a loss of social credibility. The complexity and diversity of regulations applicable due to global business expansion is a factor increasing compliance costs.