TAIYO YUDEN CO., LTD.

Due to intense competition in the electronic equipment market, electronic component prices tend to decline as a result of price-reduction requests from set makers and competition among component manufacturers. The Group is working on cost reduction and production process improvements, but depending on supply-demand trends in the components market, price declines exceeding these efforts may occur, which could affect business performance.

In the electronic equipment market, technological change is rapid and product life cycles have become extremely short, causing significant fluctuations in customers' inventory and production plans. Orders received by the Group may be significantly affected by these fluctuations, and there is a risk that the success or failure of specific products could directly impact business performance.

The Group has operations in various locations around the world, including regions that are politically and economically unstable. Unexpected events such as terrorism, war, epidemics, strikes, and power outages could impede business activities. In particular, in the development of production and sales sites in China, uncertainties such as changes in laws and regulations, a slowdown in economic growth, exchange rates, and power supply could affect business performance.

As the ratio of overseas sales is high and intra-group transactions are generally denominated in US dollars, the Group is exposed to market risks associated with sudden fluctuations in foreign exchange rates, stock prices, and interest rates. While the Group partially uses forward exchange contracts to mitigate risk, significant market fluctuations could affect business performance.

For some raw materials, the Group is highly dependent on specific suppliers for procurement, creating a risk that supply could be disrupted if procurement becomes difficult. If a shortage of supply occurs due to deteriorating conditions in various countries or import/export restrictions, or if raw material prices rise sharply due to increased demand, business performance could be affected. The Group seeks to ensure stable procurement through long-term supply contracts and diversification of purchasing sources.

The Group holds confidential information such as customer information, personal information, and trade secrets, and there is a risk of information leakage, tampering, or suspension of critical operations due to cyberattacks or internal negligence. While the Group is strengthening security management systems, employee training, and security measures using software and equipment across the Group, cyberattacks beyond expectations could affect social credibility and business performance.

As the Group handles cutting-edge technology products, there are many unknown areas of development technology, and unexpected defects may occur. While the Group strives to establish a quality assurance system, including ISO9001 certification, if quality issues become apparent, they could have a material impact on business performance.

In some countries, intellectual property is not fully protected, and there is a risk that other companies may imitate and sell products, resulting in lost sales opportunities and a decline in product credibility. In addition, there is a possibility that the Group's products or technologies could be alleged to infringe the intellectual property rights of other companies, which could affect competitiveness and business performance.

If stakeholders demand a level of climate change response that is difficult to achieve, unexpected costs could arise from measures such as the introduction and procurement of renewable energy and capital investment. There is also a risk of lost business opportunities from failing to meet required standards, which could affect business performance. The Group is addressing this through environmental medium-term targets, including tracking GHG emissions and energy-saving measures.

Business performance is highly dependent on the contributions of talented personnel in research and development, production, sales, and management, but competition for talent is intense, and it may become difficult to prevent the departure of current employees or acquire new talent. If the Group is unable to secure talented personnel, this could lead to inefficiencies in management and a decline in product competitiveness.