Epson 2016 Annual Report Download - page 17

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Risks Related to Epson’s Business Operations
At present, we have identified the following significant factors as risks that could have a materially adverse effect
on our future business, financial condition or operating results and that should thus be taken into account by
investors.
We strive 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. Our financial performance could be adversely affected by fluctuations in printer sales.
The ¥736.3 billion in revenue in the printing solutions segment in the year ended March 2016 accounted for
slightly less than 70% of Epson’s ¥1,092.4 billion in consolidated revenue. Inkjet printers (including printer
consumables) for the home, emerging markets, as well as for office and industrial applications accounted for a
large majority of our revenue and profit. Consequently, a decrease in revenue from printers and printer
consumables could have a materially adverse effect on our operating results.
2. Our financial performance could be adversely affected by competition.
Adverse effects of competition on sales
All of our products, including our core printer and projector products, are subject to the effects of vigorous
competition, which could cause, among other things, prices to fall, demand to shift toward lower-priced products,
and unit shipments to decline.
We are taking strategic action to address the risk of declines in prices, a shift of demand toward lower-priced
products, and unit shipments. On one hand, we must provide products tailored to customer needs in each market
along with high-value products and services. On the other hand, we must reduce manufacturing costs by increasing
design and development efficiency and by reducing fixed costs.
However, there is no assurance we will succeed in these efforts, and if we are unable to effectively counteract
downward pressure on prices, our operating results could be adversely affected.
Adverse effects of competition on technology
Some of the products that we sell contain technology that places Epson in competition against other companies. For
example:
- The Micro Piezo technology1 that we use in our inkjet printers competes with the thermal inkjet technologies2
of other companies;
- The 3LCD technology3 that we use in our projectors competes with other companies’ DLP technologies4, and
Epson’s projectors also compete against flat panel displays (FPDs)5 of other companies.
We believe that the technologies we use in these products have competitive advantage over the alternative
technologies of other companies. However, if consumer opinion with respect to our technologies changes, or if
other revolutionary technologies appear on the market and compete with our technologies, we could lose our
competitive advantage in technology and our operating results could be adversely affected.
1Micro Piezo technology is an inkjet technology created by Epson that manipulates piezoelectric elements to fire small droplets of
ink from nozzles.
2Thermal 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.
33LCD technology uses high-temperature polysilicon TFT liquid-crystal panels as light valves. The light from the light source is
divided into the three primary colors (red, green and blue) using special mirrors, the picture is created on separate LCDs for
each color, and then the picture is recombined without loss and projected on the screen.
4DLP technology uses a digital micro-mirror device (DMD) as a display device. A DMD is a semiconductor on which a large
number 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 registered trademarks of
Texas Instruments Incorporated.
5FPD encompasses a variety of thin electronic display technologies.
The emergence of new competitors
We presently face competition from powerful companies that have advanced technological capabilities, abundant
financial resources, or strong financial compositions. We also face competition from companies around the world
that have market recognition, strong supply capacities, or the ability to compete on price. There is, therefore, a