Listed below are the principal business risks of Sharp that may have a significant influence on investors’ decisions. Note that in addition to these there exist certain other risks that are difficult to foresee. Each of these risks has the potential to impact the operations, business results and financial position of Sharp. All references to possible future developments in the following text were made by Sharp as of March 31, 2008.

Sharp manufactures and sells products and services in different regions around the world. Business results and financial position are thus subject to economic and consumer trends (especially trends in private consumption and corporate capital investment), competition with other companies, product demand, raw material supply and price fluctuations in each region. The political and economic situation in respective areas may also exert an influence on business results and financial position.

The proportion of consolidated net sales accounted for by overseas sales stood at 50.1% in fiscal 2005, 51.2% in fiscal 2006 and 53.5% in fiscal 2007. Although Sharp employs forward exchange contracts to hedge the risk of exchange rate fluctuations while simultaneously seeking to expand and strengthen overseas production, such fluctuations may affect the business results of Sharp.

Sharp implements strategic alliances and collaborations with other companies in respective business fields to bolster the development of new technologies and products, and to enhance competitiveness. If, however, any strategic or other business issues arise, or objectives change, it may become difficult to maintain such alliances and collaborative ties with these companies, or to generate adequate results. In such cases, the business results and financial position of Sharp may be impacted.

Sharp procures materials and receives services from a large number of business partners, and transactions are made only once a detailed credit check of the company has been completed. However, there exists the possibility that business partners suffer deterioration in performance due to slumping demand or severe price erosion, face unexpected M&A, or be impacted by natural disasters or accidents, which may affect the business results and financial position of Sharp.

New technologies are rapidly emerging in the markets that Sharp operates. Such condition could change social infrastructure and intensify market competition, which may impact the business results and financial position of Sharp.

Sharp strives to protect its proprietary technologies by acquiring patents and other intellectual property rights. However, there are possibilities that rights are not granted, and Sharp may be unable to get sufficient legal protection of its proprietary technologies. In addition, there may be times that a third party infringes on the intellectual property rights of Sharp. Sharp may launch legal action against a third party in response to the wrongful use of its intellectual property rights. Conversely, a third party may launch legal action against Sharp if it deems that its intellectual property rights have been breached. Such litigation may impose a heavy financial burden on Sharp. Although compensation is given to employees for innovations that they make in the course of their work pursuant to a patent reward system governed by internal regulations, an employee may consider such payment inadequate and initiate legal action.

Sharp manufactures products in accordance with strict quality control standards to ensure the utmost in quality. In order to fulfill responsibility as a manufacturer in case product defects do arise, Sharp has taken out insurance to cover compensations based on product liability. Nonetheless, there still exists the possibility of a large-scale product recall or litigation caused by unforeseen events, which may adversely affect brand image or influence the business results and financial position of Sharp.

The business activities of Sharp are subject to various regulations in countries where it operates, including business and investment approval, export regulations, tariffs, accounting standards and taxation. Sharp must also adhere to various laws and regulations concerning trading, antitrust practices, product liability, consumer protection, intellectual property rights, product safety, the environment and recycling. Changes in such laws and regulations, and additional expenses to comply with the amendments may affect the business results and financial position of Sharp. Further, in case a major accident occurs related to one of Sharp’s products, disclosure of said incident, based on a system of accident reporting and disclosure pursuant to the Consumer Product Safety Law and related regulations in Japan, could diminish its brand image.

Sharp deploys business activities around the world, and as such, is subject to risk associated with litigation and other legal proceedings. Differences in legal and judicial system according to region make it difficult to predict the result of litigation or other legal proceedings currently involving Sharp or of these which may arise in the future. An adverse result due to litigation and measures taken by the regulatory authorities could affect the business results and financial position of Sharp.

Sharp retains personal data and other confidential information concerning its customers, business partners and employees. Extreme care is taken to protect this information. A company-wide management system promotes employee education and other measures aimed at ensuring compliance with management regulations. If information is leaked, however, it may reduce confidence in Sharp or result in substantial costs (associated with leakage prevention measures or indemnification for damages, for instance), which may affect the business results and financial position of Sharp.

In addition to the aforementioned risks, the business results of Sharp may be significantly affected by accidents and natural calamities, or major fluctuations in the stock and bond markets.