Epson 2005 Annual Report Download - page 43

44 Seiko Epson Annual Report 2005
Risks Related to Epson’s Business Operations
The matters relating to the state of businesses financial statement and management result of operation set
out in the securities this report that might have a material affect on the investors’ decisions are as follows.
It is Epson’s policy to be aware of the possibilities of these risks arising and to strive to prevent them
from arising or respond to them if they do arise.
This paragraph contains matters that relate to the future, but such matters are only judgments made
as of the day of this report.
(1) Epson’s relies to a significant degree on profits from its inkjet printer business
Epson’s ¥942,401 million of sales from its information-related equipment business for the year ending
March 2005 constituted 63.7% of its consolidated sales, which were ¥1,479,750 million (excluding
inter-segment). Inkjet printers and consumables accounted for much of the sales and profits of the
information-related equipment business. So there is a possibility that sluggish sales of inkjet printers
and their related supplies will have a material adverse effect on Epson’s overall results.
(2) Price competition causes a downward trend in prices
Market prices of information-related equipment are declining seriously, because recently competition
has been intensifying further and there has been a shift in demand toward cheaper products. A slack-
ening in demand or an excess of supply in mobile communications devices and related devices could
possibly cause prices of electronic components for mobile communications devices, such as color
LCDs and LCD-driver ICs, to drop in the future, and could similarly affect other products.
Epson is striving to improve profitability by reducing production costs, such as by using low-cost
designs, and is taking measures to fight the trend of declining prices, such as by expanding sales of
highly value-added products. However, there is no assurance, of course, that these efforts will succeed,
and if Epson is unable to respond effectively counteract the declining prices trend, its results might be
adversely affected.
(3) Epson’s technologies compete with the technologies of other companies
Some of Epson’s products that it sells contain technology with which Epson competes against other
companies. For example,
1. Epson’s Micro Piezo technology*1 that it uses in its inkjet printers competes with the thermal inkjet
technologies*2 of other companies; and
2. Epson’s 3LCD technology*3 that it uses in its projectors and large LCD projection TVs compete with
other companies’ DLP*4 and LCOS*5 technologies.
Epson believes the technology it uses in these sorts of products is technologically superior to the alternative
technologies of other companies, but if consumer opinion with respect to Epson’s technology changes, or if
other revolutionary technologies appear on the market and compete with Epson’s technologies, Epson may
lose that competitive edge and its results might consequently be adversely affected.
*1. Micro Piezo technology is an inkjet printer technology created by Epson that manipulates so-called piezoelectric elements to fire small
droplets of ink from the printer nozzle.
2. Thermal inkjet technology is a type of technology for printers whereby the ink is heated to create bubbles and the pressure from the bubbles
is used to fire the ink. (Some manufacturers call this technology by different names such as bubble jet technology.)
3. 3LCD technology is a technology whereby TFT displays are used as light valves. The light from the light source is divided into the three
primary colors (red, blue, and green) using a special mirror, the picture is created on separate LCDs for each color, and then the picture is
recombined and projected on the screen.
4. The DLP technology is a technology that uses a digital micro-mirror device (DMD) as a display device. A DMD is a display device on which
hundred of thousands of micro mirrors are arranged, each mirror directing light onto its own individual pixel, and the image is created by the
light from the light source being reflected from the mirrors onto the screen. DLP is a trademark of Texas Instruments.
5. LCOS technology is a technology that uses liquid crystal on silicon (LCOS) as a display device. It is characterized by the extremely large
number of openings on the surface of the reflective LCD panel. Because the circuits and the switching elements are etched underneath the
reflective layer, there is no need for the BM (a light-blocking layer that prevents light from falling on the pixel transistor area), making for a
seamless display of the picture.