Fujitsu 2010 Annual Report Download - page 86

1) Procurement
The Fujitsu Group utilizes sophisticated technologies to provide a
range of products and services. There is therefore a risk that we
may encounter difficulties in procuring a stable supply of certain
key components or raw materials, or in cases where regular supply
channels are unavailable, that we may be unable to secure alterna-
tive procurement sources. There is also the risk that the Group may
be unable to sufficiently procure certain parts or raw materials in
the large volumes required. Moreover, natural disasters, accidents
and other events, as well as any deterioration in business condi-
tions at suppliers, could hinder the ability of business partners to
provide the Group with a stable supply of required components or
raw materials. These and other events could cause delays in the
provision of products and services, resulting in postponement of
deliveries to customers and opportunity losses. In respect to pro-
curement of components and other materials, foreign exchange
rate fluctuations, tight supply and demand conditions, and other
pressures could drive procurement costs higher than initial esti-
mates, leading to diminished returns on products and services, as
well as lower sales due to the higher prices. Additionally, while we
make every effort to ensure the quality of procured components,
we cannot guarantee that all components purchased will be free of
defects. The discovery of such issues could result in processing
delays, as well as defective products, opportunity losses, repair
costs, and disposal costs for defective goods, plus the potential
obligation to pay damages to customers.
2) Collaborations, Alliances and Technology Licensing
To enhance competitiveness, the Fujitsu Group works with a large
number of companies through technology collaborations, joint
ventures and other means, a practice that we intend to actively
continue in the future. If, however, as a result of managerial, finan-
cial, or other causes, it becomes difficult to establish or maintain
such collaborative ties or to gain sufficient results from them, the
Group’s business could be adversely affected. Moreover, many of
our products and services employ other companies’ patents, tech-
nologies, software, and trademarks with the consent of their
owners. However, there is no guarantee that other companies will
continue to grant or license the right to use their property under
terms acceptable to the Fujitsu Group.
5. Public Regulations, Public Policy, and
Tax Matters
The business operations of the Fujitsu Group are global in scope,
and are therefore impacted by a variety of public regulations,
public policies, tax laws and other such factors in all countries
where the Group does business. Specifically, wherever it operates,
the Group must comply with a variety of government policies,
regulations, such as authorizations for business or investment,
import/export regulations and restrictions, as well as laws
3. Competitors/Industry
The ICT sector is characterized by intense competition and fast-
paced technological innovation. Events within the industry or
actions by competitors could therefore have a substantial impact on
our business results. Examples of such potential risks are listed below.
1) Price Competition
Changes in market environments, intensifying competition, tech-
nological innovation and other factors may cause prices for prod-
ucts and services to decline. Anticipating such technology- and
competition-driven price erosion, we are pursuing a variety of
measures to reduce costs, including the introduction of Toyota
Production System reforms, the industrialization of services and
standardization, and software modularization, as well as efforts to
expand sales of new products and services. Despite these steps,
the Group still faces the risk of larger-than-expected declines in
prices, as well as being unable to achieve cost reductions or sales
growth due to fluctuations in procurement costs. Any of these risks
could negatively impact Group sales and profitability.
2) Competition from New Market Entrants and Others
In addition to challenges posed by existing industry peers, compe-
tition from new market entrants continues to intensify in the ICT
sector. Today, new entrants continue to emerge in market areas
where the Fujitsu Group has a competitive advantage, thus entail-
ing the risk that we may lose our competitive edge, or fail to secure
a clear competitive advantage in future business operations.
3) Competition in Technology Development
Technological advancement in the ICT sector occurs at an
extremely fast pace, leading to rapid turnover in new products and
technologies. In this context, remaining competitive requires the
continuous development of state-of-the-art technology. While the
Fujitsu Group does its utmost to maintain highly competitive
technologies, a loss in competitiveness versus other companies in
the race to develop innovative technologies could lead to a decline
in the Group’s market share and profitability, which would nega-
tively impact sales and earnings. Further, sales and profitability
could be affected by the development of groundbreaking tech-
nologies and services by competitors that would severely compro-
mise the value of the Group’s products and services. Additionally,
there is also the risk of an adverse effect on sales and profitability as
a result of the time it takes to implement mass-production chip
technologies for semiconductors, such as in solving technological
issues concerning cutting-edge process development technology.
4. Suppliers, Alliances, etc.
In the course of its operations, the Fujitsu Group conducts business
with a wide range of suppliers and alliance partners. Accordingly,
any significant changes in relationships with these and other busi-
ness partners could affect the Group’s business.
084 FUJITSU LIMITED Annual Report 2010
Business and Other Risks