NIKON CORPORATION

In the Imaging Products Business, intensifying competition in the mirrorless camera market and rising component prices and procurement delays are putting pressure on earnings. In the Precision Equipment Business, the continued reduction in capital expenditure for FPD Lithography Systems may delay demand recovery, and changes in capital expenditure plans by major customers of Semiconductor Lithography Systems (ArF Immersion) could affect earnings. In the Digital Manufacturing Business, a slowdown in the growth of related markets may also make it difficult to reach the expected scale. In response, the Imaging Products Business is pursuing the development of the professional video market and cost reductions, while the semiconductor equipment business is pursuing a review of its business structure with an emphasis on profitability and the development of new customers.

Under an intensely competitive environment, the company is constantly required to develop new products and next-generation technologies and bring them to market in a timely manner. If investment outcomes are insufficient, if developed technologies fail to gain market acceptance, or if the company's own technologies become obsolete due to game-changing or other fundamental shifts, this could lead to a decline in corporate value and reduced earnings. In response, the Technology Strategy Committee determines the technology strategy and priority investment areas aimed at developing new focus areas and enhancing the competitiveness of existing businesses.

As the company expands globally, it is subject to a wide range of laws and regulations, including export/import controls, information security, personal data protection, competition law, anti-corruption laws, and transfer pricing taxation. Changes in these regulations could increase business operating costs, restrict business activities, and create reputational risk. In response, the Export Review Committee and the Sustainability Committee under the Risk and Compliance Committee conduct monitoring, and information on regulatory changes is collected and fed back into practical processes across the group.

In M&A and strategic investments aimed at creating new businesses or expanding existing businesses, if the expected outcomes are not achieved due to significant changes in the market environment or the loss of key personnel at the target company, impairment losses on goodwill and securities may occur, adversely affecting the financial position. In response, the company conducts due diligence on the value and risks of target companies, and after acquisitions or investments, conducts regular monitoring through the Board of Directors and management to make course corrections to strategy.

With a high proportion of revenue derived from overseas, social disruptions caused by political issues, trade friction, conflicts, riots, and terrorism may impede business activities. In particular, supply chain issues arising from US-China trade friction and worsening conditions in the Middle East may affect the procurement of semiconductor components and other items. In addition, sharp and significant fluctuations in foreign exchange rates pose a risk of substantially affecting earnings and financial position, and the company implements foreign exchange hedging according to sales scale and sales regions.

Labor costs, raw material prices, and energy costs are fluctuating significantly due to global extreme weather events, natural disasters, and geopolitical impacts. Semiconductor memory shortages and heightened tensions in the Middle East may cause supply instability, price increases, and shipment restrictions that affect continued production. In addition, growing demands to address ESG issues in the supply chain, such as human rights, labor conditions, and decarbonization, are diversifying and complicating procurement risk. In response, the company is promoting enhanced supply chain visibility, diversification of supply routes through collaboration with procurement partners, advancement of BCP, and strengthened human rights due diligence.

If natural disasters or the spread of infectious diseases caused by climate change cause severe damage to development and production sites or suppliers, there is a risk of operational suspension and delays in production and shipment. There are also risks of increased energy and raw material costs due to the introduction of policies and regulations such as carbon taxes in various countries, difficulty in procuring materials due to stricter chemical substance regulations, and damage to brand value due to greenwashing accusations. In response, the company conducts monitoring through the Sustainability Committee, promotes greenhouse gas reduction across the entire value chain, formulates BCPs, and sets voluntary standards stricter than legal regulations.

Securing diverse personnel with advanced technical skills and specialized knowledge is essential to maintaining business competitiveness. Failure to recruit and develop capable personnel, or the departure of key personnel, may cause business stagnation and the outflow of knowledge and know-how outside the company. In particular, at domestic group companies, an imbalance in age composition resulting from past hiring trends has created a risk that, as veteran employees retire, a shortage of mid-career and junior employees will disrupt the transfer of skills and technical expertise. In response, the company is promoting the leveling of age composition through continued new graduate hiring, standardization and systemization of business processes, and organizational efforts to promote cross-generational knowledge sharing.

As the company holds numerous information assets, including technical information and information on business partners and customers, if information system failures or unauthorized use of personal information occur due to cyberattacks, intentional acts, negligence, or disasters, there is a risk of damage to corporate value, claims for damages, and severe penalties for violations of laws in various countries. In addition, aging internal systems, increasing complexity of operations, and the end of support for core systems could lead to operational inefficiencies. In response, the company newly established the CISO position and an Information Security Committee in April 2026, and is strengthening its global integrated monitoring system, advancing a core system renewal project, and enhancing cyber resilience.

While holding and licensing numerous intellectual property rights, the company may face litigation arising from unauthorized use by other companies, or conversely, may be subject to manufacturing/sales injunctions or claims for damages from other companies for alleged infringement of their intellectual property rights, resulting in substantial litigation costs and adverse effects on earnings and financial position. As the business expands globally, differences in legal systems and remedies across countries and regions create risks of prolonged disputes and unexpected costs. In response, the company formulates intellectual property strategy, promotes the securing of rights such as patents, provides comprehensive protection through an