SCREEN Holdings Co., Ltd.

If US-China relations deteriorate further and import/export regulations are tightened, shipments of products destined for China may be constrained, potentially adversely affecting sales and profit. Additional tariffs have also been imposed on products exported to the US, and depending on future developments, the impact on profit could expand. While the Company currently states that the impact on business performance is not significant, there are also concerns about indirect effects from a global economic downturn caused by prolonged geopolitical risk.

Given the high proportion of overseas sales and the existence of foreign-currency-denominated transactions, sharp fluctuations in exchange rates could adversely affect profit. The Company promotes yen-denominated transactions and hedges using forward exchange contracts, but complete avoidance is difficult. Interest-bearing debt is entirely at fixed rates, but newly raised funds are exposed to interest rate fluctuation risk.

The semiconductor and display markets have boom-and-bust cycles in which growth driven by technological innovation and downturns caused by supply-demand deterioration repeat. If market conditions diverge from expectations, this could adversely affect the Group's sales and profit. Through the promotion of ROIC management, the Company aims to generate profit even during downturns, but it cannot completely eliminate the risk of market fluctuations.

If new product releases are delayed due to prolonged development periods, the Group may miss opportunities to expand market share, potentially adversely affecting sales and profit. The Company is working to improve development efficiency by narrowing down development themes, establishing and strengthening cooperation with overseas R&D sites, and collaborating with external partners, but in the fast-moving semiconductor industry, timely product introduction is key to competitiveness.

As customer consolidation progresses in the semiconductor industry, the Group's sales tend to concentrate on specific customers. Changes in the capital expenditure and order trends of specific customers could have a direct and significant impact on the Group's sales and profit. The Company is addressing this by continuing to provide value to customers through the development of competitively advantageous equipment for next-generation devices.

If there is a tightening of supply and demand for key materials or disruptions in securing materials or manufacturing subcontractors, production activities could be interrupted, and rising material and labor costs could adversely affect sales and profit. The Company has built a complementary production system that integrates domestic and overseas production sites and procurement sources, but it is difficult to be fully prepared for large-scale disasters or sudden supply chain disruptions.

Domestic production sites are concentrated in the Keiji region, and a large-scale earthquake or similar event in this region could cause significant damage to production facilities. Pandemics caused by infectious diseases could also adversely affect business activities such as sales, production, procurement, and logistics. The Company has implemented measures such as promoting a BCMS based on ISO 22301 and seismic reinforcement, but the risk of operational suspension due to unforeseen events remains.

If the Company or its supply chain is subjected to increasingly frequent, sophisticated, and advanced cyberattacks, this could result in the leakage of personal information, customer information, or technical information, or major failures in information systems, potentially leading to a loss of social trust and long-term business disruption. The Company is working on establishing IT management regulations and strengthening security, but complete defense is difficult given the increasing sophistication of attack methods.

Amid intensifying competition to secure talented personnel, if the Company is unable to continuously recruit and retain the necessary human resources, or if succession planning stalls, this could adversely affect its business and performance. The Company is promoting initiatives centered on the acquisition, development, and retention of autonomous personnel referred to as "Solution Creators," and is also working to ensure diversity including highly specialized personnel, women, and foreign nationals, but intensifying competition for talent is an industry-wide challenge.

If the Company is slow to respond to the growing need for products with low environmental impact and the tightening of international chemical substance regulations and other environment-related regulations, its products may fail to comply with environmental regulations, potentially adversely affecting sales and profit. The Company is working to expand environmentally compliant certified products and to develop products and pursue green procurement aimed at decarbonization, resource sustainability, and harmony with nature, but there is a risk that the pace of regulatory tightening could outstrip its response.