Business Risks and Other Risks
Dependence on Specific Products and Industries
The Group's mainstay business is manufacture and sales of antennas and peripheral devices. In addition, most of the Group's products are manufactured for and sold to clients in the automotive industry. Therefore, future trends in sales of antennas and peripheral devices, as well as trends in the automotive industry could impact the Group's financial conditions and business performances.
The Group has bases not only in Japan but also in China, the Philippines, Vietnam, Mexico, the U.S.A., the U.K. and Thailand. The Group provides its products to different regions around the world, such as North America, Europe and Asia. On top of that, the Group aims to continue enhancing capital investment in various locations and strengthening its sales network in certain regions. This involves risks related to political and economic trends, unexpected change of laws or regulations, tax and accounting such as transfer price taxation, terrorism, war, epidemics and other risks which could affect the Group's financial conditions and business performances.
Fluctuation of Foreign Exchange Rates
The Group's production bases are located in Japan, China, the Philippines, Vietnam and Mexico, while its sales bases are located in Japan, the US, the UK and Thailand. Therefore, fluctuation in foreign exchange rates could have an effect on the Group's financial conditions and business performances.
Since the Group sells its products all over the world, it is constantly competing with overseas competitors and domestic manufacturers in terms of pricing, and this could cause prices and market shares to fluctuate, which in turn could have an impact on the Group's financial conditions and business performances.
Procuring Parts and Raw Materials
The Group procures raw materials from outside the Group to produce core parts, and also procures some parts from outside the Group; namely, copper wires and resin. Copper wires and resin are the main raw materials used in producing the Group's antennas and coaxial cables. Hence, there may be a delay in procuring parts and materials due to suppliers' circumstances which the Group has no control over, or purchase costs may increase due to sudden rises in material prices, including that of metal material such as copper, or that of oil, and this could affect the Group's financial conditions and business performances.
Quality Assurance of Products
The Group produces products in Japan, China, the Philippines, Vietnam and Mexico based on clients' quality standards, and makes every effort in managing quality. The Group has not yet experienced any lawsuits or recalls based on the Product Liability Act; however, in the event that lawsuits or other types of complaints are made against the Group's products, large amounts of compensation for damages may be required, or the reputation of the Group's products may decline, and this may result in impacting the Group's financial conditions and business performances.
The Company develops the business internationally, and the sales outside Japan accounts for the major part of the consolidated net sales. The Company calculates the tax in conformity to the tax code at each country and makes payments in a suitable manner. Concerning the risks on tax and accounting such as transfer pricing taxation to be applied at each Group company, the Company have been paying close attention with the help of third party experts on tax etc., however, due to discrepancy in opinion with the tax authorities, the Company may get pointed out for an inappropriate transaction pricing. On top of that, in the event the intergovernmental consultations not reaching agreement, it may result in double taxation or additional tax.
Infringement of Intellectual Property Rights
The Company conducts active patent application and the patent investigation through patent office as needed, to prevent any infringement of third party’s intellectual property rights. However, it is very challenging to conduct thorough investigation and verify that the Company is not infringing any third party’s intellectual property rights, which the Company may not recognize yet. In addition, there is no guarantee that the Company will not subject to lawsuits by the third party on patent rights and other intellectual properties. In the event of receiving lawsuit by third party, the Company aims to deal with the case individually and specifically in consulting with the attorney and lawyers, but this may take a vast amount of time and cost, and thus could affect the Company’s financial and business performances.
The Company constantly analyzes the customer demand forecast to maintain the proper inventory level and to prevent the retained stock. However, in the event that the forecasted demand not performed due to market fluctuation, the inventory level may become excessive and the Company has no other choice to recognize the write-down and disposal, which it could affect the Company’s financial and business performances.
Obsolescence of Technology
The Company promotes development activities for technology concerning the current and for new products in the future. However, in the event that the company products becomes obsolescence and the Company’s technological innovation is not advanced, the Company’s product may fail to keep competitiveness against our competitors, and this may affect the Company’s financial and business performances.
Impact from Disasters and other Incidents
Natural disasters such as earthquakes or typhoons may cause decline in production capability at the Group's production and/or sales bases, breakdowns in IT infrastructure and secondary disasters, and thereby pose problems to the Group's financial conditions and business performances.