ALPS ALPINE CO., LTD.

The prolongation of the situation in Ukraine and the Middle East, US-China tensions, a Taiwan contingency, and other geopolitical risks could lead to unforeseen changes in laws and regulations, including economic security policy, import/export restrictions, and tariff increases. As the Group operates globally, if these risks materialize, they could have a material impact on business results and financial condition. In response, the Group has established an Economic Security Committee to monitor geopolitical risks and is promoting the diversification of alternative production systems, including in Japan and ASEAN.

As the majority of business is build-to-order, the Group is directly affected by fluctuations in customers' production plans, giving rise to risks of excess inventory and production adjustments. In particular, in the Mobility Business, model changes from EVs to HEVs and other vehicle types, as well as the discontinuation of EV development, have occurred, increasing the risk of earnings deterioration due to shortfalls in planned production volumes. The business divisions, sales, production, and materials departments are working together to rapidly share market trends and are advancing inventory optimization and optimization of production sites.

As cyberattacks become more sophisticated, the risks of information leakage, tampering, and destruction are increasing. In FY2026 (ending March 2026), an actual incident occurred in which unauthorized access to an external VPN system may have resulted in personal information being viewed by an external attacker. If such risks materialize, they could have multifaceted impacts, including suspension of production and shipments, claims for damages, loss of competitiveness, and damage to corporate image. In addition to strengthening the ISMS framework, the Group is implementing security measures and enhanced monitoring across the entire system, including the VPN, as well as internal training, to prevent recurrence.

As of the end of the fiscal year under review, the Group held ¥188.5 billion in tangible and intangible fixed assets. If fluctuations in customer demand in the automotive market or delays in responding to technological innovation occur, profitability may decline, potentially resulting in the recognition of impairment losses. Since the recoverability of fixed assets is affected by factors such as personal consumption trends, the timing of new product introductions, and the speed of technological innovation, the risk is significant in the event of a sudden deterioration in the business environment. The Group aims to minimize impairment risk through rigorous investment screening based on NPV and IRR criteria and by setting economic useful lives based on product life cycle analysis.

There is a risk that insufficient due diligence in M&A or failure of acquired businesses to meet plans could result in the inability to recover invested funds or the incurrence of additional costs. In addition, with respect to the carve-out of non-focus or unprofitable businesses, there is a possibility that such carve-outs may not be executable due to regulations in various countries, employment issues, or insufficient market demand, and even if executed, they may lead to unexpected outcomes such as a decline in customer evaluation. The Group carefully advances M&A and portfolio restructuring following thorough analysis and deliberation by the Executive Officers' Meeting and the Board of Directors.

Amid the rapid advancement of new technologies such as AI and 5G/6G, the pace of technological innovation for smartphone- and automotive-related products is extremely fast. Delays in responding to market changes or failure to introduce new products matching customer needs could cause products and services to become obsolete in a short period, leading to a significant decline in selling prices. The Group makes investment decisions based on ROIC for the strategic investment themes (Sensors domain, software, human capital, etc.) set out in the Mid-Term Management Plan 2027, and is systematically strengthening its technological capabilities and developing human resources.

While medium- to long-term demand growth is expected in the electronic components industry, local Chinese and ASEAN competitors are rapidly gaining strength, intensifying competition. If the Group falls behind competitors in product characteristics, supply capacity, or cost competitiveness, its market share may decline, affecting business results and financial condition. The Group aims to maintain and expand market share through a combination of continuously launching high-value-added new products leveraging its core technologies, cost reductions through proprietary production technologies, strengthening supply capacity, and enhancing sales capability.

As the Group operates globally, appreciation of the yen against the US dollar or depreciation of the yen against the euro or Chinese yuan could have a negative impact on business results, and if actual exchange rates deviate significantly from assumptions, financial condition could also be affected. In addition, as of the end of the fiscal year under review, the Group held ¥67.6 billion in securities, and fluctuations in market value due to stock market movements could also affect business results and financial condition. The Group seeks to minimize the impact of exchange rate fluctuations through forward foreign exchange contracts, currency options, and offsetting of foreign-currency-denominated receivables and payables, while also periodically verifying the rationale for, and reducing, its strategic shareholdings.

The Group recognizes that transition risks, such as the acceleration of carbon pricing systems and the tightening of energy conservation regulations, as well as physical risks, such as supply chain disruptions, suspension of the Group's own operations, and increased energy costs due to the intensification of extreme weather events, will significantly affect business activities. If these risks materialize beyond the assumed range, they could affect business results and financial condition. The Sustainability Committee manages progress on scenario analysis based on the Group's endorsement of the TCFD, the introduction of an internal carbon pricing system, and the priority implementation of disaster prevention and mitigation measures.

Due to the declining working population resulting from Japan's low birthrate and aging population, intensifying global competition for talent, and diversifying values regarding work styles and careers, the mobility of human resources is increasing. If the Group is unable to secure, retain, and develop the talent it needs as planned, this could affect future growth. The Group is working to retain and motivate personnel through town hall meetings to improve engagement, diverse talent recruitment through internal job posting systems and enhanced recruitment branding, support for balancing childcare and caregiving with work, telework, and wage increases.