Corporate Sustainability

Business Philosophy and Vision

In 1986, the Chairman of Wafer Works, Ping-Hai, Chiao established the Helitek Company Ltd. in the United States and started the silicon wafer business. The founding team is from the Silicon Valley of the United States and the domestic semiconductor industry. The team members have been worked in the semiconductor industry for a long time, and they have also laid the foundation for the development of Wafer Works in silicon wafers, which is the predecessor of Wafer Works. In 1997, Wafer Works was officially established in Taiwan. In 2011, our headquarter was established in the Longtan Science Park. With more than 20 years of efforts, we dedicated to pursuing steady development of the core business and have expanded our production base to six plants in both Taiwan and mainland China. Wafer Works has become one of the top ten semiconductor silicon wafer material suppliers, and the top three heavily doped low-resistance product leaders. We have an advanced semiconductor silicon wafer manufacturing plant with more than 120,000 square meter and a total of approximately 2,200 employees worldwide. We have been accredited as being part of "Asia's Best Under A Billion 2007" by the Forbes Magazine in 2007.

Wafer Works is firmly convinced that only by establishing a partnership of mutual trust and cooperation with customers and suppliers, in-depth understanding of customer needs, and establishing a close and flexible cooperation mechanism with suppliers, so that to exceed customer expectations with innovative products and services development. We uphold stringent operation and sales management, hence there was no huge fine due to violations of laws and regulations for the provision and uses of products and services, and no litigation matters involving anti-competitive behavior, anti-trust and monopoly practices. As a customer-oriented company, we are committed to customer promises, operate with integrity, co-create, and share an all-win situation with Company, customers, and suppliers. At the same time, we value our employees and adopt corporate core values in talent recruitment and retention, and we are committed to building a safe and inclusive workplace to ensure every employee enjoys human rights, skills development, and safety in a friendly working environment, and sharing results with employees.

Taking sustainable development as the supreme principle, we are committed to the goal of “becoming the customer-centered solution provider of semiconductor materials”, we have implemented sustainable development through five principal topics of corporate governance, employee care, environmental sustainability, customer service and social participation, and continue to provide more services and contributions to the society, and continue to strive for sustainable development for a positive business development. Upholding the concept of sustainable enterprise development, we have been published the first ESG report in 2012. In the face of ecological environment has been gaining increasing attention in recent years, the scopes of the report have gradually expanded, and all aspects of sustainable development and corporate sustainability are covered in the ESG reports published in the subsequent years. Continuing the spirit of the previous report, this report provides relevant information such as business strategy, risk management, environmental management system, etc., to fully disclose the information to the public and investment partners who are concerned about the development of Wafer Works. It enables stakeholders to understand our determination to continuously fulfill social responsibilities and pursue sustainable development and share the results of sustainable management.

Wafer Works Yangmei Fab (WWXT)	Wafer Works Longtan Fab Headquarter (WWXL)

Main Products and Services

Wafer Works mainly provides semiconductor epitaxial silicon wafers, semiconductor polished silicon wafers (single side polished and double side polished wafers), SOI wafer products (or services), and actively provides customers with suitable materials, applicable and legal products, and committed to the development and R&D of products to achieve better quality, so that customers can use and sell better products. We provide high-quality and fast service to customers during transaction period. All products manufactured by Wafer Works are comply with relevant laws and regulations, and we continue to maintain product quality to meet regulatory requirements, and improve product yield and quality.

The sales statistics by region are as follows：

Global Operating Bases

Operational Performance

In 2022, the world entered the post-pandemic period with the global economy slowly recovering. The strong growth in semiconductor and electronic component exports, as well as the impact of the US–China trade conflict and semiconductor chip shortage, positioned Taiwan as a global semiconductor hub. The demand for silicon wafers remained high, particularly from foundries and integrated device manufacturers (IDMs). According to the Semiconductor Equipment and Materials International (SEMI), global silicon wafer shipments reached a new high in 2022, driven by strong demand in the automotive, industrial, Internet of Things (IoT), and 5G sectors. This includes both 8-inch and 12-inch silicon wafers. In 2022, the global silicon wafer shipment area reached 14.713 billion square inches, representing an annual growth of 3.9%, while the total revenue reached US$13.831 billion or an annual growth of 9.5%, setting a new record.

Benefiting from the upward trend in the semiconductor industry, Wafer Works experienced strong demand and achieved full capacity shipments. The shipment volume of 8-inch silicon wafers increased by 11% compared to the previous year, resulting in an improved global market share of 7.59%. Additionally, stable production and shipment of 12-inch silicon wafers, along with an increase in the average selling price (ASP), contributed to the growth. In 2022, the Group's consolidated revenue reached NT$12.68 billion, representing a 22.6% growth compared to the same period last year, with an earnings per share of NT$4.

Looking ahead to 2023, the electric vehicle market and the rapid development of 5G terminal applications, as well as the emergence of large-scale neural networks like ChatGPT, are expected to drive the demand for semiconductors. Major research institutions hold optimistic views on the semiconductor industry's prospects, particularly as governments worldwide begin to address issues concerning chip shortage and concentration of supply sources. They are providing substantial subsidies to companies for expansion, and it is anticipated that large-scale production will commence in 2023. This will further increase the demand for silicon wafer materials.

Financial Information

The following table showed various financial information of Wafer Works, and the information disclosures such as employee salary and social investment.

Wafer Works has received subsidies from the following government agencies during the reporting period.

Board of Directors

Wafer Works adopts a candidate nomination system for the election of directors which stipulated in Article 192-1 of the Company Act, and the term of office for a director is three years. The current Board of Directors consists of eight male directors and one female director. Three of the Board members are independent directors. The average age of the directors is over 60 years old. The directors serve a term of 3 years. Each director has at least 30 years of work experience in fields such as business, law, finance, accounting, or business operations. Their expertise spans various industries including semiconductors, optoelectronics, and venture capital. They possess extensive knowledge, personal insights, and business judgment, providing valuable advice on the operational strategy and development direction of Wafer Works. In addition, at least 6 CPE hours will be arranged for directors every year with a view to enhancing their professional knowledge and legal literacy (at least 12 CPE hours will be arranged for newly appointed directors). The total number of CPE hours for directors in 2022 was 70 hours, of which 53 hours were related to sustainable development, accounting for 75.7%. Please refer to the 2022 Annual Report of Wafer Works for the continuing education status of directors. A total of eight board meetings were convened in 2022, with an average attendance rate of 96.3%.

The Company has established the "Procedures Governing the Acquisition or Disposal of Assets", "Procedures for Election of Directors", "Integrity Management Code", "Procedures for Ethical Management and Guidelines for Conduct", "Procedures for Handling Material Inside Information and Preventing Insider Trading", and "Rules of Procedure for Board of Directors Meeting", which encompass various aspects, including preventing conflicts of interest, avoiding opportunities for personal gain, confidentiality obligations, fair transactions, protection and appropriate use of the Company's assets, compliance with laws and regulations, encouraging reporting of any illegal or unethical behavior, and disciplinary measures. The relevent guidelines have been approved by the Board of Directors and are implemented accordingly. Disclosure of cross-shareholdings, transactions, and outstanding balances between members of the highest governance body and key suppliers will be made in the future. The members of the highest governance body may hold positions in other boards, please refer to the Corporate Governance Report in the Company's 2022 Annual Report for information on Board members (I) and director information (II). Directors must abstain from participating in voting on matters involving their own conflicts of interest, and there shall be no crossshareholding situations with stakeholders.

The academic qualifications and work experiences and attendance of board members are illustrated in the table below：

 Audit Committee

In order to build a sound corporate governance and strengthen the professional functions of the board of directors, Wafer Works has established the Audit Committee on June 27, 2018. The committee composed of three independent directors, at least one meeting will be convened every quarter. A total of five meetings were convened in 2022, with an average attendance rate of 93%.

The main objective of the Audit Committee is to assist the Board in fulfilling and supervising the following matters:

1. Fair presentation of the financial reports of the Company.

2. The hiring (and dismissal), independence, and performance of certificated public accountants of the Company.

3. The effective implementation of the internal control system of the Company.

4. Compliance with relevant laws and regulations by the Company.

5. Management of the existing or potential risks of the Company.

In accordance with the provisions of the Audit Committee Charter, the Audit Committee has the right to conduct any appropriate audit and investigation within the scope of its responsibility and has direct communication channels with the Company's internal audit officers, certified public accountants, and related personnel. The Committee also has the right to hire lawyers, accountants, or other professionals to assist in the performance of its duties.

Attendance of Independent Directors of the Audit Committee in 2022:

 Compensation Committee

In order to assist the board to evaluate the management performance and build a sound compensation system for directors and managerial officers, Wafer Works has established the Compensation Committee on December 29, 2011. It is composed of more than half of the independent directors, at least two meetings will be convened every year. A total of three meetings were convened in 2022, with an average attendance rate of 89%, and the resolutions adopted by the committee were submitted to the board for discussion, and the board also adopted the resolutions.

The responsibilities of the committee include formulating and regularly reviewing policies, systems, standards, and structures for the performance evaluation and compensation of directors and executives, thus ensuring that individual compensation is aligned with the Company's operational performance and complies with relevant laws while also being linked to future business performance and risks. Due to the larger business cycle fluctuations and profit volatility in the semiconductor industry, there are no shareholders with relative control participating in compensation decisions; therefore, director remuneration remains stable. Currently, there is no involvement of consultants in the compensation formulation.

The Company continuously reviews the external market competitiveness of all employee compensation and benefit packages. It participates in salary surveys to understand market salary levels, formulates salary adjustment policies, principles for distributing holiday bonuses, employee profit-sharing incentives, and measures to motivate excellent employees. It promotes retention bonuses for key talents and recognizes long-serving high-performing employees to attract, motivate, and retain outstanding talent.

For key talents and senior executives, the Company strengthens the link between their performance and compensation. Short-term incentive measures focus on performance bonuses as the main incentive, with employee profit-sharing as a secondary bonus. Long-term incentive and retention measures are based on the Company's financial performance, operational achievements, and future development, aiming to retain talent in the long run.

The source of remuneration for the directors of Wafer Works is based on the provisions of Article 29 of the "Article of Incorporation", which if Wafer Works has gained profits within a fiscal year, not more than 2% of the profits shall be reserved as the directors' remuneration, however, in the case of accumulated losses, certain profits shall first be reserved to compensate the accumulated losses. The Article 25 of the "Article of Incorporation" stipulated that the Company must pay remuneration to the Chairman and Directors of Wafer Works to perform their duties. The remuneration are based on their degree of participation in the operations of Wafer Works and the value of their contribution, and also take into account the general pay levels in the industry. The "Regulations Governing Director's Remuneration Setting" has been formulated in order to realize the spirit of corporate governance and serve as a basis for the remuneration payment to the directors of Wafer Works. These regulations were proposed by the Compensation Committee during the 1st meeting of the 4th session (August 7, 2018), and the resolution was adopted at the 2nd meeting of 9th session of the board (August 7, 2018) and implemented.

The highest-paid individual in terms of annual compensation at Wafer Works from 2020 to 2022 was the President of the Company. The ratio of his total annual compensation to the median total annual compensation of other employees at the Company ranged from 7.9 to 11.6 times. The percentage increase in his total annual compensation compared to the percentage increase in the median total annual compensation of other employees at the Company ranged from -5.7 to 5 times.

Attendance of Independent Directors of the Compensation Committee in 2022：

Risk Assessment

Based on the principles of sustainable business operation, environmental and resource protection, and ensuring the safety and health of employees, Wafer Works implements risk management procedures through management systems including ISO 9001, IATF 16949, ISO 45001, and ISO 14001, conducting detailed assessments of all potential emergencies, natural disasters, environmental impacts, and occupational risks. Comprehensive response plans and processes are in place. The achievements in risk management for the year 2022 will be reported to the Board meeting in 2023.

All departments are required to conduct risk assessments of their businesses, and the assessment steps are as follows：

The risk management policies of Wafer Works are as follows：

Business Continuity Management (BCM)

In addition, Wafer Works continues to implement BCM based on the risk assessment results for high-risk situations such as fires, earthquakes, and information security incidents with high level of hazards. In response to the severe floods and earthquakes in Mainland China in 2020 that could affect the logistics which could result in a shortage of raw materials for Wafer Works which may interrupt the production chain, BCM drills for key materials were conducted in the plant, and the backup and control of the supply chain of key materials has been strengthened accordingly. In response to COVID-19, the plant has set up the pandemic prevention team to take immediate and uninterrupted production measures for raw materials that may be affected both at home and abroad. We had conducted COVID-19 BCM drill in 2022. The production of Wafer Works has not interrupted due to the pandemic. Also, we implement five-level management for the plant's pandemic prevention measures and rolling reviews will be made.

Pandemic Preparedness and Response Plan

In facing the risk of the pandemic, Wafer Works actively organizes an pandemic prevention team to update the domestic and foreign pandemic information and conduct advocacy training and health education, coordinate with and communicate to all departments in the plant for the implementation of pandemic prevention, thoroughly implement various pandemic prevention work such as pandemic prevention announcements, pandemic investigations, etc., and responsible for incident handling and reporting. In order to effectively manage the pandemic prevention, we regularly convene or participate in pandemic prevention related meetings and implement regional preventive and response measures and the pandemic notification system.

Other than the implementation work carried out by the pandemic prevention team, all employees must also comply with the control matters according to the announcements of Wafer Works, maintain personal hygiene as well as environmental hygiene of lounge, office desk and workplace, and emphasize the importance of pandemic prevention to contractors, guests, visitors, and customers. All department heads are responsible to conduct pandemic prevention advocacy training and health education, supervise the effectiveness of their subordinates in implementing various pandemic prevention control measures, thoroughly implement the pandemic notification system and immediate reporting, as well as pandemic prevention work related to COVID-19.

Wafer Works has established internal control and internal audit systems, as well as relevant risk management measures. In response to the extreme weather events caused by global warming and the increasing awareness of environmental protection, energy conservation, safety, and health issues, Wafer Works recognizes the importance of fulfilling its corporate social responsibility to establish a strong presence in the industry. Wafer Works addresses climate-related risks and opportunities through its Sustainable Development Committee by following the framework of the Task Force on Climaterelated Financial Disclosures (TCFD), which includes governance, strategy, risk management, metrics and targets. The Committee identifies climate-related risks and opportunities, formulates response strategies, and reports to the Board of Directors on a regular basis. The Board monitors the implementation and effectiveness of these measures.

Integrity Management

"Establishment with Honesty" is the top business philosophy of Wafer Works, which commits to implement corporate governance with high ethical standards and engage in business activities with the principles of fairness, honesty, integrity and transparency.

In order to practice the spirit of integrity management, Wafer Works has formulated the "Integrity Management Code", "Procedures for Ethical Management and Guidelines for Conduct" and "Procedures for Prevention of Insider Trading", which have been approved by the board of directors in order to regulate the behaviors of board members and company staff. The "Regulations Governing RBA Code of Ethics and Business Conduct" has formulated in accordance with the RBA Code of Conduct that aims to improve the behavioral quality of all employees and regulate the professional ability and ethical judgment of employees when performing their duties in order to maintain Company's assets, rights and interests and image.

In order to ensure that all employees comply with high ethical standards in day-to-day operations when performing duties, basic behavioral standards are established for directors and managerial officers and general employees, including "Regulations Governing RBA Code of Ethics and Business Conduct", "Regulations Governing RBA Code of Conduct Identification", and other standards and specifications. All employees are committed to these specifications, including:(1) Principle of integrity, (2) Respect individuals and customers, (3) Avoid conflicts of interest, (4) Gifts and business entertainment, (5) Facilitating payment (not allowed), (6) Full, fair, accurate, timely and understandable disclosure, (7) Reporting, protection and exemption, (8) CSR. In promoting corruption-free culture, all employees are obliged to jointly maintain the Company's reputation to earn the respect and trust of customers, suppliers and industry to ensure the sustainable operation and development of Wafer Works when facing various challenges of industrial competition. In 2022, the "Wafer Works's Supplier Code of Conduct Compliance Declaration" was issued to key and important suppliers and a 99% signing rate was achieved.

Wafer Works upholds the principle of integrity and pragmatism, complies with government laws and regulations, is committed to complying with the government's social and economic policies, and fulfills CSR. There were no fines due to violations of relevant environmental protection regulations, social regulations or product (or service) regulations, and no legal action against antitrust and monopoly practices during the reporting period.

Wafer Works will regularly organize educational training and advocacy, so that employees able to fully understand the Company's determination, policies, prevention and control measures of integrity management, and the consequences of breach of ethical behavior, adheres to the positive pursuit and quality assurance, and to look forward to future of innovation, sustainable operation on this basis.

At Wafer Works, we respect the diversity of our employees' backgrounds and abilities, attain a balance development of work and quality of life of employees, combine both institutionalization and humanization in human resources management, uphold the principle of fair and equitable in treating all employees, establish mutual trust and open communication channels, and provide a work environment without any differential treatment or undue discrimination, so that employees can do their best, give full play to their strengths, and become important partners in the long-term development of the Company. Wafer Works provides a complaint process (as shown in the figure below) and its handling procedures. There was no incident of discrimination occurred this year.

• Complaint Process

In respond to the growing concern of stakeholders and the impact analysis, wastewater and waste treatment are vital to Wafer Works. Wafer Works may be penalized in the future if the Company does not carry out wastewater and waste management. A proper wastewater and waste management can reduce the cost risk of Wafer Works and improve product competitiveness from the aspect of sustainability. At present, the Industrial Safety Office and Plant Affairs Division of each plant are responsible for the environmental protection issues. There was no penalty due to any major leakage of liquid or gas reported in this year.

 Anti-corruption System

Wafer Works complies with the Integrity Management Code, Regulations Governing RBA Code of Ethics and Business Conduct and conducts anti-corruption risk assessments for directors and supervisors, managerial officers, and employees in accordance with the "Regulations Governing Risk Assessment". In accordance with the "Regulations Governing RBA Code of Ethics and Business Conduct", the Company regularly organizes education and training sessions to promote and adhere to the behavior guidelines advocated by RBA. We have developed relevant materials for integrity management and anti-corruption advocacy. In 2022, the participation rate of Board members in these sessions was 100%, and a total of 1,192 employees participated, which was a participation rate of 100%. This initiative has enabled both the governance unit and all employees to fully understand Wafer Works' commitment to integrity management, policies, prevention measures, and the consequences of engaging in dishonest behavior. "Establishment with Honesty" is the foremost principle of Wafer Works' business philosophy. All employees (100%) have signed the anti-corruption declaration. Furthermore, all high-level executives and Board members (100%) with positions of Rank 9 or above have signed the anti-corruption commitment, demonstrating the Company's determination to combat corruption. In 2022, a corruption risk assessment was conducted at the Longtan and Yangmei fabs, and no corruption risks were found. Throughout the year, no instances of corruption or reported suspicions of corruption occurred within the Company.

The risk assessment system of Wafer Works focuses on reasonable division of labor and authorization to enhance efficiency and prevent the occurrence of risks, including preventing the occurrence of corruption risks. The Company has formulated "Regulations Governing RBA Risk Assessment" to assess the risk of integrity management. For the identified risks, the relevant units must immediately review the relevant operating procedures and propose improvement measures to prevent the occurrence of relevant risks.

In order to develop well labor-management relations and establish a comprehensive and ethical management system, complaints or reports from various stakeholders and cases that are verified to be true, can be handled and investigated. The progress and results of the handling will be feedback to the complainants or whistleblowers. The channels for complaints or reports are integrated in 2022. Complaints received from mailboxes, including: This email address is being protected from spambots. You need JavaScript enabled to view it. This email address is being protected from spambots. You need JavaScript enabled to view it. and This email address is being protected from spambots. You need JavaScript enabled to view it., will be copied to Independent Directors of the Board of Directors. The physical mailbox is regularly checked by the ombudsman of Human Resources Division and the Audit Officer at the same time. The purpose of involving Independent Directors is to strengthen the handling of the grievance and reporting mechanism and bring trust of the system by all stakeholders.

Wafer Works includes honesty and integrity and customer orientation into the employees' core competency and performance appraisal based on the business philosophy of integrity management and establishment with honesty. Regular employee assessments are conducted every year to ensure that the organizational culture and employees' behaviors are in line with the philosophy of sustainable business operation, and long-term strategic planning is implemented to promote long-term sustainable development performance.

In order to establish correct legal concept and code of conduct for all employees of the Company, and reduce the risk of corporate governance, the Company plans and develops employee core competency based on the philosophy of "Establishment with Honesty" and provides employees with training courses such as code of ethics and business conduct, insider trading, commercial bribery, anti-corruption, etc. All employees are required to sign Information Security Statement and Trade Secret Disclosure Statements to ensure that they comply with various integrity principles, code of conducts and specifications and are equipped with correct legal concepts when handling relevant affairs at work, so as to strengthen the competitiveness of the Company and achieve sustainable development.

Information Security Policy

To ensure the confidentiality, integrity, and availability of the Company's information, we have established an information security policy in accordance with business requirements and relevant laws and regulations. The policy serves as a guiding principle for information security management. We have implemented effective management measures through the operation of an internal information security organization. Additionally, we emphasize the importance of raising employees' awareness of information security risks. Through management procedures and security protection technologies, we aim to achieve the security objectives of information collection, processing, transmission, storage, and circulation.

◎ Adhere to relevant information security laws and provide appropriate protection measures for the Company's information assets to ensure their confidentiality, integrity, and availability. This serves as the highest guiding principle for our information security management and operations.

◎ Regularly assess potential hazards and their impact on the Company's information assets, and establish emergency response measures and recovery plans for important information assets and critical businesses to ensure continuous business operations.

◎ Conduct regular information security audits to ensure the implementation of information security measures.

◎ Ensure the continuous operation of information systems.

◎ Promote awareness among employees regarding information security protection and establish responsibilities, principles, and behavioral standards for information security in relevant business activities.

◎ Require external entities such as vendors, customers, and third-party individuals who use or have access to the Company's information environment to comply with our information security policy and related provisions.

Information Security Organization, Members and Supervision

The Company has established an Information Security Committee responsible for formulating and reviewing information security policies, allocating resources, and reviewing the implementation of security measures. Senior management executives serve as management representatives and are responsible for coordinating and promoting information security management matters. The committee regularly convenes security meetings and reports to the Board of Directors on information security matters.

The Company's Information Security Management Plan

◎ User Access Management: Users are assigned different access rights based on security levels.

◎ Operating System Access Management: Install operating systems according to the Company's regulations and join the Company's domain for centralized management. Regularly perform security updates for operating systems, install antivirus software on the Company's hosts and computers, and automatically download and update scanning engines and virus definitions daily. Passwords for user accounts are regularly updated.

◎ Application Software Security Management: In addition to the installation of required application software, tools, and packaged software for information systems, installation of special software requires separate application and approval.

◎ Configure firewall settings to implement filtering mechanisms for restricted software and URLs, preventing their impact on network quality and security.

◎ Network Communication Security Management: External VPN access and internal access to network applications such as file transfer (FTP), instant messaging (LINE), and special connections (HTTPS) must be reviewed by the IT unit and approved by authorized personnel.

◎ Application System Security Management: Access to source code updates restricted to authorized personnel. Different program execution privileges are set based on business requirements.

◎ Off-site Backup Management: System disaster recovery and database backup measures are available.

◎ Asset Management: Implement asset numbering and regular inventory management for server room equipment and personal computers.

◎ Continuously conduct promotion of information security to enhance employee awareness.

Wafer Works has comprehensively strengthened its information security management. In 2022, the investment in information security resources included the following: