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Business Risk Factors

Star Micronics Group recognizes a variety of risks and uncertainties that have the potential to affect its operating results and/or financial position. We recognized the following risks as of March 29,2019.

 

1.Changes in Economic Conditions

The Star Micronics Group conducts each business globally. Demand in each of these business segments is subject to trends in economic conditions faced by customers. In particular, the mainstay Machine Tools Segment operates in an industry that is highly susceptible to the capital investment demand of corporations. The Group strives to cultivate customers, develop products and take other steps to make the structure of each business segment less susceptible to the impact of cyclical economic fluctuations. However, changes in economic conditions could still have an impact on business results.

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2.Production Sites

The Group has a high overseas production ratio. The Group’s overseas production sites, including outsourced manufacturing, are mainly based in China and Thailand. In addition, products manufactured in China span all of the Group’s businesses segments. In the event of an incident, regulatory development, or other such occurrence, there could be a significant impact on the Group’s production activities and product supply.

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3.Competition Based on Price

The Group handles an extensive range of products, ranging from equipment for companies to parts for consumer products. However, the Group faces fierce price-based competition in a large number of product categories mainly due to the emergence of competing manufacturers. In response, the Group constantly works to develop high value-added products and technologies that exceed what other companies offer, while cultivating new markets and pursuing cost-cutting activities. However, in the event of the rapid onset of intensified price-based competition, the Group may suffer a decline in profitability or market share.

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4.Foreign Exchange Fluctuations

The Group conducts business globally, and relies on overseas markets for a large portion of production and sales. For this reason, although the Group strives to reduce foreign exchange rate risk primarily through expansion of overseas production and foreign exchange forward contracts, business results could be impacted by foreign exchange rate movements.

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5.Earthquakes and Other Natural Disasters

Most of production sites of the Group are located overseas. However, the Company’s Head Office and domestic plants are located in Japan’s Shizuoka Prefecture, where a major earthquake is predicted to strike the Tokai region. In the event of a major earthquake, including the predicted Tokai earthquake, the Group’s business results and financial position may be significantly impacted by restoration and other such costs. Head Office functions and production activities may also be heavily impacted.
Furthermore, in the event that a major natural disaster strikes the Group’s production and sales sites around the world or the surrounding regions, the Group’s business activities could be significantly impacted.

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6.Others

The Group primarily manufactures products in Japan, China and Thailand, and sells them in markets worldwide. In the course of doing business, the Group could face trade restrictions, such as tariffs, due to trade friction or protectionist policies to safeguard domestic industries, in various countries. The Group could also face environmental issues and various government regulations, as well as quality problems and patent conflicts. In such an event, the Group’s business activities could be significantly impacted.

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