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HOYA Annual Report 2009
Business Risks
The main items believed to be potential risk factors for development of the
businesses of the Hoya Group are described below. Matters concerning forward-
looking activities included in these statements are based on information evaluated
by Hoya’s management as of the date these materials were prepared.
1. Fluctuation of Exchange Rates
As the Hoya Group develops its business on a global scale, if the currencies of
those countries in which the Hoya Group has major manufacturing operations
appreciate, export prices of its products would rise, which would incur an increase
in costs on a consolidated basis. If the currencies of those countries in which the
Hoya Group has major sales operations depreciate, it would bring about a
decrease in sales.
2. Influence of International Situations
In the event that the future movement of people, goods or money were to be
extraordinarily restrained in certain regions, or if certain unexpected events took
place in those countries in which the Hoya Group has business operations—
including changes in the political, economic or legal environments, labor short-
ages, strikes, accidents or natural calamities, etc.—certain problems may arise in
the execution of business operations.
3. Business in Production Goods
Every part of the Electro-Optics product range, which constitutes a major portion
of Hoya Group revenue, involves intermediate production goods, components or
materials. Therefore, growth of the business thereof is affected substantially by the
market conditions of such end-consumer products such as personal computers and
digital home appliances that are manufactured utilizing the resultant products.
4. Emergence of Discounters and Lowering of Prices in
the Consumer Goods Sector
In recent years, discount shops of an unprecedented type have emerged and
brought about a lowering of prices. If the influence of such discount shops swells
to an extent that cannot be absorbed by the Hoya Group’s cost reduction efforts
and strategies for adding high value both in Japan and abroad, the business
results and financial condition of the Hoya Group might be adversely affected.
5. Competence for Developing New Products
The Hoya Group strives at all times to develop state-of-the-art technologies.
However, if the Hoya Group fails to sufficiently predict changes in the sector and
markets or to develop new products that meet customer needs in time, the busi-
ness results and financial condition of Hoya Group might be adversely affected.
6. Competition
The Hoya Group, which has the top market share for its many products in their
respective sectors, is constantly exposed to relentless competition. There is no
guarantee that the Hoya Group can maintain its overwhelming market share and
compete efficiently in future. If customers shift allegiance due to cost pressures or
inefficiency of Hoya’s competitiveness, the business results and financial condition
of Hoya Group might be adversely affected.
7. Production Capacity
At present, the Hoya Group reinforces its production capacity so as to meet orders
that exceed existing production capacity in multiple business areas. However, if the
setting up of such capacity were delayed for any reason, it would affect not only the
Hoya Group’s results but also the production and sales plans of its customers,
which might bring about increased market share for its competitors, etc., and
adversely affect the business results and financial condition of the Hoya Group.
8. New Business
New business is important for future growth. In the event that no promising new
business is developed, the growth of the Hoya Group might not be achieved as
planned. In addition, the Hoya Group may carry out mergers and acquisitions as a
part of its business strategy. If unexpected obstacles emerge after such acquisition
and unscheduled time and costs are required, the business results and financial
condition of the Hoya Group might be adversely affected.
9. Risk of Information Leakage
In the course of its operations, the Hoya Group retains a substantial amount of
personal and confidential information, and the Group has numerous measures in
place to manage this information. Nevertheless, in the unlikely event that an
outflow of information were to occur, the Hoya Group could experience a loss of
trust from society and face significant liability for damages.
10. Intellectual Property Risk
In its new product development and manufacturing, as well as its sales activities, the
Hoya Group conducts thorough advance research to avoid infringing upon other
companies’ intellectual property rights. Nevertheless, these efforts cannot eliminate
the risk of a third party asserting infringement of their intellectual property rights. In
such an event, in addition to legal costs and depending on the outcome of litiga-
tion, the Hoya Group might be unable to take advantage of said technology and
could become liable for substantial damage compensation payments.
11. Product Quality Risk
The Hoya Group manufactures a wide variety of products according to stringent
quality standards. However, if a quality issue were to arise, necessitating a recall or
resulting in product liability, in addition to the cost of collecting such products the
Group could incur significant damage to its reputation with customers. Also,
depending on the product the Group could be liable for substantial damage com-
pensation payments.
12. Risk Related to Human Resource Retention and Training
The ongoing growth of the Hoya Group is largely dependent on its ability to retain
and train superior personnel in a wide range of fields. However, the Hoya Group’s
growth and operating performance could be negatively affected if the swiftly
diversifying employment environment resulted in a situation that halted the flow of
capable human resources or impeded the recruiting and training of new personnel.
13. Risk Related to Procuring Raw Materials and Other Items
Some of the raw materials and parts the Hoya Group uses in its manufacturing
activities are of a specialty nature, such that suppliers are limited, so the selection
of alternative suppliers would be problematic. Therefore, a natural calamity or
accident on the part of a supplier could result in a sudden rise in purchase costs or
the inability to secure a stable supply of parts from suppliers. This situation could
cause the Hoya Group to delay product shipments or result in lost opportunities,
thereby having a negative effect on the Group’s operating performance and
financial position.
14. Risk of Loss in Corporate Value from Hostile Takeover
The Hoya Group believes that management’s responsibility is not to create
measures defending it against corporate acquirers. However, as the people
entrusted by shareholders management believes that it is important to achieve
future corporate growth, enhancing corporate value by raising the Group’s
operating performance and financial soundness. If a hostile takeover were to
occur nevertheless, the Hoya Group’s operating performance and financial
condition could be negatively affected.