Epson 2011 Annual Report Download - page 14

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13
Risks Related to Epson’s Business Operations
At present, Epson has identified the following significant factors as risks that could have a material adverse
affect on its future business, financial condition or operating results and that should thus be taken into account
by investors. There may be other risk factors of which Epson is unaware at this time.
Epson strives to recognize, prevent, and control potential risks and to address risks that materialize.
Also, all forward-looking statements hereunder were made at Epson's discretion as of the date this Annual
Report was submitted.
1. Epson relies to a significant degree on sales and profits from its printer business.
Epson’s ¥702,918 million in sales from its information-related equipment business for the year ended March
2011 constituted 72.2% of Epson’s consolidated sales, which were ¥973,663 million. Inkjet and other printers,
including printer consumables, accounted for a large majority of the sales and profits of the information-related
equipment business. A decrease in sales of printers and printer consumables could have a material adverse effect
on Epson’s operating results.
2. Price competition could put downward pressure on prices.
Market prices for printers and certain electronic devices have been trending downward in recent years primarily
due to intensified competition and a shift in demand toward lower-priced products. Epson is striving to improve
profitability by reducing production costs, for example, by using low-cost designs. At the same time, it is taking
action to fight the trend of declining prices by, for example, developing and expanding sales of
high-value-added products. However, there is no assurance that these efforts will succeed, and if Epson is
unable to respond effectively to counteract the downward price trend, its operating results might be adversely
affected.
3. Epson’s technologies compete with the technologies of other companies.
Some of the products that Epson sells contain technology that place Epson in competition against other
companies. For example:
1) The Micro Piezo technology*1 that Epson uses in its inkjet printers competes with the thermal inkjet
technologies*2 of other companies; and
2) The 3LCD technology*3 that Epson uses in its projectors competes with other companies’ DLP*4 and
LCOS*5 technologies.
Epson believes the technology it uses in these types of product is 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 which could adversely affect its operating results.
*1. Micro Piezo technology is an inkjet technology created by Epson that manipulates piezoelectric elements to fire small
droplets of ink from nozzles.
*2. Thermal inkjet technology (also known as bubble-jet technology) is a printer technology in which the ink is heated to
create bubbles and the pressure from the bubbles is used to fire the ink.
*3. 3LCD technology uses TFT panel as light valves. The light from the light source is divided into the three primary colors
(red, blue and green) using special mirrors, the picture is created on separate LCDs for each color, and then the picture is
recombined and projected on the screen.
*4. DLP technology uses a digital micro-mirror device (DMD) as a display device. A DMD is a semiconductor on which
anywhere from hundreds of thousands to millions of micro mirrors are arranged, each mirror directing light onto its own
individual pixel. An image is formed by the light from the light source being reflected from the mirrors onto the screen.
DLP and DMD are trademarks of Texas Instruments Incorporated.
*5. LCOS technology uses liquid crystal on silicon (LCOS ) as a display device. The reflective LCD panels used in LCOS
systems are characterized by a high aperture ratio. 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.
4. Epson genuine consumables might lose market share.
Ink cartridges are particularly important inkjet consumables in terms of Epson’s sales and profit. There are other