ROHM COMPANY LIMITED

Geopolitical tensions such as U.S. tariff policy, U.S.-China relations, the situation in the Taiwan Strait, and the Russia-Ukraine issue may become prolonged and normalized, potentially affecting production and sales activities as well as the entire supply chain. Insufficient response to frequent changes in each country's economic security policies and export regulations concerning semiconductors also carries the risk of administrative penalties and legal sanctions. The Economic Security Office leads information gathering and monitoring, while the Export Control Subcommittee conducts appropriate security export controls.

In focus markets such as automotive, industrial/consumer, and AI servers, there is a possibility that global competition and price competition will intensify. A slowdown in the growth of the electric vehicle market directly affects demand for power devices, and there is also a risk of market contraction due to changes in social needs and policies in various countries. In response, the Marketing Headquarters has been reorganized into a market-based structure, and the Company is promoting fixed cost reductions and lowering the break-even point.

As the Company operates development, manufacturing, and sales sites around the world, revenues, expenses, assets, and liabilities are denominated in multiple currencies, and fluctuations in exchange rates affect business performance and financial condition. Generally, yen appreciation has a negative impact on performance, while yen depreciation has a positive impact. The Company mitigates this risk by entering into foreign exchange forward contracts to a certain extent for foreign-currency-denominated receivables and payables.

There are transition risks such as increased capital expenditure and procurement costs due to stricter environmental regulations, rising energy prices, carbon price fluctuations, and decarbonization requests from customers associated with decarbonization, as well as physical risks such as operational stoppages and supply chain disruptions due to the intensification of extreme weather events. The Company is addressing these issues under its Environmental Vision 2050 and 2030 Mid-term Environmental Targets, but there is a possibility that costs may increase beyond expectations due to changes in the external environment. The Company is proceeding to review its transition plan in stages while maintaining its 2050 net-zero target.

As information security risks such as cyberattacks, removal of confidential information by former employees, and technology leaks increase, the active use of DX tools including generative AI may also become a new risk factor. If information leakage, system downtime, or legal violations occur, they may cause serious adverse effects such as damage to brand image, significant financial burden, and business suspension. The Company implements measures from four aspects—organizational, human, technical, and physical—including operation of a company-wide PDCA cycle by the Information Management Committee, acquisition of ISO27001 and TISAX certifications, and 24/7 monitoring.

Due to the decline in the working-age population associated with the declining birthrate and aging population, as well as changes in the employment environment, there is a risk that it will become difficult to acquire highly specialized personnel in design, manufacturing, quality assurance, and other areas. Issues such as skill gaps between generations, knowledge transfer, and next-generation talent development have also become apparent, and a shortage of human resources directly leads to a decline in business competitiveness. The Company is promoting the acquisition and retention of human resources through the establishment of specialist positions, the development of compensation systems, reskilling support, and succession planning initiatives.

In M&A activities aimed at enhancing corporate value, there is a risk that if due diligence is insufficient, the estimated acquisition price may exceed the actual value, resulting in a loss. There is also a possibility that if PMI is not properly conducted after an acquisition, or if unexpected circumstances or sudden changes in market conditions occur, the acquired business may not progress as planned. The Company ensures an appropriate decision-making process through multi-stage deliberation by a dedicated project team and external advisors, incorporation of a PMI perspective from the execution stage, and monitoring of progress toward target achievement.

Natural disasters such as earthquakes and floods may damage domestic and overseas production and sales sites, resulting in reduced operating rates and impacts on the entire supply chain, including customers and suppliers. There is also a risk of simultaneous occurrence in multiple regions, which could seriously impede business continuity. The Company is promoting long-term measures such as distributing production lines across multiple sites, conducting risk assessments at major sites, utilizing OSAT, and developing flexible production lines.

If violations of competition law, anti-corruption laws, or other regulations occur in business operations around the world, there is a risk of serious adverse effects such as fines, business suspension, and damage to brand image. If misuse of public research funds or other funds for purposes other than intended is discovered, there are also concerns about obligations to repay funds, administrative sanctions, and impacts on corporate value. The Company works to prevent such risks through the establishment and operation of an ethics management system by the Compliance Committee, education for all employees, and the development of internal reporting systems, including a Global Compliance Hotline.

Because the vertically integrated business model requires a variety of materials, including rare metals, for electronic component manufacturing, restrictions on procurement from specific suppliers may adversely affect production activities and cost structure. There is also a risk that a disaster affecting a supplier or a supply stoppage could have a chain-reaction impact. The Company works to reduce this risk by promoting multiple sourcing, appropriate inventory management, and understanding the supply chain BCP status down to secondary suppliers.