IRISO ELECTRONICS CO., LTD.

Automotive-related markets account for approximately 86% of consolidated net sales, and there is a possibility that product demand could decline significantly due to a worsening global economy or rapid changes in the automotive-related products market. While the Group is promoting sales expansion into non-automotive markets such as FA equipment and communication equipment as a second pillar, at present the structure remains extremely dependent on the automotive sector.

In FY2025 (ending March 2025), the ratio of overseas sales to consolidated net sales reached 84.0%, and the overseas production ratio reached approximately 81.1%, resulting in substantial exposure to exchange rate fluctuations through transactions denominated in US dollars, euros, and Thai baht. Should the yen appreciate or depreciate sharply and over a prolonged period, this could affect business performance and financial position. The Group seeks to mitigate fluctuation risk through the promotion of local production for local consumption and through foreign exchange hedging.

Aside from products manufactured at multiple sites including the Ibaraki Plant, the Philippines, and Vietnam, the majority of production is concentrated at production subsidiaries in China, and should an unforeseen event render operations impossible, this could have a material impact on business performance and financial position. In September 2016, the Company established a production subsidiary in Nantong to rebuild its mass-production base, and from April 2025 it has operated a new plant in Akita as a second mass-production base, thereby strengthening the diversification of production sites and business continuity planning (BCP) measures.

The Group conducts production and sales activities in the United States, Europe, China, and other Asian countries, and is constantly exposed to risks such as unforeseen changes in laws, environmental regulations, or tax systems, unfavorable political and economic factors, inadequate social infrastructure, political upheaval, terrorism, war, and the spread of infectious disease. Should any of these events occur, they could affect business performance and financial position. The Group carefully considers and evaluates such risks when deciding on the establishment of sales and production bases.

The electronic components industry is highly competitive, with numerous competitors ranging from major domestic and overseas companies to small and medium-sized enterprises, and price competition is intensifying. Should the Company become caught up in a price-cutting competition, this could affect business performance and financial position. The Company seeks to differentiate itself by continuing to accumulate proprietary technologies such as Floating Board-to-Board Connectors and to develop new products and technologies, offering product proposals that contribute to reducing customers' total cost of ownership (TCO).

Should a product defect occur that leads to a large-scale recall or product liability claims, this could result in substantial costs and a significant impact on corporate reputation, thereby affecting business performance and financial position. While the Group has established a manufacturing system based on international quality management standards and has taken out product liability insurance, it pays close attention at every stage from development through to shipment, given the high level of reliability required, particularly for automotive applications.

In the markets in which the Group operates, there are stringent demands regarding technological innovation and cost competitiveness, requiring the continuous introduction of new products. Should new product development not proceed as expected due to rapid technological advances or changes in customer needs, future growth and profitability could decline. The Group continuously carries out sufficient marketing activities to grasp market needs, together with research and development investment and capital expenditure necessary for developing new technologies and products and reforming production processes.

The Group depends on external suppliers for all major raw materials and some components, and should a supply shortage or delivery delay occur due to a sudden change in demand, this could result in an inability to supply customers or a loss of competitiveness. In addition, should market prices for raw materials rise sharply, this would lead to higher product costs, potentially affecting business performance and financial position. The Group is implementing cost reduction measures such as promoting in-house production and expanding local procurement through global sourcing.

In the electronic components industry, where technological innovation proceeds rapidly, should the Group's intellectual property rights be infringed or imitated by a third party, or should the Group be subject to a damages claim on the grounds of infringing a third party's intellectual property rights, this could result in restrictions on production and sales activities and the payment of damages, potentially having a material impact on business performance and financial position. The Company centrally manages intellectual property rights through the Technology Management Section of the Technology Department within the Technology Division, and has established a system for sharing information between developers, designers, and intellectual property personnel.

The Group holds personal and confidential information of customers and business partners, as well as confidential business and technical information, and should information leakage or the destruction, tampering, or system outage of important data occur due to cyberattacks, unauthorized access, computer virus intrusion, or other events exceeding expectations, this could lead to a decline in trust and affect business performance and financial position. The Group has established a management system through the establishment of an Information Security Policy and an Information Security Committee, and is strengthening global personal information protection measures in response to the GDPR, in addition to regular training such as e-learning.