Wafer Works is committed to establishing long-term partnerships with suppliers to ensure supply chain stability.
By signing contracts, we secure a better and more stable source of raw materials, thereby enhancing the Company's competitiveness. Additionally, through the establishment of an integrated system, we conduct supplier evaluations considering factors such as "price," "quality," "delivery time," and "sustainable development." This evaluation process ensures that suppliers abide by regulatory and environmental requirements. These measures help us select the most suitable domestic suppliers, strengthening supply chain management and contributing to the sustainable development of the supply chain.
Supply Chain Interaction
By actively investing manpower and resources in the investigation and verification of raw material suppliers, Wafer Works has developed comprehensive supply chain management guidelines and measures to lead suppliers in mutual growth. This includes supplier management, supplier evaluation, supplier audits, and green material requirements, guiding suppliers to meet green supply chain requirements and mitigate supply chain risks.
When introducing new suppliers for critical and important raw materials, Wafer Works requires suppliers to sign the "Supplier Evaluation Form" and "RBA Code of Conduct". Additionally, they must provide a "Third-party Quality System Certificate," "Supplier Process/Product Change Notice (PCN) Management Principles," and sign the "Commitment to Prohibit the Use of Hazardous Substances" and "Declaration of Non-Use of Conflict Minerals" before collaboration can commence.To effectively manage harmful substance data internally, we incorporate environmental principles into our supplier management mechanism. Since 2018, Wafer Works, by referencing RoHS 2.0 regulations and customer requirements for prohibited substance control, has mandated that all suppliers of critical and important materials use raw materials and packages that observe environmental regulations and refrain from using metals produced in countries with conflict minerals. We collaborate with supplier partners to seek and develop greener products that are of superior quality and environmentally sustainable.
Furthermore, Wafer Works contributes to local socio-economic development through procurement practices. To ensure compliance with our requirements, Wafer Works regularly assesses the compliance of suppliers handling critical materials (those directly exposed to the product) and important materials (those posing a risk of appearance difference during manufacturing). This evaluation follows the guidelines of the qualified supplier evaluation and assessment. If any noncompliance issues arise, suppliers are mandated to rectify them promptly.
Supply Chain Organization Structure
The upstream and downstream relationships of Wafer Works in its supply chain are illustrated below. The Company's suppliers mainly consist of raw material suppliers, equipment engineering suppliers, waste disposal firms, on-site contractors (such as security and cleaning personnel), as well as land, sea, and air freight forwarders. These partnerships are predominantly long-term, and we maintain good procurement relationships with our suppliers unless significant changes in demand or supply necessitate seeking new suppliers or adjusting procurement proportions.
Supplier Management
Wafer Works has formulated standard procedures for supplier selection and evaluation as well as sample validation to evaluate a new supplier to ensure that the selected suppliers and materials meet the requirements. Upstream suppliers are required to comply with the RoHS standards, national provisions pursuant to the industrial safety qualifications for manufacturers, ISO qualifications, and requirements of labeling and pictograms of hazardous substances on the goods, etc. Manufacturers need to properly recycle the used container or loading device and attach no-radioactive contamination certificate to the consignment, etc. We stated our standpoint of upholding the spirit of sustainable management and required suppliers to strictly comply with the regulations as well as principle of fair trade in the "Request for Quotation" and "Purchase Order". We dedicate ourselves to requiring our suppliers to meet the requirements of environmental protection, industrial safety, and human rights. Non-compliant supplier will be rejected and listed for supplier evaluation and other punishments.
Besides, in response to the global human rights issue that has gained increased attention in recent years, suppliers are required to conduct detailed investigations on compliance with "conflict-free metals" for the procurement of materials, parts or products contain metallic components to ensure that all purchased raw materials are from legal sources. Also, we ensure that the work environment is safe, employees' rights and interests are protected and respected, pollution prevention for manufacturing processes and products are implemented, and social responsibilities are fulfilled.
As for the waste management companies, we will conduct on-site audit every year for all waste management companies to ensure that the waste disposal by vendors is conducted in accordance with the law and all the wastes are properly handled.
The Structure and Management Policies of Critical and Important Raw Material Suppliers:
Currently, Wafer Works predominantly sources materials from Taiwan. To facilitate comprehensive business operations, we partner with procurement entities to actively promote ESG and green procurement initiatives, fostering material localization to bolster the growth of local suppliers. This strategy not only cuts down on unnecessary air and sea freight expenses but also diminishes the carbon footprint associated with material transportation.
Wafer Works also implements environmental protection mechanisms. In addition to pallets and PP buffer materials being recycled and reused by warehouse personnel, measures such as using recycled materials for packaging corner paper and recycling shipping boxes have been undertaken to reduce costs and minimize resource waste.
Percentage of Pallets, PP Buffer Materials, and Shipping Boxes Recycled in 2023
Wafer Works views suppliers as important partners in co-creating value. Together with our brand customers, we aim to influence the supply chain to uphold business ethics and social responsibility, thereby reducing environmental resource consumption and impact. This enhances our ability to create value for the overall economy, environment, and society (including people and human rights), fostering industry growth and sustainable development.
Below is the regional distribution of Wafer Works' suppliers to mitigate concentration risk. We employ a multi-region strategy to develop suppliers:
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Supplier Management
Wafer Works carries out evaluations of new suppliers based on comprehensive supplier selection, assessment, and sample approval processes to ensure that selected suppliers and materials meet requirements. Upstream suppliers must comply with RoHS 2.0 standards, national regulations regarding occupational safety qualifications, and ISO certifications. It should be "the label of shipment should contain" hazardous materials free, properly recycle containers and loading tools, and adhere to fair trade principles. We are committed to ensuring that trading partners fulfil environmental, occupational safety, and human rights requirements. Failure to comply with regulations will result in rejection and inclusion in the vendor evaluation process.
Furthermore, in response to the increasing emphasis on international human rights issues in recent years, when purchasing materials, parts, or products containing metal components, suppliers are required to thoroughly investigate compliance with "conflict-free metals" to ensure that purchased raw materials are obtained through legal channels. We ensure that the working environment is safe, employees' rights are protected and respected, pollution prevention is implemented in processes and products, and social responsibilities are fulfilled.
To ensure legal waste management practices, annual on-site audits are performed for all waste disposal providers to verify their proper handling of the waste entrusted to them.
Vision of Supplier Management
Wafer Works envisions strengthening product quality through collaboration with suppliers, balancing the effectiveness of supplier management and quality costs, and thereby enhancing customer service efficiency and satisfaction. This aims to build a win-win partnership within the supply chain with customers and suppliers.Supplier management follows a process of retaining high-performing suppliers and phasing out underperformers. After a supplier is approved, a cross-functional team comprising engineering, procurement, and quality assurance departments conducts annual evaluations based on document submissions, material quality, lead time control, and overall performance.According to the internal supplier audit plan, once any instability is detected, the supplier will be urged to initiate continuous improvement.
Supplier Evaluation and Audit
According to the "Qualified Supplier Evaluation and Assessment Regulations," Wafer Works conducts assessments of suppliers in terms of quality, delivery, pricing, cooperation, and sustainability every six months. Additionally, annual supplier audits are carried out to ensure that supplier performance meets the required standards. In the 2023 annual supplier evaluation, a total of 105 critical and important material suppliers were evaluated.
The results showed that 97% of the suppliers were graded B or above, matching expectations. Suppliers who fell short of the target were required to implement continuous improvement activities, with their progress monitored, and were included in the next year's audit plan. In 2022, seven suppliers were listed for improvement tracking and all completed verification audits in 2023, meeting expectations. For the first half of 2023, three suppliers were rated below B, mainly due to quality issues. They were requested to peruse and sign the assessment report and provide improvement plans, with follow-up reviews completed by the Quality Assurance department in October 2023. In the second half of 2023, no suppliers received a grade below B, reaching the set target.
Green Product
To uphold sustainable development and fulfill social responsibility, Wafer Works has established a green material management Procedure. In accordance with the "Green Product-Related Substance Management Procedure," relevant regulations such as RoHS 2.0, REACH/SVHC, and customer requirements, suppliers are requested each year to provide third-party laboratory test reports, agreement, or declaration form to confirm that the related materials conform to RoHS 2.0 and REACH/SVHC. The test results for heavy metals, and other harmful chemicals are all found to be "Not detected," ensuring that the Company’s products are safe for both humans and the environment.
Wafer Works consistently promotes green procurement, mandating suppliers of raw materials and packaging materials to provide certificates guaranteeing that their products do not contain hazardous substances. Additionally, they are requested to provide test reports to ensure compliance with customer requirements and relevant regulations, as well as to confirm that materials from conflict areas are not used. Suppliers of raw materials and packaging materials are also obligated to provide commitments pledging not to use any materials from conflict areas. Wafer Works has drawn up the "Green Product-Related Substance Management Procedure," which cover supplier management, raw materials, packaging material inspection, product verification, internal audits, and customer inquiries. Regarding regulations or directives governing hazardous substances, such as RoHS 2.0 and SONY SS-00259, which customers are concerned about, the official instructions are disseminated to company employees through the Knowledge Management System (KMS).
Wafer Works undertakes product compliance assessments in accordance with regulations or directives to ensure that all relevant substances are regulated and compliant with RoHS 2.0, REACH/SVHC, and customer requirements. This effort aims to meet the standards for green products and minimize the impact of products on the natural environment.
Green Procurement
Using products with environmental labels can reduce resource consumption, minimize environmental pollution, and lessen the impact on the planet. As a responsible global citizen, Wafer Works actively advocates for the procurement of green products to fulfill its corporate social responsibility, preserve the Earth's environment, and enforce green product policies. Furthermore, material suppliers are required to submit inspection reports batch by batch or on a periodic basis to prove compliance with diverse international environmental regulations on prohibited and restricted substances and to fulfill customer requirements, thereby endorsing the principles and dedication of green supply chain management.
Conflict Minerals
Wafer Works has incorporated the prohibition of "conflict minerals" into its supplier management policy. As a global citizen, we declare and pledge not to accept metals sourced from conflict areas. Furthermore, suppliers are obliged to commit to not using metals from such conflict areas in their products, thus leveraging market mechanisms to eliminate such practices.
Human Rights Related Issues
Wafer Works incorporates human rights clauses in its procurement contracts, mandating suppliers to sign the "Supplier Evaluation Form" and the "Wafer Works Supplier Code of Conduct." Suppliers are expected to complete self-assessment questionnaires as requested by Wafer Works to ensure that they do not employ forced labor (including debt bondage, involuntary prison labor, slavery, etc.), nor discriminate against employees based on differences such as race, color, age, gender, sexual orientation, disability, pregnancy, religion, political affiliation, club membership, or marital status in recruitment or employment activities (such as promotion, remuneration, etc.). Additionally, they must not contravene relevant child labor laws or corporate social responsibility requirements. If any deviations are found at the suppliers’ business premises, appropriate corrective actions will be implemented.
