Epson 2009 Annual Report Download - page 23

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regulations, or the like related to the import and export of Epson products.
9. The intense technological innovation required of Epson entails risks
Epson is engaged in manufacturing and selling products that require advanced technologies, so
technological superiority is a vital element of Epson’ s competitiveness. Epson possesses core
technologies—for example, ultra-fine, ultra-precise processing technologies, low-power consumption
technologies, thin-film technologies, surface treatment technologies, high-density mounting technologies,
digital control technologies and digital color image processing technologies. By evolving and fusing these
technologies, Epson has been able to manufacture and sell products that meet customers’ needs, thereby
developing the presence that it has today.
The rate of technological innovation required in most of the fields in which Epson is engaged, however, is
so intensely fast, that in order to respond swiftly to customer needs in the face of changes in technology,
Epson sometimes must undertake long-term investments or capital spending based on product predictions.
Thus, while Epson is making every effort to gauge market and customer needs and will maneuver to
respond to the intense technological innovation on which they depend, if Epson is unable to accurately
gauge those market trends or customer needs, it may not be able to appropriately respond to the required
technological innovations, and its results might be adversely affected.
10. The short lifecycle of certain products makes Epson vulnerable to certain risks
Epson is manufacturing and selling products that generally have short life cycles, such as consumer
products. Epson has its own group distribution network throughout the world and is taking various
measures, such as trying to understand through its distribution subsidiaries and branches the needs for
different products in each region, and striving to reduce lead time by establishing production sites in
regions close to consumers. If the transitions from existing products to new ones do not go smoothly,
however, Epson’ s results could consequently be adversely affected.
Factors affecting whether the transition to a new product goes smoothly include delays in the development
or production of Epson’ s new products, competitors’ timing in introducing their new products, the
difficulty in predicting changes in consumers’ needs, a decline in purchases of existing products as
consumers anticipate new product introductions, and competition between Epson’ s existing and new
products.
11. Procuring products and outsourcing the manufacture of products entails risks for Epson
Epson procures parts, semi-finished products and finished products from third parties, but it has generally
conducted transactions without entering into any long-term purchase agreements. Epson is developing
upon its efficient procurement activities by cooperatively engaging with such suppliers in maintaining
product quality, improving products and reducing costs. However, if its ability to procure was to be
adversely affected by, for example, insufficient supply from a third party, poor quality of products
supplied or the like, then Epson’ s results could consequently be adversely affected. Epson strives to, in
principle, procure parts and the like from multiple suppliers, but there are some cases in which it can only
procure parts from one company due to the difficulty of procuring an alternative component from another
company. One such example is actuators, which are the primary component of the print heads in medium-
and low-price inkjet printers. On the manufacturing side of its business, Epson outsources the
manufacturing of certain products, such as page printers and inkjet printers in the low price range, image
scanners and computers. If demand for such products rises suddenly, it will become difficult to secure
alternative or additional manufacturers to outsource to, and Epson might become vulnerable to such risks
as an increase in costs or a delay in production.
12. Epson faces risks concerning the hiring and retention of personnel
It is vital that Epson hire and retain talented personnel both in Japan and overseas for the development and
manufacture of Epson’ s advanced new technologies and products, but the competition for recruiting
personnel is becoming increasingly intense. Epson is putting considerable effort into securing talented
personnel by establishing research and development sites and design sites both in Japan and overseas. If
Epson is unable to continue to use or employ an adequate number of talented personnel, however, the
implementation of its business plans could be adversely affected.