HARADA INDUSTRY CO.,LTD.

The Group's principal business is the manufacture and sale of antenna products and related equipment, the majority of which is supplied to the automotive industry. There is a risk that orders could decline significantly due to a marked decrease in global automobile production volumes or deterioration in the production/sales conditions of specific business partners. Although the Group conducts sales activities to avoid concentration on specific customers, its high dependence on the automotive industry remains a structural risk factor.

The Group has production and sales bases in China, the Philippines, Vietnam, Mexico, the United States, the United Kingdom, Thailand, and other locations, supplying products to North America, Europe, and Asia. There is a risk that business activities may not proceed as planned due to political and economic conditions in each region, unexpected changes in laws and regulations, terrorism, war, epidemics, and other factors. Although the Group gathers economic, political, and social information on each country daily and takes necessary countermeasures, such risks cannot be completely eliminated.

Overseas sales account for the majority of consolidated net sales, and foreign currency-denominated transactions occur on a regular basis, making the Group susceptible to the impact of foreign exchange rate fluctuations. Exchange rate movements directly affect foreign currency-denominated sales and purchases, and also affect the yen-translated amounts of the financial statements of overseas consolidated subsidiaries. The Group's policy is to limit the impact by balancing foreign currency-denominated receivables and payables, but complete hedging is difficult.

As the Group sells products in countries around the world, it is constantly exposed to price competition with competitors in each country. If price competition intensifies, it could lead to a decline in net sales and deterioration in profitability. Although the Group strives to reduce costs through enhanced material cost improvement activities and the promotion of factory productivity reforms, there is a risk that profitability could be impaired depending on changes in the competitive environment.

The Group procures copper wire, resin, and other principal raw materials from outside the Group, and there is a risk that the cost of sales ratio could rise due to procurement disruptions caused by circumstances at suppliers or sharp increases in raw material market prices. Although the Group works to ensure stable procurement through transactions with multiple suppliers and to reduce material costs through local procurement and centralized purchasing, market price fluctuations are an external factor that the Group cannot control on its own. Increases in procurement costs directly affect the Group's financial position and business results.

The Group manufactures products for the automotive industry at its production bases in China, the Philippines, Vietnam, and Mexico, and works on quality control by obtaining certification under the quality management system standards for the automotive industry. While no lawsuits or recalls based on product liability laws have occurred to date, if such lawsuits or similar issues arise in the future, they could result in substantial damages and a decline in product credibility. Quality problems constitute a significant risk that could also affect the continuation of business relationships with automakers.

As the Group operates globally with overseas sales accounting for the majority of consolidated net sales, it is exposed to international tax risks, including those related to transfer pricing taxation. If tax authorities determine that transaction prices are inappropriate due to differences in views, the Group could be subject to double taxation or additional tax assessments. Although the Group pays close attention to this issue by utilizing third-party tax specialists, the risk that intergovernmental consultations may fail to reach agreement cannot be eliminated.

While the Group actively files patent applications in connection with the promotion of innovation-driven development, it is extremely difficult to fully investigate and confirm third parties' patent rights, and there is a possibility that intellectual property rights of which the Group is unaware may exist. If the Group is sued by a third party for infringement of patent rights or other intellectual property rights, responding to such litigation could require significant costs and time. Although the Group's policy is to respond to individual cases in cooperation with patent attorneys and lawyers, there is no guarantee that litigation risk can be completely eliminated.

In the business centered on antenna products, there is a risk that the Group could lose competitiveness against competitors' products if product technology becomes obsolete or technological innovation stagnates. Although the Group is engaged in promoting innovation-driven development and optimizing global development, and continues development activities to acquire current product technologies and future core technologies, if it fails to keep pace with the speed of technological innovation, this could affect its financial position and business results.

There is a risk that natural disasters such as earthquakes and typhoons could reduce production capacity or disrupt information infrastructure at manufacturing and sales bases. Although the Group has taken measures such as formulating disaster response manuals and business continuity plans and establishing an employee safety confirmation system, damage from natural disasters cannot be completely eliminated. In a global structure with multiple overseas production bases, damage to a specific base could affect the entire supply chain.