Materiality

Under our corporate philosophy, "To contribute to realization of a sustainable, eco-friendly and prosperous society by providing better products, at a faster speed, in larger numbers, at a lower cost and by smarter means," we are committed to the belief that the essence of management lies in sustainability, and strives for both sustainable growth and contributions to a sustainable society.
Recently, we have reviewed our materiality, considering it as our "Foundational Strategy" to realize a sustainable growth. By positioning it alongside our "Growth Strategy (organic growth, M&A and developing products and supplying components for resolving social issues)" as the twin pillars of our management, we will maximize our corporate value.

Corporate Philosophy (move to company site)

4 Key Themes and our Materiality's Long-Term Vision

We have identified ten items of materiality and consolidated them into four key themes, all equally vital to our management:

1) Development and dissemination of innovative products, technologies, and business models
2) Creating an environment where employees can fully demonstrate their capabilities, skills, knowledge, and experience
3) Strengthening the resilience of management structure
4) Contributing to the resolution of global environmental challenges

These are our foundational strategies, the cornerstone of sustainable growth.

[Key Theme] Development and dissemination of innovative products, technologies, and business models

Materiality	Our Materiality's Long-Term Vision
Creating solution technologies for addressing social issues	To address the social challenges in our priority growth areas, increasing efficiency achieved through 4 highs (high voltage, high current, high frequency, and high speed) is required. Leveraging our technologies and innovation, we aim to realize the 4 highs at the high-level, thereby establishing our presence as a vital contributor to society.
Utilizing AI/DX at our manufacturing site	Securing our competitive edge as a manufacturer by introducing new ideas into our manufacturing processes and maintaining innovation in our manufacturing.
Strengthening the mass production and stable supply system of ultra-precision components	Advancing every process of our manufacturing to achieve higher stability and quality, taking our monozukuri to the next level.

[Key Theme] Creating an environment where employees can fully demonstrate their capabilities, skills, knowledge, and experience

Materiality	Our Materiality's Long-Term Vision
Creating a structure where the company and employees can grow together	Conducting human resource development initiatives targeted for talents integral to our sustainable growth, such as core personnel, and professionals in manufacturing, sales and engineering professional personnel, to help them improve their skills and foster their awareness of self-driven development, which in turn has a positive impact on our business performance.
Global DEI promotion	Diverse talents—across nationality, gender, age, and life plans— are empowered to fully demonstrate their abilities. The resulting innovations contribute to our sustainable growth.
Realizing a workplace where employees can work with peace of mind while maintaining a high level of engagement	Our corporate philosophy and strategies resonate with our employees of all age groups, allowing them to work vibrantly and healthily in a safe environment while staying self-motivated to contribute to our company.

[Key Theme] Strengthening the resilience of management structure

Materiality	Our Materiality's Long-Term Vision
More effective corporate governance	Enhancing our governance framework to improve our corporate value, through initiatives such as compliance with the Corporate Governance Code, strengthening of internal control systems, expansion of information disclosure, and reinforcement of stakeholder engagement.
Strengthening risk management	Building more robust risk management system to achieve a sustainable growth (Identification and management of diverse risks, and implementation of necessary measures).

[Key Theme] Contributing to the resolution of global environmental challenges

Materiality	Our Materiality's Long-Term Vision
Reducing global CO₂ emission through environmentally friendly products	Reducing global CO₂ emission and environmental conservation through energy savings, high efficiency, resource conserving, etc. achieved through environmentally friendly products.
Minimizing environmental impact through expanded use of renewable energy	Minimizing environmental impact across our business operations to the greatest extent possible, including reducing greenhouse gas emissions through expanded use of renewable energy, in pursuit of achieving carbon neutrality as part of our climate change countermeasures.

Process of identifying materiality issues

In 2019, we identified our materiality as key areas of focus to fulfill our social responsibilities and enhance the sustainability of our company management.
In 2021, considering the growing public attention towards environmental issues, we modified the materiality and key themes, in order to execute strategies from the company-wide perspective. Looking ahead to 2029, in 2025 we further refined the materiality and key themes by reviewing the candidate materiality from perspectives that can influence our value creation and pave the way for achieving sustainable growth.

1) 2019 Identified materiality

Step 1: Selected 20 candidate materiality items
Selected 20 candidate materiality items in reference to international guidelines, such as GRI standards, SDGs, ISO26000, and SASB, as well as our group's business model.

Step 2: Evaluated the candidate materiality through discussion with our stakeholders
Incorporated results from internal surveys and opinions from our stakeholders to evaluate the 20 items. We then asked third-party institutions for their insights about this evaluation result.

Step 3: Identified our materiality
Based on the result above, 10 materiality items were consolidated into three key themes, reported to the Board of Directors, and finalized them as our materiality.

2) 2021 Modified materiality

Considering the materiality as our management challenges in executing our corporate philosophy and challenges, we modified the materiality items with an emphasis on reducing environmental impact across our business operation, and clarified expressions used in 20 candidate materiality items. At the end, we consolidate 9 materiality items into three key themes, reported to the Board of Directors, and finalized them as our materiality.

3) 2025 Reviewed candidate materiality and further refined the materiality

Step 1: Reviewed the 20 items of candidate materiality
With the participation of all relevant departments, decided to position the materiality as our foundational strategy that underpins our sustainable growth. With that in mind, refined the 20 items of candidate materiality and key themes, viewing them as our areas of focus for 2029.

Step 2: Incorporated feedback from our stakeholders
Conducted discussion with our Directors and Outside Directors and received feedback from our institutional investors regarding the content of Step 1.

Step 3: Further refined materiality and key themes
We restructured the existing 20 candidate materiality items into 18, and selected 10 items out of 18 as our materiality, consolidated them into 4 key themes, reported them to the Board of Directors, and finalized them as our materiality.

Feedback from institutional investors on our original materiality draft:

Contents of "INTEGRATION (Sogo)" represents characteristics of your company very well, and plays a vital role in improving your corporate value by linking it to your growth strategies.
We understand that each company approaches materiality differently; however, we believe it is more appropriate to set universal themes as your materiality and define your unique initiatives as priority activities. This approach would allow you to effectively pursue higher corporate value while also addressing universal materiality.

Rearrangement of the candidate materiality

In 2021, we rearranged the 20 candidate materiality items, which was modified in 2021, into 17 items. Consequently, "Utilizing AI/DX at manufacturing site" was added, totaling it to 18 items.

2021 20 candidate materiality items & 9 selected materiality items		2025 18 candidate materiality items & 10 selected materiality items
1) Efficient use of energy		1) Minimizing environmental impact through expanded use of renewable energy
2) Minimizing environmental impact across our business operation		2) Reducing global CO₂ emission through environmentally friendly products
3) Reducing global CO₂ emission through environmentally friendly products		3) Effective use of resources
4) Reducing environmentally harmful substances		4) Adaptation to climate change
5) Effective use of resources		5) Biodiversity conservation
6) Adapting to climate change		6) Coexistence with local communities
7) Biodiversity conservation		7) Respect to human rights
8) Coexistence with local communities		8) Realizing workplace that allows employee to work with peace in mind while keeping employee engagement at a high level
9) Respecting human rights		9) Creating structure where the company and employees can grow together
10) Safety and health of employees		10) Global DEI Promotion
11) Creating worker-friendly workplace		11) Strengthening the mass production and stable supply system of ultra-precision components
12) Developing human resources worldwide		12) Improving customer satisfaction
13) Promoting diversity worldwide		13) Promoting responsible procurement
14) Strengthening the mass production and stable supply system of ultra-precision components		14) Creating solution technologies for addressing social issues
15) Improving customer satisfaction		15) More effective corporate governance
16) Promoting responsible procurement		16) More robust risk management
17) Creating solution technologies for addressing social issues		17) Commitment to compliance
18) More effective corporate governance		18) Utilizing AI/DX at manufacturing site
19) Commitment to compliance
20) More robust risk management

Rearrangement of the candidate materiality

In 2021, we rearranged the 20 candidate materiality items, which was modified in 2021, into 17 items. Consequently, "Utilizing AI/DX at manufacturing site" was added, totaling it to 18 items.

2021

20 candidate materiality items &
9 selected materiality items

1) Efficient use of energy

2) Minimizing environmental impact across our business operation

3) Reducing global CO₂ emission through environmentally friendly products

4) Reducing environmentally harmful substances

5) Effective use of resources

6) Adapting to climate change

7) Biodiversity conservation

8) Coexistence with local communities

9) Respecting human rights

10) Safety and health of employees

11) Creating worker-friendly workplace

12) Developing human resources worldwide

13) Promoting diversity worldwide

14) Strengthening the mass production and stable supply system of ultra-precision components

15) Improving customer satisfaction

16) Promoting responsible procurement

17) Creating solution technologies for addressing social issues

18) More effective corporate governance

19) Commitment to compliance

20) More robust risk management

2025

18 candidate materiality items &
10 selected materiality items

1) Minimizing environmental impact through expanded use of renewable energy

2) Reducing global CO₂ emission through environmentally friendly products

3) Effective use of resources

4) Adaptation to climate change

5) Biodiversity conservation

6) Coexistence with local communities

7) Respect to human rights

8) Realizing workplace that allows employee to work with peace in mind while keeping employee engagement at a high level

9) Creating structure where the company and employees can grow together

10) Global DEI Promotion

11) Strengthening the mass production and stable supply system of ultra-precision components

12) Improving customer satisfaction

13) Promoting responsible procurement

14) Creating solution technologies for addressing social issues

15) More effective corporate governance

16) More robust risk management

17) Commitment to compliance

18) Utilizing AI/DX at manufacturing site

Materiality/Risk/Opportunity

We have conducted an analysis on the external environment and discussion with our stakeholders, and identified mid- to long-term risk factors that can impact our corporate value. Out of all the risks identified, our materiality was finalized considering the extent of impact to our business and expectation from society. We view these risks as great opportunities for us to create new businesses and values.

[Key Theme] Development and dissemination of innovative products, technologies, and business models

Materiality	Materiality Vision	Risk	Opportunity
Creating solution technologies for addressing social issues	To address the social challenges in our priority growth areas, higher efficiency achieved through 4 highs (high voltage, high current, high frequency, and high speed) is required. Leveraging our technologies and innovation, we aim to realize the 4 highs at the high-level, thereby establishing our presence as a vital contributor to society.	Intensified competition prompted by the rise of rival manufacturer with new innovations, leading to declining our market prices Market loss and decline in our competitiveness due to obsolescence of our existing technologies and products or unsuccessful R&D outcomes Failure to capture market share due to a gap between our development direction and market demands	Opportunities to enter new businesses and strengthen existing ones through our technological capabilities and INTEGRATION Gaining new markets and outperforming competitors through market-oriented technology development Growing demands for resource-saving, energy-saving, and low-carbon products Expanding business opportunities by creating new markets in response to the emergence of new social challenges to be addressed
Utilizing AI/DX at our manufacturing site	Securing our competitive edge as a manufacturer by introducing new ideas into our manufacturing processes and maintaining innovation in our manufacturing.	Declined cost competitiveness due to delays in implementing DX initiatives	Enhanced productivity and cost reduction through active AI/DX utilization
Strengthening the mass production and stable supply system of ultra-precision components	Advancing every process of our manufacturing to achieve higher stability and quality, taking our monozukuri to the next level.	Suspension of production/lower operational level at our partner's site due to natural disasters, etc. Unstable supply chain, including geopolitical risks Higher procurement costs from soaring logistic costs Rising manufacturing costs due to diversified/more complex customer needs Significant costs and reputational damage due to serious accidents or recalls caused by defective products	Improved quality in our client's product because of the improvement in our product quality Improved production efficiency by saving energy and reducing the defect rate Securing market share by establishing the stable supply system across the value chain, fulfilling our responsibility in supply

[Key Theme] Creating an environment where employees can fully demonstrate their capabilities, skills, knowledge, and experience

Materiality	Materiality Vision	Risk	Opportunity
Creating a structure where the company and employees can grow together	Conducting human resource development initiatives targeted for talents integral to our sustainable growth, such as core personnel, and professionals in manufacturing, sales and engineering professional personnel, to help them improve their skills and foster their awareness of self-driven development, which in turn has a positive impact on our business performance.	Shortage of talents vital to our sustainable growth (core personnel and professionals in manufacturing, sales, and engineering Difficulty in securing talent due to the declining labor force Loss of highly motivated, skilled talents arising from unfair evaluation and treatment Capability underutilization and productivity decline due to mismatches between one's career vision and job assignments Failure to develop self-driven talent due to unfair evaluation and treatment, resulting in organizational rigidity and diminished responsiveness to change	Strengthening the management structure by upskilling those in key positions within our group Effective know-how succession through the development of professionals in manufacturing, sales, and engineering Improved human resource capabilities by fostering core talents Maximizing our potentials through the talent development support, fair evaluation and treatment Maximizing individual or organizational outcomes through the optimal assignment allocation and talent development support Higher adaptability to changes by fostering self-motivated personnel through fair evaluation, appropriate treatment, development support
Global DEI promotion	Diverse talents—across nationality, gender, age, and life plans— are empowered to fully demonstrate their abilities. The resulting innovations contribute to our sustainable growth.	Potential miscommunication and misaligned understanding within the organization Loss of personnel who struggle to adapt to our corporate culture	Creating innovation and delivering new values to our customers through INTEGRATION initiatives driven by the passion of our diverse employees Improved recruitment capabilities to secure diverse talent
Realizing a workplace where employees can work with peace of mind while maintaining a high level of engagement	Our corporate philosophy and strategies resonate with employees of all age groups, allowing them to work vibrantly and healthily in a safe environment while staying self-motivated to contribute to our company.	Loss of personnel who struggle to adapt to the management and organizational change Higher personnel or health-related costs	Improved business performance and productivity Enhanced recruitment capabilities Improved well-being and motivation among our employees

[Key Theme] Strengthening the resilience of management structure

Materiality	Materiality Vision	Risk	Opportunity
More effective corporate governance	Enhancing our governance framework to drive our corporate value creation, through initiatives such as compliance with the Corporate Governance Code, strengthening of internal control systems, expansion of information disclosure, and reinforcement of stakeholder engagement.	Declining social credibility Business continuity risk due to legal violations	More effective information disclosure to build trust with our stakeholders Higher transparency in our decision-making process Building the foundation for our stable growth Promoting the appropriate risk-taking
More robust risk management	More robust risk management system to achieve a sustainable growth through initiatives like management of diverse risks and implementation of necessary measures.	Loss of business opportunities and reputational damage due to compliance violations or human rights infringements Declining production capability due to natural disaster, etc. and geopolitical risk Decline in timely and appropriate risk response capabilities and organizational resilience Information leak/virus infections caused by external cyberattacks	Enhanced corporate value through compliance- or human rights-oriented management style Boosting customer appeal by implementing business continuity plans Proper placement of security personnel Improved trust through the robust information security system operation

[Key Theme] Contributing to the resolution of global environmental challenges

Materiality	Materiality Vision	Risk	Opportunity
Reducing global CO₂ emission through environmentally friendly products	Reducing global CO₂ emission and environmental conservation through energy-saving, highly efficient, and resource- conserving products.	Decreased corporate value due to delays in developing or meeting requirements aimed at CO₂ emission reduction Loss of business opportunities due to non-compliance with regulations/customer needs, such as carbon footprint reporting	Product development, market expansion and corporate value enhancement aimed at addressing challenges associated with climate change Rising demand for resource-saving, energy-saving, and low-carbon products
Minimizing environmental impact through the expanded use of renewable energy	Minimizing environmental impacts, such as reducing greenhouse gas emissions, across our business operations to the greatest extent possible, through the expanded use of renewable energy to achieve carbon neutrality.	Loss of business opportunities or decreased corporate value due to non-compliance with requirements regarding introduction of renewable energy, environmental impact reduction Rising costs and stricter regulations on carbon pricing (e.g., carbon taxes and emission trading) Business continuity risk due to reliance on external power sources and depletion of water resources	Enhancing our competitive edge and corporate value through accelerated initiatives toward carbon neutrality Production costs reduction Strengthening our resilience through large-scale in-house solar power generation system and efficient use of water resources

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