Nikon 2012 Annual Report Download - page 29

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NIKON CORPORATION ANNUAL REPORT 2012
Business and Other Risks
The Nikon Group’s business results could be materially
affected by a variety of future factors. The following is a
list of major potential risk factors that could affect the
Group’s business.
Forward-looking statements in this text are the
determination of the Nikon Group as of the time of preparation
of this document.
1. Special Business Circumstances or Situations
In the semiconductor industry, which is the target market
for the IC steppers and scanners handled by the Precision
Equipment Business, there has been an easing, in recent
years, of the wide fluctuations in the business cycle that
formerly characterized the industry. This is the result
of greater diversity in finished products. Consequently,
there is a risk that, during periods of market oversupply of
semiconductor devices, demand for steppers and scanners
will decline as semiconductor manufacturers curb capital
expenditures, producing a corresponding increase in
inventories. However, accurately predicting the timing,
length, and degree of such fluctuations is difficult. In
addition, a distinctive characteristic of customer behavior in
the industry is to postpone or cancel orders after they have
been placed, creating a structure in which inventories can
easily increase during periods of demand slowdown. The
need for LCD steppers and scanners reflects trends in the
LCD panel market and, should there be an oversupply of LCD
panels, prices will fall, perhaps causing a sudden falloff in
demand for steppers and scanners.
The market for digital cameras, the principal product
of the Imaging Products Business, continues to expand.
While a further rise in ownership rates and market growth
in emerging countries is expected, there is the potential for
fluctuations to occur in the market, including slowdowns in
demand for digital cameras stemming from such factors as
economic cycles in individual regions, and the emergence of
strong competing products such as new digital devices.
In the Instruments Business, the market for microscopes is
reaching saturation point, and there is the potential for industry
reorganization and other changes in the competitive structure.
Also, the industrial instruments business is susceptible to
economic conditions and equipment trends in a variety of areas,
including the semiconductor, electric, electronic components,
automobiles, and machine tool industries.
Such changes in the business environment could result in
a substantive impact on the business results and financial
position of the Nikon Group.
2. Dependence on Specific Suppliers
The Nikon Group is in certain areas dependent on specific
suppliers to provide its businesses with raw materials, core
components, finished goods manufactured under contract,
and other products. The Group strives to ensure stable
procurement while maintaining close relationships with
these specific suppliers. However, should procurement
be significantly disrupted due to sudden spikes in demand,
natural disasters, quality issues, or changes in strategy,
bankruptcy or business failure on the part of specific
suppliers, or should there be an appreciation of procurement
prices, there could be a negative impact on the earnings and
financial position of the Nikon Group.
3. Dependence on Specific Customers
The semiconductor industry, which comprises the Precision
Equipment Business customer base, is constantly shifting
through mergers and alliances in order to adapt to the
growing scale of capital expenditures and diversifying
technology development. As the relative competitive
merits of each company become evident, reflecting
technical capabilities or characteristics of the devices
they manufacture, the weeding-out process continues.
Competition is growing similarly fierce in the LCD panel
industry, which appears to be moving toward industry
reorganization. Under such conditions, the capital
expenditure programs of major customers of the Nikon
Group are susceptible to change, including, for example,
acute declines in order volume, the switching of orders to
rival firms, and the inability of customers to repay debts.
Such circumstances could have a negative impact on the
earnings and financial position of the Nikon Group.
4. New Product Development Capability and
R&D Investment
The Nikon Group’s principal businesses are extremely
competitive, and require constant development of new
products through ongoing, advanced research and
development. Consequently, continual investment in
product development needs to be maintained regardless
of fluctuations in the Group’s earnings.
In the Precision Equipment Business, earnings could
decline were the development of new products and next-
generation technology not conducted in a timely fashion, or
if the technology developed by the Group is rejected by the
market. There is also a risk that acquisition by a competitor
of a patent for new technology might cause production or
sales to cease, or margins to decline as a result of royalty
payments, or that new technology adopted for the systems
of a competitor will drive down the price of the Company’s
systems. For LCD steppers and scanners, the entry of a
new company into the market or the introduction of a new
technology would probably lead to more intense competition,
which could have an impact on earnings.
FINANCIAL SECTION