Shin-Etsu Polymer Co.,Ltd.

Demand for the Group's products extends worldwide and is directly affected by the economic conditions of the countries and regions in which products are sold. Rapid changes in the international situation could disrupt production, procurement, sales, and other activities. If dependence on a specific region is high, an economic downturn in that region could significantly affect business performance.

The Group conducts business activities in Asia, North America, Europe, and other regions, and is affected by exchange rate fluctuations when converting local currency-denominated sales, expenses, and assets into yen. In a yen appreciation phase, yen-converted revenue from overseas operations may decrease, potentially adversely affecting the Group's financial position and business performance. There is no explicit disclosure in the securities report regarding the presence or effectiveness of hedging measures.

The Group uses petrochemical products as the main raw material for its products, and fluctuations in market conditions for crude oil, naphtha, and other materials could push up raw material costs and put pressure on business performance. If unforeseen circumstances occur at suppliers, or if quality problems or supply shortages arise with materials or components, there is a risk that production activities themselves could stagnate. There is no specific disclosure in the securities report regarding countermeasures such as diversification of raw material procurement.

In markets related to electronic devices and semiconductors, competition for market share and price competition with overseas competitors is intensifying. A deteriorating competitive environment could lead to declines in product unit prices and sales volumes, potentially affecting the Group's profitability. While the Group seeks to differentiate itself as a proposal-oriented, development-driven company, maintaining a competitive advantage remains a challenge.

In the electronic devices and semiconductor-related fields, technological innovation and cost competition are particularly intense, and there is a risk that business performance could deteriorate if the Group is slow to respond to changes in the market and industry. The Group continuously works on new product development and production technology innovation as a proposal-oriented, development-driven company, but if it fails to keep pace with rapid shifts in technology trends, its competitiveness could decline. The scale and results of R&D investment are disclosed separately.

The Group holds and manages intellectual property rights related to its products and manufacturing processes, but if these rights are not properly protected, there is a risk of imitation by third parties or litigation. Similarly, risks may arise if the Group fails to properly obtain licenses when using third parties' intellectual property rights. The cost burden associated with litigation or responses to counterfeit products could affect business results.

The Group is subject to a wide range of laws and regulations in the countries and regions where it operates, including investment licensing, import/export regulations, competition law, environmental regulations, labor law, intellectual property rights, taxation, and currency controls. Changes to these laws or their application could affect business performance through restrictions on business activities or increased costs. As global expansion continues, the complexity of regulatory compliance is also increasing.

Since some products are produced on a concentrated basis at specialized factories, there is a risk that natural disasters such as earthquakes and storm/flood damage could seriously disrupt production of those products. While concentrated production offers excellent cost efficiency, it also results in high dependence on a single site, which may limit alternative production capacity in the event of a disaster. There is no specific disclosure in the securities report regarding the state of BCP preparedness.

While the Group is working to reduce CO2 emissions toward achieving carbon neutrality, if it is slow to respond to the manifestation of climate change or the transition to a low-carbon society, it could face increased costs due to tightened regulations or loss of business opportunities. Both physical risks (such as extreme weather) and transition risks (such as carbon taxes and tightened regulations) could affect business performance and financial condition. The Group has established a sustainability promotion structure alongside its Human Rights Promotion Subcommittee.

If a large-scale infectious disease such as COVID-19 spreads, temporary operational shutdowns or supply chain disruptions could impede production and sales activities. As the Group operates globally, there is a risk that impacts could be widespread if outbreaks occur simultaneously in multiple regions. There is no specific disclosure in the securities report regarding BCP preparedness for infectious disease response.