Epson 2006 Annual Report Download - page 43

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(5) A change in the market could affect Epson
Epson is focusing its managerial resources into its “3i” business domain, which comprises the three
businesses Epson believes have high growth potential: imaging on paper (“i1”), imaging on screen (“i2”),
and imaging on glass (“i3”). It is engaged in its strategy of establishing ties among and bringing together
its finished products and devices businesses while continuing to expand its myriad areas of business.
1. imaging on paper (“i1”)
This business aims to break away from the traditional idea of the printer being merely a computer
peripheral and decentralize printing by printers. For example, it intends to increase the opportunities
for printing directly from mobile communication devices and digital cameras without having to connect
to a computer and aims to have printers perform tasks such as printing analogue photographs,
making copies, and performing tasks conventionally carried out by commercial printing companies.
2. imaging on screen (“i2”)
In addition to further enhancing the presence of Epson projectors in the business market, by capital-
izing on the move toward digital broadcasting and the increase in quality of image contents, Epson
aims to expand its business market by pushing further into the markets for home entertainment.
3. imaging on glass (“i3”)
In this business domain, Epson aims to develop novel technologies and new applications, such as
small and medium-sized LCDs that stand out as unique from the rest, and organic light-emitting
diodes (OLED). Epson will also further build on and expand its inherent strengths, and through a
fusion of such things as semiconductor technology and color image display technology create tech-
nologies that cannot be copied by other companies and utilize them in creating new products.
However, because technological innovation and product cycles are so extremely fast in these
markets for Epson’s products into which it is focusing its managerial resources, if Epson is unable
to respond flexibly to such changes and develop and introduce competitive products, or if the
product does not grow as much as is anticipated, then Epson’s results could consequently be
adversely affected.
(6) Epson relies on certain clients in its electronic devices business
Over half of Epson’s sales in its electronic devices business are dependent on Epson’s top five major
customer groups (which includes each of their suppliers). Epson treats mobile communications devices
as a business domain and pours its managerial resources into such efforts as developing technologies
and securing production capacity. As a result of this, Epson has a record of transactions with the
market’s major manufacturers of mobile communications devices and has established good relationships
among these customers, such as by engaging in the medium-term joint development of products.
Epson believes that these trends will not change in the future, but there is a possibility that these
major customers will not carry out the same scale of business with Epson as they have done in the
past. If Epson was to lose its business with these clients, Epson’s results of operations could conse-
quently be adversely affected.
(7) Trends in the semiconductor market might adversely affect Epson
There are various trends in the electronics devices market, such as for semiconductors and for
devices for mobile communication devices, that reflect product life cycles and the economic
environment. History also shows that large declines in the industry are cyclical, and when that hap-
pens, demand becomes sluggish, there is excess production, and prices fall.
A deterioration in the situation in, for example, the electronics devices market, such as for semi-
conductors and for devices for mobile communication devices, could adversely affect Epson’s financial
condition and results of operations. There is also no assurance that Epson can always accurately
predict future trends, and it is possible that Epson might not be able to make investments that are
timely or appropriate enough to respond to market trends.