DAISHINKU CORP.

Intensifying competition and changes in the market environment in the smartphone, digital home appliance, and automotive electronics industries may cause fluctuations in the price and demand for crystal devices, which could affect business performance. In addition, single-year performance may fluctuate during the process of fundamental management reform and cost structure transformation. As a countermeasure, the Company is working to complete its 10-year long-term management plan and achieve zero defects.

The ratio of overseas sales to consolidated net sales was high at 87.1% in FY2026 (ending March 2026), and the majority of overseas sales and procurement transactions are denominated in US dollars. Since a large proportion of foreign currency-denominated assets, liabilities, revenues, and expenses, as well as the local currencies of overseas subsidiaries, are converted into yen, fluctuations in foreign exchange rates may affect the translated amounts in the consolidated financial results. As a countermeasure, the Company implements risk hedging through reducing the net difference between receivables and payables and through forward foreign exchange contracts, among others.

The outstanding balance of borrowings as of March 31, 2026 stood at a high level of ¥36,689 million (37.1% of total assets), and depending on future trends in market interest rates, an increase in interest payment burden could affect business performance. The Company addresses this through fund management based on its financial condition and funding needs.

In the crystal device industry, in addition to competition with Japanese companies, commoditization is accelerating due to the rise of overseas manufacturers in China, Taiwan, and elsewhere, and price fluctuations may affect profitability. As a countermeasure, the Company is promoting "creation of new markets" and "specialization in specific markets," with a policy of raising entry barriers through the introduction of highly value-added differentiated products and the strengthening of front-end process technologies such as photolithography technology and larger-diameter wafers.

If research and development for the miniaturization and enhanced functionality of Crystal Units does not proceed smoothly, or if commercialization is delayed, the Company may be unable to respond to market demand. In addition, there is no guarantee that the Company's proprietary technologies will be protected as unique intellectual property, and if the Company infringes on the intellectual property rights of a third party, litigation risk may arise, which could affect business performance. As a countermeasure, the Company operates a system for investigating intellectual property rights at the early stage of development and regularly checking patent gazettes.

Some of the components and raw materials used in product manufacturing depend on specific suppliers, and if the Company were to lose a major supplier, this could affect production and lead to increased costs. The continuity of supply is also subject to factors beyond the control of the Company Group. As a countermeasure, the Company is promoting BCP questionnaires and business briefings for suppliers, securing stable inventory, qualifying multiple suppliers, and standardizing common components.

Cyberattack methods are constantly becoming more sophisticated, and risks such as information leakage and unauthorized access continuously exist. If an information security breach occurs, it could have a significant impact on business continuity and customer trust. As a countermeasure, the Company continues to create security maps based on the latest security trends, implement tool-based countermeasures, and conduct employee training, while also promoting the construction and operation of an information security management system aimed at obtaining ISMS certification.

The occurrence of natural disasters such as earthquakes and storm/flood damage, fires, social disruption caused by terrorism or war, or infectious disease pandemics may have a significant impact on the production system and business activities. If the spread of infection and the resulting suppression of economic activity in various countries cause a substantial decline in product demand or damage to the supply chain, business performance may be affected. The Company aims to minimize the impact through the development of response manuals and the thorough implementation of health and safety measures.

Due to the progression of the declining birthrate and aging society, among other factors, securing the necessary human resources may become difficult, which could affect business activities, performance, and financial condition. In particular, securing excellent engineers necessary for the development of the Arkh Series, the Company's core business, has become a challenge. As countermeasures, the Company is promoting labor-saving through DX initiatives, actively recruiting young talent and career-track personnel, reviewing its wage and evaluation systems to enhance competitiveness, and utilizing engagement surveys.

Continuous capital investment is necessary for the maintenance and growth of the business, but changes in the external environment, such as significant fluctuations in demand forecasts or extended lead times for equipment delivery, may prevent the Company from achieving the expected returns as planned. The Company's policy is to mitigate this risk by developing strong marketing capabilities and making early management decisions.