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Management Policy

Basic Management Policies

TAIYO HOLDINGS CO., LTD. ("we" or "our") has identified its objectives as a corporate group in the Management Philosophy and Basic Management Policy below. The Group will develop by continuing the spirit of our management philosophy without changes and reviewing our basic management policy to match changes in the environment and strategy on a long-term basis.

Management Philosophy

We will realize "a pleasant society" by further advancing "every technology" the Group has and creating a wide range of products to help fulfill the dreams for the whole world with our innovative products.

Basic Management Policy

1. We will generate revenue and increase corporate value, thereby contributing to the well-being and prosperity of customers, communities, shareholders, and employees.

2. We will discharge our corporate social responsibility with regard to the achievement of our management philosophy, including complying with the law, protecting the environment, ensuring thorough quality management, and contributing to society.

3. We will leverage our global system to always provide superior products and services.

4. We will constantly create opportunities for employees to challenge and develop themselves, aiming to have a corporate group composed of people who are highly motivated to be successful and to achieve goals set by themselves.

5. We will increase our comprehensive corporate strengths by maximizing cooperation between the Group companies and strengthen the teamwork of all employees with emphasis on "speed and communication."

6. We aim to have a group of global companies able to contribute to the realization of a pleasant society by constantly working for technological innovation and creating new products and businesses.

Mid - to Long - Term Management Strategies and Current and Future Challenges

The Group has a global top-class share in its mainstay SR market, and more than 80% of its sales are generated at overseas. For such reasons, the Group's sales and profit are greatly affected by such external factors as the trends of overall SR market, especially that of final products that use semiconductors, and fluctuation of foreign currency rates. Under such circumstances, the Group's top priority is to further expand its market share in the SR related products, to constantly launch new products that can be another source of profit following SR and to establish a corporate structure that can quickly turn such products into new businesses. By implementing various measures in line with the said policy, we believe that our Group will be able to grow perpetually.

(1)Strengthening R&D structure

We believe that development of the R&D system is essential to create new products on an ongoing basis. We will implement role-sharing arrangement between basic research and product development by following a certain time axis. We will strengthen our basic research capability by forming an R&D team that specializes in mid-to-long-term research that is not directly linked to product commercialization. At the same time, we will set up a development team that will be engaged in the development of new technology to be turned into practical use and increase application of existing technology. By so doing, we aim to strengthen our ability to translate our basic research results into new product development. In addition, we will invest aggressively in new equipment for R&D and focus on hiring and fostering highly skilled researchers and technical personnel both in Japan and overseas.

(2)Rapid commercialization of new products

The Group considers that new product development is equivalent to new business development since the Group is able to earn profit by marketing such products. For such reason, with a view to removing commercialization barrier, the Group will set up a task force consisting of selected personnel from marketing, manufacturing and development divisions and give certain responsibility and authority to commercialize new products when they have come close to commercialization.

(3)Encouraging initiative in talent

For the Group to expand its share in the SR market while developing new businesses constantly and put them on track to achieve perpetual growth, we believe it is indispensable to nurture many self-sufficient employees who can set their own goals and enjoy attaining them. We will actively exchange our personnel between group companies to give them opportunities to experience difficulties and successes in a variety of jobs in various countries. We will also promote competent personnel to managers flexibly both in Japan and overseas so that they can gain actual management experience, thereby nurturing self-sufficient personnel and ultimately managers who can lead the next generation.

(4)Development of measures to reduce foreign currency risk

Because sales prices of many of the Group's products are denominated in foreign currency, foreign currency rates fluctuation can easily affect the Group's earnings. The Group recognizes that taking appropriate measures to mitigate foreign currency risk is important. Therefore, the Group pursues "local production for local sales" strategy (our policy of making products close to markets where they are sold) and heightens the local procurement rate of raw materials to match the currency of revenue and expenditure. These measures will also contribute to enhance our ability to respond to our customers because they will lead to rapid development of products that meet customers' needs, shorter order lead time, lower raw material cost and lower business maintenance risk thanks to diversification of raw materials suppliers.

Business Risks

Technological innovation risks

Our Group is reliant on the manufacture and sale of PWB materials, and SR in particular, as a major source of our income. If radical technological developments, such as electronic parts that do not use PWBs or PWBs that do not use SR, were to be widely adopted, this would result in a significant decrease in demand for our products.

From the viewpoint of product characteristics, operability, and economic viability, there is little possibility that such technological innovations will be widely adopted in the near future. However, the Company considers it as important issue in the field of research and development to find possible new methods for PWBs.

Risks associated with patents

In order for our Group to maintain a superior competitive position, efforts are being made to protect the products and technology we develop through patents and intellectual property. However, in the event a patent application, etc. does not result in the granting of rights or a third party requests an invalidation, insufficient protection of our rights as a Group may result. Moreover, infringing the intellectual property rights owned by a third party could impact the performance of our Group as a result of the payment of royalties or large amounts of damages.

Risk of major production facilities being affected by a disaster

Our Group has manufacturing bases in Japan, Taiwan, Korea, China and the United States. In the event that any of our manufacturing bases is damaged by a natural disaster and manufacturing functions are obstructed, manufacturing and supply functions would be switched to another manufacturing base as an emergency measure. However, this would require some preparation and adjustment and our business would be affected in the interim.

Risk related to procurement of raw materials

The Group procures many of its raw materials from external raw material manufacturers. Problems at these raw material manufacturers or a lack of supplies that hinder the Group's production activities may affect the performance of the Group.

Country-specific risks related to business deployment overseas

Our Group conducts manufacturing activities in Japan, Taiwan, Korea, China, and the United States. Sales of our Group's products particularly in China, Taiwan, Korea, ASEAN countries, and other Asian markets are expanding. Accordingly, terrorist activities, destabilization of the political situation, economic fluctuations, the outbreak of earthquakes and contagion, unforeseen changes to legal, regulatory or tax systems, and other country-specific risks could impact on the business strategies and performance of our Group.

Risk of exchange rate fluctuations

Our ratio of overseas sales to net sales is comparatively high and there are many instances when we calculate product prices in foreign currencies. Accordingly, our business performance is affected by fluctuations in exchange rates, with a highly appreciated yen normally leading to reduced income and profits.

Risk of price fluctuations in key products

PWB manufacturing is shifting to other Asian countries, especially China, and we are engaged in continuing price wars with local companies as well as other Japanese firms. There is also pressure to lower SR prices which has resulted from price competition in the PWB market. Because of this, there is a possibility that the price of our main product, SR, may drop thus affecting the performance of our Group.

Risks related to fluctuations in product demand

Demand for our Group's main products is influenced by electronic components market trends, which may affect the performance of our Group.

Credit risks related to receivables

The Group has many customers and, although we do not concentrate an excessive amount of receivables on specific customers, the deterioration of the financial position of customers and the resulting bad debt may affect the performance of our Group.

Risks related to the soaring cost of raw materials

Due to the state of the oil market, the prices of certain raw materials have risen, which may affect the performance of our Group. The profitability of PDP materials in particular may be affected due to the rising cost of silver, one of the key raw materials used in PDP production.