Daitron Co.,Ltd.

In alliances, joint investments, and capital expenditures with other companies in the industrial electronics field, if a discrepancy with an alliance partner arises due to the emergence of competitors, development delays, sudden market changes, or other factors, the resulting investment burden may affect business performance and financial position. In addition, there is a risk of recognizing impairment losses on equipment assets when profitability declines. The Group conducts its business while accepting a certain level of risk in anticipation of future growth potential.

The electronics industry to which the Group belongs (semiconductors, flat panel displays, optical devices, etc.) is at risk of market contraction due to adjustments in the supply-demand gap and reduced capital expenditure resulting from a sharp deterioration in domestic and overseas economic conditions. Since major customers also belong to the same industry, the Group's business structure is directly susceptible to the impact of market contraction. If market contraction materializes, it may have a material effect on the Group's business performance and financial position.

The Group obtains sales agency rights from leading manufacturers in Japan and overseas and offers cutting-edge products, but there is a risk that sales agency agreements may be terminated due to M&A activity or changes in sales policy on the part of supplier manufacturers. Although the Group works to stabilize its business through long-term retention of sales agency rights and to expand it through the acquisition of new agency rights, if a contract is terminated, it may affect business performance and financial position.

With the Group's active expansion of Overseas Business, sudden fluctuations in foreign exchange rates causing price changes may affect business performance and financial position. The Group endeavors to hedge risk through forward foreign exchange contracts at the time of order placement and receipt, but it may not be able to fully respond to sudden fluctuations. In addition, there is a risk that payment delays arising from business practices with overseas companies may hinder the collection of trade receivables.

As a trading company, the Group is sometimes requested by customers to supply products on short delivery schedules, and may arrange products in advance for the purpose of maintaining and expanding business opportunities. If products cannot be sold due to a market downturn, obsolescence resulting from technological innovation, or other factors, there is a risk that inventory products will remain in stock for a long period. In addition, the Group may bear contractual responsibilities such as recall compensation, confidentiality obligations, and management of environmentally hazardous chemical substances, and if liability for damages arises, it may affect business performance and financial position.

The Group handles a wide range of products from Electronic Equipment and Components to Manufacturing Equipment, and defects in manufacturing equipment or defective electronic equipment and components may disrupt customers' production lines. Although the Group has introduced an ISO9001 quality management system and works on quality control, if damage occurs to customers, a decline in product reliability and claims for damages may affect business performance and financial position.

The Group holds confidential information and personal information of business partners and within the Group, and there is a possibility that information leakage, destruction or falsification of important data, or system outages could be caused by cyberattacks, unauthorized access, computer virus intrusions, or other threats exceeding expectations. Although the Group implements measures such as strengthening IT security and facility security and employee training, it is difficult to eliminate all risks, and if an incident occurs, it may affect business performance and financial position.

To respond to the overseas relocation of major customers' production sites, the Group has established local subsidiaries and branches in the United States and Asian countries, but it may be difficult to respond promptly to changes in customers' production and procurement policies, and if sudden changes in political and economic conditions in overseas countries, unexpected changes in laws and tax systems, or social unrest such as terrorism or war occur, the closure or withdrawal of business locations may also be considered. If these risks materialize, they may affect the Group's business performance and financial position.

When exporting electronic equipment, components, manufacturing equipment, and related technologies overseas, notification to and approval from the Minister of Economy, Trade and Industry may be required under the Foreign Exchange and Foreign Trade Act. Although the Group has established security export control regulations and strives for thorough compliance, if a violation occurs and the Group is subject to criminal penalties or other sanctions, it may affect business performance and financial position.

The Group has implemented safety measures, business continuity plans, and early recovery measures in anticipation of natural disasters such as earthquakes, fires, typhoons, floods, and heavy rain, as well as infectious diseases, but since the Group's locations and business partners are globally deployed both in Japan and overseas, it is difficult to avoid all risks. If such events occur on an unexpected scale, a contraction of business activities such as sales and production is a concern, which may affect business performance and financial position.