Risk Factors

The principal risks that may affect Advantest's financial position, operating results and cash flows are as follows. For each risk, the time horizon in which the risk is most likely to materialize is categorized as short-term, medium-term, or long-term, and the level of impact is assessed taking into account the potential impact on Advantest's financial position, operating results and cash flows, should that risk materialize. As a result of this assessment, risks that are considered likely to materialize in the short- or medium-term and that may have a significant impact on Advantest's financial position, operating results and cash flows upon materialization are marked with an asterisk (*).

The risks described below do not necessarily cover all risks to which Advantest is exposed, and the order in which such risks are described does not indicate the likelihood of occurrence or the degree of importance. Forward-looking statements in this section are based on the judgments of Advantest as of the end of fiscal year 2025.

As Advantest serves semiconductor-related companies worldwide, its business is directly exposed to fluctuations in capital expenditure levels across the semiconductor industry. Semiconductor demand fluctuates in accordance with trends in demand for end products, the pace of technological advancement, global economic conditions, geopolitical factors, and other related factors. In addition, the level of capital expenditures in the semiconductor industry is influenced by a wide range of factors, including future outlooks for semiconductor supply-demand balance, technological competition among semiconductor manufacturers, and their business strategies. As a result, semiconductor capital expenditures tend to be highly fluid, with the timing and scale often deviating from initial plans, which increases uncertainty in the business environment for semiconductor production equipment manufacturers such as Advantest.

Under such circumstances, if semiconductor demand slows, customers may postpone capital expenditures, which could adversely affect Advantest's business performance. If market conditions deteriorate rapidly and substantially, customer capital expenditures may be curtailed and, at the same time, the risk of not being able to recover trade receivables may increase. On the other hand, during periods of rapid expansion in the semiconductor market, if Advantest's ability to supply products and services fails to keep pace with growing demand, missed sales opportunities and a decline in customer trust may occur, which could also adversely affect Advantest's business performance.

Advantest mitigates the impact of fluctuations in the semiconductor and related equipment markets through the development of a product portfolio that covers semiconductor testing demand from the development phase through the mass production phase, as well as the strengthening of its service business, including recurring revenue offerings.

In addition, Advantest works to enhance its ability to respond to market fluctuations by continuously monitoring semiconductor market trends, technology trends, and outlooks for demand for test equipment. Based on these factors, Advantest also flexibly optimizes the allocation of service engineers and R&D engineers. Furthermore, Advantest continues to improve its sales processes, supply chain management, and coordination between sales and production through the utilization of digital tools. In addition, Advantest works to appropriately manage customer credit risk and risks related to the recovery of trade receivables.

Moreover, to enhance its supply responsiveness in the event of a sharp increase in demand for its products and based on medium- to long-term demand growth outlooks, Advantest undertakes initiatives, including maintaining strategic inventory buffers and steadily expanding production capacity.

From a financial perspective, based on a business environment in which fluctuations in the semiconductor and equipment markets may materialize in a complex manner over a short period, Advantest works on a routine basis to strengthen downside resilience in business performance during semiconductor market downturns and to ensure financial soundness by increasing the proportion of variable costs in its cost structure, entering into financing facilities agreements, and improving the cash conversion cycle.

The semiconductor manufacturing equipment market in which Advantest operates is characterized by rapid technological innovation, and customers require not only strong technical responsiveness and development speed, but also stable service capabilities during the mass‑production ramp‑up of customers' new devices as well as a continuous service framework after installation. Under such circumstances, there is a risk that customer evaluations and trust may decline, if Advantest is unable to timely provide products and services that sufficiently meet customer expectations, if services supporting the mass‑production ramp‑up of customers' new devices do not operate as planned, or if post‑sales service cannot be provided sufficiently.

If insufficient customer trust persists over the long-term, it may become difficult to continue or expand transactions with existing customers, and Advantest's products and solutions may be less likely to be adopted by customers for new projects or next‑generation technology areas. As a result, the maintenance or expansion of Advantest's market share may be constrained, which could adversely affect Advantest's business and business performance.

Advantest's principal competitors in the semiconductor tester market include Teradyne, Inc., Hangzhou Changchuan Technology Co., Ltd. (CCTech), Beijing Huafeng Test & Control Technology Co., Ltd. (Accotest), YC Corp., Cohu, Inc., UniTest Co., Ltd. and EXICON Ltd. Advantest competes in test handlers with companies such as Hon. Precision, Inc., Hangzhou Changchuan Technology Co., Ltd. (CCTech), Cohu, Inc. and TechWing, Inc., and in device interfaces with companies such as TSE Co., Ltd., Inchange Semiconductor Company Limited (ISC) and BeLINK Co., Ltd.

As a foundation for maintaining and enhancing trust from customers, Advantest works to strengthen its technical understanding and customer responsiveness. Specifically, by engaging in opportunities for technical information exchange with key customers regarding future test solutions, Advantest seeks to gain insight into next‑generation semiconductor technologies, product specifications, future customer challenges, and test solutions to address such challenges. In addition, by advancing fundamental research into elemental technologies from a long‑term perspective while concurrently developing mass‑production technologies for Advantest's next products, Advantest is strengthening its ability to timely deliver products and solutions that meet customer expectations.

In order to enhance customer responsiveness, it is essential both to cultivate the ability to more accurately capture customer needs and to implement the ability to translate such needs into solution proposals. Accordingly, Advantest provides facilitation‑skill enhancement training to system application engineers (SAEs), who are required to maintain the closest engagement with customers, and promotes the enhancement of customer responsiveness and product development capabilities using AI.

Through these initiatives, Advantest has begun to demonstrate the value of its test solutions to customers, centered on semiconductor testers across a broader range of the semiconductor value chain than ever before. As a recent example, Advantest has commenced the provision of the innovative solution “SiConic®,” which automates silicon validation. In addition, through collaboration and technical partnerships with external partners such as probe card manufacturers and prober manufacturers, Advantest is working to develop new products and solutions that address customer challenges, while also enhancing its service offerings.

Through initiatives to expand these products and solutions, Advantest aims to contribute more extensively to improving the quality and reliability of customer products and enhancing productivity in customers' design and manufacturing operations, and continues to aim to be the company that earns the deepest trust from customers in the industry.

Advantest conducts business activities worldwide, including the procurement of materials, the manufacture of products, and sales and maintenance services, and the execution of such activities is affected by political and economic conditions and regulatory environments in each country and region. In particular, as the semiconductor manufacturing equipment business relies on international supply chains, changes in the geopolitical environment tend to have a relatively significant impact on business activities.

In recent years, amid rising global geopolitical tensions, the occurrence of regional conflicts, and the strengthening of policies emphasizing economic security, major countries have increasingly tightened export control regulations, investment regulations, and controls on advanced technologies. Semiconductor manufacturing equipment and related technologies handled by Advantest may also become subject to regulations influenced by industrial policies and national security in various countries, and changes in such regulations or policy trends could adversely affect Advantest's business operations, business performance, and financial condition. Such risks may materialize through, for example, the following events:

In preparation for potential changes in regulatory environments related to trade, investment, and technology management in various countries arising from increasing geopolitical risks, Advantest appropriately identifies the impact on its business activities and/or takes necessary measures.

Specifically, Advantest continuously monitors geopolitical trends by utilizing reliable information sources regarding trends related to tariffs, export control regulations, economic sanctions, and related regulatory developments. In addition, to assess the impact of geopolitical risks on its business in a multi-faceted manner, Advantest conducts scenario analyses that take into account region‑specific risks and evaluates their impact on business activities.

Furthermore, through participation in industry associations and expert committees, Advantest gathers information and exchanges views on policy trends and regulatory discussions surrounding the semiconductor industry, and undertakes initiatives aimed at avoiding excessive regulations on the semiconductor industry and mitigating their impact.

In the semiconductor market, initiatives to improve device performance and optimize cost performance are progressing rapidly through measures such as increased design scale, improved manufacturing precision, and greater sophistication of device structures. In addition, semiconductor manufacturers are actively undertaking investments to expand production capacity.

In such a rapidly changing environment, Advantest continuously implements tangible and intangible growth investments, including research and development and the enhancement of customer responsiveness capabilities such as product shipment and delivery capacity, to respond proactively to future industry trends and changes in customer testing needs. However, if Advantest is unable to accurately forecast and respond to industry directions, or to provide test and measurement solutions that are valuable to customers at the times and in the volumes they require, Advantest's competitiveness may decline. Furthermore, if such circumstances persist, intensified price competition and a decrease in sales opportunities for products and solutions may occur, and past investments may not be recoverable, or may require a longer period than initially anticipated to recover. In such cases, the relevant assets may become subject to impairment, which could adversely affect Advantest's profitability.

In addition, growth investments undertaken by Advantest include corporate acquisitions and capital and business alliances. However, with respect to such investment decisions, there is a possibility that the business or technological synergies initially anticipated may not be realized as expected. With respect to goodwill and intangible assets arising from corporate acquisitions, if discount rates increase due to various factors, including interest rate hikes, or if expected synergies cannot be achieved, impairment losses may be recognized.

Through communication with technology‑leading companies in the industry and experts, Advantest seeks to understand the direction of technologies or business portfolios, business models, and operating models that Advantest should possess going forward. In addition, based on the insights obtained, Advantest undertakes initiatives to expand its businesses and revenue sources and thereby supports its medium- to long-term and sustainable growth. These initiatives include advancing its solution portfolio under the strategic theme of “Automation of Test,” realizing growth opportunities in adjacent markets, and exploring new semiconductor related business domains.

In addition, by establishing discipline in the investment decision‑making process, Advantest seeks to improve the accuracy of investment planning and reduce investment risks. In particular, research and development investments are critical investments that influence future business growth potential and profitability. Advantest works to improve R&D investment returns and mitigate risks through the formulation of product roadmaps that meet customer needs and corresponding formulation of workforce plans, the improvement of development efficiency through product platform strategy, and the forecasting and evaluation of investment effectiveness based on ROIC. With respect to corporate acquisitions and capital and business alliances, Advantest also makes investment decisions after comprehensively considering factors such as projected investment effectiveness, the technological advantages of the target companies, alignment with Advantest's core competencies, and compatibility of corporate cultures.

Due to the characteristics of the semiconductor manufacturing equipment market and the results of past sales efforts, Advantest's net sales are structured such that a relatively high proportion is attributable to specific major customers. The top five customers accounted for approximately 48% of total consolidated net sales in the previous consolidated fiscal year and approximately 50% in the current consolidated fiscal year. Under such circumstances, net sales are highly concentrated among a small number of top customers. As a result, changes in individual customers' business conditions or purchasing policies may, in some cases, have a greater impact on Advantest's financial performance than changes in overall market conditions. Accordingly, if changes occur in the business strategies or capital investment plans of major customers, or if business relationships with major customers are reduced or terminated, the impact on Advantest's business performance may materialize over a short period of time.

In addition, in the semiconductor industry, building relationships with a diverse range of players involved in the creation of markets for next‑generation technologies and next‑generation devices is important for securing medium‑ to long‑term growth opportunities. If Advantest is unable to sufficiently establish collaboration with such external parties or access relevant information, its involvement in promising future customers or business opportunities may be limited, making it difficult to establish competitive advantages over the medium- to long-term.

To mitigate the risk of performance volatility arising from its customer portfolio, Advantest works to diversify revenue opportunities and achieve stable revenue growth by further strengthening relationships with existing customers, and by enhancing access to future growth opportunities.

Specifically, to further increase customer satisfaction, Advantest enhances its understanding of each customer's medium‑ to long‑term technology trends, business strategies, and capital investment plans through ongoing dialogue, and provides appropriate responses based on such understanding. In addition, from the perspective of supporting the growth of a diverse range of customers regardless of scale, Advantest establishes service structures, including dedicated teams, not only for existing customers but also for future key customers. Through the provision of tailored services aligned with the specific challenges and needs of each customer, Advantest works to enhance customer trust. Furthermore, to expand its customer base, Advantest has strengthened the local operations of its subsidiaries in markets expected to grow, such as India. In addition, in certain regions, Advantest broadens access to promising customers and new growth opportunities through strategic alliances with external partners.

Within Advantest, IT constitutes the foundation of business operations. If IT systems and related business operations fail to maintain sufficient accuracy, availability, stability, and security, Advantest's competitiveness, business performance, and credibility could be adversely affected. Specifically, Advantest's business operations may be disrupted by the following events:

Advantest works to strengthen information security measures on a regular basis and to further improve operational efficiency through the digitalization of its business operations.

With respect to the strengthening of information security and IT infrastructure, Advantest has established an information security management system and regularly reviews the status of risk management, compliance with laws and regulations, and the implementation of internal rules. In addition, to prepare for serious cyberattacks and infrastructure failures, Advantest implements proactive management of its IT systems and has established a global security monitoring framework designed to prevent disruptions to business operations or minimize their impact in the event of an incident.

In an effort to address cyberattack risks, Advantest implements security measures designed to strengthen threat detection through continuous monitoring and enhance information security awareness among management and employees through regular training. At the same time, Advantest has established the Advantest CSIRT* and has put in place initial response procedures for information security incidents. Advantest implements measures designed to maintain business continuity and the stability of business operations, including by identifying core processes and related IT systems and promoting the establishment of mechanisms designed to enable the continuation of business operations in the event of system failures, as well as the use of alternative IT systems and tools.

Following the cybersecurity incident in February 2026, Advantest implemented certain measures to strengthen its security. In addition, Advantest is advancing a broader enhancement of its cybersecurity framework. This includes the review, refinement, and acceleration of its security roadmap, incorporating lessons learned from the incident as well as insights from external experts. Advantest is implementing measures designed to strengthen its capabilities across prevention, detection, and response, with a focus on improving the timeliness, accuracy, and effectiveness of these measures. Key priority areas include network security, identity and access management, endpoint protection, cloud and application security, and security operations. Through these initiatives, Advantest aims to enhance the resilience of its information security framework, support stable and continuous business operations, and maintain the trust of its customers and other stakeholders.

Like many other technologies, AI is believed to offer significant benefits to society. Advantest aims to contribute to the development of a sustainable society by implementing measures designed to improve its own operational efficiency through the effective use of AI, thereby further supporting the innovation of its customers. At the same time, Advantest recognizes that the use of AI may introduce inherent risks, including potentially biased outputs, inaccurate or misleading information, and risks related to data privacy and over-reliance on automated decision-making. To address these risks, Advantest has established governance frameworks and usage guidelines for AI in line with its AI policy. Under these frameworks, Advantest promotes the appropriate and responsible use of AI technologies, while ensuring compliance with applicable laws and regulations, as well as internal policies governing data management. In addition, Advantest implements programs designed to incorporate ethical considerations and human oversight into the development and use of AI. Through these efforts, Advantest aims not only to enhance operational efficiency but also to ensure that its AI initiatives contribute positively to society and maintain the trust of its stakeholders.

To provide products in a timely manner, Advantest organizes its supply chain by collaborating with suppliers and outsourced partners across processes ranging from the procurement of components and materials to product manufacturing and logistics. If sufficient stability and flexibility are not ensured within Advantest's supply chain, there is a risk that this may adversely affect Advantest's business operations, competitiveness, and business performance. Specifically, such risks may materialize through events such as the following:

In preparation for supply interruptions or disruptions at key suppliers, Advantest reviews the business continuity plans (BCPs) of important suppliers, examines alternative supply routes in the event of emergencies, and has put in place protocols for communication and information sharing. In addition, through global optimization of the supply chain, including diversification, Advantest is implementing initiatives to enhance supply chain resilience across the entire group, including efforts to support suppliers in strengthening product supply capacity.

Furthermore, to stabilize the lead time for Advantest's products, Advantest advances demand forecasting, production and procurement planning, and appropriate inventory level management through collaboration among relevant departments, in addition to expanding production capacity. Moreover, for certain materials and components, Advantest has entered into long‑term procurement contracts to stabilize sourcing and secures intermediate products through measures such as maintaining inventories of wafers that have undergone front‑end processing (“die banks”), thereby seeking to improve supply stability.

Advantest recognizes that human rights, environmental matters, and compliance issues within the supply chain may affect its business operations. Therefore, Advantest communicates its policies to suppliers and, where necessary, requests improvements and engages in dialogue, thereby seeking to mitigate risks such as procurement disruptions and the suspension of business relationships.

As part of its business operation, Advantest manages a series of product lifecycle processes, including the planning and development of products that respond to future market and customer needs, improvements to existing products, and product quality management. If these initiatives do not function effectively, there is a risk that product competitiveness and profitability may decline, which could adversely affect Advantest's business and business performance. Specifically, such risks may materialize through the following events:

To mitigate the risk of declining competitiveness and deteriorating profitability arising from product lifecycle management, Advantest works to strengthen the series of processes spanning product planning based on accurate understanding of market and customer needs, research and development, mass production, and quality management.

Specifically, through dialogue with customers, Advantest works to continuously identify current and future market trends, customer needs, and the competitive environment, and, based on such information, promotes the establishment of its research and development operations and the securing of human capital and skills over the medium- to long-term. Advantest promotes research and development activities across a wide range of fields, and by periodically reviewing medium‑ to long‑term research and development themes, Advantest seeks to consistently and timely bring high value‑added next‑generation products to the market.

In addition, Advantest ensures profitability throughout the entire product lifecycle by setting prices in consideration of the market, competition and costs, while aligning demand forecasts with production and procurement plans, and promoting appropriate inventory management.

Furthermore, to ensure product safety and reliability, Advantest operates project management methodologies such as stage‑gate systems and conducts regular development reviews, including quality assessments, at each development phase. In addition, during the production process, Advantest performs various quality inspections and strives to stabilize product quality through cross‑checks by quality assurance teams.

Serious accidents, natural disasters, or other crisis events could disrupt business continuity and adversely affect Advantest's business performance and credibility. Specifically, such risks may materialize through events such as the following:

To mitigate the impact of crisis events such as serious accidents and natural disasters on business operations, Advantest seeks to enhance its crisis response capabilities through the establishment and implementation of BCPs and business continuity management.

Specifically, Advantest clarifies crisis response procedures and command and control structures at each site and establishes procedures that enable smooth initial response, recovery response, and continuation of operations. In addition, Advantest has put in place procedures for protection and appropriate handling of its assets aiming to minimize impacts even if operational suspensions or business interruption occur. Furthermore, positioning the safety of officers and employees as a top priority, Advantest clarifies responsibility structures and, through training and verification activities, works to prevent delays in response and information confusion at the time of crisis events, resulting in the mitigation of impacts on business operations and credibility.

The development and deployment of required talent, as well as the continuity of the management structure, are critical elements in the execution of business strategies and the maintenance and enhancement of competitiveness. Failure of initiatives related to human capital to function sufficiently could adversely affect Advantest's competitiveness and business performance. Specifically, such risks may materialize through events such as the following:

To mitigate the risk of declining competitiveness or impacts on business operations arising from human capital-related factors, Advantest positions the development, retention and reskilling of talent as key management priorities. Advantest works to enhance innovation capability and labor productivity through planned talent development initiatives and the provision of learning opportunities. In addition, in preparation for unforeseen circumstances involving members of management and key managers, Advantest formulates and implements succession plans and seeks to ensure management stability and the continuity of decision‑making. Furthermore, based on workforce planning that takes into account business strategies and medium‑ to long‑term growth business areas, Advantest seeks to maintain and enhance competitiveness and labor productivity through appropriate deployment of talent to the growth areas and talent acquisition.

A significant portion of Advantest's net sales is attributable to sales to customers outside Japan. During the current consolidated fiscal year, 97.8% of net sales were generated from product sales to overseas customers. Of total net sales for the current consolidated fiscal year, approximately 75% were denominated in foreign currencies other than the Japanese yen, primarily in U.S. dollars. If the Japanese yen appreciates against the foreign currencies used by Advantest for sales, primarily the U.S. dollar, this could adversely affect Advantest's business performance and financial position. With respect to the euro, as expenses currently exceed euro-denominated sales, a depreciation of the Japanese yen against the euro may adversely affect profitability.

In order to mitigate the impact of foreign exchange fluctuations on business performance and financial position, Advantest has established guidelines for foreign exchange risk management and implements hedging measures, including balancing currency holdings and utilizing financial instruments such as forward exchange contracts. In addition, through balance sheet management aimed at offsetting foreign currency‑denominated financial assets and liabilities, Advantest works to reduce the impact of foreign exchange fluctuations.

Advantest primarily relies on cash flows generated from operating activities to meet the funding requirements necessary for business operations and growth investments. However, in preparation for such matters as corporate acquisitions or sudden changes in the economic environment, and with due consideration given to capital efficiency, Advantest may issue corporate bonds, borrow from financial institutions, or take similar measures.

If Advantest's credit ratings are downgraded or financial markets become unstable, funding costs may increase, funding terms may deteriorate, or Advantest may face constraints in procuring funds when needed. These factors could adversely affect the business results and financial position of Advantest.

To maintain credit ratings and ensure a stable funding environment, Advantest strives to secure stable earnings and maintain a sound financial base. Advantest continuously monitors its capital structure, cash flows, debt levels, and related factors, and places importance on financial discipline in business planning and investment decisions. In addition, by entering into financing facilities agreements, Advantest has secured sufficient liquidity and established a framework that enables it to procure funds promptly when necessary. Through these efforts, Advantest works to mitigate the impacts on business performance and financial position arising from increases in funding costs, funding constraints, or reduced investment capacity.

As Advantest conducts business activities across multiple countries and regions, it is subject to the application of laws and regulations related to taxation, international taxation, transfer pricing, indirect taxes, and other related matters. If responses to these matters or related internal controls are insufficient, increased tax burdens arising from double taxation, penalties or similar events may occur, which could adversely affect Advantest's cash flows and financial indicators.

Advantest continuously monitors trends in tax systems, international taxation, transfer pricing, and indirect taxes in each country, and works to implement appropriate tax measures and establish internal controls. In addition, by establishing a framework for information gathering and analysis, including the utilization of external experts, Advantest works to mitigate tax risks and thereby limit the impact on cash flows and financial indicators arising from increased tax burdens.

Advantest recognizes that ensuring a workplace environment in which human rights are respected and diversity is appropriately addressed is important for sustainable growth and the foundation of corporate values. If initiatives related to these matters do not function sufficiently, there is risk that human rights violations, harassment, or similar violations may occur, which could consequently have an adverse impact on Advantest's corporate values and credibility. Specifically, such risks may materialize through the following:

To mitigate these risks, Advantest promotes, on a group-wide and continuous basis, the development of a workplace environment that respects human rights and diversity, grounded in its sound corporate culture.

Specifically, Advantest continues initiatives such as INTEGRITY workshops and “The INTEGRITY Award” to promote the permeation of its core value, INTEGRITY.

In addition, Advantest provides education and communication to officers and employees regarding respect for human rights, harassment prevention, and DEI, and works to enhance employee engagement and improve the workplace environment through appropriate engagement by managers. Furthermore, in order to prevent the occurrence of human rights violations, harassment, and similar violations and to enable early response, Advantest has established consultation and reporting contact points and put in place a structure that allows employees to seek advice with confidence.

Advantest regards ethics and compliance with laws and regulations as one of its foundational management principles and considers it essential for each officer and employee to act in accordance with corporate ethics to maintain sustainable corporate values. However, if inappropriate conduct by officers or employees, issues related to corporate culture, or deficiencies in management or operation arise, there is a risk that Advantest's corporate values, social credibility, and business performance may be adversely affected. Specifically, such risks may materialize through events such as the following:

To mitigate these risks and maintain and enhance corporate reliability and transparency, Advantest promotes, on a group-wide and continuous basis, the establishment of internal rules and systems and their effective operation.

Specifically, Advantest has established various internal rules and operational standards, including basic policies on gifts and entertainment globally. Advantest provides education to all employees, including officers and managers, aimed at enhancing compliance awareness and understanding of rules. In addition, Advantest conducts periodic employee compliance awareness surveys and seeks to improve its initiatives based on the results of such surveys.

Furthermore, for the purpose of early detection and prevention of fraud or misconduct, Advantest has established internal and external whistleblowing contact points (helplines) and operates a system that includes anonymous reporting.

In addition, Advantest ensures the implementation of these measures by establishing so-called “clawback clauses” in its “The Code of Ethics for Directors and Executive Officers” and other relevant regulations, which require directors and executive officers to return their compensation in the event of misconduct or other specified circumstances.

Advantest recognizes that responsible operations—including ensuring employee health and safety, consideration for the environment, and responding to requests related to climate change and ESG—are important. If management structure and responses related to these matters are insufficient, there is a risk that the continuity of operations and Advantest's corporate value may be adversely affected. Specifically, such risks may materialize through events such as the following:

To ensure the stability of business operations and maintain and enhance corporate value, Advantest undertakes group-wide and continuous initiatives to establish and operate management systems for its business operations, including ensuring employee health and safety, compliance with environment-related laws and regulations, and responses to climate-related risks.

With respect to occupational health and safety management and ensuring their effectiveness, Advantest has established group‑wide basic policies on occupational health and safety, and regards the assurance of safety and the maintenance of employee health as top priorities. From an institutional and organizational perspective, in Japan, Advantest has established safety and health committees and conducts ongoing discussions and improvement activities aimed at preventing occupational accidents and creating comfortable workplace environments. In addition, by establishing occupational health and safety management systems and working toward certification, Advantest seeks to systematize management frameworks and achieve continuous improvement. To promote occupational health and safety activities based on globally unified standards, Advantest conducts status assessments at overseas sites with reference to the RBA Code of Conduct (B. Health and Safety) and promotes initiatives that translate these into the setting and execution of specific goals and priority themes. Advantest also continuously provides occupational health and safety education for employees, and works to enhance safety awareness and reinforce understanding of basic rules.

With respect to environmental management and chemical substance management, Advantest has established management structure based on environmental‑related laws and regulations and internal rules, implements management utilizing chemical substance management systems, and provides education on the hazardous properties of chemical substances and their appropriate handling, thereby working to prevent environmental incidents and legal violations.

Furthermore, Advantest views responses to climate change and the strengthening of ESG‑related regulations and standards as important management issues and, with relevant departments working in collaboration, advances initiatives aimed at reducing environmental impact and responding to trends in laws and regulations. Through these activities, Advantest seeks to mitigate risks such as operational instability, the incurrence of additional costs, and adverse effects on corporate evaluation.

Due to the nature of its business as a provider of semiconductor manufacturing equipment and related technologies, Advantest is subject to export control regulations, economic sanctions, and other trade‑related laws and regulations in various countries and regions. In recent years, amid the strengthening of regulations and stricter enforcement driven by economic security considerations, the importance and complexity of trade compliance have further increased.

Under such circumstances, if Advantest fails to appropriately respond to laws and regulations related to trade compliance, it may be subject to penalties, administrative sanctions, or measures such as the suspension or restriction of product shipments. In addition, these matters may affect supply chains and business relationships, which could adversely impact Advantest's business activities, business performance, and corporate value.

Advantest conducts continuous and timely information gathering regarding trade‑related laws and regulations and regulatory trends in various countries and regions. Advantest also provides ongoing education on trade compliance to officers and employees worldwide to enhance understanding of applicable laws and internal rules and to ensure thorough compliance with trade control requirements.

As Advantest's global business operations continue to expand, including business expansion in Japan and overseas and the execution of mergers and acquisitions, the importance of group-wide governance and internal controls has further increased. Under such circumstances, if the design or operation of internal controls is insufficient or inconsistent within the Group, such controls may become ineffective. As a result, Advantest may be unable to prevent or promptly detect the occurrence of fraud or violations, which may lead to inaccurate or delayed disclosure of financial and non‑financial information. Consequently, compliance frameworks and the reliability of disclosed information may be undermined, which may adversely affect Advantest's business performance and corporate value.

Advantest positions the assurance of appropriate group-wide governance and internal controls as one of its important management foundations and appropriately designs organizational structures and authorities, while establishing internal rules and discipline for subsidiary decision‑making bodies. In addition, Advantest conducts periodic, group‑wide evaluations of the design and operation of internal controls. Through the establishment of mechanisms to prevent, promptly detect, and continuously monitor fraud or violations, Advantest works to maintain the effectiveness of its internal controls.

Based on these internal controls, Advantest seeks to ensure the accuracy and timeliness of disclosures of financial and non‑financial information.

Advantest may be subject to claims by third parties alleging infringement of their intellectual property rights, or its intellectual property rights may be infringed by third parties, which may result in Advantest being unable to ship its products or having to assert its intellectual property rights against others. If disputes related to intellectual property rights arise, such disputes may lead to a perceived decline in the competitive advantage of Advantest's products and services, perceived deterioration in evaluations of quality and brand value, and the incurrence of additional costs associated with negotiations or litigation, which could adversely affect Advantest's sales and profitability or its future business development and research and development activities.

To mitigate these risks, Advantest strategically and proactively files patent applications during product development and prior to product shipment, and protects its intellectual property rights by obtaining patents, utility model rights, design rights, trademarks, and other intellectual property rights in various countries.

If litigation or other legal proceedings arise in connection with Advantest's business activities, additional costs such as damages, settlement costs, and attorneys' fees may be incurred, depending on their progress or outcomes. Such costs could adversely affect Advantest's business performance and financial condition, as well as its reputation and credibility.

Advantest works to prevent the occurrence of disputes and minimize their impact through thorough compliance with laws and regulations in its business activities, strengthening contract and transaction management, and conducting discussions among the parties concerned to prevent disputes from arising.

In addition, to prepare for risks related to litigation and other legal proceedings, when individual cases arise, Advantest has established a framework to respond appropriately, taking into account the significance and potential impact of each case and, where necessary, utilizing external experts.