Murata Manufacturing Co., Ltd.

Since overseas revenue accounts for more than 90% of total revenue, exchange rate fluctuations significantly affect the yen-denominated amounts of revenue, expenses, assets, and liabilities. A ¥1 appreciation of the yen against the US dollar is estimated to reduce annual operating profit by approximately ¥4,500 million. While the Group implements hedging through forward exchange contracts and reflects exchange rate movements in selling prices, complete elimination of this risk is difficult in the event of a sharp and prolonged appreciation of the yen. As long as global business operations continue, this risk is recognized as consistently high in both frequency of occurrence and impact.

The risk of information leakage or business disruption due to cyberattacks or internal misconduct is increasing, and compliance costs are rising due to the strengthening of personal information protection laws in various countries, including the GDPR. While the Group implements information security management based on ISO27001, has obtained TISAX certification, and takes measures across the three aspects of personnel, technology, and physical security, if unauthorized access exceeding the anticipated level of defense occurs, it could damage social credibility and result in substantial costs. As the automotive-related business expands, information security requirements are becoming increasingly sophisticated.

Major anticipated risks include supply disruptions or price increases caused by supplier troubles, difficulty in procuring raw materials and components due to geopolitical risk, natural or man-made disasters, and resource depletion. The Group implements diversification of its supply chain, maintains appropriate inventory levels, reviews and implements supplier BCP measures, and enhances visibility of the supply network for key raw materials; however, if disasters or geopolitical risks of a scale or duration exceeding expectations materialize, or if sudden changes such as export restrictions occur, procurement difficulties could have a material impact on business results and financial condition.

Overseas revenue accounts for more than 90% of total revenue, with the Greater China region accounting for approximately 50% of consolidated revenue and approximately 20% of production output, meaning that geopolitical risks such as domestic and international conditions in China and US-China tensions directly affect management. Rising energy prices and transportation costs, as well as a downturn in final demand, are also anticipated due to escalating tensions in the Middle East. As countermeasures, the Group is strengthening production in ASEAN and other regions and advancing multi-polarization of its production structure and diversification of its supply chain; however, if changes occur that exceed expectations in speed or scale, this could have a material impact on business results and financial condition.

Demand for electronic components is heavily influenced by global economic conditions, and particularly for high-growth electronics products, demand for components can diverge from actual conditions, meaning the Group's structure amplifies the impact of demand fluctuations. As countermeasures, the Group diversifies across multiple markets—edge devices, IT infrastructure, mobility, environment, and wellness—and improves production efficiency through DX promotion; however, a sharp decline in demand could result in surplus production facilities, personnel, and materials, while a sharp increase in demand could lead to lost sales opportunities and a decline in future competitiveness.

In the electronic components industry, the pace of technological innovation is accelerating and product life cycles are shortening. Amid intensifying price competition with rivals and emerging geopolitical risks, it is essential to develop innovative new products at the appropriate timing. The Group continues to invest 8-9% of revenue in R&D, a high level within the industry; however, if changes in market or product trends or the emergence of alternative technologies exceed expectations, this could lead to a decline in expected product demand or an increase in development costs. With the acceleration of technological innovation, the risk of failing to recoup R&D investment is increasing over the medium to long term.

As the business expands with mobility and IT infrastructure as core domains, the impact on business results in the event of a serious quality issue is increasing, and the Group is also required to respond to tightening regulations concerning environmentally hazardous substances. While the Group has established quality assurance activities compliant with ISO and IATF standards and a quality control system spanning all stages from development to shipment, an accident exceeding the current level of technology and management, or insufficient response to regulatory changes, could result in substantial damages, decreased sales, and diminished product trust.

The Group carries out M&A, business alliances, and strategic investments aimed at acquiring new technologies, entering new business fields, and strengthening existing businesses. However, if significant changes in the market or competitive environment occur, or if there is a misalignment of interests between parties, or loss of key personnel, there is a risk that the intended business portfolio management cannot be executed. This could result in failure to recover invested funds, incurrence of additional costs, and impairment losses on goodwill and long-lived assets. The Group conducts periodic reviews after business integration and makes strategic course corrections as necessary.

There is a risk that both transition risk—increased factory construction and operating costs due to the introduction of carbon pricing and stricter energy-saving standards—and physical risk—suspension of operations at major plants and disruption of raw material supply due to abnormal weather events such as typhoons and heavy rain—could materialize. The Group has established a Climate Change Countermeasures Committee, set targets of achieving RE100 by FY2035 (ending March 2036) and carbon neutrality across the entire supply chain by FY2050 (ending March 2051), and is promoting an internal carbon pricing system and diversification of production locations and transportation routes; however, if the Group is unable to meet stakeholder demands over the medium to long term, this could have a material impact on business results and financial condition.

In the fiscal year under review, capacitors accounted for 51% of consolidated revenue, indicating a high degree of dependence on a specific product. While the Group is diversifying its customer base through its global sales network and diversifying revenue through the expansion of businesses such as communication devices, modules, and batteries, the emergence of innovative technologies or products that could replace capacitors, the rise of strong competitors, or a decrease in orders from specific customers could have a material impact on business results and financial condition.