SMK Corporation

The electronic components industry is an extremely competitive market with numerous domestic and overseas competitors, and there is a risk that competitors with superior proprietary technology could take market share away. Although the Company strives to secure profits through cost reductions and the introduction of differentiated products, there is a risk that profitability and business performance could be adversely affected. The Company Group is working to accumulate proprietary technology and develop new products and technologies through continuous investment in development.

The Company operates in Asia, North America, and Europe, and changes in the economic, political, and social conditions of each region may affect business performance. In addition, there is a risk that business activities could be constrained by unexpected changes in laws and regulations in each country or region, or by tightened tariffs, regulations, or sanctions related to economic security. As countermeasures, the Company is working to build a global production system that enables optimal-location and alternative production, and to strengthen supply chain BCM.

Overseas sales accounted for approximately 60% of net sales in the fiscal year under review, and since transactions are mainly denominated in US dollars, exchange rate fluctuations have a direct impact on business performance. Generally, when the yen appreciates, profits decrease, and it is difficult to completely eliminate this impact. The Company seeks to reduce fluctuation risk through foreign exchange forward contracts and the introduction of exchange rate-linked selling prices with some customers.

Raw materials and some components are procured from external suppliers, and if procurement difficulties or increases in purchase prices occur due to sudden fluctuations in demand, production delays and cost increases may affect business performance. Although the Company has built cooperative relationships with external suppliers to ensure stable supply, the risk of supply disruption cannot be completely eliminated. The Company strives to secure a stable supply of components by securing alternative procurement sources and entering into long-term supply contracts.

If it becomes difficult to secure sufficient human resources due to labor shortages caused by the declining birthrate and aging population, or due to intensifying competition for talent, business activities may be affected. The Company Group positions its personnel as human capital responsible for value creation, and considers them the driving force for sustained enhancement of corporate value. The Company is working to expand its personnel systems, develop human resources, and reform its organizational culture in order to attract and retain excellent talent.

The Company promotes strategic business alliances, capital alliances, and corporate acquisitions, but if the business environment of an alliance partner or acquired company deteriorates, the originally expected results or synergies may not be achieved. In such cases, there is a risk of an adverse impact on business performance. The Company Group continues to pursue its M&A strategy with the aim of maximizing corporate value.

In the event of unforeseen environmental pollution, countermeasure costs will be incurred, and there is also a possibility that new response costs will arise due to the tightening or revision of environmental regulations. In connection with the goal of achieving carbon neutrality by 2045, there is a risk of new burdens arising from the adoption of low-carbon electricity plans, as well as instability in electricity supply and rising costs. Under the SMK Group Environmental Charter, the Company is working to reduce greenhouse gas and waste emissions and to promote compliance with environmental regulations.

If information security issues such as unauthorized external access or internal information leaks occur, business activities may be affected. Leakage of trade secrets, personal information, or intellectual property could have a significant impact on the Company's competitiveness and credibility. The Company is strengthening countermeasures through the establishment of basic regulations on electronic information security, implementation of intrusion prevention measures, internal audits, and information security education.

Natural disasters such as earthquakes or the spread of infectious diseases may destroy production facilities or paralyze logistics functions, affecting business activities. In particular, if a large-scale disaster exceeding expectations occurs, there is a risk that the response through the BCP will reach its limits. The Company is proceeding with the formulation of a Business Continuity Plan (BCP) and is working on disaster prevention measures at each domestic and overseas site, as well as responding through alternative production and changes in procurement sources.