Ushio Inc.

The Company continues to make ongoing R&D investments targeting the semiconductor packaging, printed circuit board, and electronic components markets as well as the inspection equipment market. However, there is a possibility that the expected results may not be achieved sufficiently or quickly, or that competitors may gain a lead in technology development. Should these occur, they could have a material impact on the Group's business performance and financial position. As a countermeasure, the Company has established a system for early acquisition of information on technology trends, market conditions, and customer trends, and intends to flexibly adjust its business structure and technology development policy accordingly.

If changes in the business environment, such as economic trends in countries around the world or the uncertain situation in the Middle East, cause demand for equipment incorporating consumables or equipment utilization rates to fluctuate significantly beyond expectations, this could lead to a decline in profitability. There is also a risk that this could affect the procurement of materials within the supply chain. The Company intends to address this by establishing a system for early information acquisition and flexibly adapting its business structure.

If the enhancement and expanded penetration of video content streaming services and changes in consumer content consumption behavior result in a major industry structural change significant enough to affect the survival of cinema chains, this could cause a major change in demand for imaging systems, primarily projectors, and could have a material impact on business performance and financial position. There is a similar risk if the substitution of solid-state light sources for cinema lamps progresses faster than expected. As a countermeasure, the Company intends to continuously update its long-term demand forecasts and work on flexibly adapting its production system and expanding into new markets utilizing existing technologies and products.

If deteriorating management conditions accelerate among customers such as movie theaters, public facilities, corporations, amusement parks, and agencies due to changes in market conditions, there is a possibility that customers may become unable to fulfill their contractual obligations. This could have a material impact on the Group's business performance and financial position. The Company intends to mitigate this risk by updating demand forecasts in response to changes in the business environment and flexibly adapting its production system.

There is a risk that operations may be suspended due to delays or disruptions in the supply of raw materials, components, and purchased goods resulting from suppliers going out of business or the tightening of regulations in countries of origin, as well as a risk of cost increases due to resource depletion or supply-demand tightness. As a countermeasure, the Company classifies each component by risk level and organizes supply chain data to determine stable procurement measures, while also formulating a procurement policy combining centralized and decentralized purchasing across the Group and establishing a mechanism for appropriate price pass-through.

There is a risk that political conflicts with specific countries may restrict local business activities, and a risk of human casualties, equipment damage, and business interruption due to natural disasters such as earthquakes, tsunamis, and volcanic eruptions. As a countermeasure, the Company promotes strengthened collaboration among sites based on directional information from each business division to advance optimal-location production and sales, while regularly holding disaster response initial training, BCP training, and in-house fire brigade training to improve response capabilities.

If war, conflict, political instability, or similar events occur, this could adversely affect the Group's business and threaten the safety of employees and others. As a countermeasure, the Company intends to strengthen cooperation with overseas locations to establish a system for regularly gathering risk information, prepare response manuals for expatriate employees, and share information with each local subsidiary while regularly reviewing the manuals.

If the Company is unable to recruit personnel with specific specialized knowledge and skills, this raises concerns about stagnating business growth and declining competitiveness. There is also a risk that the technology and know-how cultivated by experienced employees may not be successfully passed on, resulting in a loss of productivity and competitiveness. As a countermeasure, the Company intends to build a global talent strategy and HR system, consider an appropriate compensation structure to secure highly specialized talent, and promote the planned development of next-generation executives through its talent strategy meetings.

There is a risk that internal fraud or malicious external attacks such as cyberattacks could result in the leakage, alteration, or loss of information, or the shutdown of IT systems, leading to loss of trust, losses in business activities, liability for damages, and business interruption. As a countermeasure, the Company promotes the dissemination of a Group-wide unified information security policy, the introduction of highly effective detection tools and log monitoring services, regular information security assessments, and the development and dissemination of response procedures in the event of a major incident.

There is a risk of delays in disclosure of information related to climate change risks and activities in accordance with the TCFD framework, as well as a risk that failure to respond to requests from customers and other stakeholders for reductions in CO₂ emissions could lead to termination of business relationships or a decline in corporate image. As a countermeasure, the Company intends to expand its climate change-related disclosures, ensure transparency and accuracy by obtaining third-party assurance for GHG emissions, and work to improve its CDP evaluation.