Hosiden Corporation

Sales to Nintendo Co., Ltd. account for 78.0% of net sales, and order trends from this customer as well as fluctuations in demand for amusement (game) equipment have a direct and significant impact on business performance. Combined with the risk of existing products becoming obsolete due to technological innovation, new product development capability is key to maintaining competitiveness. High dependence on a specific customer is a structural challenge that amplifies the risk of deteriorating business performance when orders decline.

Competition in the electronics industry is fierce, and downward price pressure in major markets is expected to intensify further going forward. Some competitors may possess superior resources compared to our group in research and development, manufacturing, and sales, creating a risk that price competition could adversely affect profitability. Continuous cost reduction and product differentiation are essential management issues.

A large portion of sales in overseas and domestic markets is denominated in foreign currencies, and exchange rate fluctuations upon conversion into yen may adversely affect the consolidated financial statements. As a countermeasure, the company seeks to match the currency of sales with that of production and procurement, and enters into forward exchange contracts as necessary. Due to business operations conducted around the world, foreign exchange risk across multiple currencies is a persistent factor.

A sharp rise in prices or deterioration in the supply of metals and petrochemical products used in products may have a significant impact on production costs. During the fiscal year under review, rising raw material prices affected business performance, and this risk is recognized as likely to continue going forward. Ensuring supply chain stability and the ability to pass on costs are important factors for maintaining profitability.

There is a risk that disruptions in logistics related to the procurement of materials and parts and the delivery of products to customers, as well as rising transportation costs, may affect business performance. During the fiscal year under review, rising transportation costs affected business performance, and it has been noted that this may continue going forward. Due to a high degree of dependence on global logistics networks, the company is structurally susceptible to geopolitical risks and supply-demand tightness.

Production and sales activities in Asia, the Americas, Europe, and elsewhere are exposed to risks such as adverse political and economic factors, changes in laws and regulations, tax increases, and social disruption from war, terrorism, infectious diseases, and natural disasters. Prolongation and worsening of the Russia-Ukraine situation and deterioration of the situation in the Middle East raise concerns about fluctuations in energy and raw material prices and instability in exchange rates. These uncertain factors may have a significant impact on the group's production and sales activities.

If diversifying and increasingly sophisticated cyberattacks result in the destruction, alteration, or leakage of confidential information belonging to customers or the company itself, business continuity could be significantly affected. As countermeasures, the company is strengthening security at points of intrusion, implementing mechanisms for attack detection, analysis, and reporting, formulating rules for handling important information, and conducting employee training. With the progress of digitalization, the importance of cyber risk continues to increase.

The company issued convertible bond-type bonds with subscription rights to shares on December 19, 2024, and if the subscription rights are exercised, the value per share will be diluted according to the conversion ratio into shares. This dilution may affect share price formation and poses a risk of adversely affecting the interests of existing shareholders. Depending on the scale and timing of conversion, the impact on the market may become apparent.

If the company is slow to respond to carbon neutrality and ESG management, there is a risk of reduced orders from customers. On the other hand, efforts toward environmental measures may also result in increased costs. The group has adopted a policy of proactively pursuing environmental measures in order to meet the demands of both investors and customers.

Due to the progress of the declining birthrate and aging population in Japan, there is a risk that acquiring human resources as planned will become difficult. As countermeasures, the company is working to secure excellent personnel through promoting work-style reforms, including reducing overtime, and strengthening mid-career hiring alongside new graduate recruitment. If the labor shortage continues, it may hinder the maintenance of production and development capabilities.