Risks such as those described below could have important effects on the MJC Group's business, financial position, and investor decisions.
The risks included here are those identified as important by the MJC Group as of the end of the current consolidated fiscal year and do not represent a comprehensive list of all risks faced by the Group.
Effect of Fluctuations in the Semiconductor and FPD Markets
The MJC Group operates a global business founded on the manufacture and sale of semiconductor and FPD testing systems and measurement equipment. While semiconductors and FPDs can see market growth and stimulation of demand as a result of technical innovation, changes in needs and the economic climate can disrupt the balance of supply and demand. Associated freezes on capital investment, reduction in production, and changes in plans on the part of MJC's customers could significantly affect the MJC Group's business performance.
To minimize the impact of such changes, the MJC Group diversifies its product mix and business portfolio.
Effect of Reliance on Specific Customers
Major semiconductor and FPD manufactures in and outside Japan are the customers for the MJC Group's products. The weeding out and reorganization of players in the semiconductor and FPD industries has resulted in specific customers accounting for a higher percentage of net sales, making MJC more susceptible to the effects of this tendency. Hence, changes in the capital investment, production plans, and business strategies of specific customers could significantly affect the MJC Group's business performance. Also, selling prices of our products may fall in response to customer’s request for cost reduction, etc., and this situation could significantly affect the MJC Group's business performance.
To minimize the impact on performance, the MJC Group monitors market trends, etc. and diversifies its client base as much as possible.
Effect of R&D
Aiming to be a company that continues to grow sustainably, the MJC Group is actively developing new technologies and trying to bring new products to the market as swiftly as possible. For this purpose, we closely monitor technological development among our customers and trends in the semiconductor and FPD markets. However, we may lose the competitive advantage of our products and have trouble maintaining our profitability if we fall short of customers’ expectations in terms of technologies and schedule or if a competitor brings out a new technology or product before we do and gains a competitive advantage over us. Situations such as this could significantly affect the MJC Group's business performance.
The MJC Group regularly exchanges technological information with our customers to build a firm relationship, gain early insights into what technologies they will need in the future, and start developing specific technologies as early as possible. These actions help us develop new technologies and bring new products to the market in a timely manner,
Effect Related to Information Security or Other IT Matters
The MJC Group manages a variety of confidential information in the course of doing business. That includes a lot of information related to technologies, sales information related to customers, and personal information related to employees. unexpected attacks by third-party hackers or computer viruses, unauthorized or careless use of its IT resources by the officers and employees, and glitches of IT resources caused by natural disasters, large-scale power outages or fires among other accidents would result in legal claim, litigation, damages liability and an obligation to pay fines as well as disruption in business continuity. In these events, the MJC Group's reputation and business performance could be significantly affected.
To prevent this information from being leaked, falsified, lost or destroyed, the Group attempts to strengthen the operations of its internal information systems in accordance with its information security policy, which is prepared and periodically reviewed in an Information Security Working Group. The MJC Group subscribes to cyber insurance to mitigate the financial and opportunity cost of any data incidents.
Effect Related to Quality
Since the MJC Group's products make use of cutting-edge technology. As a result, the occurrence of unexpected defects sometimes causes delivery delays, suspension of production, and liability for damages and additional expenses such as product recalls. Situations such as this could cause sales decrease, damage reliability, and significantly affect the MJC Group's business performance.
Based on its habitual QDCCSS efforts, the MJC Group strives to improve processes from product development to manufacturing, materials procurement, management, services, and more. It also strives to continuously maintain quality assurance systems, such as through acquisition of ISO 9001 certification.
Effect of Parts Procurement and Outsourced Processing
Since the parts and processing needed for the MJC Group's products involve cutting-edge technology, there are some parts and types of processing for which it is difficult to find alternative suppliers or outsourcing contractors. That is why situations in which these suppliers or outsourcing contractors encounter issues, such as supply delays, processing delays, or quality problems, could result in suspension of manufacturing of the MJC Group's products or a decline in the quality of the MJC Group's products, which could significantly affect the MJC Group's business performance.
To ensure the quality and timely delivery of its products, the MJC Group cultivates and maintains strong relations with its supply chain and always keeps an eye open for alternative suppliers and second sourcing.
Effect of Disasters and Other Incidents
The MJC Group is headquartered in Tokyo and has domestic production sites in Aomori and Oita prefectures as well as in South Korea, China and Taiwan. If these regions were to experience damage caused by a natural disaster such as a large-scale typhoon or earthquake, a terrorist act, an infectious disease, a large-scale power outage, or a largescale fire, it could affect headquarters' functions and product manufacturing. In these events, the MJC Group's business performance could be significantly affected.
To mitigate the damage of such incidents, the MJC Group engages in business continuity planning to ensure that business operations can continue or be resumed as early as possible.
Effect Related to Environmental Issues
Our business activities fall under environmental regulations, including those related to water pollution, air pollution, energy conservation, global warming, and use of hazardous substances in products. We face rising expectations for reducing environmental impact from our stakeholders and codes of conduct in the global semiconductor industry. Accordingly, we comply with environmental regulations and try to minimize the environmental footprint of our products and production processes. However, should our efforts fall short of stakeholder expectations or regulatory requirements, we may face additional costs, lose our competitive advantage, or suffer reputational damage. In these events, the MJC Group's business performance could be affected.
In addition to complying with environmental regulations and standards in the semiconductor sector, we try to make our workplaces as energy-efficient as possible and take other initiatives to make our businesses more environmentally sustainable.
Effect Related to Intellectual Property Rights
The MJC Group actively conducts R&D to differentiate and strengthen its products and endeavors to obtain intellectual property rights. However, intellectual property could be leaked if employees change jobs or information is leaked. Situations where this leaked intellectual property is exploited or imitated by a third party could affect to some extent the MJC Group's business performance.
Situations where intellectual property rights have become invalid because the Group failed to obtain or protect them and situations in which adequate protection of intellectual property rights cannot be secured in certain regions where the Group does business could affect to some extent the MJC Group's business performance. Situations where litigation is brought against the Group on the accusation that its products or technology have infringed upon the intellectual property rights of another company could also significantly affect the MJC Group's business performance.
Additionally, situations where the MJC Group's commercialization of a product is constrained based on a third party's technology, patents, or other intellectual property rights, or where the necessary licenses are not granted, and situations in which an unforeseen patent infringement suit is brought against the Group could significantly affect the MJC Group's business development and business performance.
To avoid violating a third party’s IP, the MJC Group carefully investigates potential issues from the development process onward, with the advice of external experts. To protect its own IP, the MJC Group offers employees a monetary incentive to obtain patents related to development, design, and production.
Effect Related to Human Resources
The MJC Group regards the securing and development of capable human resources, especially in development and technology departments, as essential for achieving sustainable growth as an R&D-driven company. However, situations such as the recruitment of the necessary human resources not going as supposed or the loss of important human resources could significantly affect the MJC Group's business development and business performance.
We have put in place a personnel evaluation system, actively recruit and develop talented people, and enhance training and education programs to provide comfortable working environment.
Effect of Compliance
The MJC group is required to comply with any laws and regulations both domestic and overseas, related to safety of products, security trade control between nations, commercial activities, patents, product liabilities, environment issues, and taxation. As compliance matters grow increasingly complex, it might not always be avoided that the Company infringes increasingly complicated laws and regulations and that the officers or employees commit some wrong-doings, which could significantly affect the MJC Group's reputation among stakeholders and business performance.
In addition to providing internal controls, the MJC Group takes steps to inculcate a compliance culture throughout the workplace. These steps include establishing a code of conduct, distributing a handbook on compliance online, and providing regular training to verify compliance awareness.
Effect of COVID-19 and Other Infectious Diseases
If COVID-19 or another epidemic or pandemic spreads in regions where the MJC Group operates, it may lead to economic changes or lifestyle changes, which could in turn destabilize demand for final products. Additionally, the spread of infections might force customers or suppliers to suspend operations, or force the MJC Group to suspend its own operations. Such eventualities could extensively damage the MJC Group’s business performance.
The MJC Group established a pandemic task force at the headquarters (Tokyo) and each business location. To minimize the impact of the COVID-19 pandemic, the MJC Group, while continuing to fulfill its role as a provider of products and services, complies with local and national authorities and takes anti-infection measures, such as limiting business travel and promoting remote work.
The MJC Group could be affected by economic climates, wars, terror attacks, financial and stock markets, fluctuations in exchange rates, standards wars, etc. in the course of doing business. In these events, the MJC Group's business performance could be affected.
The laws and regulations in Japan and other countries where the MJC Group sells its products as well as government regulations could affect the MJC Group's business performance. We have taken measures to address each of these risks.