ADVANTEST CORPORATION

Semiconductor demand fluctuates due to final product demand, geopolitical factors, and competition among manufacturers, causing the timing and scale of capital expenditure to remain fluid, which directly impacts the Group's business performance. During demand slowdowns, risks of customers postponing capital expenditure and increased receivables collection risk expand, while during rapid demand expansion, there is a risk of lost sales opportunities due to insufficient supply capacity. As countermeasures, the Group is promoting diversification of the product portfolio, strengthening of recurring-type services, holding strategic inventory buffers, and converting the cost structure into variable costs.

In the semiconductor manufacturing equipment market where technological innovation is rapid, if the Group is unable to provide products and services demanded by customers in a timely manner, or if mass production ramp-up support does not function as planned, customer evaluation and trust may decline. A prolonged decline in trust could lead to a reduction in existing transactions and loss of adoption opportunities in next-generation technology areas, constraining the maintenance and expansion of market share. As countermeasures, the Group is promoting technical information exchange with key customers, facilitation training for SAEs, expansion of customer response capabilities utilizing AI, and collaboration with external partners.

Against the backdrop of rising geopolitical tensions and strengthened economic security policies, export control regulations, investment restrictions, and management of advanced technologies are being tightened in major countries, which may constrain the Group's business activities such as procurement, manufacturing, sales, and maintenance services. This could adversely affect performance and financial condition through prohibitions on providing products to specific countries or regions, increased procurement costs or supply suspensions, and tariff increases. As countermeasures, the Group conducts continuous monitoring of geopolitical trends, regional scenario analysis, and participation in policy discussions through industry associations.

The top five customers accounted for approximately 50% of total net sales in the current consolidated fiscal year, resulting in a highly concentrated customer structure, meaning that changes in the business trends and purchasing policies of major customers could impact the Group's performance to a degree exceeding overall market changes. If a reduction or termination of transactions with a major customer occurs, the impact may materialize within a short period. As countermeasures, the Group is promoting deepening relationships with existing customers, strengthening local subsidiary structures in growth markets such as India, and enhancing access to new customers through strategic alliances with external partners.

If core systems are shut down due to cyberattacks or infrastructure failures, or if technical information, intellectual property, or customer information is leaked, disruptions to order processing, production, shipping, and other operations, as well as adverse effects on competitiveness and reputation, may occur. A cybersecurity incident actually occurred in February 2026, indicating that this risk is highly real. As countermeasures, the Group is developing a global security monitoring system and the Advantest CSIRT, strengthening network, endpoint, and cloud security, and reviewing and accelerating its security roadmap.

If necessary parts, materials, or production space cannot be secured due to natural disasters, deterioration in suppliers' business, logistics disruptions, or sharp increases in demand, delays or suspensions in product supply may occur, adversely affecting business operations, competitiveness, and performance. There are also risks of excess inventory and obsolescence, as well as procurement disruption risk due to human rights or compliance issues in the supply chain. As countermeasures, the Group confirms BCPs of critical suppliers and develops alternative supply routes, optimizes the supply chain globally, concludes long-term procurement contracts, and secures intermediate products through dual-sourcing (dyabanku).

If forecasting of and response to industry trends is insufficient, R&D investment and capital expenditure may fail to be recovered, potentially leading to declining competitiveness, intensified price competition, and reduced sales opportunities. In corporate acquisitions and capital/business alliances, there is a risk of impairment losses on goodwill and intangible assets if the anticipated synergies are not realized. As countermeasures, the Group conducts ROIC-based forecasting and evaluation of investment effects, improves development efficiency through product platformization, and comprehensively examines the technological advantages and cultural compatibility of acquisition targets.

Approximately 75% of net sales in the current consolidated fiscal year were denominated in foreign currencies, primarily the US dollar, meaning that a stronger yen would adversely affect performance and financial condition. Regarding the euro, since expenses exceed sales denominated in that currency, profitability could be adversely affected even during a weaker yen phase. As countermeasures, the Group adjusts the balance of currencies held based on foreign exchange risk management guidelines, conducts hedging transactions such as forward exchange contracts, and manages the balance sheet to offset foreign currency-denominated assets and liabilities.

If the development, retention, and reskilling of talent do not progress sufficiently, innovation capability, labor productivity, and employee engagement may decline, adversely affecting competitiveness. Unexpected absence of management or key executives, or inadequate succession planning, poses a risk of undermining management stability and continuity of decision-making. As countermeasures, the Group promotes planned talent development measures and provision of learning opportunities, formulation and operation of succession plans, and appropriate allocation and acquisition of talent for growth areas.

Given the nature of its business handling semiconductor manufacturing equipment and related technologies, the Group is subject to export control regulations, economic sanctions, and trade-related laws and regulations in various countries, and the importance and complexity of compliance have increased due to recent regulatory tightening and stricter enforcement. Insufficient compliance with laws and regulations could result in penalties, administrative sanctions, or suspension of product shipments, affecting the supply chain and business relationships and adversely impacting performance and corporate value. As countermeasures, the Group continuously gathers information on trade-related laws, regulations, and trends, and continues to provide trade control education to officers and employees worldwide.