Digital cameras are the leading products of the Imaging Products Business. The mirrorless camera market is seeing fierce competition. In addition, the business is adversely affected by rising prices and delays in procuring components, which may lead to deterioration in market conditions.
The demand for FPD lithography systems managed by the Precision Equipment Business is expected to be stable in the display market. However, the recovery in demand for lithography equipment may be sluggish due to the continued contraction of capital investment.
Although the semiconductor market, the target market for semiconductor lithography systems, is expected to grow significantly, the Group's profit may be affected by factors such as changes in capital investment plans by its major customers.
The Digital Manufacturing Business has been expanding, as seen in the acquisition of companies globally providing integrated solutions in metal additive manufacturing. However, if the growth of related markets is slower than expected, the business may not grow to the expected size.

The Imaging Products Business continues strengthening its earnings structure by optimizing production and sales aspects, reforming the supply chain and logistics, thoroughly reducing costs, strengthening digital marketing, and improving development efficiency. In addition, the business has developed new products in collaboration with the acquired company to expand the fast-growing professional digital cinema camera market.
In the FPD lithography systems field, the Group is expanding earnings through new lithography systems and service businesses and is also reducing total costs to secure a certain profit level, even in declining demand for lithography systems.
In the semiconductor lithography systems field, the Group strives to review the business structure through such efforts as reviewing staffing arrangements in related areas, under a business policy emphasizing profitability. In addition, the Group will aggressively develop ArF dry and ArF immersion lithography systems, and digital lithography systems, cultivate non-existing customers, and expand the service business. In the Digital Manufacturing Business, the Group will promote the formation of new markets by offering unique value to the increasingly digitized manufacturing industry and introducing competitive new products to the market.
As for the progress of the medium-term management plan, the Group has a system that allows it to review and revise its strategies in a timely manner by closely monitoring market and competition trends through regular monitoring by the Board of Directors and other relevant bodies.

Being subject to intense competition, the Group's core businesses are constantly required to develop new products by continuing to engage in highly advanced research and development. Therefore, it is necessary to continue to make appropriate investments in product development, regardless of the fluctuation in the Group's profit. However, corporate value may decline, and profit may decrease if the Group’s investments do not produce adequate results to enable the timely development and launch of new products or next-generation technologies, if the market does not accept the technologies developed by the Group, or if the Group's technologies are no longer needed due to drastic changes such as game-changing developments.

The Group's Technology Strategy Committee clarifies the technological strategies that will lead to the development of new areas of focus and the improvement of the competitiveness of existing businesses and determines the direction of technological development and priority investment areas. While proactively responding to a wide range of social issues and needs, the Group will realize its long-term growth.

As the Group develops its business globally, most of its production and sales activities are conducted outside Japan, and the ratio of overseas revenue to consolidated revenue is high. The Group must apply various laws and regulations, including import and export regulations, information security, personal data protection, competition laws, labor laws, anti-corruption, and transfer price taxation, and fulfill its corporate social responsibility in many countries. These laws and regulations and what the Group must do to fulfill its social responsibility could change significantly. Such changes may adversely affect the Group business, such as increasing business activity costs, imposing constraints on its business, and posing reputation risk.

While the Group organizes and manages risks through the Risk Management and Compliance Committee, its subordinate committee, the Export Control Committee, addresses risks requiring specialized knowledge. At the same time, the Sustainability Committee and the Quality Committee and their respective subordinate committees also monitor and address risks. Through such responses, the Group is working to further strengthen the system by collecting information on regulatory changes on a group-wide basis, providing feedback on the practical process based on such information, and formulating strategies based on the regulations.

The Group conducts M&As and strategic investments to create new businesses, expand existing business areas, and realize business synergies. Suppose the Group cannot achieve the desired results due to significant changes in the market environment or an exodus of human resources from the target company. In that case, impairment losses on goodwill, marketable securities, and other assets may adversely affect its financial position.

Based on its business strategy, the Group searches for M&A and strategic investment targets and conducts due diligence on the value and risks of the target companies. Following acquisition or investment, progress against the original objectives is regularly monitored by the Board of Directors and the management and other activities, and the strategy course is revised as necessary.

As mentioned above, the Group's global operations have resulted in a high dependency on overseas markets. Overseas business development may be affected by political problems, trade friction and disputes, and social turmoil due to riots, terrorism, wars, etc., in addition to overall trends in the world economy, which may cause significant obstacles or losses in business activities. In addition, sudden or significant fluctuations in foreign exchange rates could significantly impact on the Group's earnings and financial position. In recent years, geopolitical risks, especially the supply chain issues caused by the deteriorating Middle East situation, as well as the U.S.-China trade friction and other events, may affect the macroeconomy, the Group’s business activities, and the supply chains for semiconductor components and other products.

In addition to the risk organization and management by the Risk Management and Compliance Committee, the Group monitors and responds to risks by the committees under the Risk Management and Compliance Committee, the Sustainability Committee, and the Quality Committee, as well as their respective subcommittees. Although it is difficult to predict the likelihood of such risks materializing and the level of their impact, as they depend on social conditions and other factors, the Group collects information and analyzes their impact on its business and considers and implements responses. In addition, the Group conducts currency hedging based on the size of its sales and sales regions.

In recent years, labor, raw material, and energy costs have fluctuated significantly due to abnormal global weather, natural disasters, and geopolitical impacts, among other things.
In addition, the semiconductor memory shortage and the geopolitical impact of the growing tensions in the Middle East may result in some supply disruptions, soaring prices, and shipping restrictions.
There are concerns that these circumstances may increase not only the existing price risks but also supply risks that make it difficult to secure supplies in required quantities and within the required timeframe, which may impact the Group’s continued production. In addition, procurement risks have become more diversified and complex against the backdrop of people’s increased interest in social and environmental issues related to human rights, the labor environment, health and safety, and decarbonization in the supply chain.

The current uncertainty and volatility also continue to be high in various areas in the supply chain. Under these circumstances, the Group is working to build a resilient supply chain that gives top priority to securing supplies. Specifically, the Group monitors the supply conditions of high-demand items, including indirect materials used in production, across all companies by further visualizing the Group’s supply chains. The Group also promotes the diversification of supply routes through strengthening cooperation with procurement partners.

Furthermore, the Group promotes the development of a sustainable procurement base from an ESG viewpoint, through formulating and sophisticating a business continuity plan (BCP), establishing a risk scenario management and early escalation system based on changes in demand, monitoring greenhouse gas emissions, and enhancing human rights due diligence. Through these efforts, the Group aims to flexibly and promptly respond to the rapidly changing external environment to reduce risks, secure stable supplies, and ultimately achieve sustained growth.

Abnormal weather, floods, droughts, and other natural disasters caused by climate change and the spread of infectious diseases could cause extensive damage to development and production sites and suppliers, affecting operations or delaying production and shipments. In addition, as the movement toward a decarbonized society accelerates, countries are introducing or considering introducing carbon taxes and other policies and regulations, and there is a risk that the cost of energy and raw materials may increase.
Environmental policies, laws, and regulations require compliance with standards, information disclosure, and other responses, which tend to become more stringent yearly. Insufficient response may cause enormous damage to the Group's management, such as impact on production, surcharges, and loss of social credibility due to administrative penalties. If laws and regulations related to chemical substances are strengthened, obtaining necessary materials and indirect materials may become difficult. In addition, regulations on environmental labeling and claims are being tightened. If the Group’s promotional activities are not fully in line with these regulations, they may be considered greenwashing, which may damage the Group’s brand value or compromise the Group’s social reputation.

The Group considers that environmental issues such as climate change, depletion of natural resources, waste, and pollution by hazardous chemicals affect the survival of the Group. The Sustainability Committee and related committees and subcommittees monitor risks and take various responses. The Group also conducts environmentally conscious management. Furthermore, the Group as a whole is working on reducing greenhouse gas emissions and formulating BCPs throughout the entire value chain, including energy conservation activities, renewable energy utilization, and the streamlining of development and production processes.
By establishing internal rules and regulations and providing training to those in charge, the Group is strengthening its management system, including the value chain. The Group is also working to keep abreast of changes in regulations in a timely manner and ensuring to prevent environmental pollution by setting voluntary standards that are stricter than legal requirements. As for environmental labeling and claims, efforts are being made to ensure that all promotional activities are appropriate, by reviewing the content of environmental labeling and claims through cooperation among relevant divisions.

It is essential for the Group’s business growth and sustained competitiveness to secure diverse human resources with advanced technical expertise and other skills. Failure to secure or develop talented personnel, or the departure of key personnel, may cause stagnation of its business activities or outflow of knowledge and expertise, which may adversely affect the Group’s growth and business performance. The risk of talent outflow is considered to be particularly high in countries and regions with high labor mobility.
In particular, the Company and domestic group companies are faced with a skewed age distribution of employees caused by the past business environment and hiring trends. As veteran workers age and retire, and if this results in a lack of mid-career and younger workers in the future, this may generate the risk of preventing the proper handing down of technology, skills, and business know-how, which is a source of the Group’s competitiveness.

Based on the view that it is the diverse human resources working for the Nikon Group who will play key roles in achieving the Group’s corporate philosophy, the Group is promoting its human resource strategy in conjunction with its management strategy. To ensure that its employees can maximize their potential, the Group develops a corporate culture and work environment where employees respect and leverage each other’s diverse values. At the same time, the Group works to improve employee retention and engagement through giving opportunities to proactively take on challenges and play active roles and providing fair evaluation and treatment.
In Japan, the Group strives to even out the age distribution of its employees by continuing to employ certain number of new graduates every year.
As for the transmission of technologies and skills, the Group promotes the standardization and systemization of work processes, as well as organizationally promoting the sharing of knowledge and know-how across generations in an effort to systematically develop mid-career and younger human resources who will lead the next generation.

The Group retains many information assets, including technical information and business partners' and customers' information. If a cyber-attack, intentional or negligent act, or disaster causes a severe information system failure, unauthorized use of personal information, or information security incident, the Group's corporate value may be damaged, and it may be subject to claims for compensation for damages. Violations of laws and regulations worldwide concerning protecting personal information or product security requirements could result in severe penalties.
In addition, the aging of internal systems, the increasing complexity and specialization of operations, and the end of support for core systems may lead to inefficiencies in operations with the rapid progress of digitalization.

The Group has designated the Representative Director and President as the individual with ultimate responsibility for information management, including protecting personal information. It has established business processes that are compliant with the Information Security Management System (ISMS).
To maintain a high level of defense against cyber-attacks and detect and respond to incidents as early as possible, the Group has implemented various security measures and improved and strengthened its operational system to collectively monitor and respond to incidents on a global basis. In addition to improving the level of information security, the Group is also improving internal rules for information handling and conducting employee training. The Group is also strengthening its cyber resilience system considering the fact that other companies have faced many incidents in recent years that had a serious impact on their business continuity.
By promoting the core system renewal project, the Group will enhance business efficiency through digitalization, strengthen digital marketing, and improve its service platform.
To strengthen the Group’s responses to cyber-attack risks that are on the increase in recent years, the Group newly appointed a Chief Information Security Officer and established the Information Security Committee under the Risk Management and Compliance Committee in April 2026.

The Group acquires and retains many intellectual property rights during product development and licenses these rights to other companies. If the Group files a lawsuit due mainly to another company's unauthorized use of its intellectual property rights, it may incur significant litigation costs. On the other hand, the Group may receive an injunction against manufacturing and sales or a claim for damages from other companies, individuals, or other parties for infringement of intellectual property rights, which may significantly affect the Group's earnings and financial position. In addition, as the Group’s businesses develop globally, differences in legal systems and remedies in different countries and regions may prolong conflicts and cause unexpected costs and impacts.

The Group has formulated an intellectual property strategy designed to generate growth in existing operations and create new business and is continuously promoting intellectual property activities per this strategy. The Group protects intellectual property such as patents, designs, and trademarks related to technologies, products, and services created through research and development activities. By creating and obtaining rights to intellectual property with an eye to the future, in collaboration with each business unit and R&D division, the Group is working to establish a competitive advantage in the marketplace. In addition, the Group’s legal and intellectual property divisions and related divisions work together to investigate intellectual property rights of other companies as appropriate and ensure that the Group does not infringe on intellectual property rights of other companies.
At the same time, the Group’s “IP mix,” which consists of a combination of patents, designs, trademarks, etc., comprehensively protects the Group’s products and services and supports the business strategy of each business of the Group from the intellectual property aspect. The Group’s intellectual property activities are promoted by the IP divisions, business units, and R&D divisions through sharing their respective values and strategies.
In addition, for the purpose of taking countermeasures against counterfeit products and protecting the Group’s brand, the Group works to deter infringements and deal with them promptly through checking the situation on e-commerce sites and cooperating with relevant bodies.